MINUTES OF THE BOARD OF COMMISSIONERS' SPECIAL MEETING

LANSING BOARD OF WATER AND LIGHT

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Tuesday, August 12, 2003

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The Board of Commissioners met in a Special Meeting in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan.

The Acting Secretary declared a quorum present.

Chair Royal called the meeting to order at 5:30 p.m.

APPROVAL OF MINUTES

Motion made by Commissioner Haggart, seconded by Commissioner Duncan, to approve the minutes of the regular meeting held July 22, 2003.

Carried unanimously.

PUBLIC COMMENTS

THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON THE SUBJECT OF THE SPECIAL MEETING.

No persons spoke.

COMMUNICATIONS

There were no communications.

EXECUTIVE COMMITTEE

Commissioners Present:  Diane Royal, Ron Callen, and Nancy Duncan
Staff Present:  Interim General Manager John Elashkar; Director of Metrics and Audits Kellie Willson, and Corporate Secretary Mary Sova.

The Executive Committee met on July 31, 2003 at 5:30 p.m. to review the final Employment Agreement for Sanford Novick - the Director and General Manager designee of the Board of Water and Light.

The committee reviewed the details of the agreement and is satisfied with the negotiated terms, and thereby, submits the following resolution for Board approval:

WHEREAS, the Board of Commissioners (Board) has the power and duty under Article 5, Chapter 2 of the City Charter of the City of Lansing to “appoint a Director who shall be responsible to the Board for carrying out the duties assigned by the Board and shall serve at its pleasure,” and

WHEREAS, the Board in its Resolution 2003-6-8 as amended by Resolution 2003-7-1 appointed the Board’s Executive Committee to negotiate an employment agreement with Sanford B. Novick, and

WHEREAS, the Executive Committee has successfully negotiated an Employment Agreement with Sanford B. Novick for a period of one year commencing August 18, 2003; and

WHEREAS, Sanford B. Novick is willing to serve as Director and General Manager of the BWL for that period of time.

RESOLVED, That the Employment Agreement between the Board of Commissioners of the Board of Water and Light and Sanford B. Novick, dated July 25, 2003, be approved.

RESOLVED FURTHER, That the Chair of the Board be authorized to execute the agreement on behalf of the Board and file it with the Corporate Secretary.

The Executive Committee meeting adjourned at 5:50 p.m.

Respectfully submitted,
Diane R. Royal, Chair

Motion made by Commissioner Callen, seconded by Commissioner Marin, to receive the report as presented.

Action:  Carried unanimously.

Moved by Commissioner Callen, seconded by Commissioner Smith, to approve the Employment Agreement Between the BWL and Sanford B. Novick (Resolution #2003-8-1).

Action:  Carried unanimously.

MANAGER’S RECOMMENDATIONS

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

WHEREAS, the Board of Commissioners is responsible, by Charter, for all conditions of employment, which includes the Board of Water and Light Pension Plans; and

WHEREAS, the Board of Commissioners previously adopted Resolution 96-11-8, in which one portion of the resolution stated “That, subject to legal review, the revised Pension Plan is hereby approved retroactive to July 1, 1996 and is to expire at Midnight, June 30, 2002;” and

WHEREAS, The Pension Plan did not expire June 30, 2002, and the language in the resolution concerning the expiration is inaccurate.

RESOLVED, That the resolution be amended to delete the language concerning the expiration of the Pension Plan and re-state as follows: “That, subject to legal review, the revised Pension Plan is hereby approved, retroactive to July 1, 1996.”

Moved by Commissioner Duncan, seconded by Commissioner Marin, to approve Resolution #2003-8-2.

Discussion:  General Manager Elashkar reported that this resolution corrects a previous inaccuracy regarding the expiration date of the current pension plan.

Action:  Carried unanimously.

RESOLVED, That Resolution 2002-4-8 be rescinded, and

FURTHER RESOLVED, That the Board of Commissioners hereby require management to receive Board approval before any future deferrals, per SFAS #71, are recorded.

FURTHER RESOLVED, That the Board approve SFAS #71 accounting treatment for the Central Utilities Center (CUC) project.

FURTHER RESOLVED, That the Board approve SFAS #71 accounting treatment for Contribution in Aid of Construction for the Electric and Steam Utilities.

Staff Remarks RE: Central Utilities Center:  This accounting treatment would allow revenue received from General Motors (GM) for debt service payments to be “offset” by the amortization of a capital lease.  The effect on BWL net income of the entire transaction would be the 5% asset owner margin fee the BWL receives in addition to the debt service.  This fee would be recorded as miscellaneous non-operating income.  This accounting treatment accurately reflects the economic reality of the Utility Services Agreement dated November 11, 1999 between GM, Trigen/Cinergy-USFOS of Lansing, LLC, and the BWL.

Staff Remarks RE: Contribution in Aid of Construction for the Electric and Steam Utilities:  This would allow the current accounting practice of crediting customer contributions in aid of construction against the cost of the asset.  The BWL is required to file Form EIA-412 reports annually with the U.S. Department of Energy.  The use of the Uniform System of Accounts Prescribed for Public Utilities and Licensees for the reporting of data by municipalities is preferred, but not required.  The Uniform System of Accounts specifically states that the electric plant is to be recorded at cost.

“The electric plant accounts shall not include the cost or other value of electric plant contributed to the company.  The accumulated gross costs of plant accumulated in the work order shall be recorded as a debit in the plant ledger of accounts along with the related amount of contributions concurrently be recorded as a credit.”

The Water Utility will continue to record Contributions in Aid of Construction separately in accordance with water industry standards and the National Association of Regulatory Utility Commissioners (NARUC) Uniform System of Accounts.

