MINUTES OF BOARD OF COMMISSIONERS' MEETING
LANSING BOARD OF WATER AND LIGHT
___________________________
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. Chair Diane Royal called the meeting to order.
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Present: |
Commissioners Ronald C. Callen, Ernest J. Christian, Nancy W. Duncan, David O ’Leary, and Diane R. Royal. |
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Absent: |
Commissioners Rosemarie E. Aquilina, Charles M. Creamer, and Mark A. Murray. |
The Secretary declared a quorum present.
All said the Pledge of Allegiance.
APPROVAL OF MINUTES
Motion made by Commissioner O
’Leary, seconded by Commissioner Christian, to approve the minutes of regular session held April 24, 2001.Carried unanimously.
Motion made by Commissioner Callen, seconded by Commissioner O
’Leary, to approve the minutes of executive session held April 24, 2001.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.
None.
COMMUNICATIONS
There were no communications.
REPORTS OF COMMITTEES
FINANCE COMMITTEE REPORT
The Finance Committee met on April 24, 2001, to receive an update on the following topics:
Chair Mark Murray called the Finance Committee to order at 8:45 p.m. Committee Members in attendance were Commissioners Murray, Creamer, and Royal. Also present were Commissioners Callen and Duncan. Absent were Commissioners Creamer and O’Leary.
Annual O&M Budget
Chief Financial Officer Dana Tousley presented an overview of the proposed budget by utility for FY 2002. Staff plans to review the six-year cash flow model and capital forecast with the Commissioners in May or June.
FY 2002 Budget Assumptions were reviewed:
Projected Income Statement $(000)
|
216,755 |
|
22,168 |
|
|
3.6% |
Projected Cash Flows $(000)
|
46,393 42,179 |
FY 2002 Budget vs. FY 2001 $(000)
|
Category |
FY 2002 |
FY 2001 |
Change |
|
Labor |
50,929 |
48,149 |
5.8% |
|
Material |
8,082 |
7,862 |
2.8% |
|
Outside Service/Other |
26,195 |
25,203 |
3.9% |
|
Chilled Water Expenses |
1,408 |
0 |
|
|
Fuel/Purchased Power |
92,568 |
90,127 |
2.7% |
|
Capital Transfers |
-9,000 |
-9,000 |
|
|
Total O&M |
170,183 |
162,341 |
4.8% |
The Finance Committee recommends the following resolution for Board
approval in May:
Resolution # 2001-5-1
ANNUAL FY 2002 BUDGET
RESOLVED, That the annual budget covering Fiscal Year 2002, appended to this report, be approved as presented.
RESOLVED FURTHER, That capital projects are authorized in the amount of the project estimate. Capital expenditures for Fiscal Year 2002 are limited to the amount included in the budget.
Annual Rate Review
Chief Financial Officer Dana Tousley reported that rate increases over the next three years, effective as of January 1, 2001, appear to be adequate for FY 2002. The cash flow model targeted for review with the Commissioners in May or June will serve two purposes: (1) illustrate what the near term looks like for rates and (2) provide available options for the anticipated NOx bond issue. Rate strategies will be discussed at that time.
Utility Fees and Charges
Staff reviewed proposed fees and charges for electric, water, and steam utilities recommended for implementation on July 1, 2001. The fees and charges are intended to supersede the charges currently in place and are consistent with upcoming rules and regulation modifications as outlined in the February Growth and Expansion Report. The proposed fees and charges will be incorporated in the proposed Rules and Regulations for each of the three utilities and are scheduled for submittal to the Board in June for approval.
Assistant General Manager Cook reviewed plans to effectively communicate the change in the BWL
’s growth and expansion philosophy to promote better employee and external customer understanding of the policy. Over the course of the next couple of weeks, meetings will be held with employees directly impacted by the proposed changes. Marketing and Delivery plan to meet with townships, major developers, contractors and inspectors, as well as economic development people to explain the charges and get their input prior to implementation. A staff report on customer feedback and outcome of the meetings will be provided to the Commissioners at the May meeting. It was noted that customer feedback could cause a slight adjustment to the proposed FY 2002 budget.Quarterly Internal Audit Report
Director of Metrics and Audits Kellie Willson invited questions from the committee regarding her quarterly internal audit report, which was included with the meeting packet. She also distributed a summary of the proposals received from five firms to conduct performance audits. The prices range from $95,000 to $504,000 for all five phases outlined in the request for proposals. The Growth and Expansion Task Force will review and evaluate the proposals and submit a report to the Finance Committee.
