MINUTES OF BOARD OF COMMISSIONERS' MEETING

LANSING BOARD OF WATER AND LIGHT

___________________________
Tuesday, June 27, 2000
___________________________

The Board of Commissioners met in rescheduled regular session at 5:00 p.m., in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Chair Diane Royal called the meeting to order.

Present:	Commissioners Rosemarie E. Aquilina, Ronald C. Callen, Ernest J. Christian, Charles M. Creamer, Mark A. Murray, David O’Leary, Diane R. Royal and Judson M. Werbelow.
Absent:	None.

The Secretary declared a quorum present.

All said the Pledge of Allegiance.

APPROVAL OF MINUTES

Motion was made by Commissioner O’Leary, seconded by Commissioner Murray, to approve the minutes of regular session held May 23, 2000.

Carried unanimously.

SPECIAL PRESENTATION

Representatives from the development firm of Steiner & Associates, commissioned by the Board of Water and Light to conduct a market analysis and perform design work for the redevelopment of the Ottawa Street Power Station, were present to brief the Board on their findings. General Manager Pandy introduced Yaromir Steiner, Chief Executive of Steiner & Associates and Gregg Hanner, Vice President of Development, Steiner & Associates. Mr. Steiner presented an executive summary of their analysis for an urban leisure-time and retail/entertainment project at the Ottawa Street Power Station. He reported that the project would combine a total of over 384,000 square feet of physical area with the possibility of a 100-200-room hotel. Land for the project would encompass the Ottawa Street Power Station and adjacent property north of the complex to the Shiawassee Street Bridge. The $60 million project would incorporate:

Multiplex theaters, up to 16 screens
Arcade games and entertainment
Live entertainment
Themed restaurants
Unique-to-the market retail
Fitness club
Offices

It was noted that a limited-service hotel involves another phase of the project and is not included in the $60 million project.

The project would require a community investment of $25 million, mostly from local, state and federal government grants. Mr. Steiner responded to questions pertaining to risk, cost and design issues. The Commissioners were provided with a copy of the comprehensive study for in depth review and future discussion.

Commissioners Aquilina and Creamer arrived at 5:23 p.m.

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.

Larry Steckelberg from the staff of State Senator Dianne Byrum thanked the Board for making an investment in electric utility expertise provided to the Senator as legislation to restructure the State’s electric industry was being debated over the last few years. He acknowledged services offered by Assistant General Manager Bill Cook and John Davis of Noble Kheder & Associates. Mr. Steckelberg noted that the BWL is in a unique position of being a sizeable municipal utility that self generates, with a lot of exposure in physical plant and investment that would be stranded if it found itself in the wrong position in any legislation. He urged the Board to continue to invest in that expertise as deregulation activity moves ahead, and as newly elected legislators come on board with limited knowledge about municipal utility needs.

BWL employee Kathy Gorman expressed concerns with the proposed compensation plan for non-bargaining unit employees. She explained how her current base pay would be frozen due to the proposed market-based plan and the market pay rate for her job classification. Ms. Gorman told the Board that she appealed her designated classification, but it was denied. Ms. Gorman noted that there are some employees who are very dissatisfied with what is happening to them as a result of the proposed compensation plan.

Commissioner Christian arrived at 5:40 p.m.

BWL employee Richard Taylor commented that he delivered a packet of information to each Commissioner with a complete copy of the William M. Mercer Report, which he requested under the Freedom of Information Act. He made reference to his letter of
June 25, 2000, which provides a summary of past activities pertaining to the compensation plan. He pointed out differences between the Dorey, Reagan report and the William M. Mercer report. He noted that there are several job categories in the Mercer report, which are not included in the Dorey, Reagan report. Also, he stated his belief that Dorey, Reagan & Associates did not conduct a comprehensive pay review. He questioned how payments to Dorey, Reagan & Associates were authorized and if payments have exceeded the amount of $111,950, approved by the Board (Res.# 2000-1-4).

COMMUNICATIONS

Three letters from anonymous BWL employees in opposition to the proposed new compensation plan for non-bargaining unit employees.

