MINUTES OF THE BOARD OF COMMISSIONERS' MEETING

LANSING BOARD OF WATER AND LIGHT

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Tuesday, July 22, 2003

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The Board of Commissioners met in regular session at 5:30 p.m. on July 22, 2003, in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan.

The Secretary declared a quorum present.

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

APPROVAL OF MINUTES

Motion made by Commissioner Haggart, seconded by Commissioner Smith, to approve the minutes of the special board meeting held July 8, 2003.

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.

The following statement was made by BWL employee Calvin Jones.

"Good evening honorable Commissioners, BWL Interim General Manager John Elashkar, BWL Secretary Mary Sova, BWL Internal Auditor Kellie Willson and BWL Employees.

My name is Calvin Jones, I live at 5717 Pembrook Place, Lansing, Michigan.

On November 12, 2002 my family received a call that our daughter Kimberly Jones had taken a turn for the worst and we should fly to Harborview Hospital immediately.

We flew to Seattle, Washington and the details of what transpired are now in the hands of the legal, medical and spiritual experts.

My objective today is to say thank you for your support, cards, letters and positive words shared during this tragic ordeal.

Throughout this tragic ordeal we have remained faithful to the Lord and continued this journey, but not without the help of ordinary people doing some extraordinary things.

For example, a fund-raising committee raised over $12,000.00 to bring our daughter Kimberly Jones home to mid-Michigan.

Without the Lansing Board of Water & Light and the Employees’ Club of the Lansing Board of Water & Light, we would not have been able to bring our daughter home and I would not be standing here today.

Again, thank you and may God bless the continued great work you do for this community.”

COMMUNICATIONS

A Freedom of Information Act (FOIA) request was hand-delivered by BWL employee Richard Taylor.

Referred to management for response.

REPORT OF THE NOMINATING COMMITTEE

Commissioners Present:  Tim Haggart, Connie Marin, and Diane Royal.
Staff Present:  Interim General Manager John Elashkar and Corporate Secretary Mary Sova.

The Nominating Committee met on June 3, 2003 at 8:00 a.m. to review Commissioner survey responses for consideration of nominations for Board officers.

Resolution 2003-7-8
APPROVE SLATE OF BOARD OFFICERS FOR FY 2003-04

The Nominating Committee recommends the following slate of officer candidates for Fiscal Year 2003-04:

There being no further business, the meeting adjourned at 8:18 a.m.

Respectfully submitted,

NOMINATING COMMITTEE
Tim Haggart, Chair

Moved by Commissioner Smith, seconded by Commissioner Marin, that the report of the Nominating Committee be approved.

Carried unanimously.

Moved by Commissioner Wonch, seconded by Commissioner Marin, to approve the Slate of Board Officers for FY 2003-04 (Resolution # 2003-7-8).

Action:  Carried unanimously.

FINANCE COMMITTEE REPORT

Committee Members Duncan, Royal, Smith and Wonch were present.  Also present were:  Commissioners Haggart, and Marin.

The Finance Committee met on July 22, 2003 at 4:30 p.m. to discuss the following items:

1.                  Restructuring Chilled Water Debt

2.                  Indirect Cost Allocations

3.                  Utility Services Rules and Regulations

4.                  Economic Parameters for FY 2004

The committee thoroughly discussed the issues related to these topics and concurs with staff’s recommendations.  The General Manager is directed to present resolutions for the four items discussed under the General Manager’s Recommendations.

There being no further business, the meeting adjourned at 5:20 p.m.

Respectfully submitted,
Nancy Duncan, Chair

Moved by Commissioner Duncan, seconded by Commissioner Haggart, that the report of the Finance Committee be approved.

Carried unanimously.

MANAGER’S RECOMMENDATIONS

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

Resolution 2003-7-9
EMPLOYEE BENEFITS OPTION PLAN

whereas, the Corporate Incentive Program (IP) Employee Benefit Options Committee has reviewed and researched numerous options for the Incentive Program bonus, and

WHEREAS, 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 IP Employee Benefit Options Committee be approved:

Moved by Commissioner Wonch, seconded by Commissioner Marin, to approve the Employee Benefits Option Plan (Resolution # 2003-7-9).

Discussion:  Commissioner Duncan asked for clarification on the “Whatif” Program, and how the incentive plan works.  Interim General Manager Elashkar explained that the above named options are items employees may select with their Incentive Program bonus.

