Note: Since these log files are derived from the Closed Captions created during the Channel 6 live cablecasts, there are occasional spelling and grammatical errors. These Closed Caption logs are not official records of Council Meetings and cannot be relied on for official purposes. For official records, please contact the City Clerk at 974-2210.

[08:04:01]

>> good morning, I'm austin
mayor lee leffingwell.

A forum is present so I'll
call this work session of
the austin city council to
order on tuesday,
05
a.m.

We're meeting in the boards
and commissions room, austin
city hall, 301 west 2nd
street, austin, texas.

So we'll go ahead and begin
with our briefings.

Council, if there's no
objection we'll go ahead and
hear item d 1 first because
if we run out of time we can
postpone item b1 until
another date.

So we'll go ahead.

Before we start the briefing
1, which will begin
with the navigant report, i
want to announce that our
council meeting on thursday,
public hearing
item will be withdrawn, so
there will be no public
hearing on austin energy at
this council meeting.

It will be reposted for a
later date.

There will, I believe -- i
believe already has been a
briefing by austin energy
posted on the agenda, so
we'll have that instead.

So I just wanted to let
everybody know ahead of time
that that was the case.

So with that we'll go ahead
with item d 1 which is a
presentation first and a
briefing on the navigant
report and then other
aspects of the austin energy
rate proposal process.

>> Mayor?

>> Council member tovo.

while they're
coming up would you just --
can you explain who is
withdrawing the public
hearing --
withdr
withdr
awn by staff.

It's just -- the proposal is
in flux at this point and
there's no point in having a
public hearing when we don't
have a concrete proposal.

and will the austin
energy staff be getting that
on their rate review web
site and other things?

I know we have a lot of
community members who are
planning to come on thus --
that's
the reason for announcing it
today.

yeah, I appreciate
that, and for those who are
not watching the hearing if
they could be made really
well-known on the web site,
that would be great.

>> Mayor leffingwell: mr.

We
we
iss will tell us what and --
when and what information
will be available when he
comes up here.

So I want to also announce
that council member martinez
will not be here today.

He has a family emergency

[09:06:00]

and we'll be following up
with him.

I had a text from him this
morning saying that he will
be able to watch the work
session but will not be able
to come.

>> Mayor, if I may.

weiss and elaine
harez are preparing
themselve I wanted to
start out by thanking
council for the opportunity
to talk about a number of
issues listed relating to
austin energy and rate
recommendations that council
is considering, but I also
speak with respect to one of
the items in particular, and
that is the navigant report.

I just wanted to offer some
context for that, of course.

That report was done more
than a year ago, and I want
you to know that it was
originally commissioned by
me.

And the reason for that is,
of course, you know, early
in my tenure we became aware
of what we thought were
significant, and, in fact,
are, financial challenges
confronting austin energy
and at the time I wasn't
confident that I clearly
understood, or for that
matter, even austin energy,
certainly the council, the
significance in the order of
magnitude and what
implications there were for
the long-term viability of
austin energy.

As such at that time, I did
commission this report,
navigant actually carried it
out.

It was accomplished under
the leadership of cfo leslie
browder as well as robert
goode, who you may recall
was serving as the acting
manager at the time, so it
was to give us a clearer
picture of the financial
condition of austin energy,
certainly in the relative
short-term but more
importantly, you know, what
austin energy's financial
condition looked like over
the long-term, over about a

[09:08:00]

five-year period, I think is
what we looked at.

The other reason that it was
important, from my
perspective, is that it, you
know, obviously served as
the foundation for
developing strategies to
address those challenges and
indeed as the report
indicated, there were a
number of challenges, and
the result of all of that
work has resulted in, in
part, the recommendation
regarding rates that has
been under your
consideration now for a good
number of weeks.

So I wanted to provide the
context in terms of
navigant.

You know, it's -- it's the
case that in regard to a
variety of issues in the
organization from time to
time for purposes of
management and
administration, we've
commissioned reports that
serve as the foundation for
work and recommendations
we ultimately bring to
the mayor and council, and
that certainly was the case
here.

The navigant report was the
foundation for
recommendations that are in
front of you now with
respect to the rate
structure and rate
recommendations from austin
energy.

So with that, larry, elaine,
if you're ready.

>> Good morning, mayor and
council.

The --

>> let me interrupt you.

I did leave out -- I did
leave out one thing.

I wanted to just give you a
sense of what the objectives
were on that report real
quickly and essentially
there were three in the
scope that we characterized.

One was to evaluate austin
energy's current financial
condition, to provide
assurance that ae is and
continues to be a
financially viable
organization.

As I said before, in both
the short and long-term.

Perform benchmarking and
program evaluations, major
nonfuel operations and
maintenance functions to
identify any reasons of
potential cost saving
opportunities.

Compare the general fund
transfer calculation, the
economic development funding
to other municipalities,
other utilities, both in
to

[09:10:01]

test the reasonableness of
the city's methodology.

So those were the objectives
defined in the scope that
navigant was charged with
addressing, and you'll hear
in the course of larry's
presentation, he will touch
on all of those.

So -- sorry for the
interruption, larry.

>> No problem, great.

Thanks, mark.

Okay, there we go.

All right.

I'm going to go through at a
fairly high level the
navigant report highlights.

Let me say that there are,
as mark described it very
well, and there are a couple
pieces of that report that
were not made public, were
not public, and that has to
do with the rules under the
ercot market and what we can
do with our power supply
portfolio, how much of that
is public and not public,
and then we also have a
business unit that also we
have to be -- you know, so
we have competitive matters
that we have to make sure
that we're consistent with.

Navigant's principal
findings was that ae's
financial performance has
been strong for many years,
and then till 2009 the sales
growth and increasing
revenues were more than
adequate to offset rising
system expenses resulting in
no base rate increase since
1994.

They reviewed the 2011 to
2015 financial forecast, and
what was pointed out is that
ae's financial condition
will deteriorate over time,
expense reductions alone
will not be sufficient to
balance it.

And declining financial
metrics would not likely
support ae's existing bond
ratings.

The rate review fundamental
challenge was balancing the

[09:12:01]

multiple objectives to
ensure revenue sufficiency,
to prevent further
deterioration of our
financial condition,
financing the generation
plan and increased energy
efficiency and balancing
rates across customer
classes, and keep ourselves
competitive within texas,
which, as you know, is a
goal, increased reliance on
distributed generation and
energy efficiency, but the
first priority was to be and
needs to be revenue
sufficiency.

So the conclusion is --
there were several
significant actions that had
to take place.

Navigant's principal
findings were that ae facing
a series of challenges
driven by the converging
factors, the economic
downturn that happened in
the early part of the
2000s REALLY SET THE
Stage.

There is a -- there is a
chart in the december 14
presentation that shows ae's
revenues and percent of
change year to year, and
you'll note that in 2000
there was a significant
reduction with the dot-com
bust and then there was a
rebuilding after that.

That's a very important
chart to refer back to.

We have -- we have
incredible goals here, and
through our climate
protection and meeting those
strategic goals established
by the city policy makers.

There are higher costs as
well drip.

There's increased
transmission infrastructure
throughout ercot, complexity
of managing it in ercot and
the total system and the
initiatives that we have.

And implementation of new
technologies that will
enhance service and
reliability.

And they pointed out the
need to increase electric
rates and its impacts on
ratepayers.

Navigant's principal
findings is that ae should
take a serious look at its
initiatives and perhaps
focus on one or two items
that are most important to
the success of ae, paring
down the number of
initiatives for costs.

There needs to be a balance
of leadership and its
mission of affordability.

[09:14:01]

Ae considered establishing a
dismin that evaluates the --
investing in new
initiatives, capital
projects and processes.

The utilities were surveyed
in navigant's principal
findings were austin energy,
georgetown utility services,
denton municipal electric,
college station utilities,
cps and city public service
san antonio, and lubbock
power and light.

There were none texas
utilities that we were
compared against as well,
orlando, city utilities of
springfield, gainsville,
, department of
water and power, memphis gas
and water and nashville
electric.

The total transfers compared
to the utility revenue
ranged in percentage
compared to -- excuse me,
the total transfers compared
total utility's electric
revenue compared in
percentage, weighted average
of transfer was 9%.

Five utilities were less,
four utilities were more.

The city of austin has
maintained its transfer
policy both in methodology
and percentages consistently
bucketed the transfer below
the maximum stated in the
policy of 12%, maintained at
1 since 1999, the
exception being in 2002.

That's a very high level of
the navigant report, and
it's -- and its findings,
and before I have another
presentation that we want to
do this morning and that is
on the reserves and our
financial policies and if we
want to take questions on
the navigant report we can
do that now and then go into
that or if it's your
pleasure I could go on
with --
any
questions on the navigant
report?

Council member cole.

>> Cole: thank you, larry.

Can you explain this
statement, while ae's
reserve levels are currently
adequate to cover shortfalls

[09:16:02]

through 2015?

Do you know what I'm --
those numbers, mayor --

>> those numbers, were based
on the 2011 to 2015 forecast
and circumstances have
changed.

They looked at two different
scenarios.

One was a build the
generation plan, construct
the new renewables, and one
with ppa scenario, and the
statement that you just
repeated means that at the
end of that five-year period
there would be no reserves
at all.

>> Cole: oh, okay.

>> Either operational or
strategic reserve.

ppa
scenario?

What's that.

>> Let me clarify that.

That's -- in our renewable
acquisitions when we buy
renewable power, we can do a
purchase power agreement,
which is a 25-year, buy the
power, we have no ownership
in the project itself.

>> Mayor leffingwell: right.

>> The other alternative is
we finance, build one and
operate t and those are the
two alternatives we really
have.

those
are the only two
alternatives?

>> Well, there is a
combination of the two,
which is complicated and
it's called a syndicated
deal, and as far as I know
austin energy has not
contemplated those but those
are done and are very
complicated but they do kind
of a combination.

did
the green power scenario
include the council's
adopted policy of
restricting rate increases
to 2% a year?

>> The navigant report was
done before the
affordability goal was
passed by council.

so it
didn't.

>> It did not.

so it
seems to me that that's --
that's what we really need
to scenario that
limits increases to 2% per
year, it balances that with
the need for green power,
because that's what the
council adopted.

So at some point we need to
reconcile that.

Anything else?

[09:18:00]

>> Mayor, can you explain
what you just said again?

well,
the council adopted a
generation policy that
included all of the original
elements, the 35% by 2020,
the 800 megawatts energy
efficiency and 200 megawatts
of solar.

But we also at the same time
included in that plan that
it would be restricted by
two cost control measures.

One would after an initial
rate adjustment, whenever
that is, this year,
presumably, rate increases
would be limited to 2% per
year, and in addition to
that austin energy's rate
structure would remain in
the bottom 50% of all
utility rate structures in
texas, both public and
private.

So right now we're in the
bottom 40%, but there's a
little bit of room for
negotiation there.

But those are the two cost
control measures that the
council adopted.

>> Cole: thank you, mayor.

council
member riley.

larry, I have a
few questions about
navigant's evaluation of the
transfer to the general
fund.

First, did -- you point out
that navigant -- navigant
mentioned that we had
maintained our transfer
1% except it
was 8.9 until 2002.

Did navigant also consider
the transfers to the city
outside the general fund in
evaluating the amount of the
transfer?

Transfers, of course, are
not limited to just that --
that 9.1%.

The city does get some --
some revenues from the
utility beyond that 8.9%.

>> They do, and the bulk of
those are payments for
services that other
departments provide to us,
such as maintenance of our
fleet.

They charge us for that.

Purchasing office provides

[09:20:00]

us direct benefit of having
nine people on-site to
handle our purchasing needs,
and those are direct charges
to our department because
they're services provided to
our department.

In the case of fleet, if we
were not serviced by the
city fleet department we'd
have to pay another
corporation or vendor to do
that service.

So those are payments --
most of those over and above
the general fund transfer
are payments for services.

There is a small amount of
community program that we do
contribute to, but they're
less than -- I believe
they're less than 750,000.

We've actually reduced those
over the last few years.

But they did look at that.

They also looked at what
other utilities were
providing in terms of
economic development support
and found that most
utilities did provide some
funding for economic
development activities.

and those economic
development activities, is
the utilities' support for
1%
or is that on top of the
9.1%?

>> It's on top of it.

it's on top of the
9.1.

So we're actually -- what is
the number we're actually at
if you --

>> well, there's 105 million
in the gft in this fiscal
year and there's another
almost 50 million, 40-plus
million in all the other
shared services, so you add
those up and austin energy
is the department in the
city paid for -- described
for in all the different
pieces.

Egso is part of that
feature.

but you're saying
our support for economic
development is comparable to
that navigant saw in other
communities?

>> I don't know that they
went and compared the
economic development
activity with the other
utilities.

They didn't get down to that
level, I believe.

I don't read anything about
that.

>> The funding level.

>> Just the funding level.

did they get down
total of the transfer

[09:22:00]

formula?

In other words did they
evaluate the role of fuel
costs in determining the
transfer?

>> No, they kept it at a
higher level, looking at it
generally and comparing us
with other communal -- with
other -- communal -- with
other public power in the
united states is really the
basis of that.

they didn't
probably get into an
assessment of the impacts on
ratepayers outside the city
limits and how that's
handled in other cities?

>> No.

No, they did not.

They did not get at that
level.

Really -- and I think
navigant did a good job for
what they were asked to do,
and city manager described
that really well, and i
think that from my
perspective when I came here
I used that as something to
refer to, and I met with
them right when I started
work here in october of
2010, and really what I saw
out of it was really a
comparative between what is
austin energy doing that is
similar to what other
municipal public power
utilities across the country
are doing, are they out of
line, basically, and, you
know, where are some of
their business units.

There's a second part of
that report that went
through some business units,
and if anything, my
take-away was I'm pretty
impressed that austin energy
is a great utility, but at
the same time we do get
measured between the
utilities.

That's public power.

That's the basis of how we
compare.

>> Riley: last question.

Did navigant get into the
distinction between fixed
costs and variable costs in
terms of the rate structure?

Did they make any
recommendations about rate
structure?

>> No.

No.

This was all prior to our
rate -- the rate process had
started.

, The strategy of developing
a new rate had started, but
it hadn't gotten to that
point yet.

so although this
served as a foundation for
the rate proposal, that
aspect of the rate proposal
did not relate to navigant.

>> Right.

Right.

>> Riley: okay.

Thanks.

so do
you -- just a quick
question.

Do you know offhand the
transfer rate used by cps?

>> It's 14%.

so i

[09:24:00]

guess just coincidentally,
14% of our gross revenue
would be about $150 million?

>> That is correct.

so if
we factor that in we're
about the same as cps?

>> Right.

And I have no knowledge
outside of that of how cps
does it exactly, but I have,
you know, talked to their
leadership about it, and
then outside of that the
shared service part I --
and
obviously -- I don't know
what their shared service
component is, but obviously
you're paying for a service.

You're paying to another
city department for those
services, so it doesn't seem
logical that that should be
in any way included in
figuring a transfer rate
within the policy or beyond
it.

Council member tovo?

I have just a
couple questions.

I want to say first of all i
really appreciate your
making this presentation
today.

So -- one of the things that
council member riley just
talked about was the fuel
revenue.

It's not clear to me whether
this report, it's called
austin energy financial and
performance review navigant
consulting -- is this
considered part of the
navigant report?

>> Yes, it is.

>> Tovo: it is, okay.

And I had asked the
question, it wasn't dated --
my copy wasn't dated but it
was done based on the
question and answers -- it
was done around the same
time.

Is any part of this
confidential?

>> I don't know.

>> Tovo: okay.

>> Yes, there are sections
of that that are.

>> Tovo: of this report?

>> Yes.

>> Tovo: okay.

My copy is not marked so I'm
not sure what those are but
I'll try not to cross into
dangerous territory.

The conclusions on page 15,
I just wanted to note a few
of them because I think i
remember in this part of the
report that navigant did
look at fuel revenue in
answer to your question,
chris -- council member
riley, and the conclusion
was that most utilities
include fuel revenue in the
gross revenue subject to the
transfer percentage.

And then there's -- there is

[09:26:01]

also a discussion about
economic development, and
the conclusion is the last
bullet on that 15.

While it's -- it sounded --
my very cursory member of
it, while it's uncommon for
utilities outside of texas
to fund economic
development, there were
other examples within texas
where that is happening, and
then lastly, somewhere in
this document I think they
factored in those other
transfers, and the
conclusion was that it's
still lower than the council
adopted policy of no more
than 12%.

So even -- if I'm
interpreting that correctly,
even factoring in the other
community development money
and the services it's still
below 12%.

Is that an accurate
conclusion?

>> Yeah, let me take this
opportunity too, to let you
know that, in public power
utilities austin energy is
the 9th largest in the
country, and so there's sort
of a small family of
utilities to compare
against.

Some of those utilities
generate a lot of their
power with hydroelectric
power, so their fuel charge
is not -- they don't -- they
don't structure it the same
way as austin energy does.

We're a thermal-based
utilities, we do it with
coal, gas, quite a bit of
natural gas as a percentage,
so our fuel is different
than others.

So when you look across the
board and you compare public
power utilities you have to
understand they're kind of
their resource mix, and also
even us as we go forward,
what will what austin energy
will be compared against is
utilities that have a
portfolio of high
renewables, for example, so
that will become our -- who
we get measured against in
strategy and so forth.

So it's important to
recognize that.

So yes, those utilities that
have a thermal-based
generation portfolio like we
do, the fuel is parpt of
their transfer, to my
knowledge -- part of their
transfer, and that's
consistent with those other
public utilities.

[09:28:01]

thanks for that
clarification because I know
transfer based on our
decision point list we made
last week, I think transfer
to the general fund is part
of that and there has been
discussion about how the
fuel cost should be
considered within that and
it's helpful to have -- have
this sense of context.

I just had a couple quick --
well, I appreciate, too, the
bullet points and I think
the couple things that
jumped out for me in the
navigant report, somewhere
in here, and I couldn't put
my hands on t there's a very
interesting chart that shows
that austin energy actually
spends less on energy
efficiency than comparable
peers at that point in time.

Would you say this has
changed since the time this
report was created?

>> Well, that depends on how
you measure it.

If you measure it in
dollars, that doesn't really
mean a lot because it's per
customer, all right?

So some of these utilities,
like ladwp, has 3 point some
billion dollars in revenue
and I know they have a big
energy efficiency program so
they'll spend a lot more.

So really the metric is how
much do we spend per
customer?

And I know that when we've
measured that and we've
presented that before, that
austin energy is, I believe,
the number is like $55 per
customer per year on energy
efficiency, which is just
way higher than anybody else
in the state of texas.

Now, I'd be happy to go out
and measure our peer group
across the united states and
measure our energy
efficiency per customer and
I will bet you that we're,
if not at the top, pretty
close.

that's good to
hear.

Do you remember how they
measured?

>> In total dollars.

in total dollars
rather than --

>> that would be my guess.

That would be my guess.

I don't know.

I mean, we can look it up so
that I'm not guessing.

Yeah.

We can look that up.

actually I did just
find it.

I think it's on page 15 in
section customer care.

But anyway, that's helpful
to know that that is a
different --

>> that's the real trick of
this business is you have to

[09:30:00]

be very careful about how
they're statistically
measuring everybody because
depending how they're doing
the statistics slants it to
one story.

So I've always tried to look
at it both ways, total
dollars per customer, you
know, try to look at it from
both directions.

and then the other
two, you know, conclusions
that jumped out at me that
again you highlighted too is
that, you know, we've heard
a lot of discussion out
there that, you know, we
haven't -- the austin energy
hasn't raised rates in 17
years, but, you know, as
you've pointed out in one of
your bullet points, for a
good number of those years
there wasn't a reason to
raise rates because austin
energy was in a very
financially sound position
with revenues exceeding
costs.

So I think that sometimes
gets lost in our discussion
about the rate increase.

And two, given some of the
concerns I'm hearing out
there in the public, and a
few of the articles I've
read, I appreciate that the
navigant report talks about
some of those causal factors
that led to that gap and it
was the economic downturn
and other things going on
but not increasing our
reliance on cleaner energy,
and it sounds like in your
discussion you've emphasized
that as well, and I think
that is another important
message to get out there in
the public, that it was, you
know, the same economic
downturn that affected so
many businesses and
industries.

And then I guess lastly i
have a couple questions.

I did ask some questions and
I appreciate the really
detailed responses i
received back last night.

To follow up on one of
the -- 16b, I think, gets
to -- I'm asking about a
page that is confidential,
so maybe this is a
discussion better left for
executive session.

There are some
recommendations for
potential savings, and i
hope if this isn't an
appropriate place to talk
about it, I hope we can -- i
asked about the ones on 22
and I think I received an
answer about the ones on 18,
so I'll just put in a marker
that I'd like to know what

[09:32:02]

of those recommendations on
page 22 ae has explored.

And too, since some of the
recommendations talked about
processes for evaluating
capital projects, I wondered
if you could address how
that project may have
changed in the time since
the navigant report.

>> Well, first of all, back
to 16b, I'm just refreshing
myself on it.

again, we can talk
about it --
could
I interrupt?

We do have the latitude to
go into executive session,
if you want to discuss -- i
just want to let you know
that we do, rather than
discuss something that might
or might not be
confidential, we could take
it up then.

>> Tovo: thanks.

And again, I'm happy to skip
that because I do want to
talk with staff about the
17, and we
can do that privately.

>> Connected to 22, what
you're talking about.

At that time, a climate
protection plan had been
approved.

There was a generation plan
that was pending.

That wasn't approved until
the winter of '11, late -- i
think december of '11.

I can't remember now, but
that was a year ago.

And until that point in time
we had a plan to be at 30%
renewable, and 35 -- 35%
renewable, excuse me.

So we didn't know whether we
were going to do that
through capital acquisition,
by building projects.

We didn't know whether we
were going to do that by
purchase power agreements,
which we've executed with
291 megawatts of wind this
year.

So not knowing the strategy
for that, and actually the
strategy kind of developed
this year because we had an
rfp in february for
renewable projects and what
came forward were not
opportunities to buy
projects and build projects,
but what came forward were
opportunities to buy the
output of projects for a
number of years, 25 years,
and at the end of that
period of time we could
elect to purchase the
project if we wanted to.

And it has to do with tax
credits and it's
complicated, but that's what
was not known by navigant at
the time or austin energy,
what was our strategy going

[09:34:00]

to be about acquiring these
renewables.

And I can't tell you the
answer to the rest of it,
but I can tell you to date
we've made remarkable
progress on our renewable
portfolio by using purchase
power agreements and not by
borrowing money and entering
into long-term debt.

I see, and that
timing is helpful.

In terms of the -- they had
made some recommendations
about process for making
capital expenditures, and if
I understand what you're
saying, the generation plan
provided some guidance for
those decisions, and you've
sort of moved forward and --

>> I don't believe the --
the generation plant didn't
dive down into the strategy
about whether you use
capital to purchase them or
buy them.

It used it as a whole --
but it gave you
guidance for developing
those intern processes.

Okay.

I think that's it for now.

Thanks.

Anythi
anythi
ng else, bill?

if navigant were
back and they had the
benefit of knowing how cheap
we were able to get wind
power from the coast,
knowing the things we've
done over the last year, do
you think this report would
be different?

>> Yeah, they would have
recommended we enter into a
bunch of those projects.

I bet they
would.

>> That's a beautiful thing
in consulting, if you can
look backwards, like an
actuary looking in a
rearview mirror, you know?

Spell generally speaking the
report says, it seems to me,
that we're within normal
limits for most things or
we're above normal limits
for a few things, on energy
efficiency we're doing
pretty well, on renewables,
it was a little bit guarded,
but of course they didn't
have the benefit of knowing
what the wind was going to
cost us.

There are only a couple
places here where they
really issue a significant
caution, one of them we've
been talking about is you
need to raise more money
because we're upside down
for a bunch of reasons we've
discussed.

One of them is what kathie
just mentioned a second ago,
quote, there needs to be a
balance between ae's
leadership and its mission
of affordability, which i

[09:36:00]

think you've begun to
address.

I have one other question,
though, and I think the one
probably was on the
tip of your tongue and
that's the one on on-site
energy resources.

I'm just looking -- easier
to pay attention to the
review we handed.

Confid
confid
ential?

>> We can talk about it at a
general level but we can't
go into the business part.

it's not
redacted.

Mayor, this is a publicly
available document, is it
not?

The summary that you handed
out?

>> I can't see what you
have, so I don't know,
but --

>> spelman: let me show you.

>> Yeah, that's public.

>> Spelman: thank you.

So the report says, and this
is actually what I think
brought the report to our
attention in the first
place, is the -- is the
navigant people said the
history of relatively weak
profitability associated
with on-site energy
resources.

And I wonder if you could
talk about that for a
minute.

>> I will say that it is a
multi-year, 20-year business
plan.

The success of it has to do
with the growth of downtown
austin.

The project itself is for a
utility professional like me
is a pretty fascinating
project.

this is the --

>> what?

this is the
chiller plants.

>> Right.

So everybody understands, we
make child water and send it
to large buildings -- the
austinian, doesn't have a
chilling tower, no
air-conditioning equipment
hanging out the building,
all child with austin energy
and as downtown develops and
at the speed at which it
does, that determines the
pay-off of the whole
project.

And as far as we're
concerned, it's doing very
well, and it's on track and
its business plan but that
business plan and
performance and everything
else we've held as
confidential.

I understand and
I'm not going to ask about
the details, but in the
broad outlines it was by
design not going to be

[09:38:00]

particularly profitable in
the first few years of
operation.

You were betting on downtown
becoming --

>> yes.

a lot more --

>> and I might add, it takes
a peak off our system.

We make ice with it off ours
and we use that ice to chill
water to manage our peak.

So it has a lot to do with
our demand side management
program.

So the bigger downtown gets,
which isn't our design, but
I mean, that's what it was
designed for, is if bigger
buildings are there, we can
then serve off peak energy
storage and start building
that business, and that's
what it's about.

I don't want to
ask about anything which you
would like to redact or not
talk about, but the general
outline, we shouldn't be too
worried, in your opinion,
about the relatively weak
profitability up to this
point because we're going to
be making our money in the
future, and we also have the
benefit which navigant did
not highlight of being able
to knock the peaks off,
something we -- which is
reducing our costs in other
places of this budget.

>> Yes, sir.

>> Spelman: okay.

Thank you.

council
member morrison.

>> Morrison: thank you.

Thank you, guys, for
sticking with us in all
this.

I know it's a lot of
conversation.

I want to go back briefly to
the part of the navigant
report about transfers, to
the general fund and to
general government.

First I want to clarify, i
think I heard you say that
parts of it were
confidential, but I was
advised otherwise by staff
and that it would be on the
web site.

Do we need to revisit that?

>> No, let me clarify.

There were three phases of
the work.

The financial review has
just a few sections that
have been redacted with
competitive information.

The benchmarking has two
sections that have been
redacted.

There's a piece of the oser
or the chiller business and
most of the power supply
business has been redacted.

The general fund transfer
report is entirely public,
and all of those reports
either redacted or the full
report are on our web site.

[09:40:02]

>> Morrison: okay, great.

Great.

So just a couple questions
because I know, as kathie
mentioned, we're going to be
probably delving into the
general fund transfer and
transfers in general in more
detail, and I think that
when we do that it's going
to be helpful to be looking
at some charts that are
already prepared but also
some other comparisons.

As you mentioned, the egrso
transfer is part of the
overall transfers to other
departments, and to actually
see the numbers broken out
and compared to, say, san
antonio and all I think is
going to be helpful, because
there's a lot of information
in here about the breakdown
of other utilities'
transfers, but it's sort of
hard to pull it all
together, you know, being
able to look at things in
the spreadsheet like you've
bun with the reserve funds
is really helpful and i
think really helps the
conversation.

So maybe we can work on that
when we get to that.

And then the other part of
this report that I think is
very interesting is it looks
at investigator-owned
utilities -- investor owned
utilities and does
discussion that might be
analogous to what we do as
the owners of our utility,
you know, shields and all of
that.

So -- shareholders and all
of that.

So I'm hoping we'll somehow
be able to line all that up.

And I don't know if you in a
nutshell can give us a
summary of -- at this point
of what they said in this
report about about investor
owned utilities or would you
rather wait until we delve
into that.

>> Well, I believe you
really already said it, and
that is that there is a
return to shareholders of
private utilities and gf --
general fund transfers is a
common issue among
municipally owned utilities
across the country, and
that's part of the answer to
that.

But you have to remember

[09:42:00]

that you don't necessarily
want to measure yourself to
a for profit shareholder
owned company because they
don't have any return and
it's based on performance,
and I would again bring your
attention to slide 6 in the
december 14 rate
presentation where in the
years 1993 to 2000 there
was, you know, single-digit
performance year to year
that improved austin energy.

Those were great years, and
gft and everybody was happy.

And then you entered into
2001 with the dot-com bust
and 2002, and some of those
years where there may not
have been any transfers, if
you were a private utility.

Now, I don't know.

I'm just giving you my
professional opinion about
that based on that.

And this is slide 6 that
shows the performance there.

And that's really where
austin energy started
digging the hole, the
problem, looking at it on
that basis.

But that's an argument
that's made, but there
are -- there are -- it's not
necessarily a parallel.

well, just to
point out another element
that is not parallel, and
that is as a municipally
owned utility we have the
opportunity to have a broad
and wide and deep discussion
about the rate design, and
we are trying to incorporate
community values into that
rate design, which is not
necessarily -- neither of
those things would
necessarily happen with a
private utility.

So we -- that's a huge
benefit to this community
that you can't really put a
dollars and cents on.

>> That's carrying the
american public power
association flag right
there.

>> Morrison: all right.

[Laughter]
I think I deserve a 10.

>> We'll arrange for that.

Across the country,
municipal -- or publicly
owned utilities, which are
electric cooperatives,
public utility districts,
every state has something
different, that's always
been the core value of that,
what you just talked about.

[09:44:03]

And so -- but anyway --
so you're with
me on that?

>> I'm with you on that.

>> Morrison: okay, good.

And then one other question
I have, and that is I know
that -- as I understand it,
austin energy somewhat
recently started paying some
franchise fees to some of
the incorporated areas.

How does that play into all
of this and was that
considered -- was that
actually happening at the
time of the navigant report?

>> That was not happening at
the time of the navigant
report.

That was approved later, and
it's -- I don't want to make
the -- it sound like the
money doesn't mean anything,
because it does, but it's a
fairly small amount of money
that we transfer.

It's about a million dollars
that we collect from all the
ratepayers and we pay that
to six or seven cities for
the amount of revenue that's
generated in that -- inside
their city limits.

For example, bee caves, for
example, would have -- and
there's a transfer amount
that goes to there, and it's
3% of those total revenues
for that city go back to
that city.

and I'm going
to guess, but tell me
whether this is right or
wrong, that in terms of our
customers that live outside
the city of austin, those 6
municipalities and the
number of residents in those
municipalities represent a
small fraction of our
outside the city limits --

>> very small fraction.

>> Morrison: -- customers.

>> Very small fraction.

>> Morrison: okay.

Thank you.

>> Mayor leffingwell: okay.

I guess we can go on to the
next section.

>> Okay.

Okay.

The next section is going to
talk about reserves and

[09:46:01]

financial policies.

Again, I'll try to go
through this pretty quick
and then be prepared for
questions.

As requested at the
quarterly report session i
was asked to bring back a
comparison of reserve funds
with other public power
utilities across the united
states.

Before I -- before I get
into this I might say that
this morning at an early
hour I just got on the
internet and said cast
reserves for publicly owned
utilities and I got a whole
bunch of information that's
in addition to this.

It's all out there.

I was looking at the salt
river project, which is a --
it serves a big part of the
phoenix area, and -- anyway,
unfortunately it's not on
here, but we'll go through
this pretty quick.

This is a collection of
utilities.

Some are owned by cities.

I'll point these out, austin
energy, of course, the los
angeles department of water
and power is the largest
publicly owned utility in
the united states outside of
puerto rico.

Puerto rico is actually the
largest.

And then you have -- and
they -- you can see their
annual revenues and you can
say their reserve funds.

Nebraska public power
district up to our north.

Jacksonville electric, that
is a municipally owned
utility, and we took out
their water.

Jea runs water for the power
and -- and power for the
city and we took their aware
water out.

Georgia, I would judge it to
be similar to an lrca in
that they provide power for
their owners, but their
owners, there are several
cities around georgia and
what they do is they share
in this.

So it's really kind of a
joint group.

Plow river power authority,
cps, and is that number

[09:48:01]

right for their -- that
number is right for their
reserves.

I looked at that and thought
that's a lot of reserves.

So anyway.

Seattle city light, you can
see now -- there's a
contrast.

Why would seattle city light
have less reserves by a
percentage basis -- well,
now, there's 100%
hydroutility.

All of their power pretty
much is coming from
hydroelectric plants and
they have a different kind
of exposure.

Sacramento communal utility
district is not a city.

It's a municipal utility
district like an mud in
texas and they happen --
that's what this is
reflective of.

On a comparative basis
that's how we look -- the
top chart you'll see we have
a red and a blue piece.

That's our maximum amount,
is the -- with the red, but
currently we are at the
bottom part.

And then as a percent of
revenue that's how we stack
up.

Again, kind of in the
middle -- middle of the
group.

And the yellow is with the
total amount of reserve
fund.

So the need for revenues is
fuel price volatility,
counter-part risk.

What does counterparty risk
mean?

That means all the companies
we do business with, whether
they be private companies or
others, we -- we have to
evaluate that risk because
if we do a big gas deal, for
example, with somebody, they
may not show up at some
point in the performance and
we have to make sure we
evaluate that risk.

Generation disruptions,
which has been the largest
concern I have so far here
has been watching some of
these with the warm summer
we had last year.

Extensive capital
expenditures for
infrastructure improvement,
whatever might happen,
significant environmental
legislation, and the threat
of emergency expenditures
and response to a natural
disaster, catastrophic
weather and deferrals of

[09:50:00]

large deferral amount during
a period of capped rates.

Rating agencies, we've
talked to you about that
before, and how they view
this.

And utilities owning
generation have a higher
risk portfolio.

70% Of cost is generation --
we have a large fleet, a
large asset to maintain, and
that puts you at a different
risk than a utility that
buys all of its power.

I can compare a utility --
for example there's large
utilities in the northwest
that are almost the same
size that we do that
generate -- they do not
generate -- very little of
their power.

They buy it all through the
[inaudible] power
administration.

There are customers that are
served by tva, tennessee
valley authority and
similar.

>> The definition of the
reserves, this is in your
financial policy and I'm
going to let elaine answer
any dls detailed questions
that you might have, but
these are the austin
energy -- the city has a
financial policy document,
and then I think austin
energy water and other
pieces of the department of
the city all have a
different piece.

These are the ones -- these
are the ones related to
austin nrpg.

The operating cash is policy
11, 15, 21.

This talks about the -- what
the policies say in a very
high level, and we just
wanted to point that out
today, and do you want to
ask any questions about that
so far?

Questi
questi
ons?

Okay.

Go ahead.

Council member tovo.

I do actually have
a question about the
replenishment.

I noticed, I think it's
policy 11, talks about the
replenishment rate.

Let me see if I can find my
notes.

Oh, I'm sorry, policy 3
talks about the
replenishment rate being one
to three years but not

[09:52:01]

exceeding five, and so i
wonder if you could just
address that for me.

>> Which policy was it?

>> Tovo: 3.

>> 3.

and I think I got
that language from the
navigant report.

So I -- I understand the
interpretation of it being
three years, but if it says
not longer than five, it
seems to me that the
financial policy
contemplated a longer
replenishment period.

>> Do you think it's 15?

>> Policy 3.

Let me clarify and make sure
I'm answering the right
question.

Policy 3 says principal
repayment delay shall be one
to three years but not
exceed [inaudible]

>> tovo: right.

And so I guess what I'm
asking is since it says not
exceeding five years, you
know, I don't know what the
intent was.

I wasn't on the council at
the time that was adopted,
but it seems to me that that
language contemplates that
it could be as much as five
years.

>> That is -- that policy is
referring to when we issue
revenue bonds that in years
1 through 3 we can have
interest only as debt
service to keep the cost
lower in the early years but
not exceed five years of
interest only.

So that's -- that's a
guideline for when we issue
revenue bonds, and the
structuring of the debt
service payments over the
30-year term of the debt.

so is that why in
the current rate proposal
you've structured that
reflen ishment in three
years -- replenishment in
three years instead of five?

>> This is about debt
issuance.

>> Yeah, this is not related
we would issue --
let's say we bought a wind
project, and we would start
a payment when we closed
the -- closed the loan, in
effect.

We would only make interest
payments for the first few
years, and then the

[09:54:01]

principal payments would
kick in.

And there's a policy on that
and you can structure your
debt accordingly.

>> Tovo: got it.

Thank you.

I wonder if we
could maybe walk through a
line or two so I can
understand, if we talk about
the operating cash, it says
the current amount, fy 2012
budget ending balance of
38 million, the target
amount is 51 million, and
test year revenue
requirement is zero.

So does that mean that in
terms of creating the
revenue requirement we're
not adding anything to
actually replenish that
fund?

>> Yes, that's what that
means.

That means that as a fallout
of the rates, that would
automatically -- the rates
would provide that.

So we're not asking for any
additional --

>> morrison: okay.

All right.

So would that be the same on
the bottom line -- well, i
don't know -- yeah, we're
looking at the same -- the
nonnuclear decommissions,
target amount is 55 and test
year requirement is
5 million, but we're reflen
replenishing it -- that ten
years time five gets
essentially 50?

>> Yes, and the 8 million is
the remainder of the money
it would take to
decommission holly power
plant and the 55 million is
our estimate of closure
costs -- beginning closure
costs for the decker plant
and the fayette coal plant.

And so given that they have
a longer life, we used a
longer replenishment rate.

and then on the
strategic reserve
contingency, it looks -- I'm
sorry, there's very little
difference there, so -- let

[09:56:00]

me jump down, then, to the
strategic reserve, rate
stabilization.

We currently have zero in
that fund.

The target amount is
98 million, and the test
year revenue requirement is
3, and it suggests replenish
rates -- how will that be
replenished in three years?

Is some of that going to be
replenished through the
rates?

9 million would be
built into the proposed
rates.

The 98 million is a maximum
that that contingency would
ever be.

We placed a 90-day maximum
on that.

So we don't expect to get to
98 million for a number of
years.

And we have only put the
9 million in the rate
reserve.

so --

>> so that would be
replenished in future years,
if we had excess revenues
from weather, would be one
source, other than a rate
increase, that you might put
money into that reserve.

and then I see
that under number of years
to replenish in the rate
proposal, it says three
years.

Is it actually more than
three years?

>> All we've -- always built
943
years, so we certainly would
not be at the target.

That's just the target.

>> Morrison: got it.

Thank you.

>> Spelman: mayor?

council
member spelman.

if I could
follow up on where I believe
council member morrison was
going.

