MINUTES OF BOARD OF COMMISSIONERS' MEETING
LANSING BOARD OF WATER AND LIGHT
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Tuesday, April 25, 2000
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The Board of Commissioners met in regular session at 5:30 p.m., in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. The meeting was called to order by Chair Diane Royal.
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Present: |
Commissioners Ernest J. Christian, Charles M. Creamer, Mark A. Murray, David O ’Leary, Diane R. Royal and Judson M. Werbelow (by conference phone). |
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Absent: |
Commissioners Rosemarie E. Aquilina and Ronald C. Callen. |
The Secretary declared a quorum present.
The Pledge of Allegiance was said by all.
APPROVAL OF MINUTES
Motion was made by Commissioner O
’Leary, seconded by Commissioner Christian, to approve the minutes of regular session held March 28, 2000.Carried unanimously.
PUBLIC COMMENTS
THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBJECT OR ON ANY OTHER SUBJECT NOW, OR AT THE END OF THE MEETING.
Richard Taylor, Board of Water and Light (BWL) non-bargaining unit employee for the Delivery Process, distributed a document which he prepared for the Commissioners summarizing Board actions, discussions and memoranda, relative to the proposed BWL compensation plan for non-bargaining unit employees. The document also listed questions about the plan. In his address to the Board, Mr. Taylor made the following points:
Many employees find the new salary ranges disagreeable.
Questioned the sources of the new salary ranges.
Questioned why an earlier consultant hired to assist with the job classification study was replaced with Dorey, Reagan and Associates.
Questioned the wage analysis relative to the percentage of employees at the minimum, market rate and maximum of the pay ranges.
Questioned how the Position Description Questionnaires (PDQ’s), completed by non-bargaining unit employees, were aligned with the market rates and titles of similar positions.
Lori Pung, BWL non-bargaining unit employee in Financial Services, stated that employees do not feel the proposed compensation plan is fair and that they were not given adequate time to review the new pay plan before filing appeals. She made the following points:
Employees feel they are considered mediocre employees by having their base pay set at market midpoint.
The information was released prematurely without a lot of explanation.
Employees are confused on the future direction of the compensation plan.
Employees feel that the plan does not support or attract new competent employees.
Ms. Pung urged the Board to reconsider the plan.
General Manager Pandy responded to the issues raised. He stated that non-bargaining unit employee PDQ’s were used in job classifications. He reviewed the process for employees to appeal their job classification within the new classification structure. He took exception to the comment that employees are being treated as mediocre. He stated that the compensation plan has both fixed pay and variable pay components to reward for results. He displayed a slide that showed how the plan attempts to set base salaries at the market rate for positions and to reward employees with additional variable pay for performing at a high level. Other issues discussed included:
Pay ranges for each of the skill families will be adjusted each year based on a review of the market, the condition of the economy, and the BWL’s financial outlook. Adjustments to pay ranges will be made in January followed by performance evaluations in July.
The BWL and the consulting firm of Dorey, Reagan and Associates collected information from pay surveys that included pay data from hundreds of companies. Major employers in the Lansing area as well as investor-owned and municipally-owned utilities from across the country were represented in the data. A list of companies surveyed was distributed and reviewed in detail with the Board.
General Manager Pandy stated that management had listened to employee feedback with the new plan and, based on that, will be recommending the following three proposed changes to the Resolution to Adopt the New Compensation Plan for Non-Bargaining Unit Employees (this item follows the Committee of the Whole Report): (1) variable pay will be paid in a lump sum, rather than spreading it over 26 pay periods; (2) capping variable pay at the range maximum has been lifted for FY 1999-2000 because it is a year of transition to the new plan; and (3) the 65th percentile will be used for the Technical Skill Family, Grades 1 through 6, rather than the 50th percentile.
Chairperson Royal announced that this item would be discussed in more detail when the Committee of the Whole Report is considered.
COMMUNICATIONS
Letter from Boys & Girls Club of Lansing requesting BWL support for their 11th Annual Steak and Burger Dinner.
It was noted that management has already responded to this request. Received and placed on file.
Letter from Rosemary Sullivan expressing concern with the proposed compensation plan for non-bargaining unit employees.
Received and placed on file for pending discussion.
