FINAL – APPROVED BY BOARD 7/26/055

MINUTES OF THE BOARD OF COMMISSIONERS' MEETING

LANSING BOARD OF WATER AND LIGHT

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Tuesday, May 24, 2005

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

The Secretary declared a quorum present.

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

APPROVAL OF MINUTES

Motion by Commissioner Calkins, seconded by Commissioner Haggart, to approve the minutes of the regular meeting held March 22, 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.

No persons spoke.

COMMUNICATIONS 

Letter from Donald Hillman, 750 Berkshire Lane, East Lansing, regarding EMF (Electromagnetic Fields) in homes and current on ground wires entering homes.

Referred to staff for follow up and response back to the Board.

COMMITTEE REPORTS

Resolution 2005-5-1

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, at 12:00 noon, Tuesday, April 12, 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 Robin Smith.  Absent was Commissioner Wonch.

public comment

There was no public comment.

non-bargaining skill family range adjustments
and performance increase matrix for fiscal year 2006

Wendy Bradley, Human Resource Consultant for Employee Relations presented the recommended Skill Family Range Adjustments and Performance Increase Matrix for FY 2006.  She reported that the BWL annually reviews its skill family ranges for non-bargaining employees in an effort to keep salaries in line with comparable positions in a competitive marketplace.  Rates of pay for benchmark jobs in each skill family were examined in order to offer competitive salary ranges for FY 2006.  She noted that the skill family range plan was designed to offer employees salaries competitive with the market, with base pay capped at market-mid-point rates (and capped at 10% above the market mid-point for employees hired before July 1, 2000).  Ms. Bradley discussed how the information from 27 different surveys was analyzed.  She also discussed how range adjustments are determined for the eight BWL skill families.  The Commissioners asked for clarification on the performance increase matrix and discussed in detail the level of “needs improvement.”

(Commissioner Smith entered the room at 12:25 p.m.)

Following discussion, the Human Resources Committee voted as follows authorizing the General Manager to present a resolution at the next regular meeting on recommended non-bargaining skill family range adjustments and the performance increase matrix for FY 2006.

internal auditor’s  six-month performance increase

Motion was made by Commissioner Smith and seconded by Commissioners Rios that the Human Resources Committee convene in closed session to discuss the Internal Auditor’s six-month performance as permitted under Section 8 of the Open Meetings Act (MCL 15.268 regarding closed sessions and permissible purposes). (12:35 p.m.).

Approved by roll call vote as follows:

The Committee reconvened in open session at 1:25 p.m.

Internal Auditor Glenn Holloway advised the Committee that he would like to conduct a needs assessment on the use of an intern accountant to assist him with internal audits and special projects.  The intern would be helpful for detailed audit testing and documentation of various business processes.  He suggested seeking the help of local colleges and/or universities to assist him in placing an intern accountant.  The Committee agreed that this would be a worthwhile endeavor and told Mr. Holloway to proceed to evaluate this option.

Resolution 2005-5-2

The Human Resources Committee reports that it has discussed the six-month performance appraisal for Internal Auditor Glenn Holloway.  The Committee unanimously recommends the following:

RESOLVED, That the Board approve a 5% performance increase effective April 1, 2005 for Internal Auditor Glenn Holloway in accordance with the employment agreement entered into between the Board and Mr. Holloway at the time of his employment.

There being no further business, the Human Resources Committee adjourned at 1:35 p.m.

Respectfully submitted,
Tim Haggart, Chair
Human Resources Committee

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

Action:  Carried unanimously.

Motion by Commissioner Haggart, seconded by Commissioner Wonch, to approve the Committee’s recommendation. (Resolution 2005-5-2)

Action:  Carried unanimously.

Resolution 2005-5-3

COMMITTEE OF THE WHOLE REPORT

The Committee of the Whole met on Tuesday, May 24, 2005 at 4:30 p.m. to discuss the proposed agreement with River Street Triangle, LLC.

