MINUTES OF THE BOARD OF COMMISSIONERS' MEETING

LANSING BOARD OF WATER AND LIGHT

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Thursday, January 29, 2004

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

The Secretary declared a quorum present.

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

APPROVAL OF MINUTES

Motion by Commissioner Callen, seconded by Commissioner Haggart, to approve the minutes of the regular Board meeting held November 25, 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.

Donald Hines of 731 Oakwood Drive, East Lansing, stated that he has an interest in Lansing and has worked in downtown Lansing for 45 years.  He expressed his point of view about the Ottawa Street Power Plant and past efforts to redevelop the plant.  He stated his belief that in order to bring about an appropriate and fine development in that area, it would be a good idea to dismantle the building.  He noted that the plant has been useful over the years and that although it is a magnificent structure and beautifully designed, it is sitting on a piece of geography that is a phenomenally valuable land in terms of what could be done imaginatively in downtown Lansing.  Mr. Hines stated that as long as there appears to be a commitment to keep that structure, it would be difficult to develop a project to fruition.  Several projects have been proposed for this site by local developers and others from outside the area.  He emphasized that if the building were raised, interest in developing the property would increase.  Mr. Hines asked that the Commissioners and management consider his suggestion.

COMMUNICATIONS

Letter received from Director of Metrics and Audits Kellie Willson announcing her retirement effective around March 31, 2004.  The Commissioners congratulated Ms. Willson but accepted her retirement notice with regret.

COMMITTEE REPORTS

COMMITTEE OF THE WHOLE REPORT

(Resolution 2004-01-01)

Present:  Commissioners Callen, Duncan, Haggart, Joseph, Royal, and Smith

Excused Absences:  Commissioners Marin and Wonch.

The Committee of the Whole met on January 20, 2004, at 5:30 p.m. to discuss the following items:

1. Real Property Disposal Policy
2. Revised Nepotism Policy
3. Mainframe Lease
4. Special Counsel Request
5. Renewal of Suite #14 at Oldsmobile Park
6. Corporate Sponsorship of Common Ground Festival
7. Benefits of Tax Exempt Status of BWL
8. Status of Union Negotiations

There were no public comments made at the meeting.

1.         Real Property Disposal Policy.  General Manager Novick reported that at the October 28, 2004 Finance Committee meeting, he was directed to draft a policy on the disposition of real property that will serve the best interests of the Board of Water and Light’s ratepayers.  He reviewed the proposed BWL policy for input and noted that the intent is to ensure that the method of disposition is fair, legal and open to all interested parties.  The proposed policy will be submitted to the Board for consideration at the regular meeting on January 29 and listed under the General Manager’s Recommendations.  The General Manager will develop and implement procedures that are consistent with the policy.  Commissioner Smith requested to see the procedures once they are completed.

2.         Revised Nepotism Policy.  General Manager Novick presented a proposed policy on the employment of relatives to replace the current policy.  The purpose of the proposed policy is to clearly define the BWL’s policy regarding the standards for close relatives working for the BWL in the same or different departments.  He noted that the proposed policy is more stringent than the existing one and includes the following changes:

• No family member of a Commissioner, Board Appointee, Senior Vice President or Director can be hired.
• BWL will not hire, transfer, or promote an employee to work in any responsibility area that reports to a Manager or Director or through a Manager to a Director, where the Manager and/or Director is a family member of the employee.
• No employee will be placed in a position in which he or she reports directly to a family member.

General Manager Novick pointed out that the proposed policy applies to all employees except where the union contract would take precedence, e.g., where seniority rules.

Some Commissioners expressed concern that the proposed policy may not be strong enough, particularly in a case of two family members working in the same department or division wherein his or her relationship to another employee has the potential for creating adverse impact on supervision, security or morale, or involves a potential conflict of interest.  There was lengthy discussion on this issue.  Family members are defined as:

Following lengthy discussion, it was agreed to consider the proposed Policy on the Employment of Relatives, as submitted with the addition of the word “grandchild” to the family member definition.  The proposed policy will be submitted to the Board for consideration at the regular meeting on January 29 and listed under the General Manager’s Recommendations.  The General Manager will develop and implement procedures that are consistent with the policy and will be responsible for their implementation and compliance.

