FINAL – APPROVED BY BOARD 11/23/04
MINUTES OF THE BOARD OF COMMISSIONERS' MEETING
LANSING BOARD OF WATER AND LIGHT
___________________________
___________________________
The Board of Commissioners met in the Boardroom of the Administrative Offices,
1232 Haco Drive, Lansing, Michigan.
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Present: |
Commissioners Gary L. Calkins, Ronald C. Callen, Nancy W. Duncan (arrived at 6:00 p.m.), Ifield Joseph, Santiago Rios, Robin M. Smith and Nancy Wonch. |
|
Absent: |
Commissioner Tim Haggart |
The Secretary declared a quorum present.
Chairperson Smith called the meeting to order at 5:30 p.m.
Motion by Commissioner Callen, seconded by Commissioner Haggart, to approve the minutes of the regular Board meeting held May 25, 2004.
Carried unanimously.
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.
Joseph Davis, President of IBEW Local 352 thanked Commissioners Smith and Rios for attending the most recent bargaining session. He reported that a tentative agreement has been reached. The reading of the contract will be Thursday, October 7 and the vote will be held on Wednesday, October 13. Mr. Davis expressed his support for the joint meeting scheduled between the Board and City Council on October 5 to discuss concerns raised by employees.
Received a letter of support from BWL Executive Staff and those reporting to the General Manager expressing concern with misconceptions involving the job performance of Sanford Novick.
Received and placed on file.
COMMITTEE REPORTS
COMMITTEE OF THE WHOLE REPORT
Present: Commissioners Calkins, Callen, Duncan, Haggart, Joseph, Rios, Smith and Wonch. Absent: None.
The Committee of the Whole met on August 26, 2004 at 8:00 a.m. to consider applicants for the position of Director of Internal Audit of the Board of Water and Light and to make a recommendation for appointment.
The Committee met with the top three candidates being considered for the position.
The Committee of the Whole recommends the appointment of Glenn Holloway for the position of Director of Internal Audit in accordance with Article 5, Section 5-202.2 of the Lansing City Charter. This appointment is effective October 4, 2004 and through the remainder of fiscal year 2004-2005, or, until a successor is appointed, whichever last occurs, as specified in the Board’s Rules of Administrative Procedures. The Committee authorized the Board’s Executive Committee and Human Resources staff to pursue negotiations with Mr. Glenn Holloway.
There being no further business, the Committee of the Whole adjourned at 3:45 p.m.
Respectfully submitted,
Ron Callen, Chair Pro Tem
Committee of the Whole
Motion by Commissioner Callen, seconded by Commissioner Joseph, to approve the report and the appointment of Glenn Holloway as Director of Internal Audit.
Action: Adopted by the following vote:
YEAS: Commissioners Callen, Calkins, Duncan, Haggart, Joseph, Rios, Smith, and Wonch.
NAYS: None
ABSENT: None
Commissioner Wonch noted that Commissioner Haggart was unable to attend the Board meeting; consequently, she would be presenting the following Human Resources Committee Report on his behalf.
The Human Resources Committee met on September 16, 2004 at 3:30 p.m. to review and discuss the following items:
1. Pension Investment Guidelines
2. Quarterly Pension Report
3. Performance Appraisals for the General Manager and Corporate Secretary
4. General Manager’s Contract
Public Comments:
Mike Stanley of Maintenance and Construction Resource Center (MCRC), IBEW Local 352 and Chief Union Steward, reminded the Commissioners that the Bargaining Unit employees do not have a contract and have not had a contract for almost eleven months.
Pension Investment Guidelines. Sr. Vice President of Finance McFarland reported that at the April meeting, staff gave a presentation regarding management of the BWL Defined Benefit Pension Plan and the prudence of enlisting the assistance of an outside consultant on that fund on a going forward basis. The committee was advised that management was in the process of reviewing responses to an RFP to select a consultant. In July, management selected LCG Associates of Atlanta and in August began the work of having them assist staff in the performance evaluation of the Defined Benefit Plan. He introduced Richard Babcock, Senior Vice President of LCG Associates who presented an overview of LCG Associates.
Mr. Babcock reported that LCG Associates is exclusively an investment consultant to institutions and they are registered with SEC under Act 40. They were founded in 1973, making them one of the oldest independents in the United States. The firm is headquartered in Atlanta with offices in Dallas and Charlotte. Client service is something of which LCG prides itself, with an average of 11 clients per consultant, and they mandate a limit of 12 clients. The firm is 100% employee owned with 9 principals. LCG is financially stable and debt free. Mr. Babcock noted that LCG has no conflicts of interest; they do not manage money, nor do they accept commissions or compensation of any type from anyone; and they have one of the largest proprietary databases in the United States for free.
Several Commissioners requested that a copy of LCG’s Code of Ethics and its procedures for selecting and recommending investment managers be provided to them.
