FINAL – APPROVED BY BOARD 5/24/05

 

MINUTES OF THE BOARD OF COMMISSIONERS' MEETING

LANSING BOARD OF WATER AND LIGHT

___________________________

Tuesday, March 22, 2005

___________________________

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

The Secretary declared a quorum present.

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

APPROVAL OF MINUTES

Motion by Commissioner Joseph, seconded by Commissioner Haggart, to approve the minutes of the regular meeting held January 25, 2005.

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.

Glen Kirk, Finance Director for the City of Lansing, asked the Board for another thirty days to complete final details of a development agreement for the BWL riverfront property at Shiawassee and Grand Avenue, known as the Coal Storage property.  At the regular meeting in January 2005, the Board approved a resolution requiring River Street Triangle, LLC (developer) to pay a non-refundable $100,000 deposit as a condition for the developer to retain its option through June 2005, which is the date the option is due to expire.  Mr. Kirk noted that there is much to be gained from the City by having the proposed riverfront residential housing developed on the site.  The project would generate additional property and income taxes.  (See discussion under Unfinished Business.)

Patrick Reid, attorney for River Street Triangle, LLC, also urged the Board to grant a thirty-day extension to finalize details to close the transaction on the Coal Storage property.  He said the developer wants to start construction on the riverfront residential housing project this spring.  Mr. Reid recognized developer Joel Ferguson who was present in the audience to respond to any questions the Commissioners may have. (See discussion under Unfinished Business.)

Joseph Davis, Business Manager for IBEW Local 352, spoke regarding the resolution under consideration concerning changes to the pensions of Defined Benefit Plan pensions.  He noted that although the union does not negotiate for pensioners, it does negotiate for active members who are covered by pension plans and that is why the time line referenced in the attachment of the November 25, 1996 Personnel Committee Report was set the way it was.  Mr. Davis urged the Board to maintain the same timeline and to review the cost of living issue for Defined Benefit pensioners on a regular basis.

James Chandler, BWL Lineworker expressed concern with the BWL’s new strategic plan.  He said he disagrees with the perceived organizational strengths and weaknesses pertaining to operational and manpower efficiencies.  He stated that if he is going to be required to work under conditions that are going to jeopardize his safety, then he is gong to have to step back and rely on the MIOSHA Rules to make sure he works safely around high voltage, hazardous conditions.  He suggested that if he is going to get moved around to where he becomes minimally responsible for what happens out in the field, then he expects the same things to be done in-house, such as outsourcing financial accounting. 

COMMUNICATIONS 

Letter from Nancy Duncan resigning as Commissioner from the Second Ward for the Board of Water and Light effective February 28, 2005.

Placed on file.

E-mail from Howard Gladding, 3506 Laureate Drive, Holt, dated March 22, 2005, expressing concern with the proposed water rate increase under consideration.

Placed on file.

COMMITTEE REPORTS

Resolution 2005-3-1

FINANCE COMMITTEE `REPORT

A meeting of the Finance Committee of the Board of Water and Light was held at the Executive Offices, Lansing, beginning at 5:30 p.m., Tuesday, February 15, 2005.

Committee Chair Nancy Duncan called the meeting to order and asked the secretary to call the roll.  The following members of the Finance Committee were present:  Commissioners Ron Callen, Nancy Duncan, Ifield Joseph, and Robin Smith.

Chair Duncan informed the Committee that for personal reasons, she is resigning her position as Commissioner from the Second Ward for the Lansing Board of Water and Light (BWL).  She expressed her appreciation for the opportunity to serve the residents of Lansing and the customers of the BWL and wished the Commissioners the best.

The Committee along with General Manager Novick and staff thanked Commissioner Duncan for her wise counsel and service to the BWL.

Public Comment

There were no public comments.

financial accounting statement (FAS)  No. 71 issues

Senior Vice President of Finance Dennis McFarland reported that in 2003, staff made a commitment to the Board of Commissioners that all future FAS No. 71 related items to be recorded in the financial statements would be approved by the Board prior to their use.  FAS No. 71 provides guidance in preparing general purpose financial statements for most utilities.  He noted that if costs are to be recovered in the future, those costs should be capitalized as regulatory assets.  If current recovery is provided for costs expected to incur in the future, those costs should be recorded as a regulatory liability.  The goal is to match costs and revenues.

Mr. McFarland clarified management’s current accounting treatment for all transactions subject to FAS No. 71 accounting.

1.                  Accounting for the Central Utilities Complex (CUC):  Certain items, such as revenue received from General Motors for debt service payment, are offset by the amortization of the CUC investment.  The current effect in net income is 5% profit margin or $444,356 in FY 2004.  This current treatment of FAS No. 71 was approved by Resolution 2003-8-3.

2.                  Contribution in Aid of Construction (CIAC) for Electric and Steam:  Electric and Steam services to large projects may require the developer to pay a CIAC based on the BWL’s estimated construction costs.   Rather than recognizing that as revenue, it is credited to the asset, thus reducing the amount of depreciation on a going forward basis.  This complies with Federal Energy Regulatory Commission (FERC) guidelines.  This current treatment of FAS No. 71 was approved by Resolution  2003-8-3.

3.                  Environmental Remediation of the North Lake Lansing Road Landfill:  FAS No. 71 permits BWL to record the estimated liability as a deferred expense.  This deferral allows the BWL to charge operating expense as the actual costs are paid out and recovered in rates.  This current treatment of FAS No. 71 was approved by Resolution 2004-11-2.

Mr. McFarland presented the following recommendations for applying FAS No. 71:

1.       Energy Cost Adjustment (ECA)
a.   Defer difference in energy cost and amount recovered in the rates

b.   Normalization of ECA revenues

c.   Track ECA to assure full recovery of eligible costs

2.        Contribution in Aid of Construction (CIAC) for Water

a.    Credit CIAC against the asset

b.    Allow for the same treatment of CIAC for Water as for Electric and Steam.

Mr. McFarland reported that in the past, management applied FAS No. 71 to the capitalization of interest during construction.  Justification cannot be made for using FAS No. 71 on a going forward basis for capitalization of interest.  He recommended discontinuing FAS No. 71 for this accounting application.   Staff is currently in the process of developing a procedure to support the capitalization of interest related to large projects. 

Following discussion, the Finance Committee voted to advance this recommendation to the Board for action at the March 22^nd Board meeting.

BUDGET ASSUMPTIONS

Vice President of Finance McFarland presented the Financial Plan and FY 2006 budget assumptions.   He reported that the financial goals are to maintain a strong credit quality, ensure adequate liquidity, maintain rate competitiveness, efficient and appropriate use of capital, and financially independent utilities.  Beginning July 1, 2005, staff will report on four separate utilities with a revised methodology for allocating overhead costs.

Mr. McFarland compared the sales forecast for FY 2006 over FY 2005

Electric:

§                Residential/Commercial/Industrial (excluding General Motors) on historical growth rates
normalized for weather

§                Trended growth rates:  Residential = 1.5%, Commercial = 2.05%, Industrial = 0.60%

§                GM: includes retirements and line reductions at Plants 1 & 6, increased production at Mid-MI Stamping Plant

§                Wholesale based on remaining generation availability

Water:

§                Residential/Commercial/Industrial based on historical growth rates with deductions for line reductions at GM Plants 1 and 6

§                Trended growth rates:  Residential = 0.98%, Commercial = 0.19%, Industrial = 0.0%

§                Wholesale based on historical and/or contractual commodities

Steam:

§                Residential/Commercial/Industrial based on historical growth rates with deductions for line reductions at GM Plants 1 and 6

Chilled Water:

§                Based on full year of all buildings on line, normalized for weather

Revenue assumptions for FY’06 were presented:

·      Rate increases effective July 1, 2005 for each utility:

-  Electric:  3%

-  Water:  6.5%

-  Steam (Central District):  33%

·      Chilled Water at minimum bill levels

·      2% increase in Electric Wholesale prices

Operating expense assumptions include:

·      No increase in full-time employees.  Given forecasted retirements at BWL and the time it takes to fill the positions, larger cost centers will budget for vacancies at the rate of about 10%.

·      Salary increases for the bargaining unit are based on the union contract and non-bargaining increases are based on market study to be presented to the Human Resources Committee in April for Board action in May.

·      Increase in health care cost of 11% for insurance premiums and Medicare reimbursements.  This includes the premium sharing that is currently in place for active employees.

·      Funding of retiree health care (GASB 45).  The recently published GASB standard requires that the accrued liability for non-pension benefits for retirees, such as retiree health care cost, be amortized to expenses, similar to pension benefits.  Currently that figure stands at an estimated $181 million for the BWL.  Amortizing the obligation over a 30-year period would result in an additional $5 million dollars of annual expenses.

