Seattle Public Utilities Strategic Business Plan for 2015

Seattle Public Utilities Strategic Business Plan for 2015 -2020 Presentation to APWA – December 7, 2016 Melina Thung, SPU Noel Miller Karen Reed

The Challenge • Four lines of utility businesses in one department • Different rate setting periods for each line of business • Ongoing need for major capital investment to replace aging systems, meet new mandates • Declining demand for service – additional rate pressure 2

The Challenge Continued How can we get more focus on the longer-term policy and financial challenges for the Department, ensure reasonable and predictable rates for our customers and maintain service levels? 3

The Response • A transparent six-year business plan (2015 -2020) and predictable rate path for all lines of business • • Maintain current service levels Identify specific new investments Commit to efficiencies and savings Tie these investments and savings to a six-year rate path • Create customer review panel for input, advice • Engage employees, customers and policy makers throughout 4

The Response: Key Benefits • Transparency for customers, policy makers, staff • Increased focus on policy issues and service levels • Engagement of employees, customers and policy makers • Accountability • Rate predictability • Much easier budget process 5

The Six-Year Planning Process GUIDING PRINCIPLES: Mission, Vision, Strategic Role, Values Mayor, Council, Budget Office, Customer Review Panel, Employee Input STARTING POINT SWOC Baseline ANALYSIS FRAMEWORK Focus Areas & Strategic Objectives Programmatic Cuts Efficiencies & Benchmarking New Investments STRATEGIC BUSINESS PLAN • Baseline activities • New Action Plans & Efficiencies • 2015 -2020 Rate Path Customer Input 6 Customer Input

Customer Review Panel Nine customers, appointed by Council and Mayor Represented a wide range of customer interests Met twice per month (3 hours each) for 15 months Also at the table: SPU leadership, Council staff, Budget Office • Independent facilitator guided meetings, with support from Panel Chair and Vice-Chair • • 7

Guiding Principles (“Promise”) Mission: Providing efficient and forward-looking utility services that keep Seattle the best place to live Vision: Our customers will see how their utility dollars sustain and improve their quality of life Strategic Role: Solving problems at the source 8 Values: Customer focus, Safety, Innovation, Inclusion, Value for money

Starting Point: SWOC • Strengths, weaknesses, opportunities, and challenges (SWOC) developed with input from employees, Executive Team, customers, and Customer Review Panel 9 Internal Strengths External Opportunities Weaknesses Challenges

Framework: Focus Areas Initial wording Final wording Create an easy & engaged Making it easier to get help customer experience and find answers 10 Transform the workforce Enhancing our services by continually updating employee skills Protect Environment & public health Better protecting your health and our environment Achieve operational excellence Improving how we work to deliver consistent, high quality services

Framework: Strategic Objectives Focus Area Strategic Objectives Create an easy & engaged customer experience Minimize customer effort required to interact with SPU Making it easier to get help and find answers Ensure equitable access for all customers Create and opportunity to participate in utility programs, such as recycling, rain gardens, and water conservation Make SPU transparent to customers and constituents 11

Starting Point: Baseline • Definition: The change in annual rates needed to maintain existing service levels, plus meet firm regulatory requirements o Actual service quality (as opposed to targeted service quality) neither degrades nor improves o Does NOT include any efficiencies, reductions to existing programs, or adds to fill gaps o Most of SPU’s work is represented in the baseline 12

Starting Point: Baseline • Provides a long-term picture of reality • Clarifies cost drivers ü Which do you control? ü Which do you not control? • Increases focus on finding efficiencies to offset cost of needed / desired investments • Major analytical effort • Baseline rate increase starting point: 4. 6% per year 13

Starting Point: Baseline 14

Analysis: Programmatic Reductions • SPU staff prioritized their O&M programs and CIP projects using software, using a set of common criteria that was based on the Plan’s framework • Staff identified programmatic reductions to the baseline budget • Cuts had minimal service impacts and made room for new investments 15