Action:  Carried unanimously.

Resolution 2003-7-10
JOINT RESOLUTION OF THE LANSING CITY COUNCIL AND THE BOARD OF WATER AND LIGHT COMMISSIONERS APPROVING A MEMORANDUM OF UNDERSTANDING

WHEREAS, the Lansing City Charter delegates to the Board of Commissioners (Board) of the Board of Water and Light (BWL) the responsibility for the administrative, executive, and policy-making authority over the operation of those City utility services assigned to it, and

WHEREAS, the Lansing City Charter recognizes that the Board is responsible to the Mayor and to the City Council for the provisions of those City Utility services in a manner consistent with best practices, and

WHEREAS, the City Council and the Board desire to develop a more formal cooperative relationship between each other, and

WHEREAS, the cooperation between the City Council and the Board would lead to better communication and more beneficial coordination between the City Council and the Board.

NOW THEREFORE BE IT RESOLVED, That on or about January 31^st of each year the President of the City Council and the Chair of the Board shall agree upon and publish a one-to-one pairing list between the Council members and the Board members.

FURTHER RESOLVED, That the Board shall provide City Council, in advance of each of its Board meetings, with a Board packet and a monthly summary of other potential future Board actions (e.g. rate increases, tree trimming schedules) that are being contemplated which will allow each Council Member to interact with a Board counterpart concerning these actions.

FURTHER RESOLVED, That the City Council and the Board shall hold three joint Committee of the Whole meetings per year.  The meetings shall be scheduled by the President of the Council and the Chair of the Board to coincide with certain key events specified in the City Charter.  The first meeting will be held in January after the election of Council Leadership and assignment of members to committees, the second meeting will be held in April after the Mayor’s presentation of the City Budget to the City Council, and the third meeting will be held in September before the City Council’s adoption of the annual budget policies and priorities.

FURTHER RESOLVED, That the agenda of each of the aforementioned meetings shall, at a minimum, include items that require coordination between the Board of Water and Light and other City Departments, including the Combined Sewer Overflow (CSO) projects and the effects of these projects on both entities.

FURTHER RESOLVED, That the Chair of the Board and the President of the Council shall, on a regular basis, communicate to each other issues that are beneficial for the Council members and the Board members to discuss with their respective counterparts in their one-to-one interaction.

FURTHER RESOLVED, That the City Council and the Board shall reaffirm this Memorandum of Understanding annually during the month of December, by resolutions adopted by the City Council and by the Board.

Moved by Commissioner Wonch, seconded by Commissioner Marin, to approve the Joint Resolution of the Lansing City Council and the Board of Water and Light Commissioners Approving a Memorandum of Understanding (Resolution # 2003-7-10), subject to review and approval by City Council.

Discussion:  The City Council plans to discuss this resolution at their July 24, 2003 Committee of the Whole Meeting for Council action on July 28, 2003.  (Note:  The Council’s Committee of the Whole Meeting scheduled for July 24, 2003 was cancelled on July 23, 2003.)

Action:  Carried unanimously.

Resolution 2003-7-11
RESTRUCTURING CHILLED WATER DEBT (Draft #2 –Subject to Final  Review)

RESOLVED, That the preliminary Eighth Supplemental Revenue Bond Resolution authorizing Water Supply, Steam and Electric Utility System Revenue Bonds of the City of Lansing, Michigan, per Attachment A, be approved.

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Staff Comments:  The bond resolution and the Official Statement are subject to final review by our bond counsel.  A special board meeting will be necessary in August, after insurance bids are received and insurance language is inserted in the bond resolution, to re-approve the bond resolution.

The bonds will refund a portion of the 1999A Series and all of the 2001A Series outstanding.  This will restructure the approximately $25M 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 or September 3, 2003.

These refunding bonds will reduce chilled water debt service approximately $1.0M per year.  The total debt service will increase approximately $13.7M (present value $2.4M) due to extending the term of the bonds.

Moved by Commissioner Duncan, seconded by Commissioner Wonch, to approve the preliminary resolution on Restructuring Chilled Water Debt (Resolution # 2003-7-11).  A final bond resolution will come before the Board in August for approval.

Action:  Carried unanimously.