City Ethics Ordinance Compliance
In February 2001, the Finance Committee requested that the Director of Metrics and Audits. Kellie Willson, submit specific recommendation relative to expectations and the level of importance the BWL should attach to ethics. Ms. Willson presented the following recommendation:
Resolution # 2001-5-2
CITY ETHICS ORDINANCE COMPLIANCE
RESOLVED, That the Commissioners endorse both the letter and the spirit of the City
’s Ethics Ordinance.RESOLVED FURTHER, That the Commissioners encourage management to provide ongoing annual training to all BWL employees about its provisions.
With regard to purchasing issues, there was agreement by the committee that an employee should be able to bring input to the procurement process for business reasons.
This means that all BWL employees: (a) may provide input to the procurement process for business reasons only and may not derive any income or personal benefit, directly or indirectly, from the selection, (b) should be discouraged from doing business with BWL, and (c) should not accept gifts over $50 in value from vendors whether or not they influence a decision or official action.
The Committee concurred with the recommendation as clarified.
Financial and Management Information Issues
Director of Metrics and Audits Kellie Willson reported that the BWL
’s financial practices and systems must provide timely and useful information to guide the business. Deficiencies in a true accounts payable system and accrual methodology were identified as problematic areas. Chief Financial Officer Tousley reported that he has allocated $30,000 in the proposed FY 2002 budget to explore various platforms to improve database access by managers. He noted that the BWL utilizes an accrual system that is done on a fiscal year basis. Commissioner Murray suggested that perhaps the question is more a cost issue rather than a philosophical one, particularly since a monthly accrual system is integral to determine the current monthly budget position. Mr. Tousley stated that given the financial constraints of doing more, in terms of accounts payable or accrual, the decision was made that the best use of the $30,000 for now would be to explore available options to provide better database access to managers. The Committee agreed that the BWL should be moving toward a monthly accrual system. The question, however, is at what cost and at what speed. Mr. Tousley noted that if the option involves a major transformation of the BWL’s financial reporting system, the cost could be prohibitive.Ms. Willson suggested that the first step to replace the existing accounting system would be to review requirements and purchase an off-the-shelf system that could be modified, only if necessary. She said several vendors offer integrated packages that specialize in utilities. Ms. Willson stated that savings in operational efficiencies would be gained from managers through timely access to budgetary information.
Following discussion, the Committee directed the Director of Metrics and Audits to report back with an outline of cost issues with examples of solid accounting systems currently in place.
Application of FAS #71
Commissioner Murray acknowledged Internal Audit
’s written overview of the Board’s decision on the continued applicability of FAS #71. He agreed that the specific items deferred and financial implications of the deferral should be revisited by staff and the Commissioners annually.Respectfully submitted,
Mark A. Murray, Chair
Finance Committee
Moved by Commissioner Christian, seconded by Commissioner O
’Leary, that the Finance Committee Report be considered as read in full and approved.Action: Carried unanimously.
Moved by Commissioner Christian, seconded by Commissioner Duncan, that Resolution 2001-5-1 (FY 2002 Budget) be approved.
Action: Carried unanimously.
Moved by Commissioner Duncan, seconded by Commissioner Callen, that Resolution 2001-5-2 (City Ethics Ordinance Compliance) be approved.
Action: Carried unanimously.
GENERAL MANAGER
Background materials on items presented are on file in the Office of the Corporate Secretary.
Resolution # 2001-5-3
USE OF SPECIAL COUNSEL
RESOLVED, that the General Manager be authorized to retain the law firm of Foster, Swift, Collins & Smith, P.C., on as as-needed basis from May 23, 2001 to February 17, 2003. This firm has advised the BWL in the past on employment, environmental, commercial litigation and pension matters. The City Attorney has recommended this firm to Lansing City Council and Lansing City Council, pursuant to their Resolution No. 130, has authorized the BWL to retain this firm.
Staff Commentary: This firm previously responded to the BWL
’s Request for Qualifications and submitted a proposal. During the process of reviewing these qualifications, it was disclosed that the firm was presently representing a client against the City of Lansing. Both the City Attorney and the BWL’s Staff Attorney have separately met with firm representatives to discuss putting into place safeguards to avoid such representation in the future as well as the repercussions of representing clients against the City of Lansing or any of its agencies. The Staff Attorney is comfortable that this situation will not be repeated.Moved by Commissioner Christian, seconded by Commissioner Duncan, that the resolution be approved.