Mr. Babcock summarized the performance of the Defined Benefit Fund through the second quarter of 2004, which included charts and graphs for the following:
§ Total Fund Allocation
§ Distribution of Assets
§ Performance Summary
§ Comparative Performance
§ Total Fund Performance
§ Total Fund Five-Year Return vs. Risk
§ Equity Sector Allocation
§ Equity Allocation
§ Equity Performance
§ Fixed Income Sector Allocation
§ Fixed Income Allocation
§ Fixed Income and C&E Performance
§ Other Assets Performance
Mr. Babcock presented an asset allocation and portfolio construction analysis. He reviewed the following:
§ Historical Broad Asset Class Returns
§ Long-Term Rates of Return by Decade
§ Risk/Return Analysis 1926-2003
§ Diversification: Modern Portfolio Theory
§ Alternative Investments: Diversification Opportunities
§ Style Trend Overview
§ Typical Portfolio Characteristics
§ Risk/Return Analysis 1970-20031,2,3
§ Domestic and International Equity Observations
§ Historical Performance Differences
§ Risk/Return Analysis for Domestic and International Equity
§ Fixed Income Observations
§ Recommended Asset Classes
§ Historical and Expected Asset Class Risk and Returns
§ Potential Asset Allocations
§ Recommended Target Portfolios Risk/return Analysis
The Committee was asked to convey their sense as to where they would be comfortable regarding various proposed asset allocations. Mr. McFarland noted that staff is not ready to make a recommendation to the Board at this time. He said that it is staff’s sentiment, based on the work completed to date, to recommend that the asset allocation listed in examples 2 and 3 be considered, which represents about a 65/35 equity/debt allocation. Staff plans to present a formal recommendation to the Board in November. Subject to that approval, staff would start to move toward that asset allocation in a measured fashion. Mr. McFarland noted that staff is not comfortable staying with the current 50/50 asset allocation that was approved five years ago. More work needs to be done and Commissioner feedback is important at this stage.
Following lengthy discussion, the Committee concurred to move somewhere between examples 2 and 3 as listed on page 21 of the Potential Asset Allocations page of the LCG Asset Allocation and Portfolio Construction Analysis, dated September 16, 2004.
BWL retiree Max Zemer of 527 Edison, Lansing, interjected to request that the Commissioners allow public comment before convening in closed session.
Upon concurrence by the Commissioners, Committee Chair Haggart waived the order of business to permit public comments.
Public Comments:
Joseph Davis, President and Acting Business Agent for IBEW Local 352, commended City Councilmembers for their willingness to work with both sides of the union dispute to address an issue that is important to the entire City. Mr. Davis said that at a time when Lansing is facing so many challenges, including a tight budget and the lead pipe cleanup initiative, a mutual respect and teamwork approach is critical to success. He stated that City Council seems committed to finding a reasonable solution that will satisfy the working families while staying within BWL’s financial means. The union is hopeful that BWL Commissioners and management can equally commit themselves to the spirit of cooperation and partnership that is necessary at this time. Mr. Davis handed out a written statement outlining union concerns. A copy is on file in the Corporate Secretary’s Office.
Ron Byrnes, member of IBEW Local 352, and BWL employee, stated that the BWL has become anti-worker and anti-union under the current management leadership. He cited two examples, which involved the union’s right to participate on a safe drinking water task force and management questioning the use of their bulletin board to place a notice of today’s meeting.
Dewayne Williams, a member of IBEW Local 352 and BWL employee for 17 years, spoke about an incident that he brought to the attention of General Manager Novick a year ago. He was told there would be an investigation, and to date he has not heard back.
Dan DeYoung of 2315 S. Pennsylvania Avenue, Lansing, and retired from BWL, commented about the recent news article regarding Mr. Novick applying for a job at another utility. He also expressed concern about the possibility of retiree benefit co-pay.
James Hooker, a member of IBEW Local 352 and BWL employee, stated that in early August he received a letter from BWL in regards to the latest management proposal delivered to the union. He questioned the spirit of the law and said he was shocked it happened and did not appreciate it.
Alberta Tucker, a member of IBEW Local 352 and BWL employee, commented about the newspaper article regarding Mr. Novick’s explanation as to why he was considering a job elsewhere. She stated that union employees also owe a better life to their families. She noted that a happy worker is a productive worker.
Doug Zimmerman, a member of IBEW Local 352 and BWL employee for 35 years, stated that he has never seen employee morale as low as it is now.
Ron Byrnes Sr., retired from BWL, stated that in January of 2004, the retirees of the defined benefit plan were to be considered for a cost of living increase on their pension. He noted that ten months have elapsed and retirees have not heard regarding the status of this matter. He requested an answer as to when this issue will be addressed.
Max Zemer, retired from BWL with 37 years of service, stated that while at BWL he served as the IBEW Local 352 Business Manager. He noted that he is a third generation employee of the BWL and is proud of that. Mr. Zemer shared his observation that relationships between management and the union over the last three years seem to have deteriorated. He spoke about mutual respect, and urged every level of the organization and the Commissioners to consider the consequences of concerns brought before the Committee today. He reminded that the employees support this community. During outages, they are out there without question and sometimes in the most dangerous situations doing what is necessary to bring services back to this City. He stated that if those actions are not the result of pride and integrity, then he does not know what it is.
Dan Laverty, member of IBEW Local 352 and BWL employee for about five years, stated that while the union is working without a contract, Mr. Novick is here today to settle his employment contract.
Ron Corden, member of IBEW Local 352 and BWL employee, stated that he works the midnight shift at the water plant. He noted that he is a hometown person, born and raised in Lansing and spoke about his involvement in the Lansing community. He added that the employees care about this community. He further stated that bargaining employees want a fair and equitable contract.
Steve Cronk, member of IBEW Local 352 and BWL employee for over 39 years, stated that his father had about 44 years of service at BWL, which adds up to over 80 years of combined family service. He stated that he is unable to figure out what the stumbling block is to settle the agreement. He urged the Commissioners to exercise their leadership to bring about a quick settlement.
Mike Dikeman, member of IBEW Local 352 and BWL employee, commented that Mr. Novick has been without an employment contract for one month and now the Board is ready to settle his contract when the union has been without a contract for almost 11 months.