Letters from Board of Water and Light employees Steve Brennan, Tom Foster, Richard Peffley, George Podany, Randall Roost, and Robert Van Ells in support of the proposed compensation plan.

Letter from Board of Water and Light employee, John Rossi, expressing concerns with the proposed compensation plan.

Letter and attachments from Board of Water and Light employee Richard Taylor with comments about the William Mercer, Inc. report and concerns with the proposed compensation plan.

Motion by Commissioner Christian, seconded by Commissioner Murray to receive and place the employee communications on file.

Action: Carried unanimously.

REPORTS OF COMMITTEES

#2000-6-1
PERSONNEL COMMITTEE REPORT

The Personnel Committee met on June 22, 2000, to review the BWL’s new pay plan for non-bargaining unit employees, recommended by management.

Committee Members present were: Commissioners O’Leary, Christian, Royal and Werbelow. Others present were Commissioners Callen and Creamer.

At the last Board meeting held May 23, 2000, a resolution to adopt the new compensation plan fell one vote short of the majority of serving Commissioners needed to approve the action. With two Commissioners having been absent, it was determined that it would be appropriate to review and respond to issues raised at the last Board meeting.

Linda Gardner, Director of Human Resources, outlined the objectives of the new non-bargaining unit compensation system:

Designed to pay salaries that are competitive with those of comparable utilities for positions of similar responsibility; and
Relate salaries directly to measured job performance; and
Administer salaries within the BWL on a consistent basis; and
Attract, retain, and develop qualified employees who can help the BWL achieve its mission; and
Provide a framework for assigning positions to salary ranges on a fair and consistent basis; and
Establish and maintain salary ranges that are competitive in the marketplace; and
Ensure the performance expectations and assessments are discussed regularly with employees; and
Support the planning and budgeting process; and
Ensure that salary-related decisions are made without regard to race, religion, color, age, handicap, gender, national origin, or other discriminatory factors.

Ms. Gardner provided a summary of what has changed since the Base Pay Management System was first brought to the Board.

All non-bargaining unit employees hired before July 1, 2000, will have their base pay capped at 10% above the market rate; and
The appeals date was extended and all appeals have been addressed; and
Roth IRA’s are being offered, in addition to the current 457 and 401A pension options, to employees to invest their variable pay monies toward retirement as a post-tax option.

The Performance Evaluation Plan was developed because of the need to replace the previous performance appraisal instrument and in response to the employee survey where management received a low score on performance feedback. Ms. Gardner emphasized the importance to follow through with a feedback plan independent of whether or not a new non-bargaining unit base pay plan is implemented.

Paul Reagan of Dorey, Reagan & Associates presented detailed information regarding what has been developed to date. His presentation included information on job descriptions/core job duties, performance appraisal and development system, training timetable, and the implementation plan. The variable pay plans for the corporate, process and individual pay incentives were explained.

Following a lengthy question and answer period, the Committee voted to forward a resolution to the Board for consideration (see Resolution 2000-6-2).

Respectfully submitted,
David O’Leary, Chair
Personnel Committee

Motion by Commissioner Creamer, seconded by Commissioner Murray, to accept the Personnel Committee Report as presented.

Discussion: Commissioner O’Leary noted that the new BWL performance appraisal system will be implemented September 1, 2000

Action: The Personnel Committee Report was unanimously adopted.

#2000-6-2
Resolution to Adopt New Compensation Plan
for Non-Bargaining Unit Employees

BY THE PERSONNEL COMMITTEE

WHEREAS, Dorey, Reagan & Associates (consultant) was engaged by the BWL (Resolution #2000-1-4) to assist with the following goals:

Recommend and implement changes to the Non-Bargaining Unit Compensation Plan;
Align the compensation system with a process-based organization;
Provide information enabling the BWL to design pay strategies, which are market driven; and

WHEREAS, staff and the consultant presented details of the new compensation plan for Non-Bargaining Unit Employees on September 2, 1999, September 28, 1999 and October 27, 1999, with recommendations regarding changes; and

WHEREAS, the Personnel Committee on October 27, 1999, determined that the Board of Water and Light base pay in relation to market should be established at the 50th percentile; and

WHEREAS, the Compensation Plan was presented to the Board on May 23, 2000, and was not approved by 5 affirmative votes; and

WHEREAS, the Personnel Committee met on June 22, 2000, to address concerns raised by Commissioners.