REPORTS OF COMMITTEES
COMMITTEE OF THE WHOLE REPORT
The Committee of the Whole met on April 11, 2000, to discuss the following items:
New Compensation Plan for Non-Bargaining Unit Employees
Preliminary Fiscal Year 2000-2001 Budget
Michigan State University Proposals
Present were Commissioners Aquilina, Christian, Creamer, O’Leary and Werbelow (by conference phone). Excused Absences were Commissioners Callen, Murray and Royal.
New Compensation Plan for Non-Bargaining Unit Employees
Human Resource Director Linda Gardner and Paul Reagan of Dorey, Reagan & Associates presented the design objectives for the new compensation plan for Non-Bargaining Unit employees. The pay plan was designed with the following basic principles:
Internally equitable
Externally competitive in the market
Aligned with the BWL’s success as a utility
The process undertaken in order to meet the design objectives included grouping jobs into eight skill families based on similar skill requirements and analyzing the skills, knowledge, duties and experience requirements of each job using the Position Description Questionnaires completed by each of the job incumbents. Job descriptions were reviewed by their Directors for accuracy. BWL jobs were compared to similar jobs in the market and matched with survey benchmark jobs. The market median pay rates were compared to BWL jobs within each skill family, and pay ranges for each skill family were developed. A series of slides were displayed to illustrate various examples of how employees will move through their pay ranges.
Following a lengthy question and answer period, a separate Resolution to Adopt the New Compensation Plan for Non-Bargaining Unit Employees was recommended for Board consideration. (Proposed resolution is appended to the Committee of the Whole Report.)
Tentative Agreement Reached with the Union
General Manager Pandy reported that tentative agreement has been reached between the management bargaining team and the union bargaining team on all issues. A summary of the contract package was handed out for review. The current contract has been extended to allow for ratification of the package; scheduled to take place on April 25th. A recommendation will be coming to the Board for approval, subject to union ratification.
FY 2000-2001 Budget
O&M and Capital Budget. A preliminary review of the FY 2001 budget was presented. Summaries of the past ten years’ budgets vs. actual expenditures for the total BWL were reviewed. The complete FY 2001 budget and the adequacy of existing water, electric and steam rates will be discussed at the Committee of the Whole in May for consideration and subsequent recommendation to the Board.
Advertising Budget. Communications Director John Strickler and Dennis Pace of Pace & Partners reviewed the rationale for the BWL’s advertising program and what it can accomplish. They reported that the advertising campaign has informed customers about BWL attributes, programs and initiatives, and it has raised customer measures in favorability, loyalty and customer satisfaction among those who have been exposed to the messages. Following discussion, the Commissioners concurred with staff’s FY 2001 media placement proposal. Option two was selected recognizing that the election season is approaching, thus a larger presence of advertising by the political media will be occurring.
Option Two
Total six months on the air
$142,000
200 GRPs/week (Gross Rating Points = reach x frequency)
Once the election is over, staff proposes that the BWL return to the market with an expenditure that would be annualized at 0.2% of annual revenue (approximately $300,000 currently), but which would save six months of advertising time. The BWL
’s definition of advertising is the placement of paid messages in the mass media that are designed to sell a product or service or promote the utility’s attributes. Sponsorships are not counted in the BWL’s definition of advertising.Michigan State University Retail Electric Service Options
Clyde Dugan, Director of Marketing and Mark Taylor, Manager of Sales and Marketing, presented an overview of a proposal being prepared for Michigan State University (MSU) to provide retail electric service. At the request of MSU, the BWL is developing electric service options to provide MSU with 40MW of standby capacity, conversion of the University
’s 4160-volt distribution system to a 13.2kV distribution and/or operation or purchase of the entire MSU system. MSU’s current and future electric capacity requirements were reviewed along with a status of the MSU/Consumers Energy 46kV tie. Five retail service options and associated investments were outlined. The BWL’s proposal is being submitted to MSU in mid-April for consideration.Respectfully submitted,
Charles M. Creamer, Chair Pro Tem
Committee of the Whole
Motion by Commissioner O
’Leary, seconded by Commissioner Christian, to approve the Committee of the Whole Report.Discussion on the Proposed Compensation Plan: The Board agreed that the resolution on the new BWL compensation plan, which follows the Committee of the Whole Report, would be considered separately.
