WATER BUREAU

FY 2018-19 REQUESTED BUDGET

FIVE-YEAR PRELIMINARY FINANCIAL PLAN

January 29, 2018

PORTLAND UTILITY BOARD

Members: To: Mayor Ted Wheeler Allan Warman, Co-chair Commissioner Nick Fish Commissioner Amanda Fritz Colleen Johnson, Co-chair Commissioner Chloe Eudaly Commissioner Dan Saltzman Meredith Connolly Auditor Mary Hull Caballero

Ted Labbe Re: Budget Submissions for the Bureau of Environmental Services and Robert Martineau the Portland Water Bureau

Micah Meskel Date: January 24, 2018

Lee Moore

Dan Peterson The Portland Utility Board (PUB) serves as a citizen-based advisory board for the Bureau of Environmental Services (BES) and the Portland Water Scott Robinson Bureau (PWB). We submit this initial budget letter in compliance with City practice for budget advisory committees, and in response to our Hilda Stevens specific duties to: Mike Weedall “advise the City Council, on behalf of and for the benefit of the citizens of Portland, on the financial plans, capital improvements, annual budget development and rate setting for the City's water, sewer, stormwater, and watershed services. The Board will advise Ex-officio Members: Council on the establishment of fair and equitable rates, consistent with balancing the goals of customer needs, legal Alice Brawley-Chesworth mandates, existing public policies, such as protecting water quality and improving watershed health, operational requirements, and Ana Brophy the long-term financial stability and viability of the utilities. Van Le (3.123.010)”

The PUB held five board meetings and two subcommittee meetings to review the FY 2018-19 proposed operating budgets, major additions and Staff Contact: Melissa Merrell adjustments to the five-year capital improvement plans, and decision (503) 823-1810 [email protected] packages for both bureaus. We look forward to providing additional City Budget Office feedback to City Council upon receipt of the final budget decision 111 SW Columbia St., 5th Floor Portland, Oregon 97201 packages and the City Budget Office (CBO) analysis. We anticipate

participating in the budget work sessions in March, the utility rate hearing in May, as well as discussing budget issues with the Mayor if requested, as the budget develops. The PUB receives significant support from both bureaus’ directors and staff, the ex-officio members, Commissioner Fish and staff, as well as the City Budget Office and our analyst. We are grateful for their collective efforts to help us understand and navigate the complexities of these utilities. The PUB considers the following values when providing input and making recommendations to the Council:

• Affordability • Efficiency of Operations and Value to Customers • Assistance to Low-Income Residents • Protection of Public Health and Watershed Health • Improvement and Sustainability of Infrastructure • Regulatory Compliance • Equity • Service Delivery • System Resiliency • Transparency and Public Engagement

These values are not presented in any particular order and tension can exist between these values. PUB members particularly feel the tension between the need of the bureaus to increase capital investments to address system maintenance and the burden that ongoing annual rate increases place on customers. PUB encourages and has asked the bureaus to make explicit the consequences of rate constraints to increase public awareness of this issue. PUB feels strongly that this needs to be a component of the public dialog to align expectations and find the optimal levels of investment for the bureaus and the public.

Annual Rates of Increase The bureaus submit budget requests that comply with guidance from the Mayor and Commissioner-in-Charge. City Council ultimately approves those budgets and the necessary increases to rates to support those budgets during the annual budget process. Annual rates of increase for the typical single-family household in Portland over the past 10 years have increased more than three times faster than commonly used benchmarks for increases including inflation, median household income, median family income, and changes in per capita income. There are challenges to using inflation or other economic benchmarks when considering increases in utility charges. Increasing regulatory requirements and past underinvestment may mean that utilities need to invest more than inflationary increases would

Portland Utility Board Page | 2 January 24, 2018 permit. An example is the requirement that Portland reduce combined sewer overflows which contributed to significant rate increases over the last 10 years for capital investments but resulted in improved water quality in the Willamette River. While a lower rate of increase this year would translate to savings of $1 or $2 monthly for the typical single-family household, those incremental increases compound over time. Given the City Council approved rates of increase over the last 10 years, typical monthly single-family household bills are $25 more than they would have been if rates had increased in line with inflation over that period. Acknowledging the scarce resources of many Portlanders, PUB members encourage City Council to be mindful of the multiyear impact of rate increases and the cumulative impact on customers.

Budget Prioritization and Rate Options The Mayor’s FY 2018-19 budget guidance directs BES and PWB to identify efficiencies and reductions to limit rate increases. It further directs them to work with the PUB to develop prioritized reduction options for Budget Committee and City Council consideration. Budget guidance provided to the bureaus from Commissioner Fish on November 20, 2017 included an expectation that the requested budgets will “reflect good value at a fair price in any proposal for a rate increase. As in recent years, the proposed combined retail rate increase shall be below 5%.” The co-chairs requested the bureaus prioritize requests necessary to comply with the following categories: regulatory compliance, maintenance and improvement of asset health, bureau equity goals, and alignment of bureau activities with strategic planning goals. In addition, to demonstrate the relative priority of requests and the benefits that Portland customer would receive from the additional burden of increased rates, the co-chairs requested the bureaus to identify line items in their requested budgets that would not be funded if the City Council were to approve combined annual rate increases of 3% and 4% in addition to their planned requests in line with the Commissioner’s guidance of a combined increase below 5%. This information allowed the board to have substantive deliberations about the tradeoffs of the programs and the additional burden on Portland’s utility customers. PUB members recognize the amount of work such exercises require and appreciate the time and consideration of the many staff required to provide responses. The bureaus provided helpful information on the budget items that would and would not be included in their budgets if combined rates of increase were further constrained. PUB members found this exercise valuable in highlighting the tradeoffs of the costs of investment and benefit for Portland residents. The board will reserve its recommendation on individual decision packages until after the CBO reviews and recommendations are complete. PUB members encourage the bureaus to use the budget process to communicate the value of the investments over inflation and benefits that the residents of Portland receive and are committed to the working with the bureaus to do so.

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Affordability The affordability of the combined water, sewer, and stormwater bill is an ongoing concern for PUB members. The combined average monthly bill for the typical single-family household for FY 2018-19 for water and wastewater will be $113.30 if requested rates of increase are approved. There is no agreed upon standard for what rates are ‘affordable’ or ‘unaffordable’ for any given community. Rates may be measured against economic measures of inflation or changes in income. PUB considered several indicators in its discussions and agreed that budget requests should be viewed in context of core requirements to invest in infrastructure and meet new regulations. However, there is concern that the growth in the cost of service greatly exceeds growth in household income measures. In the mid-1990s, EPA1 developed benchmarks to test rate impacts on customers. Using that guide, water and wastewater bills that are 4.5% or more of the median household income would have a large economic impact on residents on a community wide level. Including the proposed rates of increase, the typical single family residential utility bill would be about 2.0% of median household income for the City of Portland. However, there are concerns regarding the use of a single indicator that may not reflect the impact to lower income households as well as economic and other trends over multiple years. Flat local wages for a portion of city residents and rising housing costs exert pressure on the perception of affordability. PUB members consider a component of affordability to be reasonable costs to customers with known and predictable rate impacts. Reasonable must be viewed in context of accumulated costs over time and the value of the service provided. PUB members encourage both bureaus and the City Council to continue to evaluate the tradeoffs and choices of investments to keep affordability concerns a priority. The proposed annual rates of increase in the 5-year financial plan for PWB have increased from the plan included in the FY 2017-18 Adopted Budget. The major driver for this increase is the direction from City Council, supported by the PUB, to pursue a filtration plant to address regulatory requirements related to cryptosporidium and other potential risks to the Bull Run Watershed. The filtration plant will be a substantial capital investment that will significantly impact rates for many years. Resolution 37309 agreed to by City Council on August 3, 2017 included direction “that during the annual rate-setting process the Portland Water Bureau will make every effort to minimize rate impacts while following the intent of this resolution.” PUB

1 See U.S. EPA. 1997. Combined Sewer Overflows – Guidance for Financial Capability Assessment and Schedule Development. EPA 832-8-97-004. U.S. Environmental Protection Agency, Office of Water, Office of Wastewater Management. Available at www.epa.gov/npdes/pubs/csofc.pdf. See also US EPA. 1995, Interim Economic Guidance for Water Quality Standards Workbook. Available at https://www.epa.gov/sites/production/files/2016- 03/documents/econworkbook-complete.pdf. See also U.S. Conference of Mayors, American Water Works Association, and Water Environment Federation. 2013. Affordability Assessment Tool for Federal Water Mandates. Available at https://www.awwa.org/Portals/0/files/legreg/documents/affordability/AffordabilityAssessmentTool.pdf.

Portland Utility Board Page | 4 January 24, 2018 requested information from the bureau on how they have minimized that impact and the bureau identified some work that would be delayed or foregone. With City Council’s approval, both bureaus have added large capital projects in recent years and additional large investments limit the bureaus’ ability to respond to future needs. Rates are driven both by capital investments and operating budgets associated with staffing. The PUB is closely reviewing BES’ request for 22 new positions and PWB’s request for 21 new positions, given the long-term cost of PERS assigned to each new full FTE. The PUB encourages both bureaus to look for efficiencies, vacancies savings, or foregoing lower priority activities within their existing budget before requesting additional rate resources. PUB requests the bureaus use the upcoming budget process to revisit the cost drivers and assumptions underlying their requests with a goal of trimming individual budget requests to contribute to a rate projection that emphasizes affordability for all Portland residents. PUB members encourage the bureaus to use the next four weeks to dialogue and explore jointly what detailed budget reductions can be identified.

Equity In 2015, the City of Portland adopted citywide racial equity goals to end racial disparities within city government; to strengthen outreach, public engagement, and access to City services for communities of color and immigrant and refugee communities; and to collaborate with communities and institutions to eliminate racial inequity in all areas of government. The PUB supports these goals and looks forward to an update on the bureaus’ implementation of their Racial Equity Plans that were created last year. As part of its deliberation on individual budget requests, the PUB will consider the equity implications of requests and how increased resources will further the bureau and citywide equity goals.

Assistance Programs The City Council resolution that directed PWB to pursue filtration also directed “that the Portland Water Bureau will seek to optimize and enhance its discount programs to lessen the impact of rising water rates on low-income customers.” The bureaus have multiple programs to provide financial assistance to low-income Portland residents. Compared to other utilities, these programs are generously designed, though few and decreasing numbers of residents are participating in the programs. PUB members feel those assistance programs are vital and commend the work of the bureaus to improve outreach and scope of the assistance programs. Members are supportive of improvements but have concerns about some of the proposals and will continue to work with the bureau during the budget process to address those concerns. PUB will provide its recommendations to the City Council once it has a more complete understanding of the proposals.

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Centralized Services and Citywide Priorities Several ongoing points of discussion with the PUB and the bureaus concern centralized services and citywide priorities. Centralized provision and citywide goals provide the opportunity for standardization and can result in efficiencies. There is also potential for duplication and fragmented implementation. For example, the PUB has heard from both bureaus that recruitment, hiring, and procurement services negatively impact bureau operations. The proposed bureau budgets include requests for staff to supplement or facilitate some of these services. Generally, the board believes the bureaus should refrain from building internal capacity for services that should be provided by other City offices. PUB members encourage the bureaus to continue to work with other city bureaus to identify and implement improvements to the provision of central services. The PUB would like consideration of the budget and staffing impacts as citywide policies are identified and evaluated. In particular, the PUB continues to encourage the Mayor and City Council to engage in a Citywide conversation about how the City is managing human resources invested in equity work across the city. The City should work to ensure that bureau-level investments are incorporated into well-framed and measurable citywide strategies.

Strategic Planning The PUB enthusiastically supports the roadmap laid out in BES’ new 10-year strategic plan and commends the bureau's staff and leadership for their work over the past two years to identify six core goals that will guide the bureau’s work over the next decade. The PUB looks forward to working in partnership with BES to prioritize the strategic initiatives through the budget process. PWB has begun work on its Strategic Business Plan and the PUB looks forward to working with the bureau to provide input on that plan. PUB members appreciate the work that BES did to link their packages to their strategic plan. They look forward to seeing that connection be refined to a more granular level in coming years. PUB members encourage both bureaus to continue to refine their budget requests to have similar formats and align with their strategic plans. The PUB encourages both bureaus to continue their strategic work and to craft metrics for measuring their progress towards achieving the outcomes identified in those plans. In addition, the PUB expects that the bureaus will include performance metrics for accountability when proposing new programs or significant changes to existing ones.

Regulatory Compliance Both BES and PWB are heavily regulated by state and federal entities which limits the discretionary components of their respective budgets. However, the bureaus do have flexibility

Portland Utility Board Page | 6 January 24, 2018 to decide how and in some instances when regulatory requirements are met. Going forward, PUB members ask the bureaus to clearly present in their budget requests those items that are regulatory requirements at this time, those that can be implemented over time, and those that are related to or complement regulatory requirements but would not jeopardize compliance.

Communications and Transparency In several past recommendations to City Council, the PUB highlighted that creating a culture of open, proactive communication and transparency in both bureaus is ongoing work and PUB is sensitive to public perception of the bureaus. PUB members commend the bureaus for the work they did early in the budget process to provide information in similar formats. Easily understood and publicly assessible budget information is one way to strengthen and maintain the public trust and PUB members encourage the bureaus to continue that work. PUB members also encourage the bureaus to explore a combined communication strategy with consistent outreach and messages to the public.

Comments on Specific Budget Proposals The PUB views this opportunity to comment on the bureaus’ budget submissions as the first of several touch points with City Council throughout the annual budget and planning processes. PUB members will review the analysis and recommendations of the CBO, consider further input from the bureaus, and weigh the requests through the lenses of its stated values, cost, impact on service delivery, connection to strategic plans, and expected outcomes. We look forward to providing you further input as the budget process continues through the spring.

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December 19, 2017

To: Todd Lofgren, Office of Commissioner Nick Fish Mike Stuhr and Gabe Solmer, Portland Water Bureau (PWB) Mike Jordan and Jonas Biery, Bureau of Environmental Services (BES) cc: Public Utility Board (PUB) members c/o Melissa Merrell cc: Shannon Fairchild, City Budget Office (CBO) BES and PWB analyst From: Janice Thompson, Oregon Citizens’ Utility Board (CUB) Re: CUB input on development of requested BES and PWB budgets

Page 1 Introduction and General Observations Page 2 “Three Portlands” and Rate Impact Evaluation Page 3 Low Income Program Expansion & Outreach on Household Finances Management Tools Page 5 PWB Observations & Suggestions Page 8 BES Observations & Suggestions

INTRODUCTION and GENERAL OBSERVATIONS This memo summarizes CUB’s initial observations, suggestions, and clarification requests regarding development of the FY 2018-19 requested budgets from both BES and PWB. Since a significant portion of this memo addresses issues pertinent to both Bureaus, CUB is submitting only one memo rather than separate memos for BES and PWB. The primary audience is for this memo is Commissioner-in-Charge Nick Fish and leadership at BES and PWB, though it is shared with other interested parties.

Thanks to both Bureaus for providing information, particularly draft decision packages, earlier in the budget process than had been feasible in previous budget discussions. We want to emphasize our understanding, however, that the earlier Bureaus provide information in the budget process, the more likely it is to change. To be clear, earlier information is not inaccurate or disingenuous; rather, by definition, earlier numbers cannot be as definitive. For this reason, CUB appreciates ongoing updates on budget refinements and adjustments, especially late in the budget process.

In early November, BES projected increases in average residential monthly bills of 2.95% for the next five years. In early December, however, notice was provided that this increase might nudge up as high as 3%. This still reflects relatively low rate increases on a long-term basis. Given that the sewer and stormwater management services provided by BES comprise two-thirds of the combined public utility bill, this low BES rate increase trajectory is helpful in combined rate increase determinations. That PWB is in the midst of major seismic resiliency projects is a major factor in its early November projection of a 6.7% retail rate increase for FY 2018-19.

These projections will comply with Commissioner Fish’s rate guidance directive to not exceed a combined 5% rate increase. In dollars, a combined rate increase of exactly 5% represents a $5.40 increase in average monthly residential bills. A combined rate increase of 4% would come to a $4.32 increase in monthly residential bills.

As discussed during last summer’s hearing on treatment options, rate impacts linked to filtration treatment will be significant, though this cost should not be compared to zero since building a UV plant for approximately $100 million was the alternative and not ignoring regulatory requirements for Cryptosporidium treatment. Dr. Paul Lewis’s description of UV treatment as a “one trick pony” was the most succinct comment that conveyed the broader range of issues addressed by filtration and its greater effectiveness in building towards long-term water system resiliency. Last summer PWB provided rate impact estimates due to filtration construction and though they were understandably preliminary, these estimates still add up to higher future costs for PWB customers.

PWB’s projected 6.7% rate increase for FY 2018-19 does not include longer term filtration construction costs, since this project is in the early planning stages. Since the filtration construction is on the horizon, however, careful assessment of current and near-term PWB budgets is all the more important. However, that doesn’t mean that cuts in upcoming requested budgets can be expected to cover filtration costs. Instead, the upcoming filtration costs have prompted CUB to identity what we call a “three Portlands” approach to evaluating rate impacts in our current environment of growing economic inequality.

“THREE PORTLANDS” and RATE IMPACT EVALUATION For all of Portland, it is essential for the City Council to make prudent and strategic investments that bring value to ensure that Portland’s water, sewer, and stormwater management systems will safely and effectively carry our community into the 22nd century. After all, many of the investments made by our public utilities will last more than 100 years. Meeting regulatory requirements is an important driver for investment, but one that also adds value, especially in a city like Portland that particularly recognizes the benefits of protecting our environmental resources. Maintaining and building infrastructure for the long term also seems consistent with Mayor Wheeler’s budget interests.

Evaluating the rate and cost impacts of these investments within a municipal setting, however, can consider economic inequalities and the growing divide between “haves” and “have nots”. This is in contrast to private investor-owned utilities where shareholders pay for major capital investments and customer rates only begin to reflect constructions costs once the major investment goes into operation. Municipalities, however, do not have shareholders and it is possible for elected leaders to consider public utility rates within the context of their community’s economic dynamics.

Many Portlanders are benefiting from our city’s growth boom and robust economy and this group is a growing percentage of our city’s population. Higher income households may complain about Portland utility rates, but another $5.40 added to their monthly bill for stormwater, sewer, and water services seems unlikely to be a financial deal breaker. One illustration of this dynamic is that relatively few public utility customers have opted into monthly billing where the cost determined by a quarterly meter read is separated into three monthly bills. As of November 2017, only 11.9% of quarterly accounts had requested monthly bills and slightly more than half of these customers had previous budget plans that had been converted to the monthly billing option. This means that since the monthly billing option began in early 2014, only 5.6% of quarterly customers have requested this change.

CUB supports more outreach on the monthly billing option. Even if the participation rate quadrupled, though, there would still be many public utility customers whose quarterly bill preference indicates they can deal with higher rates even when the bills come in those larger quarterly amounts. A question to consider regarding this group of Portland public utility customers, is whether the service level reductions likely to result from a 4% compared to a 5% combined rate increase, can be justified when

2 the difference in the average monthly bill increase is $1.08. (The $1.08 figure is the amount of money that would remain in average household coffers each month if the $5.40 monthly increase due to a 5% combined rate increase were reduced to the $4.32 monthly increase due to a 4% combined rate increase.)

At the other extreme, there are low-income residents for whom any utility cost increase is a challenging burden. These customers are why Portland has a longstanding and robust low-income discount program and other assistance options such as crisis vouchers. These customers are why CUB supports the decision package on low-income program expansion, as we discuss below.

In the middle are those Portlanders who can make ends meet but dealing with large quarterly bills is a struggle. These are the customers for who tools to manage household expenses like monthly billing and flexible bill pay options are particularly helpful. CUB supports targeted efforts to increase use of these tools, as we discuss below.

This section’s introductory comments bear repeating: It is vitally important that utility investments are prudent, strategic, and provide good value for all customers. Beyond that baseline, however, it seems appropriate to target rate-relief mitigation efforts on two groups: low-income residents who either routinely or regularly cannot pay public utility costs and customers who can pay their utility bills but might benefit from household finance management tools.

LOW-INCOME PROGRAM EXPANSION and OUTREACH ON HOUSEHOLD FINANCES MANAGEMENT TOOLS Messaging note CUB supports PWB’s decision package #7 summarizing an expansion of low-income program options. A higher profile for the role of BES in providing financial support for this effort, however, is a messaging suggestion. Having one customer service and low-income program for both PWB and BES is obviously more efficient than each Bureau providing these services separately. Housing those functions at PWB is an appropriate legacy of sewage treatment beginning many years after the City began providing water services. CUB is not recommending any structural changes in this regard. We are also aware and pleased that BES was involved in discussions about program expansions and supports PWB’s decision package #7. Continued BES involvement in low-income program discussions, however, is essential. CUB also recommends that budget presentations and public outreach about low- income programs include more frequent references to BES. Indeed, use of the affordability 2.0-multi- family eviction prevention terminology used in the BES decision package is worthy of consideration by PWB. In general, consistency in terminology between BES and PWB is recommended.

To be clear, this is not a suggestion to shift low income program administration away from PWB. Rather, more visibility for BES financial support of these programs would help educate that Portland utility bills are not just for water and that sewer and stormwater management services comprise two- thirds of a typical bill. Indeed, a major reason CUB decided to prepare one memo is the pertinence of our low-income program expansion comments to both BES and PWB.

Household financial management tools CUB recommends targeted outreach on household financial management tools: monthly billing and flexible bill pay. The outreach emphasis would be on customers who can cover their utility costs, but receiving smaller monthly bills and/or setting up flexible payment arrangements would facilitate achieving that bill paying capacity. A caution about monthly billing, though, is that this option increases the numbers of time a customer can miss a payment deadline, resulting in late fees that add to payment

3 struggles. Therefore, monthly billing is often not a good option for low-income customers for whom the problem is just not having enough money. PWB has determined that only assessing one late fee per quarter is not feasible for monthly billing customers.

Monthly billing may be an effective option if the payment issue is as basic as needing smaller, more frequent bills. A similar option is flexible bill pay or facilitating bill payment arrangements. There are limits to how long bill payments can be delayed, but developing a payment plan based on a timing helpful for the customer is possible. CUB understands why the decision package emphasizes low- income program expansion. It would be helpful, though, to add a short discussion of the role that household finance management tools can play for customers whose major challenge is dealing with the larger bills that come with quarterly billing.

Low-income services team, Auditor report, data analysis, and need for PWB management of Cayenta billing system An important element of PWB decision package #7 is forming a low-income services team. Culturally sensitive outreach will be an important function of this team, but data analysis will be another important task. These low-income services team functions can’t be addressed by current customer service representatives, but it is important that those representatives be considered important allies to this proposed team.

The PWB decision package #7 addresses concerns raised in the October 2017 Utility Payment Assistance report from the City Auditor’s office. More specifically, data analysis by the low-income services team addresses a specific Auditor recommendation for improved analysis of customer payment trends. The Auditor’s report, however, identified lack of PWB control of its Cayenta billing system as one barrier to PWB conducting this analysis. For several years now, CUB has advocated for management of the Cayenta billing system to move from the Revenue Bureau to PWB since this is not the first time PWB’s ability to respond to questions or conduct analysis has been hindered by lack of control of its own billing system. We once again identify the need for this change because of this finding in the Auditor’s report. This issue is particularly frustrating since PWB is paying the Revenue Bureau and not getting timely service. Continued inaction on moving full control of the Cayenta billing system to PWB must not hamstring the data analysis function of the low-income services team.

Increase value of crisis voucher CUB supports updating the voucher amount from $150 set in 2004 to $300 given increased costs over the last 13 years.

Adjust income guidelines to reflect Portland rather than statewide costs CUB understands and agrees with the logic of this proposal, but the results of a thorough vetting this adjustment’s feasibility are requested before we can fully support this recommendation. Of particular concern is that administrative costs and hassles could increase if this proposed approach to Portland income guidelines is challenging for the partner organizations that conduct income verification for multiple assistance programs. For example, what if only Portland’s low-income program used these adjusted income guidelines while all the other assistance programs used another set of income guidelines? Discussing the administrative feasibility of this proposal in the final budget narrative is suggested so CUB can make a more definitive recommendation on this proposal.

Higher discount for extreme low-income Adding this element to the low-income discount program is consistent with CUB’s rate impact evaluation approach that focuses on addressing Portland’s growing income inequality and the reality

4 that there are residents, particularly disabled and elderly Portlanders, who live on very low levels of fixed income.

Multi-family low income crisis assistance The Auditor’s Utility Payment Assistance report cites the 20-year history of Portland’s elusive search for a method to provide a low-income discount to low-income renters who don’t get a water or sewer bill and instead these utility costs are included in their rent. Indeed, CUB has found no evidence that any utility has figured out how to deal with this issue. The result is a problematic inequity in how low- income renters are treated in terms of relief from Portland’s public utility rates. This indicates the need to find another approach, and this is exactly what PWB has done with its multi-family crisis assistance proposal.

Using the existing Home Forward Short-Term Rent Assistance (STRA) Program as a vehicle to support rental households in crisis is strategic use of an existing program. The legal analysis about the suitability of using ratepayer funds for this purpose seems sound and this approach should be bolstered by the recent settlement of the Anderson lawsuit. The proposed level of financial support is appropriate for a pilot effort and evaluation after the first year of implementation is very important. If proven effective, however, devoting considerably more resources to this approach is warranted.

Connect low-income program expansion with water smart low-income conservation pilot The low-income program is a function of the PWB’s Customer Service group while a water smart conservation pilot project for low-income single-family home customers is housed with the other conservation efforts of the Resource Protection and Planning unit. The water smart pilot has an online focus which means its website portal operates parallel with the online portal of the Customer Services group for all customers. Key results from the water smart pilot will be available in March 2018 and CUB will make our recommendation about the merits of possible expansion of this program at that time.

The backdrop for conservation discussions is that in Portland, and across the country, water use has significantly declined over the past 10 to 15 years. Therefore, conservation cannot solve bill payment issues facing low-income customers. However, replacing old toilets and other appliances with the now- standard low flow options is challenging for low-income residents. This exemplifies the value of exploring low-income conservation options like water smart. Assuming it is prudent to continue the water smart program, though, the most appropriate location within PWB should be assessed.

PWB OBSERVATIONS & SUGGESTIONS Capital Improvement Planning (CIP) The following comments focus on proposed CIP items that are of particular concern to CUB. As has been our past practice, this typically means we are focused on projects that appear for the first time in the proposed five-year plan or are in their early planning stages.

CUB supports the PWB’s approach to conduit assessment and rehabilitation. The age of the conduits is of obvious concern, but the significantly higher cost to replace versus rehab the conduits highlight the importance of continued condition assessment and taking the rehabilitation approach. Analysis, based on information provided in PWB’s 11/21 CIP power point, indicates that 66% of conduit footage (320,000 feet or 60.6 miles) will be inspected either visually (25 miles) or through electromagnetic analysis (15 miles) over the 5-year plan. Helpful information to include in the requested budget narrative is background on how the 40 miles currently targeted for inspection were selected and when

5 the remaining 34% of the conduits will occur or if those inspections are not deemed necessary. Finally, more background on the estimate that rehabilitation would add 50 years of useful life would be helpful.

CUB supports taking a 30-year rather than 50-year approach to transmission mains seismic improvements since the cost of this project is the same under either timing scenario. However, CUB requests consideration of delaying the start date of this 30-year project by approximately 10 years. This would mean that transmission mains CIP spending would begin after completion of other major construction projects, particularly the filtration treatment plant. This spaces out the rate impacts of these projects. To be clear, these seismic improvements would still be made in 30 years, but the completion line just moves approximately 10 years to the right on the chart on page 22 of PWB’s 11/21 CIP power point.

Even with this adjusted completion date, these seismic improvements would still be made before the state plan deadline. A longer delay in starting this 30-year project so it meets, but does not beat, the state plan deadline isn’t suggested, however, since that would result a greater mismatch between completion of the transmission mains seismic improvements with the already or soon-to-be completed reservoir projects and Willamette River Crossing. In other words, system wide seismic resiliency is achieved when all key portions of the system have been strengthened and delaying transmission mains improvements would make them the weak link. CUB recognizes that our 10-year delay suggestion also raises this mismatch-between-seismic-projects-completion-dates concern, though to a lesser extent. This could mean that PWB retains its current timing for transmission mains seismic improvements, but in this case a short discussion of their rationale for disagreeing with this 10-year delay suggestion is requested. This will inform our thinking on whether or not we suggest this delay idea to the Mayor’s office later in the budget process when the Mayor is developing his PWB budget.

CUB sees the logic of moving from a 30,000 to a 60,000-foot annual replacement schedule for distribution mains replacement as discussed on pages 18 and 19 of PWB’s 11/21 CIP power point. The five-year financial plan, however, does not include this change and PWB is determining the best timeline for this possible change. Appropriately, that timing will be informed by the timing of filtration plant construction rate impacts. Determining the strategic timeline, however, should ensure that PWB keeps ahead of the replacement curve and prevents the falling-behind-so-much-we-can’t-catch up dynamic that is a challenge in other settings.

CUB’s final CIP suggestion at this time is to consider delaying facilities evaluation and planning of the Sandy River Station. This Station is located where conduits cross the Sandy River so there are flooding concerns and, though the buildings are in reasonably good shape for their age, seismic improvements are likely warranted. However, the RFP to evaluate the Sandy River Station in terms of location and facility improvements was developed before the loss of the Cryptosporidum treatment waiver and subsequent City Council decision to build a filtration treatment plant. The fast timeline of the filtration decision means that earlier thinking about the timing of Sandy River Station facility evaluation was understandable, but now the backdrop for this assessment is significantly different. For this reason, CUB suggests revisiting the timing of the Sandy River Station facilities evaluation to ensure that it dovetails with facilities location discussions linked to filtration treatment planning.

Decision Packages Decision package #7 is discussed above because, though it is in PWB’s draft budget document, it is a program that must be viewed more broadly. The following comments focus on proposed items in PWB’s other decision packages.

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Package #1 – Water Treatment: CUB supports decision package #1 that focuses on new staffing needs due to the rigorous ten-year requirement for filtration plant construction. Adding several of these positions in FY 2018-19 is also linked to the corrosion control treatment effort. The new filtration project manager and program coordinator positions are appropriately high priorities. However, discussion in the budget narrative on the role for these staff people after the planning and construction phase is suggested. A continued role for a new filtration-focused position in the Contract Administration Branch (CAB) seems clearer since ongoing PWB capacity for effective interaction with the procurement staff within the Office of Management of Finance (OMF) seems likely, but discussion on this point would also be helpful. At the same time, caution is needed to ensure that this new staff person doesn’t end up doing work that should be done by OMF procurement staff.

That an engineer associate position is requested in both Engineering and Operations reflects a critical feature of treatment plant planning and construction: You have to make sure that what you build can be effectively operated at the standards required by public health regulators. This is in contrast to the minimal role that operational considerations play in the planning and construction of an office building and many other types of facilities. In terms of the filtration plant, it may be that the Operations Engineer Associate could be brought on a bit later, but the corrosion control element of this position’s work is a strong argument against such a delay.

Bringing on water treatment operators this early may also seem unnecessary but the rationale for PWB’s timing seems linked to the relatively two dynamics noted above. One, the role of these operators is linked to more immediate corrosion control treatment needs and isn’t just due to the filtration plant. Two, planning and construction of a treatment plant needs to be fully integrated with operational testing both at the bench and pilot test levels. These points lead to CUB’s support for these positions. Other positions in this package are a higher priority, but if these operator positions are not funded in FY 2018-19 CUB won’t be surprised if they surface again as a BMP request.

A final note on this decision package is that CUB supports the prudence of PWB’s interest in hiring staff rather than using consultants for the functions discussed in this decision package.

Package #2 – UniDirectional Flushing: CUB supported adding flushing staff during the current fiscal year but this request was denied. Indeed, we raised the possibility that more staff should be have been included in that past request. Given the prudence of a quite robust unidirectional flushing effort before corrosion control improvements come on line, adding this capacity now is a need that should not continue to be denied. Another point is that more chemicals – and the expense of those chemicals - would be needed for corrosion control optimization implementation if the level of unidirectional flushing capacity proposed in package #2 is not added. Continued flushing in advance of filtration treatment coming online also seems likely and contributes to CUB’s support of Decision Package #2. At the same time, CUB would appreciate a brief discussion of unidirectional flushing needs after both optimized corrosion control and filtration treatments are operational.

Package #3 – Workforce Management: CUB sees the requested safety officer position as being the top priority in this package, especially since not adding this position earlier is evidently linked to current safety staff working problematically long hours. Adding the other two positions, public works inspectors, also seem linked to significant regulatory and safety needs. Adding one inspector in FY 2018-19 and one in the following fiscal year is an idea we considered recommended. However, adding both positions during the current budget process is necessary for DCTU contract compliance. CUB supports union representation and understands the need to honor negotiated agreements.

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Package #4 – Asset Management: CUB’s priority for the two positions requested in this package is the water loss control position. This is a reflection of CUB’s support for PWB’s FY 2017-18 request for added water loss staff capacity that was not honored. More importantly, though, as PWB will be spending more money on water treatment, there is an increased imperative to prevent water losses.

Adding the Reliability Centered Maintenance (RCM) position does seem like a logical next step in PWB’s ongoing data collection improvements within the Asset Management Branch (AMB) with the cost-saving opportunity for advancing use of that data in computerized maintenance and management systems (CMMS). This contributes to CUB’s inclination to support this position. In the budget narrative regarding this position, however, discussion of the cost consequences of delaying the addition of this position for a year would be appreciated to help us finalize our position on this staff request.

Package #5 – Communications: The value of clear communication in the wide range of technical documents prepared by PWB contributes to CUB’s understanding of Bureau’s rationale for adding a technical writing position. More information in the requested budget narrative about where the technical reporter would be housed within PWB and who manages their work load, however, is requested so CUB can take a definitive recommendation on this position. This discussion should address steps that would be taken to prevent a repeat of the previous technical writer’s work load shifting away to non-writing duties. Saving $30,000 in professional services due to adding this technical writing position is noted, but information on whether or not those savings are linked to a scattershot approach to securing those services would be appreciated. In other words, could the professional services approach be more cost effective if a bureau-wide on-call contracting arrangement for technical writing services is feasible.

Package # 6 – Equity Manager: CUB supports the City’s equity emphasis and understands that the Office of Equity and Human Rights does not replace the need for bureau-specific leadership on this issue, especially for a large bureau like PWB. Therefore, CUB supports this decision package. At the same time we recommend that the equity manager be specified as a key player in PWB’s strategic planning effort, while recognizing that that process will be underway before the equity manager is hired.

Package # 8 – Tabor Preservation Project and Package # 9 – Parks Maintenance: Both these packages involve use of general fund dollars related to past City Council decisions. CUB believes these decisions by previous Councils should be honored by the current City Council and be implemented with general fund dollars.

BES OBSERVATIONS & SUGGESTIONS Capital Improvement Planning (CIP) The following comments focus on proposed CIP related items that are of particular concern to CUB. As has been our past practice, this typically means we are focused on projects that appear for the first time in the proposed five-year plan or are in their early planning stages.

CUB is impressed by the work to date on the CIP-PREP effort and looks forward to seeing the positive impact of this project on the efficiency and effectiveness of CIP planning and budgeting. A closer connection between CIP planning and organizational strategic planning also seems to be a goal that is coming closer to fruition. A final process point is that CIPAC, the committee charged with evaluating changes in CIP projects that in the past seemed to err on being a rubber stamp, has become a more effective venue for more rigorous review of project changes.

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Regarding the six new project request forms (PRFs) submitted this year, scoring rigor seems adequate. For example, two of the six projects that did not move forward due to low scores. CUB shares the scoring concerns about the timing of a new Willamette building and remodeling the Dodd building at Columbia Boulevard Waste Treatment Plant (CBWTP), while recognizing that the secondary treatment expansion program includes appropriate replacement of some old, dilapidated buildings. CUB also concurs with the need for more discussion regarding purchasing additional property adjacent to CBWTP.

CUB supports experimenting with the idea, noted in the 11/21 BES power point, of creating an ‘unfunded’ list of projects. This addresses the prevalent pattern of BES not spending all of its allocated CIP dollars due to delays, though the CIP-PREP project should facilitate improved work flow. Even with CIP-PREP-related improvement, however, timeline glitches can occur. The list of ‘unfunded’ projects should only include projects that can be quickly activated and have gone through CIP approval procedures, but have not yet been allocated dollars. More details on how these criteria would be met should be outlined to ensure that this experiment doesn’t became a way to move unapproved or low ranked projects along without adequate vetting.

Decision Packages Draft decision packages from BES were made available earlier in the budget process than in previous years and CUB finds them more clearly organized than in previous years. It would still be helpful, however, if there could be a clearer division between additional staff requests and non-personnel related requests in each category. Due to the length of the BES decision package, additional review may occur later in the budget process.

Service Delivery Package: CUB endorses BES identifying this category of spending as a high priority given its link to the provision of core services. Workload, particularly related to development growth, and regulatory demands are major drivers for the additional positions requested in this package. All the requests have merit but the descriptions don’t consistently discuss alternatives if staff is not added. This information regarding all staff requests in the final decision package is requested to help CUB make final recommendations as the budget process continues.

CIP Planning and Delivery Improvements Package: CUB sees three important themes regarding the requested positions in this package. The first theme is that BES continues to emphasize work on stormwater system planning (SWSP). Several budget cycles ago we recognized the importance of SWSP in ensuring more rigorous assessment of stormwater system needs that, in turn, provide more definitive information for planning, budgeting, and charging customers for stormwater management services. This work requires an interdisciplinary approach which why it is good to see integrated planning and a business system analyst in this package. Several of the SWSP requests focus on condition assessment which is a second important theme also reflected in other requested positions. The third theme is that several positions reflect the work of the CIP-PREP project and demonstrate the Bureau’s interest in effective connections between CIP planning and budget and the strategic plan. As noted, above, however, not all of the position requests discuss alternatives if staff capacity is not added. That information in the final decision package is requested to help CUB make final recommendations as the budget process continues.

Workforce Development Package: CUB supports the limited-term training coordinator position because training is generally important, but of particular note is that the need for training has been identified in a “bottom up” fashion through the CIP-PREP and strategic planning processes.

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Bureau Culture Package: CUB supports the equity plan implementation request and notes that it is a City priority. Hiring an Equity and Inclusion Manager needs to be accompanied by providing adequate resources for carrying out the equity work plan.

Responsive Business Systems Package: CUB supports this package because its facilitates organizational efficiencies ranging from addressing IT issues in a timely fashion, to ensuring capacity for effective interactions with OMF-Procurement Services, and increasing the capacity for financial analysis and monitoring that enhances oversight and builds toward the goal of a meaningful connection between the strategic plan and budgeting. An important note about the procurement assistant, however, is to be on the alert for not taking on responsibilities that should remain with OMF-Procurement Services. This position addresses the need for BES procurement related capacity but it should complement and not replace OMF’s procurement work, especially since payments from BES to the general fund overhead fund pay for those centralized city services.

Community Relationships Package: CUB understands the City’s stormwater collection and management obligations within the Multnomah County Drainage District (MCDD). This is managed on a contractual basis on an ongoing basis but with monitoring to ensure appropriate cost controls.

Leadership in City Government Package: CUB supports the purchase and equipping of disaster response team trailers. Such trailers are a valuable part of PWB emergency response capacity and we assume that suggestions have been gathered from that PWB team, but if this communication has not occurred it is recommended.

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Portland Water Bureau

Nick Fish, Commissioner-in-Charge Michael Stuhr, P.E., Administrator

Percent of City Budget

Bureau Programs

Bureau Overview

Revised Requested Change from Percent Expenditures FY 2017-18 FY 2018-19 Prior Year Change Operating 653,376,913 578,236,092 (75,140,821) (11.50) Capital 109,220,440 136,720,021 27,499,581 25.18 Total Requirements 762,597,353 714,956,113 (47,641,240) (6.25) Authorized Positions 592.93 612.70 19.77 3.33

City of Portland, Oregon – FY 2018-19 Requested Budget 1 Portland Water Bureau

Hydroelectric Power Division Administrator 0LFKDHO6WXKU3( Portland Water Bureau Water Division Maintenance and Construction Services Resource Protection and Planning Finance and Support Services Operations Customer Services Engineering Administration

2 City of Portland, Oregon – FY 2018-19 Requested Budget Portland Water Bureau

Bureau Summary Bureau Mission The mission of the Portland Water Bureau (Water Bureau) is:

 To provide reliable water service to customers in the quantities they desire and at a quality level that meets or exceeds both customer and regulatory standards;

 To provide the highest value to customers through customer expectations, excellent business, management, and operational practices and appropriate application of innovation and technology;  To be responsible stewards of the public’s water infrastructure, fiscal, and natural resources; and,  To provide customers and the City Council with a water system that supports their community objectives and overall vision for the City of Portland. Bureau Overview The Water Bureau has two divisions, the Water and Hydroelectric Power Divisions. The Water Division is responsible for construction, maintenance, and operation of Portland’s municipal water system. The bureau’s Hydroelectric Power Division is responsible for all aspects of the Portland Hydroelectric Project (PHP) administration and operations.