RESOLVED:

That the brochure on the new BWL Compensation Plan for Non-Bargaining Unit Employees, submitted by Human Resources and consultant Dorey, Reagan & Associates, dated April 4, 2000, be received and filed.
That the new compensation plan shall be set as a two-tiered system.
- The market rate will remain at the 50th percentile of the market for employees hired as of July 1, 2000. The market rate will serve as the cap of base pay; and
- The base pay cap of current employees will be set at 10% above the market rate.
That 5% over maximum limit for Non-Bargaining Unit Employee increases be authorized for FY 1999-2000 only.
That the General Manager be authorized to implement the recommended changes to the salary ranges and pay structures of the new Non-Bargaining Unit Compensation Plan, effective July 1, 2000.
That the General Manager be authorized to implement a variable pay plan for Non-Bargaining Unit Employees for FY 2000-2001 with the following components:

                Corporate Share the Success
                 Process Performance Results
                 Individual Performance incentive

Maximum Variable Pay Percentage of Base
      2.5%
      5.0%
      7.5%

That the individual variable pay amount be offered in a lump sum rather than being spread over 26 pay periods.
That 3.5% of the Non-Bargaining Unit Employee payroll, budgeted for FY 2000-2001, be used for performance increases, based on variable amounts, effective
July 1, 2000.
That the General Manager, upon consultation with the Assistant General Manager and the Director of Human Resources, be authorized to pay employees with skills and experience deemed to be critical to the BWL, at base pay levels above the 50th percentile.
That 5% of the total 7.5% Individual Performance incentive pay for Directors and Managers be based on the quality of performance appraisals conducted by them or their employees.

- - - - - - - - - - - - - - - - - - - -

Item #2, above, allows for a gradual transition to the new compensation plan and reduces the percentage of employees above market rate by approximately 30%. Furthermore, it will shift approximately $200,000 from variable to base pay, with an additional $30,000 for pension and benefit costs.

Item #3, above, lifts the 5% increase over maximum limit for Non-Bargaining Unit (NBU) Employees for FY 1999-2000 only. This qualifies NBU employees for a one-time variabl e pay increase that may exceed the maximum.

Motion by Commissioner Creamer, seconded by Commissioner Murray, to approve the resolution to adopt the new BWL Compensation Plan for Non-Bargaining Unit employees (Resolution 2000-6-2).

Discussion: Commissioner Royal summarized the crux of her reservations with the proposed compensation plan: She indicated her preference to further develop the pay plan before approving it so that employees are more comfortable with it. She noted her concern with conflicts between the Dorey, Reagan plan versus the William Mercer plan because employees have not received satisfactory answers to questions raised regarding the two plans. And she stated that criteria for performance appraisals and training for managers and supervisors should be more definitively spelled out before implementing the new compensation plan.

Commissioner Callen noted that he has been trying to catch up, since he has been gone for a couple of meetings. He echoed Chairperson Royal ’s sentiments. He said that there is no question in his mind that staff is headed in the right direction with respect to a compensation-based performance program in replacing a system that should have been replaced sometime ago. He stated, however, that he too is concerned with implementing the pay plan too hastily, given concerns raised in the employee survey. He indicated that he would prefer to see some resolution to the position description issue before the new plan is implemented.

Commissioner Christian indicated that he supports slowing the process to assure the new pay plan is in order, particularly since it is significantly different from the existing program. He noted that it is imperative an attitude of "change agents" is developed, and urged that everyone work together on this change because it takes time to fully develop the vision of the BWL.

Commissioner Creamer said that he appreciated the employee input regarding the proposed pay plan. He noted that some changes have been made to the plan as a result of employee concerns as well as concerns raised by a number of the Commissioners. He also stated his belief that merit-based pay plans are essential and critical to moving companies forward. He added that while he too has some concerns about the speed of implementing the pay plan, he is convinced that whenever a significant change is made to a program of this nature, there will be apprehension by employees. He expressed concern that there is not a consistent performance appraisal process in place at the BWL. Commissioner Creamer stated that it is essential for the BWL to move ahead with the new compensation plan; and as it moves ahead, a few mistakes may be made as the new plan is a work in progress.