3.         Mainframe Lease.  Senior Vice President of Finance and Administration Dennis McFarland reported that as of December 30, 2003, a new computer mainframe was leased and a new Disaster Recovery System was contracted with Unisys, both for a five-year term.  This action was taken for two reasons:  (1) vendor support was going to discontinue beyond June 2004 and software maintenance was going to increase and (2) the pre-existing Disaster Recovery System was unsatisfactory.  The financial terms of the Unisys lease and significant terms of the Sungard Disaster Recovery Contract were reviewed.  Major benefits for this decision were based on:  (1) the disaster recovery time reduced from thirty days to two days, (2) increased functionality of the operating software, and (3) the cost savings as compared to the “do nothing” alternative.  This report was presented for information only.  No action is needed from the Board.

4.         Special Counsel Request.  General Counsel Larry Wilhite reported that due to the departure of Michael Brown from the law firm of Howard and Howard to join the firm of Plunkett & Cooney, he is recommending that the BWL retain Plunkett & Cooney, P.C. as special counsel in the case of BWL v Pathway Bellows, Inc.  Mr. Brown has been the lead attorney in this matter and by retaining the firm of Plunkett & Cooney, it would allow the case to remain with him.  This case relates to the catastrophic failure of the BWL steam main to serve General Motors.  Mr. Wilhite stated that the retention is necessary because the case is in the discovery phase and several key witnesses have already been deposed, and the BWL will be best served by allowing Mr. Brown to continue representing the BWL in the Pathway matter at his new firm.  After a question and answer period, the Commissioners concurred with Mr. Wilhite’s request.  A proposal will be submitted to the Board for consideration at the regular meeting on January 29 and listed under the General Manager’s Recommendations.

5.         Renewal of Suite #14 at Oldsmobile Park.  General Manager Novick reported that the BWL has been a suite holder at Oldsmobile Park since the stadium opened in 1995.  Initially the fee for one year was $25,000.  He noted that BWL started sharing one half of Suite #14 in 1999 with Capital National Bank.  In 2000, the BWL split its half and shared it with Capital Research Services through 2003.  The Suite Lease Agreement is now up for renewal for another three years.  Capital National Bank wishes to continue its one-half share, which allocates them ten tickets to 35 home games.  Capital Research Services does not intend to renew their one quarter share of the lease.  Mr. Novick requested the Commissioners’ concurrence for the BWL to revert to sharing one-half of Suite #14 for an annual cost of $12,500.  The use of the Suite has been a great incentive for employees and useful for entertaining major customers and others with whom the BWL has a business relationship.  BWL will have access to 10 tickets per game for 35 home games.

There was unanimous consensus among the Commissioners to support the proposal to renew the Suite Lease for an annual cost of $12,500.  The General Manager will present a resolution for Board consideration at the regular meeting on January 29.  Commissioner Haggart stated for the record that as a member of the Lansing Entertainment and Public Facility Authority (LEPFA) Board, he consulted with the City Attorney on the question of whether voting on this recommendation would pose a conflict of interest.  The City Attorney told him that it would not be a conflict of interest.  Commissioner Haggart plans to vote on this proposal at the Board meeting.

6.         Corporate Sponsorship of the Common Ground Festival.  General Manager Novick reviewed the benefits of the BWL supporting the Common Ground Festival.  A corporate sponsorship package will identify the BWL as the “Official Electricity Provider of the Common Ground Festival” for 2004.  It will also include custom BWL signage throughout the festival location.  There was unanimous consensus among the Commissioners to support the 2004 Common Ground Festival at a sponsorship level of $5,000.  The General Manager will present a resolution for Board consideration at the regular meeting on January 29.

7.         Financial Benefits of a Municipal Utility Structure.  Senior Vice President of Finance and Administration Dennis McFarland gave an overview of the BWL’s 2003 Income Statement.  He reported that primary advantages of a municipal utility structure include its tax-exempt status, access to low cost debt, and no shareholder return is required.  Revenue is reinvested in utility operations or dedicated on other community priorities.  It is not redirected to shareholders as annual dividends.  This report was presented for information only.