Moved by Commissioner Duncan, seconded by Commissioner Smith, on the approval of  Resolution #2003-8-3.

Action:  Carried unanimously.

RESOLVED, That Resolution 2003-7-11 is hereby rescinded.

FURTHER RESOLVED, That the Eighth Supplemental Revenue Bond Resolution authorizing Water Supply, Steam and Electric Utility System Revenue Bonds of the City of Lansing, Michigan, attached as Exhibit A, is approved.

Staff Remarks:  This incorporates final language required by the bond insurer.  The bonds will refund a portion of the 1999A Series ($17.255M) and all of the 2001A Series ($12.430M) outstanding.  This will restructure the $29.685M total associated with the chilled water system from the original 15-year term to a 27-year term.  The bonds will be insured and carry an AAA rating from both Moody’s (expect an underlying rating of Aa3) and Standard and Poor’s (expect an underlying rating of AA).  The bonds would be dated September 1, 2003 and sold at competitive auction on August 25.

These refunding bonds will reduce chilled water debt service approximately $0.9M per year.  The total debt service will increase approximately $15.9M (present value $2.3M) due to extending the term of the bonds.

Moved by Commissioner Duncan, seconded by Commissioner Marin, on the approval Resolution #2003-8-4.

Action:  Carried unanimously.

GENERAL MANAGER’S REMARKS

Corporate Incentive Program.  Interim General Manager John Elashkar reported that the results of the FY 2003 Corporate Incentive Program yielded a 2.15% bonus payment to employees, based on their wages as of June 30, 2003.  The results were based on financial performance and four non-financial measures related to availability, reliability, customer satisfaction survey results and employee safety.

Granger v. Daggett v. BWL et. al. Lawsuit.  The BWL was brought into the Granger v. Daggett v. BWL lawsuit as a third party defendant.  The BWL is being asked to clean up the Daggett landfill, located at 15542 Airport Road, Lansing.   General Counsel Larry Wilhite and Associate Attorney Amy Cavanaugh are the lead attorneys for this case.  Mr. Wilhite would like to hire Attorney John Yeager from the law firm of Willingham Cote’ as a resource person based on his knowledge and experience of the solid and hazardous waste disposal issue at the Motor Wheel site. 

M-Tech – Lansing Community College (LCC).  Commissioner Haggart inquired if General Manager Elashkar was aware of the M-Tech project, which is part of LCC’s technology department.  Mr. Elashkar reported that M-Tech will be drilling 270 wells 300 feet deep into the Saginaw Aquifer.  The State Health Department, Department of Environmental Quality, and the BWL Environmental Services are monitoring the impact this project will have on the Saginaw Aquifer.  M-Tech will not be drawing anything from the Saginaw Aquifer, however, plastic tubing encased in Bentonite Clay, with no possibility of leakage, will be put into the well connected to a header on the service going from the header to a heat exchanger for either heating or cooling. 

COMMISSIONERS’ COMMENTS

Commissioner Smith commended General Counsel Larry Wilhite, Government Affairs Coordinator Calvin Jones and other BWL employees who participated in the recent Capital City African-American Cultural Parade and Picnic.

Commissioner Callen reported on his participation with the American Public Power Association (APPA) Policy Committee and their activities.  He also reported on a letter he received from a BWL customer complimenting BWL for recent tree trimming that was done on her yard.

Commissioner Marin asked about the amount of money recently paid to Bargaining Unit employees for grievances against the BWL.  Interim General Manager Elashkar responded that the payout was not directly related to grievances, but due to a court ordered arbitration that occurred when the BWL attempted to change the manner in which “Share the Success” bonuses for the 2000 and 2001 fiscal years were paid to employees.

EXCUSED ABSENCE

On motion by Commissioner Joseph and seconded by Commissioner Duncan, that the absence of Commissioner Wonch be excused.

Carried unanimously.

CLOSED SESSION

Moved by Commissioner Duncan, seconded by Commissioner Smith, that the Board convene in closed session to discuss strategy of negotiations of the collective bargaining agreement. (6:18 p.m.)

Action:  Adopted by roll call vote:

OPEN SESSION

The Board returned to open session at 6:59 p.m.

CLOSED SESSION

Moved by Commissioner Callen, seconded by Commissioner Smith, that the Board convene in Closed Session to consult with legal counsel regarding strategy in connection with pending litigation.  (7:05 p.m.)

Action:  Adopted by roll call vote:

OPEN SESSION

The Board returned to open session at 7:25 p.m.

PUBLIC COMMENTS

Curt Gates, Business Manager of Local 352 of IBEW, expressed his appreciation to John Elashkar for coming out of retirement to serve as Interim General Manager of the Board of Water and Light.  This decision involved sacrificing time away from his wife and home in Traverse City.  He commended Mr. Elashkar for his efforts in leading the BWL during the transition period and his role in coordinating the search for a new General Manager.

CLOSED SESSION

Moved by Commissioner Marin, seconded by Commissioner Smith, that the Board convene in closed session to review a confidential written legal opinion.  (7:30 p.m.)

Action:  Adopted by roll call vote:

OPEN SESSION

The Board returned to open session at 9:18 p.m.

APPROVAL OF CLOSED MEETING MINUTES

Moved by Commissioner Smith, seconded by Commissioner Duncan to approve the minutes of the closed meeting held July 22, 2003.

Action:  Carried unanimously

ADJOURNMENT

On motion by Commissioner Callen, seconded by Commissioner Haggart, the meeting adjourned at 9:22 p.m.

/s/ Mary E. Sova, Secretary
Filed with Lansing City Clerk
August 26, 2003