Water Division The Water Division ensures that the water system can provide a sufficient quantity of high-quality water to satisfy the existing and future needs of the community. Approximately 950,000 people, almost one-quarter of the state’s population, are served from the Bull Run/Columbia South Shore Systems. Retail customers use about 60% of the water sold, and wholesale customers use the remaining 40%. Portland has wholesale contracts with 19 water purveyors, including cities, water districts, private water companies, and a people’s utility district. Retail water sales account for approximately 90% of water sales revenue; wholesale makes up approximately 10% of revenues. The Water Division is organized around seven major programs that encompass all of the division’s work. Please see Program Narratives for more information.

Hydroelectric Power The Hydroelectric Power Division is responsible for regulatory issues and power Division sales related to hydroelectric projects at two dams in the Bull Run watershed and the Vernon Station Hydroelectric Project. Strategic Direction The bureau’s FY 2018-19 budget themes focus on water quality, resiliency, equity, customer services, and workforce development. There is also a continued focus on the infrastructure needs of the water system.

City of Portland, Oregon – FY 2018-19 Requested Budget 3 Portland Water Bureau

In August 2017, the bureau began a 15-month project to develop a Strategic Business Plan. The primary purpose of the project is to develop a five-year plan that articulates the bureau’s current vision, mission, and values; describes critical organizational risks; creates a framework of core strategic areas and risk-mitigation strategies; and provides a road map for turning critical organizational risks into management opportunities through strategies that inform bureau programming, budgeting, and planning. The FY 2018-19 budget utilizes the bureau’s 27 Key Service Levels across 22 Water Programs as the basis for prioritizing expenditures and funding. As part of asset management, the bureau has established performance measures in each asset program. The asset management process also helps guide budget decisions on an effective mix of maintenance, repair, renewal, and replacement for water system components.

Budget Direction Commissioner Fish directed the Water Bureau and Bureau of Environmental Services (BES) to submit a budget that demonstrates commitment to operating the bureaus efficiently, economically, and equitably, with a continued focus on strengthening system infrastructure and supporting our workforce. The budget direction to the bureaus was to submit a budget that will reflect good value at a fair price with a combined bill increase below five percent. The bureaus should continue to look for ways to deliver utility services in a cost-effective manner while prioritizing investments in high-need areas. Additional direction was provided to optimize and enhance discount programs, ensure resources are dedicated to full implementation of bureau-wide strategic plans and priority equity initiatives, and explain how any requests for additional staff will support the goal of effectively and efficiently delivering high-quality services to our customers.

Forecast Retail Water Retail water demand decreased from FY 2005-06 through FY 2010-11 followed by Demand relatively flat demand thereafter with a dip in FY 2013-14 and again in FY 2016-17. This reduction in water use is not limited to Portland customers. This was a trend utilities across the nation experienced as a result of continued efforts on water conservation and more efficient appliances from changes in plumbing codes. Retail water sales for FY 2017-18 are forecast at 25.1 million ccf and are expected to meet the forecast. Water demand projections remain a key factor in setting water rates. As customers purchase less water, there is a corresponding loss in revenues that creates a need for either service reductions or rate increases due to proportionally fewer units (in ccf) of water sold to fund the fixed costs of the utility. More than 95% of Water Bureau system costs are considered fixed in the short term. The FY 2018-19 retail water rate increase is 8.9%.

Hydroelectric Power The Hydroelectric Power Division’s operating budget is $2.6 million. This budget Division Budget supports the division’s administrative and operational costs by using revenues generated from power sales. The division’s budget includes 2.25 FTE positions.

4 City of Portland, Oregon – FY 2018-19 Requested Budget Portland Water Bureau

Capital Budget Capital Summary

CIP Highlights The Water Bureau’s Five-Year FY 2018-23 Capital Improvement Plan (CIP) includes approximately $597 million in water system investment needs for the five-year period beginning in FY 2018-19. The CIP budget is $137 million for FY 2018-19. The primary drivers of the bureau’s capital work are ensuring the reliable functioning of the drinking water system, achieving compliance with federal and state drinking water regulations, improving the resilience of the water system, replacing assets that are at the end of their useful lives, and supporting the City’s renewed growth and development. The largest investments for the CIP is for the Distribution Program, which makes up about 37% of the total. Projects in this program include repairs, replacement, or rehabilitation of several system elements from pump stations and tanks to the mains that serve them. Several of the major projects will reduce risks such as pipe failures, which can cause water damage to highways, neighborhoods, railroads, or tank failures that can result in outages. Other projects require water line relocation to accommodate projects such as new or redeveloped properties or the replacement of neighborhood sewer lines. The single largest project in the Distribution Program is a seismically strengthened pipe to be installed under the Willamette River, reinforcing the vital link between the east side water supply and west side homes and businesses, including some of the bureau’s largest wholesale customers. The Transmission and Terminal Storage Program represents about 28% of the CIP. The largest project in this program is the $190 million Washington Park Reservoir 3 Project to construct a seismically resilient water storage reservoir. This major project is part of the bureau’s compliance with the Long Term 2 Enhanced Surface Water Treatment Rule (LT2 rule) as well as the bureau’s long-term plan for seismic resilience. About $100 million of the $190 million total project cost is reflected in this five-year CIP. The Treatment Program makes up 21% of the five-year total, the program includes two major projects to improve water quality and regulatory compliance. The Portland City Council directed the bureau to comply with the Oregon Health Authority’s order to treat drinking water from the Bull Run Watershed for Cryptosporidium by proceeding with planning, design and construction of a filtration treatment facility. The other major initiative is corrosion control improvements to better comply with the Lead and Copper Rule. Combined total of both projects is about $520 million. About $127 million is included in this five-year CIP. The plan includes $43.5 million in the Support Program in FY 2020-21 to fund the Water Bureau’s contribution to the renovation of the Portland Building. With this allocation, the Support Program is 10% of the total.

City of Portland, Oregon – FY 2018-19 Requested Budget 5 Portland Water Bureau

The Supply Program makes up approximately 3% of the FY 2018-23 CIP. The program includes approximately $4.4 million in improvements to roads that transport staff, supplies, and equipment into and out of the Bull Run Watershed. Other projects include improving or replacing equipment such as the Dam 1 needle valves and completing the upgrade of the electrical supply network to the Columbia South Shore Well Field Pump Station. The Regulatory Compliance and Customer Service Programs make up the remaining approximately 1%, with ongoing program commitments for habitat conservation as part of compliance with federal regulations and citywide emergency management, respectively.

Major Issues The bureau’s focus for the upcoming five-year period continues to be complying with all water quality and environmental regulations, maintaining critical infrastructure, improving system reliability and resilience, and responsiveness to change and growth in the city. Compliance with water-quality regulations is one of the bureau’s key commitments. In August 2017, Portland City Council voted to build a water filtration treatment facility to meet the treatment requirements for Cryptosporidium. On December 18, 2017, the Portland Water Bureau (PWB) entered into a Bilateral Compliance Agreement with Oregon Health Authority (OHA) that establishes a schedule to have filtration operational no later than September 30, 2027. On March 1, 2017, Portland City Council authorized the Portland Water Bureau to begin a Corrosion Control Treatment Pilot. This is the first step to implementation of improved corrosion control treatment to further limit the leaching of lead from household plumbing and fixtures. Treatment improvements are to be implemented by April 30, 2022 and are expected to cost up to $19 million. Improving system resilience includes improving essential system elements to withstand and recover from natural hazards, such as earthquakes, floods, and landslides. The City of Portland is following the guidance of the statewide Oregon Resilience Plan in strengthening its water and sewer systems against earthquakes. The bureau also collaborates with other bureaus and developers to accommodate change and growth in the city. The CIP program includes several major and many small mains projects that accommodate other utilities or support development projects. As a large bureau, the Water Bureau’s share of the Portland Building Renovation Project during the five-year period is approximately $44 million. The disbursement, located in the Support Program, is scheduled for FY 2020-21.

Changes from Prior Starting in January 2017, the presence of Cryptosporidium was detected in the PWB Year Bull Run surface water supply. This single-celled protozoan parasite is resistant to chlorination and lives in the intestines of animals and people. Routine monitoring between December 2002 and January 2017 recorded only a single detection. However, since January, there have been numerous detections of low concentrations of the organism. Due to the volume of sampling needed to

6 City of Portland, Oregon – FY 2018-19 Requested Budget Portland Water Bureau

demonstrate continued compliance with the 2012 treatment variance, continued sampling in order to remain compliant became no longer feasible. The Oregon Health Authority revoked the variance order, and in December 2017, PWB and OHA agreed to a compliance order requiring filtration no later than September 30, 2027. As required by the Lead and Copper Rule (LCR), twice each year, the PWB tests more than 100 high-risk homes to monitor the effectiveness of corrosion control for lead and copper in tap water. These high-risk homes are known to contain copper pipes and lead solder, which is more likely to contribute to elevated lead levels. While the State has considered PWB to be compliant with the LCR, results from regulatory monitoring have traditionally been near, and occasionally above the action level for lead. This was exceeded most recently in Fall 2013, 2016 and 2017. These exceedances combined with recent changes to the drinking water system resulted in re-evaluation of how Portland complies with the LCR. A water quality corrosion control study to learn more about potential ways to further reduce lead in water levels was completed in 2016. This study concluded that additional corrosion control treatment is likely the most effective means to further reduce lead concentrations at customer taps. The Oregon Health Authority approved a compliance schedule to construct and install additional corrosion control treatment by Spring 2022. The CIP is about $597 million, up from about $519 million in FY 2017-18, a difference of $78 million for the five-year period. Much of the increase is the result of the Water System Filtration Project. Excluding filtration, this budget introduces nearly $4.3 million in new major project appropriations. Three projects support other city bureau projects with water main relocation work. SCADA System improvements ($1.2 million) will start in FY 2018-19. Upgrades to Powell Butte Reservoir 1 Roof ($6.1 million) and an upgraded Hypochlorite System ($1.7 million) will also start in FY 2018-19. Future projects include the Portland Building contribution, which has increased to $43.5 million, and improvements at Dam 2 to the fixed cone (Howell Bunger) valves ($1.7 million). These new projects reduce the bureau’s risk exposure, provide emergency backup supply, improve operations, replace aging system elements, and support compliance with water quality regulations.

Council Goals and In 2015, the City’s Draft 2035 Comprehensive Plan was released to City Council. Priorities The plan includes a guiding framework for strategic growth and improvements. Major goals and policies include providing infrastructure to support healthy Portlanders, accessible neighborhoods with transportation options, and public safety. The bureau supports these goals through its mission of reliably providing excellent quality water that meets or exceeds all regulations; providing the highest value to customers through best practices; responsibly stewarding fiscal, natural, and built water resources; and providing a system that supports community objectives and the City’s vision.

City of Portland, Oregon – FY 2018-19 Requested Budget 7 Portland Water Bureau

Criteria Bureau projects in the CIP budget must meet at least one of the following criteria: compliance with water quality or environmental regulations, maintaining reliable service, supporting properly functioning equipment, reducing system risk, supporting other agencies’ project needs, or ensuring emergency preparedness. The Water Bureau selects projects for inclusion in the budget based on these criteria as well as the results of a benefit-cost analysis and consideration of rate increases, the opportunities to share costs with interagency partners, opportunities for revenue, and regulatory requirements. Capital Planning and Budgeting

Capital Planning Most bureau project proposals are identified through long-range planning studies Process such as master plans and asset specific analyses of systems, service areas, or groups of assets. Bureau decision makers weigh individual projects against wider bureau issues and requirements. If projects are recommended to move forward, planning staff conducts detailed studies. Water Bureau uses industry best practices in benefit-cost analysis and risk assessment to identify and weigh project alternatives. Project initiation and planning includes several decision-making points. For major projects, an initial concept report includes evaluations of project alternatives and recommendations. Water Bureau senior management uses the initial findings to narrow alternatives and approve next steps. If approved, a project undergoes more formal evaluation in a Project Validation Report (PVR). The PVR includes a risk assessment, which weighs proposed solutions and identifies benefits, followed by a benefit-cost analysis. Water Bureau selects and ranks capital projects with consideration for the magnitude and necessity of the project. Each year, the Water Bureau engages the public in developing its budget. The Portland Utility Board (PUB) meets monthly throughout the year to oversee financial plans, capital improvements, annual budget development, and rate- setting for the City’s water, sewer and stormwater services. The PUB also reviews key bureau plans, initiatives, and processes, such as preparations for seismic resilience and efforts to expand the Financial Assistance Expansion Program. The nonprofit Citizens’ Utility Board (CUB), attends the monthly PUB meetings as well. The mission of CUB is to “represent the interests of ...residential utility customers.“ CUB’s Advocacy Director reviews bureau materials, including financial reports, the requested budget, and project planning documents. The CUB provides evaluations and recommendations directed to Portland City Council, Water Bureau leadership, and the City Budget Office. The City seeks additional input from the public during the citywide budget process. The budget process includes City Council work sessions on the budget, a rate hearing, and postings on the bureau website and social media channels. Members of the public are invited to provide comments on the bureau’s presentations.

8 City of Portland, Oregon – FY 2018-19 Requested Budget Portland Water Bureau

City Comprehensive The 2035 Comprehensive Plan includes standards for maintaining and developing Plan Portland’s water system resources to ensure reliability, resilience, adequacy of supply, and water quality. The Comprehensive Plan includes six integrated guidelines for prosperity, education, human health, environmental health, resilience, and equity. The Water Bureau supports Comprehensive Plan goals and policies in its capital program and operations. The bureaus CIP program supports Comprehensive Plan goals and policies by providing for maintenance of the city’s water system and developing new facilities in a proactive, strategic, and cost-effective manner. Capital projects provide planned and emergency repairs, new services, replacement of aging assets, and improved or backup services to ensure the long- term expansion of neighborhoods and business centers. Supporting human health and safety is a key part of the bureaus mission and capital program. The reliable delivery of clean water that exceeds regulatory standards is integral to all bureau programs and projects. Hydrant placement for fighting fires is also evaluated as part of capital project development. Many of the bureau’s capital projects support environmental health. The Water Bureau’s Bull Run Habitat Conservation Plan includes habitat improvement projects for endangered species affected by water supply operations. Renovations and new construction projects for occupied work spaces incorporate sustainability goals where feasible. Operational changes made through the bureau’s Asset Management Program include reducing the use of energy. Building in system resilience is part of the bureau’s core mission. The Asset Management Program regularly evaluates assets at risk from natural or human- caused events and recommends methods to reduce risk and improve resilience. The Washington Park Reservoir Project includes extensive measures to strengthen the underground tank against movement from earthquakes and landslides. Another major project, the Willamette River Crossing, is being designed to ensure the flow of water to Portland’s west side, should other pipes fail in a large earthquake. The projects funded in this budget reduce the bureau’s exposure to risks. The bureau’s equity work is multi-faceted and expanding in both capital and operations programs and projects. Key bureau communications are being evaluated and made accessible through translation and accommodations according to the Americans with Disabilities Act. Recruitment, hiring, and promotion is designed to ensure racial equity. Water Bureau actively educates the community about exposure to lead hazards and offers free tests for lead in drinking water. A financial assistance program, available to qualifying customers, may provide a bill discount, crisis assistance voucher, and other services to low-income customers. The bureau’s Low-Income Assistance Program and 2016 Customer Survey both include outreach to populations that have been underserved in the past. The bureau’s Racial Equity Plan is a five-year road map to improving internal and external equity awareness and efforts.

Financial Forecast Bureau staff has calculated the projected water rates for the five-year financial Overview forecast based on the CIP, the operating budgets, and other factors affecting rates, such as projected demand estimates, inflation factors, and other economic factors such as interest rates.

City of Portland, Oregon – FY 2018-19 Requested Budget 9 Portland Water Bureau

Retail Rate Impact The FY 2018-19 retail water rate increase is 8.9%. The five-year forecasted water rate increase is 7.4% in FY 2019-20 through FY 2022-23. The forecasted required revenue is based on total costs that are expected to be recovered from water sales, regardless of from whom they will be collected. The revenue requirements must be allocated between wholesale and retail customers to determine the specific customer class rate revenue impact. Contractual provisions specify the method of allocating costs to wholesale customers. Retail rates are set on a residual cash basis to recover the portion of the total cash basis revenue requirements not allocable to wholesale customers and after deducting all other revenue sources.

Capital Financing The CIP is an integral element in the development of the Water Bureau’s financial plan, because the size of the CIP has a significant effect on water rates. The mix of projects in the CIP is also important. Projects related to supply and transmission enhancements serve wholesale and retail customers alike. Costs are shared with wholesale customers; but costs for projects related to the distribution system are mostly allocated to retail customers. The method chosen to finance projects affects rates as well. Capital investments in the water system are funded through the Water Construction Fund (WCF) which is financed from three major sources: net proceeds from revenue bond sales, transfers from the Water Fund (primarily water sales revenues), and construction fund revenues (system development charges, direct capital reimbursements, and interest earnings). These monies also fund indirect capital cost, such as overhead and interest, as well as direct project costs. Capital revenues provide approximately $65 million across the five years. Cash- financed capital funding from rate revenues provide approximately $155 million across the five years. Approximately 31% of capital requirements for this five-year CIP is funded with current resources; the balance will come from bond proceeds. The balance between debt and cash financing affects the debt service coverage targets as do bond terms and structures.

Debt Financing Pursuant to the City Charter, state statutory authority, and City Council approval, the Water Bureau may issue debt in the form of revenue bonds. By City Charter, the WCF is the recipient of net proceeds from bond sales to fund capital improvements. The Water Bureau plans to issue revenue bonds on average every 12 months through FY 2027-28. About $92 million in revenue bonds are next scheduled for sale in December 2018. Proceeds totaling $489 million are to be used to fund capital costs in the five-year period.

Construction Fund Revenues The Water Bureau’s level of WCF revenues is determined mainly by the actions of external parties, with the majority of these revenues coming from service and main installations ($8.8 million projected for FY 2018-19), system development charges ($4.0 million projected in FY 2018-19) and interagency capital revenues ($1.8 million projected for FY 2018-19).

10 City of Portland, Oregon – FY 2018-19 Requested Budget Portland Water Bureau

Cash and Water Sales Financing The Water Bureau has two debt service coverage planning standards for rate setting. Water Bureau’s target minimum debt service coverage ratio is 1.90 on first- lien bonds (1.25 per bond covenant). The planned debt service coverage ratio on combined first- and second- lien stabilized bonds is 1.75 stabilized net revenue (1.10 per bond covenant). In managing the second-lien stabilized test, Water Bureau’s employs a Rate/Stabilization Account that also serves the dual purpose of a rainy day fund. Managing these two ratios together reflects the Water Bureau’s strategy to optimize its capital financing strategies, thus maximizing its existing resources.

Asset Management The Asset Management Program supports the bureau’s goals to ensure the longest and Replacement possible useful asset life as well as the most cost-effective replacement strategies. Plan Using engineering, economics, and business expertise, asset managers identify the most cost-effective way to maintain, repair, and replace assets. The bureau’s assets are currently valued at approximately $8.9 billion, with about 93 percent in fair, good, or very good condition. The bureau tracks its high risk assets and has addressed 54% of them, and has plans to address another 23%. The bureau has implemented a monitoring and management program for the remainder of the assets. The bureau’s 22 separate asset management plans include strategies for proactively managing asset risk. Strategies currently implemented have improved asset operations and reduced the City’s risk exposure. Capital Programs and Projects

Capital Program The bureau has seven capital programs: Customer Service, Distribution, Regulatory Descriptions Compliance, Supply, Support, Transmission and Terminal Storage, and Treatment. Customer Service provides customer contact, billing and collection, water efficiency, low-income assistance, and services for facilities and grounds, including the security function. This program improves security and emergency preparedness for water system assets. The Distribution Program provides water to customers through 2,253 miles of distribution mains and related facilities, ensuring the reliability and expansion of the piping, pumping, and storage network. This program also provides for the relocation of, and adjustments to, water pipes and facilities to accommodate transportation and other public-agency projects. The Regulatory Compliance Program provides for meeting federal and state standards for drinking water quality and for meeting environmental standards related to the bureau’s operations in the Bull Run Watershed and the Columbia South Shore Well Field (CSSWF). The Supply Program focuses on maintaining the reliability of the water supply. The program includes both the Bull Run Watershed and the CSSWF.

City of Portland, Oregon – FY 2018-19 Requested Budget 11 Portland Water Bureau

The Support Program includes ongoing bureau work such as administration, finance, data management, asset management and project planning, property management, public involvement, and human resources. The Water Bureau’s contribution to the Portland Building Renovation is also being managed through the Support Program. The Transmission and Terminal Storage Program provides for the repair, rehabilitation, and replacement of these transmission system assets including the large conduits, transmission mains, and the large terminal reservoirs--Powell Butte, Kelly Butte, and Washington Park. The Treatment Program provides for meeting or exceeding federal and state requirements for a public water system utilizing a surface water source and a groundwater source through the application of chlorine, ammonia, and sodium hydroxide, and associated regulatory and process control monitoring.

Funding Sources Capital investments in the water system are funded from three major sources: net proceeds from revenue bond sales, transfers from the Water Fund (primarily water sales revenues), and construction fund revenues (system development charges, direct capital reimbursements, and interest earnings). The CIP also includes a small portion of project expenditures that cannot be funded through the WCF. These expenditures generally occur as capital studies, preliminary engineering, and other work that does not meet the capital criteria of a betterment, improvement, or addition to the water system as set forth by City policy or industry practice. The CIP includes about $7 million for Operations and Maintenance (O&M) and studies in FY 2018-19. The total amount budgeted for O&M and studies over the five years is $19 million. As an operating cost, these are 100% cash-financed, usually from water sales.

Major Projects Beginning in FY 2018-19, the five-year CIP includes funding in Customer Service to replace and enhance security technology and complete minor improvements to non-operating facilities. No major projects are planned for the program. The major Distribution Program projects address needs to improve system reliability, strengthen elements for a seismic event, and replace aging assets. The largest FY 2018-19 project is to install a seismically resilient pipe crossing of the Willamette River ($53.1 million). Another significant project is replacement of the Fulton Pump Main ($5.1 million) which will reduce the risk of a pipeline failure that could damage Interstate-5. Planning individual seismic improvements to the distribution backbone system will start in FY 2022-23. Funding for the Regulatory Compliance Program includes $8.2 million to continue to meet the ongoing environmental regulatory compliance projects described in the Bull Run Watershed Habitat Conservation Plan.

12 City of Portland, Oregon – FY 2018-19 Requested Budget Portland Water Bureau

Major Supply Program projects for the Bull Run Watershed include road-repair projects to improve safety for segments of the primary access and primary backup roads to key water supply facilities ($4.8 million), and replacing obsolete equipment like the Dam 1 Needle Valves ($3.3 million). In the Columbia South Shore Well Field, a project to upgrade the electrical supply network will improve reliability at the groundwater pump station. The five-year CIP does not include a major expansion of the well field beyond the current capacity. The Support Program includes funding each year for master planning for capital projects. This current five-year request includes approximately $43.5 million for the bureau’s contribution to the renovation of the Portland Building, to be disbursed in FY 2020-21. The Transmission and Terminal Storage Program has included some of the bureau’s largest projects to ensure system reliability and compliance with regulations. The largest, the Washington Park Reservoir Project ($190 million) achieves compliance with the LT2 rule and ensures that the west side of Portland will have seismically reinforced, reliable water storage for future generations. The coming five-year period also includes projects to inspect and restore the largest system pipes, the conduits. Repair of the Powell Butte 1 Roof ($6.1 million) is also planned. The Treatment Program includes two predominant major projects previously mentioned, the Bull Run Filtration and separate improvements to further inhibit the corrosivity of the Bull Run supply. The CIP includes over $127 million between the two projects, but most of the filtration expenditures are planned for the five years after FY 2022-23.

Net Operating and Bureau project planners estimate operating and maintenance (O&M) costs, as part Maintenance Costs of the project feasibility study and preliminary evaluations. The costs generally include labor, electricity or fuel, and chemicals. Changes in the cost of energy and chemicals are typically a greater percentage than labor or efficiency savings. Much of the CIP is dedicated to repair, replacement, or rehabilitation of pipes and other system elements used to deliver water to customers. These long-life passive assets, typically buried and not visible, do not require much in the way of regular O&M. Due to the large number of these assets, completed renewal projects may result in only a nominal net change in O&M costs because the maintenance cost for these elements is so minimal. For example, the replacement of pipes with a high frequency of leaks will result in reduced reactive O&M due to fewer leak repairs. However, the relatively small percentage of pipe length replaced in any given year will not appreciably alter the O&M budget. For infrastructure such as pump stations, O&M may increase if additional facilities are constructed or capacity is added. When new facilities are built, like filtration, the O&M cost can affect water rates and would be included in the forecast. Most improvements are to reconstruct existing facilities, and the net change in O&M expense is insignificant. The new treatment process improvements will significantly alter O&M cost starting with the first full year of operation. In FY 2023-24, the corrosion improvements could add as much as $1.4 million in additional expense, and with filtration, more than $5 million will impact the budget after FY 2026-27.

City of Portland, Oregon – FY 2018-19 Requested Budget 13 Portland Water Bureau

Supply

Description The provision of reliable water service in the quantities desired by customers is a key portion of the mission of the bureau. The Supply program is focused on providing the water to retail and wholesale customers. The program includes both water from the Bull Run Watershed and water from the Columbia South Shore Well Field. In total, these systems supply a population of nearly 950,000 people and Portland-area businesses.

Goals This program supports the entirety of the bureau mission: • To provide reliable water service to customers in the quantities they desire and at a quality level that meets or exceeds both customer and regulatory standards; • To provide the highest value to customers through excellent business, management, and operational practices, and appropriate application of innovation and technology; • To be responsible stewards of the public’s water infrastructure, fiscal, and natural resources; and, • To provide the citizens and the City Council with a water system that supports their community objectives and overall vision for the City of Portland. The program also supports the City goal of protecting and enhancing the natural and built environment, particularly with respect to providing safe drinking water.

Performance The bureau’s target is that the Bull Run Watershed provides 95% or more of the City’s annual water supply under normal operating conditions. The data is derived from the SCADA (Supervisory Control and Data Acquisition) system. There are flowmeters on each conduit and from the Groundwater outlet transmission main that provide the data input to the SCADA system. Daily averages are based on one minute intervals from whichever (or both during blending) source is providing supply.

Changes to Services The budget reflects a reduction due to a shift in capital dollars and FTE toward and Activities Treatment.

Requested No Actual Actual Revised DP Requested FTE & Financials FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2018-19

FTE 23.00 23.00 23.00 23.00 23.00 Expenditures Bull Run Watershed 4,641,054 6,442,522 7,997,617 6,764,275 6,764,275 Groundwater 3,823,574 3,218,512 3,072,705 2,786,660 2,786,660 Total Expenditures 8,464,628 9,661,034 11,070,322 9,550,935 9,550,935

14 City of Portland, Oregon – FY 2018-19 Requested Budget Portland Water Bureau

Actual Actual Yr End Est. Base Target Performance FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2018-19

Output Percentage of city's water supply provided by Bull Run watershed 86% 92% 95% 95% 95% under normal operating conditions

City of Portland, Oregon – FY 2018-19 Requested Budget 15 Portland Water Bureau

Treatment

Description The Treatment Program provides for meeting or exceeding the federal and state requirements for a public water system utilizing a surface water source as well as a groundwater source. Water treatment facilities are located at the Bull Run Headworks, Lusted Hill, and Groundwater Pump Station. This program also includes operation, maintenance, and repair of treatment facility systems, and associated regulatory and process control monitoring.

Goals This program supports the entirety of the bureau mission: • To provide reliable water service to customers in the quantities they desire and at a quality level that meets or exceeds both customer and regulatory standards; • To provide the highest value to customers through excellent business, management, and operational practices, and appropriate application of innovation and technology; • To be responsible stewards of the public’s water infrastructure, fiscal, and natural resources; and, • To provide the citizens and the City Council with a water system that supports their community objectives and overall vision for the City of Portland. The program also supports the City goal of protecting and enhancing the natural and built environment, particularly with respect to providing safe drinking water.

Performance The bureau’s target is to have no violations of state and federal drinking water quality regulations (see Regulatory Compliance section).

Changes to Services The budget reflects an increase in this program due to the decision package for the and Activities Water Treatment and for the Filtration Project.

Requested No Actual Actual Revised DP Requested FTE & Financials FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2018-19

Expenditures Water Program Treatment 2,916,156 3,266,875 3,872,578 10,170,992 10,175,992 Total Expenditures 2,916,156 3,266,875 3,872,578 10,170,992 10,175,992

16 City of Portland, Oregon – FY 2018-19 Requested Budget Portland Water Bureau

Transmission & Terminal Storage

Description The Transmission and Terminal Storage program is for the conveyance of water from the supply sources to the city, including the terminal storage reservoirs at Powell Butte, Kelly Butte and Washington Park.

Goals This program supports the entirety of the bureau mission: • To provide reliable water service to customers in the quantities they desire and at a quality level that meets or exceeds both customer and regulatory standards; • To provide the highest value to customers through excellent business, management, and operational practices, and appropriate application of innovation and technology; • To be responsible stewards of the public’s water infrastructure, fiscal, and natural resources; and, • To provide the citizens and the City Council with a water system that supports their community objectives and overall vision for the City of Portland. The program also supports the City goal of protecting and enhancing the natural and built environment, particularly with respect to providing safe drinking water.

Performance This program’s objective is to ensure there are no simultaneous conduit or transmission main outages that cause disruption of service to customers except in the case of natural vulnerability events that occur less often than once every 100 years, or in the case of planned maintenance shutdowns.

Changes to Services The budget reflects a reduction in this program as the Washington Park Reservoir 3 and Activities project progresses.

Requested No Actual Actual Revised DP Requested FTE & Financials FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2018-19

Expenditures Conduits/Transmission 1,947,378 3,181,748 4,705,505 6,718,692 6,718,692 Terminal Reservoirs 18,104,062 26,241,921 55,171,293 42,784,069 42,784,069 Total Expenditures 20,051,440 29,423,669 59,876,798 49,502,761 49,502,761

City of Portland, Oregon – FY 2018-19 Requested Budget 17 Portland Water Bureau

Distribution

Description The Distribution program is directed at the reliable conveyance of water from the terminal storage reservoirs through the customer meters. This program includes tanks to store water and maintain system pressures, meters to accurately record usage for billing purposes, hydrants for fire protection and line-flushing purposes, and valves to alter or stop water flows under various circumstances such as line breaks or fire needs. This program includes the repair, rehabilitation, or replacement of distribution system assets.

Goals This program supports the entirety of the bureau mission: • To provide reliable water service to customers in the quantities they desire and at a quality level that meets or exceeds both customer and regulatory standards; • To provide the highest value to customers through excellent business, management, and operational practices, and appropriate application of innovation and technology; • To be responsible stewards of the public’s water infrastructure, fiscal, and natural resources; and, • To provide the citizens and the City Council with a water system that supports their community objectives and overall vision for the City of Portland. The program also supports the City goal of protecting and enhancing the natural and built environment, particularly with respect to providing safe drinking water.

Performance This program’s objective is to address 80% of identified high risk assets. The percentage of high risk assets addressed is calculated by dividing the number of assets annually where action was taken to mitigate the risk of failure by the total number of high risk assets in the risk register. Preventative maintenance data is collected monthly to annually, depending on the assets criticality. Corrective maintenance data is collected intermittently as failure dictates. Assets with a high consequence of failure are tested or inspected annually.

Changes to Services There is an increase in this program due to the Willamette River Pipe Crossing and Activities project.

Requested No Actual Actual Revised DP Requested FTE & Financials FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2018-19

FTE 192.00 201.50 201.50 201.50 203.50 Expenditures Distribution Mains 17,602,790 19,967,487 28,768,619 60,603,460 61,186,892 Field Support 12,822,434 6,310,117 7,786,547 8,069,464 8,069,464 Fountains 73,668 67,991 108,357 105,854 107,854 Hydrants 4,236,714 3,329,967 2,457,302 2,584,818 2,584,818 Meters 2,713,629 2,419,247 2,704,871 2,762,637 2,762,637 Pump Stations/Tanks 17,351,249 14,170,566 9,493,505 11,002,288 11,173,978

18 City of Portland, Oregon – FY 2018-19 Requested Budget Portland Water Bureau

Requested No Actual Actual Revised DP Requested FTE & Financials FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2018-19

Services 11,005,792 11,712,271 8,148,967 8,354,451 8,354,451 Valves/Gates/Regulators 900,216 916,101 1,416,551 1,423,857 1,423,857 Total Expenditures 66,706,492 58,893,747 60,884,719 94,906,829 95,663,951 Actual Actual Yr End Est. Base Target Performance FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2018-19

Key Performance Measure Percentage of identified high risk assets addressed 42% 54% 80% 80% 80%

City of Portland, Oregon – FY 2018-19 Requested Budget 19 Portland Water Bureau

Regulatory Compliance

Description The Regulatory Compliance program provides for meeting or exceeding state and federal regulatory requirements for water quality mainly through treatment and monitoring. This program includes water quality monitoring and reporting, proper disposal of dechlorinated water, management of temperature and flow in the lower Bull Run river and implementation of programs and conservation measures involving lead hazard reduction and endangered species act compliance.

Goals The Regulatory Compliance program supports the Bureau’s mission to be responsible stewards of the public’s water infrastructure, fiscal, and natural resources. Further, the program also supports the City goal of protecting and enhancing the natural and built environment, particularly with respect to providing safe drinking water.

Performance The bureau’s performance objective is to achieve 100% compliance with state and federal drinking water quality regulations and 100% compliance with environmental regulations (including National Pollutant Discharge Elimination System permit requirements, Clean Water Act requirements, and Endangered Species Act requirements). The bureau is continuously monitoring and tracking compliance with regulations. The Oregon Health Authority also tracks violations on their website. Many data collection methods are used to monitor compliance with the Bull Run Water Supply Habitat Conservation Plan (HCP). The results of all collection methods and the subsequent data are summarized annually in an HCP Annual Compliance Report, which is submitted to the National Marine Fisheries Service and the Oregon Department of Environmental Quality.

Changes to Services There are no changes reflected in this program. and Activities

Requested No Actual Actual Revised DP Requested FTE & Financials FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2018-19

FTE 48.00 61.75 63.00 63.00 70.00 Expenditures Regulatory Compliance 6,137,212 8,743,923 10,274,815 10,520,098 10,587,413 Total Expenditures 6,137,212 8,743,923 10,274,815 10,520,098 10,587,413

Actual Actual Yr End Est. Base Target Performance FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2018-19

Key Performance Measure Number of violations of state and federal drinking water quality 00000 regulations Number of violations of state and federal environmental 00000 regulations

20 City of Portland, Oregon – FY 2018-19 Requested Budget Portland Water Bureau

Customer Service

Description The Customer Service program provides services including customer billing, payment collection, and staffing a call center for water, sewer, and stormwater services. It also provides water conservation, security, and grounds maintenance services for the Water Bureau. Emergency management and preparedness activities related to resilience and disaster recovery are funded through this program as well.

Goals This program supports the following bureau missions: To provide the highest value to customers through excellent business, management, and operational practices, and appropriate application of innovation and technology; To provide reliable water service to customers in the quantities they desire and at a quality level that meets or exceeds both customer and regulatory standards.

Performance This program supports several performance measure objectives. The data collection methods encompass several different points of entry and resolution. Data sources include the following: CMS data; Cayenta; emails received and responded to; dates on outstanding service orders, issue dates, number of service orders completed; electricity, natural gas and fuel usage data, along with air miles traveled, to calculate calendar year carbon emissions; and Workforce Management Optimization scheduling software. Those that contribute to the performance of this program work to improve or maintain the service levels. For instance, there is an expectation of an improved percentage of calls answered within 60 seconds as the new automatic payment system shortens the call times.

Changes to Services There is an increase in this program due to the Financial Assistance Expansion and Activities decision package.

Requested No Actual Actual Revised DP Requested FTE & Financials FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2018-19

FTE 111.60 115.00 120.00 120.00 122.00 Expenditures Conservation/Sustainability 846,855 623,669 951,428 854,846 854,846 Customer Services 14,950,227 15,377,317 18,870,048 18,772,621 19,354,621 Grounds/Parks 703,406 844,468 807,618 610,227 759,127 Security/Emergency Management 1,897,465 2,517,354 2,295,803 2,414,669 2,449,669 Total Expenditures 18,397,953 19,362,808 22,924,897 22,652,363 23,418,263

City of Portland, Oregon – FY 2018-19 Requested Budget 21 Portland Water Bureau

Actual Actual Yr End Est. Base Target Performance FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2018-19

Efficiency Percentage of customer inquiries or requests responded to within 98% 99% 95% 95% 95% five business days Percentage of calls answered within 60 seconds 46% 51% 80% 80% 80% Percentage of customer payment transactions made through 53% 57% 50% 50% 50% preferred methods Key Performance Measure Average minutes that customers are on hold before speaking to a 3.36 2.26 2.00 2.00 2.00 customer service representative Output Bureau's annual carbon emissions in metric tons of CO2e 13,965 9,900 14,008 14,008 14,008 Capacity of new renewable energy sources, kilowatts 400 400 400 400 400

22 City of Portland, Oregon – FY 2018-19 Requested Budget Portland Water Bureau

Administration & Support

Description The Administration & Support program provides financial management, strategic and asset management planning, data management, and human resource functions for the bureau.

Goals This program supports the bureau mission to be responsible stewards of the public’s water infrastructure, fiscal, and natural resources. The program also supports maintaining the Bureau’s credit ratings and debt service coverage in accordance with planning standards as outlined in the bureau’s financial policies and Portland Policy documents.

Performance The bureau has a performance objective of maintaining net revenues to provide at least 1.90 times debt service coverage on first-lien bonds, and maintaining stabilized net revenues to provide at least 1.75 times coverage on the combined annual debt service for both first and second-lien bonds. The bureau has achieved these targets in prior years and plans to continue to achieve them in FY 2018-19. Data is collected monthly from the City’s financial system and the bureau’s financial statements as reported in the City’s Comprehensive Annual Financial (CAFR).

Changes to Services This program is increasing due largely to decision packages and the Utility License and Activities Fee.

Requested No Actual Actual Revised DP Requested FTE & Financials FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2018-19

FTE 193.05 183.35 183.18 181.95 191.95 Expenditures Bureau Support 19,596,049 21,615,101 23,033,068 23,446,841 25,006,124 Data Management 3,124,540 3,599,824 3,568,781 3,822,798 3,822,798 Employee Investment 2,016,517 1,989,597 2,821,353 2,589,475 2,895,095 Planning (11,435,559) (11,376,424) 6,731,872 6,910,619 6,910,619 Total Expenditures 13,301,547 15,828,098 36,155,074 36,769,733 38,634,636

Actual Actual Yr End Est. Base Target Performance FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2018-19

Efficiency Percentage of projects forecast to be completed within three 77% 66% 80% 80% 80% months of planned date Key Performance Measure Maintain water revenue bond AAA credit rating 100% 100% 100% 100% 100% Output Debt service coverage at 1.90 on first lien bonds 2.97 3.02 1.90 1.90 1.90 Debt service coverage at 1.75 on both first and second lien bonds 2.01 1.91 1.75 1.75 1.75 Percentage of budgeted Capital Improvement Plan expended 90% 87% 100% 100% 100%

City of Portland, Oregon – FY 2018-19 Requested Budget 23 Portland Water Bureau

Hydroelectric Power

Description The Hydroelectric Power program provides for administrative, operational, and regulatory oversight for the Portland Hydroelectric Project (PHP). Program staff provide day-to-day oversight and coordination for the operation of PHP, which includes the control of the levels in the City’s Bull Run reservoirs, the withdrawal of water from the reservoirs, and release of water downstream for compliance with in-stream regulatory targets. Program staff coordinate all issues associated with the operation of the PHP; the sales of generated power from PHP to Portland General Electric (PGE); all state and federal dam safety requirements associated with PHP; the Vernon Station Hydroelectric Project; and the Washington Park and Mt. Tabor dams.