Discussion: Commissioner Royal expressed concern that the firm of Foster, Swift, Collins & Smith was being added to a list approved by the Board in January 2001
(Resolution 2001-1-5). She stated that any law firm should have procedures not to take on a new client with adverse positions to a former client without the former client’s permission. She noted that all attorneys have rules on ethics relevant to former clients.Commissioner Callen disclosed his intention to recuse himself from voting on this resolution due to his working relationship with Knaggs, Harter, Brake & Schneider, which is one of the law firms retained by the BWL on as-needed basis for the period February 2001 to February 2003.
Action: Adopted by the following vote:
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Yeas: |
Commissioners Christian, Duncan, and O ’Leary |
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Nays: |
Commissioner Royal |
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Abstention: |
Commissioner Callen |
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Absent: |
Commissioners Aquilina, Creamer, and Murray |
Resolution #2001-5-4
AMENDMENT TO PENSION PLAN
RESOLVED, That the Third Amendment to the Lansing Board of Water and Light Employee
’s Defined Benefit Plan for Employees Pensions is hereby adopted as indicated therein; andRESOLVED FURTHER, That the Chair of the Board of Commissioners and the Corporate Secretary are authorized to execute the amendment and any other documents necessary to implement the foregoing resolution.
Staff Commentary: This amendment is necessary to bring the plan into compliance with changes in legislation. The changes affect our ability to use excess pension assets for the payment of retiree healthcare liabilities. In summary, the law extends the expiration date of Section 420 to December 31, 2005, and changes the method used to determine whether retiree healthcare benefits have been maintained for five years following the transfer.
In order to take advantage of these changes, Steve Jurmu of Foster, Swift, Collins & Smith prepared the necessary documents and submitted them to the IRS for approval in December of 2000. On April 30, 2001, the IRS issued their approval of this amendment.
Moved by Commissioner O
’Leary, seconded by Commissioner Christian, that the resolution be approved.Action: Carried unanimously.
Resolution #2001-5-5
INCREASE IN CAPITAL BUDGET FOR STEAM MAIN REPLACEMENT
RESOLVED, That the Board of Commissioners authorize the replacement of the steam main in the 100 N. Washington block, and that the BWL Capital Budget for fiscal year 2001 be increased by $200,000 to accommodate such project.
Staff Commentary: The project will replace the steam main in N. Washington Avenue from Michigan Avenue to Ottawa Street. Replacement of this steam main section is recommended due to concerns over the integrity of the existing steam main, which is the primary connection between the north & south low pressure areas, coupled with the benefits of doing this construction with the reopening of this block to traffic.
This steam main has been in service since 1906.
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Project |
Cost |
FY 01 Expenditures |
FY 02 Expenditures |
|
100 N. Washington Block Steam Main |
$801,000 |
$200,000 |
$601,000 |
Moved by Commissioner Christian, seconded by Commissioner Duncan, that the resolution be approved.
Action: Carried unanimously.
Resolution #2001-5-6
ACQUIRE EASEMENT FOR WATER MAIN FACILITIES
RESOLVED, That the Board of Commissioners authorize the Manager of System Integrity & Customer Projects to acquire an easement from Looking Glass, Incorporated for water main facilities located on the east side of Airport Road, half way between Clark and Herbison Roads, in exchange of front footage recovery and services rendered by the Board of Water and Light in the amount equivalent to $0.80/Sq. Ft. or $30,510.00.
Easement Description:
40
’ Easement along Airport Road - Part of the Northwest 1/4 of the Southwest 1/4 of Section 18, T5N R2W, DeWitt Township, Clinton County, Michigan particularly described as follows: beginning at a point on the East-West 1/4 line of Section 18 that is 33 ft. Easterly of the West 1/4 corner of Section 18; thence Easterly along the 1/4 line 40 ft.; thence Southerly parallel to the West line of Section 18 a distance of 950 ft.; thence Westerly 40 ft.; thence Northerly on a line 33 ft. Easterly of the West section line parallel to the West section line 950 ft. to the point of beginning.Property Description:
Part of the fractional West 1/2 Section 18, T5N R2W, DeWitt Township, Clinton County, Michigan more particularly described as follows: beginning at the West 1/4 corner of said Section; thence along the East-West 1/4 line, S89°29
’46"E, 528.00 feet; thence parallel with the West line of said section S00°23’05"W, 1321.32 feet; thence N89°31’56"W, 528.00 feet to said West line of said Section; thence along said West line, N00°23’-05"E, 1321.65 feet to the point of beginning, containing 16.02 acres, more or less. Subject however to easements, agreements, covenants, conditions, restrictions and/or reservations of record, if any.Staff Commentary: The easement will permit the operation of a north
– south 16" feeder main to supply potable water to several DeWitt and Watertown subdivisions and is essential to the overall water master plan for the area.Easement is needed due to Clinton County Road Commission requirement to construct the water main outside of the road right-of-way in this area.