8.         Employee Satisfaction Survey.  General Manager Novick reported that historically the BWL would go out for bid to conduct an employee satisfaction survey around April.  He asked if the Commissioners would like to continue with the survey in the same time frame.   After discussion, the Commissioners were not prepared to formulate an opinion on the timing for the next survey.  Staff was requested to provide cost information based on the last two surveys done in 2001 and 2002.  There was agreement by the Commissioners that the survey needs to provide meaningful data to measure key aspects of employee satisfaction for actionable results.  This may require redesigning the survey.

9.         Status of Union Negotiations – Closed Session.  By motion of Commissioner Joseph, seconded by Commissioner Royal, that the Committee of the Whole convene in closed session to discuss the status of collective bargaining negotiations (7:15 p.m.).

Action:  Adopted by roll call vote:

The Committee of the Whole returned to open session at 7:58 p.m.

No recommendations were brought forth from the closed session.

There being no further business, the meeting was adjourned at 8:00 p.m.

Respectfully submitted,

Nancy Duncan, Chair Pro Tem

Committee of the Whole

Motion by Commissioner Callen, seconded by Commissioner Joseph, to approve the report as presented.

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 Water and Light (BWL) has decided to establish a policy for the Disposition of Surplus Real Property.

RESOLVED, That the BWL will dispose of all surplus real property in a manner that will serve the best interests of its ratepayers.  The BWL will ensure that the method of disposition is fair and legal, and will endeavor to ensure that the method is open to all interested parties.  The BWL will obtain the best possible return for the ratepayer.  The best possible return may include, without limitation, non-monetary considerations such as use by other governmental entities and value to the public interest.  This policy shall not apply to disposition of easements or leases.  This policy also shall not apply to transfers otherwise described by statute, the Lansing City Charter, or BWL policies, including transfers to the City of Lansing, the sale of waterfront property, or condemnation proceedings.

FURTHER RESOLVED, That the General Manager is hereby authorized to develop and implement procedures consistent with this policy.

Motion by Commissioner Wonch, seconded by Commissioner Callen, to approve the resolution.

Action:  Carried unanimously.

WHEREAS, in order to promote a diverse workforce, avoid even the appearance of favoritism in employment matters, and to assure that an employee’s hire, transfer, or promotion is based solely on the employee’s qualifications and performance, the Board of Water and Light (BWL) is altering and clarifying its policy on nepotism.

RESOLVED, That as of January 30, 2004, the BWL will not hire, transfer, or promote an employee to work in any Responsibility Area (RA) that reports to a Manager or Director or through a Manager to a Director where the Manager and/or Director is a family member of the employee.  Additionally, no employee will be placed in a position in which he or she reports directly to a family member.  Following the effective date of this policy, no family member of a Commissioner, Board Appointee, Senior Vice President, or Director shall be hired by the BWL.

FURTHER RESOLVED, That for purposes of this policy, family member shall be defined as spouse, child, parent, step-parent, sibling, step-sibling, adopted child, step-child, foster child, grandchild, grandparent, great-grandparent, in-law, aunt, uncle, or any cousin.

FURTHER RESOLVED, That exceptions to this Policy may be permitted for reasons related to exigent needs of the BWL.

FURTHER RESOLVED, That the General Manager shall establish procedures consistent with this policy and shall be responsible for their implementation and compliance.

Motion by Commissioner Haggart, seconded by Commissioner Wonch, to approve the resolution.

Discussion:  Commissioners asked for an example of ‘exigent needs,’ a term used in the new Nepotism Policy.  General Manager Novick responded this would cover situations when a particular need or skill is very limited, a position that cannot be filled locally or nationally on a timely basis, and the BWL needs that skill.  In that case a relative of an employee could be hired.

Action:  Carried unanimously.

RESOLVED, That the General Manager be authorized to retain Michael Brown, as a member of the Plunkett & Cooney, P.C. law firm, to represent the Board of Water and Light in the case of Board of Water and Light v Pathway Bellows, Inc., Case No. 02-1586-CZ.