Analysis: Efficiencies & Benchmarking • Independent consultant evaluated SPU in dozens of operational and capital areas • Consultants benchmarked SPU against several other utilities • 44 potential efficiencies identified • Executive Team reviewed this list to include items they felt were achievable within guiding principles, framework; reviewed with Customer Panel 16

Analysis: Action Plans • E-Team identified gaps via the SWOC exercise • Staff developed action plans to address the gaps: ü Rationale, what gap is being addressed ü Outcomes/goals ü Cost and timing of implementation ü How success will be evaluated • E-Team prioritized all action plans, eliminating lower ranked items; ended up with 27 action plans 17

Putting the Pieces Together 18

Six-Year Endorsed Rate Path 19 Average 2015 2016 2017 2018 2019 2020 2015 -20 Water 0. 0% 5. 2% 4. 1% 4. 4% 2. 6% 3. 6% Wastewater 0. 8% 3. 9% 1. 8% 2. 8% 7. 2% 8. 1% 4. 1% Drainage 9. 8% 10. 1% 8. 1% 7. 8% 8. 1% 8. 0% 8. 6% Solid Waste 4. 2% 3. 5% 6. 0% 4. 0% 2. 9% 2. 4% 3. 8% Combined 2. 7% 5. 0% 4. 7% 4. 2% 5. 5% 5. 2% 4. 6%

Customer Outreach – 2 Phases • Invested in finding community leaders to help do this right • 14 outreach sessions, some multi-lingual • Phase 1: Before we made decisions: What’s important to you? What level of rates can you support? • On-line customer survey • Phase 2: After we submitted the Plan: What do you think about the proposed Plan? 20

Employee Input • Staff developed the Action Plans • Dozens of employees participated in the efficiency study • Staff assisted with customer outreach • SPU conducted two employee surveys 21

New for SPU 1. Single plan for all four lines of business 2. Using a customer review panel to inform plan development 3. Engagement of Executive and Council staff throughout the planning process 4. A six-year baseline 5. A plan that includes a six-year rate path 6. Specific efficiency savings 7. Use of software prioritization tool 22

After Two Years… • Council adopted Plan with just a handful of amendments • SPU required to provide regular progress reports • Better understanding of our issues • Transparency for the public • Accountability agreement for the Utility • Budget process much easier • Stronger, more unified Utility leadership 23

Looking Back What worked well during the planning process? • SPU director and Executive Team involvement • Customer Review Panel • Executive and Council staff engagement • Public outreach and employee in-reach • SPU core team and use of consultants • Detailed analysis of the baseline and future actions Info available at http: //www. seattle. gov/util 24

Looking Back What were some challenges? • The prioritization software had its limitations • Employees lacked buy-in into the efficiency recommendations • It’s hard to quantify and realize efficiency savings • Employees lacked an understanding of what the Plan is all about • Many employees didn’t see themselves in the Plan 25

Plan Implementation What we’re doing: • Detailed out 2015 and 2016 action plans and efficiency actions and integrated these into staff work plans • Received rate increases for all lines of business, staying within the 4. 6% path • Submitted quarterly progress reports to Council on service levels, actions items, and rate path • Worked with customer groups (non-profits and SPU’s Community Advisory Committees) • Engaged employees 26

Plan Implementation Continued Key factors to sustain the Plan – culture change and continuous improvement: • Strong sponsorship and designated staff • Tailored, adaptable implementation approach • “Operationalize” the Plan – integration into day-to -day work and other initiatives • Focus on the principles and outcomes • Employee engagement 27

Plan Update Development of the 2018 -2023 Plan is underway: • Revised SWOC; included futuring trends • Updating the six-year rate path ü Adjusting the baseline budget and rates ü Identifying new savings and efficiencies ü Identifying new investments to address gaps • Convened the Customer Review Panel • Conducting customer and employee engagement 28

Thank you. Questions? Comments? 29