Goals This program supports the City goal of delivering efficient, effective, and accountable municipal services. It also supports the City goal of protecting and enhancing the natural and built environment, particularly with respect to its oversight and coordination of dam safety issues and the ongoing operation of the PHP on the Bull Run River.

Performance In FY 2017-18, the amount of power generated by PHP is projected to be equal to 100% of its long-term annual average. For FY 2018-19, that generation is also projected at approximately 100% of the long-term average. In FY 2017-18, this program’s staff will have provided all required oversight and support for the bureau’s power projects and dams. The previous sales agreement with PGE ended in August 2017. The new Power Purchase Agreement (PPA) with PGE is effective January 2018. Separate contracts for operations and maintenance, transmission, scheduling, and consultants are included in the FY 2018-19 budget. The excess balance from the previous power sales agreement with PGE will be used to establish the Hydroelectric Reserve Account (HRA). The HRA will be used to mitigate lower than planned power sales and unanticipated operating expenses. Consequently, the Key Performance Measure related to the General Fund transfer remains at $0.

Changes to Services The new PPA will be in place through June 30, 2032. New contracts have been and Activities established for operation and maintenance of PHP.

Requested No Actual Actual Revised DP Requested FTE & Financials FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2018-19

FTE 2.25 2.25 2.25 2.25 2.25 Expenditures Hydroelectric Power 817,459 742,289 13,584,136 2,618,180 2,618,180 Total Expenditures 817,459 742,289 13,584,136 2,618,180 2,618,180

24 City of Portland, Oregon – FY 2018-19 Requested Budget Portland Water Bureau

Actual Actual Yr End Est. Base Target Performance FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2018-19

Output Amount of power sold to Portland General Electric in megawatt 72,805 103,750 84,800 84,800 84,800 hours Amount of transfer of hydropower profits to General Fund $400,000 $0 $0 $0 $0

City of Portland, Oregon – FY 2018-19 Requested Budget 25 Portland Water Bureau

Performance Measures

Percentage of Customer Payment Transactions Made Through Preferred Methods In FY 2016-17 about 57% of the customers paid through preferred methods compared to the goal of 50%. The goal for FY 2017-18 is

50%. Percentage

Number of Violations of State and Federal Drinking Water Quality Regulations The bureau's goal is to have zero violations per year. Violations

Average Time that Customers are on Hold In FY 2016-17 the average hold time was 2:26 minutes compared to the goal of less than 2:00 minutes. The goal for FY 2017-18 continues to be 2:00 or less. Minutes

26 City of Portland, Oregon – FY 2018-19 Requested Budget Summary of Bureau Budget Portland Water Bureau

Actual Actual Revised Requested No DP Requested FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2018-19 Resources External Revenues Charges for Services 172,807,586 174,934,870 176,816,927 192,098,970 194,219,010 Intergovernmental 757,538 551,743 526,000 526,000 526,000 Bond & Note 0 183,389,824 98,895,000 91,930,000 91,930,000 Miscellaneous 3,906,884 5,378,188 4,763,398 5,722,437 5,722,437 Total External Revenues 177,472,008 364,254,625 281,001,325 290,277,407 292,397,447 Internal Revenues Fund Transfers - Revenue 162,007,417 160,842,044 220,114,058 237,133,473 238,473,673 Interagency Revenue 3,232,337 3,007,879 3,354,758 3,466,108 3,466,108 Total Internal Revenues 165,239,754 163,849,923 223,468,816 240,599,581 241,939,781 Beginning Fund Balance 215,063,171 196,351,717 258,127,212 180,618,885 180,618,885 Total Resources $557,774,933 $724,456,265 $762,597,353 $711,495,873 $714,956,113 Requirements Bureau Expenditures Personnel Services 60,965,367 62,689,818 70,695,856 73,487,117 75,975,745 External Materials and Services 27,349,579 29,471,213 47,031,684 42,423,926 43,898,026 Internal Materials and Services 20,211,260 20,216,171 22,856,799 22,818,244 23,148,644 Capital Outlay 28,266,681 33,545,590 78,059,000 97,962,604 97,129,716 Total Bureau Expenditures 136,792,887 145,922,792 218,643,339 236,691,891 240,152,131 Fund Expenditures Debt Service 56,497,872 154,755,847 60,048,640 62,565,450 62,565,450 Contingency 0 0 104,523,946 118,527,509 118,527,509 Fund Transfers - Expense 168,132,457 166,147,586 224,976,965 242,856,562 242,856,562 Debt Service Reserves 0 0 38,368,200 36,236,013 36,236,013 Total Fund Expenditures 224,630,329 320,903,433 427,917,751 460,185,534 460,185,534 Ending Fund Balance 196,351,717 257,630,040 116,036,263 14,618,448 14,618,448 Total Requirements $557,774,933 $724,456,265 $762,597,353 $711,495,873 $714,956,113 Programs Transmission & Terminal Storage 20,051,440 29,423,669 59,876,798 49,502,761 49,502,761 Administration & Support 13,301,547 15,828,098 36,155,074 36,769,733 38,634,636 HR Corporate Services 0 349 0 0 0 Supply 8,464,628 9,661,034 11,070,322 9,550,935 9,550,935 Distribution 66,706,492 58,893,747 60,884,719 94,906,829 95,663,951 Regulatory Compliance 6,137,212 8,743,923 10,274,815 10,520,098 10,587,413 Treatment 2,916,156 3,266,875 3,872,578 10,170,992 10,175,992 Hydroelectric Power 817,459 742,289 13,584,136 2,618,180 2,618,180 Customer Service 18,397,953 19,362,808 22,924,897 22,652,363 23,418,263 Total Programs 136,792,887 $145,922,792 $218,643,339 $236,691,891 $240,152,131

City of Portland, Oregon – FY 2018-19 Requested Budget 27 Portland Water Bureau CIP Summary

This table summarizes project expenses by capital programs.

Bureau Capital Program Revised Requested Capital Plan Project Prior Years FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 5-Year Total

Customer Service Security and Emergency Mgt 0 100,000 100,000 100,000 100,000 100,000 100,000 500,000 Total Customer Service 0 100,000 100,000 100,000 100,000 100,000 100,000 500,000

Distribution Council Crest Tank Roof 318,604 502,000 820,000 0 0 0 0 820,000 Distribution Mains 0 14,412,000 10,353,000 12,240,000 14,305,000 16,170,000 21,210,000 74,278,000 Field Support 0 4,000,000 4,130,000 4,130,000 4,130,000 4,130,000 4,130,000 20,650,000 Fulton Pump Mains Replacement 0 60,000 570,000 630,000 30,000 2,835,000 954,000 5,019,000 Greenleaf Pump Station 974,708 1,000,000 372,000 0 0 0 0 372,000 Hydrants 0 1,400,000 1,450,000 1,450,000 1,450,000 1,450,000 1,450,000 7,250,000 Meters 0 1,000,000 1,030,000 1,030,000 1,030,000 1,030,000 1,030,000 5,150,000 N Jantzen Ave west of Pavilion 186,938 19,000 1,080,000 0 0 0 0 1,080,000 NE 47th Ave and Columbia Blvd LID 60,938 0 89,000 0 0 0 0 89,000 NE 49th and Roselawn 0 127,000 101,000 678,000 10,000 0 0 789,000 NE Wheeler Basin Relocations 39,149 0 55,000 0 0 0 0 55,000 Outer Powell Transportation Safety 3,702 0 1,749,000 60,000 0 0 0 1,809,000 Penridge Mains 45,836 230,000 1,229,000 978,000 0 0 0 2,207,000 Pump Stations and Tanks 0 800,000 1,710,000 3,100,000 3,100,000 3,100,000 3,100,000 14,110,000 SCADA System Upgrade 2017 0 0 1,136,000 250,000 0 0 0 1,386,000 Services 0 6,000,000 6,200,000 6,200,000 6,200,000 6,200,000 6,200,000 31,000,000 Sunnyside North Reconstruction 0 0 790,000 90,000 0 0 0 880,000 SW Boones Ferry Rd at SW Arnold 29,876 356,000 198,000 302,000 0 0 0 500,000 St Bridge Willamette Blvd Bridge Main 25,829 860,000 715,000 624,000 2,553,000 446,000 0 4,338,000 Replacement Willamette River Pipe Crossing 929,430 6,600,000 38,600,000 7,970,000 0 0 0 46,570,000 Total Distribution 2,615,010 37,366,000 72,377,000 39,732,000 32,808,000 35,361,000 38,074,000 218,352,000

Regulatory Compliance Water Quality and Regulatory 0 2,300,000 2,080,000 2,080,000 500,000 500,000 500,000 5,660,000 Total Regulatory Compliance 0 2,300,000 2,080,000 2,080,000 500,000 500,000 500,000 5,660,000

Supply Bull Run Watershed 0 500,000 50,000 100,000 1,600,000 1,000,000 3,500,000 6,250,000 Dam 1 Needle Valve Replacement 39,622 252,000 1,647,000 1,215,000 0 0 0 2,862,000 FUTURE - Howell-Bunger Valve 0 0 0 0 0 0 273,000 273,000 Improvements Groundwater 0 390,000 220,000 570,000 570,000 570,000 570,000 2,500,000 Groundwater Electrical Supply 583,813 550,000 366,000 0 0 0 0 366,000 Road 10E MP 6.2 - 8.2 0 135,000 160,000 110,000 1,465,000 0 0 1,735,000 Road 10H MP 10.95 to 12.56 149,533 1,018,000 796,000 0 0 0 0 796,000 Road 10R MP 28.77 to 31.85 87,302 740,000 620,000 1,250,000 0 0 0 1,870,000 Vivian Groundwater Improvements 0 160,000 340,000 0 0 0 0 340,000 Total Supply 860,270 3,745,000 4,199,000 3,245,000 3,635,000 1,570,000 4,343,000 16,992,000

28 City of Portland, Oregon – FY 2018-19 Requested Budget CIP Summary Portland Water Bureau

This table summarizes project expenses by capital programs.

Bureau Capital Program Revised Requested Capital Plan Project Prior Years FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 5-Year Total

Support FUTURE - Portland Building 0 0 0 0 43,500,000 0 0 43,500,000 Contribution Planning 0 2,900,000 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 15,000,000 Total Support 0 2,900,000 3,000,000 3,000,000 46,500,000 3,000,000 3,000,000 58,500,000

Transmission/Terminal Storage Conduit 2 Internal Inspection 5,618 0 95,000 0 0 0 0 95,000 Conduits and Transmission Mains 0 2,723,440 4,260,000 5,490,000 16,530,000 16,530,000 16,530,000 59,340,000 Gresham Conduit 2 Trestle 124,030 655,000 821,000 0 0 0 0 821,000 Upgrades Powell Butte Reservoir 1 Roof 0 0 125,000 1,211,000 4,720,000 0 0 6,056,000 Upgrades Rockwood PUD Meter 141,310 0 410,000 0 0 0 0 410,000 Terminal Reservoirs 0 100,000 100,000 100,000 100,000 100,000 100,000 500,000 WA Park Hypochlorite 0 0 188,000 344,000 1,208,000 0 0 1,740,000 Improvements Washington Park 40,616,724 54,100,000 41,555,021 26,100,000 15,500,000 6,000,000 10,900,000 100,055,021 Total Transmission/Terminal 40,887,682 57,578,440 47,554,021 33,245,000 38,058,000 22,630,000 27,530,000 169,017,021 Storage

Treatment Corrosion Control Improvements 0 910,000 1,820,000 1,601,000 7,105,000 8,330,000 150,000 19,006,000 Treatment 0 0 0 100,000 100,000 100,000 100,000 400,000 Water System Filtration 0 0 5,590,000 6,500,000 21,060,000 19,890,000 55,120,000 108,160,000 Total Treatment 0 910,000 7,410,000 8,201,000 28,265,000 28,320,000 55,370,000 127,566,000 Total Requirements 44,362,962 104,899,440 136,720,021 89,603,000 149,866,000 91,481,000 128,917,000 596,587,021

City of Portland, Oregon – FY 2018-19 Requested Budget 29 Portland Water Bureau FTE Summary

Revised Requested No DP Requested Salary Range FY 2017-18 FY 2018-19 FY 2018-19 Class Title Minimum Maximum No. Amount No. Amount No. Amount 30000063 Accountant II 54,912 69,139 4.00 256,527 4.00 265,213 4.00 265,213 30000064 Accountant III 60,466 76,045 1.00 68,448 1.00 70,149 1.00 70,149 30000560 Accountant, Systems 64,813 86,403 1.00 83,676 1.00 86,173 1.00 86,173 30000434 Administrative Assistant 50,877 78,333 8.00 527,602 8.00 544,533 8.00 544,533 30000433 Administrative Specialist, Sr 47,362 72,904 7.00 441,584 7.00 452,196 7.00 452,196 30000436 Administrative Supervisor I 61,734 82,285 2.00 134,628 2.00 139,400 2.00 139,400 30000437 Administrative Supervisor II 64,813 86,403 1.00 86,400 1.00 86,400 1.00 86,400 30000203 Applications Analyst II-Generalist 64,813 86,403 1.00 64,812 1.00 64,812 1.00 64,812 30000204 Applications Analyst III-Generalist 71,510 95,472 2.00 185,556 2.00 187,712 2.00 187,712 30000207 Applications Analyst IV-Generalist 75,150 100,526 3.25 266,454 3.25 271,510 3.25 271,510 30000102 Automotive Equip Oper II: Sewer Vacuum 48,922 58,885 1.00 55,452 1.00 58,026 1.00 58,026 30000104 Automotive Equip Oper II: Tractor-Trailr 47,861 57,616 1.00 55,101 1.00 57,612 1.00 57,612 30000101 Automotive Equipment Oper I 45,053 54,621 15.00 809,784 15.00 809,784 15.00 809,784 30000441 Business Operations Manager 84,739 112,882 1.00 111,492 1.00 112,536 1.00 112,536 30000442 Business Operations Manager, Sr 105,248 146,973 1.00 146,976 1.00 146,976 1.00 146,976 30000440 Business Operations Supervisor 75,150 100,526 1.00 100,524 1.00 100,524 1.00 100,524 30000449 Business Systems Analyst, Sr 71,510 95,472 2.00 190,944 2.00 190,944 2.00 190,944 30000331 CAD Analyst 69,472 88,712 1.00 88,716 1.00 88,716 1.00 88,716 30000329 CAD Technician II 57,200 72,987 3.00 218,952 3.00 218,952 3.00 218,952 30000330 CAD Technician III 69,472 88,712 1.00 88,716 1.00 88,716 1.00 88,716 30000454 Capital Improvmnt Program Planning Supvr 84,739 112,882 1.00 112,884 1.00 112,884 1.00 112,884 30000399 Capital Project Manager I 69,472 88,712 3.00 266,148 3.00 266,148 3.00 266,148 30000686 Capital Project Manager II 75,150 100,526 1.00 50,268 1.00 52,320 1.00 52,320 30000687 Capital Project Manager III 78,770 105,851 1.00 105,852 1.00 105,852 1.00 105,852 30000110 Carpenter 56,805 63,544 3.00 190,620 3.00 190,620 3.00 190,620 30000492 Community Outreach & Informtn Rep 61,734 82,285 2.00 141,808 2.00 146,667 2.00 146,667 30000493 Community Outreach & Informtn Rep, Sr 68,078 90,792 2.00 177,487 2.00 180,803 2.00 180,803 30000107 Concrete Finisher 56,805 63,544 2.00 127,080 2.00 127,080 2.00 127,080 30000507 Conservation Program Coordinator, Sr 71,510 95,472 1.00 95,412 1.00 95,447 1.00 95,447 30000105 Construction Equipment Operator 47,986 61,277 18.00 1,097,596 18.00 1,102,366 18.00 1,102,366 30000455 Contracts Dev & Review Administrator 75,150 100,526 1.00 100,524 1.00 100,524 1.00 100,524 30000017 Customer Accounts Specialist I 37,336 53,830 38.00 1,838,828 38.00 1,889,736 38.00 1,889,736 30000018 Customer Accounts Specialist II 44,512 58,989 9.00 504,702 9.00 508,974 9.00 508,974 30000445 Customer Service Supervisor 71,510 95,472 5.00 454,800 5.00 457,552 5.00 457,552 30000732 Development Supervisor I 71,510 95,472 1.00 71,508 1.00 71,508 1.00 71,508 30000577 Economist, Principal 84,739 112,882 1.00 112,884 1.00 112,884 1.00 112,884 30000635 Electrical/Instrumentation Supervisor 78,770 105,851 1.00 101,688 1.00 104,811 1.00 104,811 30000116 Electrician 71,074 76,710 6.00 454,656 6.00 458,886 6.00 458,886 30000685 Engineer, Chief - Water Bureau 115,814 165,797 1.00 156,900 1.00 162,796 1.00 162,796 30000682 Engineer, Principal 105,789 141,086 5.00 690,088 5.00 695,244 6.00 846,240 30000680 Engineer, Sr 91,603 122,096 15.00 1,706,885 15.00 1,711,280 15.00 1,711,280 30000681 Engineer, Supervising 98,446 131,269 4.00 522,012 4.00 524,052 4.00 524,052 30000364 Engineer-Chemical/Environmental 91,333 110,989 1.00 95,892 1.00 99,474 1.00 99,474 30000365 Engineer-Civil 91,333 110,989 14.00 1,516,420 14.00 1,524,490 14.00 1,524,490 30000366 Engineer-Electrical 91,333 110,989 1.00 110,988 1.00 110,988 1.00 110,988 30000357 Engineering Associate, Sr-Chemical/Envir 78,978 100,672 1.00 86,964 1.00 90,968 1.00 90,968 30000358 Engineering Associate, Sr-Civil 78,978 100,672 15.00 1,467,156 15.00 1,477,146 15.00 1,477,146 30000353 Engineering Associate-Civil 64,896 86,965 6.00 435,872 6.00 449,543 8.00 609,935 30000355 Engineering Associate-Mechanical 64,896 86,965 1.00 71,532 1.00 74,552 1.00 74,552 30000696 Engineering Survey Manager 78,770 105,851 1.00 112,884 1.00 112,884 1.00 112,884

30 City of Portland, Oregon – FY 2018-19 Requested Budget FTE Summary Portland Water Bureau

Revised Requested No DP Requested Salary Range FY 2017-18 FY 2018-19 FY 2018-19 Class Title Minimum Maximum No. Amount No. Amount No. Amount 30000325 Engineering Technician II 57,200 72,987 9.00 616,439 9.00 628,129 9.00 628,129 30000326 Engineering Technician III 69,472 88,712 5.00 412,884 5.00 416,692 5.00 416,692 30000662 Environmental Program Coordinator 68,078 90,792 1.00 90,792 1.00 90,792 1.00 90,792 30000663 Environmental Program Manager 75,150 100,526 1.00 100,524 1.00 100,524 1.00 100,524 30000664 Environmental Program Manager, Sr 84,739 112,882 1.00 112,884 1.00 112,884 1.00 112,884 30000661 Environmental Program Specialist 61,734 82,285 2.00 142,980 2.00 146,109 2.00 146,109 30001908 Environmental Spec-Wildlife Biologist 69,472 88,712 1.00 88,716 1.00 88,716 1.00 88,716 30000339 Environmental Specialist-Generalist 69,472 88,712 7.00 584,880 7.00 594,476 7.00 594,476 30000337 Environmental Technician I 42,682 57,200 0.00 0 0.00 0 3.00 150,012 30000338 Environmental Technician II 57,200 72,987 5.00 313,196 5.00 323,634 7.00 442,842 30000567 Financial Analyst 64,813 86,403 2.00 165,108 2.00 167,529 2.00 167,529 30000569 Financial Analyst, Principal 84,739 112,882 2.00 225,768 2.00 225,768 2.00 225,768 30000568 Financial Analyst, Sr 71,510 95,472 3.00 281,310 3.00 285,132 3.00 285,132 30000127 General Mechanic 51,542 64,230 2.00 128,472 2.00 128,472 2.00 128,472 30000341 GIS Technician I 42,682 57,200 1.00 57,204 1.00 57,204 1.00 57,204 30000342 GIS Technician II 57,200 72,987 5.00 364,920 5.00 364,920 5.00 364,920 30000343 GIS Technician III 69,472 88,712 2.00 177,432 2.00 177,432 2.00 177,432 30000373 Graphics Designer III 69,472 88,712 1.00 88,716 1.00 88,716 1.00 88,716 30000252 Horticulturist 48,526 58,614 1.00 58,620 1.00 58,620 1.00 58,620 30000657 Hydroelectric Power Project Manager 84,739 112,882 1.00 95,476 1.00 99,386 1.00 99,386 30000658 Hydroelectric Power Project Mgr, Asst 75,150 100,526 1.00 93,000 1.00 96,809 1.00 96,809 30000114 Industrial Painter 56,805 63,544 2.00 127,080 2.00 127,080 2.00 127,080 30000115 Industrial Painter, Lead 59,571 66,706 1.00 66,708 1.00 66,708 1.00 66,708 30000603 Inf Syst Analyst IV(Supvr)-Gen 75,150 100,526 1.00 100,524 1.00 100,524 1.00 100,524 30000218 Inf Syst Analyst, Principal-Gen 84,739 112,882 1.00 101,592 1.00 105,409 1.00 105,409 30000239 Instrument Technician 71,074 76,710 6.00 454,656 6.00 459,826 6.00 459,826 30001408 Instrumentation & Security Systems Supvr 71,510 95,472 1.00 95,472 1.00 95,472 1.00 95,472 30001283 Laboratory Analyst II 50,502 66,664 2.00 127,104 2.00 130,164 2.00 130,164 30001284 Laboratory Analytical Specialist 57,574 76,461 5.00 334,848 5.00 343,088 5.00 343,088 30001285 Laboratory Coordinator 59,758 84,323 2.00 163,632 2.00 168,648 2.00 168,648 30000670 Laboratory Manager 84,739 112,882 1.00 110,616 1.00 112,317 1.00 112,317 30002384 Laboratory Supervisor 71,510 95,472 1.00 95,472 1.00 95,472 1.00 95,472 30000644 Maintenance Planner/Scheduler 61,734 82,285 4.00 308,682 4.00 316,424 4.00 316,424 30000073 Maintenance Worker 31,512 31,512 1.00 31,512 1.00 31,512 1.00 31,512 30000451 Management Analyst 64,813 86,403 7.00 557,076 7.00 563,045 10.00 841,001 30000453 Management Analyst, Principal 84,739 112,882 3.00 322,870 3.00 326,852 3.00 326,852 30000452 Management Analyst, Sr 71,510 95,472 2.00 190,944 2.00 190,944 3.00 289,140 30000450 Management Assistant 50,877 78,333 4.00 275,610 4.00 280,966 4.00 280,966 30000693 Mapping & GIS Supervisor 78,770 105,851 1.00 112,884 1.00 112,884 1.00 112,884 30000978 Mapping Data Technician II 69,472 88,712 1.00 88,716 1.00 88,716 1.00 88,716 30000653 Mechanical Systems Supervisor-Water,Sr 78,770 105,851 1.00 105,852 1.00 105,852 1.00 105,852 30000012 Office Support Specialist II 34,798 49,962 2.00 84,276 2.00 89,137 2.00 89,137 30000013 Office Support Specialist III 44,512 58,989 2.00 116,256 2.00 117,408 2.00 117,408 30000152 Operating Engineer I 51,646 54,080 1.00 51,851 1.00 54,084 1.00 54,084 30000153 Operating Engineer II 52,104 67,330 4.00 214,086 4.00 236,817 4.00 236,817 30000154 Operating Engineer III 54,725 70,741 12.00 801,618 12.00 817,269 12.00 817,269 30000759 Parks Maintenance Supervisor 64,813 86,403 1.00 86,400 1.00 86,400 1.00 86,400 30000081 Parks Technician 46,987 53,394 5.00 262,884 5.00 267,000 5.00 267,000 30000398 Planner, Sr City-Water Resources 82,514 95,493 1.00 90,960 1.00 93,606 1.00 93,606 30000464 Program Coordinator 68,078 90,792 3.00 232,041 3.00 241,560 5.00 422,460

City of Portland, Oregon – FY 2018-19 Requested Budget 31 Portland Water Bureau FTE Summary

Revised Requested No DP Requested Salary Range FY 2017-18 FY 2018-19 FY 2018-19 Class Title Minimum Maximum No. Amount No. Amount No. Amount 30000465 Program Manager 71,510 95,472 5.00 463,128 5.00 468,548 5.00 468,548 30000466 Program Manager, Sr 84,739 112,882 5.00 536,280 5.00 536,280 5.00 536,280 30000463 Program Specialist 61,734 82,285 4.00 296,686 4.00 305,481 6.00 415,473 30000462 Program Specialist, Assistant 50,877 78,333 2.00 118,400 2.00 123,245 2.00 123,245 30000698 Property Acquisition & Services Manager 71,510 95,472 1.00 95,472 1.00 95,472 1.00 95,472 30000497 Public Information Manager 78,770 105,851 1.00 78,768 1.00 78,768 1.00 78,768 30000495 Public Information Officer 71,510 95,472 1.00 95,472 1.00 95,472 1.00 95,472 30000691 Public Works Inspection Manager 75,150 100,526 1.00 100,524 1.00 100,524 1.00 100,524 30000228 Public Works Inspector 62,774 71,739 2.00 134,508 2.00 139,646 4.00 299,246 30000229 Public Works Inspector, Sr 68,099 80,226 5.00 359,544 5.00 364,764 5.00 364,764 30000630 Public Works Supervisor II 64,813 86,403 8.00 632,652 8.00 641,084 8.00 641,084 30000403 Remittance Technician 38,147 53,373 1.00 53,376 1.00 53,376 1.00 53,376 30000349 Right of Way Agent II 57,200 72,987 1.00 69,468 1.00 72,398 1.00 72,398 30000482 Risk Specialist, Sr 68,078 90,792 1.00 70,860 1.00 72,561 1.00 72,561 30000485 Safety & Risk Officer I 71,510 95,472 0.00 0 0.00 0 1.00 115,596 30000486 Safety & Risk Officer II 78,770 105,851 1.00 102,078 1.00 104,988 1.00 104,988 30000645 Security Supervisor 64,813 86,403 1.00 86,400 1.00 86,400 1.00 86,400 30000029 Service Dispatcher 37,336 53,830 2.00 97,602 2.00 101,238 2.00 101,238 30000054 Storekeeper/Acquisition Specialist II 47,611 58,219 3.00 164,064 3.00 169,066 3.00 169,066 30000056 Storekeeper/Acquisition Specialist III 53,789 66,851 1.00 66,852 1.00 66,852 1.00 66,852 30000468 Stores System Supervisor II 64,813 86,403 1.00 81,936 1.00 85,296 1.00 85,296 30000224 Surveying Aide II 50,960 59,322 2.00 110,292 2.00 114,799 2.00 114,799 30000695 Surveying Supvr/Water Rights Examiner 75,150 100,526 1.00 100,524 1.00 100,524 1.00 100,524 30000225 Surveyor I 58,219 72,342 2.00 144,696 2.00 144,696 2.00 144,696 30000226 Surveyor II 73,362 85,426 1.00 85,428 1.00 85,428 1.00 85,428 30001558 Timekeeping Specialist 37,398 53,747 1.00 53,748 1.00 53,748 1.00 53,748 30000532 Training & Development Officer 71,510 95,472 1.00 78,216 1.00 81,426 1.00 81,426 30001037 Utility Locator 53,165 57,200 7.00 392,340 7.00 394,092 7.00 394,092 30000076 Utility Worker I 44,491 48,381 2.00 96,768 2.00 96,768 2.00 96,768 30000077 Utility Worker II 48,381 52,021 28.00 1,438,332 28.00 1,449,580 28.00 1,449,580 30000075 Utility Worker II, Apprentice 36,421 48,110 18.00 757,812 18.00 821,816 18.00 821,816 30000438 Water Administrative Manager 78,770 105,851 1.00 105,852 1.00 105,852 1.00 105,852 30001534 Water Bureau Emergency Management Mgr 75,150 100,526 1.00 95,196 1.00 97,478 1.00 97,478 30000512 Water Conservation Program Coordinator 68,078 90,792 2.00 152,064 2.00 154,363 2.00 154,363 30000514 Water Conservation Program Manager 75,150 100,526 1.00 86,691 1.00 90,243 1.00 90,243 30000655 Water Group Manager 105,248 146,973 4.00 587,904 4.00 587,904 4.00 587,904 30000652 Water Maintenance Supervisor, Sr 78,770 105,851 3.00 317,556 3.00 317,556 3.00 317,556 30000133 Water Meter Reader I 39,915 50,710 11.00 527,930 11.00 539,090 11.00 539,090 30000134 Water Meter Reader II 48,922 57,366 1.00 57,372 1.00 57,372 1.00 57,372 30002158 Water Meter Technician I 48,381 52,021 5.00 256,464 5.00 256,464 5.00 256,464 30000142 Water Meter Technician II 49,400 57,366 4.00 226,884 4.00 228,620 4.00 228,620 30000143 Water Meter Technician III 59,571 64,750 6.00 388,512 6.00 388,512 6.00 388,512 30000654 Water Operations & Support Manager 97,989 132,766 1.00 132,768 1.00 132,768 1.00 132,768 30000145 Water Operations Mechanic 57,429 64,522 22.00 1,406,996 22.00 1,410,436 22.00 1,410,436 30000144 Water Operations Mechanic, Apprentice 44,491 60,382 7.00 402,030 7.00 406,800 7.00 406,800 30000651 Water Quality Inspection Supervisor 68,078 90,792 1.00 90,792 1.00 90,792 1.00 90,792 30000140 Water Quality Inspector II 54,725 70,741 4.00 255,894 4.00 263,560 4.00 263,560 30000141 Water Quality Inspector III 57,429 74,214 1.00 74,220 1.00 74,220 1.00 74,220 30001034 Water Quality Manager 97,989 132,766 1.00 121,332 1.00 125,472 1.00 125,472 30000647 Water Resource & Urban Affairs Coord 71,510 95,472 1.00 95,472 1.00 95,472 1.00 95,472

32 City of Portland, Oregon – FY 2018-19 Requested Budget FTE Summary Portland Water Bureau

Revised Requested No DP Requested Salary Range FY 2017-18 FY 2018-19 FY 2018-19 Class Title Minimum Maximum No. Amount No. Amount No. Amount 30000656 Water Resources Program Manager 75,150 100,526 2.00 199,632 2.00 200,458 2.00 200,458 30000138 Water Security Specialist 48,381 52,021 10.00 516,564 10.00 518,985 10.00 518,985 30000135 Water Service Inspector I 48,922 57,366 7.00 393,272 7.00 395,051 7.00 395,051 30000136 Water Service Inspector II 52,874 61,984 1.00 61,980 1.00 61,980 1.00 61,980 30000650 Water Treatment Operations Supervisor 78,770 105,851 1.00 81,996 1.00 83,956 1.00 83,956 30000146 Water Treatment Operator I 51,646 54,080 1.00 52,257 1.00 54,084 3.00 207,084 30000147 Water Treatment Operator II 54,725 70,741 9.00 576,576 9.00 598,119 9.00 598,119 30000424 Water Utility Director 146,474 209,893 1.00 198,084 1.00 205,520 1.00 205,520 30002433 Water Utility Director, Assistant 105,248 146,973 1.00 126,132 1.00 130,442 1.00 130,442 30000078 Water Utility Worker, Sr 49,130 54,621 1.00 54,624 1.00 54,624 1.00 54,624 30001081 Watershed & Conduit Supvr 78,770 105,851 1.00 105,852 1.00 105,852 1.00 105,852 30000149 Watershed Specialist I 42,432 52,021 4.00 198,492 4.00 205,439 4.00 205,439 30000151 Watershed Specialist II 49,130 54,621 2.00 109,248 2.00 109,248 2.00 109,248 30001308 Watershed Specialist III 58,594 65,686 2.00 131,376 2.00 131,376 2.00 131,376 TOTAL FULL-TIME POSITIONS 579.25 42,022,465 579.25 42,618,935 600.25 44,294,783 30000433 Administrative Specialist, Sr 47,362 72,904 0.85 61,272 0.85 61,968 0.85 61,968 30000017 Customer Accounts Specialist I 37,336 53,830 2.00 110,772 2.00 110,772 2.00 110,772 30000365 Engineer-Civil 91,333 110,989 1.40 155,388 1.00 110,988 1.00 110,988 TOTAL PART-TIME POSITIONS 4.25 327,432 3.85 283,728 3.85 283,728 30000492 Community Outreach & Informtn Rep 61,734 82,285 0.60 48,720 0.60 49,098 0.60 49,098 30000017 Customer Accounts Specialist I 37,336 53,830 2.00 107,664 2.00 107,664 2.00 107,664 30000337 Environmental Technician I 42,682 57,200 1.00 49,032 1.00 49,032 1.00 49,032 30000241 Laboratory Analyst I 47,029 59,405 1.00 54,696 1.00 54,696 1.00 54,696 30001284 Laboratory Analytical Specialist 57,574 76,461 1.00 76,464 1.00 76,464 1.00 76,464 30000451 Management Analyst 64,813 86,403 0.83 63,010 0.00 0 0.00 0 30000403 Remittance Technician 38,147 53,373 1.00 53,376 1.00 53,376 1.00 53,376 30000147 Water Treatment Operator II 54,725 70,741 2.00 114,228 2.00 125,544 2.00 125,544 TOTAL LIMITED TERM POSITIONS 9.43 567,190 8.60 515,874 8.60 515,874 GRAND TOTAL 592.93 42,917,087 591.70 43,418,537 612.70 45,094,385

City of Portland, Oregon – FY 2018-19 Requested Budget 33

Fund Summary Water Fund

Water Fund Requested Actual Actual Revised No DP Requested Proposed FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2018-19 FY 2018-19 Resources Charges for Services 168,252,384 169,393,921 173,566,927 188,098,970 190,219,010 Intergovernmental 657,696 551,743 526,000 526,000 526,000 Miscellaneous 1,754,975 2,494,569 1,576,612 2,079,535 2,079,535 Total External Revenues 170,665,055 172,440,233 175,669,539 190,704,505 192,824,545 Fund Transfers - Revenue 69,713,794 75,956,178 123,825,175 146,739,026 148,079,226 Interagency Revenue 3,179,359 2,934,952 3,282,258 3,413,608 3,413,608 Total Internal Revenues 72,893,153 78,891,130 127,107,433 150,152,634 151,492,834 Beginning Fund Balance 74,897,562 81,956,259 93,376,756 87,977,490 87,977,490 Total Resources 318,455,770 333,287,622 396,153,728 428,834,629 432,294,869 Requirements Personnel Services 60,500,631 62,338,078 70,363,293 73,131,337 75,619,965 External Materials and Services 27,003,702 29,166,218 34,012,984 40,368,366 41,842,466 Internal Materials and Services 20,081,872 20,105,702 22,623,926 22,611,404 22,941,804 Capital Outlay 28,166,834 33,545,590 78,059,000 97,962,604 97,129,716 Total Bureau Expenditures 135,753,039 145,155,588 205,059,203 234,073,711 237,533,951 Debt Service 2,951,515 3,796,319 4,255,681 4,469,280 4,469,280 Contingency 0 0 86,378,812 94,173,681 94,173,681 Fund Transfers - Expense 97,794,957 90,958,961 100,460,032 96,117,957 96,117,957 Total Fund Expenditures 100,746,472 94,755,280 191,094,525 194,760,918 194,760,918 Ending Fund Balance 81,956,259 93,376,754 0 0 0 Total Requirements 318,455,770 333,287,622 396,153,728 428,834,629 432,294,869 Fund Overview The Water Fund is the operating fund of the Portland Water Bureau. With the exception of debt service, all expenditures in this fund are for operation, maintenance, and capital assets. Receipts from the sale of water are the primary revenue source for the Water Fund.

Managing Agency Portland Water Bureau Significant Changes from Prior Year The FY 2018-19 Requested Budget includes an increase in Water Fund resources of approximately $36.1 million from the FY 2017-18 Revised Budget. The changes in Charges for Services include increases in water sales revenue due to increases in water rates, and other water fees and charges of $16.7 million. Cash transfers increased by $24.3 million from the prior year, primarily due to increased reimbursement from the Water Construction Fund for capital expenditures planned in FY 2018-19. Miscellaneous sources increased by $0.5 million from the prior year. The beginning fund balance increased by $1.6 million driven by a reduced transfer to the Sinking Fund.

City of Portland, Oregon – FY 2018-19 Requested Budget 1 Water Fund Fund Summary

Total bureau requirements are higher in the FY 2018-19 Requested Budget than FY 2017-18 Revised Budget due to increased capital expenditures, offset by reduced transfers. Capital expenditures increased $23.4 million from the FY 2017-18 Revised Budget. Fund transfers decreased by $4.3 million, which includes $6.3 million less transferred to the Construction Fund primarily for cash financed capital. This decrease is offset by $2.0 million more transferred to the Sinking Fund.

2 City of Portland, Oregon – FY 2018-19 Requested Budget Fund Summary Water Bond Sinking Fund

Water Bond Sinking Fund Requested Actual Actual Revised No DP Requested Proposed FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2018-19 FY 2018-19 Resources Bond & Note 0 90,104,866 7,017,000 6,523,000 6,523,000 Miscellaneous 282,863 369,966 313,512 517,295 517,295 Total External Revenues 282,863 90,474,832 7,330,512 7,040,295 7,040,295 Fund Transfers - Revenue 50,582,777 53,266,912 55,452,790 57,550,332 57,550,332 Total Internal Revenues 50,582,777 53,266,912 55,452,790 57,550,332 57,550,332 Beginning Fund Balance 36,863,089 36,874,429 31,468,627 29,713,013 29,713,013 Total Resources 87,728,729 180,616,173 94,251,929 94,303,640 94,303,640 Requirements Total Bureau Expenditures 00000 Debt Service 50,854,300 149,147,547 55,766,302 58,067,627 58,067,627 Debt Service Reserves 0 0 38,368,200 36,236,013 36,236,013 Total Fund Expenditures 50,854,300 149,147,547 94,134,502 94,303,640 94,303,640 Ending Fund Balance 36,874,429 31,468,626 117,427 0 0 Total Requirements 87,728,729 180,616,173 94,251,929 94,303,640 94,303,640 Fund Overview The Water Bond Sinking Fund pays for principal and interest on revenue bonds issued to finance water system improvements. The bond reserve accounts are maintained in the Water Bond Sinking Fund.

Managing Agency Portland Water Bureau Significant Changes from Prior Year The primary resource in the FY 2018-19 budget is a transfer from the Water Fund of $57.6 million to pay for debt service. A bond reserve account of $6.5 million is planned with the bond sale planned for December 2018. Debt Service will increase in FY 2018-19 as a result of the planned December 2018 bond sale. The planned bond sale for FY 2017-18 will not occur reducing planned reserves by $7.0 million. Additionally, $1.6 million of current reserves and $0.1 million of additional interest earnings will be utilized for debt service in FY 2017- 18. These decreases will be offset by the $6.5 million reserve requirement for the December 2018 bond sale, resulting in Debt Service Reserves decreasing $2.2 million.