·      Reallocation of discretionary resources.

Capital expenditures:

·      Revenue producing capital additions to be justified by cost/benefit analysis

·      Capital targeted an annual depreciation expense (FY 2006 budget ~ $29 million)

·      Ten-Year Lead Service Replacement Program

Other considerations include:

·      BWL participation in the Clean Water State Revolving Fund (SRF) funding

·      Payment in Lieu of Taxes (PILOT) to remain at 4%

By consensus the Committee concurred with the budget assumptions and directed staff to proceed with a proposed FY 2006 Budget.  A detailed O&M and Capital Budget will be presented to the Finance Committee in May for deliberation and recommendation to the Board.  

General Manager Sandy Novick reported that staff is preparing a rate case strategy presentation and a draft communication plan for various audiences on proposed rate increases for the Committee of the Whole meeting in March.

AUDIT CHARTER

Internal Auditor Holloway reviewed a draft Internal Audit Charter.  An Internal Audit Charter defines the mission, purpose, independence, authority, responsibility and scope, and standards of internal audit.  Mr. Holloway reported that the Board last approved an audit charter in October 1995.  Since that time, significant changes have taken place within the audit profession, partly driven by the Enron and WorldCom scandals.  These changes revised the International Standards for the Professional Practice of Internal Auditing by expanding the role of internal audit to include the evaluation of risk management and evaluation of internal controls and governance processes which expands it beyond traditional controls.  Mr. Holloway presented a Draft Internal Audit Charter (Attachment A) for consideration, which is based on recommendations by the Institute of Internal Auditors.  Mr. Holloway noted that he is in the process of finalizing a Records Retention Plan for his department to be distributed to the Commissioners at the next meeting.

Following discussion, the Finance Committee voted to recommend that the Board approve the Internal Audit Charter.  This item will advance to the Board for action on March 22, 2005.

AUDIT PLAN

Mr. Holloway reported that in order to develop an annual audit plan, internal audit standards require that the audit plan be based on risk assessment.   He reported on recent major milestones that have shaped our current view of risk assessments.  These include:

Sarbanes-Oxley (SOX) Act of 2002, which imposed new financial reporting requirements on listed companies.  SOX requires evaluation of internal controls over financial reporting based on a suitable framework.  Existing internal control frameworks include required risk identification and management.

International Standards for the Professional Practice of Internal Auditing.  The recently revised standards provide a new definition of internal audit, which include that internal audit activity should evaluate and improve the organization’s risk management, control, and governance processes.  An annual audit plan was also included based upon an annual risk assessment and additional risk-related guidelines.

COSO Enterprise Risk Management (ERM) – Integrated Framework.  The Committee of Sponsoring Organizations (COSO) ERM framework defines essential components, suggests a common language, and provides clear direction and guidance for enterprise risk management. 

Other milestones include (1) FASB 133 - This standard requires the method of evaluating the effectiveness of Derivative Instruments and Hedging Activities to be consistent with the entity’s approach to managing risks; (2) GASB 40 - Deposit and Investment Risk Disclosures modified standards requiring communications of these risks; and (3) Basel Accords – Impacts the banking industry and is effective in 2007 among the ten largest banks which operate internationally.  Risk identification and management is required.

Mr. Holloway then reviewed the results of his risk assessment based on interviews with Commissioners and management.  The top ten risks at a macro and micro levels were discussed.  He also reviewed his Internal Audit Plan (Attachment B) for the remainder of FY 2005.  Mr. Holloway reminded the Committee that special projects could surface requiring a slight modification to the plan.   The Committee requested information on the concepts of control and governance.  Mr. Holloway indicated that he would forward this information to the Commissioners. 

Following discussion, the Finance Committee voted as follows to recommend that the Board approve the Internal Audit Plan for the remainder of FY 2005.  This item will advance to the Board for action on March 22, 2005.

There being no further business, the Finance Committee adjourned at 7:39 p.m.

Respectfully submitted,

Nancy Duncan, Chair
Finance Committee

Motion by Commissioner Joseph, seconded by Commissioner Haggart, to receive the report.

Action:  Carried unanimously.

Resolution 2005-3-2

HUMAN RESOURCES COMMITTEE REPORT

A meeting of the Human Resources Committee of the Board of Water and Light was held at the Executive Offices, Lansing, beginning at 4:00 p.m., Thursday, February 24, 2005.

Committee Chair Tim Haggart called the meeting to order and asked the secretary to call the roll.  The following members of the Human Resources Committee were present:  Commissioners Gary Calkins, Tim Haggart, Santiago Rios, and Nancy Wonch.  Also present was Commissioner Robin Smith.

Public Comment

BWL retiree Ron Byrnes, representing the Retirees’ Pension and Benefits Committee, urged the Commissioners to consider the facts presented in letters the group submitted dated January 18 and February 4, 2005.  He asked for a decision that would be fair to everyone.

Pension COLA Issue

Chair Haggart asked General Manager Sanford Novick to give an overview of the documents included in the committee packet concerning the Pension COLA matter.  The materials included the Committee of the Whole resolution, dated January 11, 2005, which was referred to the Board for consideration on January 25, 2005.  The Board tabled the Resolution regarding the process of recommending changes to retirees’ pension, pending further study and discussion with staff.  Also, the Board Chair referred this issue to the Human Resources Committee for review and recommendation. 

Pertinent documents included in the packet were:

§                A graphical representation of how primary cash flows and what happens if money flows out of the Defined Benefit (DB) Pension Plan Trust.

§                Investment summary of the DB Plan since 1998 and schedule of funding progress.

§                Investment summary of the Post-Retirement Benefit Plan (VEBA) since 2000 and schedule of funding progress.

§                Historical Retiree Health Care Expenses since 2000 and forecast for 2005 and 2006.

§                Sections of agreements between BWL and IBEW Local 352 effective November 1, 1996 and November 1, 1999 relevant to retirement pension.

§                A letter from Ron Byrnes, Chair of the Retiree Pension and Benefit Committee, dated February 4, 2005, regarding DB cost of living consideration.

(It was explained that as of year-end 2004, BWL annual disbursements to 510 DB retirees was $7.8 million.  In addition, there are 74 active employees in the DB plan and 23 individuals that have vested interests in the plan but are not currently collecting benefits.  Over the last three years, 2001-04, the CPI has risen about 6.5%.  If a full inflationary adjustment of 6.5% were granted, the annual DB Pension expense would increase approximately $500,000 per year.  In time, another 100 individuals would begin drawing benefits, which would increase costs by approximately $100,000 per year if their benefits were adjusted correspondingly.

The Committee engaged in lengthy discussion on the question as to whether the Board is contractually obligated to continue the three-year review referenced in a document entitled:  “Pension Settlement Issues” dated November 25, 1996.  It was concluded that that there was no contractual obligation to review and/or adjust retiree pensions.  It can be assumed that the language did not become a part of the union contract.

Although there is a history of periodically reviewing and either adjusting retiree pensions or maintaining their status quo, the Committee determined that the BWL’s current financial condition and projections of revenue and expenses presented by management at the January Committee of the Whole meeting indicate that such an adjustment would not be prudent.   Further it was agreed that the Board has the right to change both what past Boards have done and future Boards have the right to change what this current Board has done.

(Commissioner Wonch entered the meeting at 4:40 p.m.)

The Committee asked whether a procedure could be developed by staff that would describe the process, rationale and impact when considering changes to retirees’ pensions.   The Commissioners suggested using the memo prepared by Internal Auditor Glenn Holloway, dated February 11, 2005 as a template for compiling useful information.  A suggestion was also made for staff to survey other utilities in Michigan to compare how others are addressing pension adjustments and health care premiums in our industry.  Further, it was proposed that within thirty days after the 2006 union contract is ratified, that management evaluate expenses and revenues including the BWL’s position with VEBA funding and health insurance liability to recommend whether the BWL’s financial position supports retiree pension adjustments.

Commissioner Wonch made a motion to bring to the Board the Committee’s recommendation in the form of a resolution that addresses three parts:

1.                  That the Board is not contractually obligated to continue the three-year pension adjustment review process.

2.                  That the Commissioners have given consideration for a COLA pension adjustment and determined that an adjustment is not financially prudent at this time. 

3.                  That a good process be established for future Boards to use to determine if pension adjustments are warranted.

The Human Resources Committee voted as follows to recommend that the Board approve at its next meeting a resolution to formalize the three points listed above.  This item will be on the Agenda under Resolutions for the March 22^nd Board meeting.

Public Comment

BWL retiree Ron Byrnes thanked the Committee for setting forth the groundwork for future Boards to advance forward when considering retiree benefit issues.