Closed Session:
The Committee convened in closed session at 5:25 p.m. to discuss the performance appraisals for the General Manager and Corporate Secretary as permitted under Section 8 of the Open Meetings Act (MCL 15.268 regarding closed sessions and permissible purposes).
Open Session:
The Committee returned to open session at 6:39 p.m.
Commissioner Rios commented that the Committee engaged in lengthy discussion during closed session regarding the reappointment of the General Manager. He noted that the Commissioners are very cognizant of concerns expressed by bargaining employees regarding the union contract. He stated that the Commissioners want to assure union members and members of the public that they will be working very closely with General Manager Novick to develop a strategy and a list of specific objectives, including a quick resolution of the union contract.
Commissioner Wonch added that settlement of the union contract is a top priority for the Commissioners. She echoed the comments made by Commissioner Rios and the fact that she sympathizes and empathizes with the employees to make sure they understand that the Commissioners have heard what has been said and that they will diligently work to resolve the outstanding issues.
Commissioner Smith thanked the employees and members of the public who came to the meeting to give comment. She gave assurance that they have been heard and that the Commissioners and management value the work they do and look forward to employees completing many more years of service at BWL. She echoed the comments made by Commissioners Rios and Wonch. She stated that the Commissioners’ number one priority is to settle the union contract.
Upon lengthy discussion, the Committee recommended the following:
The Board’s Rules of Administrative Procedures specify that the Board is to appoint a Director and General Manager, Corporate Secretary, and Internal Auditor, respectively, at the first regular meeting in July of each year, be it
RESOLVED, That the Board reappoint the following parties to the staff positions of Director and General Manager and Corporate Secretary for fiscal year 2004-2005, or, until a successor is appointed, whichever last occurs:
Sanford Novick, Director and General Manager
- and -
Mary Sova, Corporate Secretary
RESOLVED FURTHER, That Sanford Novick’s employment contract and reappointment continue beyond the fiscal year 2004-2005 up to and including August 18, 2005, and that his current contract be amended to reflect the salary increase and new contract commencement period.
Resolution 2004-9-4
Compensation Increases for
the Director and General Manager and
the Corporate Secretary
RESOLVED, That the Director and General Manager, Sanford Novick, is hereby eligible to receive a salary adjustment effective as of August 18, 2004.
RESOLVED, That the Corporate Secretary, Mary Sova, is hereby eligible to receive a salary adjustment effective as of July 1, 2004.
There being no further business, the meeting was adjourned at 6:45 p.m.
Respectfully submitted,
Tim Haggart, Chair
Human Resources Committee
Discussion: Commissioner Rios stated that he was grateful to be an observer at the latest contract negotiation session and commended management and union members for their high level of professionalism during negotiations. He said that everyone worked hard to make concessions that ultimately resulted in a tentative settlement. He emphasized that BWL is one entity and urged employees to strive forward to make BWL the best company it can be. He suggested that in order to continue the process of compromise and management and the union joining together, it would be in the Board’s best interest to table the resolution to reappoint the two Board staff members for at least thirty days.
Motion by Commissioner Rios, seconded by Commissioner Smith, to delay action on Board staff reappointments and the approval of the General Manager’s employment contract for at least thirty days.
General Counsel Cavanaugh interjected on point of procedure. She stated that the appropriate protocol to table a resolution is to first receive the Human Resources Report. Once the committee report is entered into the record, a motion to table the resolution would then be in order.
Commissioner Wonch summarized discussion that took place at the Human Resources Committee with respect to General Manager Novick’s job performance. She reported that it was the sense of the committee and other Commissioners present that Mr. Novick had achieved the vast majority of his objectives. Settling the union contract was only one of his 12 objectives.
Commissioners Calkins, Callen and Joseph added that Mr. Novick’s contract renewal is months behind schedule and to delay his reappointment would suggest some degree of doubt about his competency. They commented that there is no connection between Mr. Novick’s employment contract and the union contract.
Commissioner Smith clarified that the intent to postpone Mr. Novick’s reappointment for thirty days was not to indicate a lack of support.
Commissioner Wonch summarized some of Mr. Novick’s accomplishments: (a) realignment of the organizational structure, (b) restoring financial integrity, (c) made strides in addressing safety issues, (d) reduced health care costs, and (e) took a leadership role in addressing the lead pipe issue before it became newsworthy. Commissioner Wonch reported that a recent market analysis indicated the proposed salary increase is in line with those of General Managers with similar responsibilities in the utility industry. She noted that the committee declined his request to review different investment vehicles that give immediate vesting in lieu of the BWL’s current pension plan. The committee also discussed the removal of the clause “In the case of voluntary termination during the first year of employment, the BWL may withhold $30,000 from the termination benefits due the Director and General Manager” from the contract. Because this clause no longer applies, the committee decided to not act on it since Mr. Novick has concluded his first year of employment at the BWL.
Action: There being no objection, the Human Resources Committee report was received as presented.
Restatement of the Motion by Commissioner Rios, seconded by Commissioner Smith to table consideration of the resolution on staff reappointments and approval of the General Manager’s employment contract for at least thirty days.
The motion to table the resolution on charter staff reappointments failed by the following vote:
Yeas: Commissioners Rios and Smith.
Nays: Commissioners Calkins, Callen, Joseph and Wonch
Absent: Commissioner Duncan and Haggart
Commissioner Wonch summarized discussion held by the Human Resources Committee regarding the job performance of Corporate Secretary Mary Sova. She noted that Ms. Sova has met her fiscal year 2004 objectives and that a market analysis indicated that her proposed salary is in line with individuals in similar positions and job responsibilities. She reported that comments on her performance from the Commissioners and the General Manager were favorable. The Commissioners concurred with the favorable comments.