City of Portland, Oregon – FY 2018-19 Requested Budget 1

Fund Summary Water Construction Fund

Water Construction Fund Requested Actual Actual Revised No DP Requested Proposed FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2018-19 FY 2018-19 Resources Charges for Services 4,555,202 5,540,949 3,250,000 4,000,000 4,000,000 Bond & Note 0 93,284,958 91,878,000 85,407,000 85,407,000 Miscellaneous 629,197 1,186,422 525,404 863,930 863,930 Total External Revenues 5,184,399 100,012,329 95,653,404 90,270,930 90,270,930 Fund Transfers - Revenue 41,492,317 31,507,992 39,120,393 32,844,115 32,844,115 Total Internal Revenues 41,492,317 31,507,992 39,120,393 32,844,115 32,844,115 Beginning Fund Balance 88,351,143 65,349,065 121,817,229 60,213,033 60,213,033 Total Resources 135,027,859 196,869,386 256,591,026 183,328,078 183,328,078 Requirements Total Bureau Expenditures 00000 Contingency 0 0 17,902,015 22,005,604 22,005,604 Fund Transfers - Expense 69,678,794 75,052,156 122,770,175 146,704,026 146,704,026 Total Fund Expenditures 69,678,794 75,052,156 140,672,190 168,709,630 168,709,630 Ending Fund Balance 65,349,065 121,817,230 115,918,836 14,618,448 14,618,448 Total Requirements 135,027,859 196,869,386 256,591,026 183,328,078 183,328,078 Fund Overview The Water Construction Fund is the capital fund of the Portland Water Bureau. This fund pays for equipment and capital expenditures for the water system, including ongoing capital repair and replacement, enhancements, and large and nonrecurring additions to the system.

Managing Agency Portland Water Bureau Significant Changes from Prior Year

Revenue bond sales are planned for December 2018 and will provide funding of $85.4 million to fund capital projects. The Water Fund will transfer $32.8 million to the Water Construction Fund to fund capital projects, a decrease of $6.3 million from the FY 2017-18 Revised Budget. The Water Construction Fund will transfer $146.7 million to reimburse the Water Fund for direct and indirect capital costs, an increase of $23.9 million from the FY 2017-18 Revised Budget.

City of Portland, Oregon – FY 2018-19 Requested Budget 1

Portland Water Bureau

Capital Program Revised Requested Capital Plan Project Prior Years FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 5-Year Total Customer Service

Security and Emergency Mgt Total Project Cost: Ongoing Area: Undetermined Maintenance Confidence: Optimal Original Cost: Ongoing Objective: & Repair Project Description Projects funded by this budget will include physical security improvements to major and smaller facilities as well as improved security in the overall water distribution system and control and communications system. In FY 2018-19, the funding requested is for any needed replacement of surveillance equipment. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 0 100,000 100,000 100,000 100,000 100,000 100,000 500,000 Net Operations and Maintenance Costs 0 0 0 0 0

Distribution

Council Crest Tank Roof Total Project Cost: 1,309,000 Area: Southwest Confidence: High Original Cost: 700,000 Objective: Replacement Project Description Council Crest Tank is the highest-elevation tank in southwest Portland and serves approximately 1,300 customers with no backup gravity supply. Due to corrosion of the exposed structure, there is a risk of roof collapse from the effects of an earthquake or an ice or wind storm. Roof failure could result in a long- term boil water notice, frequent outages, and reactive repair costs. This project will replace the Council Crest Tank roof and upper wall shell. In FY 2018-19, this project will complete construction. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 318,604 502,000 820,000 0000820,000 Net Operations and Maintenance Costs 0 0 0 0 0

City of Portland, Oregon – FY 2018-19 Requested Budget 1 Portland Water Bureau Project Detail

Capital Program Revised Requested Capital Plan Project Prior Years FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 5-Year Total

Distribution Mains Total Project Cost: Ongoing Area: Citywide Confidence: Optimal Original Cost: Ongoing Objective: Replacement Project Description The bureau is committed to improving maintenance of the water system infrastructure, including repairs, replacements and upgrades. This program supports rehabilitation and replacement of substandard mains; expansion due to private lands development; increased water supply for fire protection; improved water quality; and water system upgrades due to local improvement districts and street improvements. The Portland Water Bureau uses a risk-based, reliability- centered approach to identify, catalog, and prioritize projects to ensure minimal disruption to customers. Distribution main replacements also include appurtenances such as fire hydrants, valves, pressure regulators, service branches, and other facilities. Small projects, under $125,000, are normally completed by bureau personnel. Projects with construction estimates of more than $125,000 are typically put out for bid. Many projects in this program provide for the relocation and adjustment of water facilities to accommodate storm drainage and sewer pipelines constructed by the Bureau of Environmental Services (BES), roadway configuration changes, pavement overlays, and bridge improvements for the Portland Bureau of Transportation and the Oregon Department of Transportation. Other bureaus reimburse a portion of the costs based on the age of the existing water facility. In FY 2018-19, the bureau expects to work on about 50 minor distribution mains projects. Recently, there has been an increase in the number of petition mains supporting new development. Also, the bureau expects to begin construction of larger mains at Jerald Way (720 feet replacement) and SW 53rd Ave 620 feet) and interagency projects such as PBOT's SE 122nd Ave Bridge Replacement and BES Montavilla Sewers. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, other construction fund revenues such as system development charges and interest earnings, and interagency revenues.

Total Expenditures 0 14,412,000 10,353,000 12,240,000 14,305,000 16,170,000 21,210,000 74,278,000 Net Operations and Maintenance Costs 0 0 0 0 0

Field Support Total Project Cost: Ongoing Area: Citywide Maintenance Confidence: Optimal Original Cost: Ongoing Objective: & Repair Project Description This program funds the supplies, equipment, and facilities that the bureau field crews use to maintain and operate the water system. The bureau’s fleet of construction equipment and vehicles are managed through this program. The project funding is from a combination of net proceeds from water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 0 4,000,000 4,130,000 4,130,000 4,130,000 4,130,000 4,130,000 20,650,000 Net Operations and Maintenance Costs 0 0 0 0 0

Fulton Pump Mains Replacement Total Project Cost: 5,079,000 Area: Southwest Maintenance Confidence: Low Original Cost: 5,079,000 Objective: & Repair Project Description This project will install approximately 2,890 feet of new 20-inch pump main and 450 feet of new 24-inch pump main. The 24-inch pump main includes 300 feet bored under the I-5 Freeway and approximately 150 feet bored under SW Barbur Blvd. The project will also include abandoning approximately 3180 feet of 10- inch pump main and 3,180 feet of 12-inch pump main between the I-5 right-of-way and the Burlingame Tank Site. Several sections of the Fulton Pump Main System were determined by CLEM analysis to be at high risk to the bureau. The crossing of the I-5 Freeway is an uncased 16-inch steel pipe, which would cause severe damage to I-5 and surrounding neighborhoods if it breaks. There have been 15 leaks and breaks since 1965 on the section of mains that will be replaced. In FY 2018-19, the project will continue design. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 0 60,000 570,000 630,000 30,000 2,835,000 954,000 5,019,000 Net Operations and Maintenance Costs 0 0 0 0 0

2 City of Portland, Oregon – FY 2018-19 Requested Budget Project Detail Portland Water Bureau

Capital Program Revised Requested Capital Plan Project Prior Years FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 5-Year Total

Greenleaf Pump Station Total Project Cost: 2,587,000 Area: Northwest Confidence: High Original Cost: 1,710,000 Objective: Replacement Project Description Greenleaf Pump Station will be improved to allow for the demolition of the Penridge Tank. Parts of the Penridge tank are corroded and PWB recommends the Greenleaf pump station improvements in lieu of replacing the tank. The station will be fitted with energy-efficient pumps for normal distribution needs and two large pumps for fire protection. In FY 2018-19, this project will complete construction. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 974,708 1,000,000 372,000 0000372,000 Net Operations and Maintenance Costs 0 0 0 0 0

Hydrants Total Project Cost: Ongoing Area: Citywide Confidence: Optimal Original Cost: Ongoing Objective: Replacement Project Description There are approximately 14,500 fire hydrants connected to the Portland water system. These hydrants allow Portland the flexibility and preparedness to meet the challenge of a fire emergency through coordination with the Portland Fire & Rescue Bureau. This subprogram replaces fire hydrants that are nonstandard or no longer repairable to increase efficiency. The project funding is from a combination of net proceeds from water sales revenue and construction fund revenues such as system development charges, interagency reimbursements and interest earnings.

Total Expenditures 0 1,400,000 1,450,000 1,450,000 1,450,000 1,450,000 1,450,000 7,250,000 Net Operations and Maintenance Costs 0 0 0 0 0

Meters Total Project Cost: Ongoing Area: Citywide Confidence: Optimal Original Cost: Ongoing Objective: Replacement Project Description The bureau has thousands of meters that monitor the quantity of water flowing through the system. The bureau purchases about 8,500 meters annually. These meters are tools to effectively and efficiently manage the allocation of costs of service to public agencies, commercial enterprises, and other non-residential customers. The bureau is also installing automated meter-reading devices and non-skid access lids where applicable. The bureau objective is to maintain metering devices to read within 3% of actual values. The project funding is from a combination of net proceeds from water sales revenue, BES contribution, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 0 1,000,000 1,030,000 1,030,000 1,030,000 1,030,000 1,030,000 5,150,000 Net Operations and Maintenance Costs 0 0 0 0 0

City of Portland, Oregon – FY 2018-19 Requested Budget 3 Portland Water Bureau Project Detail

Capital Program Revised Requested Capital Plan Project Prior Years FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 5-Year Total

N Jantzen Ave west of Pavilion Total Project Cost: 1,283,000 Area: North Confidence: Moderate Original Cost: 1,290,000 Objective: Replacement Project Description This replacement main is recommended for following reasons: (1) as many as six nonstandard services lack complete documentation and documented backflow devices, (2) the nonstandard services have leak histories and other possible undocumented private connections, (3) the asbestos-concrete main (while not affecting water quality) requires specialized training and personal protection for repairs. This project will correct services without backflow devices and replace approximately 2,200 ft. of substandard asbestos-concrete and plastic water lines. The project will also install six fire hydrants. In FY 2018-19, this project will finish design which was delayed by easement negotiations. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 186,938 19,000 1,080,000 00001,080,000 Net Operations and Maintenance Costs 0 0 0 0 0

NE 47th Ave and Columbia Blvd LID Total Project Cost: 1,400,000 Area: Northeast Maintenance Confidence: Moderate Original Cost: 1,400,000 Objective: & Repair Project Description PBOT will be completely rebuilding the right-of-way and installing Stormwater planters overtop of the existing 12-inch cast iron water main. Although the 12-inch pipe is a straight run of pipe, the impacted sections have connections for 12 water service lines. This project will relocate 2,035 feet of 12-inch water main, relocate three fire hydrants, install four new fire hydrants, lower and sleeve 12 1-inch water service lines under proposed stormwater planters, renew nine 1-inch and one 2-inch water service lines. Approximately 110 feet of the relocated pipe will need to be installed in a casing underneath the Columbia Slough. In FY 2018-19, this project will complete construction in coordination with PBOT. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 60,938 0 89,000 000089,000 Net Operations and Maintenance Costs 0 0 0 0 0

NE 49th and Roselawn Total Project Cost: 916,000 Area: Northeast Maintenance Confidence: Low Original Cost: 916,000 Objective: & Repair Project Description This project will install 2,970 ft of 6-inch ductile iron (DI) main, install 125 ft of 4-inch DI main, renew 82 services, and install 4 hydrants. This group of distribution mains has collectively had eight vertical breaks, six since 2010 on the 4-inch cast iron mains. The 2-inch galvanized mains have had five leaks due to corrosion and pitting and have been noted as in poor condition by field crews. These mains have reached the end of their useful life per Asset Management modelling. In FY 2018-19, the project will continue design. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 0 127,000 101,000 678,000 10,000 0 0 789,000 Net Operations and Maintenance Costs 0 0 0 0 0

4 City of Portland, Oregon – FY 2018-19 Requested Budget Project Detail Portland Water Bureau

Capital Program Revised Requested Capital Plan Project Prior Years FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 5-Year Total

NEW - NE Wheeler Basin Relocations Total Project Cost: $832,000 Area: Northeast Maintenance Confidence: High Original Cost: Objective: & Repair Project Description BES will be installing new sanitary sewer main, manholes, and Stormwater planters which will impact the existing water mains, fire hydrants and water service lines. This project will abandon 90 feet of 4-inch cast iron (CI) water pipe, 380 feet of 6-inch CI water pipe, 70 feet of 6-inch Ductile Iron (DI) water pipe, and 690 feet of 8-inch CI water pipe. The project will install 50 feet of 4-inch DI pipe, 550 feet of 6-inch DI, and 650 feet of 8-inch DI pipe, 2 new hydrants and 7 new water services. There will be about 19 temporary water services and service renewals upon completion of the work. In FY 2018-19, the project will complete construction with BES. The funding is from a combination of net proceeds from water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 39,149 0 55,000 000055,000 Net Operations and Maintenance Costs 0 0 0 0 0

NEW - Outer Powell Transportation Safety Total Project Cost: 1,974,000 Area: Southeast Confidence: Low Original Cost: 1,974,000 Objective: Replacement Project Description ODOT is planning to widen the travel roadway and add sidewalks and bike lanes to SE Powell Blvd, which will potentially impact Conduit 3 and the existing distribution mains, water service lines and fire hydrants. This project will review and consult with ODOT during design and design the water system mitigation of relocating 2,410 feet of 8-inch main, installing 260 feet of 6-inch water main. Also, relocate four fire hydrants and install three additional fire hydrants; and renew 43 1-inch water service lines, seven 2-inch water service lines, one 4-inch fireline, and one 6-inch fireline. In FY 2018-19, this project will begin construction in coordination with ODOT. The project funding is from a combination of net proceeds from water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 3,702 0 1,749,000 60,000 0 0 0 1,809,000 Net Operations and Maintenance Costs 0 0 0 0 0

Penridge Mains Total Project Cost: 2,530,000 Area: Northwest Confidence: Low Original Cost: 2,530,000 Objective: Replacement Project Description This project will replace approximately 8,000 feet of existing main and renew 41 1-inch domestic services and install seven hydrants. This work will allow the Penridge Tank to be removed from service without further diminishing already substandard fire flows. The Greenleaf Pump Station is being replaced in a separate project. In FY 2018-19, the project will begin construction. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 45,836 230,000 1,229,000 978,000 0 0 0 2,207,000 Net Operations and Maintenance Costs 0 0 0 0 0

City of Portland, Oregon – FY 2018-19 Requested Budget 5 Portland Water Bureau Project Detail

Capital Program Revised Requested Capital Plan Project Prior Years FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 5-Year Total

Pump Stations and Tanks Total Project Cost: Ongoing Area: Citywide Confidence: Optimal Original Cost: Ongoing Objective: Replacement Project Description This program maintains a large variety of infrastructure consisting of water storage tanks, pumps, and pump and control facilities. The bureau uses a reliability- centered maintenance analysis to prioritize projects in these areas. The focus for this program continues to be the replacement of the remote telemetry units at over 140 remote sites. The existing units are over 15 years old and are becoming obsolete. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 0 800,000 1,710,000 3,100,000 3,100,000 3,100,000 3,100,000 14,110,000 Net Operations and Maintenance Costs 0 0 0 0 0

NEW - SCADA System Upgrade 2017 Total Project Cost: 1,136,000 Area: Citywide Confidence: Low Original Cost: Objective: Replacement Project Description This project will replace all PWB Supervisory control and data acquisition (SCADA) machines (11 servers and 25 workstations) and upgrade the OASyS SCADA application software to the latest version. It will add virtualization of the SCADA servers for faster recovery in the event of catastrophic failure. By 2020, the current SCADA system will be obsolete because the core operating system will not be supported for fixes such as security patches. The replacement and upgrade will ensure that the system remains protected from cyber threats and potential malfunctions. In FY 2018-19, this project will complete upgrades. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 0 0 1,136,000 250,000 0 0 0 1,386,000 Net Operations and Maintenance Costs 0 0 0 0 0

Services Total Project Cost: Ongoing Area: Citywide Maintenance Confidence: Optimal Original Cost: Ongoing Objective: & Repair Project Description A service is the connection between the water main and any given customer’s service meter. Service connections are always performed by bureau crews. This program funds installation and upgrade of about 1,000 water service connections annually. The funds facilitate construction of replacement water services requested by customers for new development as well as redevelopment. A fee is collected for new service requests to partially reimburse the bureau’s costs. The project funding is from a combination of net proceeds from water sales revenue and construction fund revenues such as system development charges, interagency revenue, and interest earnings.

Total Expenditures 0 6,000,000 6,200,000 6,200,000 6,200,000 6,200,000 6,200,000 31,000,000 Net Operations and Maintenance Costs 0 0 0 0 0

6 City of Portland, Oregon – FY 2018-19 Requested Budget Project Detail Portland Water Bureau

Capital Program Revised Requested Capital Plan Project Prior Years FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 5-Year Total

NEW - Sunnyside North Reconstruction Total Project Cost: 1,077,000 Area: Southeast Confidence: Low Original Cost: Objective: Project Description This project will replace or add about 700 feet of 6-inch main, 300 feet of 8-inch main, 110 feet of 16 inch main, and multiple services and hydrants. The work also includes about 350 feet of looped water main that are betterments. This is an interagency project due to a new BES project for sanitary sewer mains, manholes, stormwater planters, and reconstructing sanitary sewer laterals that will impact the existing water mains, fittings supported by thrust blocks, and water service pipes. Replacing with a looped main will improve reliability. In FY 2018-19, the project will begin construction. The funding is from a combination of net proceeds from water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 0 0 790,000 90,000 0 0 0 880,000 Net Operations and Maintenance Costs 0 0 0 0 0

SW Boones Ferry Rd at SW Arnold St Bridge Total Project Cost: 560,000 Area: Southwest Confidence: Moderate Original Cost: 560,000 Objective: Replacement Project Description This project will abandon two parallel 6-inch cast iron water mains in SW Boones Ferry Rd between SW Comus Ct and SW Arnold St (about 800 feet). Replace with one 460-foot long 8-inch ductile iron water main, attaching the 8-inch pipe to a 125.5 foot long new bridge structure. Renew two water service lines. BES will be removing the existing roadway bed crossing the existing culvert structure under the roadway, in order to construct a 125-foot long bridge structure in SW Boones Ferry Rd north of SW Arnold St. The two existing parallel 6-inch water mains in SW Boones Ferry Rd will be impacted by this roadway removal. BES’s consultant will design the pipe on bridge structure water main and bid the water mitigation work. BES will be responsible a portion of the project cost to design and replace the existing water. In FY 2018-19 will continue construction with BES. The remaining funding is from a combination of net proceeds from water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 29,876 356,000 198,000 302,000 0 0 0 500,000 Net Operations and Maintenance Costs 0 0 0 0 0

Willamette Blvd Bridge Main Replacement Total Project Cost: 4,500,000 Area: North Confidence: Low Original Cost: 4,500,000 Objective: Replacement Project Description The 20-inch pipeline on the N. Willamette Boulevard Bridge is the primary supply to approximately 5,000 services in North Portland and to the St. John's pipeline crossing of the Willamette River. Both the existing 20-inch pipeline on the bridge and the bridge are in poor condition. The pipeline is vulnerable to failure due to condition and also due to a seismic event. This project will install 950 feet of 24-inch pipe in 42-inch casing, plus an additional 200 feet of un-cased 24-inch pipe to connect to the existing system. The bureau will abandon the existing 20-inch pipeline crossing the Willamette Boulevard Bridge. In FY 2018-19, the project will continue design. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 25,829 860,000 715,000 624,000 2,553,000 446,000 0 4,338,000 Net Operations and Maintenance Costs 0 0 0 0 0

City of Portland, Oregon – FY 2018-19 Requested Budget 7 Portland Water Bureau Project Detail

Capital Program Revised Requested Capital Plan Project Prior Years FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 5-Year Total

Willamette River Pipe Crossing Total Project Cost: 57,000,000 Area: Central City Confidence: Moderate Original Cost: 57,000,000 Objective: Replacement Project Description The project provides for the replacement of major pipelines to strengthen the transmission link between Powell Butte and the service areas west of the Willamette River, including downtown and the storage reservoirs at Washington Park. The project will include construction of a new seismically strengthened river crossing to replace one or two of the existing Willamette River crossings, and new transmission piping on both sides of the Willamette River. In FY 2018- 19, this project will complete design. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 929,430 6,600,000 38,600,000 7,970,000 0 0 0 46,570,000 Net Operations and Maintenance Costs 0 0 0 0 0

Regulatory Compliance

Water Quality and Regulatory Total Project Cost: Ongoing Area: Undetermined Confidence: Optimal Original Cost: Ongoing Objective: Mandated Project Description The bureau recognizes the Bull Run Watershed as a diverse ecosystem. The bureau is committed to preserving this habitat and complying with federal regulations using practical, locally driven solutions. Many of the projects in this subprogram respond to the Clean Water Act and Endangered Species Act, including the implementation of the Bull Run Habitat Conservation Plan as adopted by City Council and approved by the National Marine Fisheries Service. Consistent with Habitat Conservation Plan commitments, this program funds easements, purchases land, and supports projects jointly conducted with other watershed partners. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 0 2,300,000 2,080,000 2,080,000 500,000 500,000 500,000 5,660,000 Net Operations and Maintenance Costs 0 0 0 0 0

Supply

Bull Run Watershed Total Project Cost: Ongoing Area: Undetermined Maintenance Confidence: Optimal Original Cost: Ongoing Objective: & Repair Project Description The Bull Run Watershed provides one of the highest quality drinking water sources in the United States. The bureau is committed to updating the Bull Run Watershed protection and maintenance procedures and agreements based on the 2007 Bull Run Agreement with the Mt. Hood National Forest. Funds in this program maintain, improve, and protect the watershed roads and facilities. Many of these facilities are between 50 and 70 years old. Projects address the proper functioning of watershed assets, such as the dams and the intake and treatment facilities. In FY 2018-19, the bureau will continue discussions about the formal land exchange with the U.S. Forest Service. The proposed land exchange would convey approximately 2,800 acres of National Forest System land to the City of Portland in exchange for approximately 2,500 acres of City-owned lands within the Bull Run Watershed Management Unit. The purpose of the proposed land exchange is to create a better alignment of land ownership responsibilities with the respective missions of the agencies. The proposed exchange would consolidate City holdings to lands surrounding the two water supply reservoirs and associated infrastructure. The U.S. Department of Agriculture Forest Service would acquire forested uplands that are valuable for natural resource protection and ecosystem management. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 0 500,000 50,000 100,000 1,600,000 1,000,000 3,500,000 6,250,000 Net Operations and Maintenance Costs 0 0 0 0 0

8 City of Portland, Oregon – FY 2018-19 Requested Budget Project Detail Portland Water Bureau

Capital Program Revised Requested Capital Plan Project Prior Years FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 5-Year Total

Dam 1 Needle Valve Replacement Total Project Cost: 3,260,000 Area: Undetermined Confidence: Low Original Cost: 3,260,000 Objective: Replacement Project Description The needle flow control valves are 89 years old and were refurbished 24 years ago. The valves are antiquated, leaky, difficult to open and close, and pose a risk to operator safety. This project will replace the three existing needle valves, actuators, and control panels at Dam 1 with new jet-flow gate valves or fixed-cone valves. In FY 2017-18, the project will continue design. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 39,622 252,000 1,647,000 1,215,000 0 0 0 2,862,000 Net Operations and Maintenance Costs 0 0 0 0 0

FUTURE - Howell-Bunger Valve Improvements Total Project Cost: 1,647,000 Area: Undetermined Maintenance Confidence: Low Original Cost: Objective: & Repair Project Description This future project will replace existing appurtenances associated with the three (3) Howell-Bunger valves at Dam #2, including the actuators, external linkages and gearboxes, control infrastructure, electrical service and panels, and the aerial cable. The Howell-Bunger Valves planning report identified site risks associated with the continued use of the Howell-Bunger valves at Headworks. PWB’s risk-analysis evaluation process (CLEM) identified two Medium risks related to 240 V obsolete power and personnel disability due to arc flashing. Obsolete power hinders PWB’s ability to repair or replace failing system components at Headworks. Total lifecycle benefits are estimated at $2.86 million and exceed the estimated project cost at a ratio of 1.5. The project also supports federal dam regulations (FERC) and environmental conservation requirements per our Habitat Conservation Plan (HCP). In FY 2022-23, the project will begin design. The funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 0 0 0 0 0 0 273,000 273,000 Net Operations and Maintenance Costs 0 0 0 0 0

Groundwater Total Project Cost: Ongoing Area: Northeast Confidence: Optimal Original Cost: Ongoing Objective: Efficiency Project Description The Columbia South Shore Well Field is Portland’s alternative supply of water should the Bull Run Watershed supply be interrupted for any reason. The well field's primary use is to supplement the bureau peak demand in summers. If flow from Bull Run source must be interrupted or augmented due to storm-caused turbidity, drought conditions, or other causes, then the bureau pumps groundwater. The groundwater supply also allows the bureau to continue to operate while constructing and operating a filtration facility. Projects funded in this program improve the maintenance of this aging infrastructure, including repairs, selective replacements, and upgrades. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue and other construction fund revenues, such as system development charges and interest earnings.

Total Expenditures 0 390,000 220,000 570,000 570,000 570,000 570,000 2,500,000 Net Operations and Maintenance Costs 0 0 0 0 0

City of Portland, Oregon – FY 2018-19 Requested Budget 9 Portland Water Bureau Project Detail

Capital Program Revised Requested Capital Plan Project Prior Years FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 5-Year Total

Groundwater Electrical Supply Total Project Cost: 1,611,000 Area: Northeast Maintenance Confidence: High Original Cost: 2,200,000 Objective: & Repair Project Description The 2000 Portland Water Bureau System Vulnerability Analysis and later reports identified a vulnerability for electrical failures at PWB's Groundwater Pump Station. The cost of a possible transformer failure is significant, mainly due to the time needed for transformer replacement. The 2009 Portland Water Bureau Groundwater Pump Station 115kV/4160V Electrical Systems Vulnerability Reduction document studied alternatives for addressing the risk. Other major studies that addressed this issue are the 2008 Groundwater Vulnerability to Flooding and Electrical Outages Project Concept Report and the 2008 Suggestions for Additional Groundwater Vulnerability Reduction Assessment. This project consists of design and construction of a new high-voltage transformer and other components to complete a double-ended electrical substation at the Groundwater Pump Station. It will also include a new main breaker replacement and purchase of selected spare components. In FY 2018-19, this project will complete construction. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 583,813 550,000 366,000 0000366,000 Net Operations and Maintenance Costs 0 0 0 0 0

Road 10E MP 6.2 - 8.2 Total Project Cost: 1,652,000 Area: Southeast Maintenance Confidence: Low Original Cost: 1,652,000 Objective: & Repair Project Description This project will grind existing pavement, restore road subgrade, pave, and stripe 2 miles of Road 10. The road will be brought up to current standards, using fill and walls to add an average of 2 feet of width to the segment. Approximately 10 culverts will be replaced with aluminum alloy pipe. This segment of Road 10 is part of the primary access to Dam 1. It provides access from Headworks to secondary egress from the watershed, should the main route be blocked. This segment spans the location of a rollover accident caused by an unsupported road edge at a particularly narrow point. This key segment will be in Poor condition by the time construction begins and the width does not meet the current design standard for a Class A road. This project is recommended by the Bull Run Roads Asset Management Plan (Aug 2012). Construction scheduling will reflect seasonal restrictions for the watershed. In FY2018-19, the project will begin design. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 0 135,000 160,000 110,000 1,465,000 0 0 1,735,000 Net Operations and Maintenance Costs 0 0 0 0 0

10 City of Portland, Oregon – FY 2018-19 Requested Budget Project Detail Portland Water Bureau

Capital Program Revised Requested Capital Plan Project Prior Years FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 5-Year Total

Road 10H MP 10.95 to 12.56 Total Project Cost: 1,006,000 Area: Undetermined Maintenance Confidence: Moderate Original Cost: 822,000 Objective: & Repair Project Description This segment of Road 10 provides access from Headworks to secondary egress from the watershed, should the main route be blocked. This secondary road is at the low end of fair condition and the road width does not meet the current design standard for this Class A road. This project is recommended by the 2012 Bull Run Roads Asset Management Plan. This project will grind existing pavement, restore road subgrade, pave, and stripe 1.61 miles of Road 10. The road condition assessment indicates the average width of this road meets the design standard, however isolated widening may be required. Current condition ratings indicate one culvert will also be replaced. Culvert inspection during design may indicate a need to replace more. In FY 2018-19, this project will complete construction. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 149,533 1,018,000 796,000 0000796,000 Net Operations and Maintenance Costs 0 0 0 0 0

Road 10R MP 28.77 to 31.85 Total Project Cost: 2,100,000 Area: Undetermined Maintenance Confidence: Low Original Cost: 2,100,000 Objective: & Repair Project Description This segment of Road 10 provides access from Bull Run Lake to secondary egress from the watershed, should the main route be blocked. This secondary road is considered at the low end of "fair" condition with a remaining service life of approximately five years. This project is recommended by the 2012 Bull Run Roads Asset Management Plan. This project will grind existing pavement, restore road subgrade, reconstruct turnouts, pave, and stripe 3.08 miles of Road 10. The road meets the design width for this Class B segment; however several failures have occurred in turnouts designed to accommodate passing vehicles.The road condition assessment indicates the average width of this road meets the design standard, however isolated widening may be required. Current condition ratings indicate one culvert will be replaced. Culvert inspection during design may indicate the need to replace more. In FY 2018-19, this project will complete design. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 87,302 740,000 620,000 1,250,000 0 0 0 1,870,000 Net Operations and Maintenance Costs 0 0 0 0 0

Vivian Groundwater Improvements Total Project Cost: 1,730,000 Area: Southeast Confidence: Low Original Cost: 1,730,000 Objective: Expansion Project Description This project will design and construct an ammonia treatment system, corrosion control system, chlorine system improvements, two new booster pumps, and electrical upgrades at the Vivian site. Upgrade the SCADA and instrumentation systems and two motor control centers. Increasing groundwater capacity at the Vivian site helps to meet the 2010 Water Management and Conservation Plan goals regarding capacity. This reduces the risk of customer outage when the Bull Run supply is not available (the CLEM rating for this outage is High). Increasing capacity at Vivian also mitigates some of the seismic supply risks for the Columbia South Shore Well Field. The development of Vivian will be recommended in the Bureau-wide seismic study. The electrical cost (per gallon) for groundwater production from Vivian is less than from the Columbia South Shore Well Field. The benefits begin to exceed costs after ten years of operation. In FY 2018-19, the project will continue design. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 0 160,000 340,000 0000340,000 Net Operations and Maintenance Costs 0 0 0 0 0

City of Portland, Oregon – FY 2018-19 Requested Budget 11 Portland Water Bureau Project Detail

Capital Program Revised Requested Capital Plan Project Prior Years FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 5-Year Total Support

FUTURE - Portland Building Contribution Total Project Cost: 43,500,000 Area: Central City Confidence: Low Original Cost: 35,500,000 Objective: Replacement Project Description City Council has approved a project to reconstruct the Portland Building due to problems with its structure, exterior, and operational systems that repairs alone cannot address. The project is planned to complete in 2020 and PWB will contribute funds towards the project in FY 2020-21. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 0 0 0 0 43,500,000 0 0 43,500,000 Net Operations and Maintenance Costs 0 0 200,000 200,000 200,000

Planning Total Project Cost: Ongoing Area: Undetermined Confidence: Optimal Original Cost: Ongoing Objective: Efficiency Project Description This program consists of general planning studies for projects needed to improve the operation of the water system. These include pressure zone adjustments, facility modifications, and system element studies. In FY 2018-19, the bureau will continue developing the Supply System Mater Plan and Sandy River Station Facilities Plan. The bureau will also continue studies on topics such as water quality, tank and pump station issues, groundwater upgrades, and isolation of transmission pipeline elements. The project funding is from water sales revenue.

Total Expenditures 0 2,900,000 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 15,000,000 Net Operations and Maintenance Costs 0 0 0 0 0

Transmission/Terminal Storage

Conduit 2 Internal Inspection Total Project Cost: 1,788,000 Area: Citywide Confidence: High Original Cost: Objective: Project Description This project will investigate approximately 8 total miles of smaller sections of Conduit 2 that are located in highly vulnerable areas, record findings from the investigation, identify limits of damaged sections, and propose strategies to address the identified defects. This is one of several projects that resulted from the PWB Conduit Rehabilitation Plan (January 2015). The plan recommended a detailed investigation of the condition of the three conduits in areas that are known to have prior repairs due to leaks, landslide potential and corrosive soil properties. PWB will use the findings from this project to identify possible capital improvement projects. In FY18-19, the project will complete the investigation. The funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 5,618 0 95,000 000095,000 Net Operations and Maintenance Costs 0 0 0 0 0

12 City of Portland, Oregon – FY 2018-19 Requested Budget Project Detail Portland Water Bureau

Capital Program Revised Requested Capital Plan Project Prior Years FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 5-Year Total

Conduits and Transmission Mains Total Project Cost: Ongoing Area: Undetermined Maintenance Confidence: Optimal Original Cost: Ongoing Objective: & Repair Project Description The conduits that bring water to Portland from the Bull Run watershed are pipes 56 to 72 inches in diameter. This program funds repairs, replacements, and upgrades to improve availability and accuracy of metered data from wholesale connections. Service to the City's wholesale customers is a key reason for the bureau's commitment to improve maintenance of this aging infrastructure. In future years, the bureau plans to rehabilitate four to five miles of conduits each year at an estimated cost of $4 to $5 million dollars per mile. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 0 2,723,440 4,260,000 5,490,000 16,530,000 16,530,000 16,530,000 59,340,000 Net Operations and Maintenance Costs 0 0 0 0 0

Gresham Conduit 2 Trestle Upgrades Total Project Cost: 1,150,000 Area: Citywide Maintenance Confidence: Low Original Cost: 1,150,000 Objective: & Repair Project Description This project will install 13 ring girders and scour protection on both the El Camino and Beaver Creek trestles. These improvements mitigate Conduit 2 failure risks due to seismic and flooding events, which will improve the bureau's supply resiliency due to natural disasters. In FY 2018-19, the project will complete construction. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 124,030 655,000 821,000 0000821,000 Net Operations and Maintenance Costs 0 0 0 0 0

NEW - Powell Butte Reservoir 1 Roof Upgrades Total Project Cost: 6,056,000 Area: Southeast Maintenance Confidence: Low Original Cost: 6,056,000 Objective: & Repair Project Description This project will design and construct multiple structural improvements to the Powell Butte Reservoir 1 (PBR1) roof, including removal of existing overburden; a new rubberized cover; new perimeter concrete aprons around the existing opening, and a new drainage system above the roof. PWB staff have documented water leaking through the roof of PBR1. The reservoir has temporarily been placed out of service. Design for this project will begin in FY 2018-19. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 0 0 125,000 1,211,000 4,720,000 0 0 6,056,000 Net Operations and Maintenance Costs 0 0 0 0 0

City of Portland, Oregon – FY 2018-19 Requested Budget 13 Portland Water Bureau Project Detail

Capital Program Revised Requested Capital Plan Project Prior Years FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 5-Year Total

Rockwood PUD Meter Total Project Cost: 530,000 Area: East Confidence: High Original Cost: 530,000 Objective: Efficiency Project Description This project will design and construct a replacement meter vault outside of the traffic lanes to reduce risk. The existing vault houses a wholesale meter with instrumentation and requires the closure of multiple lanes to access. Due to width and height restrictions, the business case identifies a high risk exposure to injury to staff working in the vault. The new vault will be in the parking lane and sidewalk area, and will contain a check valve. Piping will be installed to reconnect the supply main to the distribution main. In FY 2018-19, this project will complete easements and construction. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 141,310 0 410,000 0000410,000 Net Operations and Maintenance Costs 0 0 0 0 0

Terminal Reservoirs Total Project Cost: Ongoing Area: Southeast Confidence: Optimal Original Cost: Ongoing Objective: Mandated Project Description The Terminal Reservoirs program includes conveying water from the supply facilities to the retail distribution system. Major assets in this program include the the terminal reservoirs, such as those at Powell Butte, Kelly Butte, and Washington Park. The program provides for the rehabilitation, replacement, and expansion of smaller reservoir system assets. The program funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 0 100,000 100,000 100,000 100,000 100,000 100,000 500,000 Net Operations and Maintenance Costs 0 0 0 0 0

NEW - WA Park Hypochlorite Improvements Total Project Cost: 1,740,000 Area: Southwest Maintenance Confidence: Low Original Cost: 1,740,000 Objective: & Repair Project Description This project will design and construct new feed systems for hypochlorite and aqueous ammonia and make upgrades to the existing chlorine building to improve safety and accommodate expanded operation. The existing hypochlorite feed system is over 20 years old, in very poor condition, and must be expanded to provide disinfection for new additional required water features. The poor condition and limited capacity of the system results in high risks including the potential to not meet water quality regulations and safety risks for operators. Design for this project will begin in FY 2018-19. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund reneunues such as system development charges and interest earnings.

Total Expenditures 0 0 188,000 344,000 1,208,000 0 0 1,740,000 Net Operations and Maintenance Costs 0 0 0 0 0

14 City of Portland, Oregon – FY 2018-19 Requested Budget Project Detail Portland Water Bureau

Capital Program Revised Requested Capital Plan Project Prior Years FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 5-Year Total

Washington Park Total Project Cost: 190,000,000 Area: West Confidence: High Original Cost: 61,132,686 Objective: Mandated Project Description The project will plan, design, and construct a new seismically resilient buried reservoir to replace open Reservoir #3 at Washington Park. This project is part of compliance with the federal LT2 mandate to replace the open reservoirs. It is assumed that Reservoir #4 will be used as the overflow detention, dechlorination, and stormwater structure. The buried reservoir would be topped with a reflecting pond and historical features will be protected as much as possible. In FY 2018- 19, this project will continue construction. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 40,616,724 54,100,000 41,555,021 26,100,000 15,500,000 6,000,000 10,900,000 100,055,021 Net Operations and Maintenance Costs 0 0 0 0 0

Treatment

NEW - Corrosion Control Improvements Total Project Cost: 19,961,000 Area: Undetermined Confidence: Low Original Cost: 19,961,000 Objective: Mandated Project Description The project will design and construct a corrosion control treatment facility at the Lusted Hill Treatment Facility. The project is required to maintain compliance with the Lead and Copper Rule (LCR) and meet Oregon Health Authority’s (OHA) compliance schedule to implement improved corrosion control treatment. In FY 2018-19, this project will continue design. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 0 910,000 1,820,000 1,601,000 7,105,000 8,330,000 150,000 19,006,000 Net Operations and Maintenance Costs 0 0 0 700,000 1,400,000

Treatment Total Project Cost: Ongoing Area: Undetermined Confidence: Optimal Original Cost: Ongoing Objective: Mandated Project Description The Treatment Program provides for meeting or exceeding the federal and state requirements for a public water system utilizing an unfiltered surface water source as well as a groundwater source. The program funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 0 0 0 100,000 100,000 100,000 100,000 400,000 Net Operations and Maintenance Costs 0 0 0 0 0

City of Portland, Oregon – FY 2018-19 Requested Budget 15 Portland Water Bureau Project Detail

Capital Program Revised Requested Capital Plan Project Prior Years FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 5-Year Total

NEW - Water System Filtration Total Project Cost: 500,000,000 Area: Undetermined Confidence: Low Original Cost: Objective: Mandated Project Description The Portland City Council has directed the Water Bureau to comply with the Oregon Health Authority's order to treat drinking water from the Bull Run Watershed for Cryptosporidium by proceeding with planning, design and construction of a filtration plant. The first step will be to develop a Basis of Design Report. This Basis of Design Report will include evaluation of needs and alternatives, implementation of a pilot study, and the creation of the report. The next step will be hiring a design consultant and managing the design process. This will be followed by construction through an alternative construction method. In FY2018-19, the project will continue planning. The project funding is from a combination of net proceeds from revenue bond sales, water sales revenue, and other construction fund revenues such as system development charges and interest earnings.

Total Expenditures 0 0 5,590,000 6,500,000 21,060,000 19,890,000 55,120,000 108,160,000 Net Operations and Maintenance Costs 0 0 0 0 0

16 City of Portland, Oregon – FY 2018-19 Requested Budget Decision Package Summary

Bureau: Portland Water Bureau Priority: 01 Type: Adds

Decision Package: WA_01 - Water Treatment Program:Treatment

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget

EXPENDITURES Personnel Services 0 916,006 916,006 0 0 0 0 0 External Materials and Services 35,000 0 35,000 0 0 0 0 0 Capital Outlay 0 (600,318) (600,318) 0 0 0 0 0 TOTAL EXPENDITURES 35,000 315,688 350,688 0 0 0 0 0 REVENUES Licenses & Permits 0 0 0 0 0 0 0 0 Charges for Services 35,000 315,688 350,688 0 0 0 0 0 Intergovernmental Revenues 0 0 0 0 0 0 0 0 TOTAL REVENUES 35,000 315,688 350,688 0 0 0 0 0

FTE Full-Time Positions 0.00 7.00 7.00 0.00 0.00 0.00 0.00 0.00 TOTAL FTE 0.00 7.00 7.00 0.00 0.00 0.00 0.00 0.00

1/29/18 9:10 Page 1 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 01 Type: Adds

Decision Package: WA_01 - Water Treatment Program:Treatment

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget Description: Problem Statement: As a public water system, the bureau’s provision of drinking water is federally regulated predominantly under the 1974 Safe Drinking Water Act (SDWA). The bureau also has to comply with the requirements of the Long Term 2 Enhanced Surface Water Treatment (LT2) Rule. This compliance resulted in a comprehensive Watershed compliance program (Bull Run Treatment Variance) and replacement of some of the bureau’s largest capital assets, it's five uncovered terminal reservoirs.