Commissioner Murray stated that an earlier meeting he was the only vote against the compensation plan primarily due to a question on the ability for the BWL to effectively measure performance. He pointed out that how an organization measures performance is essential to an organization’s health and success as compared to the early stages of a particular formula for merit pay. He noted that ultimately the Board’s responsibility is at the policy level, thus the General Manager and his team would be held accountable by the Board for the effective implementation of the proposed total compensation plan. He reminded that there are some substantial challenges ahead in order to accomplish this. Inherently the implementation of such an effort would continue to be a work in progress. He also noted that it is management’s job to do this successfully, and to fail to do so would be a very serious problem. Commissioner Murray said that at a policy level, the proposed compensation plan has been refined meaningfully, and he plans to support it.

Action: The resolution to adopt the new compensation plan for non-bargaining unit employees was adopted by the following vote:

Yeas: Aquilina, Creamer, Murray, O’Leary, and Werbelow – 5

Nays: Callen, Christian and Royal -3

GENERAL MANAGER’S RECOMMENDATIONS

Background materials on items presented are on file in the Office of the Corporate Secretary.

#2000-6-3
BOARD MEETING SCHEDULE

Resolved, That pursuant to the provisions in Article II, Section 2.1 of the Board’s Rules of Administrative Procedure, the following dates for regular meetings of the Board of Water and Light Commissioners for the ensuing six (6) months are hereby set.

2000
July 25 -	Tuesday
August 22 -	Tuesday
September 26 -	Tuesday
October 24 -	Tuesday
November 21 -	Tuesday
December 12 -	Tuesday

Regular meetings of the Board shall commence at 5:30 p.m.

This schedule is subject to change as a result of date conflicts with rescheduled City Council meetings.

Resolved Further, That a notice of the meeting schedule be published in the Lansing State Journal the week of July 3, 2000.

Motion by Commissioner Callen, seconded by Commissioner Christian, to adopt the resolution.

Action: Carried unanimously

#2000-6-4
PAYMENT IN LIEU OF TAXES TO THE CITY

Resolved, That the Board pay $6,429,067 to the City of Lansing pursuant to our agreement dated June 30, 1992.

Resolved Further, That all Receiving Fund cash and investments remaining following the above payment be transferred effective June 30, 2000 to the Special Project Fund for future capital projects.

Motion by Commissioner Callen, seconded by Commissioner Aquilina, to adopt the resolution.

Discussion: The agreement with the City ends June 30, 2002, unless extended in writing by the Commissioners and the City Council.

Action: Carried unanimously

Commissioner O’Leary left the room at 6:00 p.m.

#2000-6-5
BUSINESS PLAN FOR 2001

Resolved, That the Board of Water and Light Business Plan for 2001 be adopted. The proposed Business Plan is for the fiscal year ending June 30, 2001.

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The last page of the Business Plan is a draft of BWL Corporate and Process Measures. The measures have not yet been finalized and are for information only at this time. The corporate measures will be reviewed and recommended by the employee performance measures committee to the Share the Success management committee. The management committee’s final recommendation will be forwarded to the General Manager for approval. The amount available for Share the Success payments will be determined by the Commissioners at the July 2000 Board Meeting.

Motion by Commissioner Christian, seconded by Commissioner Callen, to adopt the resolution.

Action: Carried unanimously

#2000-6-6
FEES FOR CONTRACTOR INSTALLED RESIDENTIAL WATER SERVICES

Resolved, That fees for residential water services installed by contractors be adopted, effective July 1, 2000, as follows:

Fee Description	When Applied	Proposed Fee
Permit Application	Initial Request	$250
Annual Permit (See Board amendment below)	Annually	$150
Service Site Inspection	Each Site Visit	$75
Standard Service Meter Set	As Required	$132
Back Flow Prevention Meter Set	As Required	$253
Split Service Meter Set	As Required	$224

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Fees for contractor installed residential water services are new fees, which cover BWL costs associated with the Water Customer Choice Program adopted by Board resolution #2000-5-7.