Commissioner Duncan arrived at the meeting at 6:00 p.m. She was briefed on the status of discussion concerning the reappointment of the General Manager and Corporate Secretary.
Motion by Commissioner Calkins, seconded by Commissioner Joseph to approve the Resolution on the reappointment of the Charter Staff Positions; namely, General Manager Sanford Novick and Corporate Secretary Mary Sova (Resolution No. 2004-9-3).
Action: Adopted by the following vote:
Yeas: Commissioners Calkins,
Callen, Duncan, Joseph, Rios, Smith, Wonch
Nays: None
Absent: Commissioner Haggart
Motion by Commissioner Joseph, seconded by Commissioner Wonch to approve the Resolution on Compensation Increases for General Manager Novick and Corporate Secretary Sova (Resolution 2004-9-4).
Action: Adopted by the following vote:
Yeas: Commissioners Calkins,
Callen, Duncan, Joseph, Rios, Smith, Wonch
Nays: None
Absent: Commissioner Haggart
Resolution 2004-9-5
COMMITTEE OF THE WHOLE REPORT
Present: Commissioners Calkins, Callen, Duncan, Haggart, Joseph, Rios, and Smith.
Absent: Commissioner Wonch.
The Committee of the Whole met on September 16, 2004 at 6:50 p.m. to discuss the following items:
Public Comments:
Chris Lawrence, BWL employee and member of IBEW Local 352, asked when the vote on the General Manager’s contract would take place.
Commissioner Haggart, Chair of the Human Resources Committee, responded that the report of the Human Resources Committee would be considered at the regular meeting scheduled for September 28, 2004.
Jim Dravenstatt-Moceri, BWL employee and member of the IBEW Local 352 executive board, commended City Councilmembers for their willingness to work with both sides of the IBEW contract dispute. He stated that the City Council seems committed to finding a reasonable solution and that he hopes the Commissioners and management can equally commit themselves to the spirit of cooperation and partnership that is necessary at this time.
John Pollard, 1718 Blair, Lansing, spoke on his concern with lead in drinking water. He questioned the BWL’s current testing regimen, known as first-draw sampling, and stated that he believes it is flawed. He stated that replacing service lines that are all or partly made of lead must be done sooner than ten years. Mr. Pollard also spoke in support of settling the IBEW labor contract as quickly as possible.
Charlene Decker, 2711 Pleasant Grove, Lansing, stated that her trust in BWL was totally broken when she learned she had water pipes with some lead and was not told sooner. Her service line was replaced when the CSO construction project came through her area. She also stated that IBEW Local 352 workers deserve a decent contract and urged a quick settlement of the IBEW labor contract.
1. BWL Lead Water Service Pipes. General Manager Novick reported that the BWL has a long way to go in gaining the respect of the community on the issue of lead in drinking water and noted that that this is not where BWL needs to be. Mr. Novick acknowledged that that BWL could have communicated more aggressively and frequently about lead in drinking water and lead service lines in the BWL water system. Future communications will prominently feature information about the BWL’s lead service replacement program and steps customers can take to protect themselves from lead exposure. Mr. Novick reported that three educational open houses were held the evenings of July 22, July 28 and from 1 p.m. to 8 p.m. on August 3 to learn more about lead in drinking water and BWL lead pipe water services. The turnout was disappointing, however, ongoing education will continue until all services are replaced. Mr. Novick noted that a second task force has been organized to implement recommendations submitted to the Board in July 2004. The goal is to accelerate the ten-year lead service replacement target while minimizing both the financial impact and inconvenience to customers, and to monitor and improve the corrosion control program for reducing lead levels. Programs under discussion include working with the Michigan Health Department to pay for water tests for homes with lead service lines to help families who cannot afford it, explore available water filter programs, and other issues related to public education. Staff recommendations will be submitted to the Board at a future meeting.
2. 312 N. Grand Avenue Property. General Manager Novick gave an update on the City of Lansing and River Street Triangle, LLC, agreement. On June 19, 2004, City Council granted a second extension on the closing of agreements between the City of Lansing and River Street Triangle, LLC (developer) for the sale of property located on the corner of Kalamazoo Street and Grand until December 31, 2004. The BWL’s contract with River Street Triangle, LLC, expired in May of this year. The developer requested an extension and the Board elected to not honor the request at that time in order to see what the City would do. The BWL’s contract provides for a de facto extension, if the Board takes no action. However, since the contract had already been approved by City Council and provides for the ability to cancel, the Board has the right to cancel the contract at any time with a thirty-day (30) notice. Mr. Novick noted that the original contract and both extensions provide the developer with a cost-free option on the City’s property. He reported that the City is close to separating the BWL property at 312 N. Grand Avenue from the City property at Kalamazoo and Grand Avenue. At a regular meeting in May 2004, the Commissioners voted to postpone taking action on the agreement with River Street Triangle until the Board of Commissioners discusses this matter with the City Council and the Mayor. At a joint breakfast meeting with City Council and Commissioners held July 27, the City requested additional time for the developer to finalize negotiations with the State of Michigan regarding a lease for a proposed office building to be constructed at Kalamazoo Street and Grand Avenue, which is an important component of the three contracts involving the City of Lansing, State of Michigan and Board of Water and Light. Following discussion, the Commissioners decided to delay decision on giving the developer a thirty-day notice to terminate the agreement since the issue of the agreement extension may get resolved by the end of the year.
