Acquisition Schedule for the Florida Governmental Utility Authority (FGUA) Consolidated and Pasco Systems in Pasco County Presentation – No Funding Required

1:47:47Okay, item I'm

1:47:49gonna do it.

1:47:50Acquisition schedule for FGUA consolidated Pasco Assistance and presentation.

1:48:03Good morning Chairman, Vice Chairman, and uh members of the board. My name is Joshua Wood, Director of Public Infrastructure, Fiscal and Business Administration. As our county continues to grow at a remarkable pace, our public infrastructure, especially our water utility, must keep pace with both the demands of organic growth and the responsibility of integrating existing systems into our network. The next phase of the FGUA acquisition is a critical component of that work. Item

1:48:34R36 before you today is a presentation-only item. Its purpose is to formally signal our intent to move forward with the next phase of the planned FGUA water utility acquisition and to also discuss private utility acquisition options. Options. As I continue to settle into my role, I'm quickly learning that the county's plan to acquire FGUA utilities is connected to a deep history going back more than a decade,

1:49:04but is also tied to private utilities, which is why we will discuss both today. In this presentation, we'll outline the project's impacts, discuss rate considerations, and review the timing associated with this phase. As you will learn, we are currently about six months behind our original schedule. That delay is largely the result of rapid growth, shifting priorities, and need to remain agile as countywide demands evolve. We are now prepared to advance

1:49:35this work. And it is important that the board is aware of our readiness to proceed. In addition to the FGUA update, we'll also provide an update related to private utility acquisitions. These opportunities continue to emerge and they play an increasing important role in shaping the long-term stability and efficiency of our water system. While today's primary focus is the next phase of the FGUA plan. We intend to continue evaluating private utility options in parallel.

1:50:05Our goal is to ensure that the county grows. We are assessing every viable path to strengthen our infrastructure and deliver reliable, sustainable services to our residents. This presentation will offer historical context, walk through the financial and operational considerations, and highlight the benefits of completing this phase as we have successfully done in the past. I welcome your questions at any point, but our intent is clear to move forward, to stay aligned with our long-term plan and to continue building

1:50:36a resilient water utility that supports the growth for years to come. Can just go to the next slide, please.

1:50:46Just a little bit about FGUA. So FGUA, also known as the Florida Government Utility Authority, is an independent special purpose government entity. It was created to help local governments acquire, stabilize, and improve water and wastewater utilities that require additional support. In 1999, through an interlocal agreement among several Florida counties. FGUA was designed to allow local governments to pool resources, reduce costs, and ensure reliable services for customers across

1:51:16the state. Today, FGUA owns and operates more than 98 utility systems across 15 counties. Serving approximately 120,000 customer connections. FGUA structure gives local government the ability to influence utility operations and rate setting. Now in 2008, in one of these interlocal agreements that we discussed. The utilities that we're talking about that we've acquired what we've acquired already two and we're talking

1:51:46about the next two. Um there was also discussion around several private utilities. Those are the ones that we'll discuss today. Two of which they will discuss more specifically Nye Florida and Hudson Waterworks, at the time also known as Hudson Utilities. So it's important that we mention that because at the time when we when this was falling into FGOA, we saw this kind of divergence with private utilities. The model

1:52:17in FGOA has allowed FGOA to acquire and rehabilitate systems with significant operations, financial water quality changes, often serving as a transitional step before long-term local ownership. In FY20, as you see on the slide, Hasco County began the process to acquiring several systems that were experiencing substantial water quality issues. We acquired in FY20 the Pasco Aqua Systems.

1:52:48And in FY22, we acquired our Lindric utility systems, as you see highlighted by the check marks. Our next system is the consolidated utility system, and we'll talk a little bit about that. We have some maps to kind of show that. I'm just wanting to note here the date of 2027 is retarget date. Our initial, and you'll see some of that reflected when we discuss some of the rates, but our initial target was this year, fiscal year 2026. So it's important that

1:53:18we discuss that, especially as we think about existing infrastructure and some of the pressures on existing infrastructures such as wastewater treatment plant expansions, et cetera. And then you can see our planned Pasco utility systems in FY29. And that's really really due to the size of these. As you look at Pasco Aqua Systems, you see the 3,200 customers, Lindric was a little bit over 3,000. You may wonder why why uh Lindrick second, Lindrick had some interesting

1:53:49dynamics around the facilities and also some interlocal agreements that we had at the city of Newport Ritchie. The Pasco Utility Systems also has its own wastewater treatment plan, so it definitely comes with some unique dynamics there. We can uh advance to the next slide.