Chair Pro Tem Ifield Joseph called the meeting to order and asked the secretary to call the roll.  The following members were present:  Commissioners Ron Callen (by speaker phone), Gary Calkins, Tim Haggart, Joseph Graves, Ifield Joseph, Santiago Rios, Robin Smith, and Nancy Wonch.

Public Comment

Patrick Reid, Attorney for River Street Triangle, LLC, spoke on the proposal discussed with the Commissioners at the May 3, 2005 Committee of the Whole meeting.  At that meeting, staff was asked by the Committee to investigate with the appraiser if the estimated cost of $250,000 to relocate overhead facilities at the 312 N. Grand Avenue site was already deducted from the appraised price.  Mr. Reid stated that the appraiser reported that $250,000 had not been deducted from the estimate for moving the overhead utilities.  He noted that General Manager Novick has indicated there should be no reduction in the purchase price negotiated on May 3rd because this expense is reimbursable from Brownfield funds.  Mr. Reid said that if the Board maintains this position, then the negotiated deal would come “off the table.”  He explained that the developer plans to use Brownfield funds to cover expenses such as baseline environmental assessments, cleanups, and other matters related to the property.  He reiterated that the developer does not intend to allocate Brownfield funds to relocate utilities.

AGREEMENT WITH RIVER STREET TRIANGLE, LLC

General Manager Novick called attention to a memo, dated May 23, 2005, that he and General Counsel Amy Cavanaugh sent to the Board regarding the proposed amended and restated agreement with River Street Triangle.  The memo details events from 2001, when the Board entered into an agreement with River Street Triangle and follows activities to the present.  He referred to a policy adopted by the Board in 2004 that addresses the sale or disposal of surplus property at the appraised value.  He noted that the fundamental issue is determining the appraised value.  Once that issue is clarified, the Board has the discretion to decide as to whether it wants to be consistent with the policy or make an exception.

Commissioner Graves stated that he appreciated the time staff put into this issue and the comments and recommendations that were forwarded to the Commissioners.  He said that from his perspective, the Board received what he considered to be a reasonable and fair offer from the developer at the last Committee of the Whole meeting on May 3, 2005. 

The only outstanding issue in his mind was the appraisal clarification since the appraiser acknowledged the question about the $250,000 to remove the utilities, which the developer agreed to split with the BWL.  Commissioner Graves noted that in working with similar transactions, the question of how the buyer intends to use a grant or other financing option is the concern of the buyer and not the seller.  The buyer has the option to apply those funds in a variety of ways.  He recommended that the Board stand by the proposed amended agreement and proceed to close on this deal.  With respect to the policy on the disposal of surplus property, Commissioner Graves said he does not believe the Board would be making an exception to the policy in this instance by approving the amended agreement since the policy gives the Board some discretion when dealing with governmental entities.  He said that in this case, it is a tri-party transaction that brings revenues back to downtown Lansing through contributions to the tax base and will help stimulate the after 5 p.m. downtown business traffic.

Commissioner Rios agreed with Commissioner Graves.  He gave an overview of the process of this financial transaction based on a contract.  He discussed the issues resolved at the May 3rd Committee of the Whole meeting and pointed out that the sole unresolved matter was who would bear the cost of relocating the utilities.  The purchaser presented his position from a contractual and business standpoint signifying that the burden of relocating the utilities should be borne by the seller.  Subsequently, a compromise was reached on May 3rd between the seller and the purchaser to share the $250,000 cost of relocating the utilities, and a draft resolution to that effect was approved with a contingency placed on the resolution as to whether or not the appraiser had a different viewpoint as to how that cost should be allocated.  Commissioner Rios pointed out that the appraiser’s recent letter clearly states the purchaser should only be expected to pay 1%-2% of the total purchase price for relocating utilities.  He urged the Board to approve the transaction because the financial aspects of this deal are positive for the BWL, the City of Lansing and ratepayers.