3. Michigan Public Power Agency Issues. Senior Vice President of Operations Bill Cook presented an update on (1) wholesale electric market changes and issues potentially impacting the BWL associated with implementation and (2) transmission issues and uncertainties. He reported on the background of the Michigan Public Power Agency (MPPA), formed in 1978 and the seven different projects administered by MPPA, which are: (i) Power Pool, (ii) Belle River, (iii) Campbell #3, (iv) Kalkaska Combustion Turbine, (v) Northern Light, (vi) Green Power, and (vii) Transmission. Mr. Cook noted that the BWL is a member of the Power Pool, Belle River, Green Power and Transmission projects. The Belle River and the Power Pool have by far the largest impact on the BWL and potentially will be impacted the greatest by current industry changes. He reviewed the following Belle River statistics:
§ BWL spends about $39 million per year for Belle River power
§ Belle River generates on the order of 900,000 MWh per year, which is 29% of BWL generation.
§ Belle River is BWL’s lowest production cost resource at $14.30/MWh
§ Belle River represents 23% of BWL capacity.
Mr. Cook outlined the power pool operational impact. He noted that over the last five years (2000-2004) the annual average BWL wholesale sales and revenue have been:
|
|
Sales |
Capacity Revenue |
Energy Revenue |
Total Revenue |
Total Revenue |
|
|
MWhs |
$ |
$ |
$ |
$/MWh |
|
Intra-Pool |
312,620 |
3,331,626 |
6,827,785 |
10,159,411 |
32.50 |
|
3rd Party |
402,364 |
3,287.540 |
9,604,792 |
12,892,332 |
32.04 |
Mr. Cook discussed the evolution of Regional Transmission Organizations (RTO’s)
and the Midwest ISO (MISO), current operations. He noted that in addition to
the traditional RTO transmission functions, in the late 1990’s MISO decided to
also include an energy market. Although the MISO Transmission Owner Agreement
says nothing about operating an energy market, it is moving forward
nonetheless. Mr. Cook presented an in depth presentation about issuing
involving the implementation of MISO-MMI. He reported that the electric
wholesale market will be experiencing major changes in the near future. BWL
staff is concerned that:
§ The MPPA Power Pool may not be large enough or have sufficient expertise and resources to effectively compete, and
§ MPPA’s approach to implementation may result in the BWL left with significantly higher costs and limited benefits derivable from BWL generating resources to offset these costs.
BWL staff is working to alter the MPPA Power Pool direction in this matter. However, if a change cannot be accomplished, staff may be coming to the Board with a recommendation to give notice to terminate the BWL’s relationship with the Power Pool.
Mr. Cook concluded by noting the following:
1. There is intense pressure on MISO to meet the March 1, 2005 implementation date.
2. MPPA appears to have an approach that can “get by” in the new MISO MMI.
3. BWL will continue to work to move MPPA toward affiliating with a larger national resource management firm (ongoing).
4. At the MPPA project committee level, BWL will push for MPPA’s role to be more related to project oversight (ongoing).
5. BWL should be prepared to give the Power Pool its five-year notice of its intent to leave the Pool in the event movement cannot be made regarding this issue. BWL would propose a resolution that at such time as the General Manager feels it appropriate, that the BWL submit its five-year advance notice to the Power Pool.
Mr. Cook also reported that there has been a significant amount of work regarding transmission as a consequence or and in preparation for the anticipated MISO market changes. These issues represent opportunities as well as risks to the BWL. Staff would like to briefly review the major transmission related issues with the Board. In the future, staff may be bringing one or more of the issues forward for Board approval. Also, given the complex nature of these issues, BWL staff is reviewing the need for outside counsel to deal with FERC and related issues.
4. Capital Choice Renewal. General Manager Novick reported that the BWL has been a sponsor of the Capital Choice Renewal partnership, a privately supported program of the Lansing regional Chamber of Commerce, which markets the Lansing region to preserve and expand the regional economy. Staff believes that continuing the annual pledge of $15,000 for four years for the Capital Choice Partnership’s Campaign would be in the best interest of the community, the BWL, and the BWL’s customers/owners. Following discussion, the Commissioners concurred and the General Manager was authorized to present a resolution on the renewal of the Capital Choice Partnership Financial Support at the next regular meeting for approval. (See General Manager’s Recommendations)
5. Financial Report. Sr. Vice President of Finance Dennis McFarland presented a preliminary overview of financial results for June 2004. Staff is scheduled to meet with the Finance Committee on October 12th to review the audited financial statements and final results for fiscal year 2004. Mr. McFarland summarized the consolidated income statement, comparing actual to budget. Net income came in at $2.3 million compared to the anticipated budgeted amount of $7.5 million. Mr. McFarland identified those items accounting for the variance between budgeted and actual operating income, most of which were previously identified to the Board in prior reports. He noted certain items that had been on the pending items list for several months, and in fact, as the books were closed those pending items were realized, which included: the Ottawa Station write off to appraised value (current portion), mainframe replacement write off, environmental liabilities (some remediation costs were expensed), uncollectible accounts, and increase in accrued compensated absences. Mr. McFarland noted items that changed since the last time he reported to the Board; namely, “Maintenance during Conversion of Erickson Station to Western Coal” increased by $1.2 million. A $600,000 budget overrun occurred in May and $1.2 million overrun in June. At the same time as the books were being closed for June, the write down of Ottawa Station, which had been anticipated in excess of $5 million is now only $3.3 million, because a portion of the write down of Ottawa Station is being reflected as a prior period adjustment, going back to 2002. The prior period write down does not affect the current period’s net income. Mr. McFarland concluded his presentation by saying the fiscal year ended with less than satisfactory financial results, of which he attributed to overruns on the operating budget, weather conditions, and lower than anticipated wholesale pricing, and balance sheet adjustments.