1:54:10Consolidated systems overview. So there's 13 service areas represented and consolidated. We can read them there, Anclaude, Angus, Angus Valley, Colonial Manor, Dixie Groves, Virginia City, Westwood. And then Madhatter East and West. And if you would um

1:54:29You can see here how those two communities, east and west, all kind of represent smaller little communities, as is set up often as we can see in Pasco County. If we can just go to the next slide and we can look at the map. So you can kind of see here how the consolidated system, not my name of choice, definitely FGUA, but represents our far western part of the county and then some central parts of Pasco County there. So you see just

1:55:00south here in Land O' Lakes. The PASCO system overview is, while it just largely represents, again, name choice by FGUA. Represents seven springs in Alohar Gardens, and you can see how big and how encompassing both of those systems are as well.

1:55:20So let's talk a little bit of numbers. Uh I won't try to overwhelm us here, but I think ultimately what I want uh the board to understand is um Pasco County utilities you see here by PCU can reasonably absorb the operational capital expenses from the FY27 consolidated system acquisition. So what what are these bar uh you know what what are these line graphs really trying to represent You look at the blue line, that's basically what's happening in the

1:55:50utility without the acquisition. The yellow line is pretty much on top of what we're dealing with today. Those lines being together. Means we can handle it. As you start to see, as we get into FY29, they start to separate. So that rate of absorption, think of it like a rubber band, starts to stretch out a little bit, puts a little bit more pressure on us. One thing to note. Is that this is all based on estimations and what we've received from

1:56:20FY24. So our consultants that have done this study really wanted uh brought that to my attention because you have to understand when we actually get into this, those lines are actually spreading a little bit out, and which kind of goes to why we want to move forward uh immediately, because we're already delayed. So it's important to know that. Our debt impacts of FGUA acquisition, this is also important. I'll just take you a little bit left to right. You can see what happened in 2020, Aqua, we

1:56:51we brought in, when we brought in the system, $20 million of debt. What you don't see here represented, which is good news story, is Lindric, because on the Lindric side we had ARPA funds. So we we were able to forego that debt that would have come onto the system. But you can see our original plan was to bring in consolidated in 2026, now retargeted. Goes to 2027. And why this is important, because that's an important reflection point

1:57:21for the county. In 2027, the county has planned to bring on approximately $412 million of debt to support our existing infrastructure around wastewater treatment plant expansions. This is important to note because obviously, consolidated, as you can see, would also bring in approximately I will like to note here that the utility is currently has a debt portfolio of $192 million. So we are at a

1:57:51point now where we are beginning to manage some big dollars in terms of our system, which is just really a testament to our growth.

1:58:00Here are some average bill impacts to customers with and without acquisitions. You can see here in FY26, uh our rate increase, our rate plan calls for a 3.75% increase, and in FY27, it calls for a 4.75% increase. I will I would actually like to note on the width acquisitions, I actually have to make a correction here on the spot. But it just goes back to why it's important for us to move forward. In FY twenty six we had planned to take

1:58:30three point seventy seven five percent and add a one percent increase which would impact all rate Pairs across the county. uh so that we can absorb consolidated But as you can see there, I put it in FY27. But in FY27, if you look at the table above, you see it's 4.75. So it's actually, the correction here is it should be 4.75 plus 1%. So that impact is a little bit higher now that we're going into the next year because of our delays. So it's important for us to

1:59:00note that. I think the county still believes, you know, from a or team still believes still something that the county can reason reasonably absorb, but it's important that we move forward soon. And then you can see the rates in the out years uh as we move into like the Pasco system.

1:59:23FGUA customer rate impacts. I thought this was important. When you look at consolidated if we just look at the bottom first and we can work our way up. FGUA total bill is average at 9657. This is considering 4,000 gallons. If you bring in pass you bring them into the Pasco County system, you can see that they benefit from approximately a $27 discount by coming into our system. So it would have a uh quite an

1:59:53impact and not to mention the water quality obviously would improve. Um you could see the impacts for the Pasco systems as well.