BWL retiree Max Zemer inquired about the composition of the BWL Pension Fund Trustees.  Commissioner Wonch responded that the Trustees of the Defined Benefit Plan and Trust are all the Commissioners of the BWL.

Consultant Agreement with Former Internal Auditor

At the January 25, 2005 board meeting, some questions were raised related to the consulting agreement the Board has entered into with the former Internal Auditor.  They asked for background information to determine if appropriate policies are in place to protect BWL records.  This matter was referred to the Human Resources Committee to discuss the Board’s practice of issuing contracts. 

Commissioner Rios noted concern he has with the Board’s process of issuing contracts with an outside consultant.  He said that a procedure is needed with clear direction as to who has oversight and approval responsibilities to ensure appropriate check and balances are in place.  Commissioner Calkins and Smith stated that it would be beneficial for all the Commissioners to be kept informed on the progress of the consultant’s professional services.  Commissioner Wonch discussed the rationale for the contract and added that it was necessary relative to a specific lawsuit.  The consultant has generated savings to the BWL in legal fees by virtue of her expertise and institutional memory from her past employment with the BWL.  With respect to BWL records, Commissioner Wonch stated that the consultant only has “copies” of documents required to work on the assigned special project.  Following discussion, Commissioner Rios suggested a section in the Board’s Rules of Procedure on retaining outside consultants and the Board of Commissioners’ oversight responsibilities.

The Committee agreed to refer the issue of retaining outside consultants by the Board of Commissioners to the Committee of the Whole at which the Board’s Rules of Procedure is an agenda item for discussion at the March 10, 2005 meeting. 

Fourth Quarter Performance Reports
for the  Defined Benefit Pension Fund
 and the VEBA Retiree Benefit Plan and Trust

Senior Vice President of Finance Dennis McFarland reported on fourth quarter results for the DB Pension Fund and the VEBA Retiree Benefit Plan and Trust.  (The complete report is on file with the Secretary’s Office.)  As of December 31, 2004, the DB Pension Fund had assets of about $129 million, which is down about $5 million from 2003 due to current year benefits paid to retirees of about $9 million and the VEBA transfer of approximately $5 million, which more than offset the investment range for the year.   Mr. McFarland noted that the asset allocation for cash is a bit over-weighted because $5 million set aside for one of the small cap managers was not transferred until February 1, 2005 due to cash timing issues.  The total fund generated a return of 8.1% for the year and 5.5% for the five-year period.  There was mixed performance relative to benchmarks, but positive relative to the broad market.  He also reported that the DB funding status has not changed since the last report because actuarial studies are conducted annually as of February; consequently, before the next Human Resources Committee meeting, an updated report on the funded status will be available for review.

Mr. McFarland reported on the fourth quarter results of the Voluntary Employee Benefit Administration (VEBA):  Retiree Benefit Plan and Trust.  As of December 31, 2004, the VEBA was up almost $25 million compared to $16 million for the same period in 2003, mostly due in part to a transfer from the DB Pension Plan to the VEBA trust and investment earnings on the VEBA for the year.  Mr. McFarland explained that the asset allocation for equities is over-weighted because of not having submitted a revised asset allocation policy for the VEBA at the same time the Pension Fund Trustees’ revised the DB Plan Investment Policy, changing the asset allocation, on November 23, 2004.  Staff will make a recommendation to the Pension Fund Trustees in the fall for a change in the VEBA asset allocation similar to the DB Pension Plan.  Mr. McFarland reported that the one-year return on fixed income for the VEBA was 8.2%, which outperformed the Lehman Brothers Aggregate Index of 4.3%.   The equity investments returned 15.8% for the one year compared to the Russell 1000 Index of 11.4%.  He noted that the unfunded actuarial accrued liability as of February 29, 2004 is $180.5 million for health care insurance costs as compared $160.8 million for the same period in 2003.  Based on increasing health care costs, the total for 2005 is expected to exceed $200 million.

(Commissioner Calkins left the meeting at 5:25 p.m.)

Selection of International Fund Managers

Senior Vice President of Finance Dennis McFarland reported that staff, utilizing the expertise of our pension consultant LCG Associates, has conducted an extensive search for investment managers to manage approximately 15% of the fund to be invested in international equities.  The search was conducted in accordance with the investment policy adopted by the Pension Fund Trustees on November 23, 2004, which took immediate effect.  LCG used both qualitative and quantitative criteria to reduce the qualified candidates to two to three finalists.  An internal committee, comprised of individuals from the Finance, Accounting and Human Resources functions, evaluated and ranked the finalists.  Those rankings were reviewed with LCG and the ultimate recommendations were made.   Mr. McFarland distributed copies of the Investment Manager Selection Report with background information on the two recommended investment managers.  He reviewed the criteria for evaluation of the international growth managers.  (A copy of the Investment Manager Selection Report is on file in the Corporate Secretary’s Office.)

RETAINING INTERNATIONAL FUND MANAGERS

WHEREAS, the Trustees of the Lansing Board of Water and Light Defined Benefit Plan for Employees’ Pension has adopted an investment policy effective November 23, 2004, and

WHEREAS, that policy delegated authority to the Human Resources Committee to select and terminate investment managers, and

WHEREAS, a search has been conducted to identify qualified professional, independent investment managers, and

WHEREAS, the Human Resources Committee has determined Dodge & Cox, Inc. and Marsico Capital Management, LLC, to be such qualified investment managers.

RESOLVED, That Dodge & Cox, Inc., and Marsico Capital Management, LLC be retained to manage a portion of the Defined Benefit Pension Fund in accordance with the Fund’s investment policy.

There being no further business, the Human Resources Committee adjourned at 5:43 p.m.

Respectfully submitted,

Tim Haggart, Chair
Human Resources Committee

Motion by Commissioner Haggart, seconded by Commissioner Calkins, to receive the report.

Action:  Carried unanimously.

Resolution 2005-3-3

COMMITTEE OF THE WHOLE

The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 4:00 p.m., Thursday, March 10, 2005.

Chair Pro Tem Ron Callen called the meeting to order and asked the secretary to call the roll.  The following members were present:  Commissioners Ron Callen, Gary Calkins, Tim Haggart, and Ifield Joseph.  Commissioners Santiago Rios (5:00 p.m.), Robin Smith (4:55 p.m.), and Nancy Wonch (4:58 p.m.) arrived during the informational portion of the meeting. 

There being no objection, the Chair Pro Tem switched the order of the agenda to receive informational reports until such time that a quorum of the committee is established.  He announced that business would be conducted once five members of the committee are present.

Public Comment

There were no public comments.

lead task force report

Senior Vice President of Operations Bill Cook presented the report of the Lead Service Replacement Team Report and Implementation Plan.  The complete report is on file with the Corporate Secretary’s Office.  Mr. Cook referred to a written report he had circulated to the Commissioners earlier (copy filed with the Secretary’s Office).  He reported that the objectives of the team was to develop a plan for replacement of all lead services; communicate the project status and lead awareness; and monitor, evaluate and make recommendations to improve Board of Water and Light (BWL) corrosion control program.  He reported on the progress to date:

§                Since July 2004, over 506 lead services have been replaced, including all licensed day care facilities.

§                Updated water installation standards.

§                Solicited bids and retained Malcolm Pirnie to evaluate BWL corrosion control practices.

§                Assigned an internal BWL project engineer as the project manager.

§                Assisted Ingham County Health Department in testing all area schools.

§                Manually reviewed more than 9,000 service cards to better identify service unknowns.

§                Participated with the AWWARF study regarding lead services.

§                Worked with townships regarding lead service status.

§                Established a process for adding customers to the “sensitive population” list.

§                Established a replacement program and timetable that coordinates with City of Lansing CSO and street replacement efforts.

§                Evaluated ways to reduce the cost of internal plumbing work within the home.

§                Solicited responses to over 40 local and national water contracting firms to bid on service replacement work.

§                Expanded BWL communications via: letters, open houses, community events, brochure, connections, agency support, consumer confidence report, targeted audiences, website, and employee communications.

Remaining water services with lead as of December 31, 2004 were summarized:

Mr. Cook reviewed the implementation plan to replace an average of 1,335 lead services per year for the next nine years.  The service replacement priority was outlined:

§                Any lead service component that is worked on or disturbed.

§                Any lead service supplying a home that has been identified by the Ingham County Health Department as having a “lead burdened” child.

§                Any lead service to a school, hospital, licensed day care.

§                Any lead service supplying a sensitive population (pregnant women, children under 6).

§                Services where analysis is or has been over 15ppb or greater.

§                Scheduled lead service replacement (CSO, street restoration, planned work).