The rate stabilization
reserve exists for exactly
the contingency we are
dealing with now.

We need to raise our rates,
but you don't want a rate
shock, and so we have a
cushion there, we can spend
down the rate stabilization
reserve slightly to help
having to raise rates by too
much in any given year.

Is that about right?

>> Yeah, that's right.

It is a common tool publicly
owned utilities have, and it

[09:58:01]

can be used at the
discretion of -- it can be
set up to be used at the
discretion of the -- you
know, austin energy in this
case to use in a budget year
to say, oh, we had a bad
year for a -- some kind of
rate effect and how it's set
up, and then you can use
that to balance for that
next year, then replenish
it.

So that's what it's used
for.

seems to me the
logical way to think of it
is kind of a sawtooth.

You build it up, you build
it up, okay, then you need
it because you have to raise
rates, and you drop it down
to reduce the need to raise
rates by too much.

And so you see it coming up,
and then it comes down, and
it slowly builds back up
again.

Just every few years you
need to tap into that for
the same sort of purposes
we've been using it the last
couple years.

Is that accurate?

>> Yes.

so seems to me
that the right time to
replenish this to a
reasonable level, and the
right target ought to depend
on how frequently we expect
to raise rates, presumably
that's something that's
foreseeable, at least to
some extent, and how big
that fund needs to be to
reasonably prevent that
increase in rates when it
does happen from being too
large.

Does that sound about right?

>> Yeah, that's about right.

That's about right.

>> Spelman: okay.

Do we have a sense for how
long it's going to be
between -- well, it depends
on what we do, I understand,
and if we don't raise rates
you're going to need to
raise rates next year for
sure, and I don't want to go
there and I don't think you
do either, but if we reat raise
rates by not quite as much
as you are asking for this
year, then we're going to
need to raise them a bit
more next year and the years
after that.

I understand that's kind of
where we are.

At some point we're going to
raise rates to somewhere
close to what it is you're
talking about here.

How long going forward do
you think it's going to be
before we're going to need
to talk about rates again?

>> Rates again or this fund?

how many times
are we going to have to do a
rate case?

>> I'm running for
re-election.

I'm going to be here for
another three years, I hope.

Will I have to live through
another [inaudible]
I think I see
what you're saying.

If I understand the question
right.

If you had a rate
stabilization fund that was
big enough.

>> Yeah.

could you use
that as a shock absorber
going forward, and --

>> and the answer is i
believe probably when you
did this you had a 90-day --
90 days of operation and
when you set this metric,
and 90 days of austin energy
at that time was probably a
smaller number at that time
than it is today.

So that fund would have to
be a pretty good size to --
to be -- in other words, if
we had a big fund going into
where we are, you could look
forward and say, well, on a
cyclic time, is the economy
going to help us out?

There's a lot of different
factors, and I -- I don't
think I really have a good
answer for your question,
but it's -- it's -- it's a
good tool to have, and it
would take a long time from
where we are to build it
into being used as a good
tool, and I think that's
what elaine has talked
about.

We talked about in our
revenue case, only
$4 million a year, and it
would take a number of years
to build that slowly so that
you can use it as a tool.

but we don't
have a -- I'm looking at the
target amount as based on
non-power supply operating
requirements.

It sounds like a rule of
thumb but it doesn't seem
like it's reasonably related
to what we're using it for,
which is a shock absorber
for having to raise rates
too much.

Seems to we the target value
ought to be based on that
other than just how fast we
raise money.

The years to replenish to
that amount, whatever it is,
ought to be based on
approximately how often we
expect to have to go through
a rate case.

>> And at this time I don't
have an answer for you about
how often that is, but i
think what we're projecting
here in this rate -- in this
business case that we put
forward is that we need to
start building a fund and to
have that as a tool going
forward, and when we can
actually use it effectively
in a situation like we're in
today, I don't know that we
have an answer to that.

as, in fact, we
have been over the last
couple of years, is one of
the reasons why we've been
able to delay the rate case
up until today.

That's correct, isn't it?

>> It is.

>> We can certainly rethink
the policy target on that
since it will be a number of
years before we get there.

We may be able to address
your comment.

but in five
years or whatever the
appropriate length of time
is when we do have the next
rate case we'll have this
available so we have a
little bit of flexibility
into how much we change
rates and exactly what year
we do it in.

Let me ask you a more
philosophical question.

I'm not familiar with the
fund accounting principles
in use among the rest of
these guys but we've had
conversations about how it
is that ae structures its
reserve policy, and as i
understand it, we've got
several different buckets of
strategic -- well, three
different buckets of
strategic reserves for three
different classes of
contingencies.

Is that generally true in
public power?

Do we have different buckets
for different kinds of
contingencies or are they
thrown into one pocket like
THE IOUs AND PULL IT DOWN
When they need it.

>> What austin energy is
doing is consistent with the
three publics I've worked
with before and it's
consistent with what I know
public power does across the
country.

There isn't any set
guidelines on what you call
these buckets, if you will,
but strategic reserve is
probably a pretty common
one, but at the end of the
day when we sit down with
rating agencies, for
example, they want to know
in pretty good detail what
these different funds are
for.

Like the discussion we just
had on rate stabilization,
for example, but the other
funds are set there, and
they're not refunded every
year.

Like our rate -- strategic
reserves, we don't fund
those new every year.

That is money that sits
there.

We don't touch it.

>> Spelman: right.

>> And that's consistent
with what public power does.

put it in your
reserves until you
absolutely need them, i
understand.

>> Right.

my -- the
question that's been put to
me and let me just put it to
you, shoot the messenger if
you must, but I'm mostly be
messenger for other
folks here, although it's a
reasonable question which is
why I'm asking it.

If we've got one class of
reserves for one contingency
and we'll tap into it if
that contingency coming
comes up, we've got a
tornado, we have a tornado
fund.

If we have a downturn in the
economy we've got a downturn
in the economy fund.

And if we are funding each
of those reserves on the
basis of the likelihood of
that one thing happening,
then what's the likelihood
that we're really going to
need to tap into all of our
contingency funds at the
same time?

What's the likelihood of the
perfect storm where we have
a tornado and an economic
downturn and it's been five
years since we've raised our
rates and good gosh, we're
completely stuck?

And do we need to -- would
it not be as reasonable to
have a single reserve, which
covers all of those
contingencies or at least
the recognition that if we
have a tornado we can always
pull money out of the
economic downturn fund if we
need it?

>> Well, I believe that's an
exercise you have to go
through when you develop
your policies, and so the
discussions I've been
involved in, you know,
setting these funds in the
past is you are taking a
risk -- you're doing a risk
analysis of what possible
things can go wrong and what
your generation fleet is,
and so we're exposed, for
example, to a nuclear
project and as a generating
resource it's very
inexpensive and good for us.

So I don't know that I can
answer it simply.

I think the answer is you
have to go through that
exercise when you set these
up, and it -- I think the
questions that I have heard
from some is that you don't
need the reserves to be that
high.

Well, that's a pretty
consistent argument
sometimes with customers
because what they want you
to do is to draw them down
now, and they take advantage
of that drawdown now, but in
the future you make a
decision, well, I want to
build those back up, and
that's kind of where we are
on the rate stabilization,
is that we want to build it
back up because it's been
depleted.

And so that --
another way of
thinking about the same
issue is these reserves are
as high as they are because
we've been taking money out
of the pockets of our
ratepayers for years to
build them up to the point
where they were a couple of
years ago.

We've been spending them
down because we haven't had
the rate case in the last
couple years, even though
we've been bleeding money.

Do we need to build them
back up to the point where
they were before, which is
going to require that we
take more money out of
people's pockets and raise
rates, and if so, do we need
to do that rate now?

I think the discussion we've
been having is how long --
how long do we have before
we need to get these up to
the target amount and how
high should the target
amount be?

And what I'm asking is, does
it make sense for us to have
a separate set of reserves
for separate classes of
contingencies if we have a
good -- reasonable belief
that we're not going to have
to cover all three of those
things in the same year ?

>> We have put the whole
rate package forward to you
consistent with what we
believe to be the best
policy direct for rebuilding
the reserves in a manner
that makes most business
sense.

And so that's what's inside
of our rate proposal, is
building the operating
reserves, the operating
funds back to where it needs
to be so that we can
operate.

That's the fund that is down
right now.

so that
operating cash is the one
we're most worried about
right now?

>> Yes, sir.

>> Spelman: okay.

Last question.

It really is.

On page 2 you've got a
reserve fund comparison --
actually it's nowhere near
the last question.

It's the last question for
today right now.

On page 2 you've got two bar
charts, one of which shows
our maximum cap reserves and
our actual reserves in just
plain millions.

, Which doesn't help much,
because we've got widely
differing sizes of utilities
here.

We're just basically in the
middle of all these
utilities so there's a good
comparison group.

The second of those two
graphs on page 2 shows that
gold bar of the reserve
funds is percentage of
revenues.

Is that the -- is that gold
bar -- does that represent
the percentage of current
revenues that contains our
current reserves or our
target reserves?

>> Target reserves?

That's target reserves?

>> Target.

>> Target.

>> It's target.

>> Spelman: okay.

That's the target.

>> That's tarring.

>> Spelman: okay.

So our current reserves are
some fraction of that.

Roughly where on that bar
would we find our current
reserves?

>> 180, We'd be about 10%,
12%.

>> [Inaudible]

>> what he's saying is the
blue [inaudible] I think it
would be 12%.

>> Spelman: okay.

About 12%.

>> Okay.

so the way i
should read that right now
it looks like the gold bar
is in the middle as a
percentage of total revenues
of public power that you are
looking at, which is about
where it ought to be, that
makes sense, but that's the
target, that's not our
actual position.

Our current position is
much, much lower than that
and, in fact, 12% is lower
than any of the blue bars on
this chart and our current
reserves as a percentage hef
revenues are much lower than
the current positions of any
of other utilities you're
talking about.

>> Yes, sir.

>> Spelman: thank you, sir.

>> Cole: mayor?

council
member tovo.

I have a couple
questions and one of them
relates to this graph and
some of the information that
e auditor presented us
with.

But first, before I move on
to that, I wanted to ask
about the reserves.

Can you remind me which of
the reserve funds de
with -- well, let me just
pose the question.

When one of our -- one
question that's been raised
to me is I think you
described the other day that
there were -- there needed
to be a transfer over the
summer because the fuel
costs, austin energy ended
up buying fuel costs at a
very high point in the
market, and it was required
to make a transfer from the
operating -- operating
expenses into one of the
funds.

Can you just recap that for
us?

>> I can.

Actually what happened was
that depleted the operating
reserves.

What I was talking about at
the audit committee is there
could be a situation, if we
didn't have sufficient
operating cash, that we
would have to make a
transfer.

In this particular year we
had operating cash, but that
was drawn down to pay for
the additional power supply
in august.

But if we didn't have
sufficient operating cash,
we'd have to have a way to
pay for it.

So that would be an example
where we would need to rely
on strategic reserve for the
additional liquidity or the
additional cash to be able
to make those payments.

and so that is the
strategic reserve emergency?

>> That one is used as a
last resort.

That would be the
contingency.

the strategic
reserve contingency.

So what you refer to as the
operating reserve is the
strategic reserve
contingency and that's what
you rely on if there oont
enough operating cash.

>> If the operating cash is
depleted to zero you fall
back to the contingency in
the contingency reserve.

is within the rate
proposal it is -- part of
the revenue requirement does
contain the replenishment of
that.

Is that right?

>> A very small amount,
about $200,000.

>> Tovo: okay.

Because one question that's
been raised is whether or
not the increase in the fuel
that just happened as of --
what is it, january 1,
whether that is also making
up for that payment, you
know, for that higher than
expected cost over the
summer.

>> That is -- that higher
cost is included in that
fuel, and that's -- that
money will now be collected
from our customers.

In august when we paid those
additional costs our fuel
rate did not change, so
those costs were not passed
through to the customers
until january.

so -- but is it --
I guess are we collecting it
twice?

Are we collecting it -- are
we collecting that higher
cost of fuel through
increased fuel charges now
and the replenishment with
the operating reserves?

>> No.

The replenishment.

Of the reserves and the fuel
charge are those -- those
are two separate categories.

The fuel charge only, if you
will, as a -- is a forward
looking budget of what your
power supply is outside of
your personnel to run and
everything is strictly fuel.

So -- and if you're buying
power from somebody, a ppa
would be a part of that as
well.

So it's a forecast looking
forward and it looks back,
so you make up for what
happened in the past and you
look forward and it's a part
of our risk policy, it's
very complicated but it does
not have reserves in there.

The reserves come as a
function of your rates and
replenishing through rates.

So there's a disconnect
there.

yeah, I understand
what you're saying but i
guess part of the looking
back is recovering --
recovering those higher than
usual rates in the summer
and part of the
replenishment is also due to
that higher than expected
rate cost over the summer.

So I mean, and that -- in
that way they're both
dealing with the same
incident of higher than
normal fuel costs.

>> Well, we underrecovered
from august -- there were
two -- two options.

You could have had a fuel
increase august 1, if you
had known you were going to
have that additional cost.

We deferred that to
january 1, which is our
typical date to change the
fuel rate.

So we used money out of our
bank account instead of
collecting it from our
customers for -- from august
through january.

So we have less money in our
bank account, and so when we
crafted the fuel factor in
january, one of the
adjustments as larry says,
is we looked forward but
then we adjust for what we
did not collect that we
should have collected.

So as -- from january
forward as we collect that
money from the customers,
that cash goes back into the
bank account that it came
out of.

right, but also as
part of the rate proposal
we're replenishing that same
bank account?

>> No.

>> Actually, we're not.

If you look at the slide 4
in policy 11, the test year
requirement is zero.

>> Tovo: okay.

So it's operating -- okay.

I --

>> they can work in tandem
and -- the question is do
you have sufficient money in
the operating account, which
is your bank being.

Look at that -- bank being.

Look as that as your bank
account and the contingency
as your savings account.

If you're going to overdraw
your bank account, you pull
from savings, which would
require council action to do
a transfer from the
contingency into your bank
account.

So you can't really touch
the savings without council
approval, but you can
fluctuate your bank account
up and down for power supply
costs that were unexpected
and other kinds of things,
as long as it doesn't go
negative, you don't overdraw
it.

so the rate
proposal is replenishing, in
your language, the savings
account and the emergency
savings, but the money for
the increased fuel charges
came out of the regular bank
account, the operating cash.

>> On december 14
presentation, there's a
slide, I think I showed it
at the quarterly report
also, it's slide 10, and it
shows these funds, and I'll
hold it up for you, but it
is this slide, and it's got
the blue, and the blue is
what elaine is talking about
as the operating fund.

>> Tovo: good.

Thank you very much for that
clarification.

So then I wonder, I do have
some questions about the
auditor's conclusion
regarding reserve funds, and
your conclusion -- and your
presentation about the
reserve funds, and I don't
know if it's appropriate to
have the auditor as part of
this discussion or not, but
what I -- what I took away
from the auditor's
conclusions on reserve funds
is that it is about a
quarter of the total revenue
requirement that austin
energy does have higher
reserves than other
utilities, and that we are
increasing -- that it is a
pretty substantial increase,
that was my language, not
theirs -- increasing the
levels of reserves from
about 20% to 31%.

So I guess it sounds like
you've looked at -- I mean,
you have a different set of
utilities, so I wonder if
you could explain -- explain
your rationale and then
maybe if we can hear from
the auditor about whether or
not those conclusions were
accurate.

>> Well, I obviously can't
speak for how they developed
their data, but part of it i
believe might be that, as i
said before, all public
utilities called their
reserves different names.

They have different titles
on the buckets, if you will,
and so if you're going to
compare a reserve fund at
austin energy to a utility
that has another reserve
fund, that you might not
find any that have that same
name.

But what you really do is
look at total reserves that
a public utility carries.

As elaine explains, they're
really all one big giant
bucket of reserves.

They just have different
rules as to how you can use
them.

So if I set out to look at
utilities and compare
reserves, I'm going to look
at total reserves, because
that's really your cash
position.

And with rating -- when
rating agencies look at it,
they look at your total cash
position that you have.

I guess I --
actually, if I could ask
marry or our other
auditors just to address
this, because I do want to
make sense of this.

Is austin -- on -- you know,
how does austin energy
compare in terms of the
number of -- it's less
important the number of
reserve funds, but basically
how does it compare to other
utilities in terms of the --
how much we are saving
through our reserves and,
you know, what percentage
that is of our total
revenue, and I want to
understand at least what the
difference is between the
charts we have from austin
energy and the charts we
have --
before
you answer, I want to make
one very quick point, and
that is there really are --
there may be a lot of
different buckets, but there
are really two types of
reserve funds.

One would be for
emergencies, contingencies
or whatever, and the other
would be for budget
stabilization, as you talked
to us.

We have the same kind of
reserve set up in our
general operating fund
budget.

But to me the difference is
for emergencies, that's
something you don't go into
to cover your operating
expenses.

But the other one is kind of
designed to cover short-term
shortfalls and could be
invaded, so I do think it's
important that we make a
distinction between the two
types of reserves.

And the other comment, i
think we had a big
discussion on the fuel
charge.

To me, I think in very
simple terms, which I like
to do, is just a
pass-through charge despite
all the accounting
gymnastics that you might go
through, basically it's
passed through and austin
energy doesn't do anything
with that money except pay
for fuel.

Okay.

Go ahead.

>> I'd like to start off
first by -- like larry said,
I don't know how they come
up with their numbers
either.

We haven't had a chance to
validate them so I can't
really draw a comparison.

The way we approached it is
we were trying to identify a
judgment sample of some
utilities that were aa rated
and then we took a look at
their unrestricted funds.

That took a little bit of
study on our part.

We actually had to go into
the description of each one
of this is reserves was
intended for and it truly
was restricted or
unrestricted.

We looked for those that had
unrestricted funds that
could be used and moved
across to be used for other
purposes, other than one
particular purpose, such as
debt or other type of
covered items nar in there.

So that's why I think ours
are substantially different,
one reason it would be
possibly different than what
austin energy has in place,
and from that we then did a
calculation using the test
year, we did not use the
actual data, we used the
test year information they
provided us in the rate
proposal to calculate these
amounts.

so it's possible --
am I understanding, it's
possible that you were
looking yonld just reserves
butio -- beyond just
reserves but also other
unrestricted funds?

>> We we looking at
reserves.

Like in one situation, which
I think was san antonio,
where we had one that said
it was restricted, but when
we looked at it, 6% of it
was restricted.

The remainder was not
restricted, so we included
that fund.

So we actually looked at, in
substance, what was going on
with the reserves as opposed
to the title that was there.

>> Tovo: okay, yeah, right.

Right.

In case they had, as
weiss said, in case they
had different --

>> we absolutely agree with
that statement.

>> Tovo: okay.

Today, was that an accurate
summary of the conclusions
of your report, that austin
energy does, based on your
review, has higher reserves
than other utilities and
that what's in the rate
proposal is higher than the
reserves that we've had in
the past and that it
represents a bigger
percentage of austin energy
revenue than some other
comparable -- some other
utilities that you used to
compare?

>> I think that's a key
point, that we used a
different subset of
utilities to look at, and in
that case your statement is
correct.

As far as the past, I don't
think we went much in the
past.

It was --

>> [inaudible] we just used
the rate documentation that
was provided in december and
the test year information
from that report.

So we didn't look at
historical --
I maybe misstated
it.

I think you said that the
levels of reserves were
increasing from 20% to 31%.

So from current --

>> that's compared to the
test year, using numbers
from the test year, it's
moving from 20 to 31%.

>> Also, I'd like to point
out that austin energy did
tell us that the comparison
that we were doing that was
not one that was normally
made.

We felt from just an
information perspective it
would be useful to the city
council to have that
information available.

the comparison of
the level of reserves -- and
weiss --
the level of reserves --
which part of the
comparison?

The level of reserves and
the percentage of total
revenue?

>> I don't think they
said -- I'm saying i
thought --
you thought it
would be useful.

weiss to
explain why --

>> well, it's just industry
practice, you know, that we
compare -- there's audited
financials by every public
utility in the country, and
those are public, and, you
know, it's a pretty big job
to go through each one and
do a full analysis.

I looked for it, but it --
it depends on the -- you
know, on the metrics you
want to measure.

>> The rating agencies
typically look at days cash
on hand as a measure for
your cash support or
liquidity support rather
than a percent of revenue,
and the two particular
reserves that we have set
targets for in the rate case
that are higher than in the
past are the rate
stabilization, which we've
not really had in the past,
and the nonnuclear
decommissioning.

Those are two in particular
that I believe are much
higher than what you would
see historically for us.

well, I don't want
to monopolize the
discussion.

I'm sure there are -- I have
some other but --
yeah,
I have another quick
question, and that is, have
you guys sat down together
and talked about this?

Because obviously you're
using different criteria to
set up reserve funds.

>> Well, in the beginning --
i
think that would be a very
beneficial exercise for you
to get together on what the
numbers are, what the
criteria for setting the
numbers are to compare.

If we don't do that first,
then we're just -- some of
it is apples and some of it
is oranges and it's not a
valid comparison.

So I would strongly suggest,
auditor, that you have
that discussion with the
austin energy folks and come
to an agreement on the
actual numbers here on the
page.

>> Mayor, we have had
meetings.

We had an initial one and we
had, I guess I will call it
an exit conference when we
were about to do the audit
finance -- we made the
presentation.

And I think we have an
honest disagreement as to
whether these numbers would
be useful or not.

We do not hold these out to
be the industry practice.

We don't hold them out to be
the numbers you should be
making the total decision
on.

It was information for your
decision-making that we
thought would be useful.

well,
somehow we have tobl able --
to be able -- for the
comparisons to be valid we
have to know what the
criteria for the individual
numbers to be compared are,
so there should be a couple
of big-ol' asterisks by
these numbers, they aren't
based on the same data.

So let's see if we can do
that.

Council member riley.

just a couple
questions.

First, larry, on the
contingency reserve shown on
slide 5, the middle row, the
last column on that chart is
number of years to replenish
in rate proposal, and for
the contingency reserve
there in the middle, that
box says currently
deficient.

Help me understand that.

Does that mean the rate
proposal is currently disht?

>> There's not enough --
deficient?

>> There's not enough
revenue forecasted in the
rate proposal to return that
back to where it needs to
be.

Is that correct?

>> No, I think what that
means is that it's currently
deficient.

We've got the 200,000 in the
rate proposal, so that that
will be -- that would really
come out of the first --
should be one to three
years, just like the rate
stabilization.

All of these in the test
year, I think it was an
error.

I think it should be for
three years.

>> Riley: okay.

So that box should --

>> all of these except for
the nonnuclear are three
years, and I think it
just --
so that box should
actually say one to three
years?

>> Yes, three years.

>> Riley: okay.

And then lastly, to cut to
the chase with respect to
the replenishment of all
these reserve funds, do you
see any opportunities
consistent with our
financial policies to
stretch out the period of
replenishment so as to
reduce the revenue
requirement that we're
dealing with in this rate
proposal?

We have gotten the
suggestion from the
community with respect to at
least some of these reserve
funds, that if we -- that if
we looked for a longer
replenishment period, say we
went for five years instead
of three years, that we
could reduce the revenue
requirement and then ease
the blow of the rate
proposal.

Do you see any opportunities
to do that consistent with
our financial policies?

>> Well, I will say that
replenishment of these
reserves is not the main
driver of this rate
increase.

It is not.

And that any -- all of --
all rate proposal has a
staged replenishment of
that.

And I don't know the answer
to your question.

We'd have to go back and
look at our proposal and see
what the genuine rate impact
would be for that, but it is
not as significant as our
general operating
requirements.

but the revenue
requirement is affected by
the replenishment of the
reserve fund.

>> It is.

It is.

And correctly so in some
cais cases, I believe --
cases, I believe, because
they look at the entire
reserves and understand that
that all has to be funded by
rates.

That's not entirely -- I've
had that discussion with
several people.

do you think that
you could take a look at
whether there is an
opportunity to reduce that
revenue requirement?

And I realize -- I hear what
you're saying, it's not a
main driver of the revenue
requirement and it may not
have a tremendously
significant impact, but if
there is an opportunity
there, then that would be
helpful to know, even if --
even if it would only be a
modest reduction of the
revenue requirement, if we
could aim for replenishment
period over, say five years
instead of three years, then
that would be helpful, and i
think would be consistent
with the council's interest
in phasing in the impact of
this rate proposal.

>> Yeah.

Okay.

We can do that.

>> Mayor?

council
member morrison.

>> Morrison: thank you.

I apologize for following up
with more questions, but
since my colleagues took
time I had time to read this
chart, and I want to --
actually this is sort of a
follow-on to chris's
comment, and in terms of
looking at what's driving
the revenue requirement.

I wanted to focus in
specifically on the repair
and replacement fund,
because the test year
revenue requirement is
$20 million, so that's a big
chunk of change, and one
question -- my first
question -- well, my first
suggestion is especially
because the number of years
to replenish that is not
specified, that would be a
place -- and it's plan in
the rate proposal to be
replenished in three years,
that could definitely be a
place to focus in on because
there's a lot of funds there
and it wouldn't necessarily
involve actually changing a
financial policy.

But my follow-on question
is, if we have -- I just
want to understand how this
works in the long-term.

If we have a new element of
our rates that is going to
be capturing
$20 million because we need
to rebuild this fund, it's
going to be capturing
$20 million each year, and
the plan is after three
years and the proposal that
that would be fully funded,
what happens to the rates
after three years when we no
longer need to be
replenishing that fund?

[One moment, please, for
]
that are proposed, we could get
$20 million for three years, and
might not need it for rebuilding
funds, but might look at what
else would we need to be doing
with it.

>> That's correct, because it's
tied to the budget and capital
planning and what we're going to
build and not build and how many
substations do we have to build
depending upon the grid.

So it depends on what's
happening in the future.

>> Morrison: One other facet
we're hearing from the public
about, if we are rebuilding a
fund over three years with our
rate proposal, that means it's
being rebuilt without the
benefit of new industrial
contracts, participating in
rebuilding it.

So that's sort of another reason
you might look at for stretching
it out over longer than three
years.

So it's not all borne by the
current customers and the
current non-contracted folks.

And then another element that we
have been hearing a lot about
is, of course -- and I think
you've spoken some to this,
already, today is the cash
investment in capital.

With this fund, I see that some
large amount of funding over the
years, 30 million in 2008 and
$35 million in 2009 were moved
to the operating fund for
capital improvements.

So is that an example of where
we might be using cash for
capital improvement as opposed
to debt?

>> Yeah, well, I think you've
hit on the issue.

The sand hill project expansion
there, you know, the financial
prosections at the time and what
the market was and everything
else, that was the strategy
chosen, to use cash instead of a
debt service for that.

What exercise we're going to go
through is get more comparisons
across utilities to look at on
this issue.

I believe 50% is the best
business case.

It is an admirable place to be
to try to build yourself from,
let's say, 20% cash up to 50, is
an incredibly steep hill, and i
believe you will find that the
finest run public utilities in
the country are probably really
close to 50%.

If not, they try to be, but be
at that level.

So the answer to your question
is that varied year to year,
again, depending on the projects
we decide to do.

Right now, we talked about the
wind projects earlier, we won't
have debt service on those,
we'll be paid for those.

So that takes that cash issue
off the table.

Otherwise, we'd be struggling to
figure out how to finance those
unless we were really going to
the market with that.

>> Morrison: Sure, i
understand.

>> And we have segue into the
next section of your report.

>> Morrison: I'd like to make
one more comment about that.

I think this example is helpful
in understanding how that
decision about, you know, what
we do with cash versus debt
impacts our rate design because
we have about $60 million that
was transferred out of here to
do capital investments, and
we're short $60 million, and,
so, we're now looking at
20 million, which is about 20%
of our projected revenue
requirement.

So if you follow all those
numbers, you can see that 20% of
a projected revenue requirement
is a big amount, when we're
looking at a big rate increase.

So it's a lot to wrap your heads
around and I appreciate this
because it helps to form the
discussion.

>> One last quick question.

Council member morrison talked
about the the industrial
contracts.

I asked a question in the q&a
about when the contracts were
coming up and I think the answer
was that the last contract
expires in 2015.

>> Correct.

>> When are the first ones
expiring?

There are 18 and I appreciate
that clarification.

>> They all expire at the same
time.

>> They all expire may 25.

>> Tovo: Okay.

It says the last long-term
contract but all 18 expire --

>> all long-term contracts.

>> Tovo: Okay.

The last long-term contract.

All 18 expire then.

>> When I say last, it's because
they can no longer sign up for
them.

Well, we currently have rates
that allow it, so when we don't
have that, they won't.

>> Tovo: And this takes us
into a slightly different
direction, but one of the
questions I asked had to do with
the total revenue that might be
realized if those industrial
contracts paid at commercial
rates.

I think they're at about 6 cents
and would need to be a little
higher.

>> You mean the regular rate we
would be paying on this?

It's about $25 million.

>> Tovo: And that is
currently -- under the current
rate?

>> Correct.

>> Tovo: Okay.

>> That's the difference between
the continuing contract and
moving to a new proposed rate.

>> Tovo: So we're collecting
$25 million less than those
industrial users would be paying
if they were an individual.

>> Right.

And it's in the december 7-14
presentation as well to note
that we have a chart to show
when the revenue comes in from
the rate increase and it comes
in in pieces.

5 and that whole
piece of that is the commercial
industrial rate.

3% Of total revenue comes in
from the industrial customers
that you talked about at the end
of that contract.

>> Tovo: I agree with the
suggestion of looking at the
alternative of stretching out
the punishment rates and that
was one of the notes in the
auditor's report that that could
enable a reduction in the
revenue requirement and I think
that's a very good place to
look.

>> Mayor Leffingwell: The next
section is on revenue
requirements, and we thought --

>> the next section is on
revenue requirements, and it's
related to what we were talking
about just a little bit.

But the revenue requirements are
here.

You've seen this before.

We refreshed their -- the
reserves are added for the
reasons they're listed up there,
but our total revenue
requirement for 2009 is this
norm.

Now, when we talk about -- this
number.

When we talk about normalize, we
have to use an audit year to do
this and we normalize it for
weather and we take
extraordinary expenses out of
it.

That's utility practice, what
you do when you look at a test
year to determine your cost of
service.

So, you know, if we had 2010
audit, we would look at that,
for example, but the way this
was started, at the time it was
started, this is what we looked
at.

Then this talks about the
reserve fundings that we've --
and existing reserve balances
that are available for unplanned
events, and we just tried to
list some of the dollar amounts
that these could be and what the
possible threats are.

This is really an evaluation of
risk, and then we have reserve
fund balances needed for major
expansion.

Just an example, some of these
larger capital expenses.

Even in here, purchase options
for wind farms, for example,
might be something that we need
to put in there.

And then on managing cash, I'm
going to let elaine go through
this part of this presentation.

>> Part of managing cash is
determining how much cash to use
or how much equity you're going
to use to fund your capital
program, so one of the issues
that's been raised in this rate
proposal is our debt-to-equity
it's currently at 50/50
and we have been recommended to
move it to 60/40 by some folks
in the community.

We wanted to point out that,
typically, if you've got a low
debt-to-equity ratio, you will
be lower risk and minimize fixed
costs.

For a generating public power
entity that operates in a
competitive nodal market, you'd
prefer to have your generation
with low fixed costs.

We've made our plants as
competitive as possible by
keeping those fixed cts low,
by using our cash to fund those
capital additions to then.

Typically, a higher
debt-to-equity ratio would be a
higher risk.

As you issue more debt, the debt
is not free.

Over time, you know, it's like
paying for something with cash
versus credit cards.

You pay for it with the credit
card and you don't pay the
balance, you're going to have to
pay the purchase plus the
interest.

Well, that does, over time,
raise the cost, if you issued
more debt, and, thus, you're
going to have higher rates and
higher cost for your rate
payers, ultimately.

So we believe that the 50/50
gives us the flexibility that we
need to financially manage the
utility, but also is a great
benefit to our rate payers on a
long-term basis.

And I think one of our earlier
quarterly reports pointed out
some metrics that I'm going to
cover now.

Moody's investors service, which
is a credit rating agency,
recently issued a report on
public power that owns
generation, and in that report,
they had some metrics that they
use as guidelines for rating the
utilities, and a aa rating,
which is our strategic goal for
austin energy, they would expect
you to have a debt ratio in the
range of 26-50%.

While we are at the upper end of
the range, we are certainly
trying to improve our rate
toge -- rating to the aa.

And I have another rating agency
slide.

It looks at it a little
differently.

It looks at your debt burden per
customer, and the grass on the
left -- let me back up.

The agency does a public power
pierce study on an annual basis
and segregates the utilities by
generators as well as by their
actual credit rating.

So this data is pulled from
their most recent report from
last summer.

One of the metrics we looked at
was debt per customer, and they
have a trend graph that shows
that, on average, the debt
burden to the rate payers is
growing, has grown over time.

Where austin energy was at was
$3,416 per customer, but if you
look at the table on the right,
those are all aa minus rated by
fitch public power, and you can
see the range of debt per
customer.

We're kind of in the middle of
the pack.

You know, we've got one that's
as high as 9,000 per customer,
one as low as 400 per customer.

And again, we compare fairly
favorably to the industry median
for the aa minus rated debt,
which is at 3,265.

So, again, we think that we've
got a fairly good debt mixture
by getting to those, by looking
at these ratioos leffingwell
question?

Council member tovo.

>> Tovo: Well, again, I'll
just say we have two different
charts, one from the auditors
and one from you talking about
how austin energy compares in
its debt -- debt issue.

So I guess I just would like
you, if you could, to respond
maybe to the utilities that were
selected in the auditor's
report, because austin energy,
you know, in that lineup, was
financing more of its projects
with cash than some of the other
comparable aa minus utilities.

You've used almost -- you know,
I think anaheim is the only one
that appears on both of your
lists.

>> Yeah, I think, again, it
depends whether you're looking
at total dollars or on a
per-customer basis.

This is fitch doing this on a
per-customer basis.

I just calculated where I used
to work and we're about 7,500,
and that's because we just
acquired several large
generating projects, so there
are several large capital
expenditures.

I think that's what you will see
is a spread between a -- as was
mentioned earlier, I think our
task may be to sit down with an
auditor and make sure we reply
to their report and can sit down
and talk about where we get our
performance data from.

It's not right out there.

The rating agencies do it, but
they release limited
information.

But in the peer group that I'm
in, per se, I can make an effort
to go to those folks and we can
develop as good a set of data as
we can when we want to look at
information like this.

What's common to be done across
the industry is look what rating
agencies do.

They release reports.

I think the financial advisors
to the city may be able to
assist in that as well.

But we can do that effort, i
think.

>> Tovo: I think both
perspectives are valuable.

It's good to see it on customer
basis and how us and others
compare.

I wonder, too, we have a lot of
information here and there
about, you know, how rating
agencies make their decisions.

What I came away with is it's a
complicated bunch of, you know,
factors from having stable
financial policies to cash on
hand to debt equity.

I mean, it's not a clear cut --
you know, you finance more
things with cash than debt and
you're moving into the next
category.

Mony, I think everybody agrees,
at least in terms of the
material that we represented,
thatths a holistic approach.

>> It is.

newman
is here, who manages our
meetings with the bond rating
agencies.

If you'd like to ask a question
of him, I'm sure he would be
happy to volunteer, because it
is a complex thing and not
strictly a numbers-based thing.

The personal face-to-face
interviews, to mix that in with
the actual hard numbers and come
up with the rating.

Council member spelman.

>> Spelman: I'm with you on
the complexity of the
interpretation of the numbers
because our risks are different.

We've had higher growth than any
metropolitan area in the last
few years and that will change
our position and the cash needs
going into the future.

And I'm with you on the
difficulty of identifying what
reserve funds to include in any
kind of a reserve comparison
because different funds are
dedicated for different
purposes, and you want to be
sure we get apples to apples.

I don't understand why it is
difficult, however, to identify
long-term debt, because, at
least in my limited experience,
is to line in your balance
sheet, why would it be difficult
to compare the long-term debt
per customer for any number of
utilities as long as we can get
our hands on the cash?

>> I think we can.

We have been working on other
parts of this rate proposal as
well and it's just a matter of
an effort to go out and contact
our peers in the industry.

>> Spelman: Okay.

>> It's not something everybody
puts out there.

Ours is out there right now,
pretty good.

[Laughter]
but, seriously, everybody knows
exactly where we stand.

>> Spelman: Right.

>> This is a section that is
double and minus, in the report,
report included all public
power.

We did not design this to match
the auditor's list.

>> Spell that didn't catch my
eye because I didn't have the
list in front of me, but this
was not designed to match your
list on slide number one.

We're talking about comparable
utilities, the only one that
matches the list is jea,
jacksonville?

And I think with the possible
exception of jacksonville, are
considerably smaller than we
are, and bountiful utah -- good
heavens.

I'm not sure whether this is a
comparison group that makes a
lot of sense.

>> All aa minus.

>> I would say, looking at this
group, jea, eugene water and
electric is a municipal utility,
but small.

Anaheim, they serve disneyland
and the whole area.

They've got a big load, and i
would say they probably would be
close to half our size.

>> Spelman: I would imagine
hydroquebec is bigger than we
are, too.

>> That's a different animal.

It's looking at aa rated, so aa
rated means that, could be big
or little and have different
requirements, some utilities
might buy all their power and
some generate.

To do a peer group comparison,
we would have to look at
utilities like us, thermal
gene municipally owned.

>> Spelman: It will be
relatively simple to identify
long-term debt if we can get our
hands on the report?

>> Yeah, there are official
statements.

>> Spelman: So this won't
require a whole lot of judgment
calls on the reserve question?

>> Right.

>> Spelman: Thanks.

>> We have one other slide we
want to go through to talk about
how the debt service coverage
goes up or down, depending on
some of these metrics, and then
this is our last slide.

>> We tried to create two
scenarios.

One is at the top and one is at
the middle of the page, and in
both scenarios, the revenue, the
assumptions were that the
revenue and the operating
expenses were the same, and the
only variable was how much debt
you issued for your capital
program and how much cash you
put into your capital program.

At the top, the scenario is a
$100 of debt, $100 of cash, so
that's a 50/50% debt-to-equity
ratio with a debt service
coverage of 2. 4.

In the bottom scenario, if you
increase the debt, issue more
debt by $50, and you lower your
equity to 95, your debt equity
will go up to 61% but your debt
service coverage will go down.

So this is trying to demonstrate
how the debt service coverage
and the debt-to-equity work in
tandem and that they need to be
looked at together, not
independently.

And these are very simplistic,
just to make that point.

>> Mayor Leffingwell:
Questions?

Council member tovo?

Don't have a question?

Council member spelman.

>> Spelman: So the difference
between the top and the second
and first part, in the first
part we have $100 million in
equity and $100 million in debt
in.