Commissioner Callen stated that his view is slightly different.  He said that his concern was registered at the May 3^rd Committee of the Whole meeting because staff was not comfortable with the information the developer presented to them on the same evening as the meeting.  He noted that he voted for the compromise on the basis of the information presented at that meeting.  He added that after reading Mr. Novick and Ms. Cavanaugh’s May 23^rd memo and learning that the appraiser has indicated that the cost of relocating the utilities can be recovered from elsewhere, the value of the property (Parcel A) should stand at the appraised value.  He stated that it is not appropriate for the Board to advance those costs on a compromise; consequently, the appraised value should not be discounted.  He agreed with earlier comments concerning the positive impact this development project would have for the City of Lansing because what is good for the City is good for the BWL.

Chair Smith stated that the remaining issue at the last Committee of the Whole meeting was the appropriate price for the property in order to reach an agreement to move the deal forward.  She stated that she is satisfied a fair market price has been reached and noted that it is not the Board’s role to determine how Brownfield funds should be applied.  The developer should have the discretion to use Brownfield funds in whatever way it will benefit the development project.  She concurred with Commissioner Graves’ comments regarding the Board’s discretion to implement its policy on disposition of surplus property as it relates to the use by governmental entities.  Chair Smith said that she plans to support the amended agreement because this project will benefit the City of Lansing as well as the BWL.

Commissioner Wonch expressed concern with the proposed compromise of sharing the cost to move the overhead utilities.   She stated that the Board will be voting to increase electric and water rates at the regular meeting this evening, and approval of the compromise would send the wrong message to the ratepayers of this community.  She noted that the developer has the option to recover $250,000 from Brownfield funds for relocating the overhead utilities.  She said it is her opinion that the BWL’s policy on Disposition of Surplus Real Property is not being followed.

Commissioner Calkins asked if the developer has applied for Brownfield Project funds to reimburse for utility relocation.  Mr. Novick stated that his understanding is application has not been made by the developer for this item, although the relocation of utilities is an eligible item for Brownfield credits.  Following discussion, Commissioner Calkins took the position that he believes the appraised price should be paid by the buyer and the buyer should request the amount needed to move the overhead utilities from the Lansing Brownfield Redevelopment Authority.  He stated that the BWL should derive as much money as possible from the property sale.

Commissioner Joseph stated that he plans to support the amended agreement with River Street Triangle.  He said that he is convinced the Board received sufficient information regarding this property transaction in order to make an informed decision.  Also, the letter received from the appraiser answered the question that the buyer would not typically be required to spend more than 1%-2% of the total purchase price for relocating the utilities.

Commissioner Haggart asked about the appraised value of the 75-foot of additional property.  Mr. Novick stated that this strip was appraised at an average price of $202,500. 

Following discussion, it was agreed to combine the cost of Parcel A and the 75-foot strip into one purchase price.

Moved by Commissioner Rios, seconded by Commissioner Graves to forward to the Board the Committee’s recommendation on the approval of amending the Purchase Agreement between the Board of Water and Light and River Street Triangle, which is to include the following negotiated items:

·        Total Purchase Price of property located at 312 North Grand = $1,032,500.00

·        The developer is to assume all costs to raze the building on the property

·        The developer is to pay to move overhead and underground utilities

·        The developer is to pay a non-refundable $100,000.00 deposit within five days after the Board approves this transaction.

The motion was adopted by the following vote:

(See Board action on May 24, 2005, Resolution #2005-5-10)

There being no further business, Commissioner Rios moved, seconded by Commissioner Graves, on the adjournment of the meeting (5:28 p.m.).

Respectfully submitted,

Ifield P. Joseph, Chair Pro Tem
Committee of the Whole

COMMITTEE OF THE WHOLE REPORT

The Committee of the Whole met at the Executive Offices, Lansing, beginning at 5:30 p.m., Tuesday, May 3, 2005.

Chair Pro Tem Ifield Joseph 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, Joseph Graves, Ifield Joseph, Santiago Rios, Robin Smith, and Nancy Wonch.