6. Policy Amendment to Contract Signature Authority. General Counsel Amy Cavanaugh reported that the current policy on “Authority to Sign Documents of a Contractual Nature” permits the General Manager to delegate authority to sign contractual documents only to the Senior Vice Presidents. In practice, many of the BWL’s contracts are either from agreements, such as service agreements, or involve a very low dollar amount and potential liability. This policy change is intended to allow the General Manager more latitude to determine the appropriate person or level of management to bind the BWL for a given contract. Written procedures will clarify which employees are permitted to bind the BWL under specified circumstances. Following discussion, motion was made by Commissioner Calkins and seconded by Commissioner Duncan to direct the General Manager to bring forth a resolution to amend the policy on authority to sign documents of a contractual nature at the next regular meeting. (See General Manager’s Recommendations)
7. North Lansing Landfill Easement. General Manager Novick briefed the Commissioners on proposed negotiations with the Ingham County Drain Commission to grant an easement for a portion of the BWL’s North Lansing Landfill Property. Mr. Novick reported that staff has informally discussed the possibility of selling or granting an easement to a portion of the North Lansing Landfill to allow the Ingham County Drain Commissioner to construct a series of ponds on the property to control and treat storm water runoff from the drainage basin. Nick Burwell of BWL’s Environmental, Industrial Health and Safety Division displayed a map depicting the Groesbeck Park Drain Extension Wetland mitigation. Mr. Burwell noted that the Ingham County Drain Commissioner identified this property as the preferred spot for the pond system based, in part, on its location and the lack of impediments on its use. Because of legal and practical considerations, such as the necessity of keeping the BWL’s landfilled ash more than 100 feet from the property line, staff concluded that an easement would be preferable to an outright sale. The Ingham County Drain Commissioner has made a formal request for the easement. In addition, the Drain Commissioner has either agreed to the BWL’s preliminary terms and conditions or has agreed to work toward a resolution on the issues. Specific issues discussed between the BWL and Drain Commissioner with respect to the project are outlined in a letter sent to the BWL by Fitzgerald Henne & Associates, engineering consultants for the Ingham County Drain Commission. Following discussion, motion was made by Commissioner Duncan and seconded by Commissioner Calkins, to direct the General Manager to bring forth a resolution to the Board authorizing staff to negotiate with the Ingham County Drain Commissioner for the purpose of granting an easement to a portion of the BWL’s North Lansing landfill property. (See General Manager’s Recommendations)
8. City of Lansing Economic Recovery Riders. General Manager Novick reported that a public hearing on Street Light and Hydrant Riders for the City of Lansing was held on July 27, 2004. There were no written or public comments received. The filing and hearing process is now completed. Motion by Commissioner Duncan and seconded by Commissioner Smith to direct the General Manager to place this item on the agenda for the next regular meeting. Motion carried unanimously. (See General Manager’s Recommendations)
9. Environmental Issues. General Manager Novick reported that staff intends to report to the Board regularly on environmental issues in the planning process of ensuring the BWL is able to meet future needs. As each topic is discussed, the potential financial, environmental and health impact will be reviewed. The top two issues on the list are (1) New Source versus Routine Maintenance and (2) Multi-Pollutant Regulations (Nox, SO2, Mercury, CO2). Given the late hour, he suggested deferring the environmental presentation until the regular meeting on September 28 due to the importance of the topics. The Commissioners concurred.
10. Capital Budget Increase to Replace Communications Tower. General Manager Novick reported that Ingham County approached the BWL with a need to use the existing tower at the BWL Pennsylvania and Hazel Street complex as part of a countywide emergency communications system. The BWL tower is in a prime location to serve the communication needs of Ingham County and the City of Lansing emergency responders. The existing tower, however, cannot support both BWL and the County antennas. With the existing tower almost 30 years old and approaching the end of its useful life, a new BWL tower, in addition to meeting the County and City of Lansing needs will allow the BWL to carry out its dispatching and emergency communications at a significantly lower long-term cost. The BWL is asking for a 75% combined Contribution in Aid of Construction from the City and County, which will result in a $55,000 net project cost to the BWL. Following discussion, motion was made by Commissioner Calkins and seconded by Commissioner Rios to direct the General Manager to bring forth a resolution at the next regular meeting to increase the Fiscal Year 2005 Capital Budget for Planned Projects to replace the communications tower. Motion carried unanimously. (See General Manager’s Recommendations)
11. Strategic Planning Report. General Manager Novick reported that a draft strategic plan developed by staff is ready for presentation to the Commissioners as a starting point for discussion on the direction of the BWL and the challenges ahead. He suggested scheduling a Committee of the Whole meeting with the Commissioners and staff to discuss the basis of the plan and review how the objectives and strategies were developed. The Commissioners agreed that this is a priority item for discussion.
12. Update on Electric Reliability Complaint at 938 Alexandria. Senior Vice President of Operations Bill Cook reported that the issue of electric reliability at 938 Alexandria, Lansing, has been hopefully resolved by switching the service to a circuit lateral that has less tree exposure. This corrective measure is expected to provide a higher degree of service reliability for customers in that immediate area. He noted that although the BWL has good reliability across its system, there are some pocket areas experiencing consistent problems. Mr. Cook stated that quality and service for BWL customers is important. A concerted effort is underway to identify pocket areas. Staff intends to proactively work to prevent problems before they occur.