Moved by Commissioner Christian, seconded by Commissioner Duncan, that the resolution be approved.
Action: Carried unanimously.
Resolution #2001-5-7
CERTIFICATE OF EXTENSION OF RETAIL WATER SYSTEM AGREEMENT
WHEREAS, the Board of Water and Light and the City of DeWitt (a municipal corporation) have entered into a Water System Agreement, with an effective date of September 1, 2000, and a term of thirty (30) years; and
WHEREAS, the Water System Agreement allows the contract to be extended by one (1) additional year, if amended in writing on or before June 1st of each year, and such that the term shall never exceed thirty (30) years; and
WHEREAS, the Board of Water and Light desires to extend the Water System Agreement, now and in future years.
RESOLVED, That the Board of Commissioners authorize the General Manager and Corporate Secretary to sign a Certificate of Extension to the Water System Agreement by June 1st, now and in each year hereafter, in such form as approved by the Staff Attorney and substantially in the form included as Exhibit D in the Water System Agreement.
Staff Commentary: The City of DeWitt has approved the extension of the Water System Agreement by one (1) year to 2031, by action of the DeWitt City Council on May 7, 2001.
Moved by Commissioner O
’Leary, seconded by Commissioner Duncan, that the resolution be approved.Action: Carried unanimously.
Resolution #2001-5-8
WATER SERVICE AGREEMENT BETWEEN THE BOARD OF WATER AND LIGHT
AND LANSING TOWNSHIP
WHEREAS, the Landel Metropolitan District (
"District"), comprising certain portions of the Townships of Lansing and Delhi, was created pursuant to 312 PA 1929, and became effective on November 12, 1946, pursuant to a vote of the electors at which time a charter was also adopted; andWHEREAS, the District was authorized, among other things, to acquire and succeed to any or all the rights, obligations and property of any city, village or township, or any parties thereof, to supply water and furnish water services to properties within or without its limits (
"District System"); andWHEREAS, on October 17, 1955, the City of Lansing (
"City") entered into an agreement with the District ("District Agreement"), after approval by their respective electors, for the sale, assignment and transfer of the District’s System to the City, together with all the rights and property respecting or connected with the District System, to supply water to those areas of the Charter Township of Lansing ("Township") previously served by the District. This District Agreement included the right to transact a local business in the Township and the right to lay, maintain and operate water mains in the public highways, in certain areas of the Township; andWHEREAS, as part of the District Agreement, the City assumed the obligations of the District including the outstanding Water Supply and Sewage Disposal System No. 1 Revenue Bonds, dated August 1, 1947, which were subsequently retired and whereupon the District organization was dissolved; and
WHEREAS, the City then incorporated the District System into its own water supply system, operated by the Board of Water and Light; and
WHEREAS, the Board of Water and Light and the Township acknowledge the mutual benefits resulting from the District Agreement and desire to continue the Board of Water and Light water service in the Township as well as to extend the Board of Water and Light
’s water service to other areas in the Township not covered under the District Agreement, with all the areas being served designated as the "Water Service Area."RESOLVED, That the Board of Commissioners authorize the General Manager and Corporate Secretary to enter into a Water Service Agreement and Supplemental Agreements to provide service to Lansing Township within the Water Service Area, subject to approval of all documents by the Staff Attorney.
Staff Commentary: The Water Service Agreement shall be in substantially the form as the draft filed in the Corporate Secretary
’s Office.Moved by Commissioner O
’Leary, seconded by Commissioner Duncan, that the resolution be approved.Action: Carried unanimously.
EXECUTIVE SESSION
Moved by Commissioner Christian, seconded by Commissioner Duncan, that the Board convene in Executive Session to discuss settlement of a litigation claim. (5:56 p.m.)