Commissioner Murray questioned the lack of direct comparison with Michigan utilities, as compared to the study, adjusting the national average to arrive at Michigan market rates. He noted that he fully supports the concept of benchmarking the market and the focus on merit performance based pay. He raised questions related to the balance between performance appraisal versus skill development and training, and emphasized the importance of having a systematic method of performance appraisals. He further expressed concern with simultaneously moving to a pure merit-based system of pay without having a performance appraisal system well implemented and well understood.
Commissioner Creamer asked about the appeal and review process and the timing of the appeal notification to employees.
Human Resource Director Linda Gardner provided an overview of the role Human Resources, the directors and managers played in the notification process and the basis for an appeal. In response to a question from Commissioner O
’Leary about the downside of extending the appeal process, Ms. Gardner stated that the July 1, 2000, implementation date for the compensation plan would be delayed. Also, extending the appeal process would delay moving employees who are below the minimum of the range to the new minimum, targeted for May 15, 2000.Commissioner Christian observed that the short time frame to digest the information and for employees to talk with their managers might preclude some employees from submitting an appeal form. He suggested extending the appeal process by at least another week.
Commissioner Royal noted that because the new compensation plan is significantly changed as compared to the program currently in effect, her preference would be to postpone a decision on the proposed resolution until all Commissioners have an opportunity to review staff
’s responses to questions raised.Action: The Committee of the Whole Report was approved, but the following resolution was tabled.
Resolution to Adopt New Compensation Plan
for Non-Bargaining Unit Employees
BY THE COMMITTEE OF THE WHOLE
WHEREA
S, Dorey, Reagan & Associates (consultant) was engaged by the BWL (Resolution #2000-1-4) to assist staff with the following goals:Recommend and implement changes to the Non-Bargaining Unit (NBU) compensation plan.
Align the compensation system with a process-based organization.
Provide information enabling the BWL to design pay strategies, which are market driven.
The last redesign of the BWL compensation system was conducted in June, 1980.
WHEREAS, Staff and the consultant presented details of the new compensation plan for Non-Bargaining Unit employees with recommendations regarding changes.
WHEREAS, as discussed by the Personnel Committee on October 27, 1999, and approved by the Board, the Board of Water and Light base pay in relation to market is established at the 50th percentile.
WHEREAS, The internal equity issue related to the Technical Skill Family, Grades 1 through 6, was reassessed, especially in relation to the Bargaining Unit.
RESOLVED:
That the report on the new BWL Compensation Plan for Non-Bargaining Unit employees, submi
tted by Human Resources and Dorey, Reagan & Associates (consultant), dated April 4, 2000, be received and filed.[Changes below proposed by management are denoted in upper case.]
That based on staff analysis and subsequent review by the Board, the market rate for the Technical Skill Family--Grades 1 through 6--be established at the 65th percentile of the grade range.
That the 5% over maximum limit for Non-Bargaining Unit Employee increases be lifted for Fiscal Year 1999-2000 only. This qualifies Non-Bargaining Unit Employees for a one-time variable pay increase that may exceed the maximum.
That the individual variable pay amount be offered in a lump sum rather than being spread over 26 pay periods.
That the General Manager be authorized to implement the recommended changes to the salary ranges and pay structures as set forth in the report on skill families effective July 1, 2000.
That 3.5 percent of the Non-Bargaining Unit employee payroll be budgeted for FY 2001 to be used for performance increases effective July 1, 2000.
Motion by Commissioner Murray, seconded by Commissioner Royal, to Table the Resolution on the BWL Compensation Plan for Non-Bargaining Unit employees and to refer it back to the Committee of the Whole.
Discussion: Following lengthy discussion, it was decided that management would prepare responses to the questions raised for discussion at the next Committee of the Whole meeting.
Action: The resolution was TABLED and referred back to the Committee of the Whole for further discussion and responses to questions raised.
General Manager Pandy handed out a copy of an article on the new compensation plan, which he wrote for the May issue of PIPELINE.
GENERAL MANAGER
Background materials on items presented are on file in the Office of the Corporate Secretary.