Mr. Cook told the committee that based on bids and currently expected costs, it is anticipated that the Lead Service Replacement program will cost approximately $4,700,000 per year in today’s dollars.  Given implementation unknowns as well as potential opportunities to reduce these costs, the team recommended that the BWL budget $3.5 million for FY 2006.  Mr. Cook noted that contractor bids were impacted by the BWL Purchasing Policy Requirement 13-06 requiring prevailing wage and fringe benefits to be paid on all construction contracts.  CSO contractor bids did not reflect anticipated savings associated with the combining of these projects.

Mr. Cook reported on future actions to be taken:

§                Award the contract to the BWL contractor or contractors for the upcoming construction season.

§                Award a contract to the CSO contractor for a portion of 2006 projects.

§                Assemble and assign two BWL crews for lead service replacement.

§                Formulate a plan and implement for corrosion control upon receipt of the Malcolm Pirnie Report.

§                Provide the Board of Commissioner a status update before the next construction season in FY 2007.

JANUARY FINANCIAL REPORT

Senior Vice President of Finance Dennis McFarland presented the financial report for January (copy filed with the Secretary’s Office).  He reported that the variances in operating income from the budget to actual for the year in large part are the same as they have been in previous financial reports.  Due to timing differences, a correction from prior reports is that the City of Lansing has not yet executed a contract to take advantage of the Street Light and Hydrant Riders approved by the Board in September 2004.  Mr. McFarland indicated that staff’s planning assumption is that the City will eventually implement the riders retroactive to September 2004.  The delayed effect of the City of Lansing riders is $750,000.  Currently this amount is showing up in the budget as a timing issue.  Mr. McFarland noted that the only change to “Pending Items” is a refund of arbitrage rebate funds in the amount of $184,000.  He also noted that excess cash from the Michigan Public Power Agency (MPPA) Belle River Project is reflected as non-operating revenue.  The revised Net Income for FY’05 is projected at $2.6 million as compared to $2.4 projected at the start of the fiscal year.

BROADBAND OVER POWERLINE

General Manager Sanford Novick reported that there was an indication in the January 2005 issue of the BWL PIPELINE that the BWL had made a decision to not become involved in Broadband Over Power Line (BPL) service.  He said that probably was a step beyond where staff decided; consequently, he spoke with the Commissioners who raised questions about the issue.  Mr. Novick clarified that a decision was not made, but in fact staff continues to evaluate BPL technology and the value it would bring to the community.  He noted that this technology has not been finalized, and there is a lot yet to be done.  Staff has been in touch with the people who are offering the service in Grand Ledge later this year.  The Board will be provided with a status report of activities in this arena once more information is known about the success of the service.  Mr. Novick noted that the record would be corrected in this month’s issue of PIPELINE.

ENTERPRISE RISK ASSESSMENT

Internal Auditor Glenn Holloway continued his discussion on risk and risk management that he briefly reviewed at the Finance Committee meeting of February 15, 2005.  He reported that internal audit standards require a risk assessment in order to develop an annual audit plan.  He described the three major milestones that have occurred in risk management:  (1) The Sarbanes-Oxley Act of 2002 imposed new financial reporting requirements on listed companies, (2) International Standards for the Professional Practice of Internal Auditing as promulgated by The Institute of Internal Auditors were revised to emphasize risk, and (3) COSO Enterprise Risk Management (ERM) – Integrated Framework defines essential components, suggests a common language, and provides clear direction and guidance for enterprise risk management.  Mr. Holloway noted that COSO ERM defines risk as the possibility that an event will occur and adversely affect the achievement of objectives.  Opportunities are the possibility that an event will occur and positively affect the achievement of objectives. 

The following Commissioners entered the meeting:  Robin Smith (4:55 p.m.), Nancy Wonch (4:58 p.m.) and Santiago Rios (5:01 p.m.).

Mr. Holloway further discussed the purpose of risk assessment, the methodologies available and used for developing a risk assessment.  The top ten BWL risks at macro and micro levels from interviews with Commissioners and management were reviewed (copy filed with the Secretary’s Office). Examples of selected Enterprise Risk Management framework models used by various firms were shown to compare the differences in approach.  Mr. Holloway noted that the methodology in developing an enterprise risk assessment could be improved upon.  As processes and controls are documented, assessment will be improved.  Also, industry best practices may evolve which will contribute to improved risk assessment.   In conclusion, Mr. Holloway indicated that the issue of financial reporting and internal control is a serious matter with strict sentencing guidelines.

Chair Pro Tem Callen declared a quorum was now present for conducting business.

RATE CASE RECOMMENDATION AND COMMUNICATION STRATEGY

General Manager Novick stated that management has been spending a great deal of time planning for the future and making financial projections on future revenue and costs.  It has been concluded that the BWL will need to devise both operating and rate strategies to overcome a projected revenue deficiency.  Each utility service faces its own unique circumstances that are driving the need for increased revenue.  The rate adjustments are necessary to recover cost increases due to higher labor, health care and other operating costs, which have occurred since electric and water rates were last increased in January 2003.

Senior Vice President of Finance McFarland presented rate case assumptions and proposed rate increases for the electric and water utility.  These rates would be distributed equally across all rate classes. 

Electric:  3.0% increases effective July 1, 2005

Water:  6.5% effective July 1, 2005 followed by another increase of 6.5% July 1, 2006.

Steam:  A formal recommendation on steam rate increases will not be made at this time given the uncertainty of that utility.   With the recent announcement from General Motors about plant closing schedules, staff is not in a position to make a decision on what a rate increase might be.  Informal discussions with steam customers will take place to share information in order to determine future needs and what is best for the steam utility.  The Board will be kept informed of these discussions. 

Mr. McFarland reviewed several charts and graphs outlining the following data (copy filed with the Secretary’s Office):

§                Net Income and Cash Projection 2005-2010 with the proposed rate increases layered in.

§                Operating Expense Comparison:  FY 2003 and FY 2006 and for FY 2005 and FY 2006

§                Cost Increase Drivers for Electric

§                Rate Increase Drivers for Water

§                Rate increase history from January 1995 to present

§                Residential Rate Increases and Inflation for Electric and Water and Sewer

Communications Director John Strickler presented a communication strategy that describes the rationale for utility rate increases and actions that will be taken to communicate the proposed adjustments to BWL customers, key stakeholders and employees.

Following lengthy discussion, staff presented a recommended timeline to proceed with a public hearing to solicit public input on proposed electric and water rate increases. 

The Committee of the Whole concurred with the timeline and recommended that a formal resolution to set a public hearing date be brought to the Board on March 22, 2005 for action.

SPECIAL COUNSEL LIST

General Counsel Amy Cavanaugh reported that the City Charter requires City Council to approve special counsel that is retained by the Board of Water and Light (BWL).  In the past, a special counsel approved list for a two-year period was compiled by the BWL in-house counsel and approved by the Board for submittal to City Council for approval.  Ms. Cavanaugh noted that once approved, for the next two years, the firms are authorized to do work for the BWL without additional input from City Council.  She indicated that eight firms responded to the BWL Request for Proposals for legal services.  She then summarized the evaluation process, which included:  (a) a review of each proposal, (b) solicited comments from directors and managers, (c) solicited comments from Commissioners, and (d) on-site interviews with some of the law firms she was not personally familiar with an attorney’s work.  Discussion was held on the comparison of the firms and perceived strengths and weaknesses.  Ms. Cavanaugh also indicated the need for a FERC Washington, D.C. counsel and that she would include that firm on the list to be brought to the Board.

The Committee of the Whole voted to recommend that the special counsel approved list for a two-year period from March 22, 2005 to March 22, 2007 be brought to the Board for approval.

DISPOSAL OF PROPERTY

General Manager Novick presented draft resolutions and information regarding two pieces of property that have been identified as surplus and no longer needed for the operation of the Board of Water and Light (BWL). 

The first property situated in the 2200 block of South Washington Avenue in Delhi Township was purchased by the BWL in 1995 at a cost of $15,000 with the intent to utilize it for a well site designated as Well 83-02.  Nearby groundwater pollution from the old Gunn Road Landfill has been identified by staff and the Michigan Department of Environmental Quality as a risk for a future well site.  The BWL evaluated the pollution risks and well development costs and determined the site to be unacceptable for a future well site. 

The second property situated in the 4700 block of Richard Street in Holt, comprised of Parcels A and B, was purchased by the BWL in 1995 at a cost of $20,000 with the intent to utilize a portion of this property (Parcel A) for a well site designated as Well 84-03.  The well has been drilled and remaining portion on the property (Parcel B) has been determined as unacceptable for further well development.  In 2003, the BWL received notice from Delhi Township that this site was being assessed $27,405.09 as its proportionate share of the Diehl Consolidated Drain Assessment.  Delhi Township, in support of park and recreational development plans, has indicated its desire to purchase Parcel B in the amount of $29,000.  The proceeds from the sale would be used to pay the outstanding drain assessment of $27,405.09.