The LT2 Rule also requires water systems using surface water as a source to provide treatment to remove or inactivate Cryptosporidium. A provision of the SDWA allows a variance from that treatment under certain circumstances. The City made a request for a treatment variance to the Oregon Health Authority (OHA), and was granted the variance in March 2012 based on data, the legal protections for the Watershed, and the level of Watershed controls provided by the current management agreements and policies.

From January 2017 through March 2017, Cryptosporidium was detected in drinking water from the intake of the Bull Run Watershed in 14 samples. These were the first detections of Cryptosporidium at the intake since the treatment variance went into effect. After the repeated number of detections in early 2017, it became apparent that the concentration of Cryptosporidium would not be below allowable levels, and OHA issued an order to provide treatment.

The Portland City Council has directed the Portland Water Bureau (PWB) to comply with the order by proceeding with planning, design and construction of a filtration treatment facility. The Water Filtration Project will require a significant number of consultant expertise and internal staff for which the current staffing level is insufficient. The additional staff requested in this decision package will help PWB complete the required work and meet the deadlines imposed by OHA.

PWB currently has two water treatment facilities at Headworks and Lusted Hill that treat water from the Bull Run watershed to meet state and federal drinking water regulations. The required increase in treatment with the Water Filtration and Corrosion Control Optimization Projects will require additional staff resources in both the Engineering and Operations groups. There is also a great deal of additional work that will need to be performed to prepare the current system for the Project. Below is a description of each position request and how they will fit into the framework of preparation for and execution of the Water Filtration Project:

•The Principal Engineer is a new position request necessary to manage and oversee the new 10-year filtration project as a program manager. This position will be the lead for all the efforts that will be completed by internal staff and consultants. PWB will be looking for an individual that has experience with treatment systems to fill this position.

•The Engineering Associate positions, one position in Operations and one position in Engineering, are technical project support staff for the filtration project. These positions will support the planning, design, construction and operations phases of the filtration and corrosion control improvements. Further, the Engineering Associate position in Operations would support the Water Supply and Treatment Manager by evaluating optimizations of the treatment plants, preparing standard operating procedures and evaluating impacts of source water quality changes on the treatment processes.

•The Program Coordinator position is a non-technical project support staff member for the filtration project. This position will provide general project support. The bureau will be the lead of all the efforts required to meet treatment requirements. This position will support the Principal Engineer and other team members in keeping the project organized and on schedule.

•The Management Analyst position request is to add another position to the Contract Administration Branch (CAB). The Filtration project will need full-time support from CAB due to the increased number of estimated procurements. Further, there will be an increase in the amount of reporting and invoicing required over the course of the project. This position will enable CAB to continue to support the rest of the organization as well as the Filtration project.

•The Water Treatment Operators will oversee the day to day operations and maintenance of the treatment plants; an integral part of ensuring appropriate treatment to meet the safe drinking water act, handling hazardous chemicals and diverting water to meet clean water act requirements. The two requested positions are needed in the near-term for bench and pilot testing for the filtration facility, as well as working with Engineering on Corrosion Control Optimization while handling the existing duties at Headworks and Lusted Hill. It will take a minimum of three years to train and certify the new operators under the State of Oregon operator certification requirements for time on the job requirements for making operational 1/29/18 9:10 Page 2 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 01 Type: Adds

Decision Package: WA_01 - Water Treatment Program:Treatment

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget Description: decisions. Hiring the operators now is necessary to ensure that staffing is available to operate the new Corrosion Control facility and to perform additional pilot testing that will be necessary as the Filtration project moves forward.

Alternatives: This request represents a supplement to the existing staff needed to complete this project.

PWB believes it is in the bureau’s best interest to have bureau staff, rather than contractors, assist with the Corrosion Control Optimization and Water Filtration Projects. It allows the opportunity to develop in-house expertise. By growing this expertise in-house, staff members will acquire the knowledge and skills necessary to operate this facility once on-line. The bureau has seen that this approach provides valuable expertise and value in the long-term.

If this package is not approved this year, there will be several outcomes. The engineering and management efforts contemplated for these positions will likely be procured via contract. The internal management of the services to be procured would result in less effort on other capital improvement projects. The treatment operators would be requested again in the future as the treatment facility will require more staff than the current treatment operations. The impact of not hiring the management analyst would yield delays in processing contracts and invoices bureau-wide.

If the bureau uses a consultant for these services, the knowledge of the system is lost when the project ends. This could result in additional long-term costs at the end of the project to hire the consultants back for additional training of staff. In discussions with utilities that have filtration plants such as Tacoma, staffing had to be increased to accommodate the short and long term needs during testing and normal operations once the plant was placed in service.

1/29/18 9:10 Page 3 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 01 Type: Adds

Decision Package: WA_01 - Water Treatment Program:Treatment

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget

Expected Results: Impact: I The decision to move forward with the Corrosion Control and Water Filtration Projects ensure that the bureau will be able to provide reliable and safe water to customers in the future. This decision package is an integral part of the larger projects, and the project’s success will rely heavily on the due diligence of the organization in preparation for it. Without appropriate staff and staff levels, the bureau risks continued compliance with all drinking water regulations.

This decision package addresses Performance Measures (PM) 0077/[Percentage of city’s water supply provided by Bull Run watershed under normal conditions] by providing engineering staff for the planning, design, and construction of the capital project, and by providing the appropriately trained and certified operations personnel necessary to ensure that future processes have the experienced and knowledgeable levels of staffing required.

Further, this request would also provide engineering staff to design and implement the capital improvement project and Operations staff to assist the Water Quality Compliance group within Operations with (PM) 0058/[Number of violations of state and federal drinking water quality regulations].

Equity: How does this program or service align with the goal of advancing equity or achieving goals outlined in your bureau’s Racial Equity Plan?

Water treatment changes are unrelated to specific goals outlined in the bureau’s Racial Equity Plan. However, any increase in staffing represents an opportunity to implement hiring strategies outlined in the Racial Equity Plan.

Please identify the Citywide goals and or strategies addressed by this program or service.

Water treatment changes do not address Citywide equity goals or strategies.

What areas of the city will be impacted by your program or service and is there a larger than average population of people of color in those areas?

Changes in water treatment will affect all Portlanders, with specific populations unknown. The bureau does not have data about whether communities of color are affected differently by water quality issues in Portland. Corrosion control will primarily benefit people living in houses built between 1970 and 1985, which may have lead solder in their plumbing. There is a greater concentration of those houses in East Portland, where there are also more people at risk of marginalization.

Both corrosion control and filtration will make Portland’s water safer to drink. Citywide corrosion control is a more equitable solution to reducing lead in water than encouraging property owners to replace lead-containing fixtures or plumbing.

1/29/18 9:10 Page 4 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 02 Type: Adds

Decision Package: WA_02 - UniDirectional Flushing Program:Distribution

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget

EXPENDITURES Personnel Services 0 418,854 418,854 0 0 0 0 0 External Materials and Services 25,000 0 25,000 0 0 0 0 0 TOTAL EXPENDITURES 25,000 418,854 443,854 0 0 0 0 0 REVENUES Charges for Services 25,000 418,854 443,854 0 0 0 0 0 Intergovernmental Revenues 0 0 0 0 0 0 0 0 TOTAL REVENUES 25,000 418,854 443,854 0 0 0 0 0

FTE Full-Time Positions 0.00 5.00 5.00 0.00 0.00 0.00 0.00 0.00 TOTAL FTE 0.00 5.00 5.00 0.00 0.00 0.00 0.00 0.00

1/29/18 9:10 Page 5 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 02 Type: Adds

Decision Package: WA_02 - UniDirectional Flushing Program:Distribution

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget Description: Problem Statement: In 1991, Environmental Protection Agency (EPA) published the Lead and Copper Rule (LCR) to control lead and copper in drinking water. As a result, Portland installed additional treatment at the Lusted Hill Treatment Facility to control corrosion by increasing the pH of the water.

In 1997, the Oregon Heath Authority (OHA) approved the Lead Hazard Reduction Program as the optimal corrosion control treatment. This program is comprised of four components:

•Corrosion Control Treatment – Adds sodium hydroxide to increase pH and reduce the presence of lead in tap water; •Lead in Water Education and Testing – Provides free lead in water testing to all customers in the Bull run service area; •Education and Outreach for all sources of lead exposure – Raises awareness of all potential sources of lead, focusing on highest risk to children through trainings, workshops, and community events; and •Lead paint remediation – Provides in-home risk assessments and lead hazard reduction measures through a partnership with the Housing Bureau’s Lead Hazard Control Grant Program.

In 2014, in anticipation of the changes to the Water System with the disconnection of uncovered reservoirs, the bureau began a water quality corrosion control study. Due to events in Flint, Michigan, the bureau contacted OHA to discuss Lead and Copper Rule (LCR) compliance. The Bureau proposed an improved corrosion control treatment schedule which was approved by OHA in January 2017. The schedule includes completing an improved corrosion control treatment facility by 2022.

This program has become increasingly important as the bureau is moving forward with optimizing corrosion control. Following the completion of the Corrosion Control Study, the bureau will move forward with the construction of a new corrosion control treatment facility at Lusted Hill in the form of a structure to house and deliver protective elements to the water to prevent corrosion. Prior to the new facility going online, it is prudent to have the entire distribution system flushed. The current program staff resources are not sufficient to perform the level of UniDirectional Flushing (UDF) and ad hoc water quality flushing necessary to maintain the current distribution system at a level of water quality expected in drinking water systems.

Operations currently has one position dedicated to flushing, backfilled with available positions when necessary. UDF staff systematically open and close pipe valves, forcing water through the system to scour the insides of pipes and remove sediment, biofilm, debris, and other deposits.

With Portland Water Bureau’s (PWB) current level of staffing, it would take approximately 70 years to flush the entire distribution system. The current industry standard for a filtered system’s UDF program is to flush the entire system every 5-10 years. An individual UniDirectional (UDF) field crew is typically composed of two people. The five positions requested in this decision package will provide 6 dedicated field positions to the flushing program and will provide three, two-person crews to begin flushing the entire system. The three crews are estimated to complete a 10-year flushing cycle for the entire system. This decision package represents the first phase of flushing in preparation for corrosion control optimization. Once the bureau can analyze the flushing rate of three crews, a determination can be made to hire limited term and/or community service aides to supplement and essentially double the number of crews to flush the entire system before 2022. Moreover, the bureau will be able to make long term decisions as to what the most efficient level of staffing required to ensure the water quality stability in the distribution system for proper corrosion control and filtered water performance.

This decision package will increase labor costs for the bureau, but will reduce the cost of treating water once the corrosion control optimization program is implemented. Flushing the entire distribution system prior to optimization will potentially reduce the amount of chemicals that are needed to treat the water for corrosion. The bureau will evaluate the amount of chemical reduction after the entire distribution system has been flushed.

Alternatives: If this decision package is not approved, the bureau will continue to flush the system at the current level, then will need to add more chemicals to the water once corrosion control optimization is implemented. The addition of chemicals will cause a substantive increase in program cost. The current study and analysis of the requirements to modify treatment may

1/29/18 9:10 Page 6 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 02 Type: Adds

Decision Package: WA_02 - UniDirectional Flushing Program:Distribution

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget Description: require that the existing dosing of sodium hydroxide will needs to be five times the rate introduced now. Current budget for FY 2018-19 for sodium hydroxide is $380,000. Any additional dosing due to the lack of a flushed system may add up to $190,000 per year depending on corrosion control treatment process decisions (type of treatment chemical(s) and dosing levels).

Expected Results: Impact: I A core strategic goal of PWB is to provide reliable water service to customers in the quantities they desire and at a quality level that meets or exceeds both customer and regulatory standards. Distribution system deficiencies have been attributed to more than 25 percent of waterborne disease outbreaks annually in the United States. UDF is one of the most powerful tools available to a water utility for maintaining distribution system water quality. Left in the system, sediment, biofilm, and deposits in pipelines can reduce the effectiveness of disinfection treatment and potentially foster the growth of microbes in the system. In the fall of 2013, the distribution system had a tier two violation of drinking water quality standards in SW Portland primarily caused by pipes with biofilm and silt accumulations. Dedicating three full-time crews to UDF will ensure that the bureau can meet industry standards for UDF programs and continue to address performance measure WA_0058 Number of violations of state and federal drinking water quality regulations, ensuring that all regulatory requirements are met prior to corrosion optimization and after filtration.

Equity: How does this program or service align with the goal of advancing equity or achieving goals outlined in your bureau’s Racial Equity Plan?

Increasing unidirectional flushing does not relate to specific goals within the bureau’s Racial Equity Plan. However, any increase in staffing does represent an opportunity to implement hiring practices outlined in the plan.

Please identify the Citywide goals and or strategies addressed by this program or service.

Improving water quality moves the PWB closer to the goal of providing equitable services for all City residents.

What areas of the city will be impacted by your program or service and is there a larger than average population of people of color in those areas?

Increasing unidirectional flushing will improve water quality for all Portlanders; the PWB does not have data that reflect whether communities of color currently experience water quality differences.

1/29/18 9:10 Page 7 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 03 Type: Adds

Decision Package: WA_03 - Workforce Management Program:Support

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget

EXPENDITURES Personnel Services 0 393,820 393,820 0 0 0 0 0 External Materials and Services 15,000 0 15,000 0 0 0 0 0 Capital Outlay 0 (232,570) (232,570) 0 0 0 0 0 TOTAL EXPENDITURES 15,000 161,250 176,250 0 0 0 0 0 REVENUES Charges for Services 15,000 161,250 176,250 0 0 0 0 0 Intergovernmental Revenues 0 0 0 0 0 0 0 0 TOTAL REVENUES 15,000 161,250 176,250 0 0 0 0 0

FTE Full-Time Positions 0.00 3.00 3.00 0.00 0.00 0.00 0.00 0.00 TOTAL FTE 0.00 3.00 3.00 0.00 0.00 0.00 0.00 0.00

1/29/18 9:10 Page 8 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 03 Type: Adds

Decision Package: WA_03 - Workforce Management Program:Support

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget Description: Problem Statement: The nature of much of the work conducted at the bureau is subject to multiple regulatory and safety requirements that must be renewed on a schedule. For example, Occupational Safety and Health Administration (OSHA) requirements must be met in all the work the bureau does. It is critical to maintain a staff that has the necessary expertise and training to meet the bureau’s safety requirements and all other regulatory conditions, as well as provide specialized expertise to maximize the bureau’s efficiency and effectiveness. The three positions requested in this decision package are aimed at supplying the bureau with the resources necessary for successfully meeting regulatory and safety requirements and ensuring the necessary expertise to complete work as efficiently and effectively as possible.

Organizational Expertise: The purpose of this package is to fund two Public Works Inspectors tasked with supporting the construction of CIP project improvements to the Portland Water Bureau (PWB) distribution system. PWB typically hires contract public works inspectors to augment the bureau’s permanent staff when the bureau is short of internal resources and the project needs are above a sustained level. PWB has used on-call service contracts since 2006 and have consistently employed two to three general contract inspectors and an electrical contract inspector per year. The inspection workload fluctuates during the year, so an inspector might work for the bureau three months, be laid off for two months, and be then rehired for the remainder of the year. Records from FY 2013-14 to FY 2017-18 below shows the inspector hours utilized. Records prior to FY 2013-14 are not easily recoverable, but the bureau believes inspector utilization to be consistent since 2006.

Fiscal Year Hours Comment 2013-14 705 specialty inspector 2013-14 1,315 three inspectors working concurrently 2014-15 1,858 specialty inspector 2014-15 3,630 three inspectors working concurrently during peak season 2015-16 756 one inspector during peak season 2015-16 1,553 specialty inspector 2016-17 4,076 two inspectors working concurrently during peak season 2016-17 1,803 specialty inspector

These inspectors work primarily on capital improvement projects that improve the bureau’s resilience and reliability as well as meeting the bureau’s public health obligations and regulations. Projects include Washington Park Reservoirs, Willamette River Crossing, the Corrosion Control Treatment project, filtration, seismic improvements, and numerous distribution projects.

The City and bureau are committed to maintaining and developing staff as workload dictates. Based on the data since 2013, it is possible to sustain hiring two permanent fulltime public works inspectors.

This additional staffing is necessary to comply with the District Council of Trade Union (DCTU) contract to reduce the use of contract inspectors by hiring permanent full time public works inspectors. DCTU contract 2017-20 Article 6.3 allows use of contract staff to augment permanent full-time staff provided no permanent City staff are displaced and “… that there is a cost savings, an emergency, a statutory requirement, extreme risk, capital improvement projects, work covered by warranty, proprietary work, urgent work, limited work, or work occurs during peak loads...”.

Safety: The current level of safety support, housed in Maintenance and Construction, does not provide sufficient coverage for all activities, particularly the field work associated with Operations. There is a need in Operations for a Safety Officer to ensure that safe work practices and training are inherent. As new large capital projects are completed and come into service, such as the Hannah Mason Pump Station and the Washington Park complex, it becomes imperative that personnel safety be a part of initial and on-going work.

1/29/18 9:10 Page 9 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 03 Type: Adds

Decision Package: WA_03 - Workforce Management Program:Support

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget Description: The Operations group routinely works in high hazard situations that include high voltage electrical, fall hazards, and extreme confined spaces such as elevated tanks. This work is extremely specialized and requires continual training to perform it safely and in compliance with Oregon OSHA workplace safety requirements. Tasks from the Risk Management Plan (RMP) document are not being completed. The RMP is especially important at Headworks due to the amount of chlorine stored on site. It’s also fundamental in creating Standard Operating Procedures for activities such as working on dam assets. This position will be required to manage training requirements, safety talks, safety committees, incident responses, lockout tagout, first aid, respiratory protection equipment, and various other safety related work.

Alternatives: If the two Public Works Inspector positions are not funded, the bureau will need to continue to utilize contracted services to meet the requirement for the public works inspections of capital projects. If the proposed safety officer position is not filled, some of the work such as the required RMP or Process Safety Management plans could be done by an outside consultant but this PTE effort would still take a tremendous amount of staff time.

1/29/18 9:10 Page 10 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 03 Type: Adds

Decision Package: WA_03 - Workforce Management Program:Support

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget

Expected Results: The PWB employs nearly 600 full-time and seasonal employees. PWB’s workforce management goals include: T •Ensuring that staff has all the necessary skills and certifications •Providing a safe work environment •Developing internal expertise to meet future needs

Impact: Organizational Expertise: This decision package addresses Performance Measures (PM) 0048/[Percentage of budgeted CIP Expended]; PM 0089 /[Percent of identified high risk assets addressed]; PM 0059 Number of violations of state and federal environmental regulations] and PM 0058 [Number of violations of state and federal drinking water quality regulations] by providing full time public works inspection staff for overseeing the contractor responsible for construction of the capital improvement projects.

All three of these positions increase the bureau’s organizational expertise to ensure a safe work environment for employees and the ability to meet the regulations that govern the bureau’s work. Using outside staff and/or consultants reduces ability to fully meet the requirements.

Safety: This decision package addresses Performance Measures (PM) 0089/[Percentage of high risk assets addressed] by applying the appropriate level of maintenance through best practices which will allow for the bureau’s workforces to focus work on higher risk assets.

If this position is not funded, Operations will be required by OR-OSHA to update their RMP through the consultant hiring process. This would not address the Process Safety Management (PSM) requirements for the bureau’s other high hazard sites such as the Groundwater facility. Future facilities will require outside resources to provide high level training and document development. It is preferential that in-house knowledge and document development occur to ensure the long-term success of all safety requirements.

Many of the bureau’s existing documents were developed by a consulting firm, such as the existing PSM, which is far out of date. While there is an expense to hiring a consultant, the true advantage of having in-house development is that the knowledge remains within the bureau and updates will not require the additional time necessary to lead a consultant through the system processes.

Equity: How does this program or service align with the goal of advancing equity or achieving goals outlined in your bureau’s Racial Equity Plan?

This decision package is unrelated to specific goals within the bureau’s Racial Equity Plan; however, any increase in staffing presents an opportunity to use hiring practices outlined in the plan.

Please identify the Citywide goals and or strategies addressed by this program or service.

This decision package does not address Citywide goals or strategies.

What areas of the city will be impacted by your program or service and is there a larger than average population of people of color in those areas?

This decision package does not affect specific areas of the city or specific communities of color.

1/29/18 9:10 Page 11 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 03 Type: Adds

Decision Package: WA_03 - Workforce Management Program:Support

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget

1/29/18 9:10 Page 12 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 04 Type: Adds

Decision Package: WA_04 - Asset Management Program:Distribution

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget

EXPENDITURES Personnel Services 0 266,228 266,228 0 0 0 0 0 External Materials and Services 15,000 0 15,000 0 0 0 0 0 TOTAL EXPENDITURES 15,000 266,228 281,228 0 0 0 0 0 REVENUES Charges for Services 15,000 266,228 281,228 0 0 0 0 0 Intergovernmental Revenues 0 0 0 0 0 0 0 0 Miscellaneous Sources 0 0 0 0 0 0 0 0 TOTAL REVENUES 15,000 266,228 281,228 0 0 0 0 0

FTE Full-Time Positions 0.00 2.00 2.00 0.00 0.00 0.00 0.00 0.00 TOTAL FTE 0.00 2.00 2.00 0.00 0.00 0.00 0.00 0.00

1/29/18 9:10 Page 13 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 04 Type: Adds

Decision Package: WA_04 - Asset Management Program:Distribution

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget Description: Problem Statement: The Portland Water Bureau (PWB) has focused on specific actions to develop and implement asset management methods and best business practices throughout the bureau. Asset management enables PWB to set and maintain desired levels of service to its customers while supporting the lowest possible asset life-cycle cost, at an acceptable level of risk. The goal of PWB Asset Management Branch (AMB) is to create a framework from which the organization can pursue and achieve sustainable infrastructure management and can obtain and provide data in support of making life-cycle infrastructure decisions.

Two key areas of focus for the AMB are Reliability Centered Maintenance (RCM) and Water Loss Control. The following decision package aims to address the goals of both key areas.

Reliability Centered Maintenance: Reliability-centered maintenance practices support daily operations and business cases to evaluate project alternatives and life cycle costs to support decisions to invest in major rehabilitation or replacement. Asset Management supports decisions to maintain, repair, rehabilitate, or replace assets.

At PWB, RCM process improvements started with internal data improvements to track asset condition, field test results, work performed on work orders, and how and why assets fail and how often. PWB has an inventory of operational assets in the computerized maintenance and management system (CMMS) and has now gathered several years of failure code information on the distribution system assets. The AMB has worked with the Maintenance and Construction group as well as the Operations group to identify asset failure codes for key assets such as pipes, valves, and pumps; these codes are now required information on repair and maintenance work orders. Failure codes in recently completed work orders have allowed the bureau to better answer questions such as: how do the assets fail, what assets fail more frequently, do maintenance strategies appear to be effective in minimizing emergency asset failures? As the bureau continues to use RCM, the quality and reliability of the CMMS failure data will improve.

There has been little work with advancing the CMMS usage and failure coding information with the Headworks (supply and treatment) assets. More progress has been made on distribution-system assets than on supply-system assets. The greatest progress in implementing RCM has been with pump stations.

Next steps for the bureau are as follows: 1)Implement an RCM strategy 2)Develop predictive/preventive maintenance strategies 3)Complete an asset register for all maintenance-managed items (MMI) 4)Refine workflow processes 5)Set maintenance performance targets 6)Complete work order scheduling structure in Computerized Maintenance Management System (CMMS) 7)Record and track maintenance actions in CMMS 8)Implement cost-effective predictive and preventive maintenance activities 9)Meet/exceed performance targets (e.g., for percentages of preventive compared to reactive maintenance) 10)Develop RCM strategy for certain asset categories

These ten steps are still applicable at the maintenance programmatic level; however, RCM will be further defined as a rigorous set of process questions used to optimize the maintenance strategies used by PWB.

RCM is fundamentally a failure mode, effects, and criticality analysis used to optimize where and when maintenance is effective at preventing failure of the assets, and when not, finding an operating or capital solution that is better suited than further maintenance. For each process area with vertical assets, and each major asset cohort with linear assets, an RCM evaluation should be done to determine the appropriate maintenance tactics that prevent failure of the assets. When a proactive cost-effective maintenance strategy is not available, the evaluation will determine whether to run the asset to failure and replace, or request an evaluation to refurbish or replace the asset. The goal is to determine the optimum maintenance strategies, 1/29/18 9:10 Page 14 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 04 Type: Adds

Decision Package: WA_04 - Asset Management Program:Distribution

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget Description: and/or capital replacements, that prevent failure of the assets at the least life-cycle cost.

PWB is also investigating using RCM techniques during the design of the new corrosion control and filtration facilities. Potential failure modes can be effectively identified, and where cost effective, designed out of the asset before the asset is constructed and commissioned. As a result, Operations & Maintenance strategies can be identified and optimized at the lowest life-cycle cost to PWB before the asset is built and commissioned.

The AMB recommended creating a position in the Operations group that will have the responsibility to analyze failure information and recommend optimized maintenance strategies and assets that are ready for rehabilitation or replacement. This position will implement the field and data analyses that are currently not being accomplished and will be the link from field operations to the AMB.

The output from this requested position will begin to modify maintenance activities such that work is performed with the most efficient methods. This additional position will satisfy the needs of the bureau into the future, including requirements of the existing and future facilities. Using the decision-making outputs anticipated from this position could reduce the need for more field maintenance personnel in the future by reducing failure rates of those assets.

Water Loss Control: The State of Oregon requires that all water suppliers who request extensions of their water rights permits prepare and submit a Water Management and Conservation Plan which includes detailed reporting on water loss. Lost water is considered non-revenue water and includes transmission and distribution system leaks, meter inaccuracies, unauthorized consumption, and billing inconsistences. High rates of water loss are cause for concern both in terms of state regulation of water rights and bureau sustainability and stewardship goals. Excessive water loss poses a risk to the bureau’s ability to develop additional source capacity to address future supply and resilience needs. These cost the bureau money in terms of wasted treatment, power and transmission expenses and potential lost revenues.

Drinking water utilities throughout the country struggle with minimizing water loss, including dealing with pipeline leakage, meter inaccuracies, inconsistent accounting, or unauthorized consumption. A Water Loss Control program will provide the necessary stewardship to maintain accurate information on the nature and volumes of water loss, account for water loss on an annual basis, and implement studies and improvements that will reduce financial and customer service impacts to the bureau.

In October of 2017, the bureau published a Water Audit and Strategic Water Loss Control Plan. This plan included the findings from desktop water audits done by the bureau and the consulting firm Black and Veatch. The Water Audit and Strategic Water Loss Control Plan calculated that the annual water loss was valued at $2.9 million in FY 2015-16.

The bureau’s Engineering Services Planning staff with contracted services has been leading the data gathering effort, and with the finalization of the Water Audit and Strategic Water Loss Control Plan this fall, the bureau is poised to begin implementing the recommendations to reduce lost water and revenue. Currently, responsibility to continue to manage water loss data and the implementation of the plan is unassigned, and the bureau does not have staff resources available to manage this work. The purpose of this package is to fund a full-time position tasked to collect and manage water loss data, perform cost/benefit analyses on the recommendations, determine how and in what order to best implement the recommendations in the plan to reduce water loss and minimize non-rate revenue losses.

Alternatives:

RCM: Providing the highest value to customers through customer expectations, excellent business management, and operational practices and appropriate application of innovation and technology is a core mission of the bureau. It is fiscally responsible of PWB to utilize the data it collects and modify maintenance activities based on RCM.

1/29/18 9:10 Page 15 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 04 Type: Adds

Decision Package: WA_04 - Asset Management Program:Distribution

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget Description:

Water Loss Control: Implementation of the Water Audit and Strategic Water Loss Control Plan is considered a core business of the bureau and funding by traditional methods is deemed most appropriate. Investments in developing and implementing the water loss control program are expected to be recouped through savings from reductions in lost water. The consequence of not funding the package is continued high water loss rates, continued waste of expenses and natural resources, and potential impacts to the bureau’s ability to secure additional source capacity.

Expected Results: Impact: I RCM: This decision package addresses Performance Measures (PM) 0089/[Percentage of high risk assets addressed] by applying the appropriate level of maintenance through best practices which will allow for the bureau’s workforces to focus work on higher risk assets. Success will be measured over time with efficiency improvements, lower total life-cycle cost of assets minimization of unnecessary asset overhauls, and improvement of reliability of critical equipment.

Water Loss Control: Success will be measured by decreases in water loss each year as measured by the program’s annual water audit using the industry-standard AWWA M36 Water Audit Loss tool, targeted to reducing and maintaining the overall loss rate to below 10%. The reduction in water loss will result in reductions in overall bureau costs, energy consumption, CO2 emissions and lost revenues. Moving closer to industry standard water loss rates will also better position the bureau to obtain additional source capacity if needed through its upcoming Water Management and Conservation Plan process.

Equity How does this program or service align with the goal of advancing equity or achieving goals outlined in your bureau’s Racial Equity Plan?

This decision package is unrelated to specific goals within the bureau’s Racial Equity Plan; however, any increase in staffing presents an opportunity to implement hiring strategies outlined in the plan.

Please identify the Citywide goals and or strategies addressed by this program or service.

This decision package is unrelated to Citywide equity goals and strategies.

What areas of the city will be impacted by your program or service and is there a larger than average population of people of color in those areas?

Improvements in asset management would affect the whole city. The bureau does not have data to reflect whether there would be specific improvements in communities of color.

1/29/18 9:10 Page 16 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 05 Type: Adds

Decision Package: WA_05 - Communications Program:Support

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget

EXPENDITURES Personnel Services 0 136,650 136,650 0 0 0 0 0 External Materials and Services 5,000 0 5,000 0 0 0 0 0 TOTAL EXPENDITURES 5,000 136,650 141,650 0 0 0 0 0 REVENUES Charges for Services 5,000 136,650 141,650 0 0 0 0 0 Intergovernmental Revenues 0 0 0 0 0 0 0 0 TOTAL REVENUES 5,000 136,650 141,650 0 0 0 0 0

FTE Full-Time Positions 0.00 1.00 1.00 0.00 0.00 0.00 0.00 0.00 TOTAL FTE 0.00 1.00 1.00 0.00 0.00 0.00 0.00 0.00

Description: Problem statement: The bureau has relied on the services of a dedicated technical writer since 2006 to help design, draft, edit and finalize significant documents including the bureau’s Habitat Conservation Plan, Long Term 2 Enhanced Surface Water Treatment Rule variance request, Water Management and Conservation Plan (WMCP), bond financing official statements, as well as annual budget, Capital Improvement Plan (CIP) documents and regulatory reports. Over the past three years, the bureau’s technical writer has been assigned increasing non-technical writing responsibilities within the Asset Management Program. This transfer of duties has now eliminated the bureau’s dedicated technical writing capacity. In addition to ongoing regulatory reporting needs, technical writing requirements within the bureau are increasing with a larger and more complex CIP, increased asset management documentation needs, increased documentation requests from the public and oversight bodies, and a pending document submission deadline for a new WMCP (2020). The bureau has derived significant benefits from having a dedicated technical writer on staff to manage most of its critical document development and delivery. In addition to saving external costs on documentation, the bureau has benefitted from the accumulated expertise of the position, which has increased quality control, consistency, and workload scheduling for major documentation projects.

Alternatives: If the package is denied, individual project managers will either need to reassign staff working on other projects (if available), contract for technical writing support separately as group budgets allow, or the bureau will need to develop a sizeable central technical writing services contract to serve across the several functions in need of support. Establishing a contract is a time consuming process as well.

1/29/18 9:10 Page 17 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 05 Type: Adds

Decision Package: WA_05 - Communications Program:Support

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget

Expected Results: Impact: I This position supports multiple strategic goals for the bureau. Virtually anything requiring documentation, translation of technical information for multiple audiences, or regulatory reporting is supported by the work of this position. It would provide direct support to the bureau’s Water Quality, Equity, Resiliency and Customer Service Budget Priorities. In addition to the projects the position has worked on in the past, the bureau has new and anticipated demands for support in drafting emergency response templates, employee handbooks, quarterly Cryptosporidium regulatory reports, and customer service publications and letter templates to customers. Success will be measured by the degree to which regulatory reporting requirements continue to be fulfilled, the quality and quantity of major documentation projects achieved, and the amount of bureau spending on external technical writing services. Results should be realized within the first year of hiring the position and be ongoing.

Approximately $30,000 in professional services dollars that would otherwise be used for technical writing services in FY 2018-19 may be eliminated from the budget if this decision package is approved. Future years would see additional professional services costs avoided, particularly leading up to the production of the bureau’s WMCP due in 2020.

Equity: How does this program or service align with the goal of advancing equity or achieving goals outlined in your bureau’s Racial Equity Plan?

In its Racial Equity Plan, the bureau aims to “make public-facing materials more accessible to all communities, but particularly to English Language Learners.” Although the primary responsibility of this position is to write technical documents, this person will also write and edit material for the public using plain language.

Please identify the Citywide goals and or strategies addressed by this program or service.

This position has the potential to help the Water Bureau address the goal to strengthen “access to City services for communities of color and immigrant and refugee communities” through the use of plain language.

What areas of the city will be impacted by your program or service and is there a larger than average population of people of color in those areas?

People with low English proficiency would benefit from plain language and from the potential for the bureau to then more meaningfully translate such language.

1/29/18 9:10 Page 18 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 06 Type: Adds

Decision Package: WA_06 - Equity Manager Program:Support

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget

EXPENDITURES Personnel Services 0 139,370 139,370 0 0 0 0 0 External Materials and Services 5,000 0 5,000 0 0 0 0 0 TOTAL EXPENDITURES 5,000 139,370 144,370 0 0 0 0 0 REVENUES Charges for Services 5,000 139,370 144,370 0 0 0 0 0 Intergovernmental Revenues 0 0 0 0 0 0 0 0 TOTAL REVENUES 5,000 139,370 144,370 0 0 0 0 0

FTE Full-Time Positions 0.00 1.00 1.00 0.00 0.00 0.00 0.00 0.00 TOTAL FTE 0.00 1.00 1.00 0.00 0.00 0.00 0.00 0.00

1/29/18 9:10 Page 19 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 06 Type: Adds

Decision Package: WA_06 - Equity Manager Program:Support

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget Description: Problem Statement: The City has adopted Citywide Racial Equity Goals and Strategies including: to end racial disparities within city government; to strengthen outreach, public engagement, and access to City services for communities of color and immigrant and refugee communities; and to collaborate with communities and institutions to eliminate racial inequity in all areas of government. Per the Mayor’s Budget Guidance, this continues to be a critical area on which to focus our efforts.

The bureau has adopted a 5-year Racial Equity Plan that lays out the bureau’s approach to operationalizing the City’s goals and strategies while also articulating goals and strategies unique to the bureau. See: https://www.portlandoregon.gov/oehr/article/595598.

Currently the bureau has four staff directly engaged in operationalizing the strategies outlined in the plan: Water Administrative Manager, Training and Development Officer, and two Community Outreach and Information Representatives. The work done by the team has focused on employee and organization development and outreach. The proposed position will be part of the existing team to assist with the implementation of the bureau's Racial Equity Plan, promoting equitable policies, practices, and actions to produce equitable access, opportunities, impacts, and outcomes. The addition of this position will allow the bureau to add to our efforts and meet our goals by focusing on equity in the development and delivery of projects, programs and services. Overall, this position will concentrate on equity impact assessments and the implementation of an equity lens/tool as a standard bureau practice to ensure that both existing and proposed programs, polices, projects and decisions will empower communities of color in decision making and minimize unanticipated adverse consequences to underrepresented racial and ethnic groups. The position will provide expertise and advice and serve as a resource to managers to analyze impacts and outcomes, provide data and historical context to ensure that programs, policies, and decisions are aligned with the equity goals of the Racial Equity Plan. For example, if the Water Efficiency program wanted to expand its reach in communities of color, this position could advise the program manager about finding and using demographic data; creating meaningful relationships with community partners; applying an equity lens to potential program changes; and communicating effectively with customers the program has not reached in the past. This will be done for both internally and externally facing projects, programs, policies, decisions, etc.; however, the major focus will be on our external programs with community impact. This position will make recommendations to project and program management staff and to bureau leadership.

This position will also coordinate closely with the Office of Equity and Human Rights (OEHR) as well as Equity Managers in other bureaus.

Alternatives: If this decision package is not approved, the bureau will continue to move forward pursuing the goals and strategies put forth in the Equity Plan as existing resources are available. Work will proceed more slowly and without as much coordination without this position. Additionally, there are no dedicated existing resources at the bureau to coordinate with OEHR. If this position is not funded, the bureau will request funding for this position in the next budget year.

1/29/18 9:10 Page 20 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 06 Type: Adds

Decision Package: WA_06 - Equity Manager Program:Support

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget

Expected Results: Impact: I This decision package addresses Citywide Racial Equity Goals and Strategies including: to end racial disparities within city government; to strengthen outreach, public engagement, and access to City services for communities of color and immigrant and refugee communities; and to collaborate with communities and institutions to eliminate racial inequity in all areas of government. This position will support a more expeditious implementation of the Racial Equity Plan, particularly in areas not covered by current dedicated staff.

Equity: How does this program or service align with the goal of advancing equity or achieving goals outlined in your bureau’s Racial Equity Plan?

This position is intended to specifically advance racial equity goals and the bureau’s Racial Equity Plan. This position’s work could affect every aspect of the Racial Equity Plan.

Please identify the Citywide goals and or strategies addressed by this program or service.

The bureau’s Equity Manager would work to implement all Citywide equity goals and strategies.

What areas of the city will be impacted by your program or service and is there a larger than average population of people of color in those areas?

This position is specifically intended to benefit communities of color and immigrant and refugee communities. This position represents an increased ability to meaningfully engage with community members of color, increased ability to improve access to Water Bureau programs and services, increased ability to emphasize equity in the Water Bureau’s workforce, and a more community-focused approach to bureau priorities.

1/29/18 9:10 Page 21 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 07 Type: Adds

Decision Package: WA_07 - Financial Assistance Expansion Program:Customer Service

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget

EXPENDITURES Personnel Services 0 172,000 172,000 0 0 0 0 0 External Materials and Services 10,000 200,000 210,000 0 0 0 0 0 Internal Materials and Services 0 200,000 200,000 0 0 0 0 0 TOTAL EXPENDITURES 10,000 572,000 582,000 0 0 0 0 0 REVENUES Charges for Services 10,000 572,000 582,000 0 0 0 0 0 Intergovernmental Revenues 0 0 0 0 0 0 0 0 TOTAL REVENUES 10,000 572,000 582,000 0 0 0 0 0

FTE Full-Time Positions 0.00 2.00 2.00 0.00 0.00 0.00 0.00 0.00 TOTAL FTE 0.00 2.00 2.00 0.00 0.00 0.00 0.00 0.00

1/29/18 9:10 Page 22 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 07 Type: Adds

Decision Package: WA_07 - Financial Assistance Expansion Program:Customer Service

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget Description: Problem Statement: This decision package comprises a comprehensive update to our low-income services for a rapidly changing Portland. Our current program includes a Bill Discount, Flexible Bill Pay, Crisis Assistance, Fixture Repair and Replacement, Utility Safety Net Program, and Water Conservation Kits.

The decision package will allow the bureau to target underserved communities and Portlanders in need, reach customers without individual water accounts, and reduce shutoffs for low-income customers.