The second part, we have
$45 more in debt and equity
together, and somehow our equity
has gone down by 5 and our debt
up by 50.

How did we get from the top to
the bottom slide?

>> We leveraged ourselves more.

>> Spelman: Seems like it
would be in the same financial
position on the top and bottom,
the equally should go down to 95
and the debt up to 105.

It will pay for it over the long
term but the current value of
the debt will be 105, won't it?

>> When you issue the $50 more
debt, the debt service increases
from the 15 to the 20, so you
have increased expenses, your
net income is lower and affected
your equity position.

>> Spelman: But the other
thing affected the equity
position is we're buying
$45 worth of capital goods and
we happen to be paying for them
not just entirely in debt, but
we're actually reducing our
equity and paying for more debt,
so we're -- I'm not sure of the
proper term, but seems like not
an easy comparison between the
first and second because we're
incurring more capital goods and
also somehow owning fewer of the
additional capital goods we now
have access to.

Okay.

I do understand it properly.

Okay.

>> It's hard to make it simple.

That's what we're trying to do.

>> Spelman: Want to make it
simple?

Another way of doing it is
saying here is where we are now.

100 And 100.

Now we want to buy $20 worth of
capital goods.

Two days to do it.

Pay all for it in equi120 and
100.

The debt service coverage ratio
will change and you can show the
same thing about debt service
relative to net income, we is
smaller if we're paying for more
debt.

So the same effect, but a lot
less violent a comparison.

And I think it will be a little
closer to the experience of what
we're talking about here.

>> And you can look backwards
and say I should have done that
and we could have been in a
different position, but the real
track is looking forward.

When you look forward you have
to be careful because, if you
get in a position where you want
to do a lot more capital
investment, you need to have the
shock absorber, if you will, the
ability to do that.

If you deplinnish that and not
in a good cash position, you're
in a position you can't borrow.

>> Another issue, not to belabor
any further than necessary, i
feel I need to belabor this one
point.

We're not necessarily making
decisions right now for the
foreseeable future.

We could be thinking in terms of
making a decision for the next
two or three years, which we
could then revisit downstream.

So even if we were to all
conclude that we didn't need to
spend 50% on cash, 50% on debt
for the next 2 or 3 years, but
that still might be a
longer-term target, which we can
work our way back up to, or
for -- in the entire totality of
our capital improvements could
be 50% cash, 50% debt.

Even though, in any given year,
leading up to our three, four,
five-year target, we might be at
variance from that.

>> Given the size of the capital
improvements project it has
about a 30, 20 year life?

>> I think what you're right.

We have to look forward in our
capital planning on the
renewable acquisitions and other
things and even maybe a ten-year
and you can derive a plan from
that.

There is a lot of market
uncertainties right now that
prevent us being a clear picture
of that, but, generally
speaking, we are working on the
generation strategy now which i
haven't even presented to the
city manager, which will be done
this summer, where we're going
in the future generation and
that will be a big impact.

>> Spelman: My point is, on a
very short-term basis, if we
were to put in 40% cash, 60%
debt, for a year or two, it
wouldn't appreciably change the
total amount of our capital
improvements that we own, but if
we pursued that strategy for a
long period of time, that would
certainly get us into trouble
with the rating agencies.

In a short period of time, we
might be able to use that as a
partial shock absorber to
prevent rates from going up too
quickly.

>> It's a little by little each
year, so isn't an immediate fix.

That's the caution note I say.

It doesn't fix anything.

The rates don't even fix
anything overnight.

It's a long period of time.

>> Right.

>> So you can build a different
capital financing position if
you have the revenue coming in
and you can slowly build to that
position.

>> Spelman: If we look
downstream and make sure we have
long-term solvency and
sustainability, but recognizing,
short term, people are going to
have to pay their bills.

>> Mayor Leffingwell: Council
member tovo?

>> Tovo: I think I heard you
say, council member spelling,
that could affect the bond
rating.

The other utilities that have
the same bond rating, they have
hiring debt.

Would you clarify?

>> Spelman: I'm speaking
hypothetically.

At some point, we'll have so
little invested in the capital
improvement, we would be causing
a problem for the rating
agencies.

Whether it's 40/60 or some other
number, I'm not prepared to say
till we have further information
from the auditors and uae till
we understand where we stand as
to cash versus debt in the
system.

>> Spelman: As was pointed
out, the actual debt, there may
be good reasons for it, they did
this or needed to do that.

That's why the rating agencies
look at all the details and they
see, for example, that you had a
high amount of debt.

Well, why is that?

If there's a good explanation
for it, then that may is
suffice.

That's why the subjective part
of it is such an important part
of the rating process.

Anyout conversation?

Council member morrison.

>> Morrison: Are we through
with the presentation?

Because I wanted to make a
couple of ch -- comments
going and get conversation going
about one aspect.

As I understood the conversation
last thursday and the target
date for finalizing some things
so that we can get into the
summer months with a new rate is
the beginning of march.

Is that correct?

>> Correct.

>> Morrison: So what I wanted
to throw up there is I know
there's been some talk for the
potential of doing a temporary
rate increase, if, in fact, we
don't feel we can come to an
appropriate conclusion by
march 1, and there are also some
arguments out there that would
actually make sense to do it
later.

So I guess my concern is that i
think it's important that we
keep that option on the table,
and if we want to keep that
option on the table, what kind
of conversation and what kind of
work do we need to be doing now
to make sure that, when march 1
rolls around, we have the option
of a temporary rate increase, if
we can't come to a conclusion or
decide that it is the right --
it is better to defer?

>> Well, if I might, I think
there have been some rumors out
there -- in fact, even with
respect to what was going to
happen today, that we were going
to come back with some alternate
recommendations --

>> Morrison: I heard that
rumor.

>> Obviously, we've not done
that.

>> Did you start it?

>> Morrison: No, I did not
start it.

[Laughter]

>> obviously, we've not done
that today.

However, I have been working
weis and his staff
goode, but I do anticipate,
thursday, offering an
alternative proposal that,
generally speaking, might offer
that kind of solution.

>> Morrison: Great.

I think that's going to be
beneficial for us to have that
option.

I just wanted to make sure we
don't close any options off.

That might be the best way to
go.

Thank you very much.

>> Mayor Leffingwell: Council
member spelman.

>> Spelman: ott, is there
a possibility we'll see better
outlines of that proposal until
thursday?

>> I don't anticipate being
ready till thursday.

>> Spelman: Look forward it to
then.

>> Mayor Leffingwell: Council
member cole.

>> Cole: I know once you put a
proposal out there, like ae put
a proposal out there, it starts
to be, well, here's another and
another proposal.

So I guess I'm wanting to know
what kind of flexibility you're
going to present with that
proposal.

Like, I know council member
spelman always has an excel
spreadsheet he goes in and says
if we have an equity ratio of
8, that's
what I would like to think of
making before we put a proposal
out there.

I would just rather see you
spend the time having the option
and looking for direction from
council about direction that we
could evaluate.

I don't know whether we do that
in a work session as opposed to
actually coming forth, well,
here's our second proposal and
third proposal, that type of
thing.

>> Stating the obvious, I mean,
notwithstanding whatever we put
on the table, of course, council
is the ultimate decision maker,
so, you know, certainly what we
have been doing since we put our
recommendation on the table is
paying attention to all to have
the comments that have been
offered during the various
hearings and meetings and even
at this meeting, and it's, you
know, with all of those things
in mind that I've challenged the
austin energy staff and general
manager with taking that into
account, to provide an alternate
recommendation to council that,
on the one hand, remains true to
what is the best business
decision for austin energy and i
think we've provided that.

That's the original
recommendation.

But we're also mindful of all of
the other things we've heard.

So being true to what we think
is in the best interest of
austin energy, we think,
perhaps, to our other paths that
are getting there that do not
compromise the business
requirements of austin energy,
and that's what we're working on
and going to attempt to provide
on thursday.

That's the work that's going on
now.

Again, I'll state the obvious,
enjoy the prerogative to modify
what -- you know, what's offered
on thursday, you absolutely do.

You already know that.

Are we going to be in a position
during that council meeting to
do, you know, what-if scenarios?

The answer is no, and I wouldn't
recommend we do that just
because this conversation today,
how complex that all is.

So that is what we hope to be in
a position to provide on
thursday, and beyond that,
certainly we're at your service
to entertain and respond to any
suggestions or comments that you
have or questions.

>> Thank you, mark and larry and
elaine.

I look forward to that.

>> So just to muddy the water a
little bit more, when we're
having this discussion about the
reserves and how many years it
would take to replace and how
much money went in there out of
the revenue stream that maybe
we're asking -- maybe we're
asking the question the wrong
way.

Maybe the question should be
asked, if you reduced your
revenue requirement by a certain
number, say 30%, what would that
do to all these variables?

What would that do to
reliability?

What would that do to reserve a
replenishment, or what other
needs you might be, what would
that do to our bond rating,
et cetera?

It's just a thought that
occurred to me now.

I throw it out there on the
table so you can ponder it,
perhaps.

>> We'll be excited to see you
thursday.

[Laughter]

>> Mayor Leffingwell: Yeah.

The hits just keep coming.

[Laughter]
council member tovo.

>> Tovo: We talked last week
about process and decision
points and I think, you know,
with the proposal in some flex,
it's hard to know what we might
be best off talking about next
tuesday, but I would like to
suggest we keep this item on the
work session agenda.

I think this is a productive
discussion.

I appreciate the concise
presentation on the issues that
related to some of the topics we
wanted the talk about.

>> Mayor Leffingwell: I think
we can certainly put a place
holder on that.

>> Tovo: Maybe next week we
can move on to the general fund
or some of the other items on
the decision point list we
collectively talked about last
week.

>> Mayor Leffingwell: All
right.

Thank you.

It only took two hours.

So, in anticipation of this
lengthy presentation by austin
energy, the folks from ems have
departed, and, so, we're going
to hear their briefing on
another day to give us a little
bit of time here, a little bit
less than an hour to discuss
items on the agenda you might
want to discuss for next
thursday's meeting.

So the floor is open for any of
that.

It appears to be maybe the
shortest agenda I've seen in a
long time.

City manager.

>> If I may, with respect to
ems, we will, in the meantime,
put much of what they were going
to say today in an informational
report for you in writing, until
we have such time to get back on
the this schedule and have some
open discussion about it.

>> Mayor Leffingwell: Great.

Very good.

Any items to be brought up?

Council member tovo?

>> Tovo: Just a quick one.

I have an item on the agenda on
thursday that relates to the
discussion we had at our work
session last week and council
meeting about the austin fire
department, lbj field academy.

So I am looking for help in
covering those costs and I think
we've got about 300.

The full cost is a little bit
higher but only part false
within this fiscal year.

Unfortunately, one of my
sponsors is not here.

Right now the allocation is
coming out of my budget of 300
and I would ask that osars -- i
know there was a lot of
enshoesiasm for supporting that,
if anyone would like to support
me in that, I would appreciate
it.

>> How much are you asking for?

>> Tovo: It would be great to
have 100 from a couple other
offices.

>> 100,000 Or million --

>> Tovo: We're talking real
small numbers now.

>> $100 Each or from one person?

>> Tovo: I would like two
partners for $100 for a total of
300.

I've got --

>> I don't do fee waivers, but
in this case, I'll make an
suspension.

>> Tovo: Appreciate that,
council member spelman.

100 From council member spelman
and 100 from mayor pro tem cole.

>> Morrison: So that's as much
as was needed.

>> Cole: I like that.

>> Morrison: Like an auction.

>> Mayor Leffingwell: Just
seems strange.

[Laughter]
any other items?

>> Spelman: Mayor?

>> Mayor Leffingwell: Council
member spelman.

>> Spelman: Could the sponsors
of item 15 walk through with
me --

>> Mayor Leffingwell: Looks
like we skipped part of our du-1
presentation.

If we could go back to that.

My apologies.

It's in the fine print.

Auditor, do you have anything to
add at this point?

On the customer assistance.

>> I think we've requested to do
a presentation on it.

>> Mayor Leffingwell: Come on
up here.

>> This is ken moore, city
auditor.

At the last afc meeting we had a
report that went out on customer
assistance program.

We did not present it.

We have been asked by some of
the council members if we could
present it at this meeting if
that's all right.

>> Mayor Leffingwell: Yeah, go
ahead.

>> Walt persons is the assistant
city manager over that project.

Walt will be making the
presentation.

>> Mayor and council, austin
energy has several programs
where we're assisting customers
having difficulty paying their
utility bill.

This focuses on two programs,
the discount and the plus one
programs.

For customers who made certain
eligibility criteria, the
discount program waives the
monthly customer service fee and
those customers pay a disranted
rate.

The plus one program provides
financial assistance through
these vouchers to eligible
customers through partners
agencies.

Our objective for this audit was
to evaluate the funding and
program structure for these two
programs, specifically in light
of potential rate changes.

A sub objective was to determine
how these programs compared to
selected utilities.

Our scope included program
activities occurring between
fiscal year 2011 and relevant
portions of austin energy's
pending rate proposal.

>> Mayor Leffingwell: Mayor
pro tem.

>> Co COUNCIL MEMBER.

>> Do you have a copy of your
presentation?

>> We didn't bring any last
time.

>> Spelman: Last time, we
didn't bring it with us.

>> Yes, sir, I got it.

>> Spelman: Okay, thanks.

>> Cole: Please continue.

>> Thank you.

The current structure of the
discount program does not allow
austin energy to fulfill the
programs' intended objective.

Austin energy limits
participation in the program to
10,000 customers.

Information provided by austin
energy indicates only 38% of
eligible are -- or potential
eligible customers participated
in the program.

Customers who received benefit
from certain qualifies
assistance programs such as
medicade and supplemental
security income qualify for the
discount program.

However, other groups are not
eligible, such as those
participating in the
supplemental nutrition
assistance program or snap, or
the child health insurance
program or chip.

For persons on fixed income or
low utility rates, do not.

The austin energy discount
program no longer has an
established funding source.

Instead, austin energy is
foregoing revenues to provide
the discounts.

As I mentioned before, the
discount program weighs the
customer service charming and
applies a discounted fuel rate
to participants.

Recently, austin energy provided
the discounted fuel rate by
supplying participants with
energy from batch one of the
green choice program.

However, green choice, the
energy pledge from green choice,
batch 1, expired in march 2011.

At that time, council directed
austin energy to continue
charging discount program
participants the same fuel rate
as before even though the lower
energy was
no longer available.

As a result, austin energy is
now giving participants a
discount without an identified
funding source.

Since the discount must come
from somewhere, it's coming from
the revenues that austin energy
is foregoing.

I'd like to turn now to the plus
1 program.

Austin energy has limited
eligibility criteria for
participants in the plus one
program and, as a result, must
be subsidizing customers who are
not having difficulty paying
their bills.

Austin energy partners --
partners with 16 agencies to
operate the plus 1 program.

These partners include local
nonprofits, religious
organizations in travis county.

During our audit, we interviewed
representatives from nine of the
partners and found that the
criteria used by these
partners -- partner agencies
varies significantly.

Some of the partners only
provide payment vouchers to
individuals who already
participated in programs that
they offer.

At least one program or one
partner requires the applicant
citizen or a
permanent resident, but most
significantly, we found that an
individual's income is not
considered by at least three of
austin energy's partners.

For this reason, we conclude
that there is a risk, an
increased risk that customers
who do not have a financial need
may receive benefits through the
plus 1 program.

Austin energy does have some
controls in place, such as
reviews to detect if a customer
is receiving vouchers for more
than one partner, or if a
customer has received benefits
in the prior year.

However, we did not test the
effectiveness of these controls
during our audits.

In addition, austin energy does
lay out certain criteria for its
partners.

For instance, the partners
cannot provide vouchers to
individuals who have tampered
with a meter.

However, there is no standard
uniform criteria for
establishing who qualifies for
the program.

Turning now to austin energy's
pending rate proposal.

The rate proposal includes a new
community benefit charge for
costs associated with the
customer assistance program,
other services such as street
lighting and energy efficiency
program.

Austin energy will not determine
how it will use funds collected
for the customer assistance
program for the proposed
community benefit charge and
estimate collecting 7 million
annually from the charge.

Austin energy has not decided
thousand use funds collected
from the cap program from
proposed charges.

Austin energy management said
they intend to meet with
community groups to develop a
plan in the new charge is
approved.

>> As noted earlier, one of our
audit objectives was to comair
austin energy programs to
orthoselective utilities.

We surveyed a judgment sample of
seven electric utilities.

We found in the areas of types
the program offered, funding
sources, program administration,
eligibility criteria and
performance measurers, austin
energy's discount and plus 1
programs are comparable to the
programs offered by the other
utilities in our sample.

Each of the utilities fund them
in their programs with voluntary
contributions.

Two of the utilities along with
austin energy contribute
directly to their program.

Denton municipal electric uses
late fee collections as a
funding source.

Three of the utilities obtain
state or federal funding passed
through from other
organizations, and three
utilities use funding from
community organizations for
their programs.

To address the issues we
identified in the audit, we
recommended that austin energy's
management work with council to
identify a funding source for
assistance provided through the
discount program.

And work with the plus 1
partners and community
representatives to define what
is meant by having difficulty
paying bills, as is the purpose
of these programs currently
stated, and determine the
feasibility of establishing
consistent minimum criteria for
end recipients of the plus 1
program.

Aunts energy's management
concurred with both
recommendations.

I'd like to thank austin energy
for the assistance they provided
during this and the rate
proposal audit we delivered last
week.

That completes my presentation.

I'm happy to answer any
questions you may have.

>> Mayor Leffingwell: Council
member spelman.

>> Spelman: I perceive council
member tovo also has questions
but graciously allowed me to go
first this time.

Let me I understand the terms
you're talking about?

Slide 2, you're saying because
the participation in the cap
can't grow beyond 38%, that 38%
is 38% of exactly what?

>> That is 38% of an estimate of
eligible customers within the
austin energy service area that
meet their current qualify
cases.

>> Spelman: But we haven't got
qualify cases because at least
the plus 1 providers are
providing it on the basis of
very little --

>> this 38% rate is specific to
the discount program.

>> Spelman: and
medicade?

>> That's correct.

>> Spelman: So if you qualify
or medicate, then
you're in the pool of people who
are eligible for the discount
program?

>> That's correct.

>> Spelman: And 38% of the
people in that pool are
currently receiving the benefits
now.

Is that accurate?

>> I think the appropriate
metric is 10,000 people are
approved for it and we came up
with 38 by estimating what the
total population was that might
be eligible for it.

>> Spelman: So no hard numbers
on that denominator.

>> Yes.

>> Spelman: So the hard number
we know about is a little less
than 10,000 a month and
fluctuates.

>> Yeah.

>> Spelman: So if we put in --
if we wanted to fully fund
everybody who is in that
population you were discussing a
minute ago, then we would have
to more or less almost triple
the amount of money we were
spending.

>> Correct.

>> Spelman: Okay.

And that would provide a
discount of how much in terms of
the size of the entire bill?

>> The discount is reducing the
charges -- I can get you that
figure, council member spelman.

>> Spelman: I guess what I'm
trying to put on the table is
we've got a program, now, which
reaches a sizable but not
overwhelming percentage of a
pretty desperate community, 38%
of a very small group of people
who don't have very much money,
and it's paying a certain size
benefit, which I think would be
valuable for us to establish.

We have three dimensions we can
work with.

We just put more money into the
same program and have that 38%
go up and have exactly the same
level of benefit.

Alternatively, we can take the
same 10,000 people, put more
money in and give them a greater
benefit, a larger discount, or
do some combination of the two.

How broadly we serve and how
much depth, how much of a
discount we give to the people
in that pool that we serve are
really up for grabs at this
point.

Did you reach a conclusion or
could you offer us any advice as
to prow broad and how deep this
discount aught to be?

>> We did not reach a conclusion
on that.

We had discussions with austin
energy where they are
contemplating that very question
in regards to the community
benefit charge and how to use
the proseeds from that.

>> We have a representative here
from austin energy here, i
think.

If you would like for her to
speak to that.

>> Spelman: Let me ask another
couple of questions first.

I know council member tovo has
other questions as well.

So one of the issues, I guess,
was if we could -- we'll have to
have a discussion about how
broad and deep we want to go,
how much it will cost us to get
to a certain level of breadth
and depth.

The certain question follows
that, if we wanted to get to
more of that population we are
currently tapping 38% of, say we
wanted to get up to 80% of that
group, do we currently have in
place the instruments needed to
find them and to make that
discount available or not?

>> Council member, that's not
something we did in the course
of thought is to determine the
answer to bear marketing, so to
speak, of the program.

>> Spelman: Well, you don't
know whether or not we have a
means of automatically
identifying them, putting them
in the program, keeping it out
of the program, anything like
that?

>> That's really a question for
austin energy.

>> Spelman: Fortunately,
someone from austin energy is
conveniently right.

>> In response to the first
question regarding could we
identify the 80% or the percent
of customers who would be
eligible for our cap program,
and we do have a way of
identifying those people.

We do have a list of
participants in the current
federal program in that list --
and that list allows us to
understand who would meet the
qualify case force our cap
program.

>> So we've got a list of people
or have
medicade or both.

Do we also have a way of
crosswalking that list against
people who are paying for the
utilities through their rent?

>> We don't have that exact
information but we do know how
many of those customers are
account holders with austin
energy.

>> Spelman: Okay.

>> And that is the crosswalk
that we do each month with that
list to understand, of that
list, how many are eligible for
our cap program.

The cap program participants
must be an account holder.

>> Spelman: I can imagine a
different class of concerns.

Somebody might be
-eligible or receiving
and be a member of a
household, she or he may not be
the account holder, they're a
member of the household where
the account holder is somebody
else.

>> Yes.

We do look at that scenario as
well, and we make house visits,
position force those situations
and may make exceptions in that
regard.

>> Spelman: Do we have a
general policy on that subject?

>> We do, actually.

The policy really is, in
general, that the account holder
must be the participant of the
cap program.

>> Spelman: Okay.

So, for example, if my wife and
I -- I was not eligible for
disability, but she were,
then we would not be eligible
for the program because the
householder, in this case, would
be me --

>> the account holder.

>> Spelman: -- The account
holder would not be eligible?

>> Yes.

>> Well, we could shift the bill
into her name.

>> Yes.

>> That would make her eligible.

>> Yes.

>> I wanted to make sure what we
understood the numbers were.

So we have a way of identifying
all people who are either on
or medicade and account
holders.

About how many of those people
are there, do you know?

>> That I don't know.

>> Spelman: Okay.

>> That murm grows -- number
grows and ebbs and flows.

The number, I've seen, as large
as 40,000.

>> Spelman: persons was
estimating we have 30% of the
or
medicade.

And I don't remember ask you
this, and I don't remember you
saying, but you were excluding
people who were not account
holders.

Your best guess was 38% of the
total, is that right?

>> That's correct.

>> Spelman: That would be less
than --

>> our approximation was 28,000.

>> But you're talking about
40,000 people completely
and or
medicade and account holders.

>> Correct, and includes other
programs we were considering so
that's where that number grows.

>> Spelman: From your point of
view, would it make sense to
broaden the eligibility
requirements?

>> Yes, it would.

>> Spelman: Why?

>> We've worked with the
community advocates and
community partners that we
utilize for this program and
have learned that the two
programs that we do use for
criteria really do not reach the
complete need of our community.

We've seen that those two
programs, while they reach a
broad need, don't cover the
complete need.

There is chip -- there is other
programs as well that also kind
of meet the federal poverty line
level that we could consider
that is in addition to the two
programs that we accept.

>> Spelman: Chip and snap are
the obvious cases.

>> Yes, those are the two
obvious cases.

>> How many more people would we
include if we added chip and
snap.

Do you have that?

>> I don't have the full
numbers.

We had a study performed by our
marketing and research
department that they do have
numbers.

>> Spelman: They're available,
we just don't have them yet?

>> Correct.

>> Spelman: I think this is
the last question.

If the proposal in front of us
is to double the total amount of
money we're spending on this
issue, and I can imagine two
obvious ways, take the same
10,000 people we've got now and
give them twice the benefits, or
give the same benefit to 20,000
people, or, of course, we could
go in between.

We could go beyond that point to
40,000 people and have a
shallower benefit, or reduce the
eligibility requirements to,
say, 5,000 people and give a
deeper benefit.

How do we sort that out?

>> That is the conundrum that we
have been in discussions with
our community partners and
advocates for quite some time.

We've actually had sessions
where we prioritize the various
criteria and say, out of all the
programs which would be the
most -- which beneficiary would
benefit the most and the second,
the third.

We have struggled with that very
complex discussion, and in that
is a discussion we'll have with
our community partners coming
forward after the rate is
complete.

>> Okay, but we don't have to
make this decision as part of
the rate review, the decision as
how much to spend.

But it would be helpful if i
knew where the discussions were
going and where we end up at
least in broad terms before i
had to make a decision as to how
much money.

>> Yes, and we can provide that.

We have what we're calling a
framework for those discussions
and that framework will outline
the number of potential
recipients that we could serve
based on a couple of different
benefits -- cost saving options.

So if we go broad and shallow,
we'd have a scenario for that if
we go keep and narrow then we
have a scenario for that, and we
have the numbers to support
that.

>> Spelman: So your proposal
will be kick it back to us and
say here's ways we could do
this, which one do you feel most
comfortable with?

>> Yes.

>> Spelman: Do the community
advocates care one way or the
other?

>> Most definitely, and we
currently have had many
conversations with our partners
and our applicants as far as
what's the right mix, and we
started those conversations even
before this rate case.

It harkens back to our 2009
customer advocacy group that we
started based on some other
issues.

>> Spelman: Is it giving you a
sense of which direction the
community advocates would like
to go, or are they going in
several different directions?

>> There are competing
directions within the group.

>> Spelman: I'm sure we'll
hear about it all later.

Thank you, ma'am.

>> Mayor Leffingwell: I guess
we need a clearer definition of
what the last question means.

I'm just pulling your leg.

[Laughter]
council member tovo.

>> Tovo: Yeah, I appreciate
this discussion.

I certainly have heard
recommendations from members of
faith communities and consumer
advocacy groups that we looks at
expanding eligibles to
individuals on snam and
telephone lifelines and other
programs.

So, to me, I think one of the
challenges here is to identify
more money for cap, and that
does become an issue relevant to
the rate proposal, from my
perspective.

One of the things that really
has come through this is we're
currently 38% of those who are
right now eligible are being --
are part of that program, and if
we expand the eligibility, we're
really talking about quite a few
more people who are not being
served.

So we're not even serving those
who are currently eligible.

If we expand the eligibility
requirement, we're talking tens
of thousands of more families in
need of assistance with their
bills and if we're contemplating
a rate proposal, those families
in need will be increasingly
burdened by their monthly costs.

>> One of the things that is not
clear to me is how the decisions
are made.

If you can only serve 10,000,
how do you pick which 10,000 are
eligible -- not eligible, but
enrolled in cap?

>> We do use an automatic
enrollment process which allows
us to receive the list of
participants of the two programs
that we -- that meet the
criteria today, and that list
first service those that are
currently on the program, and we
seek to validate that they still
have the need, they still are
participants of the federal
programs.

Once we exhaust the list of
current participants, we look at
up to 10,000, who would -- who's
not currently on the program but
meet the criteria, and we reach
out to those families.

We've had a waiting list in the
past and it's really simply
first come, first serve.

Those families will reach out to
us various ways.

We have phone calls, letters
and/or actually reaching out to
them on call.

So it is first come, first
serve.

>> Tovo: I guess we've had
discussions in finance and audit
about automatic enrollment, but
seems to me that might not be a
strategy for austin energy,
because if you automatically
enrolled everyone who was
eligible we would exceed the
budget.

>> That's correct.

>> Tovo: One last question
before I turn to the auditor
with questions.

There is a lot of discussion
right now on the rate proposal
and the financial burden for
many of our families, and i
wondered if you are
contemplating any kind of
outreach to our broader
community to support the
customer assistance program.

You know, I'm not sure there's a
lot of knowledge out there, you
know, about the program in which
every rate payer within austin
energy can actually help support
it.

This might be a good
opportunity, while everyone is
focused on this to say, hey,
this is a great way for you to
offset -- you know, help offset
the bills of your needier
neighbors.

>> This is the good opportunity
to market and we have considered
increased marketing.

Today, we currently market
through our bills.

It's the utility bills
themselves.

Each bill has the ability to
contribute voluntarily to the
cap fund.

In addition to that
contribution, that way of
communicating, we also, in our
monthly news letters to our
customers that are included with
the utility bill, we also market
the program there.

We don't do any marketing
outside of those avenues
because, right now, both of
those avenues reach every home
that has the utility account.

So we find that to be one easy,
inexpensive way to reach and
market our community, but there
are other ways we are
considering as well.

>> Tovo: Great.

Thanks.

I have a couple of questions
about the audit itself.

On page 3, it talks about those
eligible currently and those who
might be eligible under snap,
and I wondered if there was some
overlap in those two groupings
that you factored out in
determining how many
additionally eligible
individuals there would be if
the eligibility extended.

So, in other words, does that
50,684 who are registered in
snap and 98 or 9 receiving
medicade, children, are those in
addition to those individuals
who are eligible in exhibit 2
or, you know, are we talking, i
guess, potentially about 70,000?

>> That would be in addition.

>> Tovo: There would be
overlap --

>> if there's overlap, it
doesn't account for that.

>> Tovo: One of your findings
that is of concern, we talked
about the scarcity of funds to
those currently eligible and we
talked about partner
organizations who do not have
clearly detailed criteria and
that's of concern and i
appreciate you raising that to
the attention of austin energy
and our attention.

Anecdotally as you talked to the
organizations, my guess is many
are serving the clients who are
meeting lesser requirements.

In your discussions, did they
say most to have the people who
they've given -- that most of
their clients tend to reach the
financial requirements, it just
wasn't something that was
verified for the purpose of
giving them those funds?

>> Of the organizations we spoke
to, they in some cases are using
judgment to determine need.

I didn't see any or hear of any
particular cases, individual
cases that would set off an
alarm for us as being perhaps
someone who doesn't need those
benefits.

But we didn't go to the level of
the individual organizations and
actually test to look to see who
received the benefit and what
their income was.

We didn't do that level of work.

This was based on our
testimonial evidence from these
partner agencies that we've
spoken to.

>> Tovo: But that's helpful.

Sounds like many of those
organizations did some kind of
assessment, just not a formal
one, so that money is likely
supporting those who have an
economic need, it just wasn't
quite as formal a process as
austin energy uses to determine
eligibility.

And I did have a question about
one of the responses from austin
energy for recommendation number
2, and I guess maybe this is
better directed to austin
energy.

This is about the plus 1
program, austin energy
management will conduct a study,
et cetera, taking into account
the operational aspects the
feedback from community and
stakeholders referred to by the
program.

So basically you're going to
work with the community
stakeholders that are part of
the group and come up with
recommendations for moving
forward.

>> That's correct.

>> Tovo: I think that does it
for me, now.

Thanks.

>> Mayor Leffingwell: One
quick question or comment, and i
think this has been raised
already, but council member
spelman and tovo, we've
basically got a fixed-size pie
and the question is how do we
divide it up.

It's not everybody gets a slice
so big, it's how big a slice for
so many people and that will be
tough to figure out.

And you alluded to the fact you
were already engaging the
community, the people who are
experts in doing this, and i
think that's going to probably
be your best source of guidance
about how to do this, so I just
encourage that very strongly.

>> May I have a question?

>> Mayor Leffingwell: Mayor
pro tem.

>> Cole: The question is how
big are the piece force a need
that is so great.

Wasn't there a public process
that already made a specific
recommendation?

>> It's the beginning of the
rate review.

There was a low-income
representative on that team as
well as a residential
representative and, together,
they did recommend an amount for
the discount.

Do you remember how much that
was?

>> $25?

>> Director of regulatory and
governmental affairs and energy.

>> Earlier this year, we had a
public involvement committee
that was a citizens committee
that we assembled to provide
input to austin energy on many
of the rates issues.

Four members of the group were
citizens including the
residential rate advisor and a
representative from karatas
(phoneti as the low income
representative.

Those came to the committee and
made a recommendation that we
collect what we presented to you
in our rate proposal, which is a
dollar per residential bill, and
65 cents per megawatt hour for
commercial and industrial
customers, we estimate that will
2 million, and in
addition, since there are
industrial customers on the
long-term contract, who will not
be affected by the rate increase
till may 15, we talked to some
of them about making voluntary
contributions to the program and
we have indication of acceptance
of that but haven't ironed it
out.

2 million or more --

>> those are the industrial.

>> Cole: Those are the
industrial customers whose
contract expires in 2015?

>> That's correct, so a minimum
2 million under the
current proposal, and suggested
a million should go directly to
weatherization for customers
with high usage and that the
2 million would be set
aside for cap discounts.

gutierrez said we'll
work with our community partners
once we determined what the
final rates will be to figure
out what's the best way to
spread the money for the
program.

>> Cole: And approximately how
many people does that cover?

>> That depends on what the
structure of the discount is and
gets back to the question about
the question council member
spelman had as to how deep or
how far do you want to go.

>> Cole: I understand we don't
know what happens under a new
rate case but what are we doing
now?

>> Today, we have between 9,000
and 10,000 customers at anytime
in the cap program.

We provide a waiver of the
$6 customers charge, and then,
instead of the fuel factor, we
substituted a discounted fuel
factor of 1.7 cents.

That's about a 2-cent discount
on the fuel factor.

>> Cole: And those are
medicade,
right?

>> As well as the county map and
c-ap program.

>> Cole: Do we know how many
in the city would be in those
programs thus the snap program
and -- what other program -- the
chip program?

>> We really don't have a hard
number for that as there's a lot
of overlap in those programs,
and we don't know with
specificity what the number
would be.

>> Cole: Let me ask the
auditor because I swear I got a
number of 26,000 somewhere.

>> Potential volume eligible
under the program, current
criteria 25,980 in the austin
energy service areas.

>> And also we got a dollar
amount, average $17 for the fuel
charge discount, so the total
with the 6 is $23 is the
average.

Very dependent on the customer.

>> Cole: So isn't that roughly
another $7 million, if we wanted
to -- if we were going from
10 million -- 10,000 to 26, i
5 million, we would go
to about 16 million.

Is that right?

>> I can't to the math in my
head.

>> Cole: You don't have to do
it right now.

If we're going deeper because
we're making a rate increase and
we're looking at that increase
and we should go wider.

If we're in the context of a
rate case, what would that
dollar figure look like.

>> Right.

>> And you might have to get
back with me on that number, but
I don't want to leave it off the
table because it's not a part of
our current budget proposal.

So you can give that to my
office.

Thank you.

>> What's the average bill for a
residential customer, about
$100?

>> I think that's a fair numb.

>> So we're talking about a
coverage and the average
reduction is somewhere in the
neighborhood off20, 25%.

>> That's correct.

As you recall.

From the date we presented,
there's a lot of diversity.

There's dorse merse with very
low usage where the discount
goes into the bill and customers
with high usage.

So that discount is in average
but may not be typical of all
our customers in need.

>> Spelman: And if we wanted
to provide something more easily
distributed to the customers, we
would have to rework the way we
do it?

>> We have proposed to you a
rate design with a lot of
different components, and, so, i
think in thinking about how we
might structure the cap discount
in the future, we'll have to
think about all those components
as well.

>> Spelman: Thank you.

>> Cole: Council member riley.

>> Riley: I want to shift to a
different kind of pie.

We have been talking about the
cap program in terms of discount
off utility bills, but one
suggestion from the community is
that, beyond doing that, we step
up our efforts to assist
customers with energy efficiency
improvements, like
weatherization, that we have
been doing, that would lower
those bills over the long term.

Is there currently a direct link
between the cap program and
weatherization and other
efficiency programs?

>> There is a link.

I don't think a direct link.

Both programs serve the same
community.

Both programs use the same or
similar criteria.

The proposal that we have in
conjunction with the rate, the
new rate design, further deepens
that link and really does make
the cap program eligibility and
the weatherization eligibility
one in the same.

>> One of the purposes of the
audit was to determine how the
cap compares other municipal
utilities.

In the course of doing that
audit, did we look at the links
between other utilities, cap
programs and their support for
energy efficiency improvements?

>> No, council member, we did
not.

We focused our comparison to the
programs other utilities have
that are similar to discount or
plus 1 programs.

>> Riley: The current proposal
includes a line item to support
energy efficiency, in addition
to the community benefit charge,
isn't that correct?

>> That's my understandle.

>> Riley: So if we wanted to
to -- tailor a program to
support our cap customers with
energy efficiency improvements,
like weatherization, seems like
we could draw from --
conceivably, we could draw from
either of that energy efficiency
charge or the community benefit
charge.

Isn't that right?

>> I think the austin energy
would need to answer that.

>> Riley: That's a question
for austin energy.

The question is should we be
looking at ways of helping
people -- in addition to helping
people pay their bills on a
monthly basis, shouldn't we be
looking at ways to step up
efforts to enable customers to
lower bills over the long term
which actually would reduce the
cost associated with assisting
each customer if it were
successful?

>> That is a component to have
the program design we're
considering for moving forward
two the cap program.

We've determined that we can --
or we'd like to include a
weatherization component within
cap that would target the
highest energy users and allow
them support in weatherizing
their home and reducing the
usage or reducing the need for
additional discounts.

But we've built that in as a
design component.

Now, how that will clear out in
the end with the discussions
about the actual discount and
how much of the program funds
will go towards weatherization,
all of that is still in the
design.

>> Your expectation is that that
support would be provided
through the proposed community
benefit charge?

>> At this time, yes.

But I have to defer to the rate
team.

>> That is our proposal now is a
million dollars received from
the community benefit charge
would be set aside specifically
to target weather cigs for high
usage cap program participants.

>> Riley: On top of the energy
improvement supported by the
energy efficiency --

>> that's right.

>> Cole: Council member
morrison has questions.

We have questions about the
agenda.

We have a 12:00 stop time.

Think about whether you want to
go till 12:05.

I'm not going past of that.

>> Morrison: One of the
challenges in the weatherization
for low income customers is how
to deal with renters versus
property owners.

Is there a plan for renters?

>> There is a thought to
providing wettization.

To those who are not homeowners
it is very difficult because we
must work with the facility
owner, property owner to get
authorizations to make changes
within those dwellings.

But there are things we can do
appliancewise, education, habit.

Those kinds of things that will
put a small dent in the usage,
but the major -- the major
impacts really would have to be
done in conjunction with the
property owner.

>> Morrison: Right.

And I appreciate you thinking
more creatively.

I do think there are lifestyle
choices and things for -- simple
things for windows that are just
temporary and also I think that
would be a great component.

And this is not my last
question.

I have two more questions.

And that is specifically, i
understand that it's been
suggested among community
partners that there be sort
of -- I know you're working with
them right now, but there
actually be an advisory group to
the cap program that's a
permanent element of the cap
program.