Fees will cover BWL costs of assessing contractor qualifications and quality of work for approval to install residential water services, annual administration and review, inspection of work and installation of meter sets.

Motion by Commissioner Creamer, seconded by Commissioner Christian, to adopt the resolution.

Discussion: In response to Commissioner Werbelow’s inquiry, General Manager Pandy clarified that the fees will recover costs incurred associated with allowing contractors to install residential services. The fees are in addition to what the owner pays the contractors. Marketing Director Clyde Dugan noted that the reason for an annual permit fee is to prequalify contractors to eliminate the need to prequalify them for each service installation. Following discussion, the Commissioners consented to a friendly amendment to the resolution by changing the second line of the Fee Description column as follows: Annual Contractor’s Qualification permit Fee.

Action: Carried unanimously, as amended.

#2000-6-7
BULK WATER SALES – HYDRANT USAGE FEES

Resolved, That the BWL charges for water hydrant usage and pool filling be established, effective July 1, 2000, as follows:

Hydrant Usage
Schedule of Fees
(Effective 7-9-00)

Permit application fee		$120.00

Consumption fee:
1" RPZ (to serve 1" and smaller connections)	$25.00 per month *
60302" RPZ (to serve 1½-2" connections)			$50.00 per month *
( per month, or any portion thereof)*

Hydrant Usage Non-compliance Fee		$250.00
(Refundable at expiration of permit contingent on proper hydrant usage)

Water Theft Penalty Fee (See Board amendment below)		$500.00 1st occurrence **
(Further violations may be prosecuted to the fullest extent of the law)

Any changes of location to include a different hydrant must be approved by the Board of Water and Light in advance of the change, in order to prevent a non-compliance fee.

Additional Purchase Items

RPZ Purchase Cost
1"	$223.00
2"	$418.00

Hydrant Wrench Purchase Cost		$22.00

Permits will be valid from April 1 – October 31 of each year.

POOL FILL FLAT RATE		$195.00

Motion by Commissioner Christian, seconded by Commissioner Callen, to adopt the resolution.

Discussion: In response to an inquiry made by Commissioner Werbelow, General Manager Pandy clarified that fees for bulk water sales are designed to deal with customers who purchase bulk water from a hydrant. The fee schedule provides a set of rates applicable for the use of hydrants to fill a tank truck or other hydrant uses, such as at a construction cleanup site; i.e., a contractor may want to use a hydrant to wash a road or clean up dirt that has gathered on a road surface. The fee schedule is an attempt to delineate BWL fees and rates for those types of services. Mr. Pandy noted that the Consumption Fee is a rate for getting water connected based on the size of connection, which would be either a 1-inch or 1-1/2 to 2-inch size, together with a commodity charge. The customer also pays for the water used, based on the BWL’s retail rate. He reported that fees are being updated to reflect the BWL’s actual cost of providing such services; the fees and charges will be updated annually. Marketing Director Clyde Dugan gave a historical overview of bulk water sales and hydrant usage. In response to Commissioner Royal’s question, Mr. Dugan clarified that the Hydrant Wrench Purchase Cost of $22.00 establishes a flat rate for the BWL to provide a special hydrant wrench--adapted for hydrants on the BWL system.

Commissioner Murray asked about the governance role of the BWL relative to prosecutorial discretion. General Manger Pandy responded that the Water Theft Penalty Fee is intended for the BWL to levy $500.00 for the first occurrence, and then if someone repeats the incident, the BWL would file charges for theft. Staff Attorney Wilhite added that generally the State is the complaining party of the criminal matter. He noted that there is a statute on meter tampering, theft and related issues. The BWL would make the complaint to the prosecutor. Commissioner Murray noted that if the intent is to charge another $500.00 fee for a second incident of theft, the resolution should be modified.

Motion: Following discussion, it was moved by Commissioner Murray and seconded by Commissioner Callen to propose a friendly amendment to the Water Theft Penalty Fee as follows: $500.00 ~~1st~~ PER occurrence. ~~Further Violations may be prosecuted to the fullest extent of the law~~ any violation of this policy may also be reported to the prosecutor’s office.