Staff Remarks:  Mr. Brown was originally retained to handle this matter while a member of the Howard and Howard law firm.  Mr. Brown chose to leave Howard and Howard to join Plunkett & Cooney.  It was the opinion of the General Counsel that the BWL would be best served by allowing Mr. Brown to continue representation.

Motion by Commissioner Callen, seconded by Commissioner Wonch, to approve the resolution.

Action:  Carried unanimously.

WHEREAS, the Board of Water and Light has shared a suite at Oldsmobile Park since the stadium opened in 1995, and

WHEREAS, the presence of Oldsmobile Park has contributed to the economic development of downtown Lansing, both in terms of new businesses locating downtown and in continuing to bring people and business to the downtown area, and

WHEREAS, participating in the success of Oldsmobile Park promotes the well-being of downtown Lansing, and

WHEREAS, having access to the suite at Oldsmobile Park has enhanced employee morale at the BWL and has been a successful means of entertaining customers and potential investors in the Lansing community.

RESOLVED, That the General Manager is authorized to renew the BWL’s Oldsmobile Park suite lease agreement for one-half share of the suite for a three-year period.

Motion by Commissioner Wonch, seconded by Commissioner Callen, to approve the resolution.

Discussion:  General Manager Novick stated that he is still attempting to find an organization to share the suite with the BWL at Oldsmobile Park.

Action:  Carried unanimously.

RESOLVED, That the Board of Water and Light agrees to be a corporate sponsor of the 2004 Common Ground Festival at a sponsorship level of $5,000.

Staff Remarks:  Lansing’s seven-day Common Ground Festival reached profitability last year, in just its fourth year of existence.  Last year’s festival attracted 87,000 participants and had a positive economic impact of an estimated $5,000,000 on the Greater Lansing economy.

The sponsorship package will identify the BWL as the “Official Electricity Provider of the Common Ground Festival” for 2004.  Among other things, it will include custom BWL signage throughout the festival venue.

Motion by Commissioner Smith, seconded by Commissioner Callen, to approve the resolution.

Action:  Carried unanimously.

RESOLVED, That Board of Water and Light Policy 1-01 “Authority to Sign Checks” is hereby amended as follows:

The signatures of not less than two (2) of the following officers shall be required to sign checks for the general checking account at National City Bank and the payroll/pension checking account at Michigan National Bank STANDARD FEDERAL BANK drawn on and after July 1, 1988.

1.                  General Manager

2.                  Chief Financial Officer SENIOR VICE PRESIDENT OF FINANCE AND ADMINISTRATION

3.                  Assistant General Manager SENIOR VICE PRESIDENT OF OPERATIONS

4.                  Corporate Secretary

Motion by Commissioner Wonch, seconded by Commissioner Smith, to approve the resolution as amended.

Action:  Carried unanimously.

RESOLVED, That Board of Water and Light Policy 1-02 “Authority to Sign Documents of a Contractual Nature” is hereby amended as follows:

The General Manager and Corporate Secretary are authorized to execute, on behalf of the Board of Water and Light in the general conduct of its business, all agreements, contracts, deeds, leases, easements, permits and other contractual documents, which have been approved either by action of this Board or pursuant to policy established by this Board.

In the absence of the General Manager of Corporate secretary, the Acting General Manager and the Acting Secretary, respectively, are authorized to execute the described documents.  THE GENERAL MANAGER MAY FURTHER DELEGATE AUTHORITY TO EXECUTE DOCUMENTS TO THE SENIOR VICE PRESIDENT OF FINANCE AND ADMINISTRATION OR THE SENIOR VICE PRESIDENT OF OPERATIONS.  THE CORPORATE SECRETARY MAY FURTHER DELEGATE AUTHORITY TO THE ACTING SECRETARY.

Motion by Commissioner Wonch, seconded by Commissioner Smith, to approve the resolution as amended.

Action:  Carried unanimously.

RESOLVED, That Board of Water and Light Policy 1-03 “Delegation of Authority is hereby amended as follows:

In the General Manager’s absence, the directors OFFICERS listed below shall have the full authority and responsibility for Board of Water and Light (BWL) operations, in the order in which they are listed, or as otherwise designated by the General Manager.