2:00:02So this is where I want to talk about private utilities operating the Pasco Account. As of now, we have identified 29 total private utilities in Pasco County. This is super important. Uh we've grouped them into multi-cluster areas and single cluster areas. And you can see here we have highlighted Hudson Waterworks and Nye, Florida. Uh it's important to note that These are ones that going back to my uh original opening remarks Around the time that we

2:00:33brought in and we identified utilities that fell under the Florida Government Utility Authority, these were two that really probably should have fallen in as well. But there were some updates and some changes, some mix of really staff at the time, and I'm coming off of some reading here today. But our staff was really engaged in kind of stepping in and doing some work, and then there were some private utility acquisitions that took place

2:01:03at that point.

2:01:06So recommendation. And I've I place this here for board discussion. Our recommendation is to move forward with the FGUA plan and consolidated in FY27. And then you can see this second bullet point. We'd like to in parallel in FY27 and 28 really kind of work a strategy around the integration of private utilities as well. I think the initial recommendation from the team is to commission a formal appraisal

2:01:37for Nye Florida and Hudson Waterworks. We've obviously looked at some numbers, but it's not really fair to speak to those numbers unless we get an actual formal appraisal. and and then begin to have further discussion with the board around that. And then of course the Pasco systems and FY29. So uh I think that really concludes my portion. So I'll see if there are any questions or comments at this point.

2:02:04Yeah. I want to say d you d you've done a great job. Uh we've had a couple of discussions about this. Uh it was gonna come before the board a little bit ago and uh we we went through more discussion and we did try to work again hard on Hudson. I just want to talk about that for just a little bit. 2004 when I was running for office, Center for Sano at the time came to me and says this is a big issue for us to go forward with. Um and the coming forward with it, we need to take care of water quality. We had people showing coming up to public hearing with babies in black

2:02:34bathwater, uh pictures of sludge and all our things that were a big issue for families that try to try to live and survive. And again, the big one. at the time were Aqua, Lindric, Aloha, and the Hudson systems. So with all that said, it was good that the Aqua system sold, Lindric system sold, and Aloha did. But because the PSC was operating the way it was and granting Hudson another big rate, um the gentleman could actually get more money selling it privately

2:03:04than he could from us. So without even give us an opportunity, they paid more money. And the utility that bought it justified, well, even if I pay too much for it, I'm gonna be able to raise my rates, go justify my rate of return, and on we go. So that's what led and it's been my passion to try to help all these utilities. We did a great job on the board with summary a few years back, getting state help, et cetera, to make it happen. This could be something we could do as well. But I want it I want us to go forward with looking at the Hudson one as well as doing all the all the others we're doing with the FGA, because

2:03:35if we don't, it's gonna get worse. And Hudson has got a lot of struggles in there. We had a property in Tower Drive flooded out year after year. When we finally put the project together a couple of years ago, you guys may not remember, but it took a long time to get it done. We didn't know where the water lines were from the private utilities to where we had. it and it delayed us like six months for getting the project done trying to get it through an increased cost. Last year you saw, last two years you saw Old Dixie Highway. All the projects we've done in stormwater have been fixed. The reason we

2:04:05found out We just found it out after the season. The reason that Hudson was flooding at Old Dixie was the pipes underneath weren't cooperating together. One was leaking, affected the other one, and affects service on both ways. I can tell you what And I'll do some public hearing on this just like we've done before. I will bring the people of Hudson together. We will craft what their issues are, what their problems are, and I think we build a strong case to get the support to go forward and buy this utility one way or the other. And I saw Hillsborough kind of did it years ago. They

2:04:36just stepped in and said, We're gonna do this. It's the right thing for our citizens. Now, the good thing with Hudson, if we do that one, you're gonna be able to keep the rates of about the same, it's gonna be less of an impact to the citizens. The other ones, the good thing is even if you're gonna impact the sections, when we did the people at Aqua, their rates went down. They were extremely happy and it really helped the neighborhood bounce back. When we did Lindrik, those people were ecstatic. Because now they could get better citizens. So you're gonna see a little bit of an increase for the folks, but the long run it's

2:05:06better for the county that we take all these things over anyway. The F makes it a little bit easier though it's been more expensive because they haven't paid down the debt like we expected 'em to. But But um you've done a great job and I think we can run the Hudson Utility System acquisitions separate but parallel to everything else you're doing.