Is that something that you all
have worked through with them?

>> We've not finalized that
recommendation but have heard
that recommendation as well and
it's under consideration.

>> Morrison: Okay.

Because I think that would be a
good idea to make sure we have
longevity and the advisory role
they can play.

And this is my last question.

I'm not sure if it's for the
auditor or austin energy.

When we're talking about these
numbers, like 40,000 folks that
we know, do we have any -- has
in the been filtered to reduce
it to an estimate of the number
of households?

Because, certainly, there may be
households where more than one
person in the household is
eligible for s.s.i. or medicade.

>> That's the point of research
that really is kind of stumps
all of us, being able to take
the various lists that we
receive and cull them down to a
finite number of households
and/or participants that are
account holders.

And, so, that's the work that's
ahead of us in the program
design.

We don't have that information
right now, but we have
researchers trying to get at
that exact information.

>> Morrison: Because I would
think there would be a way to
figure out whether at the
addresses there is more than
one.

>> Most definitely.

>> Morrison: And that may
change the numbers in a
non-trivial way and will reduce
the numbers and help us come to
terms with the actual means.

Thank you.

>> Cole: Any other questions
on that item?

Let's move back to the agenda.

I believe we were discussing
item 15.

>> Spelman: I believe council
member morrison answered my
question.

I think we should have some
means of putting questions for
other council members for items
for council on a table someplace
where we can get at them.

I don't think it would be an
open meetings act violation as
long as the written questions
and written answers were in a
public place and might be
something we ought to go to some
trouble to figure out how to do.

This particular -- this item
raised that question for me.

It happened before.

Maybe it will happen again.

>> Cole: Why don't we ask
legal to look at that and get
back with you.

Karen, did you understand the
questions?

So we'll take something like
that up in executive session.

We can take that up at anytime
because we're posted for open
meetings.

>> Tovo: I think that's a good
suggestion.

I had a question for austin
energy.

I think I had a question about
the grant to cover the cost for
covering electric vehicles.

I understand that the item is
going to be withdrawn.

>> You might have to repeat the
item.

>> I promise to read you home
for the rest of the day.

Thank you for coming back in.

Item 11 is a grant for
electrical vehicle study and the
question is whether it covers
all of austin energy's cost.

>> We'll have to get back with
you on that.

I don't know the answer.

>> Tovo: Well, the answer that
was returned to me is it was
going to be withdrawn from the
council agenda for thursday and
I just want to be sure that
we're not going to miss
opportunities in terms of that
grant and our eligibility for it
and, so, maybe we can talk about
that thursday about the
withdrawal of this item from
this week and whether or not
it's coming back next week.

>> There's a purchasing issue
involved with that and I don't
know the details of it.

bice
just advised me there is a bid
protest on that so we'll have to
look into the details on that.

>> Tovo: Okay.

Thanks.

>> Cole: If there's not any
other comment, without
objection, the work session of
the austin city council is
adjourned.

[Rumbling]
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Title: CHANNEL6
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[08:44:07]

I am
mayor mayor and I will call
to order of this work
session on tuesday,
january 10th, 2012.

It is 9:03 a.m.

We are meeting in the board
and commissions room, austin
city hall 301 west second
street.

So the first item on the
agenda is item b1, to
discuss a town hall meeting,
and the posters are council
member tovo and council
member martinez.

>> Thanks, lee.

This is just a discussion
item number that council
member tovo and I are
considering.

It is not really a city
council meeting.

I am actually glad that
someone brought forth
potential cost projections,
because I think that's
important to have that
conversation as to what it
would cost us to do it, a
saturday town hall style
meeting.

The way I envisioned it is
simply those council members
who are willing to or can
attend would simply be
present for questions and or
comments from citizens and
respond, if we could, but if
we don't have a response,
take that through our normal
change of requesting staff's
assistance later on at a
later date and getting back
to those citizens.

I don't envision this being
something that is on channel
6.

I don't envision this being
something that is requiring
staff members from the city
to attend
, it is just allowing a
saturday input session, if
you will.

We don't have to call it a
town hall meeting.

There is really no
presentation.

Just a start input session
where we give citizens the
opportunity to speak to
council members outside of
our normal procedures,
outside of monday, 8 to 5
and outside of thursday's
regular scheduled council
meeting and, again, it would
be something that we would
post in case there is a
quorum of council members,
but obviously maybe not all
council members would want
to or could attend.

so
there is no particular
topic?

>> Martinez: Absolutely not.

>> Mayor leffingwell:
Kathie.

>> Tovo: Apologies for being
a few minutes late and I may
repeat what some of my
colleague said.

But the intention -- this
was an idea that was
suggested to us by several
citizens and I think it
makes a lot of sense.

It is -- having been on the
other side of this equation
and planning ahead and
calling two weeks ahead to
get on the citizen's
communication agenda and
then needing to take off
00,
it can pose some difficulty
for members of our community
00 or
during weekday work hours
and so I think this is an
opportunity to allow a
broader cross-section of
folks to come down and talk
to us.

And, again, the intent is to
really minimize the impact
on staff and city resources
and so that is why there is
no particular topic.

It will be broad, wide open,
so that citizens can come
down and address on any
topics of their choice, so
it will be extended
citizen's communications
day.

>> The posting is for
sometime in 2012.

I would just suggest that
the springtime is going to
be a very busy time for the
council as a whole and some
of us in particular.

Maybe we could hold it off
until summer time, sometime
like.

>> Tovo: Well we -- sorry.

>> That's all right.

I think because it is an
open invitation and it is
not something that is
mandatory, if you are busy,
then you don't have to
attend.

So I don't have -- we can
hold it in the summer.

We can hold it in the spring
and the summer and the fall.

I mean it just -- because it
is not -- it is not
structured like a regular
council meeting and because
we won't need legal staff
and cmo staff.

It is simply an extended
citizens' communication
session.

We could hold it this
saturday if we wanted to.

>> Mayor, can I -- I just
want to -- even though it is
not a regular council
meeting, there is still
going to be some
requirements when members of
the governmental body gather
related to the open meetings
act, and so we want to make
sure that we have properly
posted it, that a quorum is
present, and when you are
dealing with just having,
you know, kind of a general
session, currently like
citizen communication, we
ask most members of the
public to tell us what they
are going to talk about and
under the open meetings act,
that gives you, the council,
an opportunity to, then,
engage in the discussion
with them.

For those members of the
public who currently don't
want to put, you know, the
specific topic that they
want to discuss during
citizen communication, the
open meetings act kind of
has some restrictions on
what you as the governmental
body -- how you can interact
and I think we've talked
about that a little bit
before.

It basically says that you
can answer them with, you
know, a current policy
that's in place, give them
as an answer but you can't
really have a discussion as
a citizen or you can ask the
staff, to then put that item
on a future agenda so there
will be some limitations if
the members of the public
don't identify the topics
that they would like to have
a discussion with you about.

I know that seems a little
more constrictive in maybe
what you are anticipating
but the open meetings act
will still come into play
during that type of session.

>> And I think that's an
important aspect of it, too,
that the topics for
discussion -- for discussion
would have to be posted, at
least 72 hours in advance.

It could not be the kind of
free-for-all where somebody
comes in and says I want to
talk about dogs running
loose in my neighborhood,
for example, and what do you
think about that.

About the most you could say
is, as the city attorney
said, okay, we have a leash
law in this city.

We can possibly post it for
future council meeting but
it would not be the kind of
open discussion on any topic
that you might think it
would be.

Normally when we have town
hall meetings, there is a
specific topic for
discussion.

>> Tovo: Mayor, maybe the
better term, then, here
would be a listening
session.

I regard this as, you know,
a 2-3 hour listening session
with the citizens and
certainly they -- we will
receive information that we
will need to follow up on or
we will be able to encourage
them to follow up with.

but i
understand it will work in
the same which that citizen
communication does in terms
of our ability to respond
with thepublic.

i
think that would -- that
would be a lot better if it
were posted as a listening
session and made very clear
that there wouldn't be any
interactive discussion of
particular items unless they
were posted in advance on
the agenda.

Because I -- I don't want to
create a false expectation
here.

>> Tovo: That there is going
to be a lot of dialogue.

for
people to come in and think
this will be a lot of
interaction.

>> Spelman: Mayor, I don't
know if this is a question
or comment or both.

If people were able to say
in advance what they are
going to talk about and it
is listed on the agenda and
62 hours in advance -- 72
hours in advance and it is
talking about territories,
people want to talk about a
particular class of land use
issues, okay, it is
something we can have a
dialogue on.

If having marked out that
territory is up for grabs in
the discussion, if other
people want to talk about
the same issue, we can
engage with the other people
even if they have not posted
that item.

Is that the way I hear it?

>> Mayor leffingwell: yes.

That's exactly what we do on
every meeting on citizen
communication, most people
post their topic and we can
discussion that and some
people say city issues or
tba and you can't engage in
dialogue on that.

>> Spelman: I am asking
slightly different question.

If somebody comes in and
says they want to tuck about
vmus and we posted that as
something that is a topic
for discussion and joe comes
talks about vmus as schedule
and sarah comes in after
that and says I want to talk
about vmus, too, can we talk
with sarah about that
because it would be posted.

>> Mayor leffingwell: yes.

>> Spelman: We can do that.

It seems like people who
want to specifically talk
about something, they can
say here is specifically
what I want to talk about a
and that's marking off
certain territory we can
talk about and if somebody
talks about vmus and they
can talk about that and have
three or four people talk
about that and engage in the
discussion on that issue.

And I think the other value
of that would be that we are
also having a concentrated
discussion on one issue
rather than bopping back and
forth between land use,
fluoride and god knows what
else.

i
think it's probably that
it's not as simple as it
sounds, so I guess I would
suggest that maybe the staff
law department try to answer
some of these questions in
writing and set forth a set
of guidelines for, quote, a
listening session.

>> We are happy to do that
mayor.

and
come back with a later date
for those.

>> We will try to get it out
to you before the end of the
week.

>> Martinez: I don't
understand why it is so
complicated, say, for
example, the practice, the
subcommittee meetings, our
subcommittee meetings have
citizen communication and we
don't know what they are and
allowed to talk about and we
allow them to sign up that
day, right then and there
and they ask us questions
and we respond.

what
we are seeing is that is
probably illegal.

>> I don't know if it is
illegal, mayor.

I wouldn't go there.

it
depends on the question.

>> I think sometimes those
subcommittee meetings --
[laughter]
the subcommittee is talking
about items on the agenda.

We can work with this and
have an open session, as i
said, similar to what we do
in citizen communication,
and like council member
spelman said, I think there
could be broad topics that
we know citizens want to
speak on and I think we
could craft a listening
session agenda that would
comply with the open
meetings act and also give
the council some
flexibility, but I don't
want to imply that it is an
impossibility.

I want to make sure that the
council recognizes that
there are some limitations
in having this kind of
forum, but I think it's
doable.

>> Martinez: So the reason i
bring that final point up is
because my intention is to
eliminate the burden of
having to presign up and
having to prelist the
topics.

Literally the intention is
if you want to come down on
a saturday and say something
to us about any given topic,
that you have that ability
to do so.

So I want to -- I want to
make sure that we preserve
that opportunity that if
some citizen that didn't
come down to city hall and
didn't sign in advance can
still show up on the
saturday morning and sign up
and say, this is what I want
to talk about, even though
we may not be able to engage
with them.

and
there is absolutely nothing
wrong with that, but another
suggestion, just throwing it
out there, would be to have
less than a quorum of
council members present at
these sessions.

>> Martinez: You will be the
first to volunteer to not do
that?

>> I think that would be a
little more problematic and
I want to look at that,
mayor, so I don't want to go
on the record on what i
would advise on that but i
want to look at that a
little closer.

>> Mayor leffingwell: okay.

I think that's what we need
to do, is, karen, have your
department take a look at
what potential problems
might be and try to bring
that to our attention.

>> Tovo: A question for the
group.

You mentioned the timing of
it.

Ideally I would hope we
could get on a schedule of
doing this every quarter or
twice a year and my concern
about doing it in the summer
months is that we are on
recess for part of that time
and then we are in the
budget session and people
are coming in specifically
talking about budget and i
think this could easily be a
budget discussion rather
than a more open forum, so,
I guess I would like to hear
from the rest of you about
whether a spring session
would work.

I understand some of you are
going to be very busy, but
there are very few years
where that's not going to be
the case for somebody on
this council and I would
rather get start and have
this session before we get
into the budget session this
is summer.

Lee.

>> Mayor leffingwell:
Sheryl.

>> I would like to make a
suggestion that some of the
topics we list for our
council retreat actually be
posted for discussion for
the citizens.

I get the idea we want a
free-for-all for what the
citizens want to hear, but i
think the citizens need to
know what we are going to be
contemplating, and that's of
a high urgency for us to
hear before -- or even after
a retreat.

I guess I am just putting
that out there to whoever
wants to comment on that.

>> Mayor leffingwell:
Laura.

>> Morrison: I have a
question I am not quite sure
I understand.

Are you talking about the
topics that are going to be
on our retreat, that they
also be included in the
listening session?

>> Cole: Maybe not all of
them because trying to keep
it down to 2-3 hour a
session but as council
member tovo suggested we do
quarterly meetings, that if
we have nine topics and we
post three of them.

That way, there is at least
some structure and then we
still have it open for the
free-for-all, but at least
staff has some idea of what
we think we are going to
hear and we have some idea
of items that we are going
to be contemplating and so i
think it might be more of a
useful dialogue.

>> Morrison: And I can see
that when we are discussing
items at our retreat, maybe
that's something we can talk
about, is this an item that
we really need to have
broader discussion and input
on and really see which ones
naturally evolve into
something that we need to be
reaching out, and I do want
to comment, also, in terms
of just in general -- the
idea, I appreciate you all
bringing it up because i
think it's a good idea.

In terms of doing it on a
regular basis, I can
certainly see that
developing and I think it
would be real interesting to
do one and get some lessons
learned and figure out how
we might be able to make
them more productive, to
sort of do a pilot, and I am
not sure if you are
contemplating doing this in
different areas of town if
we do it on a regular basis,
but I think it would be
certainly something to think
about.

>> Mayor leffingwell: okay.

All good ideas.

We are going to get
preadvice from the staff and
law department and we will
have lessons learned from
the first one, I guess.

I don't know who put this
out, the estimated costs of
a town hall meeting.

It just appeared.

>> Martinez: I think we were
asked; is that correct.

>> Yes.

>> Of cost?

is
there some way to cut down
on this?

>> It sounds like base on
the description that I heard
a moment ago about staff
minimizing or no staff, not
being televised, you
know, -- I would imagine
much of the 3,000 goes away
and much of the 750 goes
away and building services
may be the same, ctm.

I mean there is a
difference -- I don't know
if this includes -- it
doesn't.

It is just a technology,
probably the mics and those
kinds of things and so it is
probably a good number so
cost wise I think it is
substantially less than what
you see here based on what i
heard in this conversation.

>> Martinez: Yes.

I think at a minimum f you
back out the city staff and
channel 6 and this is with
the assumption we are
holding it here at city hall
and that would not be the
case, that would be $525 to
have the building services
of ctm available according
to this estimate but if it
happened in spring, we
wouldn't need either, not
security or ctm, literally a
listening session.

Maybe a pa system, I don't
know, but, again, I think we
can minimize the cost to be
very minimal, if nothing at
all and I am more than
willing to help fund it out
of my own personal income if
we need to rent a pa system
for that.

we
will put you down for that.

[Laughter]
do you want to buy it or
rent it?

>> Martinez: Actually, i
have two or three, lee.

You can crew use them any
time for a small fee.

we
will come back at a later
day with more information on
this and go from there.

So without objection,
council will go into
executive session to take up
11 of
the city government code and
seek legal count to d1 to
discuss legal issues related
to austin -- to discuss
legal issues related to
austin life care versus the
city of austin et al and
roman catholic daises of
austin et al versus the city
of austin et al.

Is there any objection in
going into executive session
on the item?

Hearing none, the council
will go into executive
session.

Bergstrom,sus
austin-bergstrom,sus
test.

we
discussed legal issues
related to item d1.

So what is next is anything
on the agenda that council
members would like to bring
up.

>> Morrison: Lee.

>> Mayor leffingwell:
Laura.

>> Morrison: I guess I would
like to jump right in on
item number 68, which is the
item -- ifc brought forward
by bill and chris about
short term rentals,
proposing an indefinite
suspension to collect more
information and it raises
some concern for me,
especially because there has
been a lot of work going on
in terms of getting
regulations in place, in
terms of being on hold for
adjustment action from the
current board of adjustment
ruling and so at this point
I would like to understand
the rationale for bringing
this forward.

>> I will happily address
that.

First, though, I should
mention that making its way
around is a slightly revised
version of the resolution.

I had a meeting with some
folks from the zilker and
allendale neighborhoods a
few days ago and they
brought up a couple of
points which I think were
well taken and fed back into
the resolution.

There are a couple of
changes.

Let me back up.

The reason for the
resolution, I think, is
because this is a case where
we have not just a
difference of opinion as to
what is the council ought to
do but a difference of
opinion that is almost --
diametric opposition as to
what the facts of the case.

I have heard from the board
of realtors and particularly
zi and allendale
neighborhoods.

They have short term rentals
that are very short and the
short term on their list
seems to be located in
zilker and allendale
neighborhoods and it does
haven't a significant impact
and the zilker and allendale
have a long list which have
properties not well kept up
and have code violations and
a number of police and fire
reports.

We have a few difference of
opinion on what the basic
facts are in that respect.

I don't know how many short
term rentals we have.

I don't know how many code
violations we have and how
many crime calls and 3-1-1
calls in this area and it
seems to pass an ordinance
without getting the basic
facts of what really is at
issue may be a problem.

In particular the
neighborhoods are suggesting
there is an important
distinction between what
they are referring to as
commercial short term
rentals.

They are houses by people
using them only for short
term rental purposes and
owner occupy short term
rentals, a person out for a
week an wants to rent his
house, for example, for
south by southwest.

It seems like reasonable
distinction on its face but
I don't know if the public
cost short term rentals are
substantially different than
owner occupy rentals and
either to are associated
with the cost of long term
rentals or owner occupy
single family houses by
themselves, I don't know
where we are in this and i
have a lot of anecdotal
evidence collected mostly
from the neighborhoods.

We also have apneck total
evidence collected by the
board of realtors which is
in diametric opposition it
seems the best thing to do
is rather than pass an
ordinance in a vacuum to
collect information that we
agree to.

Here are facts that we all
agree are facts and look at
those and then make a
decision as to what we ought
to do once we have fact on
the table that everybody can
agree to.

So what this is doing, it is
asking for the city auditor
who already has some
background in the issue,
having collected a lot of
information about short term
rentals that are not paying
bed taxes, they have a
better list than anybody
else does right now.

Improve the list and come up
with a list that is fairly
universal and then tell us
what is going on in these
places, how many 9-1-1 and
3-1-1 calls are there, how
many code violations are
there, to what extent can we
believe the class of short
term rentals are adding to
the cost of the general
public, which seems to me to
be the best single basis for
making a decision as to what
kind of regulation is
necessary.

>> Morrison: Okay.

I, in theory, obviously
having data and information
on what to base our decision
is important.

I guess I have a question
for staff and that maybe
can't be answered right now
but come up and give it a
try, jerry.

I department want to put you
on the spot.

One question is what is the
chance -- like why haven't
we collected this
information already?

This has been a topic of
discussion and work by the
planning commission and your
department, jerry, for how
long?

Eighteen months?

>> Jerry from plan and
development review, the code
ordinance of the planning
commission indicated last
year, we have been working
on, the full commission
appointed working group that
we held meetings over
several months.

The working group came up
with a recommendation which
was then forwarded to the
codes and ordinances
subcommittee again, because
the ordinance of the
subcommittee added some
items to the working group's
recommendations and where we
are at right now is we are
getting prepared to bring
the item to the full
planning commission for
their recommendation prior
to coming to city council.

We have been gathering data
and studying what other peer
cities do, but mostly we
have been dealing with
staffing the subcommittee
and the working group and
attending their meetings and
putting together their
recommendations, so we
haven't done a lot of the
data gathering that is
called for in this
resolution, because ther
is -- it is just never.

>> Morrison: Is it feasible
to do this data gathering,
since there is -- well there
is a requirement to register
because people are supposed
to be paying a hotel tax but
we know that's not a good
measure of how many short
term rentals there are out
there.

So is it feasible to collect
this data?

>> Yes, I believe it would
be feasible to collect this
data.

These things are hiding in
plain sight.

It doesn't work to have a
short term rental unless you
advertise it so it is rather
easy to find out who it is.

Just a labor intensive task.

Because they are on all
different places.

A lot on the internet.

Different websites and to my
knowledge, you can gather
different places you can
find short term rentals and
do research on issues that
are identified in the
resolution.

>> Morrison: And then you
will also need to do
research on whether the
property is homesteaded or
not?

Right?

>> Correct.

>> Morrison: To determine if
it's --

>> the recommendation in the
code ordinance of the
subcommittee had a two tier
as council member spelman
referred to, a two tier set
of regulations, one for
those homestead properties
and one for those that are
not and I presume that would
be part of the research as
well, comparing the two in
seeing if there is a
difference in terms of code
violations or police calls
goes.

>> And then another issue
you would need to pay
attention to, I understand
there is a new law that has
taken in effect at the state
that makes it -- you have to
go through a few more steps
to actually homestead a
property now because there
is a big -- a lot of folks
are homesteading a whole
bunch of properties so it is
not just a matter of whether
or not they're homesteaded
on tax rules to determine
whether or not they are
owner occupied place?

>> The other thing is, while
the auditor is doing this
work which presumably will
be done mostly by auditor's
office, there is stig thing
planning can do, we can work
on the ordinance language.

We haven't put the paper
yet.

We still haven't worked out
among ourselves how we would
actually enforce this
ordinance or which
department would handle what
aspects of it, registration,
inspection, et cetera, and a
lot of issues haven't been
worked out yet and we can
keep working on those issues
internally among the city
departments while the
auditor is doing this, so we
won't just sit back doing
nothing, waiting for the
auditor's work.

>> And then that does bring
up the issue that, as i
understand it, the director
had put out a memo that
said -- well, just to back
up, just to review the board
of adjustments, made a
ruling of interpretation
some months ago stating
that, I think, anything that
was rented for less than.

>> Ten days.

>> Morrison: Ten days was
not allowed if sf zoning and
then that has not been ebb
enforced so it would shut a
lot of these down.

It had not been enforce and
the director sent out a memo
saying it would be enforced
after december 31st.

>> There was two 'em memos,
one was a memo to council
member which the board of
adjustment summarized and
then also in discussions
with compliance department,
ourselves and the assistant
city manager office, we
decided it would not be a
wise idea at this point to
enforce that action, one,
because we are talking about
over 300 properties in the
city, and the -- echcause
me, and the planning
commission was actively
considering a code amendment
and they are still doing so,
and so 300 plus people --
telling 300 plus people they
are in violation of the code
and then having the same
fine, there is also that the
interpretation of that is to
change, it seems like follow
foolish idea that would
cause a lot of unnecessary
grief among people reminisce
sent of the discussion
involving the flood plain
and so we don't want to go
down that path and the other
reason is we have a pending
lawsuit that has been filed
by some short term rental
owners contesting the
board's action and whether
the applicability of the
board's action is city wide
or whether it's applicable
to one address, whether the
board's action was legal,
correct, et cetera, et
cetera.

Right now the lawsuit is
being held kind of as part
while the code amendment
process goes through.

However, if we were to start
enforcing the action we are
told by the plaintiffs in
the lawsuit that they will
get the lawsuit moving and
then we will be fighting
that battle at the similar
time we are trying to do
code amendment.

We thought the best action
to hold steady and wait the
process to run its course.

There was another memos will
sent by the director,
sometimes the director has
multiple authors but went to
the two parties in board
adjustment case, mckell
meade representing allendale
and the other with the
property owners and they
said they will not pursue
enforcement but there would
be a date and anticipating
this done december 20th and
start enforcing whatever the
code was at that time and
that letter anticipated that
the code amendment would be
done obviously before
december 20th if not, so
there is a new memo sent out
by the two individuals but
said we are continuing that
enforcement but does not
have a date pending the
final action by the council
on the code amendment.

[One moment, please, for
change in captioners]
[one moment, please, for
change in captioners]

>>i haven't been working on
the law enforcement issue
but we can get a response to
you by thursday.

>> That would be great.

And we also -- I wonder if
an auditor might be able to
give us some ideas on how
long this is going to take
and I guess I would have
a -- question them for why
it's just indefinite.

Why don't we have a
particular date in here.

>> Good morning, council
members.

Good morning, mayor pro tem.

I don't know why you have
the indefinite date.

I think maybe it's because i
said it when we initially
started talking about it, we
didn't know exactly how long
it was going to take.

We had some opportunity to
take a look at it at this
point.

We think probably the
shortest amount of time we
need would be about three
months.

And let me explain why we
think that may be the case
to look at it.

When we look at the web
sites they don't necessarily
have an address and we have
to do investigations in
order to try and identify
WHERE THESE ICRs ARE
Located.

We've done some of that
work.

We had an audit back in june
of this year where we
identified about 266 of
these short-term rentals,
and were able to identify
addresses at that point of
200.

But that took a team of
about six people to actually
investigate it, go find it,
sometimes even visit the
site to identify those
short-term rental and we
would have to do the same
type of thing right now.

The thing about short-term
rentals and you're aware of
this, is they change over
periods of time and we would
to verify those are the ones
that are there.

The difficulty at this
particular point is when we
did this it was during the
sxsw --

>> morrison: sxsw.

>> Sxsw activity -- I'm so
excited about alabama having
won last night.

I'm an alabama fan.

Still not over it at this
point.

So we had an opportunity,
people were putting them on
the web site, we had an
opportunity to actually
identify them.

That is not the case right
now.

We're going to have to, you
know, just look for them to
be posted and determine
where they're at.

So depending on the degree
of the universe that you
want identified and the
information you want
available, that's going to
take time to get that done.

We can report out when you
ask us to report out, it
will be the information we
have available attachment on
top of that we're looking
for revenue, we were not
looking at complaints,
citations, things of that
nature.

That would be new to the
audit.

And depending how that
information is registered
and filed, you know, the
ability for us to be able to
find it and connect it to
the actual site, we don't
know exactly how much time
that's going to take as
well.

I guess I have
a question about some of the
feasibility of actually
going after this, because if
somebody is -- they live in
their place and they're
going to rent it out three
times a year when they're on
vacation, there's no way you
can find that unless it
happens to be advertised in
the time that you're
investigating.

>> That is correct.

>> Morrison: okay.

So that -- I guess the
chance of finding the
commercial is more likely.

Anyway, so I have -- I have
concerns about what this is
really going to bring us,
and I'm just going to throw
out there what my sense of
this is, and that is we've
done a ton of work already.

I'm not sure this is really
going to bring us a
fundamental -- a better
fundamental understanding of
what's going on.

From my perspective if
there -- if there are a
whole lot of them and the
people that are saying there
are a whole lot of them are
right, then I think we
certainly have some issues
because I'm real concerned
about the sustainability of
our central neighborhoods
especially, because, you
know, just to the extreme,
which isn't going to happen,
I presume, but to look at it
in the extreme, if you have
all of zilker or all of
allandale commercial
short-term rentals, you no
longer have a neighborhood.

And I'm -- and that's a
policy I would fight, you
know, having them all do
short-term rentals.

If they're -- so in that
case it would make sense to
have some limits.

And I think the planning
commission and the working
group, I'm really pleased
with the work that they've
done.

I know it doesn't go -- it
goes farther than some
people want and doesn't go
as far as some people want,
but it basically suggests,
and jerry, correct me if I'm
wrong, that there will be
a -- that they be
grandfathered and that for
new ones that they not be
closer than a thousand feet,
sort of like bed and
breakfasts.

>> Right, and a conditional
use permit.

and a
conditional use permit.

If there's a ton of them
like some people say, then
that's a problem and we we
ought to put something in
place.

If there are very few of
them, like others say, then
nobody should mind limiting
them because there just
aren't that many of them.

So to me there's a logical
reason that says it makes
sense to move forward,
especially in light of I'm
not sure how much this new
data can be complete or
really help us understand
the problem.

That's where I am on this
and I'm certainly looking
forward to hearing what
other folks have to say
about it.

it
seems to me like having a
good, sound, at least
initial database, it sounds
to me like right now we
don't really have one, a
good database on who and
where and all that kind of
stuff, is essential to what
I would consider to be one
of the most important parts
of this ordinance, which is
enforceability.

If you don't have good
enforcement, none of this
stuff is going to work, and
if you don't know exactly
who and where and all that,
it's going to be very hard,
I would think, to enforce.

That's just kind of off the
top of my head thinking,
but -- laura?

I think the
point is it's not clear what
kind of data we can --
i
understand that.

you're
suggesting if we can't get
data we shouldn't have --
no, i
didn't make any kind of
I'm
just saying it's going to
be -- regardless of what
happens, retaining this data
I think would be important
to that aspect of it,
enforceability.

So regardless of what
happens, I think that the
audit should go forward
whether or not --
depending -- I don't know
when it should be
implemented or -- I'm just
saying this as a separate
statement, that the audit
itself should stand --
so it could be
that we would move forward
with the ordinance and the
audit wouldn't go forward to
help us with the
enforceability of the
ordinance?

well,
I think that has to be one
of the possibilities, yeah.

There could be several, and
I haven't thought too much
about that but --

>> cole: mayor?

>> Mayor leffingwell: sheryl?

I have a different
line of questions on this,
and there is the issue about
enforceability of the
short-term rental status
from a planning and
commission and office
information that we've
received, jerry, from your
office, but you've met with
the neighbors; is that
correct?

>> Yes.

and you've met with
the subcommittee of the
planning commission?

>> Yes, multiple times.

and you've met with
the real estate
representatives?

>> For the subcommittee as
well.

now, is my
understanding that all those
groups agree that these
entities should be paying
the hotel occupancy tax?

>> Yes, that's correct.

and so what I want
to focus on is why we can't
immediately go forward or
on -- maybe in a shorter
time period than indefinite,
on some ways to start having
improved procedures for
collecting this tax while we
gather this data and work
out these thorny issues.

I don't want that left open.

So I guess I'll first lob
that at the auditor.

>> I think you can do that.

I think we did an audit
early on the year where we
identified some of these
short -- shortages in the
approach to short-term
rentals and made
recommendations about
working with the industry,
working with, you know, the
vendors that are actually
offering it, and I think
that work is in process.

When you talk about getting
the whole universe, I think
you're right, it's unlikely
we'll ever have the whole
universe because there's
going to be some one-offs
we're not going to identify.

I think when you look, you
know, at the overall issue
that I think you all are
addressing, we can probably
get a majority or, you know,
maybe 70%, 75%, or even more
of that identified.

We'll never know what the
right percentage is until --
we just won't know what that
is, but what I would -- you
know, if I'm asked to do
this I want to give you the
best data that I can get
given the constraints around
what we're trying to do, and
that's what we would aim at.

Now, with regard to the code
enforcement, you know, if we
don't know who they are,
unless you receive a
complaint, it's pretty
difficult to go find them
and get the revenues coming
in and --
well, I want to put
the code enforcement issue
aside and those that we
don't know, but those that
are currently classified as
short-term rentals, i
believe you all have
presented some
recommendations and audit
and finance, and I'm sure
there are more, especially
through their web site, that
we could immediately start
to implement to have
improved collection of the
hotel occupancy tax.

>> I think that is in
process and it's ongoing.

When we do the audits, we
also try to educate the
short-term rentals.

I think the industry
representatives are
providing training on how to
do this and do it properly.

I know the controller is
working on trying to improve
the web site and provide
easier means of them
reporting and registering
with the city.

I'm not going to say that
it's 100% complete because i
don't know that.

I doubt that it is at this
point, but it is improving.

And I think the efforts are
under way at this point.

And I think we've also had
some discussions with code
compliance.

I'm not quite sure, you
know, everything that went
on, but we're trying to work
together as a city team to
get it done.

>> Well, one of the
recommendations of the
subcommittee and actually it
was a staff recommendation
very early on in this
process was to create a
registration so that if you
were doing this, you had to
register with us, that would
make it easier for us to
check to see if you paid
your tax.

So if you said you were
doing this, you're
registered as a short-term
rental property, if
you're -- it would be
simpler for us to compare to
see if you had paid your
hotel tax.

So that's one of the very,
you know -- recommendations.

as far
as council member cole's
direct question, going ahead
with collecting these taxes,
that's ongoing.

>> Yes, it is.

that's
ongoing anyway, sheryl.

I guess what I'm
wanting to do is to amend
this resolution because i
know that it is ongoing, but
I also know that nothing has
happened, and I don't think
the compliance issue needs
to hold up those efforts,
and we need to be very clear
with city staff, the auditor
and the short-term rental --
and they all agree to this,
that we want to have
immediate implementation of
the registering procedure
together with the
recommendations of the audit
and finance -- I mean, the
audit tour together with the
recommendations of the
comptroller for improved
collection procedures, and
I'd like know the thoughts
of council member spelman --
or council member riley.

council member
riley is not here -- well,
now he's back but since i
have the floor let me pursue
this.

What, ken, were your
suggestions for any changes
in procedures for collecting
bed taxes from short-term
rentals?

>> I'm not sure I can
remember them all at this
point but I'll do my best.

We did recommend -- we
worked and recommended that
we work with the vendors and
get them to contact all of
their short-term people and
make sure that they did the
filings and paid their
taxes.

We worked with the industry
representatives and worked
on setting up training and
provided information from
the industry perspective to
do the same thing going
forward.

We had discussions with the
controller in trying to
improve the web site and
actually, you know, continue
to provide that information.

There may be other
recommendations at this
point and I cannot recall
them.

have you gotten
help on on this from the
industry?

>> I wouldn't get help as
the auditor but I think the
city is getting help and
they've done training.

I think council member
morrison may have had some
of that information provided
to her directly that I may
not be privy to at this
point.

I'm sorry to put you on the
spot, council member.

I'm not sure
what you're talking about.

I know that there was a
special session held.

Is that what you're talking
about?

>> Yeah.

and invited,
was it a board that held it
or -- I can't remember.

>> I think it was -- I think
it was in your office as a
result of the audit where we
had industry members came
in.

I was there, you were there,
we had the discussion.

I think diana thomas was
also there as well.

And I know -- what i
understand is that there was
follow-up to that and there
was actually some training
that went on and some
outreach on it.

yes, yes, and i
think that that has
continued.

>> It has to continue.

I think it's the kind of
environment we can't -- you
got to continue auditing,
you got to continue doing
outreach and grabbing these
people as they start
offering their homes for
short-term rentals.

Not just one time.

Must be ongoing.

so from your
point of view, ken, we're
actually in progress doing
the things that you were
recommending?

>> That is my understanding.

We'll probably come back on
a follow-up on it as well.

>> Spelman: I understand.

Jerry, that's your
understanding, that we're in
the process of implementing

[10:46:00]

that stuff?

>> Yes, what I was
addressing before was the
code enforcement side of it.

There's never been a
suspension of the revenue
collection.

As a matter of fact I was
referring to there's been an
attempt to improve that.

So no one is in disagreement
right now about the fact we
need to be collecting these
taxes now.

nobody is in
disagreement.

I understand that.

Conceptually people owe us
money, we'll try and collect
it.

But are we changing our
procedures, or are we doing
anything proactive to make
sure we're getting the taxes
that are owed?

>> My understanding is the
auditor's office has been
working with the
controller's office on
smoothing out that process.

and i
agree with the auditor that
it's not a one-time deal,
that you have to continually
add and subtract names from
this list, so it will be --
it will be a process that
goes on and on.

But it's important to get it
done initially too.

>> And mayor, others is we
continue the -- on the
otheride is suicide is we
continue the audits, we're
doing two to four audits a
year, to comply.

>>> Kathie?

>> Just to kind of sum up,
your office has been working
on this issue for, what
would you say, at least a
year, trying to collect
revenues from the short-term
rentals that are not
occurring paying hotel/motel
tax?

>> We focused on the
short-term the past year,
2011.

Prior to that we've done
many audits with regard to
hotel okayancy, which may or
may not have included what
could be defined as
short-term because there's a
range, obviously.

But short-term, yes, one
year.

so we've got at
least a year's worth of
numbers looking at how many
there are in this area,
would you say?

>> Yeah, we did two audits
on it.

The first audit was really
what was the condition, and
they really didn't look at
numbers at that point and we
had recommendations as a
result of that, which ended
up in, you know, some of
these other organizations
getting involved and
correcting the problem.

The second audit was
actually looking at the
numbers along with hotels,
we put them together, so
we're looking partially
short-term, partially at the

[10:48:00]

hotels but also always the
tax.

So really one audit of
numbers at this point.

but in essence
you've already done what is
being asked for.

You've taken a look within
the time you had to get some
sense of how many there are
in the city so that you
could begin to collect taxes
from them?

>> From the tax perspective
that is correct.

From citation, violation, et
cetera, we have not looked
at that at all.

and I want to get
to that point in a minute
because we have done -- my
staff has talked a little
bit with code enforcement
about what the viability is
of getting information or
data from code enforcement
that's actually going to be
useful in this regard, but i
just want to make the point
that, you know, for about a
year the auditor has been
collecting numbers that we
can use in making our
decision on this ordinance
when it comes forward from
planning commission.

So I -- you know, I guess i
share council members'
concerns about a further
delay because I'm not sure
that that delay is going to
get us any different
information than we have
here today, or that we'll
have here in a few weeks.

And I think it's also worth
emphasizing that, you know,
this is a process that began
more than a year ago, but i
mean, eve heard concerns
about short-term rentals
from communities where they
are being converted from
residences to what many
people regard as a
hotel/motel use.

I've heard those concerns
for a couple years.

It's only been a year since
the planning commission has
initiated a code amendment
process, but it has been, i
think, jerry, just about a
year.

I know those meetings, those
stakeholder meetings started
early in 2011.

>> Yeah, I think it was
april.

Look at some of the
documents in my folder.

so by the time --
things don't always move
quite as quickly around here
as you think they could, but
for a whole year almost
people have been -- the
planning commissioners have
been studying this issue,
looking at it, meeting with
stakeholders, taking input
and considering best
practices or what other

[10:50:00]

municipalities have done and
there's a wide variety.

Environmental, we have
municipalities around the
country that have banned
them.

We have municipalities that
are proposing some kind of
regulation and as council
member morrison said, we've
got a recommendation that
the planning commission is
going to be considering that
really, I think, doesn't go
as far as some people want
and goes too far for others.

So that I may be a good
sense that, you know, it's
somewhere in the middle,
because no one is -- we
don't have 100% consensus on
it but it represents in some
people's minds sort of a
middle position.

So again, I guess back to
the delay, I'm really quite
concerned about it.