13. Closed Session: Moved by Commissioner Calkins, seconded by Commissioner Duncan to meet in closed session for strategy and negotiation session connected with the negotiation of a collective bargaining agreement. (9:00 p.m.)
Approved by roll call vote:
Yes: Commissioners Callen, Calkins, Duncan, Haggart, Joseph, Rios, and Smith
Nays: None
Absent: Commissioner Wonch
[Commissioners Joseph and Rios left the meeting 9:48 p.m].
Closed Session: Moved by Commissioner Calkins, seconded by Commissioner Duncan to meet in closed session to consult with legal counsel regarding strategy in connection with pending litigation. (9:48 p.m.)
Approved by roll call vote:
Yeas: Commissioners Callen, Calkins, Duncan, Haggart, Joseph, and Smith.
Nays: None
Absent: Commissioner Joseph, Rios, and Wonch.
The Committee reconvened in open session at 10:06 p.m.
There being no further business, the Committee of the Whole adjourned at 10:07 p.m.
Respectfully submitted,
Ron Callen, Chair Pro Tem
Committee of the Whole
Motion by Commissioner Callen, seconded by Commissioner Duncan, to approve the Committee of the Whole report as presented.
Action: Carried unanimously.
MANAGER’S RECOMMENDATIONS
Background materials on items presented are on file in the Office of the Corporate Secretary.
Resolution 2004-9-6
|
A. |
CAPITAL CHOICE PARTNERSHIP FINANCIAL SUPPORT RENEWAL |
Whereas, the Capital Choice Partnership, a privately supported program of the Lansing Regional Chamber of Commerce, markets the Lansing region to preserve and expand the regional economy, and
Whereas, in terms of investment dollars and human capital, Capital Choice Partnership has led or had a significant role in attracting over 35 projects representing nearly $2 billion in capital investment and creating 9000 direct and 50,000 indirect jobs with an annual payroll estimated at $1.87 billion, and
Whereas, Capital Choice Partnership is launching Campaign V, its fifth campaign to raise funding since its beginning in 1990, and
Whereas, the Board of Water and Light is currently and has historically been a supporter of the Capital Choice Partnership with an annual pledge.
Resolved, That the Board of Commissioners approve continuing to pledge, beginning in 2005, $15,000 annually for four years to the Capital Choice Partnership.
Motion by Commissioner Duncan, seconded by Commissioner Wonch, to approve the resolution.
Action: Carried unanimously.
Resolution 2004-9-7
|
B. |
AMENDMENT TO POLICY ON AUTHORITY TO SIGN DOCUMENTS OF A CONTRACTUAL NATURE |
Resolved, That the Board’s Policy 1-02 “Authority to Sign Documents of a Contractual Nature” adopted January 29, 2004, is hereby amended to permit the General Manager broader delegation authority. The policy as amended will read as follows:
The General Manager and Corporate Secretary are authorized to execute, on behalf of the Board of Water and Light (BWL) 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 or 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 GENERAL MANAGER MAY FURTHER
DELEGATE AUTHORITY TO EXECUTE DOCUMENTS IN ACCORDANCE WITH WRITTEN GUIDELINES
ESTABLISHED BY THE GENERAL MANAGER. The Corporate Secretary may further
delegate authority to the Acting Secretary.
The old language is shown as strikethrough, and the new language is shown in ALL CAPS.
Motion by Commissioner Joseph, seconded by Commissioner Wonch, to approve the resolution.
Discussion: Staff Attorney Cavanaugh commented that the current policy permits the General Manager to delegate authority to sign contractual documents only to the Senior Vice Presidents. In practice, many of the BWL’s contracts are either from agreements, such as service agreements, or involve a very low dollar amount and potential liability. This policy change is intended to allow the General Manager more latitude to determine the appropriate person or level of management to bind the BWL for a given contract. Written procedures will clarify which employees are permitted to bind the BWL under specified circumstances.
Action: Carried unanimously.
Resolution 2004-9-8
|
C. |
STREET LIGHT AND HYDRANT RIDERS FOR THE CITY OF LANSING |
Whereas, the Finance Committee received a briefing on May 11, 2004 of management’s recommendations on a proposed Street Light Rider and proposed Fire Hydrant Rider to assist the City of Lansing in addressing its budgetary issues on a short-term basis. Through these ten-year riders, the City of Lansing would receive a rate discount on its streetlight and hydrant rates of up to 50% in the first year and up to 20% in the second year. In years 3-10, the City of Lansing would pay a rate surcharge of approximately 9% on the normal base rates. The riders were designed to assist the City without harming the ratepayers of the Lansing Board of Water and Light. On May 17, 2004, these proposed riders were incorporated into the City’s budget by City Council, and
Whereas, the proposed Street Light and Fire Hydrant Riders for the City of Lansing were made the subject of a public hearing, to provide opportunities for citizens to comment on the proposed riders, and
Whereas, in accordance with the City Charter, notice was published and a public hearing was held on July 27, 2004 in regard to the Street Light and Hydrant Riders. There were no written or public comments received.
Resolved, That the proposed Street Light and Fire Hydrant Riders for the City of Lansing (Attachment A and Attachment B) are hereby approved with an effective date of September 1, 2004 and an expiration date of July 1, 2014.
Motion by Commissioner Calkins seconded by Commissioner Duncan, to approve the resolution.
Action: Carried unanimously.
Resolution 2004-9-9
|
D. |
NEGOTIATIONS WITH INGHAM COUNTY DRAIN COMMISSION TO GRANT AN EASEMENT FOR A PORTION OF THE BWL’S NORTH LANSING LANDFILL PROPERTY |
Resolved, That the Board of Commissioners hereby authorizes staff to negotiate with the Ingham County Drain Commissioner (ICDC) for the purpose of granting the ICDC an easement to a portion of the BWL’s North Lansing Landfill property. The easement would allow the ICDC to construct a pond system to control and treat storm water runoff from the drainage basin.