Following discussion, the Committee of the Whole voted to recommend that resolutions authorizing the sale of the two pieces of property be brought to the Board for approval.

RULES OF PROCEDURE

Suggestions have been made by some Commissioners for a review of the officer nominations process and the scope of responsibility for each of the standing committees.  Following discussion, it was agreed that the Board’s Rules of Procedure must be reviewed in their entirety periodically for updating.  An ad hoc committee will be formed by Board Chair Robin Smith to review the rules and report back to the Committee of the Whole with an amended copy for discussion.

OPERATIONAL PERFORMANCE REPORTING

General Manager Novick reported that interest has been expressed by some Commissioners for more detailed operational reporting from staff at Committee of the Whole or Board meetings.  One example given was a report on the status of the Erickson Station Western Coal Conversion project.  He asked for the Commissioners’ guidance in determining a preference on the level of information to be provided.  Mr. Novick offered to meet individually with Commissioners to answer specific questions.  Also, he noted that the Balanced Scorecard is an attempt to reflect at a higher-level operational performance results.  Following discussion, there was consensus that BWL staff meeting notes have been helpful in getting a recap of general state of affairs.  Also, the Commissioners agreed that a statement from the General Manager on significant operational activities would be sufficient either by memo or a verbal report at Commissioner meetings.

ENVIRONMENTAL UPDATE

General Manager Novick discussed the significance for staff to work with the Board in developing a sense of direction on philosophy with respect to management’s treatment of environmental issues.  For example, should the BWL be the lowest cost provider or the most environmental and clean utility in the country, or balance those two to the extent it makes sense?  He referred to Nick Burwell of Environmental Services for an update on environmental issues.  Mr. Burwell reported that last September he discussed multi-pollutant regulations (CO2, NOx, SO2, Mercury) and their potential impact on the BWL.  For planning purposes, regulations that were determined as “most likely” were used.  One of the next steps defined at that time was to monitor and participate in regulatory development.  Mr. Burwell suggested that the time to act is now.  He discussed the many different regulatory routes, pointing out that there are multiple proposals to control all or some of NOx, SO2, Mercury and CO2.  One route is the Clean Air Act (CAA), which has resulted in emission reductions and significant air quality improvements nationwide.  He noted, however, that the CAA process addresses one pollutant at a time.  There is also the Clear Skies initiative.  The EPA estimates that from the base year of 2000, the Clear Skies initiative will reduce NOx emissions 59% by 2008 and 67% by 2018; reduce SO2 emissions 60% by 2009 and 73% by 2018; and reduce mercury emissions 29% by 2010 and 69% by 2018.  Clear Skies supporters include:  Unions for Jobs and the Environment (UJAE), American Chemistry Council, American Petroleum Institute, Edison Electric Institute, other utilities in Michigan such as CMS, DTE, AEP, WE, MMEA, APPA.

General Manager Novick offered to bring to the Committee a draft philosophy that attempts to capture the essence of the Board’s view on balancing costs and environmental stewardship.  Following input from the Commissioners, it was agreed to have staff prepare a philosophical statement defining how environmental issues are to be approached rather than a policy statement.

There being no further business, the Committee of the Whole adjourned at 6:45 p.m.

Respectfully submitted,

Ron C. Callen, Chair Pro Tem
Committee of the Whole

Motion by Commissioner Callen, seconded by Commissioner Calkins, to receive the report.

Action:  Carried unanimously.

MANAGER’S RECOMMENDATIONS

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

Resolution 2005-3-4

WHEREAS, over the past four months, Board of Water and Light management has been discussing rate strategies with the Commissioners to overcome a projected revenue deficiency over the next six years. 

WHEREAS, staff has recommended a rate hearing process to adjust electric and water rates effective July 1, 2005.  The rate adjustments are necessary to recover cost increases due to higher labor, health care and other operating costs, which have occurred since electric and water rates were last increased in January 2003.  The rate case recommendation for electric is a 3 percent across-the-board increase effective July 1, 2005.  A 6.5 percent increase is recommended for water effective July 1, 2005 followed by another increase of 6.5 percent on July 1, 2006.

RESOLVED, That the request for proposed electric and water rate increases be made the subject of a public hearing prior to further consideration by the Board of Commissioners.

RESOLVED FURTHER, That the Board of Commissioners hereby sets the date of Tuesday, May 10, 2005 at 5:30 p.m. for a public hearing to solicit public input on the proposed electric and water rate adjustments.  The hearing will be held at the Board of Water and Light offices, 1232 Haco Drive, Lansing.  The Corporate Secretary is directed to file with the City Clerk no later than March 26, 2005, information regarding proposed rate increases with an effective date of July 1, 2005.

Management discussed rate case scenarios with the Commissioners, based on various assumptions, at the following meetings:  Committee of the Whole on December 14, 2004 and January 11, 2005; Board Meeting on January 25, 2005; Finance Committee on February 15, 2005; and Committee of the Whole on March 10, 2005.

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

Discussion:  General Manager Novick stated that a sophisticated and focused planning process over the past year has culminated with a strategic plan and a long-term financial plan.  The BWL’s planning process recognizes its commitment to the customers and the community by continuing to hold down rates or otherwise mitigate the impact of the increases.  Mr. Novick noted that the new Balanced Score emphasizes the BWL’s need to compare its performance with leaders in the utility industry and to constantly search for ways to improve productivity and efficiency.

Commissioner Callen noted that management has discussed rate case scenarios with the Commissioners, based on various assumptions, at the following meetings:  Committee of the Whole on December 14, 2004 and January 11, 2005; Board Meeting on January 25, 2005; Finance Committee on February 15, 2005; and Committee of the Whole on March 10, 2005. 

Action:  Carried unanimously.

Resolution 2005-3-5

RESOLVED, That the Board of Commissioners, as the regulatory body of the Board of Water and Light, recognize, pursuant to the Financial Accounting Standard (FAS) 71, the financial liability or asset created by the items listed below and elect to defer the current recognition of these items.

§                Energy Cost Adjustment (ECA).  This would allow for the recognition of a deferred liability (asset) for the over/under collection of the ECA.

§                Water Contribution in Aid of Construction (CIAC).  This would allow for the crediting of the customer contributions in aid of construction against the cost of the asset.

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

Discussion:  Senior Vice President of Finance Dennis McFarland reported that this accounting treatment would allow the ECA to be tracked and would assure that the difference between actual energy costs and the amount established in the rates would be collected through an adjustment to the ECA in future periods.  An account would be used that is established by the FERC Uniform System of Accounts to track the deferral.  This would assure that all fuel costs are collected or reimbursed in a timely fashion as appropriate.

The Water CIAC would be handled in the same manner as the Electric and Steam CIAC.  The plant accounts would be recorded at cost.

Action:  Carried unanimously.

Resolution 2005-3-6

RESOLVED, That the following law firms be placed on the Board of Water and Light Special Counsel Approved List for a two year period from March 22, 2005 to March 22, 2007.

1.         Canady Law Offices

2.         Dickinson, Wright PLLC

3.         Foster, Swift, Collins & Smith, P.C.

4.         Varnum, Riddering, Schmidt & Howlett, LLP

5.         Willingham Cote’, P.C.

6.         Loomis, Ewert, Parsley, Davis & Gotting

Further Resolved, That the following attorneys are approved to complete the specified on-going projects:

1.         Mike Brown and associates with Plunkett & Cooney to complete the Pathways litigation.

2.         Jeff Chalmers with Howard & Howard to prepare condominium documents for development of the Ottawa Street Station.

RESOLVED FURTHER, That this list be submitted to the Lansing City Attorney, and upon his recommendation and opinion, then to the Lansing City Council for final approval in accordance with the Lansing City Charter.

Motion by Commissioner Calkins, seconded by Commissioner Rios, to approve the resolution.

Discussion:  General Counsel Amy Cavanaugh reported that the BWL sent ten Requests for Proposals to area law firms and received eight responses.  Staff Attorney Brandie Ekren and General Counsel Amy Cavanaugh evaluated the proposals in the following manner: a) reviewed each proposal, b) solicited comments from directors and managers, c) solicited comments from Board members, and d) interviewed some law firms (particularly where staff was not personally familiar with an attorney’s work.)  A comparison of the firms’ strengths and weaknesses was also considered.

Action:  Carried unanimously.