>> Council member, I want to
make sure that I have not
misled you.

We've worked on it but it
was a limited look and it
was limited to the sources
we looked at and the number
we looked at from a revenue
perspective.

So we were looking at, you
know, where is the beef with
regard to the amount of
revenue we could collect.

It was not a universe type
or attempt at a universe
type study to identify all
of them.

you were looking
maybe less at how many but
which are the high -- which
are maybe the ones where you
might get the most revenue
from initially?

>> That's correct.

and your numbers
were in the 200 range.

I know we've received
information from home away
suggesting that they've got
370 registered in this area
so it's not like we have no
information on this subject.

>> And we did look at home
away and we were not able to
identify addresses for all
of those as well and some of
these were not within the
city.

We think there may be up to
6, 7 or more hundred that we
could identify but that
would not be the austin
number.

That would include people
outside the austin city
limits.

and we could
certainly cycle back to home
away and ask them where
there are 300 in the city
limits or outside.

I think we'll still be in
the ballpark of some
estimates of how many we
have in our city.

rusthoven, my
understanding of the

[10:52:00]

information we have
available from code
enforcement, is when code
complaints come in they
haven't always been logged,
being related to a
short-term rental.

So can you speak to that
issue?

Are we going -- there's not
a search one could do that's
going to return a big list
of code violations that are
logged to shor
rentals.

>> I'm sorry, I'm not aware
of how compliance organizes
their data.

that's my
understanding.

It wasn't a direct
conversation I had.

It was one joi harden on my
staff had.

But maybe we could get
something from code
compliance here on thursday
and I guess my point in
raising this is I don't
think even with more time,
even with an indefinite
amount of time, that we're
going to get information
from code compliance that's
going to be thorough or
comprehensive in terms of
how many -- you know,
whether short-term rentals
tend to have more or fewer
code violations.

I think we'll have -- we'll
have violations that are out
there that weren't logged to
a short-term rental and
short -- you know, anyway,
council member?

if I could
address that very briefly.

I wouldn't want to
second-guess how ken is
going to do his work, but my
best guess is if we've got a
list of addresses, we can go
back on an address by
address basis and see how
many violations or what was
the nature of the violations
we had at each individual
address, and even if the
code's folks did not have
breakdown by long-term
verses short-term or vacant,
even if they didn't have a
clue as to what was going
on, if they had an address
and we knew it was a
short-term rental we would
be able to break it down.

So I think there's a good
chance we'd be able to
collect some decent
information as to what was
going on at those addresses
so long as we can get that
universe of addresses, and
it's my understanding that's
what ken and his people have
been working on for the last
year is to come up with that
list.

So I think we can collect
better information than
we've got right now.

Whether it's going to be
sufficient to change your
mind or anybody else's mind
is something I'll leave to

[10:54:00]

you, but it would certainly
be very useful information
for me.

>> Morrison: mayor?

>> Mayor leffingwell: laura.

mayor, just to
that point, that raises a
concern what you're talking
about for me, just having to
base it on the address,
because structures are
sometimes short-term rentals
and sometimes not, and so
what we're talking about is
giving -- we're not getting
really data.

We're just -- we just need
to be real clear what the
data is, and that it's not
necessarily going to be
telling us what we think
it's going to be telling us
and that gets us into
dangerous territory.

>> Spelman: in what sense?

just because
there is an address that we
have some address is a
short-term rental today, it
might be a short-term rental
on and off, it might fit in
long-term rentals when the
call was made, if -- let's
say there's a code
compliance code to the
particular address on a
given date.

We don't know the status of
what that structure was on
that date.

we may be able
to find that out.

I don't know.

you mean you're
going to go back in history
and say, on march was that
being rented at a short-term
rental?

no, but we may
be able to find out if that
had been used at a
short-term rental on and off
starting on a particular
date.

we could
potentially be able to find
that out but likely we won't
be able to for some of the
assesses so we're getting
into a rely/ -- we're
getting data that's not
going to be telling us what
we think it might be telling
us and then it's going to
be -- for me it's worse to
have wrong data than it is
to have a lack of data.

for me it's
worse to have no information
to making decision blind and
I feel like that's a
decision I'm in right now,
having no information about
what the public costs of any
of the short-term rentals
are, commercial, private or
otherwise.

so you're
looking for public cost of
the short-term rental?

that's what
we're focusing on here, the
enforcement issues, 911 and
311 calls, code enforcement,

[10:56:01]

911 and 311 calls are what's
listed in this resolution
and that's public cost
issue.

>> Morrison: okay.

And I get that, but I really
have to question whether
we're going to be able to
line up and get information
about compliance issues for
known short-term rentals
because we don't know if
they were short-term rentals
or not.

They might at some time have
been short-term rentals when
the compliance issue arose,
but we don't -- we don't
know that, so we're just
going to be getting into
having to argue about
whether or not the data
means anything.

Because it may well have
been a compliance call
against a long-term rental,
and we will have no way to
determine that, we'll only
have suggestions that
sometimes this structure was
used as a short-term rental
so it may or may not have
been a short-term rental
call spell I can't
second-guess the
persuasiveness of ken's data
in advance.

From my point of view, i
think there's a good point
of view we can get data
which will be persuasive to
me.

If it's not going to be
persuasive to you, it won't
to you.

You'd have to vote against
the resolution, I guess.

just to be
clear, it's not clear it's
going to be data, it's going
to be suggestions about this
property had a compliance
call and sometimes it was
used as short-term rental.

that doesn't
mean it's not data.

It just means it's not data
that you're not persuaded
by.

no, it just
means we need to be real
clear about what the data
is.

>> Spelman: sure.

I think clarity is always a
good thing and it's one of
the reasons I'm happy the
auditor is willing to take
this on because they are
extremely clear what it is
that they can and can't say.

clarity
is always a good thing.

Kathie?

>> I agree.

I want to
follow up to the issue of
public cost, and i
appreciate that, that we do
need to take into account
public cost of short-term
rentals, but this does not
address that -- that public
cost you're mentioning
doesn't address the public
costs of the sustainability
or lack thereof of our
neighborhoods, which is
another issue.

[10:58:00]

it's another
issue.

do you think you
could provide us with backup
information that you already
have in terms of the number
that your audit found when
you looked at numbers for
the purpose of collecting
hotel/motel tax?

>> I'm sorry, could you say
it again?

>> Tovo: sure.

Your office has done?

Work in collecting numbers
on hotel/motel tax.

I wonder if you could
provide us those backup
materials for our meeting on
thursday with some numbers,
you know, how many of those
your data returned and maybe
by zip code?

Is that something that's
feasible between now and
thursday?

>> We can try to do it by
zip code.

We looked at, I think, 11
zip codes -- excuse me, 30
zip codes, the ones we
thought were the most likely
ones, and we actually
located 246 of about 266
addresses were identified in
the short -- in the study we
did over those several
months, but there's
potentially a lot more out
there that we need to look
at.

So, you know, we've already
provided that in the audit
that was released this year,
I believe it was in june --
excuse me, last june 2011,
so we can certainly provide
that informa.

If you want more detail it
might take a minute to go
into the work papers, the
aca and auditing charge have
left the city.

One retired and the other
went to chicago.

Why I don't know but he went
to chicago.

Okay?

So it would take us a minute
to make sure we've got the
right information, depending
on what the question was
that you were asking us.

>> Tovo: okay, thanks.

>> I do need to say of those
amounts we didn't look at
246 in the audit because
when we do the audits we
have to go in and look at
all the, when they paid it,
when they didn't pay it, all
the paperwork so we normally
do maybe 30 to 35 in each
audit because it takes a
long time first of all to
get the information from
them.

Short-term rentals aren't
the best at keeping their
records, and when we do get
their records quite obvious
oftenthey can be incomplete so we
have to work with them over
a period of time to get that
information.

So I want you to know even
though we have that many we
didn't complete a lot of
them.

They're going to be done
over a period of time.

but do you have
addresses for about 246 of
the 260 that you identified?

>> That's correct.

and so we could at
least see where those 246
are and whether they're
spread across the 30 zip
codes or whether they tend
to be located and he can
doad al evidence or to
suggest in the central city?

>> Well, they would be in
the central city because the
zip codes we selected were
the ones we felt were most
likely to be renting for the
kind of events that you
would do that for.

So it's already biased
toward that.

>> Tovo: got it.

So -- I was going to wrap up
my comments from earlier
saying, you know, I think
that the benefit -- the
additional information we
might receive with a delay
is not going to be any more
helpful than the information
we already have, in my
opinion, and this is a
multi-year issue that is
involved -- involved
probably hundreds of
stakeholders at one point or
another coming to meetings
to participate in this
process and for me it is a
fundamental land use
decision and we make them
with some regularity.

It's a planning decision
about what -- you know,
whether -- what our central
city land uses should be and
why it is appropriate --
what is appropriate within a
single-family use
neighborhood.

Were we're talking about --
what we're talking about in
my opinion is taking
structures out of their
primary function as a
residence and converting
them into something that's
more like a hotel/motel use
and I think that really
should be balanced against
our goal, our city-wide goal
of trying to reverse the
trend of families moving out
of our central district.

It's a serious trend.

We have to take strong
actions if we want to see
any measurable reversal of
that trend and converting
residence in our central
city neighborhoods which are
losing families with
children, converting those
into hotel/motel uses that
are not going to be serving
families with children in
our community, is not
something we should continue
to delay.

I think we do need some form
of regulation and I think
delaying is not of great
benefit.

so
1 under your
directive here, which is to
distinguish those short-term
rentals where a homeowner
lives on-site from those
where the homeowner does not
live on-site, I'm assuming
that means distinguish
between buildings that are
permanent short-term rentals
and those that are only
rented out occasionally, and
seems to me like that's a
very important thing to know
but also seems like it's
going to be really hard to
determine.

What are your comments on
that?

>> We have not done that in
the audit that we've done so
we'd have to go back and we
do that on these ones we've
looked at --
the
ones you've looked at have
all been like permanent?

>> We have not made that
distinction.

you
have not.

>> No, whether someone lives
there or doesn't live there.

It was just whether it was
short-term rentals, do they
owe the money.

It was a simple, focused
audit so we would have to go
back and look at that.

With enough time we can do
just about anything.

We'll send people out there
that when we did this
particular project we hired
a consultant to identify and
then we had a team of
interns headed up by our
audit staff to call, visit
and do that kind of work.

So we can go out there and
check that kind of
information, investigate
it --
it
seems to me like that's a
really, really important
thing to know, if it's at
all possible to be able to
know that, that would --
because if it's a permanent
str, then that truly is a
land use decision, without
question.

>> The only thing I can
suggest, and I don't know if
this would meet the needs of
all the city council members
or a portion of it, but we
can try to do it on a sample
basis, which would make it a
much smaller project for us,
and as long as you are
willing to accept a valid
statistical sampling as
opposed to an attempted
universe, that might be a
better way of approaching
it.

But that's something you all
need to consider in
determining if you want to
do that or not.

>> Mayor leffingwell: chris?

assuming that at
the end of this process some
short-term rentals are still
allowed, even if it's just
residential short-term
rentals, someone leaves town
for sxsw and rents it out.

Your office would
occasionally be expected to
look at the compliance in
terms of paying the
appropriate hotel/motel
taxes with those.

Isn't that right?

>> That has been the
direction of the city
council from the beginning
and that's why we continue
to do this, from a -- from a
monetary impact to the city,
et cetera, it's not the
largest amount we could be
looking at, but because of
the importance of it city
council has indicated they
want us to do that, and
we've been doing it for
several years.

but to date i
think what I heard is you
haven't really done an
exhaustive assess him of the
short-term rentals that are
out there in the city.

So what I'm getting at, is
it -- it seems like taking
some time now to do some
work, some additional
research to cast a wider net
and figure out where all the
short-term rentals are -- it
seems like that would be
valuable information to have
regardless of the outcome of
this -- of this whole
discussion.

Whatever we decide to do
with short-term rentals, it
seems like if you have built
your database based on the
work that's proposed with
this resolution, seems like
that database would put you
in a much -- in a
significantly improved
position going forward in
terms of your ability to
stay on top of the
short-term rentals that are
out there for purposes of
ensuring compliance with
hotel/motel taxes in the
future.

Isn't that fair?

>> That would be useful,
yes.

>> Rile this would be a
valuable exercise.

It's not just getting
additional information in
order to make sure we make
the right decision on this
issue.

This is about us in the best
think so that we're able to
conduct appropriate
enforcement and monitoring
of short-term rentals in the
future.

>> I would say it would be
useful for us, we don't
audit everything in one time
but it would be useful
information for the
controller as well to
monitor whether they're
registered or not.

So --

>> riley: okay.

Thanks.

>> Tovo: mayor?

who's
first here?

Laura?

Go ahead.

just a couple
comments in response to this
most recent idea of going
out and trying to get an
exhaustive -- exhaustive
database, and clearly one is
needed for enforcement of
hotel tax payment.

About you to me that's not
necessarily -- to have our
auditors and their resources
used to go out and find
that, which is going to be a
pretty difficult challenge,
is not necessarily the most
cost-effective way to do
that, because if we can get
this issue settled and then
do some outreach to the
community, I think that
there will probably be many
people who would just
voluntarily say, yeah, I'm
here and this is what I do,
you know, I rent my house
out twice a year or
whatever.

So -- but it does bring me
to the question of the
amount of effort.

You mentioned the
possibility of just doing a
sampling, a statistically
valid samp.

I'm not sure how you do a
statistically valid sample
if you're not quite sure
what the size of the
universe is.

But there are a lot of
complecations like for
instance there are homes
that are [inaudible] like
for instance a garage
apartment is used as a
short-term rental full-time,
so -- and then that's a
different situation from
when you might have a single
residence being used as a
short-term rental three
times a year.

But my question is, you
mentioned before that
previously it took six of
your investigators, what --

>> well, it took two
auditors and interns from
ut.

to do the most
recent effort that you did.

So -- and then you also
mentioned that the shortest
amount of time you might be
able to do this effort is
three months, and how many
people were you thinking
that would be working on it?

I guess I'm trying to get a
sense of the amount of
resources you're going to
have to expend in gathering
this information.

>> I think it would be a
similar number of interns
and auditors, plus we would
need to use some of the
consulting money we have in
the budget to hire the
consultant we used
previously.

And yeah, the three months
would not be -- first of
all, I don't believe I can
do an exhaustive -- it's
just not possible, because
there are outliers that I'm
never going to find, even if
I did try to do t but i
think we could probably get
a very substantial number of
them so that --

>> mayor leffingwel99%
would be enough, I think.

[Laughter]

>> I'm not even sure I can
do that.

Probably somewhat less than
that.

But yeah, there would be a
gap between what you say
would be an exhaustive, and
the sample would be based on
the known universe that we
identify.

and so do you
have an assessment of the
hours that this effort would
take?

>> Can you define what the
effort is for me again?

Because I'm a little
confused about --
let's just say
what's written right now in
the --

>> well, right now, you
know, we think at a minimum
three months, depending what
we run into, particularly
with regard to, you know,
what the files are in code
compliance and the police
department.

We need to find out how we
can pull that data and dot
matching.

three months
and how many people?

>> It would probably be a
couple of my staff plus some
interns that we'd be
working, probably four.

so maybe -- i
guess you'll probably be
bringing forward a fiscal
analysis for this by
thursday?

That will give us the dollar
amount?

>> I can do that, I wasn't
going to do that but I will
do that.

[Laughter]
well, we get
them on and off for various
[inaudible].

I'm not sure when it's
determined whether we'll get
a fiscal analysis or not,
but it sounds like it's a
nontrivial amount of
resources.

>> It would require some of
our resources, yes, and i
want to get an estimate what
we think it would take for
the three-month period.

>> Cole: okay.

Colleagues, any other item
we want to move on to or are
we ready to move on?

Council member tovo.

sorry, I did have
one follow-up question,
really for council member
riley.

I guess I'm still struggling
with where we're treating
this differently than other
land use decisions.

We don't typically survey
how many bars there are
across our city or other
kinds of land uses before we
decide, you know, that we
need a classification
specific to that land use.

So there's no doubt that the
auditor is, and I support
this effort, going to
continue to try to find them
to make sure that they're
paying their hotel/motel
taxes, and that can go on
independent of a delay here
and will go on independent
of a delay because we want
to be sure they're complying
with the requirement to pay
hotel/motel taxes.

But I -- if you would just
sort of talk me through why
you feel that a delay would
be necessary when what we
are making is a decision
about the kinds of land uses
we want in our residential
neighborhood, and we
certainly didn't do this
kind of analysis before the
council decided to have some
regulations particular to
bed and breakfast, for
example.

that was a whole
different thing.

We could discuss that at
length.

With respect to this
decision, it's -- I think
there is a fairly basic
disagreement about the
extent of the problems posed
by short-term rentals.

You have one side as council
member spelman was saying --
you have one side saying
there is no problem here,
that in general short-term
rentals are maintained
better than longer term
rentals and have not
presented issues for code
and compliance.

You have another side saying
it really is a problem.

You've got all sorts of
issues there.

So just from the standpoint
of making a well-informed
decision, there is value in
having good data.

Beyond that I think there is
significant value in having
a -- a working base of
information about the
short-term rentals that are
out there for purposes of
ensuring that we're
collecting appropriate taxes
in the future.

And I think taking a little
bit of time now to make sure
that we're making a good
decision will have benefits
in the future in terms of
our ability to actually make
sure that people are paying
appropriate taxes.

So it just seems like -- i
don't -- I would not expect
this would be a very lengthy
delay.

I heard some -- I heard
three months suggested.

I don't know if that's -- if
that's the best estimate of
how much time we're looking
at, but if we have to take
three months to make a
well-informed decision that
will put us in a good
decision going forward, then
it seems to me that that
kind of delay would be worth
it.

council member, are
we ready to move on to other
items?

I immediately have a
66, spops
sponsored by council member
morrison, council member
tovo and mike martinez.

Can you explain to me what
the peak hour surcharge is
and how that works?

well, before we
do that I wonder if our
legal department wants to
talk about the fact that
these both need -- that
66 and 65 need to be
postponed.

>> Cole: oh, okay.

because of the
posting issue.

>> Yes, council member,
deborah thomas with the law
department, 65 and 66 lack a
little bit of clarity.

[Chuckle] and so we have
recommended that we post post
postpone those until the
26th agenda to give us time
post those.

>> We will remind the mayor
and anyone listening knows
they will be postponed.

>> It will be in the
announcements in changes and
corrections at the beginning
of the meeting so people
will know that's going to
happen.

>> Next item, council member
riley?

the point is if we
got resolutions related to
taxicabs it would be helpful
to use the word "taxicabs"

when we're posting.

>> Yes.

if I could just
add, in fact, this is a
little bit of a failure of
our process because we had
one resolution covering both
items originally.

That's how we had drafted it
and it talked about taxicabs
in the posting, and then
when they got pulled apart
the word taxicab fell out of
both.

So live and learn.

deborah is here,
if I could.

On the same subject, if you
could take a look at the
posting language for 35, 36
and 37, these are not quite
as random.

They happen to be together
because I think it's a
similar kind of a problem.

In 35 we're authorizing
award and execution of a
contract [inaudible] single
lots
of detail on exactly what
kind of fiberoptic cable.

Sounds like [inaudible].

What kind?

Fiberoptic cable.

But we're not saying what
the devil we're going to use
it for.

It might be helpful to say
here's the department that's
going to be using the
fiberoptic cable and very,
very roughly put what the
reason for it is.

>> Council member spelman, i
believe these are purchasing
items.

>> Spelman: I understand.

>> And I just want to let
you know that we have an
attorney right now assigned
to purchasing it and we are
looking at these kind of
templates, how we post for
other departments that have
lots of items, looking at
having templates that, you
know -- more specifically
tell you what we're doing,
of course they meet the open
meetings requirement, about
you they're uniform so that
you know, you know, when you
see this item, particularly
what it might be about
because you'll have a
uniform template.

We're working on that.

the template
we're working off specifies
what and how much, which is
really good.

If we could add to that for
whom and for what.

>> We'll write that down.

I think that lawyer is here
right now in the back.

[Laughter]

>> spelman: thank you.

>> Mayor, I have another
question for deborah.

council
member martinez.

deborah, i
wanted to ask on 65 and 66,
who drafted the posting
language?

>> Council member, I'm not
quite sure where it came
from, but the law department
reviews all the posting
language.

and so if we
have these posting
requirements that council
tries to meet and staff had
the proposal ten days
prior -- the wednesday prior
to this coming thursday, how
can we not have fixed it in
wednesday and friday saying
we need to work on this
posting language?

I mean, once we as a council
member submit something,
obviously we've put our best
foot forward to drafting
and/or contemplating
whatever the item is, but we
submit it specifically for
legal review and staff
review to tell us if there
is something wrong or if
there's concerns or if
there's edits or additions
and yet we heard nothing.

>> Let me just take that,
council member.

I think there was a mistake.

We had -- this is no excuse.

There is a new lawyer that
was working on this, and
she's, you know, getting up
to speed, but we also have a
team, and everybody just
missed it.

So we apologize for that,
but I think we have an
obligation to pull it down
when we don't believe it
meets the requirements of
the law, but we just missed
it.

right, and i
certainly am not asking that
line of question to deborah
to try and point fingers.

I'm trying to respond to
council member riley's point
that, you know, the word
taxi should be in there, and
what I'm trying to emphasize
is we did have it in there,
and, you know, it should
have been captured when it
was split apart into two
different items.

>> We agree.

>> Martinez: thanks.

could
I just real quickly bring up
item no. 50?

Because I think we have some
folks here that could answer
just a quick question, maybe
bert.

I'm assuming that's grant
money we're spending?

It's just a big number.

I just want to be clear that
...

>> Carlos rivera, director
health & human services.

Yes, it's grant money.

It's from cppw, communities
putting prevention to work.

>> Mayor leffingwell: okay.

That would be a handy piece
of information to have in
the posting language too.

That's all I have.

Laura?

could I just
add to that before you guys
go away, it does look like a
big number going to an
advertising firm but i
imagine a lot of that money
is for the media -- media
buys themselves and do you
have any breakdown of that?

Could you fill us in?

>> I don't have a breakdown
with me, but we can provide
that.

The grant is coming to an
end.

It ends at the end of march,
so this is our last
significant media buy for
this campaign.

The total grant was 7 1/2
million.

>> Byron johnson, purchasing
officer.

Yes, in the backup, the --
excuse me, the contract
amendment has $833,425 is
actual media placement, and
that's in the backup on the
agenda item.

>> Morrison: thank you.

council
member tovo.

just a quick
question about that.

The backup talked about the
deobligated grant funds,
that these are deobligated
grant funds.

What does that mean exactly?

Are they deobligated in the
sense that these are grants
that could be shifted to
other health & human
services issues or does it
need to stay within the same
granlt but it's deobligated
for the purposes for which
you had initially intended
to use it.

>> I'm not familiar with the
"

sort of new to me
too.

i
never heard it either.

>> But I do know that it
was, I guess, repurposed, i
guess would be the --
generally the same thing.

It's meant to be for this
particular grant.

It can't be moved to any
other campaign that we have
in the department.

So as long as it is related
to tobacco cessation, use it
as such.

but you could use
it for any purpose within
that overall mission?

>> Yes, council member.

Part of the grant funds,
it's part of the stimulus
programs and as the funds
are being allocated out
around the country,
unallocated funds come back
to that programs that are
able to use it and the city
as part of our live free
tobacco program these funds
are allocated back to us.

>> Tovo: okay.

So it was deobligated from
another municipality to --
okay.

I gotcha.

So it could be used for
anything within this
grant -- within this
program, not necessarily
media buys?

wong is
phil wong
is responsible for the
prosecuting and in his --
program, and in his
determination would be best
used -- I suppose we could
have used it elsewhere but
in his determination --
the highest --
okay.

Thank you.

other
items?

Okay.

I assume there are no
questions on any other
agenda items.

Kathie, are you checking
or -- okay.

Okay.

Go ahead.

I just want to
throw out a quick question.

You know, we have -- on our
agenda is an item to set a
public hearing for
january 26 to make a
decision about the austin
energy rates, and I guess i
would just -- I wonder --
that
date could be changed on the
dice.

on the 26th or on
thursday --
it
will be changed day after
tomorrow.

>> Tovo: sure.

Well, what are your general
thoughts?

I mean, to me that seems
pretty quick, and I think --
I think --
my
general thought is it seems
pretty quick.

>> Tovo: okay.

Thank you for that feedback.

Others --
will we have an
option what would a more
appropria on the
dais?

yes,
we will.

Council member martinez?

go ahead -- i
know there are a lot of
people who want to talk
about the electric rates,
and that's -- the public
107 on our
agenda, it's the last item.

Given that the last item,
like all public hearings,
could be held anytime after
--
I've
already set it for 6:00.

It will come out in changes
and corrections.

00 or actually
since we usually have
proclamations and live music
30 we might put it for
30 since it's unlikely
we'll get started till 6:30.

i
don't think it makes much
difference but we could get
00 and 30
minutes --

>> spelman: flexibility.

Okay.

Good.

>> Mayor leffingwell: kathie?

I have some
questions for the sponsors,
mayor, or council member
martinez.

Could you just talk for a
70,
the resolution for the
waterfront planning advisory
board, what you envision
coming out of that and what
your resolution --
well,
basically what this
addresses is the fact that
boards and commissions
generally can't have work
sessions in the bylaws, they
either can't or they have
very limited work sessions,
and I had a request from the
chair of that group saying
that they had this important
work to do and they would
like to have some work
sessions.

So that's all this does, is
allows them to have work
sessions until they complete
this mission.

>> Tovo: okay.

Great.

>> Mayor leffingwell: mike?

>> Martinez: thanks, lee.

I didn't really have any
questions, but I do want to
publicly acknowledge and
thank the city manager for
his efforts to resecure
funding for weatherization
at the mount carmel -- we've
gone through this issue for
the last few meetings.

I realize that the minority
participation opportunities
are limited because much of
the additional funding that
was secured is for actual
hvac replacement, but I do
appreciate the efforts of
you and your staff going
back after those funds to
make sure that those needy
families are taken care of
this winter.

Thank you.

>> Mayor leffingwell: yeah.

Anything further?

Without objection we stand
adjourned at 11:25 a.m.

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=======================================================

[08:12:00]

 

>> we have one of our euc
commissioners, commissioner
day, I believe, is on the
line, on the telephone line,
that she'll be able to hear
everything that we talk
about this morning and also
to participate.

I assume we can verify that
commissioner day is on the
line at this point.

Okay.

Thank you.

There's a voice from
somewhere, and --
[laughter]
we're glad to have you here
swells other commissioners
from the euc.

And we will advise
commissioner day, who will
lead the minority
presentation when we get to
that point.

So just a couple of
housekeeping items.

This is a special called
work session, which means
the work session rules apply
as opposed to the council
meeting rules, which means
that we will not be taking
public testimony.

We'll only be taking
testimony from people who
have been invited to come
here and testify, and i
don't have before me a list
of those names, but I would
sure like to get one, if i
can be provided with such.

Thank you.

So we might as well go ahead
and get started.

30, and i
don't know if we want to go
directly into our
presentation from the
electric utility commission,
philip.

Are you ready to leave that
discussion?

Go ahead -- lead that
discussion in go ahead,
we'll have questions to you
and your associates and then
we'll hear the minority
presentation.

>> Great, and I have
[inaudible] statement, and i
think the other
commissioners all as well.

I believe barbara has as
well.

So if you would, if we can
all go through those first.

I will try to monitor my
time.

I've written maybe too long
and if it's too long I'll
stop and we can move on and
I'll cover it later.

And I will offer that at the
end of my presentation I'm
happy to take a pay cut of
50% of my pay.

[Laughter]
I wanted to talk to you
today about four principal
themes.

One is there was a whole lot
more consensus than conflict
at the euc level, and I want
to draw that out and talk to
you about that.

The second is that the
utility company as a whole
really needs to be operated
more as a utility and less
as a department of the city,
and that is a fundamental
point I hope you take away
from this presentation
today.

The third is the importance,
if we want to achieve the
goals that the city council
has given to austin energy,
the importance of unbundling
the rates so that the fixed
charges come through fixed
fees and the variable
charges come through
variable fees.

We're never going to achieve
our goals that you set for
the austin energy if we
don't take that fundamental
step.

And then the fourth, and
maybe I'll cut this one off
for time, we'll go there
later, is there are some
other ideas I've had since
the euc on new ideas to
explore to find some common
ground.

But let's go with the
consensus versus the
conflict.

In honor of mlk day
yesterday I thought, well,
what common ground did we
have at the euc?

We had 27 issues that we
have to go through to reach
a decision on, and out of
those 27 issues, we had 21
of them where we had a vote
of either 7-0 or what i
would call broad consensus
of 6-1.

Let's go through those real
quick.

The first one was to achieve
the revenue requirement.

The austin energy staff
recommended to collect
revenues from all customer
classes sufficient to fund
core functions in the amount
of $111 million.

The euc position on that was
to concur with the austin
energy staff subject to the
following caveats.

One, delete funding for the
economic growth and
development services
organization in the amount
of close to $10 million per
year from the revenue
requirement and the austin
climate protection plan
which are employees that are
not controlled by austin
energy.

Two, to remove any portion
of the general fund transfer
based on fuel revenues.

And 3, to remove an
additional
6 million from the
revenue requirement.

That motion passed on a vote
of 6-1 with only
commissioner day voting no.

The second item was to set
policy bounds on customer
class alignment --

>> do we stop as we go for
questions and will we back
up and do all that --
i
think it would be best if
you need to ask a question
of clarification, you don't
understand what was just
said, ask it now.

philip, you talked
about the core functions
that were kind of unanimous
in your recommendation,
deleting funding for es --
ergs.

But what I didn't get is
what you said about the
employees and [inaudible].

So will you tell me that?

>> Oh, sure.

There is a growing habit to
have austin energy pay for
city of austin employees
that do not report to austin
energy, which we feel is a
bad management.

And so one of those new
developments is to have
austin energy fund the
austin climate protection
plan employees, even though
they don't report to the
general manager of austin
energy.

And so we ask that the cost
to pay for those employees
be removed from austin
energy's revenue
requirement.

And the other is the
recommendation that we've
made, I think, on the
[inaudible] basis since 2007
to the city council, which
is that the general fund
1% of
the revenues austin energy
receives for fuel, even
though fuel is a
pass-through for austin
energy and they don't make
any money off of it so
they're paying a percentage
of money that's a
pass-through to them.

>> Cole: okay, thank you.

and that's the
source of the
6 million is those two
things added together, is
that right?

>> No, that was an
additional
6 million that was
actually recommended by the
residential rate adviser and
you're going to stretch my
memory as to what actually
it applied -- I believe it
applied to some
decommissioning reserves
that they recommended were
too aggressive and we
incurred -- through
decommissioning that we
concurred would be removed.

>> Spelman: gotcha.

just one quick
point of clarification.

What you're doing right now,
these points that you're
going through are all
identified in what I think
we have as appendix a --
we've several received
several times.

I'm referenced it as
appendix a and -- a little
easier --

>> thank you.

Yeah.

If this is redundant to you
guys, if you guys have read
this -- my sense was there's
a perception that there was
a whole lot more conflict in
the euc than I believe there
really was.

and I didn't
want to suggest that i
thought it was redundant or
that you shouldn't go
through it.

It's a lot easier, because i
know it's a lot of
information, at least for
me, to have it in front of
me as you're walking through
it.

>> Gotcha.

and
one more question.

>> Sure.

you
mentioned the sustainability
office should also be either
not funded by austin energy
or placed under the control
of austin energy.

I believe that's correct.

So I remember at the time
the sustainability office is
not that old, and when it
was established the idea was
that it be not under the
control of any of the
utilities, august energy,
austin water, solid waste
services, so that they could
be independent and make
their recommendations and
studies and efforts
independent of the
organizations that they were
recommending about.

And so I just wondered if
that factored into your
thinking on that.

>> I think that makes total
sense.

In that sense every agency
that's governed by the
sustainability office should
be paying a share of those
costs, versus austin energy
paying 100%.

>> Mayor leffingwell: okay.

Gotcha.

Go ahead.

>> Mayor?

>> Mayor leffingwell: chris.

>> Okay.

The next one.

>> Riley: one last question.

Did you talk about the debt
service coverage ratio?

>> Yes, we did.

I'll get there.

and you agree with
staff on that, that the
current debt service
coverage ratio level is
appropriate?

>> 2.0, Yes.

>> Riley: just 2.0?

My understanding is more
currently some were closer
to 2.7.

>> Yes, because we've been
0 for the last two
years.

6, i
believe, so I think there
needs to be some catch-up
there.

is there any
savings associated with
27 to
2.0?

I mean, doesn't that knock
something off the revenue
requirement?

>> I don't know --
I'll -- I don't
have those numbers.

don't our -- I'm
sorry --
mayor
pro tem.

just a quick
verification.

I'm support ofive of
consensus and I want -- but
I want to point out that it
looks from our matrix as if
there were various subpoints
within this achieving the
revenue requirement decision
point, and that there were
different -- different
positions.

It looks like commissioner
fast joined with
commissioner day on certain
subpoints, and as we get
down to, for example, system
sales and reserve funds and
debt service coverage, it
looks like it was not a 6-1
vote.

>> Absolutely, and I'm not
suggesting otherwise, but i
am suggesting that if
council is looking for areas
of common ground on which to
build a proposal, I think it
makes sense to start by
looking at where was there
common ground at the euc
level.

>> Tovo: okay.

So you weren't meaning to
suggest that there was
consensus around debt
service coverage, some of
the subpoints related to
debt service coverage and
some of the other cials.

>> What I'm saying is out of
the 27 other issues that we
marked through and voted on,
on 21 of them we had a vote
of either 7-0 or 6-1.

Coffee coffee and one of
them -- one of the 27,
though, was achieving the
revenue requirement, which
seems to be broken down into
a series of subpoints about
which there was some
disagreement beyond 6-1.

Is that right?

Am I reading this correctly?

>> Yeah, I'm telling you the
first one on the achieve
revenue requirement, with
the motion that I just
described to you, that
passed on a vote of 6-1.

okay and that was
strict ri the collect refuse
nuls from all -- news --
revenues from all customer
classes, et cetera, et
cetera.

>> In the amount of
$11 million.

I guess we'll let
you proceed on although it
looked like mayor pro tem
had a question and maybe we
can nail down to the system
subpoints, which are
subpoints of this first
decision point.

>> Absolutely and I intend
to address those.

I want us to start from the
perspective of where do we
have consensus rather than
starting from the
perspectives of where do we
have our conflicts.

>> Tovo: I understand that.

I'm just trying to keep all
our ideas here.

Okay.

>> Mayor leffingwell: sheryl?

I just wanted to
follow up on council member
riley's point that we're
going to drill down more
into debt service coverage
we might do that then, but i
thought that our financial
policies, and I'm not sure
that's in our report,
required us to at least have
a 2.0 debt service.

>> Yes.

That's correct.

so are we in
violation of that policy?

>> We have been the last two
years, yes.

Okay.

I'm just -- all I'm going to
do, I'm going to go through
the items where there was
consensus.

I'm going to can the rest of
my opening statement and I'm
sure later on it will come
up.

The next one is to set
policy bounds on customer
class alignment and with
cost of service, which was
to set the residential,
secondary [inaudible] less
of 10k w in lighting
customer class charge at 95%
of cost of service and set
all other customer classes
at 104% of cost of service.

So that means that
residential and secondary
voltage, the smaller users
were set at -- they would
only pay 95% of the cost it
takes to serve them.

Everyone else would pay 104%
of the real cost it takes to
serve them.

Our motion was we concurred
with austin energy on a
motion by commissioner
smallhoff, seconded by
webber.

That passed on a 7-0 vote.

At the subsequent meeting i
will say commissioner day
did request that her vote be
changed to be reflected as
no.

But let me tell you the
importance of this item
here.

There is a lot of discussion
about base load,
intermediate peak, how do
you calculate the cost of
service, base load
intermediate peak versus
average, excess demand.

I'm sorry, I'm a bit of an
outcomes-oriented person.

When you look -- when you
apply this formula to the
cost of service methodology
that the staff recommended,
the average excess demand,
the result for the
residential customers is
that they're paying 7/100th
of a penny more per kilowatt
hour than they would if you
use the base intermediate
peak formula.

So when I heard that i
became a lot less interested
in debating the theory of
base load intermediate peak
versus average excess demand
simply because the overlay
formula that staff applied
brought residential
customers so close to what
it would have been anyways,
what a waste of time to sit
around and talk about
theoretical issues regarding
cost of service.

>> Spelman: mayor?

>> Mayor leffingwell: bill.

I hate to
interrupt your flow, philip,
but --

>> no problem.

this is an
important point, I think.

You're talking about
residential customers,
basically whether we use 95%
of aed or 100% of bip, it's
the same number, basically?

>> Correct.

are there some
other classes that are going
to be paying more or less as
a result of movement from
bip -- or the difference
between bip and aed?

>> I know small commercial
users using the -- this
formula, are paying less
than they would if you used
bip.

>> Spelman: okay.

My apologies for being so
pedantic but who's paying
more?

>> Large commercial.

>> Spelman: okay.

>> Industrial.

Who else is paying more.

Yeah, I mean, it's really
every other class except for
residential and small
commercial.

>> Spelman: okay.

So again --

>> so those are being
subsidized and everyone else
is paying the subsidy.

but the subsidy,
we're only talking about 5%.

>> 5%, Yes.

at a maximum
point.

>> Yes, and I will point out
that we had an interesting
discussion at euc about if
we wanted to alleviate the
impact of the rate
adjustments on residential,
maybe what we should do is
change the 95% to 90%.

And I -- we asked the folks
who were testifying on
behalf -- on behalf of the
large commercials that
question, they said that's a
possibility to explore.

They were more interested in
exploring that possibility
than they we abandoning
using average and excess
demand as a methodology.

>> Spelman: okay.

>> So I think there's some
room for compromise there.

>> Spelman: okay.

Briefly, as you understand
it, why is it more important
to keep aed plus or minus 5%
than to go to bip?

What's the value in that?

>> There are -- honestly, i
don't really know.

I know the representatives
of the large commercial
users and the industrial
users are very committed to
having the aed, and I think
it becomes a political
question more than anything
else.

>> Spelman: okay.

Even though, as you put it a
few minutes ago, under aed
plus and minus 5%, they're
probably paying a little bit
more than they would under
bip, and the residential
customers are paying just
about as much as they
otherwise would.

>> Correct.

>> Spelman: thanks.

>> I think one of the issues
from their perspective is it
brings austin energy in line
with most other utilities in
the state.

>> Spelman: right.

>> And that allows them to
do better comparisons
between austin energy and
other utilities.

the theological
point of view bip may make
more sense but aed is used
by the state for the most
part.

>> Right.

>> Thanks.

4 on this
list was to mitigate impacts
within customer class.