Staff Remarks: For several months, staff has informally discussed the possibility of selling or granting an easement to a portion of the North Lansing Landfill to allow the ICDC to construct a series of ponds on the property to control and treat storm water runoff from the drainage basis. The ICDC identified this property as the preferred spot for the pond system based, in part, on its location and the lack of impediments on its use. Because of legal and practical considerations, such as the necessity of keeping the BWL’s landfilled ash more than 100 feet from the property line, staff concluded that an easement would be preferable to an outright sale. ICDC has made a formal request for the easement. In addition, ICDC has either agreed to the BWL’s preliminary terms and conditions or has agreed to work toward a resolution on the issues. Therefore, staff requests the Board’s authorization to negotiate the proposed easement. Any easement granted by the BWL would require both the Board and City Council approval.
Motion by Commissioner Duncan, seconded by Commissioner Wonch, to approve the resolution.
Action: Carried unanimously.
Resolution 2004-9-10
|
E. |
INCREASE TO FY 2005 CAPITAL BUDGET FOR PLANNED PROJECTS TO REPLACE COMMUNICATIONS TOWER |
Whereas, the County of Ingham, Michigan (County) desires to use the Board of Water and Light’s (BWL) existing communications tower as part of a county wide emergency communications system; and
Whereas, the existing BWL communications tower cannot support the combined loads of the BWL and County antennas; and
Whereas, the County and the City of Lansing desire to financially contribute to replace the existing BWL communications tower; and
Whereas, the BWL and the County desire to enter into an agreement for locating County antennas on a new BWL communications tower and to provide the County space for an equipment shelter; and
Whereas, funds for this project are not included in the Fiscal Year 2005 Capital Budget for Planned Projects
Resolved, That the Board of Commissioners hereby moves that upon execution of an agreement between Ingham County and the Board of Water and Light, to increase the fiscal year 2005 Capital Budget for Planned Projects in the amount of $220,000 to replace the BWL radio communications tower located at the Hazel/Penn Complex.
Staff Remarks: Ingham County approached the BWL with a need to use the existing tower as part of a county wide emergency communications system. The BWL tower is in a prime location to serve the communication needs of the County and the City of Lansing emergency responders. The existing tower, however, cannot support both BWL and the County antennas. With the existing tower almost thirty years old and approaching the end of its useful life, a new BWL tower, in addition to meeting the County and City of Lansing needs, will allow the BWL to carry out its dispatching and emergency communications at a significantly lower long term cost. The BWL is asking for a 75% combined Contribution in Aid of Construction from the City and County, which will result in a $55,000 net project cost to the BWL.
Motion by Commissioner Duncan, seconded by Commissioner Wonch, to approve the resolution.
Discussion: There will be a lease agreement to protect the BWL from liability.
Action: Carried unanimously.
UNFINISHED BUSINESS
No unfinished business
No new business
RESOLUTIONS
No resolutions.
Environmental Issues. General Manager Novick stated that Commissioner Smith has requested that the agenda item on discussion of environmental issues be deferred until the next Board meeting.
Financial Report. Senior Vice President of Finance Dennis McFarland
reviewed the financial report for the one month ended July 31, 2004. He
reported that net income is 36% below budget for July. Water sales were down
11% and electric retail sales were down 12%. Those numbers were partially
offset by a 33% increase in electric wholesale sales. Cooling degree-days were
26% below normal for July. The Lansing area usually experiences 192 cooling
degree-days in July; however, this year there were only 143 cooling
degree-days. Rainfall was 41% above normal for July. The weather impact on
August revenue is expected to be even greater.
COMMISSIONERS’ COMMENTS
Commissioner Wonch congratulated management and the union for reaching a tentative agreement.
Commissioner Callen thanked the executive staff for their letter in support of General Manager Novick.
General Manager Novick thanked the Commissioners for their support and assured them that he would work diligently with bargaining and non-bargaining unit employees to help move the BWL forward.
Commissioner Calkins inquired if consideration will be given to non-bargaining employees in reducing their health care premium sharing to 5% once the union agreement is ratified. General Manager Novick responded that this issue would be evaluated once the union contract is ratified.
Commissioner Joseph thanked the management and union negotiating teams for their efforts in reaching a tentative contract settlement. He stated that BWL is one entity comprised of Commissioners, Management, Bargaining and Non-Bargaining employees. He expressed his ongoing support for General Manager Novick and Corporate Secretary Mary Sova.
Commissioner Smith also thanked staff and the negotiation teams on reaching a tentative contract settlement. She recognized Director of Special Projects Clyde Dugan and congratulated him on his retirement.
ABSENCES
On motion by Commissioner Duncan and seconded by Commissioner Calkins, that the absence of Commissioner Haggart be excused.
Carried unanimously.
PUBLIC COMMENTS
Steve Tews, long time BWL employee, expressed concern on the lack of trust and confidence by BWL workers. Mr. Tews stated that he believes City Councilmembers are more willing to listen to concerns of BWL employees than BWL Commissioners and Management.
Commissioner Smith responded that the issue of employee morale and trust is on the agenda for the joint meeting with City Council and BWL Commissioners scheduled for October 5, 2004.
ADJOURNMENT
On motion by Commissioner Joseph, seconded by Commissioner Callen, the meeting adjourned at 6:50 p.m.