Chair Pro Tem Ifield Joseph welcomed returning Commissioner Joseph Graves to the Board.  Commissioner Graves stated that he had the opportunity to serve on this Board from 1996 to 1998 when he left to become Chief of Staff for the City of Lansing, and he looks forward to working with the Commissioners.

public comment

There were no public comments.

agreement with river street triangle, llc

General Manager Sanford Novick presented an update on the number of discussions held over the past several weeks between the BWL, City officials, and the developer (River Street Triangle, LLC) concerning the agreement on the sale of the BWL property located at Shiawassee Street and Grand Avenue.  Present to address specific project issues currently under negotiations were Glenn Kirk, Finance Director for the City of Lansing; Joel Ferguson, a principal of River Street Triangle, LLC; and Patrick Reid, attorney for River Street Triangle, LLC.

Mr. Kirk stated that having affordable housing in a prime downtown location is key to the success of economic development in the City.  The proposed residential housing project is important for the City to attract people downtown.  Mr. Ferguson gave an overview of the riverfront project known as the Triangle and BWL/Coal Storage Property, which culminated into an agreement between the City of Lansing, the Board of Water and Light and River Street Triangle, LLC, which linked two parcels together.  Mr. Ferguson noted that there has been the assumption that the Triangle Project at Kalamazoo Street and Grand Avenue would be built first.  However, the developer has decided to move up the housing phase of the development located on the BWL property at Shiawassee Street and Grand Avenue with a June 2005 start date.  Mr. Reid referred to a revised “Amended and Restated Agreement to Sell Between the Board of Water and Light and River Street Triangle, LLC, Regarding Sale of the Property Located at the Corner of Shiawassee Street and Grand Avenue.” to replace the first agreement dated May 2001.  Mr. Reid noted that the developer has determined that the south half (known as Parcel B) of the property included in the original agreement is no longer needed; therefore, it is being deleted in the revised amended and restated agreement.  This leaves the north half of the property, which was appraised at a market value of $955,000 for the housing development, subject to an adjustment to be presented later.  Mr. Reid noted that the appraisal excluded a 75-foot strip of land on the north side of the property. 

Commissioner Rios entered the meeting at 5:45 p.m.

Mr. Reid presented a handout that explained River Street Triangle’s justification seeking to adjust the appraised value of Parcel A, located on the southeast corner of North Grand Avenue and East Shiawassee Street.  The appraised market value of Parcel A minus the 75-foot strip was determined by the appraiser to be $1,095,000.  However, to achieve this value, the existing building would have to be razed, estimated to cost $141,000.  Mr. Reid pointed out that if a purchaser bought the property for $955,000 and paid $141,000 for razing the building, the purchaser would have a parcel of property worth $1,095,000.  Mr. Reid further noted that the cost of razing the building should have included the cost for relocating the utilities at an additional cost of $250,000.  He added that this amount would have to be subtracted from the value given by the appraiser of $955,000; consequently, the actual appraised value should be $705,000.  Mr. Reid stated that this would mean that if a purchaser bought the property for $705,000 from the BWL and spent $141,000, and another $250,000 for utility relocation, then the purchaser would have a parcel of property valued at $1,095,000, as appraised.  He determined the value of the property as follows:

Mr. Reid stated that it was the purchaser’s understanding the BWL would be responsible for removing and relocating any underground utilities on the site (Parcel A), except for the 75-foot utility easement granted to the City of Lansing on the north side of Parcel A.

General Manager Novick and General Counsel Amy Cavanaugh stated that they had not seen Mr. Reid’s handout concerning the “Adjustment to Appraised Value” until now at this meeting.  Ms. Cavanaugh stated that her understanding from the original agreement was that the purchaser had assumed the cost of removing and relocating the above ground utilities.  She asked Mr. Reid if he was proposing to change that condition in the agreement.  Mr. Reid responded that it was his understanding the BWL, as the seller, would be responsible for the relocation of the utilities.  Commissioner Wonch asked if it was correct to say that the purchaser would agree to pay the BWL $705,000 and $141,000 to raze the building.  Mr. Reid agreed and commented the purchaser would accept having the BWL perform the utility removal and relocation work based on an agreed upon allowance.