Action: Carried unanimously

Commissioner Callen suggested that for future fee schedule changes, it would be helpful for the Commissioners to receive a comparative list of fee changes showing the current and proposed fees.

#2000-6-8
WELLHEAD PROTECTION PLAN

Resolved, That the Board approve the City of Lansing Wellhead Protection Program Plan as provided to the Commissioners under separate cover.

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The Wellhead Protection Plan will serve as a guidance document for protection of the region’s groundwater resource from contamination and misuse. It was developed through the cooperative efforts of the Tri County Regional Planning Commission, the Groundwater Management Board, the Board of Water and Light, the City of Lansing, Michigan State University, the Michigan Department of Environmental Quality, the Ingham County Health Department, and Delhi Township.

Motion by Commissioner Callen, seconded by Commissioner Creamer, to adopt the resolution.

Action: Carried unanimously

2000-6-9
EMPLOYEE BENEFITS OPTION PLAN – 2000-2001

whereas, The Share the Success (STS) Employee Benefits Option Committee has reviewed and researched numerous options for the Share the Success bonus program. The option package has administrative costs only, while providing employees the opportunity to purchase additional fringe benefits.

RESOLVED, That the final recommendations submitted by the STS Employee Benefits Options Committee be approved:

I. Options available through the "Whatif" Program
1. Purchase of Vacation *		No change
2. Purchase of Free Choice *		No change
3. ICMA "Deferred Compensation Plan"		No change
4. ICMA "Roth IRA" ****		New Option
5. FSA (Flexible Spending Account) ***		No change
6. Charitable Contributions **		Lansing Board of Water & Light Fund Ele’s Place "A healing center for grieving children"
II. Options available through Human Resources
7. Long Term Disability Program		Annual enrollment for "buy-up" option changes
8. UNUM Term Life Insurance		Annual enrollment for changes
9. Cancer, Intensive Care, Voluntary Indemnity (previously called Direct Cash Supplement), Accident Expense AFLAC Plans		Annual enrollment for changes
* Purchase of Vacation and Free Choice will be limited to ten (10) total days to include no more than two (2) Free Choice Days.

** To lower administrative costs, all checks less than $5.00 will be defaulted to the charities options. Opt out procedures will be available for employees declining the default.

*** Maximum annual contribution for health care expenses is $7,500 and dependent care maximum is $5,000 (see IRS rules).

**** Lump sum and/or continued payroll deduction.

Motion by Commissioner Murray, seconded by Commissioner Aquilina, to adopt the resolution.

Action: Carried unanimously

#2000-6-10
CAPITAL BUDGET INCREASE
– ALLEGAN STREET STEAM MAIN PROJECT

Resolved, That the BWL Capital Budget for fiscal year 2000 be increased $145,000 and the Capital Budget for fiscal year 2001 be increased $1,517,000 to accommodate the following project:

Project	Project Cost	FY 00 Expenditures	FY 01 Expenditures
Allegan St. Steam Main	$1,662,000	$145,000	$1,517,000

This project will replace the steam main on Allegan Street from Walnut to Pine and also extend the main to Sycamore turning south on Sycamore to feed the State Library/Museum. Replacement of this steam main section is recommended due to concerns over the integrity of the existing steam main, which provides the only source of steam to the State of Michigan complex on Allegan Street, coupled with the benefits of doing this construction along with the Chilled Water mains.

In addition to serving the State Library/Museum, the extension of the steam main from Allegan and Pine is a one-year advancement of work required to supply steam service to the Hall of Justice Building on Martin Luther King Blvd. A portion of a $1,025,000 total Contribution-in-Aid is allocated to this work. Construction of the Chilled Water mains along the same route provides an opportunity for cost savings including reduced street work exposure.

Motion by Commissioner Murray, seconded by Commissioner Werbelow, to adopt the resolution.

Action: Carried unanimously.