Resolution 2003-7-12
UTILITY SERVICES RULES AND REGULATIONS FOR ELECTRIC, WATER, STEAM AND CHILLED WATER

WHEREAS, in accordance with Board Policies 19-05 (Electric), 19-13 (Water) and 19-15 (Steam) of the Utility Services section, the utility Rules and Regulations shall be subject to review and modifications by the Commissioners.

RESOLVED, That the Board of Commissioners hereby moves to amend the Rules and Regulations for the Electric (Attachment B), Water (Attachment C), and Steam, Services (Attachment D), as submitted and reviewed by the Finance Committee on July 22, 2003, with an effective date of August 1, 2003.

RESOLVED FURTHER, That the new Board of Water and Light Policy 19-16 of the Utility Services section, Chilled Water Rules and Regulations, shall state that:

“The chilled water rules and regulations shall govern the chilled water services and shall be subject to review and modification by the Commissioners”.

RESOLVED FURTHER, That the adoption of the Board of Water and Light Rules and Regulations for Chilled Water Services (Attachment E) become effective August 1, 2003.

Moved by Commissioner Duncan, seconded by Commissioner Marin, to approve the resolution on Utility Services Rules and Regulations (Electric, Water, Steam and Chilled Water (Resolution # 2003-7-12).

Action:  Carried unanimously.

Resolution 2003-7-13
ECONOMIC PARAMETERS FOR FY 2004

RESOLVED, That the Economic Parameters for Fiscal Year 2004 Studies (Attachment F) presented by staff at the Finance Committee meeting of July 22, 2003 be approved.

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Staff Comments:  In FY 2000 staff identified the need for a standardized consistent set of economic parameters for use in project evaluations.  R.W. Beck subsequently reviewed the BWL proposed methodology and parameters and agreed with staff that the BWL had established a “good approach and parameters need to be reviewed and updated annually.”  The attached is the FY2004 update.

Moved by Commissioner Duncan, seconded by Commissioner Wonch, to approve the resolution on Economic Parameters for FY 2004 (Resolution # 2003-7-13).

Action:  Carried unanimously

Resolution 2003-7-14
INDIRECT COST ALLOCATIONS

RESOLVED, That the Indirect Cost Methodology (Attachment G) presented by staff at the Finance Committee meeting of July 22, 2003 be approved.

RESOLVED FURTHER, That the General Manager be directed to make required changes to the Fiscal Year 204 Budget.

Moved by Commissioner Wonch, seconded by Commissioner Smith, to approve the resolution on Indirect Cost Allocations (Resolution # 2003-7-14).

Action:  Carried unanimously.

NEW BUSINESS

None.

MANAGER’S REMARKS

Interim General Manager John Elashkar reported on the following topics:

R. W. Beck to Analyze BWL Transmission System.  A contract was awarded to R.W. Beck in the amount of $27,000 for the performance of an analysis of the BWL transmission system.  The analysis will delineate between transmission and distribution assets using the FERC seven-factor test published in FERC’s Order No. 88.  The analysis will also establish BWL transmission system revenue requirements for the assets identified above.  This analysis will be used in evaluating the BWL’s position with respect to joining the Midwest Independent System Operator (MISO) as a transmission owner.

Fly Ash Sale and Disposal Contract with Boral Material Technologies.  There is a high demand for Western coal flyash that is being burned in power plants.  Environmental Services Manager Nick Burwell recently negotiated a five-year contract with Boral Material Technologies, Inc. (BMTI) to market the flyash.  BMTI will pay BWL the greater of $10/ton or 50% of the sale price minus the cost of transportation.  By selling the flyash, the BWL will be reducing its disposal costs by about $300,000 per year.

Ottawa Station Development.  Lange Limited, LLC, an entity being formed by Dorian N. Lange of Michigan Equities, submitted a proposal for the development of the Ottawa Station.  Mr. Lange has indicated they have an anchor tenant with space requirements of 70,000 square feet.  Upon negotiating a lease with the tenant, they will negotiate the terms of the development agreement with the BWL.  The proposal calls for a Standstill Provision until August 31, 2003 with a target closing date of December 31, 2003.

Steam Cost of Service Progressing on Schedule.  An interim report on the Steam Cost of Service (COS) study is progressing well.  The consulting firm of FVB is scheduled to deliver the COS results for FY04 and FY07 by late September.

Employment Agreement for New General Manager.  Agreement in principle has been reached on all major aspects of an employment agreement with Sanford B. Novick to become the BWL’s new General Manager.  Once final agreement is reached, Mr. Novick is expected to begin his new duties in mid-August.