#2000-4-1
FUNDING PROCESS FOR RETIREE BENEFITS
Resolved, That the Board adopt a process for funding retiree benefits using both a VEBA Trust and, to the extent permitted by law, excess pension assets in the defined benefit pension plan. As long as there are sufficient excess pension assets in the defined benefit pension plan and Section 420 transfers are permitted by law, BWL will annually transfer amounts reimbursed from the defined benefit pension plan to the VEBA Trust. Additional contributions to the VEBA Trust from BWL operating funds to supplement Section 420 transfers will not exceed the recommended annual contribution amount required to cover current service of active participants and amortize the unfunded accrued liability over 30 years. Valuations of the BWL
’s post-retirement benefit obligation and the recommended annual contribution amount will be updated periodically by benefits consultants.- - - - - - - - - - -
By adopting this process for funding retiree benefits, BWL will begin to set aside money for the payment of retiree benefits in the future. The first transfer of about $3.2 million from the defined benefit pension plan to the VEBA Trust will be made by June 30, 2000. Current law permits annual transfers in an amount equal to the amount paid during the year on behalf of retirees. The ability to make these transfers of excess pension assets is set to expire December 31, 2005.
Pension assets in the defined benefit pension plan may not be reduced below 125% of the estimated pension obligation. The estimated available excess assets in the defined benefit pension plan are about $37 million. The estimated liability for retiree benefits is currently about $65.5 million.
The recommended annual funding cost has two components: a normal cost that reflects the accrual of service for active participants and an amortization of the unfunded accrued liability. Based on a level dollar funding method and a 30-year amortization of the unfunded liability, the recommended annual contribution is currently $6.7 million. By paying about $3.2 million directly from BWL operating funds on behalf of retirees, reimbursing that amount from the defined benefit pension plan and transferring it to the VEBA Trust, the maximum additional contribution to the VEBA would be about $300,000 next year.
Motion by Commissioner O
’Leary, seconded by Commissioner Christian, to adopt the resolution.Action: Carried unanimously.
#2000-4-2
GRANTING OF USE AGREEMENT
RESOLVED, That the BWL grant a Use Agreement to the City of Lansing for 4,100 feet of frontage on the southerly bank of the Grand River, located at the north end of Sunset Street between Kaplan Street on the west and the railroad bridge that spans the Grand River on the east; the parcel is one to 400 feet in width, and consists of approximately 14 acres. (Map attached). A substantial portion of the property is in the flood plain. The City desires the property for the northern extension of the Lansing River Trail and to meet MDNR requirements that the City acquire a riverfront property for park property that the City sold to a developer.
The total parcel of land owned by the BWL at this location consists of approximately 30 acres of land, a large portion of which was utilized as the
"Comfort Street flyash landfill". The BWL maintains monitoring wells within the proposed agreement area, which would have to be protected in the Use Agreement.In July of 1998, the City had an appraisal done which opined that the property had a market value (as of 7/9/98) of $95,000. A complete property description as described in the Use Agreement is on file in the Corporate Secretary
’s office.Motion by Commissioner Christian seconded by Commissioner O
’Leary, to adopt the resolution.Action: Carried unanimously.
#2000-4-3
RETAIL WATER SERVICE AGREEMENT
Resolved, That the Board enter into a Retail Water Service Agreement with the City of DeWitt, a Michigan municipal corporation, to supply water in all areas currently served by the City of DeWitt and in such areas as subsequently agreed to by the parties pursuant to the Water Service Agreement.
Further Resolved, That the General Manager and Corporate Secretary are authorized to sign the Retail Water Service Agreement in such form as approved by the Staff Attorney.
Motion by Commissioner Christian, seconded by Commissioner Creamer, to adopt the resolution.
Action: Carried unanimously.
#2000-4-4
RETAIL WATER SERVICE AGREEMENT
Resolved, That the Board enter into Supplemental Agreement No. 5 to the Retail Water Service Agreement dated July 14, 1995 with the Charter Township of DeWitt to amend the Water Service Area to include the entire extent of the Township. Further, to provide water supply in all areas currently served by the Township and in such areas as subsequently agreed to by the parties pursuant to the Water Service Agreement.
Further Resolved, That the General Manager and Corporate Secretary are authorized to sign Supplemental Agreement No. 5 in such form as approved by the Staff Attorney.