UNFINISHED BUSINESS

Review Implementation of Rate Increases

At the request of Commissioner Royal, the rate increase implementation schedule approved at the May 23, 2000, meeting was placed on the agenda for reconsideration. With two Commissioners having been absent, she deemed it appropriate to bring up this matter for discussion.

General Manger Pandy reported that the original recommendation considered at the last meeting had an August 10, 2000, effective date. City officials have requested that BWL consider postponing its rate increases until January 1, 2001, to mitigate the effect of the sewer rate increase for customers on a fixed income. The City is implementing sewer rate increases by 5 percent effective July 1, 2000. Mr. Pandy noted that if the Commissioners prefer to move the effective date of BWL rate increases to January 1st, subsequent increases would also be moved to January 1st, rather than an August to August cycle for the second and third years. An analysis prepared by Chief Financial Officer Dana Tousley was provided to the Commissioners showing the financial consequence of deferring the five-month time period to January 1, 2001. The analysis included a calculation of revenue increases needed in the next two years in an attempt to keep the BWL whole in terms of revenues received over the three-year period. A comparison was provided on the impact if the BWL adjusts the rate increases to make up the revenue loss in the same three-year period. Calculations of resulting revenue increases in percentages for each year were also reviewed.

Mr. Tousley reviewed the planning and budgeting process that takes place to determine if rate increases or bonding should be considered.

Commissioner Royal expressed concern with the BWL’s lack of coordination with the City on rate increases. She noted that the impact of simultaneous BWL and City rate increases could be problematic to residential ratepayers on tight budgets. She indicated her preference to review and adjust rates annually for smoother, inflationary-type of adjustments, rather than three years of rate increases followed by no increases in subsequent years.

Following discussion, there was consensus among the Commissioners to move to a January time frame for annual increases. An advantage to shifting rate increases to January is that it may help diminish the misunderstanding among ratepayers that the increase to sewer rates is the responsibility of the BWL, when in fact it is not.

In response to Commissioner Creamer’s question relative to possible legal implications for deferring rate increases five months from the date of a public hearing, Staff Attorney Wilhite opined that to move rate increases back by five months would not damage anyone’s due process rights.

#2000-6-11
Resolution Authorizing Deferral of
Rate Increases for Water, Electric and Steam
until January 1, 2001

RESOLVED, That any rate increases considered for water, electric and steam shall be deferred until January 1, 2001. Further, that the implementation period for future Board of Water and Light rate increases shall be readjusted from August to a January time frame.

Moved by Commissioner Creamer, seconded by Commissioner Callen that the resolution be approved.

Discussion: The public hearing set for Tuesday, July 11, 2000, at 5:30 p.m. for comments on proposed rate changes will continue as scheduled. Mr. Pandy noted that the decision to postpone the rate increases will have an impact on the BWL’s net income. Revised budget and financial targets will be presented for review at the next meeting.

Action: Carried unanimously.

NEW BUSINESS

None.

GENERAL MANAGER'S REMARKS

Capital Project Status Report. General Manager Pandy handed out a copy of the Annual, Planned and Bonded Capital Projects status report as of May 31, 2000. He reported that the only capital project number that requires some justification is 2000-006 (Purchase/Scrap Transformers). The reason for the justification is due to transformer demand and costs to meet new customer service requests are higher than projections.

Hulett Road Pump Station and Reservoir Update. General Manger Pandy reported that the Hulett Road Pump Station and reservoir are completed. This project is the 10 million gallon per day pump station and 2 million gallon underground storage reservoir that is visible looking north from I-96 west off the Okemos Road exit. The project has one 16-inch raw water supply line and two 16-inch mains; one serves the Jackson National Life Headquarters and Alaiedon Township, and the other serves Meridian Township and Alaiedon District #2. The project cost to date is at $3.4 million as compared to the budget estimate of $4.6 million, and it is expected to come in at the budget estimate when all costs are charged to the project.