The decision package includes improvements to our existing suite of programs in five areas. The package will 1) create a low-income services team; 2) increase the value of the crisis voucher; 3) adjust income guidelines to reflect local incomes; 4) provide a new discount for extremely low-income customers; 5) provide multi-family low income crisis assistance; and 6) utilize the incremental Utility License Fee (ULF) paid to the general fund to offset additional programmatic costs. More detail on each program is below.

1)Low-income services team: This portion of the package will consolidate all low-income services within the bureau and authorize the hire of two program specialists well-versed in working with low-income communities to manage data collection and generate regular analysis; submit policy recommendations as needed; provide customer service tailored to underserved communities and Portlanders in need; and host a biannual workshop and trainings for service providers and other community groups.

Currently, Portland Water Bureau (PWB) Customer Service Representatives (CSRs) are trained and evaluated based on customer service best practices and key service levels. As part of their training, CSRs learn how to recognize and respond to low-income issues when speaking with customers, but CSRs also need to be efficient to meet the two-minute wait time key service level. Many low-income households require time and sensitivity to overcome obstacles specific to their income level. They might include language/cultural barriers; a general distrust of government; the shame inherent in falling into debt; as well as the reluctance to ask for help. These instances require time, a sophisticated understanding of poverty and specialized training.

2)Increase value of crisis voucher: PWB and Bureau of Environmental Services (BES) currently offer a $150 Crisis Voucher to Low Income Discount recipients (single-family households) once a year. It is a flexible tool to assist households that require immediate assistance. The current voucher has been in place since 2004 and has not kept pace with inflation, cost of living, or utility rate increases. For comparison, the Oregon Energy Assistance Program (OEAP) currently offers $500 annually to qualifying energy customers. For purposes of this package, an increase to $500 is used. The cost of the voucher increase will be split between PWB and BES, proportionate to the cost of the bill.

3)Adjust income guidelines: PWB income guidelines are currently based the state’s median family income (MFI), which includes income data from the entire state. These guidelines do not reflect Portland incomes and should be adjusted accordingly. With this change to include local income guidelines the participation will increase.

4)Provide a new discount for extremely low-income customers: This proposal would increase the low-income discount to 80% of the typical bill amount for households below 30% of the median family income. It is estimated that 50% of current participants are households with income below 30% of median family income. By discounting that service for Portlanders on the extreme low end of income, the bureau will be able to reduce shutoffs to customers who are least able to pay for this essential service. A four-person family earning below $22,000 annually would pay less than $30 monthly for water, sewer, and stormwater services.

5)Provide multi-family low income crisis assistance: Currently, the low income assistance program is focused mainly on providing a discount to customer bills through the account process. As multi-family residents do not receive a bill, there has been no way to provide a discount. However, multi-family residents are customers. Recognizing this inequity, the recommendation is for a $600,000 annual transfer to Home Forward’s Short-Term Rent Assistance Program (split proportionally between BES and PWB). The funds would be distributed to 19 community organizations and provide up to $500 of crisis assistance per household, annually. The $500 assistance represents approximately 80% of the average annual water-sewer consumption in a Portland multifamily unit. The program will be evaluated after the first year of implementation.

1/29/18 9:10 Page 23 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 07 Type: Adds

Decision Package: WA_07 - Financial Assistance Expansion Program:Customer Service

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget Description: 6)Affordability concerns for low-income customers was raised during the review of water treatment options that were presented to City Council during summer 2017. For FY 2018-19, the incremental ULF related to the filtration water treatment plan is $146,000. The incremental amount will grow to approximately $1.0 million by FY 2022-23 and will continue to increase until the filtration water treatment plant is complete and operational. By dedicating this incremental ongoing revenue to low income expansion, City Council would mitigate the rate impact of filtration on low-income customers. The amount would be revised each year based on requested rate increases and changes to filtration plans.

Alternatives: If the package is not approved, the comprehensive suite of improvements to the low income program will not be made. Without a low-income services team, the entire customer service team will continue to field calls and inquiries from low-income customers mixed with all customers, avoiding efficiencies that could occur with the decision package. If the crisis voucher is not increased, the bureau will continue to offer a program that has not kept pace with inflation and rate increases since 2004. Without this package, the bureau will not change our eligibility to match local demographics and will instead rely on eligibility requirements that are based on broader and less targeted data. If this program is not approved, extremely low-income customers will rely on the same discounts as customers with higher incomes. Finally, without the multi-family approach in this program, the bureau will continue the inequity of having low-income Portlanders living in multi-family properties who are not eligible for a bill discount because they receive no individual bill. If the package is granted at less than the full request, some portion of these services will be enhanced. For instance, the crisis voucher could be increased from $150 to $250, rather than a greater and more effective number.

1/29/18 9:10 Page 24 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 07 Type: Adds

Decision Package: WA_07 - Financial Assistance Expansion Program:Customer Service

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget

Expected Results: Impact: I The elements of this package support both the city’s and the bureau’s equity plans and specific goals, particularly those directed by Council. The program improvements target underserved communities and Portlanders most in need. The program would finally reach low-income customers without water accounts, and reduce shutoffs for low-income customers, particularly those in extreme circumstances. These measures will help address both the acute and chronic needs of our customers: an increase in the crisis voucher, an expanded discount for extremely low-income customers, and dedicated customer service will all contribute to a reduction in shut-offs for Portlanders most in need. This decision package is designed to immediately decrease the number of shut-offs affecting this population, while also developing the framework (Low-Income Services Team), to monitor and analyze data at an increasingly granular level. The program encompasses all recommendations from the Auditor’s 2017 audit report and has been presented to more than 20 stakeholder groups.

Equity: How does this program or service align with the goal of advancing equity or achieving goals outlined in your bureau’s Racial Equity Plan?

In its Racial Equity Plan, the bureau aims to “make the Low Income Program more accessible to people of color and immigrants and refugee households so that all communities we serve are able to utilize it equitably.” This decision package would increase the bureau’s capacity to realize that aim.

Please identify the Citywide goals and or strategies addressed by this program or service.

By increasing the reach of this program, the Water Bureau would work toward the following goal and strategies: •“We will strengthen outreach, public engagement, and access to City services for communities of color and immigrant and refugee communities;” •“Be data driven;” •“Partner with other institutions and communities” (the program relies on partnerships with community organizations, and increased capacity within this program would strengthen those partnerships).

What areas of the city will be impacted by your program or service and is there a larger than average population of people of color in those areas?

Low-income communities would be most affected by this program expansion. Those communities tend to overlap with communities of color.

This expansion would result in increased funding for the crisis voucher program, increased funding for staff to help people understand their financial options with regard to sewer/stormwater/water services, a new discount for customers living in a greater degree of poverty, and funding for people living in multi-family housing (who are not currently eligible for the program).

1/29/18 9:10 Page 25 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 08 Type: Adds

Decision Package: WA_08 - Mt Tabor Historic Preservation Program:Support

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget

EXPENDITURES External Materials and Services 1,115,000 0 1,115,000 0 0 0 0 0 TOTAL EXPENDITURES 1,115,000 0 1,115,000 0 0 0 0 0 REVENUES Fund Transfers - Revenue 1,115,000 0 1,115,000 0 0 0 0 0 TOTAL REVENUES 1,115,000 0 1,115,000 0 0 0 0 0 Description: Problem Statement: Resolution No. 37146 was adopted by City Council on July 15, 2015, to maintain, repair and preserve the Mount Tabor Reservoirs following disconnection. The Portland Water Bureau (PWB), and other City agencies as are necessary, including any City agency that may be responsible for managing the reservoirs in the future, are directed to work with the Mt. Tabor Neighborhood Association (MTNA) to prioritize maintenance, repair and preservation work identified in the 2009 Mt. Tabor Reservoirs Historic Structures Report to be accomplished over a four-year period beginning in FY 2016-17. Resolution No. 37146 required that City Council set aside $4.0 million total over four years for this work, and that the financial obligations and other commitments are binding city policy.

The bureau began work on the project in FY 2016-17, including monthly meetings with representatives of the MTNA. The bureau worked collaboratively with MTNA to update the 2009 Historic Structures Report and developed a prioritized list of projects. The bureau also worked with MTNA representatives to hire two design firms, one for historic preservation and one for the interpretive program. The contracts for this work were approved in February 2017 and both firms have been working on their respective parts of the project. The first preservation contract was bid in summer of 2017 and construction started in fall 2017 on the first batch of priority work at Reservoir 1. The contract is in the amount of $827,839. There is some uncertainty in the amount of concrete repair that may be discovered after the contractor starts construction. The contract is unit price bid items, so the contract amount could increase to $ 1.0 million (up to 25% over). With carryover from FY 2016-17, including soft costs, it is expected that the project will expend most of the budget allocation in FY 2017-18.

PWB is submitting this request to the General Fund to allocate $1,115,000 for FY 2018-19. This is the year three request of the $4.0 million total over the four-year period beginning FY 2016-17 for the maintenance, repair and preservation work identified in the 2009 Mt. Tabor Reservoirs Historic Structures Report, as updated in 2016. A list of prioritized work for year three has been developed by the preservation consultant in collaboration with MTNA representatives and PWB, and is about $2.0 million in construction costs. This work will be further refined to meet the project budget prior to bidding. The design for this work has started, and is scheduled to bid out in spring 2018. Approval of this Decision Package will fund the second year construction project beginning in FY 2018-19.

PWB and other City bureaus as are necessary are directed to collaborate with the MTNA to develop an interpretive program that tells the history of the Mt. Tabor reservoirs and the City’s water system. With the intent to minimize the visual impact on the treed character of the park, PWB will confer and consult with the MTNA before planned work and after emergency events in the park which have potential impact on trees.

PWB and other City bureaus as appropriate will coordinate and collaborate with the MTNA on a joint semi-annual written report to City Council documenting compliance with this resolution, as well as annual presentations to City Council and the Portland Utility Board, including a Final Summary Report to be submitted by December 31, 2020, to City Council regarding the implementation of the maintenance, repair and preservation work identified in the 2009 Mt. Tabor Reservoirs Historic Structures Report.

Alternatives: If this package is not approved, the work at Mt. Tabor will no longer be supported, or will require an increase to Water retail rates to provide funding to continue the work.

1/29/18 9:10 Page 26 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 08 Type: Adds

Decision Package: WA_08 - Mt Tabor Historic Preservation Program:Support

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget

Expected Results: Impact: I Success of this project will be measured by the work completed in the four-year timeframe directed by the Resolution, and the total cost of the project when completed.

Equity: How does this program or service align with the goal of advancing equity or achieving goals outlined in your bureau’s Racial Equity Plan?

This decision package is unrelated to specific goals in the bureau’s Racial Equity Plan.

Please identify the Citywide goals and or strategies addressed by this program or service.

By funding this work from the general fund instead of from utility rates, the City moves toward providing more equitable services to all residents.

What areas of the city will be impacted by your program or service and is there a larger than average population of people of color in those areas?

Work to preserve the reservoir areas of Mount Tabor will primarily affect neighborhoods around Mount Tabor. There is not a larger than average population of people of color in those areas.

1/29/18 9:10 Page 27 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 09 Type: Adds

Decision Package: WA_09 - Parks Maintenance Program:Customer Service

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget

EXPENDITURES Personnel Services 0 45,700 45,700 0 0 0 0 0 External Materials and Services 0 49,100 49,100 0 0 0 0 0 Internal Materials and Services 0 130,400 130,400 0 0 0 0 0 TOTAL EXPENDITURES 0 225,200 225,200 0 0 0 0 0 REVENUES Fund Transfers - Revenue 0 225,200 225,200 0 0 0 0 0 TOTAL REVENUES 0 225,200 225,200 0 0 0 0 0 Description: Problem Statement: On December 6, 2011, the City was sued by a group of water and sewer ratepayers in Anderson et al. v. City of Portland, Multnomah County Circuit Court Case No. 1112-15957 (the “Anderson Case”). Plaintiffs challenged certain expenditures by the City's Water Bureau and Bureau of Environmental Services, alleging that the expenditures were not authorized by the City Charter and seeking to reimburse the Water Fund and Sewage Disposal Fund. The City has vigorously defended this lawsuit, and on June 30, 2017, the Court rendered an opinion on the last of the issues before it. The City prevailed on most of the claims, but the Court concluded that some of the expenditures were not appropriate use of rate payer funds. The general guidance provided by the Judge is that the expenditures made to transform the property into a park, and maintain it as such, were not an appropriate use of rate payer funds.

This decision package is in response to the Judge’s opinion in the Anderson Case. Certain maintenance activities at Dodge Park, Hydro Parks, and Powell Butte should no longer be funded by the Portland Water Bureau (PWB).

The General Fund already reimburses PWB $35,000 ($25,000 Dodge Park, $10,000 Hydro Parks) for non-water activities. The total of this decision package accounts for the $35,000 reimbursement, so the net requested is $225,200.

Alternatives: This decision package is a cost reduction for the bureau. It will be an increase in cost to the General Fund due to the opinions made in the Anderson Case. The only alternative for PWB is to discontinue funding park-like maintenance activities at Dodge Park, Hydro Parks, and Powell Butte. This decision package represents two options for funding maintenance at those locations. One option is for PWB to continue to provide the maintenance at the locations and subsequently be reimbursed by the General Fund. Another option would be for Parks to assume the maintenance activities at the properties in the same way they maintain other parks.

1/29/18 9:10 Page 28 of 29 sap_b_dp_summary Decision Package Summary

Bureau: Portland Water Bureau Priority: 09 Type: Adds

Decision Package: WA_09 - Parks Maintenance Program:Customer Service

FY 2018-19 FY 2018-19 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Requested Requested Requested Estimated Estimated Estimated Estimated 1 Time DP Ongoing DP Budget Budget Budget Budget Budget

Expected Results: Impact: I If this decision package is not approved, there would be no other option for the PWB than to stop these activities, therefore, closing Dodge Park to camping, closing the bathrooms at hydro parks and Powell Butte, and discontinuing trail maintenance at Powell Butte, closing it to the public.

Equity: How does this program or service align with the goal of advancing equity or achieving goals outlined in your bureau’s Racial Equity Plan?

This decision package is unrelated to specific goals in the bureau’s Racial Equity Plan.

Please identify the Citywide goals and or strategies addressed by this program or service.

By shifting funding for this work from the utility rate structure to the general fund structure, the City moves toward providing more equitable services to all residents.

What areas of the city will be impacted by your program or service and is there a larger than average population of people of color in those areas?

If Water Bureau parks-like properties closed to the public because of lack of funding to maintain them, fewer people would be able to access Water Bureau property. Four of the seven HydroParks, plus Powell Butte, are in areas of medium to high risk of marginalization as defined by Multnomah County.

1/29/18 9:10 Page 29 of 29 sap_b_dp_summary

FY 2018-19 FIVE-YEAR PRELIMINARY FINANCIAL PLAN

January 2018

City of Portland Water Bureau Nick Fish, Commissioner Michael Stuhr, P.E., Administrator

TABLE OF CONTENTS EXECUTIVE SUMMARY ...... 1 Introduction ...... 1 Budget Development ...... 2 Strategic Business Plan ...... 3 Retail Water Rates ...... 3 FINANCIAL PLAN ...... 8 ISSUES AND UPDATES ...... 8 Major Capital Projects ...... 8 Long Term 2 Enhanced Surface Water Treatment (LT2) Rule ...... 8 Willamette River Crossing ...... 9 Corrosion Control Facility ...... 9 Portland Building Renovation ...... 9 Mt. Tabor Preservation ...... 10 Forecast Retail Water Demand ...... 10 Affordability ...... 11 Lawsuit Update ...... 12 Equity Plan ...... 12 II. FIVE-YEAR RATES ...... 12 III. CONTINGENCIES/RESERVES ...... 13 IV. PERFORMANCE MANAGEMENT ...... 16 V. BUDGET PROGRAMS ...... 17 VI. OPERATION & MAINTENANCE (O&M) PLAN ...... 19 VII. CAPITAL IMPROVEMENT PLAN (CIP) ...... 20 APPENDIX ...... 27

DOCUMENT FIGURES

Figure 1 – Monthly Bills Change ...... 4 Figure 2 – Current Average Basic Utility-Only Services ...... 5 Figure 3 – Residential Monthly Water Bills ...... 6 Figure 4 – Retail Water Demand Forecast & Actual ...... 11 Figure 5 – Five-Year Rates Forecast ...... 13 Figure 6 – Rate Stabilization Account Transfers ...... 14 Figure 7 – Rate Stabilization Account Balance at Fiscal Year End ...... 14 Figure 8 – Unrestricted Cash as Number of Days of Operating Expenses ...... 15 Figure 9 – FY 2018-19 Preliminary Budget Request by 22 Water Programs ...... 18 Figure 10 – Operation & Maintenance Plan ...... 20 Figure 11 – Five-Year Capital Improvement Plan ...... 22 Figure 12 – Five-Year Capital Plan Summary ...... 23 Figure 13 – Capital Plan Forecast ...... 24 Figure 14 – Capital Financing Plan ...... 26

FY 2018-19 Preliminary Financial Plan

EXECUTIVE SUMMARY

Introduction

The Portland Water Bureau (bureau) is the largest domestic water supplier in Oregon. About 950,000 people, almost one-quarter of the state’s population, are served from the Bull Run/Columbia South Shore system. On an average basis, the bureau delivers about 100 million gallons a day (MGD). On peak days, the bureau may deliver in excess of 160 MGD and has the capacity to deliver over 200 MGD. The bureau delivered about 31 billion gallons of water to its customers in fiscal year (FY) 2016-17.

About 60 percent of water delivered serves retail customers in the city. The remaining 40 percent is provided on a wholesale contract basis to nineteen cities, special districts, and private water company customers surrounding Portland.

As part of the bureau’s overall mission and values, its financial objective is to “maintain fiscal integrity, undertake sound financing practices and ensure auditable results,” which

• provides for sufficient annual funding of operating, maintenance, and capital programs approved by City Council;

• provides for rates and charges to customers that are equitable and based on generally accepted cost-of-service principles unless otherwise directed by City Council;

• strives for a natural optimal balance among financial health, operational effectiveness, infrastructure condition, effective management, rate affordability, and maintaining a skilled and experienced workforce;

• strives to optimize capital financing strategies, today and into the future; and

• ensures the maintenance of appropriate and adequate cash balances (operating fund, construction fund, sinking fund, and rate stabilization account) consistent with City policies, bond covenants, and industry standards.

1 FY 2018-19 Preliminary Financial Plan

Budget Development

The bureau’s FY 2018-19 budget themes focus on water quality, resiliency, equity, customer services, and workforce development. There is also a continued focus on the infrastructure needs of the water system and specific outreach plans for major capital projects.

Commissioner Fish directed the Water Bureau and Bureau of Environmental Services (BES) to submit a budget that demonstrates commitment to operating the bureaus efficiently, economically, and equitably, with a continued focus on strengthening system infrastructure and supporting our workforce. The budget direction to the bureaus was to submit a budget that will reflect good value at a fair price with a combined bill increase below five percent. The bureaus should continue to look for ways to deliver utility services in a cost-effective manner while prioritizing investments in high-need areas. Additional direction was provided to optimize and enhance discount programs, ensure resources are dedicated to full implementation of bureau-wide strategic plans and priority equity initiatives, and explain how requests for additional staff will support the goal of effectively and efficiently delivering high-quality services to our customers.

Mayor Ted Wheeler’s budget guidance for the utility bureaus was to identify efficiencies and reductions to limit rate increases. Bureaus are to highlight, as realignment packages, areas where they are identifying efficiencies or shifting resources to better address changing priorities. The bureaus are to work with the Portland Utility Board (PUB) and Citizens’ Utility Board (CUB) to develop prioritized reduction options for the Budget Committee and City Council consideration. Additional guidance calls for bureaus to present budget requests that will achieve measurable progress on the City’s key priorities which include increasing housing and reducing homelessness, maintaining critical infrastructure, enhancing livability, ensuring public safety and police accountability, pursuing innovation, and strengthening resiliency.

There are two oversight groups providing input throughout the budget development process. The PUB is an 11-member citizen body created to strengthen oversight functions for the City’s water, sewer and stormwater services. The CUB provides outside independent review of the Water Bureau and BES on behalf of residential ratepayers.

The PUB identified equity, public and community engagement, regulatory compliance, strategic planning, operational efficiencies, resiliency and emergency preparedness and inter-bureau coordination as specific topics for engagement in the next fiscal year, in addition to its responsibilities as part of the budget process.

2 FY 2018-19 Preliminary Financial Plan

The CUB identified low-income program expansion, targeted outreach to customer regarding household financial management tools, system maintenance, resiliency, and regulatory compliance as specific areas of focus for the next fiscal year.

The FY 2018-19 budget development utilizes the bureau’s 27 Key Service Levels across 22 Water Programs as the basis for prioritizing expenditures and funding. The Water Programs are consistent with the City Council directive to bureaus to establish a list of programs and services.

Strategic Business Plan

In August 2017, the bureau began a 15-month project to develop a Strategic Business Plan. The primary purpose of the project is to develop a five-year plan that articulates the bureau’s current vision, mission, and values; describes critical organizational risks; creates a framework of core strategic areas and risk-mitigation strategies; and provides a road map for turning critical organizational risks into management opportunities through strategies that inform bureau programming, budgeting, and planning. The plan will collect information on what the bureau does well, improvements that can be made, challenges and opportunities facing the bureau, and how to prepare for the future. It will reflect the thinking of bureau employees, managers, customers, partners, regulators and elected officials. The project will progress in three main phases. First, an update of the organizational vision, mission and values in Fall 2017. Next, an assessment of organizational risk and development of a risk register to be completed in Summer 2018. Finally, the development of the Strategic Business Plan to address identified risks to be completed in Winter 2018. The current timeline anticipates the plan to be finalized in December 2018, with the completed plan being utilized in the FY 2019-20 budget process.

Retail Water Rates

The bureau is proposing a higher retail rate increase than was forecast for FY 2018-19. The FY 2017-18 Adopted Plan estimated an average effective water rate increase of 6.7 percent for FY 2018-19 for anticipated cost increases related to inflation and capital projects related to ongoing maintenance and replacement of the water system.

The proposed water retail rate increase for FY 2018-19 is 8.9 percent. The higher retail rate increase for FY 2018-19 was driven primarily by the addition of the filtration water treatment project, offset by operating and capital savings in FY 2016-17.

3 FY 2018-19 Preliminary Financial Plan

Proposed FY 2018-19 Water Rates

The proposed average effective retail water rate increase of 8.9 percent would increase the typical monthly residential customer’s water bill by $3.21 – from $36.11 to $39.32. A typical residential customer uses about 500 cubic feet (ccf) or 3,740 gallons of water each month.

The retail volume rate will increase from $4.499 per ccf to $4.899. The base charge (the fixed charge on the bill) for the quarterly meter read customers will increase from $13.61 to $14.82 per month. The base charge for the monthly meter read customers will increase from $40.82 to $44.45 per month. Figure 1 shows sample bill increases.

Figure 1 – Monthly Bills Change

FY 2017-18 FY 2018-19 Change 5 ccf Low Income Residential Monthly Bill (50% discount) $18.06 $19.66 $1.60 5 ccf Typical Residential Monthly Bill1 $36.11 $39.32 $3.21 100 ccf Medium Commercial Monthly Bill $490.72 $534.46 $43.74 20,000 ccf Large Commercial Monthly Bill $90,021 $98,044 $8,023

Basic Utility Services Comparison

Water service provided to Portland residents continues to be one of the lowest essential2 utility costs in the local area, accounting currently for 11 percent of a typical residential customer’s total basic utility-only bills per month as shown in Figure 2.

1 The Typical Single Family Residential Customer water usage per month is 5 ccf. 2 Does not include other services such as Internet, mobile phone, and broadcast/satellite cable service. 4 FY 2018-19 Preliminary Financial Plan

Figure 2 – Current Average Basic Utility-Only Services

Basic Utility Services Typical Monthly Charges Percentage of Total Electricity (900 kWh) $116.81 35% Sewer and Stormwater $71.86 21% Natural Gas (55 therms) $57.08 17% Water (5 ccf) $36.11 11% Solid Waste and Recycling $29.25 9% Telephone $25.68 7% Total $336.79 100%

Water service is also typically far less expensive than the cost of less essential, but commonly incurred services, such as broadcast/satellite cable service, mobile telephone service, or Internet service.

Bill Affordability

The bureau offers one of the most extensive financial assistance programs of all water utilities in the United States. The federal guidance on water bill affordability ranges from 1.0 percent to 3.5 percent of median household income, although 2.0 percent is the most commonly cited affordability measure. The Portland median household income for a two-person family for 2017 was about $4,980 a month. The current typical monthly water bill of $36.11 would then represent only about 0.7 percent of the monthly median household income, and this percentage would be 0.8 percent with the proposed rate increase. Also, the current thresholds to qualify for a low- income discount for two- and four-person families are $2,517 and $3,701 per month, respectively. Under the current program of a 50 percent discount, the typical residential low-income monthly bill of $18.06 represents only 0.7 percent and 0.5 percent of these low-income threshold values, respectively. The FY 2018-19 monthly bill to qualified low-income residential customers will increase by $1.60 – from $18.06 currently to $19.66 per month.

In addition to the Low-Income Assistance Program, the Utility Safety Net Program continues to be available to provide assistance to customers experiencing temporary financial hardships due to extraordinary medical expenses, changes in employment status, or change in household status that

5 FY 2018-19 Preliminary Financial Plan adversely impacts their ability to pay their utilities. Other affordability benefits include flexible bill pay, crisis assistance, interest-free payment plans, in-home fixture repair and replacement, conservation kits, and assistance with using water efficiently. This Five-Year Preliminary Financial Plan includes a decision package to expand the current low-income program. See the Affordability section for more detail.

Bill Comparability

Figure 3 compares residential customer monthly water bills in Portland to other local and national water utilities. Portland Water Bureau customers currently pay $36.11 for 5 ccf and $58.60 for 10 ccf of water each month. These amounts are higher than average for water bills in the Portland area.

Figure 3 – Residential Monthly Water Bills

For 500 cubic feet

Local Utilities Rockwood Water PUD $19.99 Tualatin, City of 22.12 Milwaukie, City of 25.37 Beaverton, City of 29.35 Gresham, City of 33.96 West Slope Water District 35.62 PORTLAND, CITY OF (Current) 36.11 Tualatin Valley Water District 37.00 PORTLAND, CITY OF (Proposed) 39.32 Lake Oswego, City of 40.56 Tigard, City of 46.24

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In the Local Area3 and the Nation

For 1,000 cubic feet

Local Utilities Rockwood Water PUD $31.94 Tualatin, City of 36.27 Milwaukie, City of 42.97 Beaverton, City of 44.70 Gresham, City of 45.96 Lake Oswego, City of 56.97 West Slope Water District 57.17 PORTLAND, CITY OF (Current) 58.60 Tualatin Valley Water District 60.05 PORTLAND, CITY OF (Proposed) 63.81 Tigard, City of 71.28

National Utilities

Phoenix, AZ $20.66 El Paso, TX 28.40

Charlotte, NC 31.19 Cincinnati, OH 32.30 Denver, CO 37.36

Boston, MA 52.61 Atlanta, GA 54.96

Sacramento, CA 55.33

Kansas City, KS 56.42 PORTLAND, CITY OF (Current) 58.60 PORTLAND, CITY OF (Proposed) 63.81 Seattle, WA 68.10

Austin, TX 69.68 San Diego, CA 76.13

San Francisco, CA 89.03

3 Calculations are based on rates in effect as of January 2018. Portland Current rates are effective July 1, 2017 through June 30, 2018. 7 FY 2018-19 Preliminary Financial Plan

FINANCIAL PLAN

I. ISSUES AND UPDATES

Major Capital Projects

The five largest capital projects included in this Five-Year Preliminary Financial Plan are the Water System Filtration Treatment Facility, Washington Park Reservoir Improvement, Willamette River Crossing, Corrosion Control Treatment Facility and the Portland Building renovation.

Long Term 2 Enhanced Surface Water Treatment (LT2) Rule The City was granted a treatment variance by the Oregon Health Authority (OHA) to the treatment requirements of the LT2 Rule for 10 years beginning April 1, 2012. There are a set of conditions that the City is required to meet as part of maintaining the treatment variance. The conditions include ongoing monitoring of the Bull Run source water for Cryptosporidium. Beginning in early 2017, there were multiple detections of Cryptosporidium in drinking water samples from the intake of the Bull Run Watershed. The number of detections indicated a one- year concentration that would be above allowable levels, and on May 19, 2017, the bureau received a letter from OHA revoking the variance effective on the date OHA signed a compliance schedule and interim measures agreement. In August 2017, City Council directed the bureau to proceed with planning, design and construction of a filtration treatment facility. The bureau and OHA entered into a bilateral compliance agreement on December 18, 2017. Under the terms of the agreement, a filtration plant will be in operation no later than September 30, 2027. Prior to completion of the filtration plant, the City and bureau will continue protections on the Bull Run Watershed and limit potential sources of Cryptosporidium, monitor the Bull Run raw water intake for Cryptosporidium, notify the public of any further detections, and coordinate with state and local health officials on Cryptosporidium infection surveillance.

The LT2 Rule also requires changes to how uncovered finished drinking water reservoirs are utilized, managed, or operated. The Rule requires water systems with uncovered finished water reservoirs to cover the reservoirs or provide treatment at the outlets of the reservoirs to inactivate Cryptosporidium, Giardia and other pathogens. The Washington Park Reservoir Improvement project is the last project to comply with the Long-Term Enhanced Surface Water Treatment (LT2) Rule requirement for uncovered finished drinking water reservoirs. It involves building a new below-ground reservoir to replace the existing 120-year-old uncovered reservoirs. The new enclosed reservoir will be built to current seismic standards to withstand earthquakes and

8 FY 2018-19 Preliminary Financial Plan landslides. The bureau began construction in September 2016 and the project is scheduled to be completed in October 2023.

Willamette River Crossing The Willamette River Crossing project will construct a seismically hardened transmission main under the Willamette River to provide reliable water supply to wholesale and retail customers on the west side after a significant seismic event. The bureau anticipates construction to begin within the next two years.

Corrosion Control Facility The Lead and Copper Rule requires large utilities to maintain optimal corrosion control treatment and to conduct lead monitoring at high risk customer taps. The City has a Lead Hazard Reduction Program approved by OHA in 1997 as optimized corrosion control treatment. In 2014, in anticipation of changes to the water system, the bureau began a water quality corrosion study. The results of the study indicated that additional treatment is the most effective means of further reducing lead in water from home and building plumbing. On May 17, 2017, OHA approved a modified schedule to improve corrosion control treatment. The schedule includes completion of a corrosion control treatment facility by April 30, 2022. The estimated capital cost for the corrosion control treatment facility is $19.0 million and is included in this Five-Year Financial Plan.

Portland Building Renovation The Portland Building Renovation Project is underway with an estimated total project cost of $195 million. The building renovation is expected to be completed by the end of 2020. The bureau owns the 6th floor of the Portland Building and leases additional floors in the building. After completion of the Portland Building renovation, the bureau plans to own about three floors and will cost share on the total project costs. This Five-Year Financial Plan includes bureau’s share of the Portland Building renovation and space optimization costs for a total of $43.5 million to be incurred in FY 2020-21 as provided by the Office of Management and Finance.

The permanent relocation of the City’s primary data center out of the Portland Building that was approved in the FY 2016-17 budget process is nearing completion. The data center houses servers for nearly all City applications, including SAP, Cayenta Utility Billing, and PortlandOregon.gov, as well as file and printer servers for the bureaus. The estimated project funding is approximately $10 million. The bureau’s allocation share of this cost has been included in this Five-Year Preliminary Financial Plan with the final payment in FY 2018-19.

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Mt. Tabor Preservation

The Mt. Tabor Reservoirs were disconnected from the City’s water distribution system in December 2015 to comply with the LT2 Rule. An agreement with Mt. Tabor Neighborhood Association, adopted by City Council on July 15, 2015, committed the City to keep the reservoirs filled with clean water after the reservoirs were no longer used for water delivery. The City also agreed to allocate at least $4.0 million from FY 2016-17 through FY 2019-20 to maintain the reservoirs’ historic appearance and to develop an interpretive program that tells the history of the Mt. Tabor reservoirs and the City’s water system. City Council authorized $750,000 from the General Fund to the Water Bureau in the FY 2016-17 budget and $1.0 million in the FY 2017-18 budget. This Five-Year Preliminary Financial Plan assumes funding for the maintenance, repair, and preservation of the reservoirs and the interpretive program will continue to be provided by the General Fund. The bureau has requested $1.1 million from the General Fund for FY 2018-19 in a decision package.

Forecast Retail Water Demand

Retail water demand decreased from FY 2005-06 through FY 2010-11 followed by relatively flat demand thereafter with a dip in FY 2013-14 and again in FY 2016-17. This reduction in water use is not limited to Portland customers. This was a trend utilities across the nation experienced as a result of continued efforts on water conservation and more efficient appliances from changes in plumbing codes.

The bureau has lowered its demand plan through FY 2015-16 to recognize the lower actual retail water demand over the last decade. The bureau’s water demand for FY 2016-17 was 24.7 million ccf, or 0.4 million ccf below plan. Retail water sales for FY 2017-18 are forecast at 25.1 million ccf and are expected to meet the forecast. The retail water demand forecast remains flat at 25.1 million ccf for the forecast period.

Figure 4 shows the historical retail water demand through FY 2016-17 and forecasted demand through FY 2022-23.

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Figure 4 – Retail Water Demand Forecast & Actual

Water demand projections remain a key factor in setting water rates. As customers purchase less water, there is a corresponding loss in revenues that creates a need for either service reductions or rate increases due to proportionally fewer units (in ccf) of water sold to fund the fixed costs of the utility. In the past, the bureau has made reductions in operations and maintenance staff to offset additional increases. More than 95 percent of Portland Water Bureau system costs are considered fixed in the short term. This is similar to most water utilities in the United States.

Affordability

The bureau’s current low-income services include a bill discount, flexible bill pay, crisis assistance, fixture repair and replacement, the utility safety net program, and water conservation kits. To better target underserved communities and those in need, this Five-Year Preliminary Financial Plan includes a decision package for the creation of a low-income services team, an increase to the crisis voucher, expansion of the bureau’s income guidelines, an increased bill discount for extremely low-income customers, and providing crisis assistance to multi-family low income customers. These changes will result in a more targeted approach for communities most affected by rate increases, will reach customers without individual water accounts, and will reduce shutoffs for low-income customers.

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Lawsuit Settlement

The lawsuit against the City filed by Citizens for Water Accountability on December 6, 2011, alleging that the City spent utility ratepayer monies on projects that were unrelated to the utilities’ core functions, has been settled. The lawsuit requested an order that would require the City to reimburse the Water Fund and Sewage Disposal Fund for those expenditures. A remedy decision was released by the court on June 22, 2017. The court concluded that the City was required to restore $14.0 million to the Water Fund and $3.0 million to Sewage Disposal Fund. On December 20, 2017 the City Council authorized settlement of this lawsuit for a total of $10.0 million, out of which $3.0 million will be paid to the plaintiffs’ counsel for attorneys’ fees. The remaining $7.0 million is to be paid by the City to the Water Bureau and BES. The Water Bureau will receive $5.5 million and BES will receive $1.5 million on or before September 30, 2019. This Five-Year Preliminary Financial Plan includes reimbursements from the City to the Water Fund in FY 2019- 20.

Equity Plan

In coordination with the Citywide Racial Equity Goals and Strategies, the bureau has adopted a five-year Racial Equity Plan that identifies the bureau’s approach to operationalize the City’s broader goals and strategies while also articulating goals and strategies unique to the bureau. The bureau’s FY 2018-19 budget includes a decision package for an Equity Manager position to support a more expeditious implementation of the bureau’s plan. The current equity plan will also be a component of the Strategic Business Plan project.

II. FIVE-YEAR RATES

The five-year retail rates forecast includes funding a revised Five-Year Capital Improvement Plan, rate increases associated with new positions request, and inflation. Figure 5 shows the projected retail rates for the five-year planning period. The bureau utilizes a Rate Stabilization Account (RSA) to smooth retail rate increases over the planning period to minimize rate spikes.

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Figure 5 – Five-Year Rates Forecast

For Fiscal Year Ending in June of 2019 2020 2021 2022 2023 Maintain Current Service Level 2.7% 3.4% 2.9% 4.2% 2.8% Fund Balances Surplus -2.1% Wholesale & Other Revenues Updates -0.5% -0.3% -0.1% -0.1% -0.1% Operating Budget Adds 1.3% Portland Building Renovation 2.9% Filtration 2.2% 2.2% 2.2% 2.2% 2.2% Capital Program 6.9% 3.2% 0.4% 1.5% 0.8% Rate Stabilization Account (RSA) -1.6% -1.1% -0.9% -0.4% 1.7% Rate Increase 8.9% 7.4% 7.4% 7.4% 7.4%

III. CONTINGENCIES/RESERVES

The bureau’s Operating Fund Contingency Account, on a modified accrual basis, includes the minimum cash fund balance, the Rate Stabilization Account, and non-cash accounts. The bureau uses the cash basis of accounting in its financial planning and rate forecasts.

Cash Reserve

The bureau plans for a minimum fiscal year-end operating cash reserve of $15.0 million in the Operating Fund. This represents about 50 to 70 days of operating costs. This standard conforms to the generally accepted industry standard for such reserves, and has been approved by the Office of Management & Finance as a reasonable amount for this reserve. Cash flow will fluctuate throughout the year and the Operating Fund cash balances are lowest after transfers are made for debt service payments in the fall and spring.

Rate Stabilization Account

The bureau established a Rate Stabilization Account (RSA) within the Water Operating Fund to smooth retail rate increases over the financial planning period and beyond. The bureau began funding the RSA in FY 2006-07 as defined in the Master Second Lien Water System Revenue Bond Declaration and plans to maintain a minimum balance of $5.0 million. This smoothing is one of the bureau’s key financial planning objectives and is aimed at maintaining financial stability and predictability.

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The rates forecast includes increasing rates to fund the filtration treatment facility beginning in FY 2018-19. The expected annual rate increase is 2.2% each year over the next 12 years to fund the construction of the filtration plant and to operate the facility. The revenue generated from the 2.2% rate increase each year will be transferred to the RSA to be used in the latter years of the project when construction costs are highest to mitigate rate impacts and avoid rate spikes.

The RSA balance going forward will continue to increase through this Five-Year Preliminary Financial Plan and beyond, until FY 2025-26 when funds are expected to be drawn from the RSA to mitigate rate increases due to the filtration projects. Figure 6 shows projected RSA transfers. Figure 7 shows the actual and projected RSA balances at the end of each fiscal year.

Figure 6 – Rate Stabilization Account Transfers

FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 Transfers to the RSA $6.4 M $11.9 M $1.1 M $9.1 M $11.2 M

Figure 7 – Rate Stabilization Account Balance at Fiscal Year End

The RSA also serves as an available useable reserve for unforeseen requirements and helps ensure that debt service coverage meets planning standards. The transfers from and to the RSA could

14 FY 2018-19 Preliminary Financial Plan change with each update of forecasted operating expenses and revenues, the planned amount of bonds to be sold, and the balance of the RSA.

Unrestricted Cash as Number of Days of Operating Expenses

Unrestricted cash available for operating expenses is from the Operating Fund and the Rate Stabilization Account. Figure 8 shows the number of days of unrestricted cash available for operating expenses.

Figure 8 – Unrestricted Cash as Number of Days of Operating Expenses

400 14.0%

350 12.0% 300 10.0% 250 8.0% 200 6.0% 150 4.0% 100

50 2.0%

- 0.0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Fiscal Year Ending Actual Projected Water Retail Rate Increase Projected Water Retail Rate Increase

Non-Cash Accounts

The bureau uses the full accrual basis of accounting for financial reporting. This means that revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flows. This results in accounts receivable for revenues earned until the cash is received and accounts payable for expenses incurred until the payments are made. These non-cash account balances fluctuate throughout the year and the year-end

15 FY 2018-19 Preliminary Financial Plan balances can range from $10 million to $20 million. Although accounts receivable are technically funding sources to the bureau, the funds are not available for use until the cash has been received. Therefore, the bureau uses the cash basis of accounting for financial planning and rate forecasts.