2:05:24I agreed, Chairman. We'll proceed on.

2:05:27Alright.

2:05:28Commissioner Weightman, very good.

2:05:30Yeah, Mr. Wood and Mr. Grant, glad y'all got two of you now, one on either either side of the of the door. I I appreciate you all taking the time to run through my litany of questions and um help me understand so So I wasn't around when this initially, this endeavor was aspiring to happen, and I understand the I guess almost humanitarian health

2:06:01nature of this of this um program, but I have reservation and concern based on The debt strategy in the position that this in our debt position that that this this deal could potentially lead us in the shaky territory and our bond rating and you name it. I understand it's a it's a it's a good deal for the folks that are on the FGUA

2:06:32systems and are on the the private utility, but it's also a fee increase on the existing consumers. Boilerplate just from a business level, take feelings and emotion out of it. This isn't a good deal. um financially. So I'm for moving forward and trying to put together a comprehensive and cohesive strategy on how to uh help folks and provide good, clean

2:07:02quality, safe, consumable water. Um but I I I'm confident in you all and Mr. Wood, as we've spoken over the course of time, in your ability to help us understand our uh debt impacts and the position that it can put us in. And if we need to restrategize along the way, I think we should. We need to be incredibly deliberate. uh on how we move forward here. Um I don't want to see us end up in

2:07:32a real pickle. Uh so I just share those remarks with you. I appreciate all the time and Justin, you working with our team. Uh and it worked out great 'cause you understand our language and I assume when the questions went forward you probably said, oh, those got to be from Weightman. Um which is good. You already know how our thought process is, but I I very much appreciate your both and your patience and the whole team uh looking into uh our concerns. So thank you, Chairman. Thank you.

2:08:04From the commissioner? No?

2:08:07I I'll just go. My my um conversations were much more direct as far as what we wanted to look at. And again, this is something that the way the county grew is how these small systems get started, how they got acquired. Um I think it's good to let these next steps take place. We haven't voted on it we haven't voted through anything more but c continue the process because that was we told the people when we were We're going to put them under the FJA. We're going to continue the process to look at it. Uh, I'm very happy the fact that we did the Aqua and

2:08:37Landric systems. I think there's a path forward to keep on going. And, you know, between, I think this is Orange Wood that's down. They got PFAS, it's a small one one off one-off system. Then maybe PFAS money we can put toward that would make sense uh to get credit. Uh the Hudson system, it could be something where. Yeah. The great thing with that system is the people are paying, let's say, similar race of the county when you add both of them together, taking them over, you're not going to see the bump in. It's just a matter of negotiating the price. So I think studying, doing the appraisal, going

2:09:07to look at it, let's do the public hearing out there to find out what's out there. I think you'll find a way that there's there's a path forward somewhere we just don't know yet. But I think we should move forward with the recommendation going forward for the FGO systems. And I think we should add in looking at the Hudson system too. And then it's gonna come back to us. We can study it further, see how it looks, and then make a decision in the entirety with more information.

2:09:35Okay. So there are any motions.

2:09:37No action.

2:09:40Do you need do you need any any motion or can you just work parallel with Hudson doing

2:09:43the appraisal? No, uh no Mr. Chairman Mul we will continue uh with our efforts. Um the results of uh this presentation only today is just the signal to the board our intent to move forward. There will be several actions from here. Um our our new date is June of twenty twenty-seven. So Just you know from here until June of twenty-seventh, we'll be we'll be bringing uh several items to the board.

2:10:06Well I appreciate your discussions with me to listen, Justin, Joseph, to to go forward to make all this happen because it is gonna be the best for the citizens. So with that, thank you very much. Absolutely. Made you jump.

2:10:28Major job.

2:10:31I learned how to cook. You know Tom Weightman doesn't cook.

2:10:34What's the best recipe you did for?

2:10:36Probably my aunt, my late aunts, but Tom doesn't cook.

2:10:40And older wines that are not. You know, that is pretty emotional. That's

2:10:44her.

2:10:58You

2:10:58see it. I know, now I gotta pay attention. That's beautiful. He's raised the bar. Come on.

2:11:05This is a nice signature.