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need it for our customers, our contractual obligations, we get it back, OK? And in the process, as time
<br />goes by, we may learn that we actualiy have more surplus, And we can identify to you under the contract
<br />that additional surplus and you can exercise the right of whether you want it or not, and if you want it, you
<br />take it.
<br />So, a well-written document can give you a lot of flexibility. It depends on the willingness of both parties
<br />to live within the flexibility that you need. It can be as simple as you want it to be, or it can be as
<br />complicated as you want it to be. What I'm trying to say to you, I think you need a good technical analysis
<br />of how much water you're contractually obligated to provide to other parties, and how much you currently
<br />use as a city, and how much you reasonably foresee needing as a city over your horizon. You may need
<br />to have that last part of it short-staggered. How much will you need in 2020, 2030, etc. You can then take
<br />that number and subtract it from your 55 mgd, and that amount is truly surplus, you don't have any plans
<br />to use that water, OK? You can tell Irving, we can guarantee we can give you this amount of water, and
<br />we think we can give you this under-utilized portion of our contract water. So if you look at all your
<br />contracts and they total up to be 30.3 mgd, but over a long-term average, take the peak annual usages of
<br />those customers over the last five years, you could multiply that by a factor, and tell Irving we think we
<br />can get you that amount of water as surplus, because we haven't been using it. But we always reserve
<br />the right that if something happens to change that pattern of use and we need to get it back, we have the
<br />right to get it back. So from Irving's standpoint, there is a certain amount of water that is assured. there's a
<br />certain amount of water that has a degree of probability that they're going to get, and then there's maybe
<br />a third category of, as we learn more about our operations and our customer operations, maybe we can
<br />negotiate with our customers about, can we reduce the contractual obligations to more correctly reflect
<br />your usage patterns, you may free up more water that you can say we can give you this on a certainty
<br />basis. And you could have a contractual mechanism that would allow you to offer that water for them to
<br />accept that water, and it goes into a different category at a point in time.
<br />What I am saying is, you can try to structure a contract that provides for near full utilization of resource
<br />with flexibility as to who has first rights on it, and the city and the city's customers would always have that
<br />first right on it, so from Irving's standpoint, they're going to have an interest in purchasing. They're going
<br />to be willing to pay you more for that certain supply of water. They may be highly interested in this
<br />probable supply of water, but because iYs probable and not certain, it might be worth less to them, OK?
<br />Reeves Hayter: Another thing to remember there, is that we plan for our needs through 2060. If there is
<br />a surplus and if the citizens want, we sell that to Irving. But we are only selling it to them through 2060. So
<br />in 2060, we're not out of water. We get back all of the water we sold Irving, unless we want to sell it to
<br />them again.
<br />JM: You could start by saying we're going to sell you 100 percent of today's surplus plus this other
<br />stuff, OK? And in a decade, we may cut it to 90, or 80, or 60, kind of rachet it down, because as you
<br />grow, the amount of the water you can free up declines. So if you can be smart enough, and crystal ball
<br />enough to tell me what your demands are going to be, I can write you a contract that will reflect that. But
<br />the hard job is your job, OK? The hard technical questions are what your needs are going to be in 2020,
<br />in 2030, in 2040, in 2050, in 2060. Y'all are going to have to make some assessments about that, and
<br />you've got the benefit of your regional plan. You just need to have good assessment in terms of what your
<br />demands are going to be, what your available supplies are, and how much you want to make available in
<br />different buckets different categories of surplus. Some of it can be certain water, some of it can be
<br />highly probable water, some of it can be if things happen we'll offer you more water. And there are ways
<br />we can construct your contract language to accommodate that. I can help you see the issues and I can
<br />work with the staff to do that, but these sort of things require a lot of analysis about your historic water use
<br />patterns, a lot of discussion with your customers about what their needs are and well be, and so forth.
<br />Reeves Hayter: They (Irving) are not contemplating a short-term contract, OK? (laughter)
<br />~ 00 U049
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