1.                  Assistant General Manager SENIOR VICE PRESIDENT OF OPERATIONS

2.                  Director, Sales and Marketing SENIOR VICE PRESIDENT OF FINANCE AND ADMINISTRATION

3.                  Chief Financial Officer

4.                  Director, Communications

Motion made by Commissioner Wonch, seconded by Commissioner Smith, to approve the resolution.

Action:  Carried unanimously.

RESOLVED, That Board of Water and Light Policy 7-01 “Authority To Invest Operating and Pension Funds” is hereby amended as follows:

RESOLVED, That the General Manager and/or one of the following designated representatives in the sequence listed below, shall be authorized to invest operating and pension funds in such securities as permitted by law and to purchase, sell, sign and endorse for transfer, certificates representing said securities and invested in the name of the Board of Water and Light (BWL):

1.      Chief Financial Officer SENIOR VICE PRESIDENT OF FINANCE AND ADMINISTRATION

2.      Manager, General Accounting MANAGER OF FINANCE AND PLANNING

3.      Assistant General Manager SENIOR VICE PRESIDENT OF OPERATIONS

The Revenue Bond Act of 1933 (PA 94 of 1933, MSA 5.2731), as amended, and BWL Bond Resolution 89-10-3 govern and restrict the investment of BWL operating funds.  Pension funds are governed by the Public Retirement System Investment Act (MCL 38.1132 et seq.), as amended.

Motion made by Commissioner Wonch, seconded by Commissioner Haggart, to approve the resolution.

Action:  Carried unanimously.

WHEREAS, Act No. 738 of the Public Acts of 2002 authorizes the use of electronic transactions by designated officers of the Board of Water and Light; and

WHEREAS, the Board of Commissioners deems that it is in the best interest of the Board of Water and Light to make certain financial transactions by using electronic transactions as described in the Act.

RESOLVED, That the Board of Water and Light is authorized to utilize electronic transactions in compliance with written procedures and internal controls developed and recommended by the Senior Vice President of Finance and Administration and presented to the Commissioners as Electronic Transactions Procedures on this date.

Authority

The Senior Vice President of Finance and Administration may enter into ACH or electronic transaction agreements.

Responsibility

The Senior Vice President of Finance and Administration shall be responsible for establishing all ACH and electronic transaction arrangements, including payment approval, accounting, reporting, and overseeing compliance.  The Senior Vice President of Finance and Administration shall be responsible for documentation detailing the goods or services purchased, the cost of the goods or services, the date of the payment, and the responsibility area and account charged.  This information is contained in the BWL electronic general ledger software system and is available upon request.

Internal Controls

Electronic transactions are used to pay federal income tax withholding, FICA taxes, state income tax withholding, states sales tax and fees paid to credit card processors and other third party payment processors.  Electronic transactions are used to process automatic bank deposits for employee payroll and retiree pension payments.  Electronic transactions are used to deposit payments from customers via credit card or other third-party payment processors.  Currently, only payments initiated by General Accounting or deposits processed through Remittance Processing are transacted electronically.  In the future, if the volume of electronic payments demands it, additional internal controls may be desired.  For the present, the following two rules are sufficient:

Motion made by Commissioner Callen, seconded by Commissioner Smith, to approve the resolution.

Discussion:  Dennis McFarland, Senior Vice President of Finance and Administration, explained that this resolution is required by Michigan State Statute enacted in 2002.  This statute requires all public agencies in the State that take advantage of electronic transfers to have a written policy on electronic transactions.  The BWL has been following these procedures for the past five or six years but has had no written policy.

Action:  Carried unanimously.

UNFINISHED BUSINESS

None

GENERAL MANAGER’S REMARKS

New Lobbying Firm Retained.  General Manager Novick invited Government Relations Analyst Calvin Jones to the podium to introduce members of the newly retained lobbying firm of Muchmore, Harrington, Smalley & Associates (MHSA).  Mr. Jones presented Pat Harrington, co-founder and partner of the firm and Adrian Cazal, a legislative consultant.  Muchmore, Harrington, Smalley & Associates will represent the Board of Water and Light in State and local legislative and regulatory issues.