IV. PERFORMANCE MANAGEMENT

In FY 2016-17, the City advanced its Performance Management initiatives to correlate directly to the specific goals found within Portland’s 2035 Comprehensive Plan. The Portland Comprehensive Plan sets clear standards for maintaining and developing water system resources to ensure reliability, adequacy of supply, and water quality. The Plan also includes six integrated goals that support prosperity, human health and safety, environmental health, equity, and resilience. These goals will be used in setting long-term strategic targets. The Performance Management System will be used to inform budget decisions that directly support those targets and ultimately influence the progress of the mission and goals of the City of Portland. Web-based dashboards are used to illustrate the key performance measures of each bureau and bureau progress within the measures. The dashboard is viewable on the City Budget Office web page and serves to better communicate the quality and breadth of services of each bureau to the community.

The bureau continues to measure its progress in the following core Key Performance Measures, developed as part of the FY 2015-16 budget. Program goals and performance objectives are described in the annual budget for each budgeted program in the narrative, and results are reported in the Performance Measures section.

Core Service: Provide high-quality water Measure: Number of violations of state and federal drinking water quality regulations Target: 100 percent compliance with state and federal drinking water quality regulations

Core Service: Provide excellent customer service Measure: Average time that customers are on hold before speaking to a customer service representative Target: Less than 2 minutes

Core Service: Maintain water system infrastructure Measure: Number of high risk assets identified and percent addressed Target: 80% of the identified high risk assets are addressed

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Core Service: Maintain water service Measure: Percentage of customers per year that are without water for more than 8 hours Target: Less than 1 percent of customers are out of water for more than 8 hours in a year

Core Service: Efficient use of public resources Measure: Maintain Water Revenue bond credit rating Target: Aaa bond rating

Core Service: Provide responsible environmental stewardship Measure: Number of violations of state and federal environmental regulations Target: 100 percent compliance with state and federal environmental regulations

V. BUDGET PROGRAMS

The bureau has Seven Budget Programs - Supply, Transmission and Terminal Storage, Treatment, Distribution, Regulatory Compliance, Customer Service and Administration & Support. See the Program Narratives in the Requested Budget submission for further detail of the Seven Budget Programs. Within these Budget Programs are 22 Water Programs. The 22 Water Programs are organized so that bureau staff and the public can more easily understand the work that the bureau performs. Each Water Program includes its purpose(s); the program inventory, consisting of the assets, work products, or components of the program; the desired outcome or effectiveness measures; and a brief description of the tasks and activities associated with the program. The Budget Program framework provides an integrated approach that facilitates continuity between the bureau’s planning (i.e. what is budgeted) and accomplishments (i.e. the work that is done.)

The FY 2018-19 preliminary budget request for the 22 Water Programs that are funded by the proposed 8.9 percent rate increase are presented in Figure 9. The list of full-time equivalencies (FTE) in this figure refers to the anticipated hours spent by all staff on the respective program activities. The FTEs listed do not reflect the staff organizationally assigned to each program. For example, a staff person assigned to Customer Service might charge time to Employee Investment (training), and those hours are shown in Administration & Support, not Customer Service.

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Figure 9 – FY 2018-19 Preliminary Budget Request by 22 Water Programs (Amounts in thousands)

FY 2018-19 Budget Request by 22 Water Programs Water Programs O&M CIP Total FTE

Supply Bull Run Watershed $3,354 $3,410 $6,764 20.7 Groundwater $1,998 $789 $2,787 7.2 $5,352 $4,199 $9,551 27.9 Transmission & Terminal Storage Conduits/Transmission Mains $1,133 $5,586 $6,719 7.8 Terminal Reservoirs $816 $41,968 $42,784 16.8 $1,949 $47,554 $49,503 24.6 Treatment Treatment $2,766 $7,410 $10,176 22.2

Distribution Distribution Mains $5,644 $55,542 $61,187 87.0 Field Support $3,939 $4,130 $8,069 35.1 Fountains $108 $0 $108 0.9 Hydrants $1,135 $1,450 $2,585 13.7 Meters $1,733 $1,030 $2,763 17.7 Pump Stations/Tanks $7,149 $4,025 $11,174 38.0 Services $2,154 $6,200 $8,354 46.0 Valves/Gates/Regulators $1,424 $0 $1,424 6.7 $23,287 $72,377 $95,664 245.1 Regulatory Compliance Water Quality & Regulatory Compliance $8,507 $2,080 $10,587 48.5

Customer Service Conservation/Sustainability $855 $0 $855 4.0 Customer Service $19,355 $0 $19,355 99.4 Grounds/Parks $759 $0 $759 2.5 Security/Emergency Mgmt $2,350 $100 $2,450 13.8 $23,318 $100 $23,418 119.7 Administration & Support Bureau Support1 $25,006 $0 $25,006 55.7 Data Management $3,823 $0 $3,823 21.3 Employment Investment $2,895 $0 $2,895 14.7 Planning $3,911 $3,000 $6,911 30.8 $35,635 $3,000 $38,635 122.5

Total $100,814 $136,720 $237,534 610.5

1 Bureau Support includes Utility License Fee of $7.9 million. Total may not add due to rounding

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VI. OPERATION & MAINTENANCE (O&M) PLAN

The Water Bureau’s O&M plan includes all non-capital expenditures required to maintain, operate, support, and manage the water system. This includes the bureau’s ongoing operating costs within the O&M and CIP budgets (including Utility License Fees), General Fund Overhead, Pension Obligation Bonds, and offset with capitalized overhead.

FY 2018-19 O&M is forecast at $102.6 million, a $9.1 million or 9.7 percent increase compared to the FY 2017-18 Adopted O&M Plan. A $4.0 million increase is related to non-capitalizable expenses for the filtration treatment project. There is a $2.7 million increase in the O&M budget primarily due to inflationary increases in the O&M budget that includes cost-of-living adjustment, salary step increases, the new DCTU labor contract, and employee pension and health costs. The O&M budget also increased $2.1 million for new requests. In addition, an increase in the O&M budget of $0.8 million is due to the increases in the Utility License Fee (ULF), Pension Obligation Bonds and General Fund Overhead offset with a $0.5 million increase in capitalized overhead. An increase in capitalized overhead means more operating expenses would be capitalized, resulting in lower operating costs.

Figure 10 shows the FY 2017-18 O&M plan and the forecast of O&M costs over the five-year planning period beginning in FY 2018-19. The O&M forecast is projected to rise to $116.7 million by FY 2022-23, growing at an annual average rate of 3.3 percent over the five-year planning period. The forecast includes assumptions from the City Economist regarding expected increases in Public Employees Retirement System (PERS) contribution rates in FY 2019-20 and again in FY 2021-22. This O&M forecast includes $0.7 million of operating cost for the Corrosion Control Facility in FY 2021-22 and the full year cost of $1.4 million in FY 2022-23.

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Figure 10 – Operation & Maintenance Plan

$125 $120 $115 $110 $105 $100 $95 $90 $85 $80

(Millions) $75 $70 $65 $60 $55 $50 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-2021 FY 2021-22 FY 2022-23

VII. CAPITAL IMPROVEMENT PLAN (CIP)

The bureau has developed a proposed FY 2018-19 Five-Year Capital Improvement Plan (CIP) as part of the comprehensive budget process that responds to the priorities identified through bureau planning processes and the City Council. New capital projects may be proposed through several processes: bureau master plans and studies; asset management plan recommendations; and requests by internal bureau staff, other agencies or bureaus, City Council, developers, and citizens. Significant projects go through a multiple-layered approval process. Projects are typically initiated with a planning-level report developed by engineering and reviewed by senior management. Upon approval, a more advanced Project Validation Report (PVR) is developed. The PVR uses industry best practices of benefit-cost analysis and risk management to identify and weigh alternative solutions to fulfilling the bureau’s service standards. In addition to this quantitative analysis, the bureau also considers rate increase impacts, shared costs with other agencies, outside revenue opportunities, and regulatory requirements when evaluating a project for inclusion in the budget. Public input for projects is also received through the Portland Utility Board, the Citizens’ Utility Board, and City Council, during the public budgeting process and during any city, state, and federal permit review periods.

The CIP includes projects with a requested budget totaling $136.7 million for FY 2018-19 and $596.6 million (in FY 2018-19 dollars) over the five-year period. The bureau has developed a Five-Year CIP that is achievable and continues to address the infrastructure needs of the water system. The primary drivers of the bureau’s capital work are ensuring the reliable functioning of

20 FY 2018-19 Preliminary Financial Plan the drinking water system, achieving compliance with federal and state drinking water regulations, improving the resilience of the water system, replacing assets that are at the end of their useful lives, and supporting the City’s renewed growth and development. The proposed FY 2018-19 Five-Year CIP continues to address the more immediate and short-term water system infrastructure needs.

A summary of the proposed Five-Year CIP is shown in Figure 11.

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Figure 11 – Five-Year Capital Improvement Plan (Amounts in thousands)

Water Program FY 18-19 FY 19-20 FY 20-21 FY 21-22 FY 22-23 Total SUPPLY Bull Run Watershed $3,273 $2,675 $3,065 $1,000 $3,773 $13,786 Groundwater $926 $570 $570 $570 $570 $3,206 Total $4,199 $3,245 $3,635 $1,570 $4,343 $16,992

TRANSMISSION & TERMINAL STORAGE Conduits/Transmission $5,586 $5,490 $16,530 $16,530 $16,530 $60,666 Terminal Reservoirs $41,968 $27,755 $21,528 $6,100 $11,000 $108,351 Total $47,554 $33,245 $38,058 $22,630 $27,530 $169,017

TREATMENT Treatment $7,410 $8,201 $28,265 $28,320 $55,370 $127,566

DISTRIBUTION Pumps Station/Tanks $4,038 $3,100 $3,100 $3,100 $3,100 $16,438 Distribution Mains $55,529 $23,822 $16,898 $19,451 $22,164 $137,864 Services $6,200 $6,200 $6,200 $6,200 $6,200 $31,000 Meters $1,030 $1,030 $1,030 $1,030 $1,030 $5,150 Hydrants $1,450 $1,450 $1,450 $1,450 $1,450 $7,250 Field Support $4,130 $4,130 $4,130 $4,130 $4,130 $20,650 Total $72,377 $39,732 $32,808 $35,361 $38,074 $218,352

REGULATORY COMPLIANCE Water Quality & Regulatory Compliance $2,080 $2,080 $500 $500 $500 $5,660

CUSTOMER SERVICE Security/Emergency Management $100 $100 $100 $100 $100 $500

ADMINISTRATION & SUPPORT Planning $3,000 $3,000 $3,000 $3,000 $3,000 $15,000 Bureau Support $0 $0 $43,500 $0 $0 $43,500 Total $3,000 $3,000 $46,500 $3,000 $3,000 $58,500

TOTAL $136,720 $89,603 $149,866 $91,481 $128,917 $596,587

Totals may not add due to rounding.

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Capital Plan

The bureau’s Capital Plan includes routine and ongoing capital repair and replacements to the water system as well as enhancements and additions that tend to be large and nonrecurring. The Capital Plan is composed of the capital portion of the CIP, bond sale costs, and indirect capitalized costs (overhead and interest).

The capital plan summary for the five-year planning period is presented in Figure 12.

Figure 12 – Five-Year Capital Plan Summary (Amounts in thousands)

FY 18-19 FY 19-20 FY 20-21 FY 21-22 FY 22-23 Total Capital Improvement Plan Total Studies in CIP $7,000 $3,000 $3,000 $3,000 $3,000 $19,000 Total O&M Labor in CIP $1,650 $1,650 $1,650 $1,650 $1,650 $8,250 Total Direct Capital $128,070 $84,953 $145,216 $86,831 $124,267 $569,337 CIP Total (Current Dollars) $136,720 $89,603 $149,866 $91,481 $128,917 $596,587 Forecast Inflation 1.00 1.05 1.08 1.14 1.17 1.23 Total CIP (Inflated Dollars)4 $136,720 $93,814 $160,212 $104,183 $150,928 $645,857 Total Studies in CIP $7,000 $3,141 $3,242 $3,417 $3,512 $20,311 Total O&M Labor in CIP $1,650 $1,728 $1,783 $1,879 $1,932 $8,971 Total Direct Capital4 $128,070 $88,946 $155,187 $98,888 $145,484 $616,575 Forecast Capital Expenditure Rate5 100% 100% 100% 100% 100% 100% Total Forecast Direct Capital $128,070 $88,946 $155,187 $98,888 $145,484 $616,575 Indirect/Other Costs Bond Sale Costs $602 $650 $731 $631 $821 $3,434 Capitalized Interest6 $988 $0 $0 $0 $0 $988 Capitalized Overhead $17,044 $17,897 $18,469 $19,467 $20,012 $92,889 Total Indirect/Other Costs $18,634 $18,547 $19,201 $20,097 $20,832 $97,311 Total Forecast Capital $146,704 $107,493 $174,388 $118,985 $166,317 $713,886

4 $43.5 million of direct capital is included in FY 2020-21 for the Portland Building Renovation and is not inflation adjusted. 5 The Water Bureau assumes direct capital over the 5-year forecast period will be spent at the full budgeted amounts. Indirect capital is assumed to be spent at the full budgeted amount. 6 Interest costs will no longer be capitalized beginning in FY 2019-20 consistent with the GASB exposure draft for Project No. 9-5. 23 FY 2018-19 Preliminary Financial Plan

FY 18-19 FY 19-20 FY 20-21 FY 21-22 FY 22-23 Total Capital Financing ($) Capital Revenues $14,784 $13,262 $11,841 $12,308 $12,591 $64,785 Debt $108,996 $66,704 $128,031 $71,840 $113,500 $489,071 Cash $22,060 $26,428 $33,441 $33,765 $38,960 $154,654 Interest on Investments $864 $1,098 $1,076 $1,072 $1,266 $5,376 Capital Financing (%) Capital Revenues 10% 12% 7% 11% 8% 9% Debt 74% 62% 73% 63% 68% 69% Cash 15% 25% 19% 30% 23% 22% Interest on Investments 1% 1% 1% 1% 1% 1%

Totals may not add due to rounding.

Figure 13 displays the capital plan forecast over the five-year period.

Figure 13 – Capital Plan Forecast

This five-year capital plan reflects the CIP as updated through January 2018:

$180.0 $160.0 $140.0 $120.0 $100.0 $80.0

(Millions) $60.0 $40.0 $20.0 $0.0 FY 18-19 FY 19-20 FY 20-21 FY 21-22 FY 22-23

• The Capital Financing Plan provides funding for capital expenditures of $713.9 million across the five-year forecast period. Capital expenditures include direct project costs and indirect costs (capitalized overhead, capitalized interest through FY 2018-19, and bond issuance costs).

24 FY 2018-19 Preliminary Financial Plan

• A bond sale of about $91.9 million is planned for the December 2018. In total, bond sales of $530.7 million are planned over the five-year planning period. Bonds will be sold annually through FY 2027-28. Bond proceeds totaling $489.9 million are to be deposited in the Construction Fund over the five-year period. About $40.8 million of the bond proceeds will be used to fund debt service reserves funds. The current and projected debt service payments are forecast to total $356.5 million for the five-year forecast period. The debt service is funded by $352.4 million from the Water Operating Fund and $4.1 million of interest earned on bond reserves.

• Capital revenues provide approximately $64.8 million across the five years. Capital revenues include system development charges, new service/main installations, City interagency project revenues, and sales of assets.

• Cash-financed capital funding from rate revenues provide approximately $154.7 million across the five years.

• The bureau includes a set-aside of $2.5 million for bureau-funded utility relocation investments.

Figure 14 displays the mix of capital financing over the five-year forecast period.

25 FY 2018-19 Preliminary Financial Plan

Figure 14 – Capital Financing Plan

Studies and O&M Embedded in the CIP

The bureau’s CIP also includes project expenditures that cannot be capitalized or debt financed. These expenditures generally fall into the grouping of capital studies, preliminary engineering, and O&M investments.7 The bureau has included $27.3 million (FY 2018-19 dollars) for capital studies, preliminary engineering, and O&M costs in the CIP over the five-year forecast period.

7 O&M costs within the CIP projects that are not deemed capital include the portion of a CIP project that does not clearly meet the capital criteria of a betterment, improvement, or addition as prescribed by the City and industry standard, and are considered an ordinary periodic expense. These are project costs, which are embedded in capital projects, but by their nature do not meet the capitalization test (e.g., preliminary engineering costs or capital maintenance). 26 FY 2018-19 Preliminary Financial Plan

APPENDIX

The figures listed below are included in this appendix. Forecast figures were prepared based on the bureau’s recommended forecast.

Figures A1 – Historical Water Rates This figure displays the bureau’s water rate schedules for the period FY 2013-14 through FY 2017-18.

Figure A2 – Forecast Assumptions This figure provides a comparison of economic and budgetary assumptions underlying the current year (FY 2017-18) and the five-year forecast period.

Figure A3 – Operating Budget This figure displays the bureau’s annual system operating costs and their funding for FY 2017-18 and the five-year forecast period.

Figure A4 – Revenue Requirements from Rates Summary This figure displays annual revenue requirements from rates for FY 2017-18 and the five-year forecast period. Revenue required from rates (net revenue requirements) is computed by subtracting other current system revenues from current system costs.

Figure A5 – Water Sales Summary This figure provides a synopsis of projected changes in total system revenue requirements, the costs financed by water sales, and projected changes in water sales and water rates for the combined wholesale and retail customer classes for FY 2017-18 and the five-year forecast period.

Figure A6 – Outstanding Debt and Annual Debt Service This figure provides a summary of the bureau’s projected outstanding debt and annual debt service requirements (principal and interest) for FY 2017-18 and the five-year forecast period.

Figure A7 – Projected Debt Service Coverage This figure provides projected revenue debt service coverage for the first lien revenue bonds only and first and second lien revenue bonds stabilized for FY 2017-18 and the five-year forecast period. This figure also displays the projected gross revenues (operating revenues plus non- operating revenues) and operating expenses that are included to calculate debt service coverage.

27 FY 2018-19 Preliminary Financial Plan

Figure A8 – Statement of Sources and Uses of Funds This figure summarizes the combined Operating, Construction, and Sinking Funds projected sources and uses of funds on a cash basis for FY 2017-18 and the five-year forecast period.

Figure A9 – Water Operating Fund This figure displays the Operating Fund’s projected sources and uses of funds on a cash basis for FY 2017-18 and the five-year forecast period.

Figure A10 – Construction Fund This figure displays the Construction Fund’s projected sources and uses of funds on a cash basis for FY 2017-18 and the five-year forecast period.

Figure A11 – Sinking Fund This figure displays the bureau’s sinking fund’s projected sources and uses of funds including the bond reserve account on a cash basis for FY 2017-18 and the five-year forecast period.

Figure A12 – Rate Stabilization Account (RSA) This figure displays the bureau’s Rate Stabilization Account’s projected sources and uses of funds on a cash basis for FY 2017-18 and the five-year forecast period.

28 CITY OF PORTLAND Figure A1 PORTLAND WATER BUREAU

HISTORICAL WATER RATES

Effective July 1 - June 30 2013-14 2014-15 2015-16 2016-17 2017-18

Inside City:

Volume Rate (per ccf) $3.441 $3.682 $3.940 $4.216 $4.499

Outside City - Wholesale Customer: Burlington Water District 0.998 1.061 1.386 1.337 1.484 GNR Corporation 0.543 0.574 0.653 0.700 1.059 Green Valley Water Co. 0.543 0.574 0.653 0.700 1.059 Gresham, City of 0.554 0.578 0.656 0.700 0.725 Hideaway Hills Water Co. 0.543 0.574 0.653 0.700 1.059 Lake Grove Water District 1.075 1.278 1.377 1.800 2.261 Lorna Portland Water, LLC 0.543 0.574 0.653 0.700 1.059 Lusted Water District 0.912 0.940 1.003 1.085 1.052 Palatine Hill Water District 1.543 1.586 1.690 1.978 2.319 Pleasant Home Water District 0.806 0.841 0.952 1.027 1.073 Raleigh Water District 0.698 0.734 0.832 0.911 1.017 Rockwood Water PUD 0.532 0.564 0.647 0.708 0.712 Sandy, City of 0.394 0.446 0.543 0.582 0.605 Skyview Acres Water Co. 0.543 0.574 0.653 0.700 1.059 Tigard, City of** 1.389 1.482 1.660 N/A N/A Tualatin Valley Water District 0.852 0.884 1.033 1.139 1.189 Tualatin, City of 0.782 0.792 0.927 1.005 1.061 Two Rivers Water Association 0.543 0.574 0.653 0.700 1.059 Valley View Water District 1.652 1.720 1.827 2.040 2.227 West Slope Water District 1.190 1.263 1.301 1.405 1.757

BASE CHARGE (Monthly Rate) Quarterly Billed Customer $10.40 $11.13 $11.91 $12.75 $13.61 Monthly Billed Customer $31.21 $33.40 $35.74 $38.25 $40.82

Monthly Bill for 5 ccf $27.61 $29.54 $31.61 $33.83 $36.11

Monthly Low-Income Water Discount* $13.80 $14.77 $15.80 $16.90 $18.05 Retail average overall change 3.6% 7.0% 7.0% 7.0% 6.7% Wholesale average overall change** -11.4% 4.9% 14.4% 9.3% 5.9% Portland CPIU*** 2.6% 1.3% 1.8% 2.8% 4.4%

* The low income discount program began January 1, 1995. ** The Water Sales Agreement with City of Tigard ended June 30, 2016. City of Tigard is excluded from the average beginning in FY 2016-17. *** The Consumer Price Index for All Urban Consumers (CPIU). FY 2017-18 is the melded inflation estimate used in the adopted plan. Figure A2 CITY OF PORTLAND BUREAU FINANCIAL FORECAST ASSUMPTIONS PORTLAND WATER BUREAU

Revised Plan 2018 2019 2020 2021 2022 2023 Economic Assumptions Melded Inflation Rate* 4.40% 3.40% 4.70% 3.20% 5.40% 2.80% Interest Earnings Rate ** 1.00% 1.65% 2.00% 2.00% 2.00% 2.00% Bond Discount 0.60% 0.60% 0.60% 0.60% 0.60% 0.60% First Lien Bond Interest 5.00% 5.00% 6.00% 6.00% 6.00% 6.00% Second Lien Bond Interest 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% Wholesale Users' Rate of Return - greater of: 4.25% 4.04% 4.76% 4.76% 4.76% 4.76% Bond Buyer's Index 4.25% 4.04% 4.76% 4.76% 4.76% 4.76% Average Cost of Debt 3.43% 3.26% 3.26% 3.26% 3.26% 3.26%

Bond Term 25 Years 25 Years 25 Years 25 Years 25 Years 25 Years Debt Structure level level level level level level Minimum Target Coverage Ratios - 1st Lien 1.90 1.90 1.90 1.90 1.90 1.90 Minimum Target Coverage Ratios - Combined 1st and 2nd lien bonds Stabilized test 1.75 1.75 1.75 1.75 1.75 1.75

Budgetary Assumptions Fund Balance Cash Cash Cash Cash Cash Cash City Franchise Fee $ 7,244,000 $ 7,883,000 $ 8,482,000 $ 9,113,000 $ 9,792,000 $ 10,520,000 City Franchise Fee - imputed rate 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% Direct CIP Capital Expenditure Rate 100.00% 100.00% 100.00% 98.90% 100.00% 100.00%

* Rates calculated as of January 2018 ** Amount does not include Treasury management fee that reduces rate by approximately .07%. CITY OF PORTLAND Figure A3 PORTLAND WATER BUREAU (Amounts in 000's) OPERATING BUDGET Revised Plan Total 2018 2019 2020 2021 2022 2023 Years 1-5

Forecasted Operating Budget: O&M* (includes inflation) $72,292 $76,437 $78,159 $80,320 $85,677 $89,017 $409,609

O&M Labor in Capital (includes inflation) 1,650 1,650 1,728 1,783 1,879 1,932 8,971

Studies in Capital (includes inflation)** 2,900 7,000 3,141 3,242 3,417 3,512 20,311

General Fund Overhead (includes inflation) 5,140 5,241 5,644 5,825 6,139 6,311 29,161

Pension Obligation Bond Debt 4,236 4,339 4,786 4,977 5,176 5,383 24,662

Utility License Fee 7,244 7,883 8,482 9,113 9,792 10,520 45,790

Total Forecasted Operating Budget $93,463 $102,550 $101,940 $105,259 $112,081 $116,676 $538,505

Funding Funded thru Rates $82,566 $102,550 $101,940 $102,490 $112,081 $116,676 $535,737 Other Resources 10,896 0 0 2,768 0 0 $2,768

Funding - % of Total Funded thru Rates 88.34% 100.00% 100.00% 97.37% 100.00% 100.00% 99.49% Other Resources 11.66% 0.00% 0.00% 2.63% 0.00% 0.00% 0.51%

* O&M excludes all capitalized overhead $16,500 $17,044 $17,897 $18,469 $19,467 $20,012 $92,889 ** FY 2018-19 includes $4.0 of non-capitalizable expenses for the filtration treatment project. CITY OF PORTLAND Figure A4 PORTLAND WATER BUREAU (Amounts in 000's) REVENUE REQUIREMENTS FROM RATES SUMMARY

Revised Plan Total 2018 2019 2020 2021 2022 2023 Years 1-5

Operation and Maintenance * (O&M + O&M Labor + Studies) $76,842 $85,087 $83,028 $85,344 $90,973 $94,461 $438,892 General Fund Overhead $5,140 $5,241 $5,644 $5,825 $6,139 $6,311 $29,161 Utility License Fee $7,244 $7,883 $8,482 $9,113 $9,792 $10,520 $45,790 Pension Obligation Bond Debt $4,236 $4,339 $4,786 $4,977 $5,176 $5,383 $24,662

Debt Service ** $54,810 $57,080 $65,295 $73,531 $75,534 $84,057 $355,497

Cash Financed Capital Improvements $31,631 $22,060 $26,428 $33,441 $33,765 $38,960 $154,654

Annual System Costs $179,904 $181,690 $193,662 $212,230 $221,380 $239,693 $1,048,655

Less: Other System Resources Interagency Receipts $2,766 $3,030 $7,812 $2,074 $2,186 $2,247 $17,349 Interest Earnings $820 $1,487 $2,006 $2,279 $2,547 $2,912 $11,231 Other Water Sales Adjustments*** ($2,390) ($3,335) ($3,350) ($3,631) ($3,884) ($4,225) ($18,425) Other Miscellaneous Receipts $2,621 $2,911 $3,048 $3,145 $3,315 $3,408 $15,827 Transfer from (to) Rate Stabilization Account $0 ($6,400) ($11,900) ($1,100) ($9,100) ($11,200) ($39,700) Change in Beginning and Ending Balance $7,080 $743 ($0) $1 ($2) $1 $743

Total Other Resources $10,896 ($1,564) ($2,385) $2,768 ($4,938) ($6,856) ($12,975)

Required Revenues from Rates $169,007 $183,254 $196,047 $209,462 $226,319 $246,549 $1,061,630

* O&M excludes capitalized overhead $16,500 $17,044 $17,897 $18,469 $19,467 $20,012 $92,889 ** Debt Service Excludes capitalized interest $956 $988 $0 $0 $0 $0 $988 *** Other Water Sales Adjustments include delinquent charge revenue, and other offsets to water sales including: low-income discount on base and volume charge, safety net, voucher program, bad debt expense, and cash collected on prior year volume rate. CITY OF PORTLAND Figure A5 PORTLAND WATER BUREAU (Amounts in 000's) WATER SALES SUMMARY

Revised Plan Total 2018 2019 2020 2021 2022 2023 Years 1-5

Water Retail In-City Volume Revenue $111,399 $121,338 $130,317 $139,962 $150,323 $161,450 $703,390

Base Charge Revenue $33,497 $36,588 $39,296 $42,202 $45,321 $48,671 $212,078

Fireline Charge Revenue $5,160 $5,750 $6,176 $6,633 $7,124 $7,651 $33,335

Total Retail Revenue In-City $150,056 $163,677 $175,789 $188,797 $202,768 $217,773 $948,803 Average Effective Retail Rate Increase 6.7% 8.9% 7.4% 7.4% 7.4% 7.4%

Groundwater Revenue $58 $60 $63 $65 $69 $71 $328 Outside-City Revenue $655 $679 $722 $740 $810 $918 $3,869

Total Retail Revenues $150,769 $164,416 $176,573 $189,602 $203,647 $218,762 $953,000

Wholesale Revenue Requirements $18,238 $18,838 $19,473 $19,860 $22,672 $27,787 $108,630 Wholesale Revenue % change* 5.9% 3.3% 3.4% 2.0% 14.2% 22.6%

Revenue Requirements Water Sales $169,007 $183,254 $196,047 $209,462 $226,319 $246,549 $1,061,630

Water Sales Financing: Operation and Maintenance (net of capitalized overhead) $82,566 $102,550 $101,940 $102,490 $112,081 $116,676 $535,737 Capital Repair and Replacement $31,631 $22,060 $26,428 $33,441 $33,765 $38,960 $154,654 Debt Service (net of capitalized interest) $54,810 $57,080 $65,295 $73,531 $75,534 $84,057 $355,497 Fund Balance/Reserve $0 $1,564 $2,385 $0 $4,938 $6,856 $15,743

Water Sales Financing - % of Annual Total: Operation and Maintenance 48.9% 56.0% 52.0% 48.9% 49.5% 47.3% 50.5% Capital Repair and Replacement 18.7% 12.0% 13.5% 16.0% 14.9% 15.8% 14.6% Debt Service 32.4% 31.1% 33.3% 35.1% 33.4% 34.1% 33.5% Fund Balance/Reserve 0.0% 0.9% 1.2% 0.0% 2.2% 2.8% 1.5%

* Increases in FY 2022 and FY 2023 are driven by completion of the Willamette River Crossing and Washington Park Reservoir projects, respectively. CITY OF PORTLAND Figure A6 PORTLAND WATER BUREAU (Amounts in 000's) OUTSTANDING DEBT SCHEDULE

Revised Plan 2018 2019 2020 2021 2022 2023

Revenue Debt:

Current: Total First Lien $421,915 $401,345 $379,755 $357,100 $340,850 $323,905 Total Second Lien $201,690 $192,690 $183,280 $173,440 $161,990 $149,960 Total Current Debt $623,605 $594,035 $563,035 $530,540 $502,840 $473,865

Future: Proposed First Lien $98,895 $91,930 $190,044 $299,738 $390,382 $510,571

Total Debt Outstanding (year end) $722,500 $685,965 $753,079 $830,278 $893,222 $984,436

CITY OF PORTLAND PORTLAND WATER BUREAU (Amounts in 000's) ANNUAL DEBT SERVICE

Revised Plan Total 2018 2019 2020 2021 2022 2023 Years 1-5

Interest: Current Debt Schedule $27,511 $26,199 $24,771 $23,280 $21,700 $20,428 $116,379

Principal: Current Debt Schedule $28,255 $29,570 $31,000 $32,495 $27,700 $28,975 $149,740

Total Current Debt Service $55,766 $55,769 $55,771 $55,775 $49,400 $49,403 $266,119

Total Future Debt Service $0 $2,298 $9,524 $17,755 $26,134 $34,654 $90,366

Total Debt Service $55,766 $58,068 $65,295 $73,531 $75,534 $84,057 $356,485 CITY OF PORTLAND PORTLAND WATER BUREAU (Amounts in 000's) Figure A7

Projected Debt Service Coverage Revised Plan Total 2018 2019 2020 2021 2022 2023 Years 1-5

Operating Revenues Water Sales (retail & wholesale) $169,007 $183,254 $196,047 $209,462 $226,319 $246,549 $1,061,630 Other Water Sales Adjustments* (2,390) (3,335) (3,350) (3,631) (3,884) (4,225) (18,425) Interagency Receipts (operating - all) 2,766 3,030 7,812 2,074 2,186 2,247 17,349 Miscellaneous Revenues 2,621 2,911 3,048 3,145 3,315 3,408 15,827

Total Operating Revenue 172,004 185,860 203,556 211,051 227,936 247,979 1,076,382

Operating Expenses Base O&M Budget (including all adjustments) 102,719 111,711 111,354 114,615 121,755 126,168 585,603 Capitalized Overhead (Deduction) (16,500) (17,044) (17,897) (18,469) (19,467) (20,012) (92,889)

Total Operating Expenses 86,219 94,667 93,458 96,146 102,289 106,156 492,715

Total Operating Income 85,785 91,193 110,099 114,905 125,647 141,823 583,667

Non-Operating Income Interest Income 1,862 2,351 3,105 3,354 3,619 4,178 16,607 SDC Revenue 3,250 4,000 3,500 3,250 3,250 3,250 17,250 Cap. Contributions/Other 7,489 10,784 9,762 8,591 9,058 9,341 47,535 Others: Asset sales (225) (225) (236) (243) (256) (263) (1,223)

Total Non-Operating Revenue 12,376 16,910 16,131 14,952 15,670 16,505 80,169

Net Revenue Available for Debt 98,161 108,103 126,230 129,857 141,318 158,329 663,836

Stabilization Transfer - (6,400) (11,900) (1,100) (9,100) (11,200) (39,700) Stabilized Net Revenue $98,161 $101,703 $114,330 $128,757 $132,218 $147,129 $624,136

Debt Service Detail Debt Service - First Lien revenue bonds $36,988 $40,413 $47,630 $55,872 $56,768 $65,283 $265,965 Debt Service - Second Lien revenue bonds $18,778 $17,655 $17,665 $17,659 $18,766 $18,774 $90,519

Debt Service Coverage Tests First Lien Revenue Bonds Only 2.65 2.67 2.65 2.32 2.49 2.43 First Plus Second Liens Revenue Bonds Only 1.76 1.86 1.93 1.77 1.87 1.88 Stabilized Test First and Second Lien 1.76 1.75 1.75 1.75 1.75 1.75

* Other Water Sales Adjustments include delinquent charge revenue, and other offsets to water sales including: low-income discount on base and volume charge, safety net, voucher program, bad debt expense, and cash collected on prior year volume rate. CITY OF PORTLAND PORTLAND WATER BUREAU (Amounts in 000's) Figure A8 STATEMENT OF SOURCES AND USES OF FUNDS Revised Plan Total Fiscal Year 2018 2019 2020 2021 2022 2023 Years 1-5

BEGINNING BALANCE $213,366 $145,199 $133,790 $179,026 $165,634 $199,667

REVENUES Water Sales $169,007 $183,254 $196,047 $209,462 $226,319 $246,549 $1,061,630 Other Water Sales Adjustments* (2,390) (3,335) (3,350) (3,631) (3,884) (4,225) (18,425) Interagency Receipts 2,766 3,030 7,812 2,074 2,186 2,247 17,349 Other Miscellaneous Receipts 2,621 2,911 3,048 3,145 3,315 3,408 15,827 Interest Income 1,862 2,351 3,105 3,354 3,619 4,178 16,607 Total Revenue $173,866 $188,210 $206,661 $214,405 $231,555 $252,157 $1,092,988

OTHER SOURCES OF FUNDS Bond Proceeds including Bond Reserve 0 91,930 100,040 113,540 96,770 128,425 530,705 Contributions 7,489 10,784 9,762 8,591 9,058 9,341 47,535 System Development Charges 3,250 4,000 3,500 3,250 3,250 3,250 17,250 Total NonOperating Sources of Funds $10,739 $106,714 $113,302 $125,381 $109,078 $141,016 $595,490

TOTAL SOURCES OF FUNDS $397,972 $440,123 $453,753 $518,811 $506,267 $592,840

OPERATING BUDGET Operating & Maintenance 93,342 102,131 100,924 103,813 110,439 114,473 531,781 Utility License Fee 7,244 7,883 8,482 9,113 9,792 10,520 45,790 Pension Obligation Bond Debt 4,236 4,339 4,786 4,977 5,176 5,383 24,662 General Fund Overhead 5,140 5,241 5,644 5,825 6,139 6,311 29,161 Total Operating Budget $109,963 $119,594 $119,836 $123,728 $131,547 $136,688 $631,393

CAPITAL COSTS Direct Capital (Total)** 87,044 128,672 89,596 155,919 99,518 146,305 620,009 Debt Service (Total) 55,766 58,068 65,295 73,531 75,534 84,057 356,485 Total Capital Costs $142,810 $186,739 $154,891 $229,449 $175,053 $230,362 $976,494

TOTAL OUTLAYS $252,773 $306,334 $274,727 $353,177 $306,600 $367,050 $1,607,887

ENDING BALANCE $145,199 $133,790 $179,026 $165,634 $199,667 $225,790

TOTAL USES OF FUNDS $397,972 $440,123 $453,753 $518,811 $506,267 $592,840

* Other Water Sales Adjustments include delinquent charge revenue, and other offsets to water sales including: low-income discount on base and volume charge, safety net, voucher program, bad debt expense, and cash collected on prior year volume rate. ** Direct Capital includes bond issuance costs. CITY OF PORTLAND PORTLAND WATER BUREAU (Amounts in 000's) Figure A9 WATER OPERATING FUND

Revised Plan Total Fiscal Year 2018 2019 2020 2021 2022 2023 Years 1-5

BEGINNING BALANCE $21,104 $15,744 $15,001 $15,002 $15,001 $15,003

RECEIPTS: Water Sales $169,007 $183,254 $196,047 $209,462 $226,319 $246,549 $1,061,630 Other Water Sales Adjustments* (2,390) (3,335) (3,350) (3,631) (3,884) (4,225) (18,425) Interagency Receipts 2,766 3,030 7,812 2,074 2,186 2,247 17,349 Transfers from Construction Fund 104,500 146,704 107,493 174,388 118,985 166,317 713,886 Interest Income 588 970 1,347 1,476 1,577 1,778 7,147 Other Miscellaneous Receipts 2,621 2,911 3,048 3,145 3,315 3,408 15,827 TOTAL RECEIPTS 277,092 333,533 312,396 386,914 348,497 416,074 1,797,414

Transfer from Rate Stabilization Account ------

TOTAL SOURCES OF FUNDS $298,196 $349,278 $327,397 $401,916 $363,498 $431,077

EXPENDITURES Operation and Maintenance $93,342 $102,131 $100,924 $103,813 $110,439 $114,473 $531,781 Transfers to Construction Fund 31,631 22,060 26,428 33,441 33,765 38,960 154,654 Direct Capital Costs 87,044 128,672 89,596 155,919 99,518 146,305 620,009 General Fund Overhead 5,140 5,241 5,644 5,825 6,139 6,311 29,161 Utility License Fee 7,244 7,883 8,482 9,113 9,792 10,520 45,790 Pension Obligation Bond Debt 4,236 4,339 4,786 4,977 5,176 5,383 24,662 Transfer to Water Bond Sinking Fund 53,815 57,550 64,635 72,728 74,564 82,923 352,400 TOTAL EXPENDITURES 282,452 327,876 300,496 385,815 339,395 404,875 1,758,457

Transfer to Rate Stabilization Account - 6,400 11,900 1,100 9,100 11,200 39,700

ENDING BALANCE 15,744 15,001 15,002 15,001 15,003 15,002

TOTAL USES OF FUNDS $298,196 $349,278 $327,397 $401,916 $363,498 $431,077

* Other Water Sales Adjustments include delinquent charge revenue, and other offsets to water sales including: low-income discount on base and volume charge, safety net, voucher program, bad debt expense, and cash collected on prior year volume rate. CITY OF PORTLAND PORTLAND WATER BUREAU (Amounts in 000's) Figure A10 WATER CONSTRUCTION FUND

Revised Plan Total Fiscal Year 2018 2019 2020 2021 2022 2023 Years 1-5

BEGINNING BALANCE $120,239 $59,070 $35,481 $60,990 $37,618 $54,978

RECEIPTS Capital Revenues $10,739 $14,784 $13,262 $11,841 $12,308 $12,591 $64,785 Bond Proceeds 0 85,407 92,214 104,658 89,200 118,379 489,858 Transfer from Water Fund 31,631 22,060 26,428 33,441 33,765 38,960 154,654 Interest Income 960 864 1,098 1,076 1,072 1,266 5,376 TOTAL RECEIPTS 43,331 123,115 133,002 151,015 136,345 171,196 714,673

TOTAL SOURCES OF FUNDS $163,570 $182,185 $168,483 $212,006 $173,963 $226,173

EXPENDITURES Capital Reimbursement to Water $104,500 $146,704 $107,493 $174,388 $118,985 $166,317 $713,886 TOTALFund EXPENDITURES 104,500 146,704 107,493 174,388 118,985 166,317 713,886

ENDING BALANCE 59,070 35,481 60,990 37,618 54,978 59,857

TOTAL USES OF FUNDS $163,570 $182,185 $168,483 $212,006 $173,963 $226,173 CITY OF PORTLAND PORTLAND WATER BUREAU (Amounts in 000's) Figure A11 WATER SINKING FUND

Revised Plan Total Fiscal Year 2018 2019 2020 2021 2022 2023 Years 1-5

BEGINNING BALANCE * $31,351 $29,713 $36,236 $44,062 $52,944 $60,514

RECEIPTS Transfer from Water Fund $53,815 $57,550 $64,635 $72,728 $74,564 $82,923 $352,400 Bond Reserve from Proceeds 0 6,523 7,826 8,882 7,570 10,046 40,847 Interest Earning from Bond Reserve 314 517 659 803 970 1,135 4,084 Transfers from Construction Fund 0 0 0 0 0 0 0 TOTAL RECEIPTS $54,128 $64,591 $73,121 $82,413 $83,104 $94,103 $397,332

TOTAL SOURCES OF FUNDS $85,479 $94,304 $109,357 $126,475 $136,048 $154,617

EXPENDITURES Debt Service 55,766 58,068 65,295 73,531 75,534 84,057 $356,485 TOTAL EXPENDITURES 55,766 58,068 65,295 73,531 75,534 84,057 $356,485

ENDING BALANCE 29,713 36,236 44,062 52,944 60,514 70,560

TOTAL USES OF FUNDS $85,479 $94,304 $109,357 $126,475 $136,048 $154,617

*The Bond reserve account is included within the Sinking Fund. CITY OF PORTLAND PORTLAND WATER BUREAU (Amounts in 000's) Figure A12 RATE STABILIZATION ACCOUNT

Revised Plan Total Fiscal Year 2018 2019 2020 2021 2022 2023 Years 1-5

BEGINNING BALANCE* $40,672 $40,672 $47,072 $58,972 $60,072 $69,172

RECEIPTS Transfer from Water Fund $0 $6,400 $11,900 $1,100 $9,100 $11,200 $39,700 TOTAL RECEIPTS $0 $6,400 $11,900 $1,100 $9,100 $11,200 $39,700

TOTAL SOURCES OF FUNDS $40,672 $47,072 $58,972 $60,072 $69,172 $80,372

EXPENDITURES Transfer to Water Fund 0 0 0 0 0 0 $0 TOTAL EXPENDITURES 0 0 0 0 0 0 $0

ENDING BALANCE 40,672 47,072 58,972 60,072 69,172 80,372

TOTAL USES OF FUNDS $40,672 $47,072 $58,972 $60,072 $69,172 $80,372

* Interest earnings are recorded in the Water Operating Fund. Nick Fish, Commissioner Michael Stuhr, P.E., Administrator

1120 SW 5th Avenue, Room 600 Portland, Oregon 97204-1926 Information: 503-823-7404 www.portlandoregon.gov/water

Date: January 29, 2018

To: Andrew Scott, City Budget Office

From: Cecelia Huynh, Finance Director

Subject: FY 2018-19 Budget – Fee Study

As required by the City’s Financial Policy 2.06 to complete fee studies based upon cost-of-service principles, the Portland Water Bureau will be filing its annual rate ordinance for the first rate hearing on May 17, 2018 for rates and charges for water and water-related services during the fiscal year beginning July 1, 2018 to June 30, 2019.