No residential customer
electric bill below
1500-kilowatt hours should
increase by more than $20 a
month on average and
transition nondemand
secondary commercial
customers to demand rates.

The euc position was to
concur with austin energy on
a motion by webber, secked
by smallhoff, passed on a
6-1 vote with day voting no.

This is an important issue
to consider regarding the
affordability of this rate
case, but the underlying
tenet is if you're below
1500-kilowatt hours, you're
not going to be paying more
than $20 a month extra, and
the people who focus on the
percentage increase on the
fixed cost I think are
playing with numbers,
because the bottom line bill
is just a $20 increase
versus the percentage
increase of their -- that
they're talking about.

I think that's really
important to firm.

And -- important to
remember.

And it's also important to
remember that the proposal,
the first two tiers of
electric -- of residential
electric usage the cost has
actually been reduced from
the current tiers, so how
often do you have a product
that over 17 years the cost
has actually been reduced
for the first two tiers of
usage?

I think it was pretty
impressive.

The second --
one
quick question on that
point.

If you have a $20 cap for
that one class, how does
that -- are they still in
the 95% -- are they still at
95% cost of service after
that's applied?

>> Yes, and that's the whole
underlying structure of the
rate proposal.

By using that 95%, we're
able to accomplish the fact
that if you're a small to
moderate user of
electricity, your bill will
not go up by more than $20 a
month.

well,
I would like to see a little
more analysis of that, i
mean, what's a person using
1,499-kilowatt hours versus
somebody using 1,501 -- what
the difference in their
bills were.

>> Sure, and staff -- i
mean, they have produced
probably four or five
scenarios of different bills
for all the different types
of users.

That is there.

That's available for you to
look at.

I don't have it available at
my fingertips.

>> Mayor leffingwell: mike?

what I'd like
to see is the impact to
customers who are lower
income or heavy conservation
customers who would see 100%
increase or significant
increase in their overall
bill as opposed to just this
$20 cap.

Some of our customers may be
consuming less energy and
only see a $20 or less
increase, but it could
reflect a higher percentage
of their overall bill on a
monthly basis.

>> Yes, on a percentage
basis you are correct.

and that to me
is significant.

Specifically, if you're
lower income, $20 may not
sound like a lot to you, but
to some folks it is, and so
I just want to see those
numbers -- before we start
throwing out --

>> I understand.

-- adages that
say it's only 20 bucks and
nobody will go up by 20
bucks, I get that.

For me that's not a big
deal, but for a lot of folks
it is, and I would like to
see the true impact of that.

>> I understand.

Yeah.

Okay.

>> Tovo: mayor?

>> Mayor leffingwell: kathie.

>> Tovo: I completely agree.

To me that's not playing
with numbers.

I think we've heard from
lots of customers out there
for whom $20 is a hardship
and it does represent a
significant percentage
increase, and that's, again,
as council member martinez
said, it may not for many of
us in this room that may not
be an issue but for tens of
thousands of people who are
served by austin energy it
is.

You made a comment about
rates going down.

I didn't completely
understand the last point
you made about --

>> when you look at the
lowest two tiers of rates
for the rates for the
first -- I believe the first
thousand kilowatt hours and
up to 1500-kilowatt hours,
but I don't have my numbers
right here, those rates,
when you compare them to the
existing rates that are now
being charged by austin
energy, per kilowatt hour,
are being reduced, are being
proposed to be reduced in
this rate case.

>> Tovo: okay, thanks.

>> Mayor leffingwell: carol?

so under what you
just said I'd like to know
if this is possible through
conservation or other
measures because you're
using so little energy, for
you to actually raise your
rate but lower your bill.

>> I'm not following the
question.

well, we have a lot
of weatherization programs,
and what I understand you to
just say, when you get down
to low numbers, you know, a
thousand kilowatt hours, the
rates go down.

>> Well, let's remember, the
average user uses about a
thousand kilowatt hours.

The average user.

So that is not so low.

>> Cole: okay.

So is it possible, and i
just want to put this in the
range of possibilities
because I mean, I know we're
all concerned about raising
rates and what impact they
have on our customers and
especially low income
customers.

Is it possible for us to
target in such a way the
very low income customer
that is also a very low
consumer and conservationist
so that although their rates
go up, they're not seeing
this type of increase, or
less of an increase, or even
no increase in their bill?

Because a lot of times we're
talking about rates and we
haven't lined out, you know,
all the different kilowatt
hours and what the average
is and what the average
could be under different
scenarios, but if we focused
on being able to say we're
going to meet you halfway,
if you meet -- we're going
to meet you halfway with
conservation, we're going to
meet you halfway with
education, and we need you
to continue with that
conservation even more so.

And we've got a possibility
here of even raising your
rates and still lowering
your bill or raising your
rates and your bill is going
to be $5.

>> Mike webber, utility
division [inaudible].

Some data with that.

As a part of the concern for
what might happen to poor
users or people who don't
have a lot of money is a
doubling of the programs.

[Inaudible] rate cases is a
lot more money to help the
customer with bill
management, spreading bills
out over many months,
weatherization, energy
officials.

So what you're asking for is
already incorporated into
the proposed rate structure.

It's -- I won't say it's
4 1/2 million but
$9 million.

So substantial increase in
investments to help lower
rate users deal with the --
is it possible for
us to run that scenario to
say we have -- and I don't
believe we have it now or
else council member morrison
would have pointed it out
already.

[Laughter]
is it possible for us to run
that scenario on what we
expect the increase of
assistance to be, what we
expect or have seen with the
weatherization increase and
then what we are about to do
on a lower income customer?

>> So I think the increase
is already built into
everything we voted on and
everything you've seen, so
there's already an increase
of investment for customer
assistance, for example.

What that will do and
whether people take
advantage of it I think is
scenarios -- I don't think
we know exactly.

So part of it would be
letting people know, hey,
there's more help if you
need it, we have more help
with weatherization, more
help with bill payment
programs.

So austin energy already
does that.

We'll have to do more of
that because there's more
funding available for that
support and that funding has
been doubled particularly
because of euc and other
concerns that lower income
classes will be hit by a
rate increase.

And so there's money to deal
with that.

And I think a point that
philip was trying to make
also in there, that there
is -- there's a big
difference between low use
and low income.

They are not the same.

A lot of low use people
received [inaudible] because
they have solar panels and
I'm not interested in
looking out for his
financial interest but the
low income low users as a
class can be helped for
these other programs that
austin energy is -- double
the amount of money for
that.

we can focus on
that later, but I'm
particularly intood in the
low use low income.

>> In that program, they're
double, specifically for low
use, low income people.

>> Well, I think we need to
watch out there because i
believe a lot of low income
people are in very
inefficient homes, and it
makes it very hard for them
to actually be low use when
they tend to be, in fact,
relatively high use, and i
think that's a changing
phenomenon that we're
witnessing.

and I think we need
to focus on both before we
actually land on the number
of the increase, because if
we're able to focus on low
use/low income and see what
we can do for that customer
class in terms of a rate,
and then we're able to focus
on high use, low income and
what we expect to become --
or we need to go forward
with weatherization for that
customer class, then I'm not
so sure that the push-back
that we see on the rate that
we've adopted we can
actually challenge more
whether it's necessary for
your inability to pay.

>> Tovo: mayor?

--
there's
two people in front of you
first.

But if I could respectfully
suggest that we limit our
comments during the
presentation to questions
about clarification,
otherwise, we're going to be
time limited this morning,
we might not have time to
get to the minority report.

So it's just a suggestion,
and I think it would be a
benefit to all of us to try
to get the entire
presentation before we begin
a generalized discussion.

With that said, laura?

thank you,
mayor, point well-taken, and
just for my own
clarification and as we work
through this, there's some
additional information that
would be really helpful for
me to have because i
understand the
considerations that have
been made and the
recommendations for low
income folks, that one of
the differing pieces of
information I've been
getting has been about what
is the average usage of low
income folks, and it would
be really helpful if we
could have an estimate of
the distribution of usage of
low income people because
our responsibility, while we
need to move toward
mitigating these rates for
low-income folks, I want to
have a realistic assessment
of what the reality of the
impact is going to be,
because even though we're
doubling the cap investment
with the recommendation,
that really only goes from
one-fifth to two fiftsz of two 50s of the
people that need it.

So that distribution would
be helpful.

>> The day that we've
been -- data we've been
given to address that issue
show use and consumption and
the data I've seen indicates
that the average energy
consumption for low income
people, people that are
participating in programs
that the utility is actually
higher than the average
energy consumption for
people who are not
participating in those
programs.

and data that
we were given last thursday
said that the average for
low income was much lower
than the average for the
state.

From a very reputable
person, so we just need to
get all that sorted out.

>> Mayor leffingwell: kathie?

I concur with your
suggestion.

I'm getting a little
concerned we may not have an
opportunity to hear from
minority members of the euc
but also I want to remind my
colleagues that we have a
good number of other people
in the audience today who
have offered to be here to
share their testimony and
some of them do work --
[inaudible] knows a lot
about the customer
assistance programs and we
have others, so if we can
kind of proceed and hear
from everybody but then sort
of move to the issues in a
way that --
as we
talked about initially, work
session rules will not take
general comments from the
public, only those listed on
the.

that's what you've
listed.

I'm not sure that everybody
has the list in front of
them as to who is available
to speak, so I just want to
point out, we have a
representative from the
school district here to
speak to that.

We have josh houston and
McCALL JOHNSTON, WHO CAN
Speak to the impact of the
rates, and some of their
suggestions in terms of
congregations.

We have carol bejitsky and
linette a cooper, who
linettea cooper can speak to
revenue requirements and a
variety of other things in
great detail.

Carol can talk about -- we
have other experts available
to us too.

>> [Inaudible] looking at
low income, high use.

There's not one reason.

Some of it could be due to
energy inefficiency, which
is -- there's a process by
which that's being remedied
through monies and austin
energy is out there trying
to help retrofit.

Another could be size of
family, and another could be
just wasteful use.

So, you know, because of
whatever the family -- the
individual family is doing,
as far as their own
appliances and everything
else and lifestyle.

So I think looking at this,
you're not going to find one
answer to the whole thing,
but there is a -- built into
the rate cases, commissioner
smallhoff put it,
[inaudible] as far as what
is due to housing stock and
try and mitigate as many
bills as possible.

yeah,
I think that is an important
concept to keep in mind as
we go through this.

This is not any kind --
there's not a direct
correlation between income
and usage.

In fact, it may be exactly
the opposite.

If you're very wealthy you
can afford to invest in the
kind of things that would
reduce your usage where if
you're not you wouldn't be
able to make those
investments.

Judy?

>> Mayor, in the interest of
time, I'm judy flare.

May I suggest that you have
the decision [inaudible] and
if you want to ask questions
about any of them, do so,
and otherwise I'm sure
there's a whole lot more
dialogue that needs to take
place.

that's
a good point, and -- but,
smant is making his
presentation now and we're
going to try to get through
that and go to a minority
presentation and hear from
some of the other folks that
are on this list here, and
then engage in a general
discussion.

So as quick as --

>> I'll talk about -- I'll
just talk about one more and
up up's the dais.

13, apply residential
customer charge.

The city staff recommended
raising the [inaudible]
central customer charge from
$6 to $15 a and to remove
this portion of the charge
from variable energy charge.

Euc voted to condition cower
with the residential rate
adviser and instead elected
for a $12 customer charge
with additional fixed
charges of the a line
extension hook-up fees, and
that passed on a vote of 6-1
with day voting no.

This is the kernel of
unbundling your rates.

The city council has asked
austin energy to reduce
through energy conservation,
reduce usage by up to
800 megawatts by 2020.

That is a great goal, but
that is a very difficult
goal to accomplish.

Austin energy's current
capacity, generating
capacity, is 2700 megawatts,
so you're essentially
telling this company, reduce
your sales by roughly 33 to
40% in the next eight years.

What owner tells their
company to go out and reduce
sales by over a third?

And how can you possibly
afford to do that?

That -- we're pointing the
utility in a direction where
they're going to lose
substantial revenues in the
next eight years.

I'm
sorry, really quick
question, michael, if i
could just -- I'll just put
this on the table and you
don't have to address it,
but maybe think about it as
a part of the fixed fee, did
you consider -- did you
write any scenarios on the
concept of including within
that fixed fee a certain
number of kilowatt hours, 2
or 300, something like that?

>> Absolutely, that was
commissioner fass's
suggestion and I think the
euc as a whole wouldn't have
a problem with doing that.

Let me tell you why in the
end we didn't go that
direction, or what I think
is a reason, and that has to
do with transparency.

The euc went through six
months of increasing
transparency for austin
pricing and policies
being and we thought it was
more intellectually honest
and more transparent to the
rate payers if we say this
is your fixed fees and these
are your variable fees.

If we open the door to
saying there's an area here
that's somewhat fixed and
somewhat variable, that door
is going to get opened wider
and wider in the future, we
believe, to where it's going
to be hard for people to
track what's fixed and
what's not.

But the concept was fine,
but it was the issue of
transparency that led us to
say, probably won't work
doing it that way.

more
discussion on that concept
to follow.

Laura?

>> Absolutely.

I have a quick
question for you.

I think we all understand
that the fixed costs are the
lion's share of the
utility's expenses.

Was there any discussion
about target for the percent
of revenue that would be
fixed, overall, out of the
$.1 billion?

Was there a target set?

>> That was dictated by the
cost of service study, which
broke things into category
of fixed versus variable, so
that's an empirical
question, and when the
studies were done on the
cost of service there were
some expenses that were
fixed and some that were
vacial.

To say that 2 it should be
60 20/80 is
variable --

>> you're saying the
proposal should essentially
match up that the variable
expenses will be coming in
with variable revenues and
the fixed expebz will -- so
it's -- it should
theoretically be 100%
aligned with --

>> that would be the
objective.

It's important to keep in
mind the large chunk of
one's bill is variable cost
and it's fuel.

So it's definitely not the
case that the majority of
the utility's expenses are
fixed.

Roughly half of the budget
ends up being fuel.

>> Since we've got a number
that is like $45 for
residential customers and
fixed cost, and right now
$6 of that is recovered --
the current rate structure,
the austin energy proposal
is to cover $15 in fixed
form and we passed 6-1 it
would be $12.

The average cost I believe
is --
what i
summarized is incorrect.

It's not 100% alined.

There's a judgment made as
to how much -- just as we
deal with the water utility,
we know that it's more
than -- it's not aligned
with the --

>> it's not --
-- with the
breakdown so there is a
judgment call.

Do we have an idea of what
percent that that proposal
brings in in terms of fixed?

>> My recollection is that
roughly half of the fixed
costs that could have been
recovered if we had been
strict in the economics are
what came through to the
proposal here as the, you
know, fixed customer
charges.

Roughly -- it's roughly half
of what it could be on a
pure model.

>> Let me just say that
by -- by increasing the
fixed charges you are
opening the door for austin
energy to really be a unique
utility in the country in
meeting its conservation
energy goals.

If you don't do that I'm
afraid you are, in fact,
closing that door and going
to make it very difficult
for them to ever accomplish
those goals.

On top of that, the rate
proposal has what would be
the most progressive
inverted block rates in the
state of texas so that the
highest energy users would
pay the most.

The people that are saying
it's backwards or sideways
or whatever I think is
missing the value of
unbundling these rates and
getting this energy utility
to accomplish the goals that
you have set forth on energy
conservation.

Let me just say one more
thing on the revenue
requirement on the issue of
the utility needs to be
more -- treated more as a
utility.

We really need to be careful
that we're not trying to --
we've got four -- we've got
two commissions, we've got
the city council and we've
got the city manager who all
oversee austin energy, and i
don't think either one of
them does it effectively.

You're being advised by a
volunteer board that meets
once a month to review a
$1 billion a year
corporation.

I think we need to move off
of that and to have a
discussion on the best way
to manage this utility, and
in that connection I urge
you with regard to the
revenue requirement not to
do it on a political basis.

We've had four separate
financial analysts review
the revenue requirement, and
they've all come back and
said, it's correct within a
few percentage points.

I mean, two of them had some
quibbles, but very, very
minor.

I think it's extremely
dangerous for some of us to
start putting a finger in
the air and say, well, maybe
we'll [inaudible] 50% of the
revenue requirement or 60%.

That I don't think is a
responsible board of
directors of a utility, when
you've had four independent
analysts review it and
advise you.

And I'll stop right there.

further
questions?

>> Philip, when you all were
talking about the fixed
charge, did you look at
practices of other texas
utilities?

Some concerns have been
raised about the prospect of
austin energy becoming an
outlier on the spectrum of
fixed charges applied by
municipally owned utilities.

>> Absolutely, we will be an
outlier, and that's actually
a reason to do it, because
this is -- we need to do
things differently than
we've done things in the
past.

If you continue to force
austin energy to recover its
fixed costs by the sale of
energy, well then, guess
what?

They're going to try to sell
more energy.

They're not going to try to
cut that back by
800 megawatts.

They will not be able to do
that.

They won't be able to
financially survive.

at our hearing
last week we heard some
concern about the prospect
of the puc reviewing the
rate case and in particular
the notion that the puc
would not look kindly upon
fixed charges that are so
far out of line, to the rest
of municipal utilities in
texas.

>> I can't advise you what
the puc will do or not do.

I can advise you on what i
think is the right direction
for this utility.

And if puc slaps us down,
then the puc will slap us
down, but I do think it's
the right direction to get
this utility to meet the
800-megawatt goal.

And in the long run, the
people who are complaining
the most about this i
believe are the ones who
will be benefited the most
because they will be saving
a lot of money by avoiding
expensive generation, by
building new generation.

If we can, in fact, reduce
800 megawatts, that's
800 megawatts we didn't have
to build.

That's a great long-term
investment.

[One moment, please, for
]
so in my world, this was a
whole new world, and i
didn't know anything about
it.

She came on board,
september 1, with the euc
rate case, and then december
we had the city council rate
proposal.

But anyway, I will follow
barbara.

>> And I think barbara is
out there somewhere.

[No audio available]

[10:52:23]

[no audio available]

[10:56:10]

>> I'm sorry to interrupt
you, but I have to announce
that your voice is not
coming through on channel 6.

Everyone of course here in
the chamber can hear you
loud and clear, but we're
working on it, it's
technical difficulties type
thing, we're trying to
correct it, but I wanted to
make sure that everyone
viewing at home didn't think
we were just sitting here
twiddling our thumbs.

So go ahead.

>> Mayor, could I interrupt?

Barbara, thank you for that.

I know this seems to be a
critical fundamental issue
from a policy point of view,
and I wonder if there is
some way that staff and
various members of the
public could help us sort
through this.

What is the real difference?

What is the impact?

And help us understand that
not right now, but I think
it's a fundamental issue,
and it's a philosophical
issue also.

>> Agreed.

And when barbara gets
through with her
presentation, I assume
everyone has this list, we
can call on anyone that you
would like to call on.

>> And I plan to address
that too when I get to --
thank you.

>> Sure.

[10:58:00]

[No audio available]
it has become apparent now
that the school [inaudible]
to the low-income, one of
the other members spoke,
[inaudible]
council should take plenty
of time to look at.

..

Future expenses and the
historic adjusted downward
revenue, and I think that
needs to be looked at much
harder, and the -- I think
the solution to that is to
redo the revenue requirement
part using 2011 test year.

That would be a complete
year of operation through
ercot, and use actual
numbers.

The revenues from system
sales, which means austin
energy's home customers have
been adjusted downward in
the original case that was
looked at by the euc, the
adjustment downward was
6 million, and they did
that through a, quote,
normalization of weather, by
saying that 2009 was an
extraordinarily hot year and
it wouldn't be normal or
replicated in the future.

Well, we know that is not
true because of what
happened this past summer.

But surprisingly, when the
case was filed in december,
with council, that number
with us adjusted by -- was
adjusted by $20 million
more.

So now they have adjusted
the system revenues down by
$29.6 million.

No explanation.

Thisno carrierringconnect 57600
actual revenue that austin
energy realized
was taken out of the total
revenues because -- and the
argument was that those
sales wouldn't necessarily
continue.

So there's --

>> they didn't represent
normal operating, because
the weather was extreme in
2009.

That was their rationale for
it.

>> And as you pointed out,
you know, we had the same
situation this year except
the number was 30 million.

So the revenue was lowered,
the forecasted, instead of
using actual costs, they
used forecasted costs
because they were switching
to the nodal market, so the
costs were not exact.

They were forecasted costs
and then the off system
sales of 2009 were also
adjusted out.

So is that --

>> just about--

>> -- simplified version of
what you said?

>> It is in general, but
there are some slight
differences.

One is that although the
original weather adjustment
6, austin energy, when
it refiled the case in
december with you, with
council, they increased that
6, so
they've adjusted even more
revenues out for weather
adjustment.

I don't know why.

They did not say why.

And, yes, the off system
sales were also adjust
out.

They removed $33 million
from the case that was at
the puc, and they've
increased that, and removed
now another ten million
dollars, they've removed
$43.8 million.

So revenues are understated,
and expenses are overstated,
and the expenses that are
overstate ready not due to
the nodal market
necessarily.

>> And so the --

>> but, yes, the principle
that you are stated is
correct.

>> Commissioner davis, to
get to the bottom line of
that, in 2009 we had more
revenues than we're
considering here, and fewer
costs that are being
considered here.

>> Yes.

That would be correct.

>> And so that -- that is --
those are numbers that
factored into the revenue
requirement which is the
basis for the rate increase.

>> Correct.

>> To get back to what the
mayor was saying about, you
know, whether or not it's
appropriate for us to look
at the revenue requirements,
I would say absolutely we
should be looking at the
revenue requirement, because
as you've shown through this
point, but also some others,
you know, those are the
bases for how much revenue
we're trying to collect
through a rate increase, so
if those numbers are wrong,
we're in danger of
increasing individuals'
rates beyond what we
actually need.

>> Yes, I think that is
correct.

And the residential rated a
visor's latest report to
you -- I'm sorry, december,
I don't know the -- I think
it's maybe 19, he has
pointed out in that report
this very phenomenon, not
with numbers, but the
principles of it, and he has
pointed out, and stated a
concern that austin energy
has used forecasts and
projected numbers for
expenses but have not
projected revenues for
corresponding period, and --

>> I believe laura has a
question for you.

>> Thank you, mayor.

Sorry to interrupt,
commissioner day, I just
want to -- the points that
you and summarized by
councilmember tovo are
making, I think it's
critical we put those in
context, because what you've
listed is potentially, let's
see, 60, $70 million in
understated revenue, and the
total amount that we're
working on in terms of an
increase revenue that we're
looking for is I believe
101 million or 124 million,
but then you take some off
for the underreported.

But anyways, about
100 million, if you found
$70 million under the table,
that would decrease the
extra amount of money we
need to get with this rate
increase to 30 million
instead of 100 million.

That is a significant
difference, and I know that
there are other -- so that
would have -- that would
hugely change the proposal
that we would be looking at
in terms of rate increases
and fixed fees and all of
that, and the additional
issues to consider here are
have we chosen the right
debt service coverage,
because that folds into the
revenue requirement.

Have we appropriately
identified what our reserve
funds should be?

That also folds into the
revenue requirement.

Whether our capital
expenditures should be as
heavily cash financed or
not, and whether we should
be looking at a change in
impact fees.

So I whole heartedly agree
with you, mayor.

I think that this is
absolutely the fundamental
driver of why we're here in
the first place.

>> Leffingwell: Thank you.

And I just want to say --
emphasize once again, I'm
not saying a is right or b
is right, I'm just saying
this is a question that we
have to resolve and we have
to gain consensus on what
that resolution is.

>> I agree.

And it's -- it's not only --
I mean I think it's so
important because it has
such a significant impact on
our future actions.

>> Leffingwell: Go ahead,
barbara.

>> With regard to the debt
service coverage, that is
another area that is driving
the revenue requiremen
and, and it has been state
bid austin energy that --
they stated I guess three
different ways.

They've stated at one point
that they've only achieved
66 time coverage in
another place within their
filing they stated they
81 time coverage
for the same year, so
there's something going on
with the way it's being
calculated.

I was hoping that the
auditor would be looking at
that and I don't know when
you are going to be hearing
from the auditor on that,
but I am very hopeful that
he has looked at that and
will be looking at it.

In fact, your bond
covenants, the bond issuance
57600no carrierringconnect 57600
nobody
that I'm aware of at this
point is suggesting that
your bond coverage should be
lower than two times.

That is with -- that is your
range.

That is the stated financial
policy, and I think
everybody has come around to
accepting that you should
have two times, but austin
energy newest filing in
december to you has included
37 times, and
then I think in the third
44
times.

Now, remember that your bond
25
times.

And the rating agencies
consider that 25% bump up as
a cushion, but you have
chosen to be conservative
and go with two times, which
is very, very generous, and
it is a conservative number.

But austin energy has
produced in this filing the
revenue requirement they've
37 and then
2.44 in the third year.

So another way to look at
this is to scale that back,
make that calculation, and
that was included in the
memorandum that I sent to
councilmembers.

>> Leffingwell: And
barbara --

>> played out how it's down.

>> Leffingwell: Barbara,
for planning purposes, we
have a couple of other
people, your shooting wants
to say a few words also.

About another ten minutes or
so, if you can plan on that,
so we will have time for
discussion before we
adjourn.

>> And then what I would
like to jump to are the
charges, and then I will
pass it over to trudy.

Customer charge is currently
$6.

The euc has recommended
doubles that to $12.

For the 100 or so years of
utility regulations,
customer charge is a very
small group of charges.

It's billing and it's
metering and customer
service costs of operating
your phone banks.

And it's always been that
way.

There has been no study by
austin energy to show that
those costs have increased.

In fact their filings shows
that those -- that small
group of costs has
decreased.

So I see no reason to double
the customer service -- the
customer service charge.

In fact I see no reason to
change it.

Austin energy is using it
simply as a source of income
and as a source of money.

But since it doesn't -- they
haven't shown that those --
their costs for servicing
the customers have
increased, I'd see no reason
to do that.

Again, it's a -- it's a
rive charge.

Anything done on head count
as opposed to usage is a
regressive charge.

It harms the small user the
most and sends the wrong
signal as far as conserving
energy, because people have
no control over it by their
usage.

The delivery charge, as i
think the mayor's office has
already pointed out.

We -- no other regulated
utility in the state of
texas has a delivery charge.

The only one that I'm aware
of is pedernales, and it has
not been appealed to the
puc, so it has not been --
it's the only one that has a
delivery charge.

Again, this is a very
regressive charge.

It's done on head count and
not on usage.

So if I'm using -- well,
let's say that customer a is
using 500-kilowatt hours a
month, and customer b is
using 5,000 kilowatt hours a
month, each of those
customers, under this
proposal, would pay the
fixed, flat fee.

And yet, the customer that
is using 5,000 kwh a month
is using much more of the
distribution system than
customer a is.

And so it is inherently
regressive and unfair.

Now, I understand the
argument, well, we want to
collect more of it in a
fixed charge, because we
don't want austin energy
trying to sell more power.

But this is not the way to
get there.

Definitely not the way to
get there, because you are
putting the costs on in the
wrong place, and you're not
collecting it, as it's being
imposed on the system.

You have -- austin energy
has always collected the
distribution charges in the
kwh charge, and it should
continue to do so, because
that is the way the cost is
imposed.

And it imposes the costs on
those customers who are
imposing the cost on the
system.

Now, somebody has talked
about -- or a couple of
people today have talked
about, well, gee, the
low-income people are not
necessarily low-use
customers.

They're actually high-use
customers.

That -- I dispute that, and
there was one -- I think
austin energy put out one
study on that, but I know
that cooper and paul robins
did analysis of that, and
looked carefully at the
low-use customers and the
low-income customers, and
came up -- came to a
different conclusion.

So that I caution you not to
take that to the bank.

That is in dispute.

That may be something else
that you would like to have
really resolved before you
make your final decision.

A final thing I want to say,
and I have addressed this in
a memorandum to you, but i
was very surprised that
austin energy raised its
fuel charges effective
january 1, and the increase
on the residential class is
16%.

That is a pretty large
increase, and in combination
with a base rate increase is
going to be very hard for
working class people to
accept and live with.

And I would ask you to look
at the procedures that you
have for supervision of
austin energy on these fuel
charges.

As I understand it now,
austin energy itself makes
the decision without coming
to the euc, without coming
to council for approval, and
while I'm not suggesting a
particular procedure, I am
suggesting that you look at
this process and change the
procedure because I think
there needs to be some
supervision.

We're at a time where fuel
costs are dropping,
dropping, dropping, and it's
the gas costs which is
usually a proxy or fuel cost
for the utility business
have gone down, so it's not
at all clear what is driving
this fuel increase, and i
think we need to understand
that.

We need to have some
supervision of austin
energy.

They need to answer to
council or to some
representative appointed by
council before this --
before changing the fuel
factor.

I'm getting the idea that
council is very focused on
the impact and the practical
in this, and I applaud you
for that.

This cannot be done strictly
on a theoretical basis.

We have to look at, and i
know you are looking at the
impact on all the citizens
of austin, and outside the
city limits.

But I also encourage you to
look -- keep in mind very
big picture if you have the
right revenue requirement,
you scale this request back,
then you don't have to
provide so many subsidies,
because no one will be hurt
as badly as the way austin
energy has structured it now
and is requesting it.

I encourage you to take more
time to look at the revenue
requirements and ask austin
energy to utilize a new test
year.

Thank you for letting me
participate on the phone.

(One moment, please, for
..)
s.

>> -- 39% Of the total revenue
and the commercials paid 40% and
so even though they are many,
many times more than residential
than commercial, the revenue
input is roughly equal.

And now look down to the fourth
series of numbers, the cents per
kilowatt hour.

6
cents per kilowatt hour.

The commercials are paying 9
kilowatt hour and at
the bottom, the industrials are
paying 6 cents per kilowatt
hour.

And that's -- that's mainly
those long-term contracts that
don't expire until 2015 and of
course, that is another story,
but the other thing is the cost
of service modern dolg.

Methodology.

The other paper has three
columns and we are talking now
about cost-of-se
methodology.

And this is something that meryl
did us for, and I have known him
20 years and he used to do
cost-of-service methodologies on
his home computer in the late
1980's and he took two
columns -- three -- no, two
co out of austin energy's
comparison of aed and the key
thing is the last column.

96%
decrease and then it goes on
down the way.

And the big story is those last
three primary volten people
under aed they get further
reductions of 10%, 12%, 14%.

And that is what a lot of this
discussion this year is about
cost-of-se methodology
because when they do rates for
the 2015 increase, this is
where -- and I say just give us
96% but
if you don't address moth dolg methodology
today, you're going to be stuck
with -- and then the next time
you do rates, this is what they
want and you wrote y'all a
four-page memo, and I watched
all five hours of it and the
only person that ever spoke with
methodology was the man touting
aed and this is why, this is
why.

And they want their foot in the
door and they want y'all to say
oh it doesn't make much
difference.

You just use aed when it's
wrong.

And in that respect, I asked our
residential rate advisors, very
recently, were you able to
verify that the consultants
properly did aed and bib and he
said, no.

He said they kept changing the
numbers and he was never has
able to verify it and so I have
three requests for y'all today.

One of them is to hire contract
with a local consultant named
diversified utility consultants.

They live here and they practice
here, but they practice
nationally and they represent
only municipal and co-ops.

And they have helped us two or
three times on past rate
changes, in the 80's and
probably the '94 -- I'm not
sure.

And it takes an engineer and a
financial guy to do this and you
get the engineering data for
each generator and then the
numbers and the load curves and
everything.

But diversified was one of the
bidders on this contract, and i
don't know anything about the
staff evaluations but they were
not recommended.

And I will say that all of
these -- well, I would say 90%
0%of all the consultants that do
rate cases they make their
living off of representing
investor-owned utilities.

That is where the money is, and
these people -- I don't know how
many there are, but they are
wonderful guys and I haven't
talked to them in several years
and I'm not trying to make them
to the commission or whatever,
but if they studied the proper
computation of these
methodologies, I would believe
it.

And until that time, I don't
believe it and our rra told us
that he was not able to verify.

And so I think that is very key.

Now, another thing -- and my
second request is I wrote y'all
a four-page letter because i
could not come to that five-hour
meeting and on the third page i
asked for a study request of us
austin energy to just make four
charts.

And sheryl, and the other
councilmen, you were told about
impacts.

Well, in september we had a
one-page chart of the rate
proposal for all the classes and
a one-page thing that showed the
bill impact on the various
consumption levels and those
charts included fuel.

And so when they did the
december proposal that came to
council, they didn't have fuel;
they just had the base rate
numbers, which is better, but
the bill proposal had rates on a
chart and the impact has a
graph, and I would say if you
would have them make four charts
and use base rates without fuel
and put them all on charts then
I think you would all know what
we were trying to talk about.

Even I would know what we are
trying to talk about, because
you can't -- you can't -- you
can't assess this with so many
different things.

And the december charts had a
fuel price spread across the
middle of it, and they didn't
have fuel in the numbers but
they had a fuel price three
point something, and then about
a week later they announced it
61 higher than whatever
they had there.

And then my third request is to
please allow the uc to go back
and study more on time of use,
rates, the small commercials,
the religious facilities and --
so there is a -- the third
question is that we now have a
nondemand general service rate
class.

That is the commercial people
that use these than 20kw.

And so what I don't know is how
many of them -- you know, there
are 40,000 something commercials
and I don't know how many
customers are in that general
service nondemand, and I don't
know what type businesses they
are.

I strongly suspect they are very
diverse and they are little guys
trying to get along and they
don't have a lot of options
about where they can do this or
that.

They are just trying to serve
the customers and make a living,
but if we had a who many and who
they are, we would have a better
idea of what you're talking
about, and the uc unanimously
recommended that you start
commercial demand charges at
20kw.

And so you have that class
already isolated under another
name, but there are no demand
charges.

The demand charges also bring
look something called a power
factor adjustment.

And I don't know how many of
those little guys there are, but
I have a vivid picture of the
wonderful people at austin
energy trying to explain to the
little restaurant owner or
repair shop owner what a power
factor adjustment and what a
demand charge is and all he
wants to know is what is the
bottom line on my bill.

This utility lives and dies by
its system load curve, its
overall system load curve.

It's lower in the spring and
fall and higher in the summer,
and blah, blah, blah.

But these people -- those demand
charges and power factor
adjustments are to try to
encourage the customer to
improve their load factor.

And my contention is those
little guys don't have -- they
have enough diversity that they
don't have squat influence over
what the system load curve is.

And so now as far as religious
facilities, we didn't -- we
didn't talk about those and we
didn't make a recommendation.

I listened to it and I think
time-of-use is something very
important.

And I don't know if we have
time-of-use optional rates now
for anybody, the residentials
and I think small business.

I don't know whether it adjusts
in the summer time or just on
week days.

I don't know what the deals are,
but there are different ways of
looking at it.

And there is a facility -- as i
understand it, all but the
sanctuaries are already in the
commercial rates and so these --
the sanctuaries that have
services on saturday or sunday,
and that is generally in the
morning.

And they may have to heat that
building the rest of the day,
but if the load curve is lower
on weekends, I don't know
whether it is or not -- if the
load curve is lower on weekends,
then you have time-of-use rates
for week days but not weekends.

And we didn't talk much about
that.

And I don't know much about it.

You need a lot more data and
discussions.

And I've got, let's see, a few
more.

About the fuel charge, I was
shocked too, with natural gas
prices in at a low to get that
half-cent increase on january 1
and I do want to say that for
nine and three-quarters years
from 1988 until april -- yeah,
january 1, 1988 to april 1 of
'97 we had a monthly fuel
charge.

It was a three-month moving
average.

The actual cost.

They had the last month we got
the bill, we knew what we spent
and then a forecast for the next
month and then they adjusted it
by what they estimated, over or
under the previous month and so
you were getting actual charges.

What we do now is we
overcharge -- it helps some
people in the summer, but some
people would object to knowing
that austin energy is being big
poppa and overcharging for fuel
so you don't have to pay as much
in the summer.

I'm not going to get into that,
but anyway, there is such a
thing as monthly fuel charges
that we could find out where
this came from.

Residential rate design, in this
letter I wrote.

And I've talked to larry weis
and I think he agrees with it.

And I've talked to the mayor,
and I mean there is a good
possibility that instead of
that -- we want a fixed dollar
customer charge and instead of
the delivery charge we want what
I learned this from austin
energy in september, a bundled
charge -- a bundled charge, and
it's so many cents and it covers
whatever it ought to be.

In september they proposed a
bundle charge for the first 300
kilowatt hours at $30 fixed
charge.

Well, I looked at my bills for
the last two years and half of
my bills were less than 300 and
so I used to save 150 or not
over 200 but that way, it may
not be as transparent as our
wonderful chairman likes to talk
about but it could effect the
bottom line of a bill and thank
is what most customers look at
and I would recommend the bundle
charge at not more than 200, i
think that is a little high and
I think we can go back to the
201 census and find out how many
thousands and thousands of
unoccupies dwellings there are
in our service area that
maintain electric service while
trying to rent or sell the house
and a few people are on
long-term overseas and they've
been getting away with a $6
customer charge and hardly any
usage and so they have just had
a gravy train for all of these
years and if you had a bundle
charge it would probably be 19
hours of whatever charge you get
and that would take care of the
unoccupies dwellings.

>> Commissioner, I have a
question about that.

You're suggesting that the
delivery charge would go away --

>> yeah, yeah.

>> -- And be replaced by that.

>> And the city could get its
fixed numbers, and probably an
even 19, and they want -- 23
[inaudible] and they do 19 or
20.

20
at 200 and if there is one
person living in a small
dwelling in an apartment or
house and they don't have
air-conditioning but have lights
and a refrigerator, a tv,
lighting and some fans and i
don't know how much they use.

And that is what we are talking
about.

>> And I wondered, do you have
any other thoughts
philosophically speaking about a
delivery charge --

>> oh, I'm totally opposed.

I use my house as an example.

We built our house in 1965 in a
little subdivision in a
neighborhood and the last house,
and when we moved in, the wires
or down the street and the
wooden poles were in, and what
they were saying is this was to
pay for what you put on the
system.

If I had been paying $10 a month
since 1966 to deliver my
electricity, now I know that is
extreme, most people are not as
blessed as I am to live that
long, but what these fixed
charges [inaudible] type
ratepayers are being asked to
subsidize and it's the same
issue.

Barbara didn't talk about it but
on debt service coverage, austin
energy does 50/50, and your
financial policies say you can
do anywhere from 35 to 60% cash
versus debt.

Well, most people think if you
did 40/60 instead of 50/50, that
is how much cash you would save
every time you go out and build
a new gas turbine or substation
or you know, a high-dollar
capital improvement.

>> And just to be clear, that is
a part of making up our revenue
requirement --

>> that's right, that's right.

>> Okay, thank you.

>> [Inaudible]

>> yeah, yeah.