RESOLVED, That the following law firm be placed on the Board of Water and Light Special Counsel Approved List for a two year period from March 22, 2005 to March 22, 2007 as the BWL’s Federal Energy Regulatory Commission (FERC) counsel:

Miller, Balis & O’Neil

1140 Nineteenth St., NW

Suite 700

Washington, D.C. 20036-6600

RESOLVED FURTHER, That this firm be submitted to the Lansing City Attorney, and upon his recommendation and opinion, then to the Lansing City Council for final approval in accordance with the Lansing City Charter.

Motion by Commissioner Calkins, seconded by Commissioner Rios, to approve the resolution.

Discussion:  General Counsel Amy Cavanaugh reported that as discussed at the March 10, 2005 Committee of the Whole meeting, the BWL did a separate Request for Proposals for a Washington D.C. counsel to represent the BWL before the Federal Energy Regulatory Commission.  Having this counsel is particularly important given the BWL’s notice of termination to the Michigan Public Power Agency (MPPA) of participation in the power pool.  The BWL received two proposals, from Van Ness Feldman and Miller, Balis & O’Neil.  Although both firms were clearly capable of performing the work, Ms. Cavanaugh, General Manager Novick and Sr. Vice President of Operations Bill Cook selected Miller, Balis & O’Neil because they felt more comfortable with the relationship and the specific attorney who would be assigned to the BWL’s work.  William (Bud) Miller will be the attorney primarily responsible for the BWL’s representation.

Action:  Carried unanimously.

Resolution 2005-3-8

WHEREAS, the following described Well 83-02 Property, located east of S. Washington Ave and approximately one-half mile north of Holt Road in Delhi Township, Ingham County, Michigan, has been identified as surplus and no longer needed for the operation of the Board of Water and Light (BWL); 

Well 83-02 Property Description: A parcel of land in the Southeast 1/4 of Section 17, Town 3 North, Range 2 West, Delhi Township, Ingham County, Michigan, said parcel particularly described as follows: Beginning at a point on the East line of Lot 8 of Supervisors Plat Number 14, Delhi Township, Ingham County, Michigan, as recorded in Liber 21 of Plats, Page 29, Ingham County Records, said point of beginning being 317 feet South of the South Line of Lot 13 of said Plat; thence North 200 feet, along the East lines of Lots 8,9 and 11 of said Plat to a point that is 117 feet South of the South line of Lot 13 of said Plat; thence East 200 feet; thence South 200 feet to a point that is 317 feet South of the South line of Lot 13 of said Plat; thence Westerly 200 feet Parallel to the South Line of Lot 13 of said Plat to the point of beginning. Together with an easement for ingress and egress described as follows: Beginning at the Northeast corner of Lot 11 of Supervisor’s Plat No. 14, Delhi Township, Ingham County, Michigan, as recorded in Ingham County Plats; thence North along the East Plat line 60 feet, more or less, to a point on the South line of Lot 13 of said Plat; thence Easterly along the South line of Lot 13, 30 feet; thence South 117 feet; thence Westerly parallel to the South line of Lot 13, 30 feet to a point on the East line of Lot 11 of said Plat; thence North along the East line of Lot 11, 57 feet, more or less, to the point of beginning of this Ingress/Egress Area description.  *Reference deed to the City of Lansing by its Board of Water and Light recorded in L. 2320, Pages 378-379 of Ingham County, Michigan deeds.

*See  EXHIBIT “ A-1”

WHEREAS, the BWL has been contacted by an adjacent property owner interested in purchasing the property for development purposes; and

WHEREAS, upon approval of the property as surplus by the Board of Commissioners, the BWL will proceed to obtain an appraisal and dispose of the property in accordance with current BWL “Property Disposal Procedures;”

RESOLVED, That the Board of Commissioners hereby declares the above described Well 83-02 Property as surplus and no longer needed for Utility purposes and approves the sale of the property in accordance with current BWL “Property Disposal Procedures.”

RESOLVED FURTHER, That the General Manager and Corporate Secretary are authorized to sign all documents necessary to dispose of this parcel, subject to approval of the BWL General Counsel.

FURTHER RESOLVED, That this sale is expressly conditioned upon compliance with the Lansing City Charter or Codified Ordinances of the City of Lansing, including approval of the sale by the Lansing City Council.

Motion by Commissioner Joseph, seconded by Commissioner Rios, to approve the resolution.

Discussion:  Mr. Novick reported that the BWL purchased this property in 1995 at a cost of $15,000 with the intent to utilize it for a well site designated as Well 83-02.  Nearby groundwater pollution from the old Gunn Road Landfill has been identified by staff and the MDEQ as a risk to this site as a future well site. A staff committee on water supply met on January 13, 2005 to evaluate the pollution risks and well development costs and determined the site to be unacceptable for a future well site.  Therefore, it is recommended that the property be declared surplus and sold in accordance with the BWL “ Property Disposal Procedure.”  The selling price will be set at an amount that will reimburse the BWL for the current appraised value of the property, BWL administrative costs, real estate fees, closing fees, etc.

Action:  Carried unanimously.

Resolution 2005-3-9

WHEREAS, the following parcel (Parcel “B”), located on the east side of Main Street and the north side of Richard Street, approximately one-half mile north of Holt Road in Delhi Township, Ingham County, Michigan, is no longer needed for the operation of the Board of Water and Light (BWL); and

Parcel “B” Description: COMMENCING AT THE 1/4 CORNER COMMON TO SECTIONS 15 & 22, T. 3 N., R. 2 W., DELHI TOWNSHIP, INGHAM COUNTY, MICHIGAN, SAID 1/4 CORNER RECORDED IN L. 8, P. 606, INGHAM COUNTY LAND CORNER RECORDATION CERTIFICATES: THENCE N 00°06’31” W 1316.21 FT. TO A FOUND SQUARE CONCRETE PLAT MONUMENT AT THE NORTHWEST CORNER OF THE “REPLAT OF BLOOMFIELD PARK”, L. 19, PP. 30-31, INGHAM COUNTY PLATS, AND BEING THE POINT OF BEGINNING OF PARCEL “B”: THENCE N 00°05’30” W 1305.65 FT. TO THE LOCALLY ACCEPTED CENTER POST OF SECTION 15, SAID CENTER POST BEING RECORDED IN L. 8, P. 603, INGHAM COUNTY LAND CORNER RECORDATION CERTIFICATES; THENCE ALONG THE SOUTH PLAT LINE OF “STERLING FARMS” AS RECORDED IN L. 6, P. 46, INGHAM COUNTY PLATS,  S 89°28’17” E 217.93 FT. TO THE N.W. CORNER OF “WEBERT PARK SUBDIVISION” AS RECORDED IN L. 8, P. 11 OF INGHAM COUNTY PLATS; THENCE ALONG THE EDGE OF “WEBERT PARK SUBDIVISION” THE FOLLOWING FOUR COURSES; S 07°11’03” E 146.19 FT. (147 FT. PLAT); THENCE ALONG A CURVE TO THE LEFT WITH A RADIUS OF 316 FT., LENGTH OF 152.64 FT., CENTRAL ANGLE OF 27°40’33”, LONG CHORD BEARING S 54°00’54” E FOR 151.16 FT. (152 FT. PLAT) TO A FOUND 1/2” IRON PIPE IN AN 8”± DIAMETER CONCRETE BASE; THENCE ALONG A CURVE TO THE LEFT WITH A RADIUS OF 884 FEET, LENGTH OF 301.96 FT., CENTRAL ANGLE OF 19°34’16”, LONG CHORD BEARING S 81°41’27” E FOR 300.49 FT. (302 FT. PLAT) TO A FOUND 3/4” IRON PIPE AT THE N.W. CORNER OF LOT 81 OF “WEBERT PARK SUBDIVISION”; THENCE S 00°12’34” E 531.17 FT. (531.40 FT. PLAT) TO THE N.W. CORNER OF LOT 74 OF “WEBERT PARK SUBDIVISION”; THENCE N 89°04’08” W 135.00 FT.; THENCE S 00°12’34” E 62.97 FT. (63 FT. DEED); THENCE S 89°04’08” E 135.00 FT. TO THE S.W. CORNER OF LOT 74 OF “WEBERT PARK SUBDIVISION”; THENCE ALONG THE WEST LINE OF “WEBERT PARK SUBDIVISION” S 00°12’34” E 442.91 FT. (443.1 FT. PLAT & DEED) TO A FOUND SQUARE PLAT MONUMENT AT THE N.E CORNER OF THE “REPLAT OF BLOOMFIELD PARK”; THENCE ALONG THE NORTH LINE OF RICHARD STREET (66 FT. WIDE) N 89°04’08” W 231.43 FT. (231.70 FT. DEED); THENCE N 00°04’08” W 150.00 FT.; THENCE N 89°04’08” W 239.72 FT. (240 FT. DEED); THENCE S 00°04’08” E 150.00 FT. TO A POINT ON THE NORTH LINE OF RICHARD STREET; THENCE ALONG THE NORTH LINE OF RICHARD STREET N 89°04’08” W 186.49 FT. (186.7 FT. DEED) TO THE SQUARE CONCRETE PLAT MONUMENT AT THE POINT OF BEGINNING OF THIS DESCRIPTION, SUBJECT TO RIGHTS GRANTED FOR THE “DIEHL DRAIN”, AND SUBJECT TO ANY AND ALL OTHER EASEMENTS AND RESTRICTIONS OF RECORD, AND EXCEPT THE FOLLOWING DESCRIBED PARCEL “A”: BEGINNING AT THE FOUND SQUARE PLAT MONUMENT AT THE N.E. CORNER OF THE “REPLAT OF BLOOMFIELD PARK”; THENCE ALONG THE NORTH LINE OF RICHARD STREET (66 FT. WIDE) N 89°04’08” W 231.43 FT. (231.70 FT. DEED); THENCE N 00°04’08” W 202.59 FT.; THENCE PARALLEL TO RICHARD STREET S 89°04’08” E 230.93 FT. TO A POINT ON THE WEST LINE OF “WEBERT PARK SUBDIVISION”; THENCE ALONG THE WEST LINE OF “WEBERT PARK SUBDIVISION” S 00°12’34” E 202.60 FT. TO THE POINT OF BEGINNING OF PARCEL “A”.