The FY 2017-18 rate ordinance approved by City Council by Ordinance No. 188396 for FY July 1, 2017 to June 30, 2018 is available on the following website:

http://efiles.portlandoregon.gov/Record/10973004/

c: Michael Stuhr, P.E., Administrator Shannon Fairchild, CBO Budget Analyst

To help ensure equal access to City programs, services, and activities, the City of Portland will provide translation, reasonably modify policies/procedures and provide auxiliary aids/services/alternative formats to persons with disabilities. For accommodations, translations and interpretations, complaints, and additional information, contact 503-823-1058, use City TTY 503-823-6868, use Oregon Relay Service: 711, or visit the City’s Civil Rights Title VI & ADA Title II web site.

Nick Fish, Commissioner Michael Stuhr, P.E., Administrator

1120 SW 5th Avenue, Room 600 Portland, Oregon 97204-1926 Information: 503-823-7404 www.portlandoregon.gov/water

Date: January 29, 2018

To: Andrew Scott, City Budget Office

From: Michael Stuhr, P.E., Administrator

Subject: FY 2018-19 Budget - Percent for Art

We have completed review of the Portland Water Bureau’s CIP program and the requirements of City Code Section 5.74.

Funding for Portland Water Bureau projects, and any portion of shared projects, is derived from the water fund and water construction fund. The funds are exempt by ordinance in participation in Public Art.

Therefore the Water Bureau’s CIP is exempt from the percent for art program.

c: Teresa Elliot – Water Bureau Chief Engineer Jeff Winner – CIP Planning Supervisor Cecelia Huynh – Finance and Support Services Director Shannon Fairchild, CBO Budget Analyst

To help ensure equal access to City programs, services, and activities, the City of Portland will provide translation, reasonably modify policies/procedures and provide auxiliary aids/services/alternative formats to persons with disabilities. For accommodations, translations and interpretations, complaints, and additional information, contact 503-823-1058, use City TTY 503-823-6868, use Oregon Relay Service: 711, or visit the City’s Civil Rights Title VI & ADA Title II web site.

Budget Equity Assessment Tool

CITY POLICY

This Budget Equity Assessment Tool is a general set of questions to guide city bureaus and their Budget Advisory Committees in assessing how budget requests benefit and/or burden communities, specifically communities of color and people with disabilities. As noted in Portland’s 25-year strategic plan, the Portland Plan, Goal-Based Budgeting, and page 102:

When fully implemented, the new budget approach will direct City of Portland bureaus and offices to: • Use an asset management approach to achieve more equitable service levels across communities and geographies. • Track and report on service levels and investments by community and geography, including expanding the budget mapping process • Assess the equity and social impacts of budget requests to ensure programs, projects and other investments to help reduce disparities and promote service level equity, improve participation and support leadership development. • Identify whether budget requests advance equity, represent a strategic change to improve efficiency and service levels and/or are needed to provide for basic public welfare, health and/or meet all applicable national and state regulatory standards.

It is the policy of the City of Portland that no person shall be denied the benefits of, or be subjected to, discrimination in any City program, service, or activity on the grounds of race, color, national origin, English proficiency, sex, age, disability, religion, sexual orientation, gender identity, or source of income. Additionally, the City’s Civil Rights Title VI program guidelines obligate public entities to develop systems and procedures that guard against or proactively prevent discrimination, while simultaneously ensuring equitable impacts on all persons. Therefore, City bureaus may find this tool helpful when evaluating equitable impacts on all residents.

The Office of Equity and Human Rights is also available for discussion/training/consultation regarding the use of this document.

BUREAU/OFFICE/DEPARTMENT:

SECTION ONE: BASE BUDGET

Bureaus should consider the following questions in developing their base budgets. These questions should clarify how resources could be reallocated within the base budget in order to achieve more equitable outcomes. These questions are most effectively considered in the early stages of budget development when bureau leadership is considering priorities and potential realignments. Please contact your Equity Advisor or City Budget Office analyst for ideas on how to specifically incorporate these questions into your bureaus budget development process.

1. In what areas did you consider the impacts on underserved communities in the development of your base budget?”

The Water Bureau’s Management Team prioritized five themes during budget discussions: resilience, water quality, equity, customer service, and workforce development. The Water Bureau plans to maintain current funding on equity-related work and expand in several areas.

Customer Service One bureau decision package for FY 2018-19 would add resources to the utilities’ Financial Assistance Program. The program would be led by a Program Manager. The decision package also proposes two new Program Specialists to support the Financial Assistance Program (see the Financial Assistance Expansion decision package for more detail).

The Customer Service group also intends to redesign all notices with simpler language and increased readability, and to provide some notifications in multiple languages.

Communications The Communications group continues to expand outreach in underserved communities. One part of this work is the development of a manual for staff who do construction project outreach. The manual incorporates best practices for translation and interpretation, accessibility, and community engagement. The group will spend funds according to this manual’s guidance in FY 2018-19.

The bureau’s webmaster is pursuing a contract to redesign the bureau website. As part of this redesign, the bureau would increase accessibility.

In FY 2018-19, the Communications group will also roll out guidance for bureau staff to help them create more accessible outreach materials.

Emergency Preparedness One of the bureau’s priorities is to increase the resilience of the water system. People at higher risk of marginalization are less likely to have the ability to store water for an emergency, and are also less likely to be able to leave the city following a major disaster. Improving resilience improves the chances that people at risk of marginalization will be able to rebuild their lives after a major natural disaster. The FY 2018-19 budget continues to fund key resilience work.

Strategic Business Plan The Portland Water Bureau has launched a project to develop a Strategic Business Plan by December 2018. The plan includes an organizational evaluation and the development of an equity framework to support the bureau’s equity goals and planning. The organizational scan will include interviews with stakeholder organizations representing communities of color and vulnerable populations. During the development of the plan, the bureau will seek community engagement around the bureau’s risk assessment and draft strategic plan through listening sessions and an online portal for comments.

Training and Development The bureau’s Training and Development Officer offers employee engagement programs related to equity goals, language, and implementation of the bureau’s Racial Equity Plan. In FY 2018-19, this program will spend funds on speaker and facilitator fees for these sessions.

The Training and Development Program has also allocated funding and staff time for the development and implementation of an equity-focused hiring training course for the bureau’s managers and supervisors. The training will be fully implemented in FY 2018-19.

Drawing from the bureau’s Racial Equity Plan, this program will develop and implement a monthly series of micro-trainings for the bureau’s Management Team, focused on developing an equity mindset.

The Training and Development Officer with the Police Bureau’s Equity Manager will co-develop an Emotional Intelligence and Diversity Leadership Development and Equity training for delivery to both bureaus.

This program is also leading the development of a Job Shadow program that is intended to enhance promotional career development opportunities of current employees.

This program will fund training through the Government Alliance for Racial Equity on the use of a racial equity lens/tool for the designing, planning and implementing for bureau programs, services, policies and procedures. This training will set the stage for work to be done by the proposed equity manager position.

Water Quality The bureau’s lead-in-water testing program plans to develop and implement a new mailed outreach initiative to residents in multifamily units; currently people in multifamily units generally do not directly receive lead messaging because they do not directly receive utility bills.

This group also plans to identify and attend 1-2 new key outreach events that target historically underserved Portland communities. Workforce In 2017, the Water Bureau hired two interns with Project Search, an organization that connects people with disabilities to job opportunities. Funding for these positions will be incorporated into the FY 2018- 19 budget.

The bureau’s decision packages include hiring entry-level water treatment and unidirectional flushing staff. In the budget process, the class specification for the water treatment staff was changed so that the training period would be longer, allowing staff more time to gain necessary qualifications. These positions present an opportunity for people outside of the current water treatment field to apply.

Equity Manager This budget proposes to add an Equity Manager position. This person could expand the reach of the bureau’s Racial Equity Plan into more work groups, benefiting both bureau employees and communities of color. The position will concentrate on equity impact assessments and the implementation of an equity lens/tool as a standard bureau practice. Using an equity lens or tool will help existing and proposed programs, polices, projects, and decisions include communities of color in decision making and minimize unanticipated adverse consequences to underrepresented racial and ethnic groups. The position will serve as a resource to managers to analyze impacts and outcomes, provide data and historical context to ensure that programs, policies, and decisions are aligned with the equity goals of the Racial Equity Plan.

2. In what ways have your base budget been realigned and in what ways will these realignments impact communities of color?

The budget has been realigned in the following areas:

Program Change Impact on Communities of Color Treatment See Water Treatment decision package. Transmission and Terminal Storage No clear equity impact. Distribution program See Unidirectional Flushing Program decision package. No clear equity impacts of other changes. Regulatory Compliance See Water Treatment decision package. Also, the group that performs outreach about lead-in-water testing intends to increase its work in communities of color and communities with low English proficiency. Customer Services Program See Financial Assistance Expansion Program decision package. Other changes have no clear equity impact. Support See Equity Manager decision package. One of the items in this realignment is an increase in one- time costs related to the Regional Water Providers Consortium, which is funded by local water utilities, including the City. The Consortium intends to increase outreach efforts, particularly in Spanish.

3. Are there specific realignments in your base budget that would advance or inhibit your achievement of equity goals outlined in your bureau’s Racial Equity Plan?

Business Operations The Business Operations group is moving funds out of professional services for technology and into professional services for staff development around equity.

Communications To roll out interpretation services to all bureau groups, funding for interpretation services is moving from the Customer Service group to the Administration group. (Currently the Customer Service group, the Efficiency Program, the Administration group, and the Water Quality Program use interpretation services, with the Customer Service group managing invoices.)

In the next fiscal year, the Communications group will spend staff time implementing best practices for applying an equity lens to outreach materials. The bureau will also rework several documents with the intention of simplifying text, using more images, and incorporating translations as a matter of course.

4. What funding have you allocated for translation, interpretation and ADA (American’s with Disability Act) accommodation including ASL (American Sign Language) interpretation and video captioning? What are the impacts of these allocations?

Programs fund translation and interpretation from their program budgets.

Communications The bureau plans to expand the use of interpretation services to all employees who work with the public, train staff, and create business cards that explain how to use interpretation services.

The Communications group will work with programs to help them use best practices in translation, discuss when to translate, which languages to use, and how to incorporate translation into a broader plan for community engagement.

The Communications group will work with the Water Quality group to improve the way the bureau presents translations online for Boil Water notices.

The bureau will work to provide American Sign Language interpretation for public health-related press conferences.

Customer Service The planned Customer Service system upgrade will allow people to see billing system webpages in Spanish. If that effort is successful, the Customer Service group will add additional languages in FY 2018- 19.

The Customer Service group’s hiring practice now gives preference to candidates who are fluent in more than English, and intends to increase advertising to reach those candidates. For the walk-in Customer Service Center, the Customer Service group recently bought a dual-language phone handset for interpretation and intends to purchase an iPad for video interpretation.

Regional Water Providers Consortium The Regional Water Providers Consortium, a group of local water utilities funded in part by the Water Bureau, has budgeted funds to increase outreach in Spanish. This effort will use professional services to develop culturally appropriate messaging; translate materials; and create how-to videos, public service announcements, radio content, and social media. This funding is provisional until the Consortium approves its budget in February.

Water Efficiency The Water Efficiency Program plans to hire Community Engagement Liaisons for interpretation at events. The Efficiency Program has also dedicated funding to print and develop more multilingual program materials.

Water Efficiency has piloted the use of WaterSmart, a program that promotes increased engagement with customers in the bureau’s Financial Assistance Program. The program plans to expand WaterSmart communications into Spanish in FY 2018-19.

Water Quality The bureau’s Water Quality group translates its annual Water Quality Report, emergency water quality notifications, and information about lead in water. This group also uses phone and email interpretation to talk with community members about water quality concerns.

In FY 2018-19, the Water Quality group will develop relationships and partnerships with specific event organizers with the intent to provide language interpretation at tabling events.

5. Are there deficiencies in the ongoing funding of your base budget that inhibit your bureau’s achievement of equity or the goals outlined in your Racial Equity Plan?

Existing Equity Staffing One of the bureau’s decision packages for the next fiscal year is to add an Equity Manager role. The bureau has several staff working on elements of the Racial Equity Plan, but is missing a person dedicated to helping program staff identify inequities in their programs and implement meaningful change.

Bureau-Wide Funding for Translation and Interpretation Funding for translation and interpretation has not increased at a bureau-wide level. Program managers pay for translation and interpretation from their specific program budgets.

Varying Levels of Equity Understanding Some program managers consistently consider equity when developing their budgets, and others do not yet do so.

6. Identify impacts on workforce demographics in the development of the base budget and relevant decision packages.

To help you answer this question, the following link to the City of Portland’s workforce demographic dashboard is provided. https://www.portlandoregon.gov/oehr/article/595121

Training of Hiring Supervisors The Business Operations budget has allocated funds for training supervisors to better incorporate equity into hiring processes. The bureau’s Training and Development Officer will spend significant time in FY 2018-19 working to increase the equitability of hiring practices.

Training Periods The bureau’s decision packages include hiring entry-level water treatment and unidirectional flushing staff. In the budget process, the class specification for the water treatment staff was changed so that the training period would be longer, allowing staff more time to gain necessary qualifications. These positions present an opportunity for people outside of the current water treatment field to apply.

Equity Manager Having an Equity Manager could improve the bureau’s ability to consider workforce demographics in recruitment, hiring, employee development, and retention.

Section Two: EQUITABLE ENGAGEMENT AND ACCESS (Racial Equity Goal #2)

This section is intended to assess the community engagement in the budget process and whether there was equitable representation and input. Bureaus should consider these questions as they plan for the budget advisory committees and specifically identify how their BAC will use the tool. If needing assistance in incorporating the Budget Equity Tool into the bureau’s Budget Advisory Committee process, please contact your OEHR Equity Support staff member and/or your City Budget Office analyst.

1. How has community engaged with your requested budget, including this tool?

Public Utility Board The bureau’s requested budget is reviewed by the Public Utility Board, a community-led, autonomous oversight body whose aim is to represent Portlanders. The Public Utility Board meets regularly throughout the year to discuss Water Bureau and Bureau of Environmental Services work.

The Water Bureau has provided this tool to the Public Utility Board.

Citizens’ Utility Board The Citizens’ Utility Board oversees budgets for many Oregon utilities. The Citizens’ Utility Board serves as a public advocate, asking questions about the budget, providing feedback to bureau staff, and attending budget work sessions. Bureau staff regularly briefs Board staff on budget updates. The Board sends recommendations about the bureau’s budget to City Council.

The Water Bureau has provided this tool to the Citizens’ Utility Board.

Website and Public Meetings The bureau’s requested budget is posted on the City Budget Office website. Members of the community may review the bureau’s budget and rates in three public meetings: a Council Work Session on the requested budget, usually in March; the Mayor’s budget work session and various public hearings often in April; and the City Council rate hearing, often in May.

2. How does this budget build the bureau’s capacity to engage with and include communities most impacted by inequities? (e.g., improved leadership opportunities, advisory committees, commissions, targeted community meetings, stakeholder groups, increased outreach, etc.)

Communications This budget continues to fund a Community Outreach and Information Representative staff person whose time is 50% dedicated to developing relationships with organizations representing communities of color and communities of immigrants. In the next fiscal year, this person will continue to represent the Water Bureau at community events and with community organizations to better understand how the bureau can meaningfully engage with communities of color. Strategic Business Plan Outreach The bureau’s Strategic Business Plan outreach process will involve engagement with organizations representing communities of color, and will incorporate listening sessions with community members.

3. How does this budget build community capacity and power in communities most impacted by inequities? (e.g., improved leadership opportunities within BAC, community meetings, stakeholder groups, increased outreach, etc.)

Financial Assistance Program The Financial Assistance Expansion decision package emerged in part from extensive engagement with community organizations. The Public Utility Board will review options for this specific decision package with an emphasis on which options provide greater opportunities for increasing equity. Community organizations will continue to help determine how this program is developed and implemented.

Communications In FY 2018-19, the bureau aims to improve its ability to meaningfully engage communities of color. Communications staff members are working with program managers to find the points in decision processes where the community can authentically help determine outcomes, and are asking community members to help create meaningful campaigns.

Equity Manager The bureau has proposed to add an Equity Manager position. If this decision package is approved, the bureau would have an increased ability to meaningfully engage with community members of color, increased ability to improve access to Water Bureau programs and services, increased ability to emphasize equity in the Water Bureau’s workforce, and a more community-focused approach to bureau priorities.

Ongoing Equity Work In previous years, the bureau’s Budget Equity Assessment Tool has included information about ongoing equity work. Here is a summary of work in those areas:

• The bureau continues to offer equity-related trainings and discussions for all levels of staff. In February 2018, the bureau is circulating a survey about equity to all bureau employees. • Managers increasingly seek candidates from underrepresented groups when recruiting. • The bureau’s apprentice program continues to provide an extended paid training period, which allows people outside the field of utility work to apply. The bureau recruits apprentices from underrepresented communities, including communities of color. • The Racial Equity Toolkit process is examining outreach efforts for the utilities’ Financial Assistance Program. Improvements so far include creating an online application form and seeking data to understand who uses the program now. • Communications work continues to focus on identifying stakeholder populations and is working toward authentically engaging the public in Water Bureau work. The Communications group has recently developed plans to hire Community Engagement Liaisons to help communicate water quality and supply issues in emergency situations. • The Water Quality group routinely translates the Annual Water Quality Report into Portland’s top four non-English languages, and translates emergency water quality notifications into the City’s language list. With the Water Efficiency group, Water Quality participates in many events in the city, with equity as the major criterion determining which events they attend. Working with community organizations, the Water Quality group seeks to increase testing for lead in water in communities at high risk of marginalization. • The Education Program continues to offer field trips and school programs. Some Education Program materials and events are offered in Spanish. • The Customer Service group continues to offer interpretation for customers and has worked to integrate language assistance into many programs. • The Efficiency Program offers material in many languages and prioritizes the events it attends based on equity considerations. The program continues to run a pilot program with the bureau’s Financial Assistance Program to examine how increased communication from the bureau may benefit these customers.

Identifying Impacts Worksheet

Decision Package Populations Impacted Potential Positive Impacts Potential Negative Impacts Parks Maintenance Part 1: Ratepayer impact. Under the decision package If the parks were to close to the The Water Bureau has Water rates affect people with scenarios, funding for park-like public, communities at risk of historically maintained some of different incomes differently. maintenance will not come from marginalization would be its properties as parks. Because Unlike general fund taxation, water rates. The more disproportionately affected. of recent legal action, the everyone pays the same rate for progressive tax structure of the bureau can no longer use water, regardless of assets (with general fund will pay for such ratepayer funds for this the exception of those enrolled maintenance. maintenance and is requesting in the bureau’s Financial that such maintenance be Assistance Program). covered by the general fund. Part 2: Impact to park-like properties. If Water Bureau park-like properties closed to the public because of lack of funding to maintain them, fewer people would be able to access Water Bureau property. Four of the seven HydroParks, plus Powell Butte, are in areas of medium to high risk of marginalization as defined by Multnomah County. Tabor Preservation Project Water rates affect people with Under the decision package No clear negative impacts. In 2015, City Council resolved to different incomes differently. scenarios, money for the Mount maintain, repair, and preserve Unlike general fund taxation, Tabor project will not come the Mount Tabor Reservoirs everyone pays the same rate for from water rates. The more after their disconnection. This water, regardless of assets (with progressive tax structure of the decision package seeks the the exception of those enrolled general fund will pay for work associated money from the in the bureau’s Financial on Mount Tabor. general fund. Assistance Program).

Decision Package Populations Impacted Potential Positive Impacts Potential Negative Impacts Water Treatment All Portlanders, with specific Part 1: Both corrosion control Increased water rates. The Water Bureau is working populations unknown. The and filtration will make toward both improved corrosion bureau does not have data Portland’s water safer to drink. control treatment and filtration about whether communities of Citywide corrosion control is a of water from the Bull Run color are affected differently by more equitable solution to Watershed. This package water quality issues in Portland. reducing lead in water than requests seven additional staff encouraging property owners to members to work on these Corrosion control will primarily replace lead-containing fixtures projects. benefit people living in houses or plumbing. built between 1970 and 1985, which may have lead solder in Part 2: Two of the positions in their plumbing. There is a this decision package are at the greater concentration of those entry level and entail extensive houses in East Portland, where paid training periods, which there are also more people at presents the opportunity for the risk of marginalization. bureau to hire outside of the current water quality field. Unidirectional Flushing All Portlanders; unknown Increasing unidirectional Increased water rates. Program whether there would be specific flushing will improve water Nationally, the industry impacts on communities of quality. standard for drinking water is to color. flush the whole system (push Three of these positions will be water through for water quality at the entry level and will purposes) every 5-10 years. At provide an opportunity for the current capacity, the Water bureau to hire outside of the Bureau can only flush the whole current water quality field. system every 70 years. This package increases staffing to improve water quality and potentially reduce the amount of chemicals needed to treat the water. Decision Package Populations Impacted Potential Positive Impacts Potential Negative Impacts Workforce Management Water Bureau employees, No clear equity impacts. Increased water rates. Would add two public works contractors, and the public. inspectors and one safety officer. Asset Management All Portlanders would benefit No clear equity impacts. Increased water rates. Would fund one position to from an increased ability to better prioritize infrastructure prioritize maintenance; maintenance and another unknown whether there would position to track and remedy be specific impacts on water loss (water lost through communities of color. system leaks, theft, etc.) Communications The bureau, regulatory agencies, One of this person’s Increased water rates. Would fund a technical writer and the public. responsibilities would be to use position. The bureau has had a plain language to write and edit technical writer since 2006, but material intended for the public. that person’s responsibilities People with low English have shifted and the bureau proficiency would benefit from now lacks this capacity. plain language and from the potential for the bureau to then better translate such language. Equity Manager This position is intended to Increased ability to meaningfully Increased water rates. Would fund an Equity Manager specifically benefit people of engage with community to oversee implementation of color and those with low English members of color, increased the bureau’s Racial Equity Plan proficiency. ability to improve access to and work with other city offices Water Bureau programs and on equity initiatives. services, increased ability to emphasize equity in the Water Bureau’s workforce, a more community-focused approach to bureau priorities. Decision Package Populations Impacted Potential Positive Impacts Potential Negative Impacts Financial Assistance Expansion Low-income communities, Increased financial help: Increased water rates. Would add staffing and other which tend to overlap with increased funding for the crisis funding to increase financial communities of color. voucher program, increased help for customers, including to funding for staff to help people renters in multi-family housing understand their financial (who are not served by the options with regard to current Financial Assistance water/sewer/stormwater Program). services, a new discount for customers living in a greater degree of poverty, and funding for people living in multi-family housing (who are not currently eligible for the program).

______Name of Staff Contact

1/29/2018

Name of Bureau Director Date

Rev: November 2017

HYDROELECTRIC POWER DIVISION CITY OF PORTLAND, OREGON FY 2018-19 PRELIMINARY FINANCIAL PLAN

January 2018

City of Portland Water Bureau

Nick Fish, Commissioner

Michael Stuhr, Administrator Introduction The Bureau of Hydroelectric Power was an enterprise bureau charged with developing and then operating hydroelectric projects for the City of Portland. The Hydroelectric Power Operating Fund is the City of Portland financial fund through which the business activity for the City’s Portland Hydroelectric Project (PHP) is conducted. The operating budget portion of this fund was budgeted as the Bureau of Hydroelectric Power through the FY 1998-99 budget. In 1989, the City Code was amended to have the Bureau of Hydroelectric Power report directly to the Water Bureau and beginning with the FY 1999-00 budget, the Hydroelectric Power operating budget has been budgeted as the Hydroelectric Power Division in the overall Water Bureau budget submission. Hydropower Division Fund Structure There are two funds that are used to account for PHP operation. The Hydroelectric Power Operating Fund (601000) contains the operating budget which is primarily funded by revenue from the sales of power generated at PHP. The Hydroelectric Reserve Account (601001) is a sub-fund within the Operating Fund established in FY 2017-18. The sub-fund will be used to supplement and stabilize operating revenues, serving as a “sunny day” fund to mitigate the impact of periods with low power production or high operating costs. The Hydroelectric Power Renewal & Replacement (R&R) Fund (618000) is a capital fund that is used to pay for repairs, refurbishment or replacement of the facilities related to PHP. Within the City’s Comprehensive Annual Financial Report (CAFR), these funds are rolled up into one fund that is referred to as the Hydroelectric Power Fund. Under the Enterprise Funds – Budget and Actual Section of the CAFR, the funds are accounted for individually. The Hydropower Funds are excluded from the Water Bureau’s rate based financial structure used for the Water Division of the Water Bureau budget. Revenues for the Hydroelectric Power Operating Fund The primary source of revenue for the Hydroelectric Power Operating Fund is from sales of power generated at PHP to Portland General Electric (PGE). The City of Portland and PGE entered into a new Power Purchase Agreement (PPA) in late 2017 after the old agreement expired in October 2017. The term of the new agreement extends through the end of June of 2032. Under the new PPA with PGE, PGE purchases all the power generated and PHP is responsible for all operation and maintenance of the facility. The new PPA begins January 1, 2018, and requires PHP to make an annual election for guaranteed power sales each September for the subsequent calendar year. PHP may elect a 70% to 90% portion of historical long term mean power sales volume. This volume is then multiplied by the contract price to determine the specified revenue for the calendar year. The contract price, based on a forward price curve, has been pre-established through 2032 as part of the PPA. The contract price is fixed for on-peak and off-peak periods each year. Additional power sales outside of the specified volume are valued at current market prices. PHP utilizes a forward

2 pricing model that is aligned with the PPA to project power sales revenue for FY 2018-19 as follows: • Generation of power at PHP is driven by the actual amount of power produced during any given Contract Year which is dependent on the amount of precipitation falling in the Bull Run Watershed and the availability of PHP powerhouses to operate when needed and within compliance of the City’s Habitat Conservation Plan for the Bull Run Reservoir system. For the purposes of Hydropower’s budgeting process, the historical average monthly power generation totals (based on 27 years of data) are adjusted by the annual election, which determines the projected specified, as-available, and deficient volumes. • The guaranteed revenues are calculated based on the projected specified volumes multiplied by the PPA contract rate. As-available and deficient revenues are projected based on projected volumes multiplied by a forward price curve as of December 2017. The forward price curve utilized is for the Mid-Columbia hub and is the most proximal major electricity hub to PHP. The forward curve projects prices for the next 10 years with years 11 and beyond inflated by 3 percent.

FY 2018-19 power sales revenues are projected to total $2.3 million. Power sales revenues are projected to increase over the five-year period to $3.3 million as the contract price increases. Another source of revenue for this fund is from an Interagency Agreement with the Water Division for work that Hydropower Division staff performs on Water Division owned facilities. Expenses for the Hydroelectric Power Operating Fund The Hydroelectric Power projected operating expenses for FY 2018-19 total $2.7 million. The operating budget includes: • Personal Services – two full time staff members plus some part time staff • External Services – operating expenses including maintenance and non-capitalizable repairs. This includes $1.0 million for an operations and maintenance agreement, $0.4 million in fees and licenses, $0.3 million of one-time costs, $0.1 million of consultant costs, $0.1 million for a transmission line contract, and $0.1 million for a scheduling contract. • Internal Services – Interagency Agreements or Cash Transfers with other City entities • Cash Transfers – transfers from the Hydroelectric Power Operating Fund to the R&R Fund as power sales revenues permit. The Hydroelectric Reserve Account The HRA will be funded in FY2017-18 with $2.4 million transfer from R&R Fund balance after reconciliation of the prior PPA. This sub-fund will act as a “sunny day” account which can be drawn on to cover operating expenses as needed throughout the life of the PPA. As additional net revenue from power sales are generated, contributions will be made to the HRA to reach a

3 balance equal to approximately one year of operating expenses. See Figure 1 for projected HRA transfers and balances for FY 2018-19 through FY 2022-23. Figure 1 Hydroelectric Reserve Account Projection (in millions)

FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23

Beginning Balance $ 2.4 $ 2.0 $ 1.6 $ 1.8 $ 1.9 Transfers (From)/To HRA (0.4) (0.4) 0.2 0.1 0.4 Ending Balance $ 2.0 $ 1.6 $ 1.8 $ 1.9 $ 2.3

Hydroelectric Power Renewal and Replacement Fund Hydropower R&R Fund balance is expected to be $2.5 million after reconciliation from the previous PPA. In FY 2017-18, $2.4 million of this balance will be transferred to the HRA, leaving $0.1 million in the R&R Fund. The R&R Fund will continue to be utilized for capital expenses for replacement of major equipment and necessary improvements to the project to maintain Federal and State licenses.

The Hydropower Division will need to re-establish the R&R Fund and will transfer funds from the Hydroelectric Power Operating Fund to the R&R Fund as power sales revenues increase and after the HRA maintains a minimum balance equal to one year of operating expenses. This five- year plan does not include any transfers to the R&R Fund based on the projected power sales net revenues. Current projections show contributions to the R&R Fund beginning in FY 2025-26 and continuing for the life of the PPA through FY 2031-32.

Projected Hydroelectric Fund Balances This five-year plan projects that during the first few years of the transition to the new PPA and O&M agreements, minimal PHP operating profits will be generated. Key drivers for the projection of low profits are due to O&M costs that were previously covered under the previous power sales agreement that are now the responsibility of PHP, the new O&M contract will have implementation and startup costs, and low current market power prices. Based on current energy market conditions, Hydropower staff have projected power revenues from the new PPA to be slightly lower than operating expenses until FY 2020-21. Transfers from the HRA are expected during this period. As a result, PHP is projecting a drawdown of fund balances over the next two years, and contributions to the HRA and the R&R Fund are expected to begin thereafter. See Figure 2 for the net cash flows of this five-year plan, including transfers from the HRA.

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Figure 2 Hydroelectric Operating Fund Summary (in thousands)

FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23

Beginning Balance $ 215.3 $ 248.2 $ 295.8 $ 220.7 $ 284.5

Revenues Power Sales 2,251.7 2,364.1 2,929.6 3,156.2 3,310.3 Other Revenues 62.5 62.5 62.5 62.5 62.5 Total Revenues 2,314.2 2,426.6 2,992.1 3,218.7 3,372.8

Expenses Personal Services 355.8 372.5 383.5 403.4 415.1 External Materials & Services 2,055.6 2,129.6 2,199.8 2,361.4 2,318.0 Internal Materials & Services 206.8 213.9 220.7 226.9 232.8 Other Expenses 63.1 63.1 63.1 63.1 63.1 Total Expenses 2,681.3 2,779.1 2,867.2 3,054.9 3,029.0

Net Cash Flow (367.1) (352.5) 124.9 163.8 343.8

Transfer From/(To) HRA 400.0 400.0 (200.0) (100.0) (400.0)

Ending Balance $ 248.2 $ 295.8 $ 220.7 $ 284.5 $ 228.3

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Fund Summary Hydroelectric Power Operating Fund

Hydroelectric Power Operating Fund Requested Actual Actual Revised No DP Requested Proposed FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2018-19 FY 2018-19 Resources Miscellaneous 837,481 886,808 2,210,000 2,261,677 2,261,677 Total External Revenues 837,481 886,808 2,210,000 2,261,677 2,261,677 Fund Transfers - Revenue 218,529 110,962 1,715,700 0 0 Interagency Revenue 52,978 72,927 72,500 52,500 52,500 Total Internal Revenues 271,507 183,889 1,788,200 52,500 52,500 Beginning Fund Balance 462,859 16,990 359,000 2,615,349 2,615,349 Total Resources 1,571,847 1,087,687 4,357,200 4,929,526 4,929,526 Requirements Personnel Services 419,044 347,540 332,563 355,780 355,780 External Materials and Services 286,999 284,722 3,518,700 2,055,560 2,055,560 Internal Materials and Services 111,416 110,027 232,873 206,840 206,840 Total Bureau Expenditures 817,459 742,289 4,084,136 2,618,180 2,618,180 Debt Service 21,781 23,931 26,657 28,543 28,543 Contingency 0 0 215,349 2,248,224 2,248,224 Fund Transfers - Expense 440,177 25,507 31,058 34,579 34,579 Total Fund Expenditures 461,958 49,438 273,064 2,311,346 2,311,346 Ending Fund Balance 292,430 295,960 0 0 0 Total Requirements 1,571,847 1,087,687 4,357,200 4,929,526 4,929,526 Fund Overview The Hydroelectric Power Operating Fund supports the administration, operation, and monitoring of the Portland Hydroelectric Project (PHP) through the Portland Water Bureau’s Hydroelectric Power Division. All expenditures needed to meet the City’s responsibilities for PHP are paid by this fund.

Resources The primary revenue source for this fund is power sales payments made to the City by Portland General Electric (PGE) for the purchase of electricity that is generated at PHP.

Managing Agency Portland Water Bureau Significant Changes from Prior Year

Power Purchase The City of Portland and PGE entered into a new Power Purchase Agreement Agreement (PPA) (PPA) with PGE effective January 1, 2018. Under the new agreement, PHP makes an annual election based on the historical long term mean power sales volume. PHP made an election for 80% of the long term mean for calendar year 2018 and plans to make a similar election for calendar year 2019. All power sales that fulfill this election are valued at a pre-established contract price as part of the PPA. Any power sales outside of this specified election will be valued at current market prices.

City of Portland, Oregon – FY 2018-19 Requested Budget 1 Hydroelectric Power Operating Fund Fund Summary

Operating Contracts The PPA does not address operating expenses related to PHP. As a result, PHP entered into contracts for operations and maintenance, transmission, scheduling, and consulting work. Under the previous power sales agreement these costs had been borne by PGE or shared with PHP.

Hydroelectric In settling the previous power sales agreement, PHP anticipates $2.4 million will be Reserve Account transferred from the Renewal and Replacement Fund to the Operating Fund. These funds will be placed in the Hydroelectric Reserve Account which is a newly created sub-fund. The account can be drawn down to cover operating expenses as needed throughout the life of the PPA.

2 City of Portland, Oregon – FY 2018-19 Requested Budget Fund Summary Hydroelectric Power Bond Redemption Fund

Hydroelectric Power Bond Redemption Fund Requested Actual Actual Revised No DP Requested Proposed FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2018-19 FY 2018-19 Resources Miscellaneous 6,643 4,210 100 0 0 Total External Revenues 6,643 4,210 100 0 0 Total Internal Revenues 00000 Beginning Fund Balance 4,332,574 1,820,478 15,600 0 0 Total Resources 4,339,217 1,824,688 15,700 0 0 Requirements Total Bureau Expenditures 00000 Debt Service 2,670,276 1,788,050 0 0 0 Fund Transfers - Expense 0 0 15,700 0 0 Total Fund Expenditures 2,670,276 1,788,050 15,700 0 0 Ending Fund Balance 1,668,941 36,638000 Total Requirements 4,339,217 1,824,688 15,700 0 0 Fund Overview The Hydroelectric Power Bond Redemption Fund was established to pay the debt service due on revenue bonds that were issued to finance construction of the Portland Hydroelectric Project (PHP). This fund was required by the prior PHP power sales agreement between the City and Portland General Electric.

Managing Agency Portland Water Bureau Significant Changes from Prior Year On October 1, 2016, the last of the outstanding Portland Hydroelectric Power Revenue Refunding Bonds, Series 2006 were paid off, and the residual assets for this fund are currently being held in an escrow account by the former Hydropower revenue bond trustee. This fund will be closed in FY 2017-18 with the settlement of the prior power sales agreement.

City of Portland, Oregon – FY 2018-19 Requested Budget 1 Fund Summary Hydroelectric Power Renewal and Replacement Fund

Hydroelectric Power Renewal and Replacement Fund Requested Actual Actual Revised No DP Requested Proposed FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2018-19 FY 2018-19 Resources Miscellaneous 395,725 436,213 137,770 0 0 Total External Revenues 395,725 436,213 137,770 0 0 Total Internal Revenues 00000 Beginning Fund Balance 10,704,399 11,005,498 11,090,000 100,000 100,000 Total Resources 11,100,124 11,441,711 11,227,770 100,000 100,000 Requirements External Materials and Services 0 0 9,500,000 0 0 Total Bureau Expenditures 0 0 9,500,000 0 0 Contingency 0 0 27,770 100,000 100,000 Fund Transfers - Expense 218,529 110,962 1,700,000 0 0 Total Fund Expenditures 218,529 110,962 1,727,770 100,000 100,000 Ending Fund Balance 10,881,595 11,330,749 0 0 0 Total Requirements 11,100,124 11,441,711 11,227,770 100,000 100,000 Fund Overview The Hydroelectric Power Renewal and Replacement Fund is a sinking fund for the Portland Hydroelectric Project (PHP). The fund provides resources for the repair and replacement of major equipment and facilities that become damaged or are in need of repair.

Managing Agency Portland Water Bureau Significant Changes from Prior Year In the settlement of the of the previous power sales agreement with Portland General Electric, PHP anticipates $2.5 million will be the remaining fund balance. In FY 2017-18, $2.4 million will be transferred to the Hydroelectric Reserve Account, leaving $0.1 million in the Renewal and Replacement Fund. Funds will be transferred to the Renewal and Replacement Fund as power sales and operating expenses permit. There are no planned transfers to the Renewal and Replacement Fund in FY 2018-19.

City of Portland, Oregon – FY 2018-19 Requested Budget 1