BWL Receives Awards for Employee Involvement.  Calvin Jones presented Board Chair Diane Royal with two plaques:  (1) an appreciation award from the Boys and Girls Club of Lansing for employees’ contribution of time and effort spent with youth at the Club and (2) a Business Award from the Arts Council of Greater Lansing in recognition of outstanding contributions to the enrichment of community life through appreciation and support of the arts.  Commissioner Royal expressed her thanks on behalf of the Board to the employees for their efforts in earning these awards.

Diversity Leadership Training.  General Manager Novick reported that he has made corporate diversity a top priority at the BWL.  He noted that diversity is much more than gender or race.  Directors and Managers recently attended  two-day diversity leadership training sessions, and the program was well received.  The training will be offered to all BWL employees in the future.  General Manager Novick invited the Commissioners to attend this training if they wish.

Financial Report.  Senior Vice President of Finance and Administration Dennis McFarland presented the BWL’s financial statistics by utility and performance for fiscal year-to-date through December 2003.  For the six months into this fiscal year, BWL revenues are up 2% compared to budget, while expenses are 1% over budget.  Net income at $9.1 million is 1% ahead of budget.   Detailed information pertaining to financial statistics and performance by utility and variances in operating income was reviewed.  Mr. McFarland asked for feedback from the Commissioners as to whether the updated format of the financial report is providing the information they need.  The Commissioners responded affirmatively with the new report format.  Commissioner Smith remarked that she would like to see information on how the BWL compares with other utilities.

Congratulations to Kellie Willson and Larry Wilhite.  General Manager Novick congratulated Director of Metrics and Audits Kellie Willson on her upcoming retirement.  He also congratulated General Counsel Larry Wilhite on his new position as General Counsel with Sparrow Hospital.  Mr. Novick thanked them for their public service and for all they have done on behalf of BWL.

COMMISSIONERS’ COMMENTS

Commissioner Joseph extended his best wishes to Kellie Willson and Larry Wilhite and wished them success in their new endeavors.

Commissioner Wonch expressed appreciation to BWL employees for their volunteerism and on receiving the two awards presented by Government Relations Analyst Calvin Jones.  She congratulated Kellie Willson on her retirement and Larry Wilhite on his new job with Sparrow Hospital.  She said change is not always bad and that in change we sometimes lose people we would like to keep.

Commissioner Smith thanked Kellie Willson and Larry Wilhite for their hard work over the years.

Commissioner Callen conveyed his best wishes to Kellie Willson and Larry Wilhite.  He also acknowledged the activities and involvement of BWL employees in the community.

Chairperson Royal echoed the sentiments expressed by the Commissioners and expressed appreciation to Kellie Willson and Larry Wilhite on their accomplishments.

EXCUSED ABSENCE

There were no absences.

PUBLIC COMMENTS

Curt Gates, Business Agent of IBEW, Local 352, reported that the union rejected the mediated contract settlement by a vote of 284 to 38, which is a 7 to 1 margin.  Mr. Gates stated that several issues contributed to the union membership voting against the contract, and they were: (1) an employee was threatened by a manager, (2) rumors of union trashing the contract,(3) mixed messages from senior management, and (4) lack of a partnership statement.  He asked if BWL will be conducting an employee satisfaction survey this year.

Calvin Jones congratulated Kellie Willson on her retirement and Larry Wilhite on his new position at Sparrow Hospital.

CLOSED SESSION

Moved by Commissioner Smith, seconded by Commissioner Joseph, that the Board convene in closed session to discuss the status of collective bargaining negotiations (6:44 p.m.).

Action:  Adopted by roll call vote:

OPEN SESSION

The Board returned to open session at 7:20 p.m.

No action was taken as the result of the closed session.

ADJOURNMENT

On motion by Commissioner Wonch, seconded by Commissioner Smith, the meeting adjourned at 7:21 p.m.

/s/ Mary E. Sova, Secretary
Filed with Lansing City Clerk
February 10, 2004