*See  EXHIBIT “ A-2”

WHEREAS, the BWL property disposal procedure specifies that local units of government be given first rights to purchase surplus properties at an amount equal to or greater than the appraised value; and

WHEREAS, Delhi Charter Township in support of park and recreational development plans has indicated its desire to purchase Parcel “B” in the amount of $29,000.00.

RESOLVED, That the Board of Commissioners hereby moves that upon execution of a Purchase and Sale agreement and a Memorandum of Understanding between Delhi Charter Township and the Board of Water & Light, declares the above described Parcel “B” as surplus and approves the sale of the property to Delhi Charter Township for $29,000.00;

RESOLVED FURTHER, That the General Manager and Corporate Secretary are authorized to sign all documents necessary to convey this parcel to Delhi Charter Township, subject to approval of the BWL General Counsel;

RESOLVED FURTHER, That this sale is expressly conditioned upon compliance with the Lansing City Charter or Codified Ordinances of the City of Lansing, including approval of the sale by the Lansing City Council.

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

Discussion.  The BWL purchased the property comprised of Parcels “A” and “B” in May of 1995 at a cost of $20,000 with the intent to utilize a portion of this property (Parcel “A”) for a well site designated as Well 84-03.  Well 84-03 has been drilled and the remaining portion on the property, Parcel “B” has been determined as unacceptable for further well development.  In May of 2003, the BWL received notice from Delhi Township that this site was being assessed $27,405.09 as its proportionate share of the Diehl Consolidated Drain Assessment.  Delhi Township contacted the BWL and recommended that the BWL sell to Delhi Township the unused portion of the property (Parcel “B”) for use as a Township park.  Since the BWL has no future identified use for Parcel “B,” it is recommended that the BWL accept the offer from Delhi Township.  An appraisal of Parcel “B” was completed in October of 2003 and Parcel “B” was determined to have a value of $20,000. The recommended selling price of $29,000 will reimburse the BWL for the appraised value of the property and the administrative costs involved in the property sale.  After the sale closing is completed, the proceeds from the sale will be used to pay the outstanding drain assessment of $27,405.09.

Action:  Carried unanimously.

UNFINISHED BUSINESS

Motion to take From the Table

Motion by Commissioner Rios, seconded by Commissioner Callen to Take From The Table the “proposed” resolution presented by the Committee of the Whole at the January 25, 2005 Board Meeting:

“proposed” Resolution Regarding the Process of

Recommending Changes to Retirees’ Pensions

Whereas, on January 11, 2005, the Committee of the Whole reviewed a summary prepared by Human Resources regarding retirees’ pension adjustments. The summary provided a history of previous pension plan adjustments and other considerations, and 

WHEREAS, this background information was requested by the Commissioners as a result of a question raised by several retirees at the November 23, 2004 Board meeting as to whether the Board of Commissioners resolved to periodically review retirees’ pensions.

RESOLVED, That BWL management may, in its discretion, review and/or recommend changes to retirees’ pensions to the Board of Commissioners.

Discussion:  Chairperson Smith stated that at the January 25, 2005 meeting, the Board consented to Lay the pending question on the Table until additional information requested from staff was received.  The issue of retiree pension adjustments was also referred to the Human Resources

Action:  Carried unanimously.

Motion by Commissioner Rios and seconded by Commissioner Joseph, to rescind the proposed Resolution.

Action:  The motion to rescind the proposed resolution was approved by the following vote:

YEAS:  Commissioners Callen, Calkins, Haggart, Joseph, Rios, Smith.

NAYS:  None

ABSENT:  Commissioner Wonch

Resolution 2005-3-10

RIVER STREET TRIANGLE PROPERTY PROJECT

Chair Robin Smith, referring to the request received during Public Comment by City Finance Director Glen Kirk, to extend by thirty (30) days the agreement between the Board of Water and Light and River Street Triangle, LLC, asked for a motion on the question to extend the agreement.

Moved by Commissioner Rios, seconded by Commissioner Haggart to rescind Resolution 2005-1-5, “Resolution to Require Payment of Non-Refundable Option Fee or to Issue Notice of Cancellation for Purchase Agreement Regarding Former Coal Storage Property at 312 North Grand,” approved at the last meeting, January 25, 2005.

Discussion.   General Manager Novick reported that by rescinding Resolution 2005-1-5, all terms, conditions and timetables established in the agreement dated May 17, 2002 remain the same.  He noted that the earlier resolution approved in January required a non-refundable $100,000 deposit as a condition of the developer retaining its option through June 2005, which is the expiration date.  The deadline for paying the deposit was March 29, 2005.  Mr. Novick pointed out that the agreements with the City were amended November 1, 2004 to extend the contracts to June 15, 2005 to give the developer additional time to complete the lease negotiations.  Commissioner Joseph expressed concern with the dormant state of the project over the past three to four years.  He also expressed disappointment that the developer left the meeting before the Commissioners discussed the request made by the City and the developer.  Following lengthy discussion, the Commissioners agreed to give the City’s request consideration and then address this matter again after thirty days. 

Action:  Carried unanimously.

NEW BUSINESS

TRI-COUNTY REGIONAL PLANNING COMMISSION PRESENTATION

Gail Peterson, BWL Engineer/Specialist of Environmental Engineering, reported that she and Bill Maier, Engineer/Specialist of Environmental Engineering, have been working on the Groundwater and Wellhead Protection Program with the City of Lansing.  The BWL has received state grants used to promote groundwater educate relative to wellhead protection and groundwater protection in the Lansing area.  Ms. Peterson introduced Christine Spitzley, Environmental Program Planner for the Tri-County Regional Planning Commission who presented a detailed presentation on wellhead protection efforts.  She reviewed the timeline over three decades of water quality starting with the 208 Water Quality Plans in 1970, the start of the Groundwater Management Board in 1980, the Groundwater and Wellhead Protection in 1990 and the Storm Water/Phase II in 2000.  Ms. Spitzley reported on things the Tri-County Regional Planning Commission has done in the areas of public education and wellhead protection ordinances, and contaminant source inventory and abandoned well survey/closures.  At the conclusion of her presentation, Ms. Spitzley thanked the Board for the opportunity to speak on the important issue of groundwater and wellhead protection.  She commended the Board and BWL staff for their generous support and participation in wellhead planning.  She noted that the Lansing area is considered to be a national leader in groundwater protection efforts.

BWL Receives United Way Campaign Plaque.

General Manager Novick reported that BWL employees dug deep into their pockets for the second year in a row to support the United Way.  He congratulated Co-Chairs Jim Dravenstatt-Moceri, representing the Bargaining unit, and Calvin Jones, representing the Non-Bargaining unit, for their leadership.  Mr. Dravenstatt-Moceri reported that the campaign goal was $96,000 and a total of $96,652.85 was raised.  He acknowledged the team and representatives who contributed their time to assure the success of the campaign.  He also presented the Board with a plaque, which says:  “The Lansing BWL with sincere appreciation for your outstanding support to United Way in the community.”  The Commissioners applauded the United Way representatives and all employees for their outstanding support.

BWL a Silver Bells Signature Sponsor.