Motion by Commissioner Christian, seconded by Commissioner O
’Leary, to adopt the resolution.Action: Carried unanimously.
UNFINISHED BUSINESS
None.
NEW BUSINESS
None.
GENERAL MANAGER'S REMARKS
Ottawa Station Power Plant Awarded Redevelopment Grant. General Manager Pandy reported that the State of Michigan has awarded the Board of Water and Light a Clean Michigan Initiative Waterfront Redevelopment Grant in the amount of $3,941,600 to redevelop the waterfront at the Ottawa Street Power Station into a downtown office/commercial/residential development. The grant cannot be used to redevelop the interior or exterior of the building. It is limited to the public space surrounding the building and along the riverfront. Mr. Pandy noted that the grant offer for this project is contingent upon three factors: (1) completion of response activities for which the BWL is responsible; (2) strong developer commitment; and (3) commitment to place the piazza, riverwalk, and outdoor public areas in city ownership or permanent easement. Staff will work quickly to try to fill out the grant agreement and to comply with the terms of the grant. Mr. Pandy reported that the project feasibility study from Steiner and Associates has been delayed until mid-May.
Rate Increase History. General Manager Pandy handed out a correction to the BWL Rate Increase History page included with the Board packet. The previous copy included thirty years of percentage increases, and the corrected sheet has been shortened into a twenty-year history. Staff plans to discuss and recommend general rate increases for all utility services at the Committee of the Whole meeting to be held in May.
Newspaper Article Highlights the BWL
’s New Central Utilities Complex. General Manager Pandy handed out a copy of an April 18, 2000, article in the LANSING STATE JOURNAL featuring a story on the new central utilities complex to provide water, electricity and steam to the General Motors (GM) Grand River Assembly Plant. The article highlights the joint venture between the BWL, Trigen-Cinergy Solutions and US Filter. Mr. Pandy briefed the Board on the location of the GM’s proposed Platinum project (parts and assembly plant) in Delta Township and the prospect of another central utilities complex to serve that new facility.Chilled Water Project Update. General Manager Pandy reported that staff continues to press the State of Michigan on the issue of a chilled water contract for summer air conditioning of its downtown buildings. The BWL has advised the State that the deadline on the chiller equipment bids is Friday, April 28, 2000; consequently, a formal commitment is needed in order to take advantage of the favorable bids received by the BWL and to meet next year
’s schedule for providing service.Erickson Station Scheduled Outage Completed. General Manager Pandy reported that Erickson Station
’s 18-month overhaul is completed. Richard Peffley, Director of Production, and all the employees involved were congratulated for the modest amount of overtime that this six-week effort involved. Mr. Pandy also advised the Board of a thrust bearing failure at Eckert Station’s #6 unit. He noted that the last major overhaul of Eckert’s #6 turbine was done in 1995. Staff is evaluating available options and solutions and will report back.
REMARKS BY COMMISSIONERS
None.
EXCUSED ABSENCES
By Commissioner Christian, seconded by Commissioner Creamer, that the absences of Commissioners Aquilina and Callen be excused.
Adopted unanimously.
PUBLIC COMMENTS
THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY BOARD OF WATER AND LIGHT SUBJECT.
Brian Cooper, BWL non-bargaining unit employee for the Delivery Process, expressed concerns with the proposed compensation plan. Mr. Cooper prefaced his comments by stating that with deregulation in the horizon, he is aware the BWL has to posture itself to be a competitive organization. He requested more information on how the classification study results were compiled. He noted also, based on the new compensation program, that it might be appropriate for those employees who selected the Defined Benefit Pension Plan option to have another opportunity to evaluate their decision.
Richard Taylor added to comments previously made at the beginning of the meeting. He stated that the employees put their best efforts into the BWL on a day-to-day basis, and many put their lives on the line. He asked that employees be provided with a copy of their completed Position Description Questionnaires, as many of them did not keep a file copy. He again questioned why the report of an earlier consultant hired to conduct the compensation study was not used.
ADJOURNMENT
On motion by Commissioner Christian, seconded by Commissioner Creamer, the meeting adjourned at 7:08 p.m.
/s/ Mary E. Sova, Secretary
Filed: May 1, 2000
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Marilynn Slade, City Clerk