COMMISSIONERS’ COMMENTS

Commissioner Wonch thanked BWL crews for their timely and efficient repair of an underground phase interruption at Cooley Law School during a recent storm.

Commissioner Marin welcomed Sanford Novick to the BWL.  She also acknowledged the earlier comments of BWL Employee Calvin Jones and offered her prayers for his family.

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.

No one spoke.

EXCUSED ABSENCE

On motion by Commissioner Duncan and seconded by Commissioner Haggart, that the absences of Commissioners Callen and Joseph be excused.

Carried unanimously.

DISCUSSION RE: CLOSED SESSION

Commissioner Royal acknowledged receiving an employee complaint against Interim General Manager John Elashkar.  The employee’s attorney sent the complaint letter to each Commissioner.  Mr. Elashkar requested to meet with the Board in closed session pursuant to the Open Meetings Act, Section 15.268(a), Closed Sessions, to respond to the complaint brought against him.

Moved by Commissioner Wonch, seconded by Commissioner Marin, that the Board convene in closed session to discuss an employee complaint brought against Interim General Manager John Elashkar. (6:10 p.m.)

Action:  Adopted by roll call vote:

Interim General Manager John Elashkar directed that all persons in the audience present for the regular Board meeting be excused clarifying they were not needed for the closed session.  General Counsel Larry Wilhite stated that a closed session with Mr. Elashkar was not permitted under the Open Meetings Act (OMA), pursuant to MCL 15.268 (e).  Mr. Wilhite stated that the OMA indicates the Board may close a meeting to consult with its attorney regarding trial or settlement strategy in connection with specific pending litigation.  Mr. Elashkar pointed out that the purpose for the closed session was for the Board to hear his response to complaints brought against him through an employee’s attorney.  Mr. Elashkar referred to MCL 15.268(a), which states that a public body may meet in closed session “to consider the dismissal, suspension, or disciplining of, or to hear complaints or charges brought against, or to consider a periodic personnel evaluation of, a public officer, employee, staff member, or individual agent, if the named person requests a closed hearing.  A person requesting a closed hearing may rescind the request at any time, in which case the matter at issue shall be considered after the rescission only in open session.”

Upon discussion and clarification of the purposes for which to close a public meeting, Mr. Wilhite acknowledged that the meeting could be closed for the reason cited by Mr. Elashkar.  All persons not required for the closed session were excused.  General Counsel Larry Wilhite asked  to stay for the closed meeting in his role as attorney for the Board of Water and Light’s legal functions.  He noted that without his attendance at the closed session, he would not be able to advise the Board on the complaint and the Board would lose its attorney-client privilege.  Discussion was held regarding Mr. Wilhite’s anticipated role and involvement in the closed meeting.  Interim General Manager Elashkar reasserted that the BWL attorney’s attendance was not required for the meeting since Mr. Elashkar only intended to respond to the complaint.  Mr. Wilhite asked the Board to take a vote on the question as to whether he should remain for the closed session.  Commissioner Wonch pointed out that it is her understanding this complaint consists of a two-part issue, and Mr. Elashkar’s part  would be to respond to the complaint directed at him.

Following discussion, Chairperson Royal called the question, stating that the purpose of the closed session was to hear a response to a complaint brought against Interim General Manager Elashkar.  Mr. Elashkar has requested a closed session pursuant to the Open Meetings Act, Section 15.268(a). 

Moved by Commissioner Wonch and seconded by Commissioner Marin to excuse Mr. Wilhite from the closed meeting.

Adopted by the following vote:

Yeas:  Commissioners Haggart, Marin, Royal, Wonch (4)

Nays:  None

Abstentions:  Commissioners Duncan and Smith (2)

Absent:  Commissioners Callen, Joseph (2)

Commissioners Duncan and Smith stated they abstained because they were unfamiliar with the legal requirement of having the BWL attorney present for the closed session in this particular case.  The Board met in closed session at 6:14 p.m.

OPEN SESSION

The Board returned to open session at 6:48 p.m.  No action was taken.

ADJOURNMENT

On motion by Commissioner Duncan, seconded by Commissioner Wonch, the meeting adjourned at 6:49 p.m.

/s/ Mary E. Sova, Secretary
Filed Preliminary Minutes  with Lansing City Clerk August 1, 2003
Final Minutes filed with City Clerk August 14, 2003