General Manager Novick reported that Silver Bells is a major event in the City of Lansing, which starts off the holiday and winter season.  The BWL is a signature sponsor with BWL employee involvement in the lighting of the holiday tree in front of the State Capitol and two festive floats.  Due to the rainy weather, 50,000 people attended the event as compared to 80,000 the previous year.  Mr. Novick noted that the Arts Council of Greater Lansing has donated to the BWL a beautiful digitally enhanced picture of the Silver Bells celebration of lights.  The picture will hang in an appropriate place in the main office building.

Commissioner Smith commented that Silver Bells is a great family event.  She thanked BWL volunteers for their contribution in making this event a success

Resolution 2005-3-11

ELECTION OF THE CHAIR PRO TEM

Chair Robin Smith announced that the election of a Chair Pro Tem for the remainder of this fiscal year was now in order.  She asked for nominations.

Commissioner Callen nominated Commissioner Tim Haggart, but Commissioner Haggart respectfully declined it.

Moved by Commissioner Rios and seconded by Commissioner Calkins to nominate Commissioner Ifield Joseph.

There being no other nominations, the Chair closed nominations.

By unanimous vote, Commissioner Ifield Joseph was elected Chair Pro Tem for the remainder of this fiscal year ending June 30, 2005.

RESOLUTIONS

Resolution 2005-3-12

Resolution Honoring NANCY W. DUNCAN

WHEREAS, in recognition of her outstanding service as a Commissioner of the Lansing Board of Water and Light, it is with respect and appreciation that we recognize Nancy Duncan as she completes four and one-half years of dedicated service as a public servant on this Board; and

WHEREAS, Nancy Duncan was appointed to the Board as an At Large Commissioner on August 2000 and later assigned to the Second Ward in 2004.  She was elected Chair Pro Tem in 2002 and held that office two times.  She became Vice Chair in 2004 and served in that capacity for one year.  She also chaired the Finance Committee between 2001 and 2005 while being a member of the Executive Committee since 2002 and Nominating Committee in 2000 and 2001; and

WHEREAS, we are sincerely grateful for Nancy’s outstanding vision, leadership and intelligence.  The people of the Lansing community and the employees of the Board of Water and Light have benefited from her long hours and hard work on this Board.  She never lost sight of the goal of assuring that electric, water, steam and chilled water are reliable and delivered at the lowest price possible.  Nancy played a pivotal role in the success of the Board of Water and Light by sharing her analytical ability and broad knowledge in evaluating financial management systems.  She actively monitored the utility’s organizational performance to achieve excellence in rates, reliability, and service; and

RESOLVED by the Board of Water and Light Commissioners, That the members of this Board honor and thank Nancy W. Duncan for her distinguished service.  In regular session this 22^nd day of March 2005, we wish Nancy and her husband, Ron, and family the very best and well-deserved happiness and fulfillment.

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

Discussion:  Commissioner Callen commented that the Commissioners and the BWL benefited from the financial experience Nancy Duncan brought to the Board.  Commissioner Smith noted that the Commissioners plan to honor Ms. Duncan at a recognition dinner.

Action:  Carried unanimously.

RESOLUTION BY THE HUMAN RESOURCES COMMITTEE

Resolution 2005-3-13

BOARD POLICY ON CHANGES TO
DEFINED BENEFIT PLAN PENSIONERS

WHEREAS, the Board of Commissioners, at its January 25, 2005, meeting, tabled a Resolution from its Committee of the Whole regarding Defined Benefit Plan cost of living considerations and recommended the issue to its Human Resources Committee for further study and discussion; and,

WHEREAS, the Board of Commissioners’ Human Resources Committee received written and public comments regarding Cost of Living Adjustments to the pensions of BWL Defined Benefit Plan pensioners; and,

WHEREAS, the Board of Commissioners’ Human Resources Committee reviewed the records provided them by the public and staff regarding Defined Benefit cost of living considerations, sections of agreements between BWL and IBEW Local 352, investment summaries of the Defined Benefit Plan and Post-Retirement Benefit Plan (VEBA), historical retiree health care expenses, and other information concerning the financial impact of giving to Defined Benefit pensioners a Cost of Living Adjustment; and,

WHEREAS, the Board of Commissioners’ Human Resources Committee sought and received legal opinion from the BWL General Counsel regarding the legal obligation of the Board of Commissioners to consider increases.

RESOLVED, That neither the Board of Commissioners nor the BWL is legally obligated to review post-retirement pension increases for Defined Benefit Plan pensioners;

RESOLVED FURTHER, That the Board of Commissioners has given consideration for a Cost of Living Adjustment to Defined Benefit Plan pensioners and determined that an adjustment is not currently prudent.

RESOLVED FURTHER, That the issue be reviewed again by Management within 30 days of Board of Commissioners’ approval of the next BWL-IBEW Contract considering the BWL’s projected revenues and expenses.

RESOLVED FURTHER, That Management compile additional information for Board of Commissioners’ consideration that might be useful in evaluating the prudence of any future adjustment.

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

Action:  Carried unanimously.

RESOLUTION BY THE FINANCE COMMITTEE

Resolution 2005-3-14

INTERNAL AUDIT CHARTER

RESOLVED, That the Board of Commissioners hereby approves the Audit Charter, appended to these minutes as Attachment A, which conforms with the International Standards for the Professional Practice of Internal Auditing.  The Internal Audit Charter was submitted and discussed at the Finance Committee meeting on February 15, 2005.

Motion by Commissioner Calkins, seconded by Commissioner Rios, to approve the resolution.

Discussion.  Internal Auditor Glenn Holloway stated that the purpose of the Internal Audit Charter is to establish the mission, purpose, independence, authority, responsibility and scope, and standards of the Internal Auditor.  It puts the emphasis on improving the effectiveness of risk management, control, and governance processes.

Action:  Carried unanimously.

RESOLUTION BY THE FINANCE COMMITTEE

Resolution 2005-3-15

INTERNAL AUDIT PLAN

RESOLVED, That the Board of Commissioners hereby approves the Internal Audit Plan, appended to these minutes as Attachment B, for the remainder of Fiscal Year 2005.  The Internal Audit Plan was submitted and discussed at the Finance Committee meeting on February 15, 2005.  The audit plan is subject to slight modification pending special projects that may require priority attention.

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

Discussion:  Internal Auditor Holloway reported that the Internal Audit Plan is based on the risk assessment from comments received by management and the commissioners.  He noted that the plan is flexible and may change as circumstances require.  The Commissioners acknowledged that some adjustments might be necessary due to urgent projects.

Action:  Carried unanimously.

GENERAL MANAGER’S REMARKS

December Customer Survey.  General Manager Novick reported that an executive summary of the Customer Survey conducted in December was included with the Board meeting packet.  The survey specifically measures the effectiveness of communications activities over the last year, although it also contains questions regarding overall satisfaction and favorability, which are a staple of the spring survey.  He noted that given some of the negative publicity directed toward the BWL over the last several months, survey results were very encouraging, with overall satisfaction and favorability remaining steady.  The survey provides direction for our communications activities in community sponsorships and activities, radio and TV campaign, lead service lines, and the Connections newsletter.

Addy Awards.  General Manager Novick reported that the Lansing Advertising Club held its annual awards ceremonies on March 11^th and work performed for the BWL over the past year was heavily represented.  Mr. Novick congratulated Pace & Partners, the BWL’s advertising agency, for taking top honors with nine awards, including five for work performed on BWL projects.  He also commended Queue Creative, formerly known as The Foresight Group, for winning three awards for the corporate brochure produced for the BWL last year.

Commissioner Rios echoed Mr. Novick’s comments and noted that it is a real tribute for the hard work and recognition these two local advertising agencies have achieved.  Commissioner Smith commended John Strickler and staff for responding to the Commissioners’ request for a fresh approach and focus, such as having a recognizable theme, The Lugnuts “Plug into Lansing” TV spot.

COMMISSIONERS’ COMMENTS

Chair Robin Smith announced that she is appointing Commissioner Ron Callen chair of the Finance Committee for the remainder of this fiscal year ending June 30, 2005, to fill the position held by former Commissioner Nancy Duncan who resigned as of February 28, 2005.

Chair Smith also appointed an ad hoc committee to review the Board’s Rules of Procedure for updating.  Committee members are:  Commissioners Calkins, Rios, Wonch, and Smith.

ABSENCES

On motion by Commissioner Rios and seconded by Commissioner Haggart, that the absence of Commissioner Wonch be excused.

Carried unanimously.

PUBLIC COMMENTS

There were no public comments.

ADJOURNMENT

On motion by Commissioner Joseph, seconded by Commissioner Rios, the meeting adjourned at 7:34 p.m.

/s/ Mary E. Sova, Secretary
Filed with Lansing City Clerk
April 5, 2005