I think I'm through.

>> Thank you, appreciate that.

And before we go to questions
from the group listed here, i
would like to give other duc
members an opportunity, some of
you or all of you.

>> [Inaudible] study this not
not only austin but throughout
the nation, and one comment is
about the revenue needs and how
much we need, and this is
actually not a number we are
going to figure out.

All you can do is predict and
guess and come up with a model
that makes sense and the answer
is rough any $100 million plus
or minus.

To be honest, we are like from
zero to $200 million --

>> you're not helping us --
(laughter).

>> But the point I want to make
is we are arguing about whether
the revenue needs have been
overestimate and I think we have
underestimated because
natural gas prices could double
and we could have a power plant
or stp go off line for
environmental or other events
and we could have other new
environmental issues kick in,
and [inaudible] a cost of some
sort.

We have potential downing of
lines due to hurricanes and all
sorts of things that I could
think of that would cost tens of
millions or hundreds of millions
that are really not a part of
the conversation.

And I worry that we are
underestimating.

And I don't think we are
overestimating.

And I just want to make sure
that you hear that.

Another piece and I want to give
a four-year perspective and when
I first joined four years ago,
roger duncan said we are going
to run out of money in about
three years and a year ago he
said we are about to run out of
money, and now he says okay, we
are really running out of money.

This is like a slow-moving
train, and we've been warned for
a long time and it's very
predictable that the revenues
are not going to be there
because of rising costs like the
cost of health care and things
like that.

[Inaudible] I don't think we're
going to come up with a really
good number in all honesty and
whatever number we come up with
will be wrong by tens of
millions and we should accept
that and I think we need to
rais revenue.

And another issue on the table
[inaudible] I think that is the
fundamental philosophical
question at hand.

Our only plan was invented about
100 years ago and it's what has
led us to -- run out of money.

If this is the plan that the
whole nation uses it's not a
very good one.

And [inaudible] energy
efficiency -- these are all
novel things for the business
model that bring on efficiency
and they have better financing
and they are cheaper in the long
run because it avoid expensive
power generation -- mark.

And if we think the rate
increases are expensive, pieing buying
power from the market is even
more expensive and building
is -- than many of the obvious
choices that a traditional
business plan goes through and
it's also traditional goals and
a mix and smaller -- that is the
n model and it has
rate adjustments in it.

The older models make us
bankrupt and also putting austin
energy in the middle of the
pack -- [inaudible]
philosophical fundamental
question -- I'm pretty
convincecide not working and i
say that not only as a team
member, but we are grabballing
grapplingwith the same issues.

-- Natural gas -- retail prices
are going up.

There is no question retail
prices are going up nationally
but they are not only a function
of pricing but smart meters and
new poles and all of the other
things we are debating.

Retail rates are going up and
wholesale is dropping and we are
a part of that revolution and we
have to figure out if we want to
lead on that or not.

My last comment is recognizing
how this rate plan makes a lot
of people very angry and it was
arrived at in a very deliberate
and slow process but I want to
remind including us on
the uc this was the least ire we
could come up with, and if we --
it's going to make other people
angrier.

And I hypothesize that what we
have now is a least angry mix.

And if you know what I mean -- a
lot of people are angry but then
in we shift things around to
subs this or that class, we
are going to make other people
angrier.

And so this is my thoughts on
what we've been through
[inaudible]

>> thank you, I appreciate those
points, and what I'm hearing you
say about you know, changing the
business model, none of that
really addresses if I understand
you correctly, the issue of the
[inaudible] or was there
something implicit.

>> It doesn't address it, the
different models address peak
costs differently than other
models and the residential and
the commercial consumers are
where we see the largest -- with
the large industrial -- so they
have different exposure on the
calculations of the cost and
whether you care more about
total or peak consumption
depends on whether you're
worrie resiliency rather
peak problems and the
commercial and -- [inaudible]
driver of the base consumption.

And this methodology affects how
your pricing -- load versus
user -- and then the new
business model is more peak
oriented and you're putting
higher real-time prices and we
are not debating yet but the
newer models that open up the
door for real-time prices impact
00 in the afternoon users
more than -- [inaudible] hope i
answered your question.

>> I think I got it.

Aed is more about
incentivizing a flat load, flat
usage where this is more about
identifying the use of less --

>> I don't know if they are
incentivizing but they are
looking at costs and looking at
what the actual costs are today.

And I think -- they produce
roughly the same answer, and i
don't think there is a huge
departure in all honest, and i
don't see much difference --
again, they kind of give the
same answer --

>> but it looks like some of the
information that that is not
quite true when you look at
businesses costs and we'll leave
that for later --

>> I think the industrials are
far more sensitive to this and
see how they are hit by the
assessments more than the
others --

>> well, some -- gains, that is
one of them -- [inaudible]

>> different.

>> Karen, can I make just a
quick comment in front of the
fellow engineer?

>> Yes.

>> In my day, if somebody gave
me a number that was specific to
digits, I would assume that
number was very accurate, eight
of those digits were very
accurate, and I'm wondering if
it's that much of a stab to $100
million, if it's plus or minus
$100 mi shouldn't that be
somewhere in the equation?

Would you care to comment, and i
engineer and
I'm only a b.f.

>> And we all know what b.f.

is -- when
students turn in a paper to me
with a number bar and no arrows
they lose points, and so error
bars are not required as a part
of the assessment.

I believe probably the first two
digits, maybe 110 million, or 90
million, but I don't believe the
next seven digits.

I think it's a pretty big error
bar, but it's not a part of the
assessments to include that, and
they added up the cost and they
had a clear methodology, but
they are not clear error bars.

>> Okay.

>> -- Nine digits.

It's the ones on the right that
are accurate, it's the one on
the left that you can't count
on.

>> I have a question.

>> Feel free to use it.

Michael, we have had barbara
largely contradicted what philip
said and I think it's something
that we've been hearing so many
contradictory statements and
hope that you can help us to
move the ball forward in terms
of what I can say about this and
that is that the whole business
needs more than we've been
giving it, and so how does this
work.

>> So let's call austin energy a
drug pusher.

They selling drugs, electricity
and the more they sell the more
they make and in addition you
have fixed costs.

If they had their fixed costs
covered and their revenue was
based on existing as opposed to
how much they sell, they
intention to sell would be
lower.

The more they sell, the more
money they make and if we give
them more fixed charge, their
incentive to sell is lower and
that makes they can make money
selling efficiency or
conservation and could be a
financial stakeholder in the
process and a winner.

Right knew they do efficiency by
a social mandate but it's a
money loser for them, but not
exactly.

Because they make their money
based on sales.

And if you recover more for
fixed charges they don't have to
be a drug pusher anymore.

>> I think I understand that
and I think most people would
understand that wonderfully from
the suppliers side, how about
from the demand side.

>> If you prepay for your drugs
you are going to consume more,
and if you make the fixed costs
too high, its does not --
[inaudible] and so if the actual
fixed recovery costs are $45 per
customer and you charge the
whole thing, people say i
prepaid for $45 and I might as
well use it all, and so actually
you have higher fixed costs
better for the utility and worse
for the consumer and at the
present you don't find the
accommodations -- pretty good
compromise to that, one that
brings on some of the
conservation measures --

>> would it be accurate to say
that my choice of how much to
conserve -- whether I turn the
thermostat to 72 or 74 should be
driven not by my total bill but
by the amount I'm paying for the
difference between 72 and 74?

>> It depends on the information
that the consumer has, most are
driven by total bills but if you
have a higher fixed charge and
start to see more clearly
what is the connection between
your decisions and your bill,
especially if it's hourly, and
so we are almost there, and
people can start to -- but the
estimates will be clearer i
think.

>> In the way that the rate
structure before was set up you
pay fewer cents per kilowatt and
that increases as you go further
and further down and the
conservation argument would be
that last kilowatt hour is the
expensive one and if I back off,
that is going to reduce my bill
by more than if it was just a
flat fee all the way through.

>> What we are missing is this
inverted block structure which
has good incentive for
conservation and it will be good
for the grid but also not just
the worse generator [inaudible]
it has better than marginal --
better than average marginal
benefits for the environment and
resiliency and cost.

And so we can get -- fish ti of efficiency
o utility -- save money in
the long run -- I guess that is
good news --

>> probably is.

Going to be more effective for
people with large consumption
like the industrial and
commercial --

>> yes.

>> And I don't know the answer
to this question which is why
I'm asking and I don't know if
you know the answer either but
seems to be that a lot of the
value that inverted block
structure comes only if we can
make information available to
consumers as to what the
consequences of their decisions
are.

Right now I don't know what that
looks like.

Is there something on the
horizon --

>> giving real-time information
to the consumer.

Right now when you get a bill,
that is consumption from 45 days
ago and your payment is not in
the time of your actions and if
we get that real-time it's must
have closer in time and so
people can recognize oh that
decision is expensive, I will do
my laundry later or set my
thermostat lower.

And what it looks like is you
give more information to the
consumer and better thermostats
exist, and -- it's like at the
gasoline station when you're
putting gas in the car you watch
the money particular, and we
don't have that with electricity
and that would solve a lot of
problems, if people had that
information, they would figure
it out quickly and save money.

>> I have it like the theory on
my telephone.

Don't touch that dial, you're
about to increase your monthly
dill by $10 or something.

Is that likely to happen any
time soon.

>> We are not debating that
piece -- part of the new
business model -- sethe stage
for that to happen -- real-time
pricing -- where we are
headed -- within two years if we
want it to be, and we are a
national leader -- [inaudible]
we would like to keep that going
but that structure, a big piece
of that puzzle --

>> so even if that inverted
block structure is not before us
today, but it's not just of
academic interest.

It would actually have practical
value once you can get the
information in people's hands
which we are likely to be able
to do in the future.

>> It has practical value --
public health benefits this is
the most important thing we do
in terms of the resiliency of
the grid -- real economic and
public health value to the
inverted block structure.

>> But to be clear, the inverted
block structure is before you --

>> one of the few parts that is
not controversial.

>> That correct, and we are just
celebrating that we have it --

>> I'm with you on that, thank
you.

Sheryl?

>> Thank you, I just wanted to
go back to the inverted block
structure, I think they have
something that says -- forgot
they started that -- do you see
us being able to do that because
I think 99% of the people that
are angry, they are not just
angr proposed rate.

They are angry because they
cannot figure out what is going
to be on their bill.

And because you can budget for
it -- I mean, take it away from
very low income customers and i
think the premiss that oh, $15,
$20 is not that much a lot of it
is I can't deal with it when i
don't know what it is just like
I can go get a full tank of gas
or I can go and get $5 worth of
gas.

Is there any plan -- could we do
it on a pilot basis --

>> I think the only approach to
that is the suggestion from the
public of possibly slowly
introducing the higher rate
structure while people are
getting used to it and while the
numbers are coming home to
roost.

>> Inverted blocks have been
done in dallas and irvine,
california and that itself is
not highly controversial, that
utility roll-out, in austin for
water, and it's been done, and i
don't think it needs to be
piloted because it's not
necessarily that novel, although
I recognize that [inaudible] i
think we need to slow it down
and make it less confusing --

>> so how long does it take to
roll out the inverted block --

>> rate case.

>> We have had an inverted block
since 1981.

The first 500 is cheaper year
round and then it goes up and
above 500 goes up more in the
summer than it does otherwise,
..

>> Very quickly, we've only got
about 20 minutes left.

>> I don't think that we need do
it on any kind of a pilot basis.

It's a very good message to
people, but remember that it
doesn't have to be done in
combination with a fixed charge.

By itself, it does the job.

>> Okay, thank, kathie has a
question.

>> Yes, I wonder if it's
appropriate at this point to
move beyond our list?

It seems to me from the comments
that I have heard that the
inverted block structure is not
what is causing the controversy,
that there is a lot of support
for that, as I think everybody
has spoken to it today has
talked about it how it is a
value to increase conservation
and decrease usage but I think
there is -- I have heard
controversy about whether the
fixed fees are so high that they
get the inverted block structure
off track.

cooper
who is on the list might --

>> I'm sorry --

>> thank you.

>> Okay.

>> Speak and then we'll go to
speakers.

>> I drew the short straw and so
I'm going to bring up a
difficult topic.

I've been on the aec to four
years.

I want to talk about the
question of transfers from the
utility to the city because it's
kind of the large elephant in
the room.

A large number, I'm coming up
with roughly $150 million a year
in 2009 time frame and other
folks have come up with $170
million.

That ends up being roughly
double the national average for
transfers for a publicly owned
utility to its city.

And this is a very large number.

This number has been growing at
the rate of between 5 and 10%
per year for as long as I've
been involved and it goes back
quite a ways further than that.

One of the effects of this --
I'm looking at the utility and
noticing two major problems.

The first is that reserves at
the utility have been drawn
down.

I saw 257 million in reserves
and it's probably going to hit
zero and that is roughly $50
million a year of drops in
reserves and it hasn't been
going to pay for the things it
was intended for.

It's mainly been traferred into
the city budget, and revenues
are running roughly 10% less
than expenses and the issue is
that the expenses and the fixed
overhead of dealing with
transfers to the city are very
high.

And I guess I want to make sure
that you understand that it's
totally possible to reduce rates
for any class that you would
like to have, but there is a
limited number of places where
those dollars can come from.

You could take a dollar from the
transfer.

You could take a dollar out of
the generation plan and climate
protection, or you could have
customer pay that
dollar, and that is how the
dollars are going to be working
and I realize these are policy
and political decisions but the
level of transfer is extremely
high and we have been talking
for years abouting and it's up
to you to make some decisions
about how you want to proceed,
but complaining about rates,
you're also complaining about
the level of transfers because
the level of transfers is in
part driving the rates.

If the utility needs an
incremental 100 or 110 million,
whatever the number is, keep in
mind that the transfers to the
city budget fro utility are
roughly 15 170 million and
it's dwarfing the size of the
rate increase.

>> I understand what you're
saying and I've been saying for
this for years especially the
fuel charge which has become
such a big part of the total
revenue, 35% plus, is that about
right?

>> Rough any two-thirds of the
transfer are implicit in the
general fund transfer --

>> I'm talking about the
1%,
1% is off of gross
revenues which includes a
pass-through charge basically
that is about a third of the
total.

And I think we have to address
that.

And that being said, address the
entire issue, but I don't think
that it's practical to consider
addressing it in one year.

We need to get on track to start
making that adjustment but it
would be I think traumatic to
our city budget to try to take
$150 million out of it in one
year.

Mike?

>> Just I want to agree with you
on that point.

I do appreciate the
recommendations that counterso come in
regarding the transfer and
understand that we need
to contain our costs but we also
need to understand that is a
benefit to the citizens to own
our utility.

If it was a public company, that
would be passed on to the
shareholders and here the
citizens of austin are the
shareholders and we are the
board, and if you want to cut
that, tell me which 15 fire
stations and which 20 libraries
you want to close but that is
the reality of where those funds
go, they pay for critical city
services.

Not all of them continue to be
justified.

We have to ween ourselves nzs in
some regard but there is a
benefit to owning a utility and
I don't want that to be lost in
treating it as a business, but
because not only is it a
corporation but it's an asset to
the citizens.

But I just wanted to keep that
in mind.

>> I couldn't agree with
councilmember martinez more, and
also we get those resolutions
every year and not only -- there
are sources of revenue that we
need to make -- that are
available to the city for park,
for library, for police, and for
fire, and for sidewalks.

It's sales taxes which we cannot
control and it's property taxes
and user fees and it's a
transfer from the utility.

So that is a very real hit when
we talk about not making that
transfer, and I don't think it's
any of this conversation -- and
I am so glad that keith has
brought this up and we have
really put on the table the pull
push-pull of this decision, that
it's not only about raising the
rate or only about austin
energy.

It's also about all city
services.

Thank you.

>> Okay, so part of what I'm
going to say is a bit redid you
redundantbut let me reshape this.

First of all, the rate increase
is necessary and there is a
counterintuitive mission going
on here.

Austin energy is no longer
longertasked with selling as much
energy as possible, it's charged
with cleaning up the environment
and the air by selling less over
time.

And so saying that we can just
grab the money as it comes is
tough on the utilities and there
has to be in my eyes some
recovery of fixed charges to
acknowledge that as more energy
is distributed and the costs put
on solar panels on people's
homes, austin energy doesn't own
the physical plan to get a
return on investment.

There has to be a way for them
to recover the charges that are
out there and established.

And even the residential rate
advisor indicated this needs to
be reworked.

Right now in collecting money
off of a pass-through as
every acknowledged it is
on the fuel charge is akin to
the government saying in I'm
sorry that your inventory costs
have gone up but we are
creasing taxes because of
it.

Austin energy is not making
money from the fuel.

And I don't think there is an
argument that there is a place
for a general fund transfer.

It has to be fair and has to be
sustainable and has to be, just
from an accounting stand point,
legitimate.

And I've been on since '09, and
by the way again, bernie, the
commissioner, sorry.

>> [Inaudible]

>> but before I came on board
they were also trying to get the
city council to acknowledge the
need to rework it and we
received absolutely no response
and I think that is why the
voices have grown louder because
we felt like we were being
ignored.

The whole issue with the general
fund transfer is a part of this.

Paying money as if they are
making more profits which in
fact they are not and the other
gso and other city services
another 50, 60 million in
expenses and the argument over
the legitimacy of the expense is
an issue of where it's coming
from.

The issue in the past has been
that it's prop ae to share
the bulk of the burden because
we they are getting more
customers and -- so since it
benefits the public at large,
this is the main thrust behind
the argument that it needs to be
sitting in the general fund.

How you pay for it, obviously is
a difficult thing.

All right?

That is why you're paid for your
job more than i, but it is an
issue that the fact that it's
been done incorrectly is the
past is no argument to continue
doing it that way, and so that
is the discussion there.

$50 Million to $60 million above
and beyond the funds transfer
chunk out of the 126
million that austin energy feels
it's fallen short.

I believe if these issues are
addressed, if there is actual
work being done on reformulating
the general fund transfers, if
expenses are allocated and shown
in a proper set of books, one,
the people who are not living
within the city of austin will
you are serviced by austin
energy that are threatening to
take this to the tec, that will
mitigate a part of that
argument, and if a serious
effort is made by council to
address that, I think the tec
will look more favorably on
whatever we are trying to put
forward, and at the end of the
day, austin energy is going
through enough to cover expenses
wi taking the political
flack for something that is
beyond its control, which is how
the city takes the funds.

And so putting a task force to
get this dealt with and I will
bring up the methodology.

I think a number of us agreed --
well, first of all, we
questioned when austin energy
was supporting this and then
changed its mind at the last
minutes.

I didn't get an answer I was
happy with, but when the
residential advisor showed at
that point there was not much of
a difference at the end of the
day that is why I think we
decided to agree with going
forward with that methodology.

There is certainly room to argue
going forward and I'm willing to
consider my decision in light of
new numbers but I would just ask
the city council to aside what
it brought up seriously pern may
.>> may I just say a couple of
clarified at the
public meeting and -- gave --
customers per square mile in the
versus austin.

And the -- general fund
transfer, that money outside of
the transfer, part of it is what
they call shared administrative
expenses and austin energy
legitimately owes its proper
share of administration, ip,t,
vehicles, and find out what all
they are, but the allocation
factors have never been very
clear.

We've asked about it and we
scuttlebutt that a
few years ago they said we have
to have examine amount more and
we'll fix it next year and that
never happened.

So that is something you need to
look at.

Whatever our proper share is,
ought to be charged but not more
than our proper share.

>> I agree again that this is
something we need to be doing
and credit for several years
just happened to be coincidens
where a major recession swept
the country and we have not been
able to make that adjustment and
it's --

>> [inaudible]

>> we are the easy cash cow.

Well, we could use a couple of
others.

>> One other note on redoing
this on the general fund
transfers recalculation, all of
the shares that energy does is
based on what the definition of
the revenue is.

And if the argument that I'm
using is that the revenue that
is being used is not correct,
that skews everything else that
austin energy is saying whether
it's for shared expenses and
anything else.

And so if we can get a revenue
number that is correct and
supportable, then I think the
argument over what our
percentage share of those
expenses should be will be dealt
with in a more supported way
going forward because it won't
feel like we are being sacked.

>> Totally agree.

And kathie -- I think everyone
has had an opportunity on the
commission to make remarks and
you had a question from one of
the other folks on your list.

>> I do, and now I have another
question for these guys and I'm
aware that we only have eight
minutes, six now.

If I could just ask for a quick
answer.

We have heard a lot about the
audit and we have received it
but not had an opportunity to
discuss it -- you have had an
opportunity discuss it?

One issue that I had like a
quick answer and I think this is
a subject for further
discussion, one of the items in
the audit is a common sense one
that austin energy be asked to
reduce expenses particularly in
discretionary spending.

Have you as a commission had an
opportunity to determine the
degree to which that has been
implemented in the years ains
years sincethe audit --

>> absolutely not.

We only received the audit in
the last week, and we didn't
even know it existed.

And to the folks overseeing
austin energy, the city manager,
had that report, but we did not
have that report, we are very
interested readers but my
take-away is different from your
take-away.

You could just as well say that
that report shows that austin is
spending too much on
reliability.

>> Sorry, what?

>> On reliability, and the
report makes that statement,
that maybe austin en should
be spending less on reliability,
more on.

>> And just a point of
clarification, I'm still
determine what is my take-away
is, but I think we should
discuss it as a council and
thank you -- the question I was
asking earlier about is the
vertical block structure and if
cooper is willing to provide
input, that would be useful.

>> [Inaudible] -- pull that mic
up really close.

>> We've talked a lot about cost
allocation but the cost
allocation we've been talking
about is how much each customer
class to have to pay for the
utility.

Rate design is the cost
allocation within the
residential or the commercial
class and that is one thing that
is really missing here.

A lot of the statements I've
heard is there is this
assumption that all residential
customers are alike but it's
contradictory because the next
thing they say is we need
inverted block structures.

I passed out this exhibit at the
rate hearing and it shows the
rate adjustment impact on the
residential class and it tells
several things.

First of all, austin energy says
it costs more, costs more the
more we use.

Well f you look at this, when
they say the bill is the cost of
service, they are saying that
large commercial customers cost
less on a cents per kilowatt
basis than small users.

That makes no sense.

That is a 1960's mentality,
large users cost more and the
only way you can show that is i
have highlighted one of the
sections that says estimates
kilowatt u per month because
usage and kilowatts is the same,
it's just a different side of
the coin.

Usage is how we look at it and
how we want it, and kilowatts is
how the utility looks as it as
what we need and so it's the
same thing.

And there is no other customer
class -- except lighting which
is always this weird stepchild,
no other customer class is being
asked to pay a fixed
distribution charge.

Why?

Because usage is a responsible
cost driver in distribution
costs.

If we were just to take the
current proposed small business
distribution charge, which is
about $2 a kilowatt hour and
applied it to this chart, what
we would find is someone who
uses 250 kilowatt hours as a
business customer would be
charged about $1.

Instead, austin energy wants to
charge them $10 and they are ott
notthe ones driving the huge costs
into the distribution system.

The residential class was
assigned based on kilowatt usage
means that the bigger users have
a lot more cost to be assigned
to the residential class, and so
who was in the residential class
should pay for that increased
cost?

Well, it should be the people
who cause that cost to come and
that is the large user.

Now, I gave y'all a memo, I'm
not going to go over it, there
are like six or seven other
reasons why I say you should not
have a fixed distribution
charge.

It doesn't make sense.

And here a another one.

On december 14 -- stood before
you and said low load factor
customers are more costly to
serve than low load customers.

Small users have high low
factors and large users have low
lode factors and when I asked
for this study, they have not
done them within the commerce
class, they are once again
assuming that every kilowatt
hour a customer uses is the same
cost to the system when it's
another contradiction.

Load factors are more costly
to serve and they should pay
more.

And another assumption, they
keep on talking about fixed
cost.

Well, that is a five-year
planning horizon.

We should be look at incremental
costs this is why we have energy
efficiency.

We want to keep the usage the
same or the lower if we can get
it.

And I looked at the historical
data and the oldest I could get
was 2003 and if you compare
august rates with august 2011
you see there is a 20% increase
because of fuel and I agree that
is one issue that y'all should
be looking at more seriously
because I'm very concerned about
that, but the second thing i
found very interests is they
took last year's kilowatt use
this and for 2002 the average
user was 1303 and for 2010 it
was 1336.

36 More kilowatt hours and if
you compare february, what you
see is that actually in february
2003, less kilowatts were
used -- well, in 2002 -- that in
2010.

And so we are a very
weather-oriented customer base.

I'm not trying to discount that
but what we are trying to do
with energy efficiency is make
that more consistent and bring
ta load factor better, and it
doesn't help by having a rate
design and if you look at the
billing analysis that creates a
declining block rate until we
get to about 1500 kilowatts.

Until you get to 1500 your bill
on a cents-per-kilowatt hour
declines.

And this is why I think we need
five tiers.

I don't know how much clearer i
can be, but I think we have one
of the most prerogative rate
designs in the country.

I think it's a good one and you
might want to consider adding a
another tier, I five is
very confusing and the last time
you look at your telephone bill
it's just very confusing.

You try to keep it simple for
people -- and if you want your
customer to really understand
it, I think breaking out all of
the costs is really more
confusing and I think it hides
our efficient a company is and i
think that is another problem of
breaking out all of the costs.

Another big problem I have with
the rate design is because of
the special contracts, we have
some that continue the old way
and they want to c some of
those and I'm concerned that
that may be a situation where
we'll be moving more costs and
we'll be bearing more of the
costs for what the industrial
should be paying and I hope that
you look at the rate design
because they have done
significant changes in the rate
design.

And I don't know if I have
anything else --

>> thank you.

And I think you make a really
good point about the complexity
of billing.

I know my telephone bill is five
pages and it's hard to stumble
through that, and I don't think
you want to get into that.

>> Mayor.

I have a question.

>> Sure.

>> One of the things you
mentioned in the enormously long
public hearing last thursday --

>> nawb.

>> [Inaudible]

>> in five and a half hours i
think I missed a few things but
one of the things I recall
hearing you talk about were
hook-up fees and whether they
have too high or too low and
what they should be.

>> They did not look alternate
at many ofthe rates that affect people and
particularly people of low
income.

One thing with advanced metering
is we should be seeing huge
reductions in customer costs
beca automating that,
and so why is the customer
charged that when the automation
should make it significantly
less and we should certainly get
rid of the same day connection,
disconnection of $50, and there
are a lot of folks in austin
making $10 an hour and that is
is half day of fee because they
could not get the money that
week before the disconnection
notice, and that to me is a
problem but they did not look at
the disconnection fees or the
impact fees and I think those
are very important fees because
austin's new business model is
asking current rate payers to
pay for future development.

More so than they have ever
done.

When the utility started out we
had a debt equity of about 80/20
and that is a good thing.

And if you were a private
investor they would not have
dead equity, there is no
construction in progress that
rate payers pay, unless a
utility shows they are
financially distressed.

And so you have to put all of
the construction costs in the
rate all right through dead
debtservice and then it becomes
important to see are we using
current rate payers to pay for
tomorrow's service and we are in
we have debt service that puts a
whole lot of current cash in and
so I agree with the commission
erthat we need to really seriously
look at this debt service.

And in their past spending, at
paper 14, since 2006 even if we
use 50/50 as a cut-off, they
spent $67 million more in cash
and so they are coming here
telling you they are starving to
death but then you look at how
they are carries throughout
financial policies and even
under 50/50 they are spending
more.

So we need a efficient utility
that cares about their rate
payers and that puts the future
costs on future rate payers.

This is an important issue of
their financial policy and their
rate design in making sure that
current rate payers only pay for
their fair share of the cost of
utilities.

>> Thank you.

And obviously we're going to
have a lot more public
testimony, the next public
hearing is scheduled for the
february 2 council meeting and i
think there's least an outside
chance there may be public
hearings beyond that.

With that, thank you all for
coming today.

I think it's been very helpful
and useful testimony.

Without objection, we stand
adjourned at 12:37.

[Rumbling]
Announcer: What if a disaster strikes without
warning?

What if life as you know it
has completely turned on its head?

What if everything familiar becomes anything
but?

Before a disaster turns your family's world
upside down,
it's up to you to be ready.

Get a kit. make a plan. be informed today.

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Title: CHANNEL6
Channel: 6
Recorded On: 1/24/2012 12:00:00 AM
Original Air Date: 1/1/1900 12:00:00 AM
Transcript Generated by SnapStream Enterprise TV Server
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[08:04:23]

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.

>> Cole: Good morning.

I'm mayor pro tem sheryl
cole and I now call this
work session to order of the
austin city council.

Mayor leffingwell is
travelling on important
economic development
business outside of the
country.

02 and we are
meeting in the boards and
commissions room at city
hall.

I want to inform anyone that
is listening and our
councilmembers and
professional staff that the
briefing on ambulance
staffing has been withdrawn.

So if you're here for that,
we will not be discussing
that this morning.

The first item of business
is to go into executive
session.

And without objection of
council, we will go into
closed session to take up
one item, pursuant to
071 of the
government code, the city
council will consult with
legal counsel regarding the
to discuss
legal issues related to
austin lifecare for city of
austin and the roman
catholic diocese of austin
and the city of austin.

Is there any objection to
going into executive
session?

Hearing none, the council
will now go into executive
SESSION. 231][v:tv][C483]

[09:42:00]

[Rumbling]
Announcer: What if a disaster strikes without
warning?

What if life as you know it
has completely turned on its head?

What if everything familiar becomes anything
but?

Before a disaster turns your family's world
upside down,
it's up to you to be ready.

Get a kit. make a plan. be informed today.

>> We're out of closed session.

In closed session we took up and
discussed issues related to item
.

Now we will move to council
items of interest, and the first
item is discussion of potential
times and locations for off-site
public hearings on proposed
austin energy rates.

I beli does everybody --
rudy, he's here.

Does everybody have a copy of
potential items for council
retreat?

That's the next item.

I want to get that passed out.

Then let's talk about potential
times and loabsz for hearings on
proposed austin energy rates.

The council retreat item is
second.

Any comments on the austin
energy rate discussions off-site
public hearings?

>> Tovo: You want to talk
first about locations?

>> Yes.

>> Tovo: I don't know have
feedback on locations but I want
to talk about decision points we
need to make space for as part
of the council discussion.

>> Cole: Let's land on times
and locations.

I think it's important we have
locations around the city, in
particular I think we should try
looking at our timetable.

Larry, can you go ahead and come
up?

You might be able to help us.

I know we haven't set a date to
vote, but -- assistant city
MANAGER michael McDonald?

>> One of the things, as you
deliberate on locations, one of
the things that will be
important as you deliberate in
having it in different locations
throughout the city is whether
you'll want to televise it or
not.

Then, of course, very certain
locations that will probably
present challenges to us versus
other locations, you know, that
are city facilities that may be
equipped to help us along those
lines.

That's one of the areas you may
want to think on as you decide.

Once you get to specific
locations, we can weigh in as to
let you know what we think is
accomplishable or not.

>> Cole: I would like to
suggest we consider austin
community college because they
have all the media equipment
that we have and I don't think
that that would run nearly the
cost of what we sometimes
continue plate of doing off
campus, and they have large
facilities.

So I would like to direct staff,
as long as it's not -- I mean,
without objection of the rest of
my colleagues, to look at the
austin community college east
view and to look at austin
community college south, i
believe it's called the
pinnacle, and we can bring up
any other locations after that.

>> Morrison: I would like to
suggest that wherever we have
off sites they be televised.

This is so important across the
city.

>> I would agree with need to be
televised.

Council member martinez?

>> Martinez: Does anybody have
any idea how many we'll have and
what days?

I'm curious as to what peoples'
thought process are.

I firmly believe we should go
out into the community and hold
these input sessions and town
hall meetings and briefings, but
when you start talking about the
pinnacle and east view campus,
obviously, somebody will get
left out.

Where do we stop?

Do we go to runburg, northwest
austin, the delco center?

Where is there a stopping point
in at some point, we'll have to
make a decision.

>> Are we not using first names
now that lee is gone?

>> I'm practicing!

>> Morrison: That's a good
point.

One of the things I'm wrestling
with is not only does it make
sense to get input from
different parts to have the
city, but, also, you know, i
think that there are, as kathie
mentioned, there are specific
nitty gritty things we need to
talk through, having received
the input.

You know, you have about six
broad areas I think that are
policy areas that are embedded
in this, so I don't know how
that plays into moving around.

Do we want to have the
discussions as part of the
hearings or are those going to
be separate discussion times for
us?

>> Mayor pro tem.

>> I think we should be talking
about timing.

We're scheduled to vote on
SEPTEMBER 22nd.

I don't think we'll be ready as
a body or community to make
those decisions on february 2.

It might make sense to have
internal discussions or work
sessions around policy
discussions around decide what
our long-term gain is.

Are we going to ask for
revisions and then come back and
have public hearings or do we
want to continue to have public
hearings around a rate proposal
that we may all agree need very
significant revisions.

So to come extent it might make
good sense to have focused
policy discussions as a council.

But I think we need to give the
community a sense of our time
line and whether it's still on
the projected vote on
february 2.

>> I'm pretty sure we moved the
february 2nd date to a final
vote.

>> We've not done that as to
date.

It's set for february 2 but we
can certainly do that.

February 2 is the next public
hearing with potential action.

That's on the timetable, but we
can certainly shift that as
we're feeling we need to
continue this discussion.

>> Morrison: I wonder if we
could work backwards a little
bit.

If my goal is to make sure we
have some kind of rate change in
the budget next year, whether it
be an interim or something
that's proposed but adjusted,
what's the last time period that
you can get approval fra from
council and still get that
implemented in the system for
next year's budget?

>> General manager, austin
energy, larry weis.

That's a very good question.

It depends on what time, so it's
good to answer that question.

I want to make sure we don't
encumber the public process and
the decisions to get there.

We have a new billing system
that's up and running and in
place, we have the -- the timing
is part of our plan.

We would have liked to have
gotten it before the summertime,
but it depends on the rate
structure design a bit, what the
timing is.

So right now, all we have on the
schedule is a place holder for
the 2 of february and one for
THE 9th.

>> Sorry for interrupting.

It's not for next budget cycle.

It's ideal to implement it
before the cooling season.

>> So the rate structure as
proposed could be implemented --
the reason I'm thinking back is
when we talked about adjustments
to the water rate structure, the
building couldn't handle that
it.

There was going to have to be
changes and that was going to
delay it.

If we were just to do
adjustments to the rate
structure now or adopt the new
rate structure, all of that
could be implemented before the
summer and I presume that there
would be a deadline of the final
numbers you would need out of
council.

>> Right.

The last question that I asked
of her cc&b team at austin
energy for the building system
is is there any dependency on
the timing for the new building
system to do it and the answer
was no, the new building system
is ready when the rates are.

>> If we passed a new rate or
interim rate by march, would
that give you time to get it
running on the billing system?

>> I would have to check on the
date.

As far as I know, there isn't
any impediment for a new billing
system.

>> I was wondering what the
delay would be between when we
passed the rate and when it
would be up on the billing
system.

>> I don't know the answer, the
timing or the actual days to
take it to make it happen.

>> We'll get the answer to
laura's question.

>> And one last thing, if we
want to do it before the summer
season, what's the start date?

What's the goal for that?

>> I would want to confer with
the city manager on that to make
sure we have the information for
you.

>> But it appears there is
leeway beyond february 2?

>> Yes.

>> Great.

>> I think that our goal all
along and the timing of all the
rates was to try to get them in
place.

That's behind our schedule is to
get them in place before the
cooling season.

>> Yes, and I remember that, i
apologize.

>> I just wanted to add to
kathie's comments.

I think she makes a really good
point in there's a healthy
balance between public input and
what austin energy has taken
back from the input and what we
are contemplating from a policy
standpoint.

So it could actually help answer
a lot of folks' questions in
their minds out in the community
as opposed to having, you know,
an eight-hour public hearing,
when we already are hiding in a
certain direction, we're already
thinking about certain things
that's on the public's minds, so
I agree with kathie that there
should be some good, healthy
policy discussions with austin
energy staff and among us as
council members in anticipation
of going out and hearing
furtherer from the public so
they will know what we're
contemplating and what direction
we may be heading and maybe ease
some of the tension out there.

>> Maybe we can come to some
conclusions if you would talk to
the city manager and try on
thursday during your quarterly
briefing of the financial report
for austin energy to let us know
based on what you think is the
financial position of the
utility, the deadline that we
need to make a decision, we
would appreciate that from you,
just like you suggested the
2nd and 9th, there was rhyme
or reason behind that, so if you
tell us thursday what the date
is.

It's wide open when you say
before the cooling season.

Well, what are the financial
implications of that?

When do you need us to make a
decision?

Then we can back up into dates
and how many places we'll go.

I think if we cover eastview and
austin pinnacle, that's good,
but there are additional places
the council wants the go, we
can, and we heard we want that
to be televised.

>> Any other comments on austin
energy hearing and rates bill?

>> I want to throw this out as a
possibility.

Since larry is scheduled for a
briefing on thursday and we have
a lot of unanswered questions,
would that be a good opportunity
for us to ask larry and staff
about questions about the
background of the rates or
should we hold that off for a
different meeting?

I'm not sure whether it's a
legal or a practical question.

>> I think the posting is pretty
broad.

I think it's an austin energy
quarterly update.

So I think my understanding of
the presentation he gives to you
covers a whole host of different
issues and I think it would be
appropriate if you had questions
that related to rates from his
quarterly update th I think
you could ask those and have a
discussion about those issues.

But I think the posting brought
enough for you to have those
discussions under that matter.

>> I think it might be a good
opportunity for us to clear the
air and at least begin the
discussions we were talking
about.

>> Cole: I'd like to suggest,
either if we do it here or
thursday, it would be --

>> Morrison: It would be
helpful to have discussions with
council going out and delineate
topics that we'll address in
each of the work sessions.

I don't know if the rest of my
colleagues are interested in
doing that, but I think that we,
in addition to asking questions,
if we can sit around and roll up
our sleeves and delve in and
make decisions about the revenue
requirement and all the pieces
there and the general fund
transfer and all of that.

So I'm not quite sure how we
would create that schedule.

>> Okay.

Let me see if I can help.

We're posted today to give the
quarterly briefings on the
financials.

We're posted tomorrow to get
that in audit and finance and
posted thursday to get the
quarterly briefings.

I think the posting brought
enough to consider a number of
topics, such as reserves out of
service -- I mean, out of sus
tin, rate payers, and yang of
much else that wouldn't fit in
that if you want to quantify
those and ask for those at a
subsequent time.

>> And it's not that I want to
ask questions about those.

I want us to have a focused
discussion and I think it would
make sense if we landed on some
decisions about, for instance,
how do we want to handle capital
investments with austin energy,
what percentage will we be using
cash versus debt.

That's a policy discussion we
need to have and it's not just a
question and answer.