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Yeas: |
Commissioners Callen, Christian, Duncan, O ’Leary, Royal |
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Nays: |
None |
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Abstentions: |
None |
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Absent: |
Commissioners Aquilina, Creamer, Murray |
Action: Carried unanimously.
The Board returned to open session at 6:10 p.m.
Resolution # 2001-5-9
SETTLEMENT OF LITIGATION CLAIM
WHEREAS, the Board of Commissioners is authorized by Charter to approve settlement of litigation; and
WHEREAS, the Staff Attorney, with concurrence of the Assistant General Manager and upon request of its Special Counsel, recommends that the Board of Commissioners authorize William J. Cook, the Assistant General Manger, to negotiate a settlement in the litigation it has filed against its insurer in the Federal District Court, Western Division, Docket No. 5:00-CV-131 and titled as Lansing Board of Water and Light v. Deerfield Insurance Co.
WHEREAS, the Board of Commissioners has been advised as to the merits of the case, the costs associated with this matter through trial, and all known risks. The Board of Commissioners has been advised that a Rule 16 Scheduling Conference concerning this litigation has been ordered by the Magistrate Judge that requires the attendance of an executive officer with complete and unrestricted authority to negotiate a settlement.
RESOLVED, That the Board of Commissioners authorize the Assistant General Manager to negotiate the terms and conditions for settlement of this litigation.
RESOLVED FURTHER, That the General Manager is authorized to execute all documents related to the settlement of these claims.
Moved by Commissioner Callen, seconded by Commissioner Christian, that the resolution be approved.
Action: Carried unanimously.
UNFINISHED BUSINESS
None.
NEW BUSINESS
None.
RESOLUTIONS
None
GENERAL MANAGER'S REMARKS
Sale Date for Revenue Bonds, Series 2001A - May 30, 2001. General Manager Pandy handed out a letter from Standard & Poor
’s, dated May 15, 2001, regarding the $11,780,000 BWL Water Supply, Steam and Electric Utility System Revenue Bonds, Series 2001A, due July 1, 2015. Standard & Poor’s assigned a rating of ‘AA’ to the obligations. S&P views the outlook for this rating over the intermediate to longer term as stable. The date of the bond sale is set for Tuesday, May 30, 2001, at 10:30 a.m., and settlement should be within two weeks of the sale.BWL Supports Michigan Renewable Energy Program Proposal. General Manager Pandy handed out a BWL letter of support, dated March 16, 2001, to the Michigan Public Service Commission Case No. U-12915 regarding recommendations outlined in the Michigan Renewable Energy Program Proposal.
Update on Air Quality Standards. General Manager Pandy updated the Board on the Environmental Protection Agency
’s (EPA) right to set strong air quality standards. He reported that the Midwest states and others sued EPA over the Section 126 petition. This section allows a state t hat has a compliance problem because of another state to petition EPA to force the other state to reduce emissions that are blown into their state. EPA has been sent back to the drawing board to come up with new numbers. Staff is working with a consultant on compliance strategies that would help the BWL meet the tough new Nox standards.Overview of Tree Management Program. General Manager Pandy reported on the BWL
’s standards for tree trimming of primary voltage lines throughout the service area. The program is designed to achieve a complete trimming of the BWL’s entire electric system within a four to five year cycle. It is aimed at reducing power outages caused by contact with tree limbs, which cause 20% of the outages on the system.
REMARKS BY COMMISSIONERS
Commissioner Duncan asked how the BWL
’s potential green power supplier would be selected.General Manager Pandy stated that renewable energy bidders would be selected by competitive proposals. Mr. Pandy reported that local environmental groups and interested citizens were invited to a meeting for information sharing on a plan to launch GreenWise, the new green power electric energy alternative.
Commissioner Callen congratulated staff for a successful 25-Year Dinner held May 17th.
EXCUSED ABSENCES
On motion by Commissioner Christian and seconded by Commissioner Duncan, that the absences of Commissioners Aquilina, Creamer, and Murray be excused.
Carried 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.
None.
ADJOURNMENT
On motion by Commissioner Duncan, and seconded by Commissioner Christian, the meeting adjourned by unanimous consent at 6:35 p.m.
/s/ Mary E. Sova, Secretary
Filed with Lansing City Clerk
May 31, 2001
(Click here for
Fiscal Year 2002 Budget)
Regarding Resolution #2001-5-1