Report on Water Utility Financial Performance. At the request of Commissioner Murray, General Manager Pandy handed out a brief analysis that explained the variance in water operating income. Mr. Pandy reported that water operating income is approximately $1 million less than budgeted (-47.2%), water revenue is down compared to budget due to the following factors: (1) the Select Steel Corporation deal did not materialize (-$500,000), (2) water customer accounting and service expenses associated with going to 24 hours/7 days per week of customer service operations, the water portion of the new emergency phone system and the Bath Township meter reading not budgeted (+$300,000), (3) the water portion of administrative/general expenses were higher than budgeted, due to lower than expected transfers to fixed capital (+$100,000), and (4) the water depreciation expenses were higher than budgeted (+$100,000). Mr. Pandy stated that management is continuing to find ways to cut costs, increase sales, and increase rates.

Chiller Line Construction Schedule. General Manager Pandy handed out a map of the chiller line work schedule for the first and second phases of the project. He reported that both phases are under construction. The City of Lansing has approved a noise variance allowing the BWL to work on the first part (Phase 1b) and authorizing the BWL to work from 6 a.m. to 8 p.m., including weekends. A similar variance request for the Phase-1a work will be the subject of a City Council public hearing on July17. Commissioner Murray suggested that, in conjunction with the City, it would be helpful for the driving public to see additional signage that communicates when downtown streets will be closed and reopened. Mr. Pandy agreed to follow up with the Public Service Department to discuss this concept.

Report on the Steam Main Rupture. General Manager Pandy reported that the 20-inch steam main feeding into General Motor’s (GM) Plant #6 has suffered a severe failure on Tuesday morning (6/27/00) at approximately 6:00 a.m. The operation of the 20-inch steam main has been plagued with problems due to various leaks at joint locations. A map was displayed showing the location of the steam main and the problem areas. In the interest of public safety, South Martin Luther King, Jr. Blvd near Olds Avenue and Williams Street was closed after the leak blew a large hole in the ground along the steam main. There were no injuries. Mr. Pandy reported that arrangements for the rental of portable boilers to cover the Plant #6 steam load are in process. Assistant General Manager Bill Cook reported that the steam supply to Plant #6 is being halted at approximately 8:00 p.m. (6/27/00), which will create production problems for GM. He outlined efforts underway in dealing with this issue and the action plan. He also reported that experts have been hired to analyze the design of the steam main and to determine the cause of the joint failures. Mr. Cook briefed on the financial implications to repair the steam main. Mr. Cook noted that to repair the large break and if all 24 expansion joints need to be replaced, the cost could exceed $5 million, depending on the final plan to be adopted. The cost to the BWL to rent portable boilers for three months (July through September) to cover the Plant #6 steam load this summer is expected to total $500,000.

General Motors to Construct a New Plant in Delta Township. General Manager Pandy reported that General Motors (GM) has announced they will build a vehicle manufacturing complex in Delta Township. The second major production facility launched in the Lansing area this year as part of GM’s global manufacturing strategy. The complex will consist of a body shop, paint shop and general assembly facility; a regional Metal Fabricating Division metal center; and a central utilities complex to serve the site. The BWL will be providing service to GM in Delta Township, serving an approximately 30MW load.

REMARKS BY COMMISSIONERS

None.

EXCUSED ABSENCES

There being no objection, Commissioner O’Leary (who left the meeting at 6:00 p.m.) was excused.

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.

BWL employee Joseph Davis, President of IBEW, Local 352, commended Richard Taylor for standing up and making his comments regarding the new compensation plan. Mr. Davis advised the Board that a special conference call is scheduled with the Michigan Employment Relations Commission on Friday, June 30th with regard to the IBEW representing the Clerical-Technical group. He stated that he was hoping the Board would have delayed action on the new pay plan until concerns raised by some employees had been satisfied.

Richard Taylor stated that one thing he did not mention in his earlier remarks to the Board was that according to the April and May 2000 Board minutes, the Technical Skill Family, Grades 1 through 6 would be set at the 65th percentile rather than the 50th percentile. He noted that in reviewing his " blue sheet," on job and compensation information, his new market rate was set at 60%.

ADJOURNMENT

On motion by Commissioner Murray, seconded by Commissioner Werbelow, the meeting adjourned by unanimous consent at 7:08 p.m.

/s/ Mary E. Sova, Secretary

Filed June 30, 2000

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Marilynn Slade, City Clerk