[10:44:00]

So I wanted to capture all of
those topics every one thinks we
should have and have a focus on
each one.

Especially through the hearings,
we have been hopping from topic
to topic and not coming to what
might be a consensus on how we
want to handle each of these
issues that then drives the
rates.

>> I think the posting is fine
but I would suggest to eektaably
participate in that.

If you lay out a few items
thursday you'd like to focus on
for the next public hearings
that we could have a discussion
about or anybody could lay those
out.

In autumn finances day, maybe
we can divvy up the topics.

>> Tovo: I took a stab at
information we heard conflicting
information about in our public
hearings.

I'll say that I've requested we
have a short briefing about the
audit.

I think that will inform our
discussion and I'm told there
hasn't been a grieving about the
navigant report and there are
areas where I certainly have
questions and others may as
well.

>> Let's hold that up till we
bring up austin energy in the
quarterly report and move to the
council retreat, because we'll
bring these guys up if you can
stay right there.

>> Tovo: So don't want me to
run --

>> no, public hearings and
proposed locations.

>> Tovo: I thought we were
mempleg merging.

>> No.

>> I misunderstood the agenda.

[10:46:01]

I don't believe we'll actually
get a briefing today.

We'll get a briefing tomorrow at
afc and thursday.

>> We'll have a briefing but it
is posted on your agenda.

>> We bring it up but --

>> correct, but sit on the
agenda.

>> We can talk about it.

>> It's item.

No 59.

We can talk about it.

We're not going to have a
briefing.

Let's move on.

I hope everybody has a
discussion of the potential
locations and agenda for the
council policy retreat.

The first one was from council
member morrison.

Expectations of how the
comprehensive plan will be
utilized for policy, guidance
and planning.

>> Morrison: There is a lot of
effort that went on in the past
two years for the comprehensive
plan and theoretically that will
be providing a road map and
guidance to us as council as
well as the community add a lot
of the things we do for the next
30 years, and, so having worked
through it in conference of
planning and transportation
committee, getting stuff going,
and there is an implementation
section of the comprehensive
plan.

I think a lot of people have
maybe different ideas about what
it's really going to do for us,
how we'll use it.

I thought it would be
interesting if we could maybe
make sure that we're sort of up
to speed, number one, on what
the "priority programs" are that
are being recommended, what the
implementation plan is and how
we might see that play out in
the way that we do our jobs as
council members.

>> Okay.

I think that is a great idea.

The next one was from council

[10:48:02]

member riley, current council
and committee structures.

>> Riley: A lot of our work,
obviously, is in council
committees.

In the almost three years I have
been here, we've never stepped
back and talk about what the
committees are and how they're
structure.

I think it would be interesting
to talk about the committees
we've had in the past, the
current committees and if we
want to consider changes as it
currently stands.

There has been changes in
membership and it would be
helpful, as long as we're having
a retreat, to survey the council
members and see if there's any
interest in adjusting the
current commit as and we can
talk about membership of the
committees.

It's just something that the
rest of the general public may
not have mat much interest in,
but we obviously have a real
interest in that, and, so, a
retreat seems like an opportune
time to talk about that.

>> Thank you.

The next is encouraging
development that provides
community benefits and support,
community priority such as
housing and sustainability.

>> I think the description sort
of captures the main idea and
I'm -- I added another one, too.

And, you know, if we need to
tighten up, we can certainly
tighten up around this one.

But it struck me, as we talked
about cure and the downtown
plan, that it might be useful to
have a more global conversation
about community benefits and
what are some of the city's
priorities and how might we get
there.

You know, in particular, I'm
interested in affordable
housing, and I know that's a
stated priority of the council,
and also family -- promoting
family friendly divide and how
we get to the point where we are
meeting the city's stated goal
of being the most
family-friendly city in the
nation.

So community benefits are one
way of talking about those.

[10:50:00]

In general, it was kind of a
broad discussion about sort of
different philosophies about
what community benefits we want
to encourage and how we will
encourage those.

You know, what the different
perspectives are, encouraging
them from requirements on one
side.

>> Thank you.

Any comments?

The next and final item was city
support and collaboration of
school district that fall within
the city of austin boundaries.

Do you want to comment on that
one?

>> Sure.

The city staff and the district
staff have done great work at
looking for opportunities of
collaboration.

A few of those moved forward,
and I think will be successful.

Some of the others are worth, i
think, considering and talking
about.

But this is designed to be an
opportunity for us to get a
presentation about that work
through the staff.

I've done a pretty detailed
matrix of opportunities and it
would provide us with an
opportunity to go through and
talk about them.

Some things were returned as
impossibilities for the city to
participate in and I would like
more information and an
opportunity to talk about why
those might be legally
impossible or whether there are
other opportunities out there.

>> Cole: Very good.

Laura?

>> Morrison: That's a great
thing to consider.

If I understand you right,
you're talking about the
financial collaborations that
were done.

I wanted to mention that, with
our joint subcommittees that the
mayor and kathie and are on,
there is been good
collaborations and we have
opportunities of setting new
projects to work on.

So I'd like to broaden this to
include a quick rundown of what
we have done to get the full
council's ideas on things we
might collaborate on.

[10:52:01]

>> Tovo: The other thing I've
talked with our city manager
with are discussions going on
around use planning and the way
the city and county and district
might further collaboration in
that area and that belongs in
this area.

So it's a good opportunity to
bring that up to talk about some
of the successful collaborations
that have taken place at joint
subcommittee and potential for
the future and maybe get
feedback at which are priorities
for the council.

>> Cole: Shows would be
subgroups under agenda items
we'll propose for the meeting.

Do you want to tell us the
details of where it's located
and time and place?

>> The location will be at the
palmer event center.

We'll have a meeting room there.

Scheduled -- it's actually up
for council action on
26th this week.

Item 18.

To move the date to february 29.

So that's pending council
discussion and approval.

At this time, we're scheduled
from 9 to 4:00.

We talked about a facilitator.

The facilitator is rubina
jackson from group solutions.

>> Cole: Bill?

>> Spelman: We have a list of
topics.

I wonder how bound we are to be
circumscribed in our discussion.

We talk about the comp hence
offplan and how to use it for
policy.

It could open up individual
department plans, lead us to
talking about the capital
improvement plan generally, it
could lead us to talk about what
aught to be on the bonds in
november and wondered how
careful we need to go stay
inside these boundaries when
we're discussing this.

>> Cole: Give that to legal
because I think it's a posting

[10:54:03]

issue.

>> Morrison: What we would do
to give you as much flexibility
as possible is we would take
these items here and try to
broaden them so they aren't so
specific to give you that
flexibility.

So I guess, off the top of my
head, comprehensive plans and
any other plans related to
guiding the city's planning or
something like that.

So we'd have to work with them,
but what we try to do is not to
be so specific but allow you to
have a very broad conversation
about any of the things that
ordinarily could be an offshoot
of those discussions you want to
have.

But I think some of these are
very specific and we will tinker
with them to make sure that they
are as broad as possible.

>> If we continue the specific
conversation, that would be
fine, but I can imagine one
thing leading to the next.

All of a sudden we talk about
plans and departments.

I appreciate that.

I would like for us to be able
to do that.

>> I definitely think the bonds
should be covered within that
specifically.

I think the november bond
election should be included
within the comprehensive plan as
council member spelman pointed
out.

I would just be sure to check
with the authors of the topics
about whether details -- yeah.

Okay.

>> We will work with each of the
council members listed to make
sure we adequately captured the
nature of the discussion they
want to have with the council.

If there are other issues, send
them our way and we will get
them posted.

>> Okay.

That leaves us to other items on
the agenda.

We've already had some
discussion about austin energy

[10:56:00]

and I know that we want to have
a lot of robust discussion while
we're already here.

It would be my preference to go
ahead and take that up, unless
you guys -- and then go in order
through the agenda.

>> Okay.

Austin energy quarterly briefing
is number 59, but, larry, why
don't you come on up.

Kathie, I remember you wanted to
talk about that, particularly.

>> Tovo: Thanks.

I wonder if you could give us a
short sense of what you will
presenting thursday and if
you'll have an update about the
rate proposal and I wanted to
have areas I wanted to high
light as discussion area.

>> Larry weis, general manager
austin energy.

We did not plan on having a
rates discussion thursday.

What we try to do in the
quarterly briefings is go to the
resolution and what was passed
by council, and that is to do
financial update.

So we'll have an end of year
financial report, and then the
other part of it is our
generation plan and where we are
in a different generation pieces
and components are.

So I know that, in that
presentation which I was editing
just as late as last night,
there was our solar rebate
program.

We have presentation on that,
where we are with some of our
wind acquisition strategy, and
others.

So those are the only two
components that we have in
there.

But I also have a pret -- pretty
cognizant a couple of questions
might come up about rates and so
forth, but we don't have
anything prepared.

>> Tovo: It was my
understanding there was a
presentation last night.

Will you be prepared maybe
thursday to tell us if they are
having continuing deliberations
about the rate proposal?

>> There was no presentation to
the eeuc last night.

[10:58:00]

There was just an update about
the calendar as to where we are.

There was also a discussion,
some of the members wanted to
have more discussion about the
rates, but the year of the euc
pointed out we're kind of past
that now and what we need to
work on is the calendar and
where we are.

So I gave that update last nigh.

I didn't give a lot of specifics
because, as you can see, we
don't have those.

That's where we are with that
last night.

>> Tovo: Calendar with regard
to the rate proposal?

>> With regard to the rate
proposal.

Specifically, I told them I have
to sit down with the city
manager and go over various
options we're working on and,
with his permission, and so
forth, we'll figure out where we
go next.

That hasn't been done yet.

>> Tovo: And I think based on
our earlier conversation, do you
think you might have an answer
back from the technology folks
by thursday about how quickly
the turnaround time is for
implementing a rate proposal?

>> From the technology?

Oh --

>> you will be able to tell us
on thursday.

>> Should be able to by
thursday, yes.

>> Tovo: As I mentioned, seems
clear from my perspective we
need more time on the raid
proposal.

We've heard very compelling
testimony from lots of different
stakeholders and I'll just kind
of get to what I see as policy
discussions that we as a council
might consider having in terms
of thinking through the timeline
and what it might take us to get
there to a final decision.

Allocation methods is kind of
top on my list for having a
really in-depth discussion about
the different allocation methods
and whether or not the one
that's been used in this rate
case -- in this rate proposal
makes the best sense and offers
the most protection to different
customer classes.

The revenue requirement is the
second big issue, and then i
broke this down for me into the
areas that I would like to see
more detailed discussion about
debt service, reserve funds,
whether low-income users use
more energy or less.

I think there is conflicting
information about that.

That, for me, relates very
directly to fixed fees and
whether or not fixed fees are a
good approach or whether they
are -- have too much impact on
our low-use customers.

And then test year, what is the
appropriate test year?

You used 2009.

We've heard some folks say there
is -- that using post market
test year might make better
sense.

General fund transfer, I think
we've gotten a lot of questions
from the public, so I think it
might be useful to have some
discussions.

But allocation method, revenue
requirement, and then underneath
that debt service, rate funds,
fixed fees and impact on
low-income and low-use users and
then test year.

So I'll just throw those out as
some of the issues I would like
to explore and I think maybe we
can talk about a council about
how we can carve out time in
tuesday work sessions or
quarterly briefing on thursday
or create some other time for
focused discussions around some
of those issues, if they are --
if they are decision points for
the rest of y'all as well.

>> Deputy city manager michael
McDONALD HAD A RESPONSE.

>> I think the council member
answered my question.

The list of questions and the
list as we move forward, as you
have your session before we go
into the community meetings and
you do your deliberations, those
are the things you're wanting to
cover, but, you know, there's no
expectation on thursday for us
to be prepared to go into all of
that, is there?

>> Well, I think that probably
these are all big enough
discussions that we will want to
break them down.

If there's a consensus among the
rest of you these are topics you
want to talk about, I would
suggest we take them in chunks,
debt service and so forth, in
one discussion.

We might want to talk about it
next tuesday because there is
significant discussion in the
navigant report.

The other thing I'm open to, i
haven't completely figured out
whether it makes sense to have
another public hearing and talk
about.

I'm open to either one.

We want a lot of public feedback
at the rate proposal more than
on the calendar at present, but
I think we probably could make
some decisions as a council that
will reflect the public's
testimony we've already heard.

To
get us in a different position.

>> Morrison: I wanted to add,
I agree with all of those as
topics and maybe wanted to
expand them a little bit.

Under the revenue requirement,
I'd like to add the financial
policy for capitol expenditures,
cash versus debt, because i
think that that apparently may
be a driver for the revenue
requirement.

Is certainly, the allocation
method is critical, and I would
like to make transfers a
separate topic, because I think
that the whole -- there was a
very interesting report that
really sort of eliminated the
topic for me from fox and
smallens (phonetic), is that the
name to have the company that
did the report under navigant on
transfers and did research about
what other utilities do and what
happens with private investors.

There is a lot of complicated
considerations there.

So it's the transfers to our
general fund to, economic
development, to the other
special trams, and that gets us
into a topic of rates for
non-city residents, which we
heard from representativeworkman
workman and a discussion of
whether to fall under the
regular tier or the other one.

I would like to, as part of this
discussion, if my colleagues
agree, I think it would really
make sense for us to ask staff
to put on the table an interim
rate proposal as was suggested
by the residential rate advisor,
because we do get into timing
with the test year issue and
perhaps other things in terms of
special contracts being over and
all of that.

So under test year and under
timing issues, I think that,
actually, starting a
conversation about it doesn't
make sense to have an interim
would be important.

With regard to fixed fees, i
think that that's a very
important issue to discuss, and
it's not just about, you know,
impact on low users.

I think that, as per the water
utility, we should really sit
back and talk about do we want
to have a goal of what percent
of our revenues come from fixed
fees.

We know that 57% of our
expenditures are fixed, so how
do we want to play that, and
then how do we deal with that in
term volumetrics, so that's
important.

This might be too ambiguous, but
I'm interested in how our plan
for renewable and efficiency
plays into and is treated by our
rates design and how we need to
take special care with that.

>> Okay.

I want to be clear that what
we're kind of doing is teeing up
from you guys the topics and
subject areas, but I want us to
be careful not to get into too
much discussion while
mayor leffingwell is gone.

So we can continue that process,
but I just want to make sure
that he can hear that and be a
part of that discussion because
I know he's been real active.

>> Sure.

>> Bill.

>> Spelman: We had a couple of
things to talk about.

One came up in the public
hearing, the assignment of
religious institutions to one
category or another, perhaps
coming up with a separate wrait
rate for religious institutions
that came up a lot.

We need to talk about it at
least.

The other one is the amount and
usage of the cap program funds,
who is entitled to get them and
how will we spread them out in
such a way that we're holding
the poorest folks as harmless as
possible.

And one piece of that that i
think works to the fixed fee
issue is if we could actually
get not just the average for --
average usage for poor families
or households, but the entire
distribution, so we have a sense
of who are in the group of very
lowest users who are or who are
not poor.

I think that will help us
understand whether the fixed fee
really is as bad as it "pierce
to be on paper or whether it
really doesn't matter that much.

>> If I could comment on that, i
would remind you that we have
given you these vast volumes of
information and that there is a
distribution of bills and
numbers of customers, a lot of
that is inside of there.

>> I understand that you've
given us a lot of information
and there's two issues here.

One of them is sometimes we'll
need a little indexing help,
where we'll find all this stuff.

And the other thing is we need
to have a conversation about
what it means.

Thanks.

>> Along those same lines, bill,
as it relates to the cap, we'd
love to continue the discussion
of eligibility and automatic
enrollment so that folks don't
have to necessarily sign
themselves up if they fit into a
category of eligibility, they're
automatically signed up.

>> Spelman: I agree
completely.

>> Along the lines of what laura
was saying and hearing the
different topics that are being
brought up, this is going to be
a lengthy conversation, and I'm
certainly open to creating or
contemplating some type of
stability for a short period,
meaning 12-16 months, so we can
have this very detailed decision
and hopefully come up with a fix
that's permanent and not kick
the can 17 years down the road
for some other council to have
to deal with.

I think we really have an
opportunity here to do something
really special with austin
energy and customers, so I'm
open to that suggestion that we
put stability into place for now
but then we go into drilling
into this and coming up with
policies to affect all the
areas we're concerned about.

>> Riley: One item is to add
the value of solar rate, would
shift us from net metering to
the value of solar rate.

Some questions about the add
kweisi and proposed rate in
terms of its likelihood to get
us to the goals for developing
solar.

So I think it would be worth
spending time to talk about that
rate and whether any adjustments
would be appropriate.

>> Morrison: I appreciate,
larry, some of your folks will
come to our committee tomorrow
to talk about solar so we can
delve into it and out of that
might come broader policy issues
we want to discuss about solar,
because I think there are other
things on the table including
values.

>> Mayor pro tem, if I may.

>> Cole: Go ahead, robert.

>> ,Is a complicated subject
that needs a lot of time.

It was just a financial report
and we weren't prepared and i
don't think you are for that
kind of dialogue in a council
session.

Perhaps you agree to have that
as your topic in the next work
session is how do we get with
you all and have this kind of
in-depth conversation rather
than -- I mean, we knew these
were already swirling around and
we were working on how to give
you more data and how we can
help, but the question,
probably, is how and when and
want do we want to do to engage
you all with this conversation,
and I do suggest that I think
you all talked about that
earlier.

If we can talk about that
together, that would be maybe
where we take out the public,
then, for public hearings is the
next decision point, and you
seek more input.

Because you all have gotten an
awful lot of input, already, on
this, so now we need to do
something with it.

You all need to do something
with it.

That's probably the conversation
is what next step do we take
with you, then, to roll up our
sleeves and have these great
conversations?

>> And I think -- I guess we've
heard from everybody.

Let me try to add a little
context.

I think, from listening to
everybody, clearly, this council
has made a decision that they're
going to make a decision --
[laughter]
-- and that is step one and is a
huge decision.

This has been 17 years.

And I also think, from the
desire to have more public
discussions and from the public
discussions that we've had thus
far, we've not done a very
active role in explaining to the
public why this decision is
front and center before us.

And I hope to do more on my end
just to address that.

And the question of an interim
method, a phase-in approach, i
think those things haven't fully
been vetted, but it's hard to
get there without answering the
other policy questions that
everybody has put on the table.

For me, I considered these in a
little broader classes that may
help or anybody can comment on.

First, I would like to hear
about our financial policy and
what is or is not in play, what
is or is not -- have been
violated or may be violated if
we don't act within a certain
period of time, because that was
created by prior council, and we
have the bond rating we have now
because we stuck to that.

And, so, we have opportunities
to go out for bonds to have
debt, to do some of the
wonderful things we do because
we stuck to those policies.

And that includes our capital
purchases, that includes our
debt service rating shield, that
includes our bond rating, that
includes our transfer policy,
because I don't want to see us
bite off just one piece of the
financial picture and not have a
good discussion about what it
means to every thing else.

So I would like to see that one
be front and center and maybe
just a special work session or
whatever the mayor or anybody
else decides we have to discuss
that day, because I don't think
the public senses the potential
urgency of this decision and why
we are focused on it and
especially when they come before
us, it's clear we don't want our
rates raised, and we understand
that.

But we have another asset on the
other end that needs to be taken
into consideration.

So I see the financial part
needing to be on the table in
whole, and then I see the whole
issue with -- out of austin rate
payers and the legislature and
what we're going to do with them
and a decision needing to be
made on that just front and
center and clear.

And then I really appreciate the
question that council member
morrison raised about our
renewables and I would just, you
know, expand that to include the
climate protection plan because
I know, back during those
discussions, there was lots of
discussions about the push and
pull between that policy that we
have, and we've adopted it, and
I don't know of anybody here
that doesn't want to stick
behind it, but if we are going
to stick behind it, what does
that mean, and does the
community that stood behind that
plan, are they ready to come and
stand behind it now.

And, so, I think that is a major
discussion to have.

The whole issue of churchs,
schools and low income, I think,
needs to be explored all
together in the context that
they can't afford the rate
increase that we are
anticipating and just what can
they afford and what does it
mean to our weatherization
policy and what else could we do
or offer to lower those rates,
but in the different categories.

We know that the churchs have
changed the way they operate
over the last 17 years.

The schools have definitely done
that.

The whole question that kathie
brought up and mike brought up
earlier about a low-income payer
versus a -- and their use of
energy as compared to a
low-income payer and their use
of energy, does it make more
sense to offer customer
assistance, weatherization, or
what?

Where are we going to get the
best bang for our buck?

And, so, I kind of see those in
those broad kind of categories.

Does anybody want to add
anything?

Okay.

Kathie?

>> Tovo: I don't know if i
need a sponsor to put something
on next week's work session
agenda, and if I do, I will be
dilated.

There is a good section in the
navigant report about the
financial policies, and so that
might follow naturally from our
briefing next week on tuesday's
work session.

>> I would just add to that, to
the extent that there is
information in the navigant --
we want a briefing on that, but
sometimes I think we get
briefings we ask for and we
don't get counterpoints.

You know, like, to the extent
you don't agree with it, don't
just read it.

Tell us why you think it's
inaccurate and you should also a
member maybe pro and con from
the euc present to help with
that if they want to comment,
because I found them very, very
helpful.

But we know there is lots of
reports out there you've done
and lots of reports that we've
received and lots of visitors
and we're just trying to get our
minds around which one is right
and we know that there is some
projections and estimates in
this, but we need to do the best
we can.

>> Okay.

Let's go back, if there's no
other comments, to see if there
is any other items on the agenda
that council would like to
discuss.

>> I have a couple of reasonably
quick ones.

Do you want to take them in
consecutive order?

>> If we can.

>> Tovo: My first question is
about item 38.

I had submitted some questions
and I guess I have questions
about the responses.

So this is an item regarding
parking.

>> Yes.

>> Tovo: And I had asked the
question about whether the state
of texas is going to charge the
city for use, but I didn't get a
response to that in the
response.

I did get a response, but didn't
specifically answer that
question.

Is the city being charged by the
state of texas for the parking?

>> Parking enterprise manager,
no.

>> Tovo: And then, let's see.

You said there is no cost
comparison.

Could you summarize the
responses about how it's going
to be used, what revenues will
be collected and why there are
charges at certain points, not
others and what the relationship
with the state is with regard to
setting the costs or the fees.

>> Sure, would be happy to.

This is in reference to the two
surface slats under i-35.

1 million
on resurfacing the lots and the
light strands.

And those lots are free up until
7:00 p.m. each day.

That was requested the city uses
these for municipal court
visitors.

Some city employees and also
there is some federal, state
highway employees that use the
lot.

00 monday through
thursday, we charge $7, and this
is primarily used for visitors
to the sixth street area.

And this is something the state
asked us not to have excess
charges, but to have charges
that would be able to pay back
the construction dollars we
spent on these two lots.

>> Tovo: So the arrangement
with the state is that the fee
is being charged to anybody not
be excessive?

>> Yes.

>> Tovo: Monday through
thursday, the charge after
7:00 p.m. is $7?

>> Monday through saturday.

>> Tovo: Okay, did say that in
the memo.

Monday through saturday, if you
park there after 7:00, it's $7.

If you park after that, it's
free, and the fees are used to
pay back the cost of the
reconstruction?

>> Yes.

>> Tovo: Okay, thanks.

>> From the backup, it looks as
the fees have been approved by
the state and the federal
highway administration.

>> That is correct.

It might appear in the future
some adjustments or changes to
the rates would be warranted.

Could you describe what steps
could be taken to do that?

>> Yes, I would then go back to
and ask them what
increases we would need to cover
those.

>> Supposed we saw a surge of
daytime uses and suppose the
parking lot were filling up
first thing in the morning, and
the visitors to the municipal
court weren't able to find a
parking space because you have a
bunch of people parking there
and storing vehicles there all
day, typically, some fees have
been assessed not so much to
gain revenue and to pay off
expenses, but actually manage
the re ensure a
turnover occurs so people could
secure a parking spot.

The way you'd get there is to
monitor the utilization of the
parking lot and adjust fees
accordingly.

Seems like we'll int somewhat
constrained in that as far as
these rates seem for more or
less written in stone until we
go through some procedures to
get there.

>> These are not written in
stone.

They have given us the
flexibility to go back to them
and discuss the rates.

They just wanted to make sure
they weren't excessive,
depending on the market rate and
that type of thing.

>> Would further council action
be necessary in order to change
the rates?

>> That would no be necessary.

>> So straitively, you could go
to the state and get approval
for an adjustment rate?

>> Yes, sir.

>> And that could be up or down.

>> Yes.

>> Supposing in the evening
we're finding that the costs
were so excessive nobody was
using a lot, made sense to bring
it down more in line to respond
to the market and you could talk
to the state about reducing the
fee in order to --

>> that's correct.

>> All right.

So you have flexibility there.

>> Very much so.

>> Okay.

Thanks.

>> Steve, what percentage of the
spaces are filled before and
after 7:00?

>> I don't know have before and
after 7:00.

Thursday, friday, and saturday,
they're 80% filled.

Monday, tuesday, wednesday,
about 10%.

>> So nobody goes to sixth
street on monday, tuesday and
wednesdays and parking on the
lots.

Do you have any idea how full
the lot is filled before 7:00?

>> I don't.

I could run statistics on that
if you would like.

>> Spelman: I wonder if it's
full or close to full.

>> It's municipal court.

The visitors to municipal court
fill that up.

>> I think it would be municipal
court visitors, but council
member riley, there may be
people who work in the city and
don't have use of a parking lot
to store their vehicle.

I can see an argument for a
moderate charge for folks who
weren't going to municipal court
to regulate the use to make sure
there is space pore those who
are using the court.

>> Would you like for me to get
back to you on that?

>> Spelman: That would be good
and to council member riley,
too.

>> My interest is making sure
we're keeping an eye on the lot
to make sure the spaces are used
appropriately and there is
parking for people at the
municipal court and not being
used to store vehicles at the
expense of the state.

We need to keep an eye on it to
make sure we're managing it
effectively.

>> Okay.

We'll do.

Thank you.

>> Any other items, council?

Laura?

>> Morrison: I have a question
on a couple of items.

Item 10 about the new central
library, there is an extension
and expansion for a contract for
pre-construction.

I the city manager there.

Basically it's an amendment to a
contract for preconstruction
services for the new central
library, to add 450,000.

So it seems like quite a large
an expansion of the contract,
and then there was some
discussion in the back of about
why the different tasks and the
scope was expanding.

I wondered if you might be able
to discuss that a little bit for
us.

>> We have john gillem from
director of facilities with the
library that can give you the
detail, but, as you recall, to
give you background and context,
part of this will have to do
with the actual time frame
through which we went through
the process where we had the
$90 million and had to
identified the add its thele
funding sources to be able to
get to the point where we could
actually have the full amount of
funding to move on with the
conceptual design of the
facility.

So a part of that was built into
that extension of timepiece, and
then when john gets here --

>> Morrison: He's right behind
you.

>> There he is.

Part of that is the time
extension based on that delay,
and then I think john can talk
about some of the other
specifics as well.

>> Thank you.

>> Mayor pro tem, council
members, city manager, assistant
city manager, the new central
library project is a home for
the creek development district,
and we're also driving a bit of
other bridge and
street expansion or extension
project is really a dovetailed
project.

And our construction manager at
risk has been awarded the
construction contract for that
project as well.

We have a number of design
issues, as you might imagine, to
deal with in the redevelopment
of this formerly pretty
utilitarian area of the city
used for waste water and
electrical energy production,
and the construction manager at
risk is really proven to be -- i
can't tell you what a help they
have been for us.

They have the capacity to help
us with scheduling and with
modeling of the design we're
trying to put together to
interface with the park
development and street and
bridge and that's essentially
the reason for the request to
enlarge their contract and the
design phase for this project.

>> I think a big objective of
this project is to fully
integrate into the site with not
only the second street, but as
you recall a big element that we
added was also the creek
because, you know, we have a lot
of different components like the
hike and bike trail, you know,
the opportunity, really, to
integrate the use of the creek
into the facility itself as well
as just making sure that, like,
for example the second street
piece was in place when the
facility gets eventually
constructed.

So I can tell you our team has
been really looking at all of
these pieces and making sure
that we keep that in mind before
this facility gets finalized.

>> And I think that's great,
that completely makes sense to
make sure its well I want
grated.

I guess, since we had to search
around and be creative about how
we were actually going to fund
the total project, it sort of
raised a flag for me.

We obviously need to make sure
that we're going to come in on
budget after we've already
increased the budget or beyond
what the bond covered.

So I just wondered if this is at
all a flag that the -- you know,
the total project is going to go
beyond the scope or beyond the
cost that we've already got
budgeted.

>> We understand what the bottom
line is, and it is a very
complex project with other very
complex projects tied into it,
but we very much understand what
the total amount of the budget
is, and we do not think this is
going to exceed our budget when
we deliver a new central library
to you in 20:15.

>> That whole integration and
the downtown commission and
design commission are looking at
that pretty carefully, and, so,
I can see that it's a risk
because we are trying to do the
whole integration and to do it
right.

So thank you.

>> Any other questions,
colleagues?

Chris?

>> Riley: Not on this one.

I have questions about the one
right before this one, item 9,
which relates to the williamson
creek blarewood storm drain
improvements.

I don't know if we have anyone
from watershed here, but I just
want to raise the question
generally.

This relates to a bunch of
improvements -- actually it's
$6 million contract for storm
drain improvements along
williamson creek and includes
work like stream bank
stabilization and a bunch of
gutter replacement, repair of
culverts and so on, and my
question relates to whether we
have explored -- whether there
are any opportunities for
promoting a trail along the
creek.

There has been a lot of interest
in a trail along williamson
creek.

I know both in the oak hill area
and further east between, say,
manchak and i-35, in the flood
plains, there are opportunities
for trails and existing trails
along segments of williamson
creek.

When we do stream bank
stabilization and culvert
repair, there are opportunities.

Recently on riverside, when we
were doing some repairs along
williamson creek, even though
there's not a trail -- not
williamson creek -- country club
creek, even though there's not a
continuous trail, we had the
foresight to put in a path under
riverside and its there now.

No connections north or south.

Whenever we get the connections
in place, we'll be glad we had
foresight to anticipate a
trail under riverside.

So I wonder if there are any
opportunities as we do repairs
on williamson creek whether we
contemplate pedestrian areas in
the future.

I wanted to raise that question.

>> We have your question and
make sure we get back with your
office as soon as possible.

>> Riley: Great, thanks.

>> Cole: Any other questions?

Kathy?

>> Tovo: A couple of quick
ones about item 12.

I apologize for going backwards
after we specifically had a
discussion about going forward.

>> Dug fowler, chief of austin
fire department.

>> Tovo: A couple of follow-up
questions.

I'm not sure if there is a fee
schedule attached to the online
agenda.

So my first question is the
fees -- looks like the fees
associated with these are the
drill field are 350 per
four-hour block with abestimated
$700.

Do you know how often they are
contemplating using the drill
field?

>> It's most frequently used in
the fall, one to three times a
month in the fall.

In the spring, much lighter.

The seniors will be going
training
and the juniors still have
classwork.

So once a month in the spring,
but the fall has the heaviest
use.

>> Tovo: If you know if the
backup information for the site
spells out how many?

>> It does not.

>> Tovo: I apologize.

I know, colleagues, you've
discussed this academy in some
detail in the past and I wasn't
part of the discussions, so I'm
probably asking things you've
already covered, but was there
any discussion about the city
either waiving that cost or
having that be their in-kind
participation.

Is there any cost to the city
use the
fields on that day?

>> Yes, ma'am.

Typica we have instructors
that participate so we're just
recuperating costs, trying to
for
the instructors who have to be
there to operate certain areas
of the drill field.

>> So the $700 is for
instructors to help operate the
drill field?

>> Yes, ma'am.

>> Tovo: And there was a
response in the second question
that talked about the fire
department had anticipated
absorbing any and all remaining
expansions including
funding for instructors for the
senior an instructors for the
saturday drill skill field days.

So I guess if that was the
intent, I'm wondering why there
is a cost being assessed to
aisd.

>> The costs that we're
incurring above and beyond is
for the supplemental instructors
when we have skills that are a
high student to instructor ratio
such as live fire training.

We committed we were going to
see the seniors through and we
have this spring semester and
then we're done with that.

But in the future, aisd will be
responsible for those
supplemental instructors.

>> Tovo: I guess I'm having a
little trouble matching up all
thew these pieces of
information.

Sounds like aisd is funding
instruction for junior and
senior classes.

>> Yes, ma'am, and we help out
with supplemental instructors
for some of these skills that we
have to have.

More instructors in the
classroom.

You can have one instructor
operating in the class.

When we move out into the drill
field, we need to have the
mentors and supplemental
instructors despending on the
skill they're working on.

>> So the 51 thousand-dollar are
the anticipated costs to be
absorbed by aisd are the
instructors that you talked
about, the funding of the
instructor for the seniors that
are not the supplemental?

>> Yes, ma'am.

Most of that was spent in the
fall.

We anticipate another 16,000 in
the spring and then will be
done.

>> Tovo: What I know of the
program, sounds like, you know,
a really unique opportunity, and
I just applaud the school
district and the fire department
for working together on it.

Seems like it has a lot of
potential and we aught to be
continuing the city's investment
in it.

But I know, again, that there
have been previous discussions
about that that I wasn't a part
of.

So I'm not sure of the range of
considerations that went into
this.

But I do want to ask a question
about the extent to we data is
being collected.

There were a few questions I'd
asked about -- and there was
information back -- the response
back was we don't have any
numbers regarding the number of
students that went on to
take the emt national registry
exam, and then sounds like only
anecdotal information about what
happened to students once they
graduated.

Seems to me, if we're trying to
assess the value of the program
and sounds on the surface it
would have great value, to the
students, the city, the
community, it's hard to quantify
the value if you aren't
collecting information about
what the students are doing with
their training.

Are there plans in the works to
collect that data and get some
of that accounted.

>> Once the spring is over with,
officially the austin fire
department is out of it.

We will be happy to ask and they
can look it up for us.

But part of the difficulty is
this last go-round to applying
for the austin fire department
was the first opportunity in
this existence of the 6-year
program they could actually
apply.

We talked with the mentors, both
austin retired firefighters, to
get a sense of what they're
hearing, but there is no
official contact list to go back
to the people who started as
early as 2006 to find out did
they apply or going elsewhere.

That part is difficult.

The other part is when the emt
portion is completed in the
spring -- and that's for the
seniors -- the seniors graduate
and move on and we give them the
information to take the national
registry exam to get their
e.m.t. certification.

But it's completely up to them,
and we've lost contact at that
point with them.

Again, it would be nice to know
if we could follow up and find.

So far, all we have is the one
firefighter that works in esd4,
and we know there are two
seniors in the current class
that have been accepted to
eastern kentucky and their fire
prevention degree program, which
includes they work as
firefighters as part of the
program on campus.

>> Okay.

Thank you.

Chris?

Laura?

>> Morrison: I have a question
on a different item.

Mike, you might be able to help
me.

Item 29, approve a contract with
citele group to secure a
security initiative training
exercise for the office of
homeland security and emergency
management.

And, so, basically, what this is
a -- we're going to be hiring a
company to help us put together
an exercise, which is a
complicated issue, 350
thousand-dollar, and we do this
with the city of austin, city of
round rock, travels county, -- travis
county, williamson county and
hayes county.

I could be wrong, but my
understanding before was that
the uac was mainly funded
through federal funds and
perhaps some of those have been
cut, now, and, so, I wonder if
this is -- if I'm accurate about
that and if this is indicating a
shift in the way we're going to
be funding this organization and
whether or not, for instance,
with this contract, other -- the
other entities will be
participating and paying for it,
also, or if we're capturing the
full cost of it.

So those are basically my two
questions about that.

>> I believe although the funds
are being cut, this is still
part of some of those funds, the
federal funds.

>> Morrison: So the funds came
into our budget and we're just
spending them?

>> Right.

>> Morrison: So maybe byron
has the answer to that.

>> Byron johnson, purchasing
office.

Yes, he's exactly correct.

These are funds that we got.

This is an exercise that meets
the parameters to have the
funding, and it's -- parameters
of the funding, and it's an
exercise done in other
communities, and it would be
fully funded through the grant
program and the extra costs
funded through our partners.

>> Right receiving the homeland
security fund, we would have
some exercises, you know,
similar to this regionally and
we'd get with our partners and
everyone would participate in
putting that exercise together.

So that's the way we did it
prior to the homeland security
funds coming in.

>> I see.

So -- and then I know I've
talked with the city manager
about this idea before and that
is the concept of, at least at
some point, having elected
officials be part of training
exercises for disaster response
in general.

I think this is previously
terrorism.

So do you know if elected
officials are going to be part
of this or that's just a
different topic to discuss?

>> Well, not part of this
particular exercise, but, in
fact, today a memo is going to
be going out to mayor and
counsel for city manager.

We became aware last friday of
an opportunity that will involve
elected officials that will take
place next week.

We apologize, it will be short
notice, we just found out about
it, but it's going out today and
will take place next week on the
2nd or 3rd.

But we'll get that information
out to you.

That's one opportunity.

Moving forward in the future,
the city manager talked with
homeland security and me about,
you know, taking advantage of
some of those federal
opportunities that come in where
you eat gore to virginia or
they -- you either go to georgia
or they come in and do a
wide-scale exercise to involve
elected officials and staff.

>> Council member morrison,
there is a recent attorney
general's request for a quorum
of council members to maybe
participate in these activities.

We don't have guidance on that
now but we'll work with the
manager's office if some of you
want to participate.

>> Morrison: I appreciate
that.

That's important for this or
just in general.

The experiences over the past
year with the wildfires and all,
for all of us to have a sense --
I think some people have more
than others just because of
background on this council, the
way things works during a
disaster.

It's critical we understand that
so we don't get in the way,
number one and, number two, so
that we can help to make it more
productivity and play a
particular role.

So whether less than a quorum or
whatever, and in the future i
think that's very important.

>> Yeah, again, I apologize for
the short notice, but a lot of
what's going on now is you have
different vendors and everything
trying to spend the homeland
security funds up.

So they got in touch with a
short notice.

Of course, we'll take advantage
of the opportunity and get that
information out to you today.

>> Is it on thursday, a council
meeting day?

>> I don't think so.

[Laughter]

>> other items, comments?

>> Briefly, item 46 is
sponsoring significant events, a
pretty significant event for us
a.

The halojeology society secured
funds to help us roll out the
red carpet in for three days,
one day of seminars, one day of
parade, which is what we're
sponsoring, the parade, and one
day of unveiling the monument
and festivities around town.

Certainly invite the community
out and hope you consider
supporting this.

It should be a pretty
significant event for austin
that weekend and looking forward
to sharing it with all of you.

>> Any other comments,
colleagues?

No further comments, I'll
entertain a motion to adjourn.

>> Second.

>> No objection.

We're adjourned.