General Manager Novick stated that he understood the issue was about the payment to relocate underground utilities, and that the overhead utilities would be the purchaser’s responsibility.  Mr. Reid acknowledged that he had previously introduced that proposal, however, it was the purchaser’s assumption that the BWL was responsible for the above ground utilities.  He stated that a provision to put the underground utilities back on the BWL’s obligation was recently added the last time the BWL met with the developer and the City to discuss the proposed amended and restated agreement.  Ms. Cavanaugh referred to Section 101.C of the 2001 agreement, which states “…after demolition, the Purchaser shall be responsible, at no cost or expense to the Seller, for maintenance, restoration, relocation and installation of utilities, necessary to serve the building adjacent to the Phase I Site and commonly known as the Stackable building.”  Mr. Reid stated that their understanding was that if there was going to be a cost in razing the building, they would assume that cost.  He noted that after reviewing a BWL memo delivered to him on April 29^th outlining costs to remove and relocate the utility facilities necessary to serve the Stackable building, such as streetlights, traffic lights, and abandoning water and steam service lines, the costs went beyond what they anticipated.  Mr. Reid further noted that it was assumed the relocation and reconnection of utilities would be less complex, hence, $250,000 of utility work is considered expensive.   It was presumed that the appraisal assumed that the Board of Water and Light would relocate the utilities.

Commissioner Calkins suggested reviewing this matter at a later date once staff has sufficient time to review the new proposal submitted by the developer.  Commissioner Callen concurred and stated that he was not comfortable making a decision at this time because staff has raised concerns over their understanding of what the original arrangement was and what the current offer is.  He indicated that he would like to hear from staff once they have an opportunity to clarify some of the issues raised.  Commissioner Joseph expressed concern with the developer bringing information to the meeting and asking for a decision on the same day.  Commissioner Smith stated that she was comfortable with the way the amended and restated agreement was written, however, her main concern was how to divide the cost to relocate the utilities and also restore the utilities necessary to serve the Stackable building. 

General Manager Novick stated that from his point of view, Parcel A needed to be sold at the appraised price and the issue of who pays for underground utilities was still up for negotiation.  Since the original agreement was negotiated prior to his employment with the BWL, he does not know what the original intent was.  Although not discussed, it was his understanding that the overhead utilities had been there and addressed all along.  The language in the agreement seemed clear and based on standard utility practice.  Mr. Novick pointed out that it was recently discovered the Parcel A description differs from the appraisal description by approximately 20,000 square feet (75-foot easement area); as a result, the developer was notified and it was agreed to let the appraiser conduct a separate valuation on that strip of land.  The developer is willing to accept the appraised value based on an agreed upon formula. 

Following lengthy discussion, Mr. Reid stated that in the spirit of resolving the misunderstanding with the proposal, he would accept the counter offer suggested by Commissioner Joseph to split the cost for the relocation of utilities with a cap on that number.  General Manager Novick recommended including a contingency for the appraiser to clarify whether the $955,000 appraised price included the assumption that the BWL would relocate the utilities to the Stackable Building.  The Commissioners concurred with seeking clarification to determine if the intent was to layer in the cost to relocate the overhead utilities.  Commissioner Rios stated that he believes it is in the BWL’s best interest to move forward with this transaction particularly since a concession has been made by the Purchaser in the amount of $125,000 to divide the cost of relocating the utilities, which is a reasonable approach.  He noted that the question of how the appraised value was determined could be argued for months or years.

It was moved by Commissioner Rios, seconded by Commissioner Smith to forward a formal resolution to the Board on the approval of the amended and restated agreement with River Street Triangle, LLC to purchase the BWL property, known as Parcel A, located at Shiawassee Avenue and North Grand Avenue for a purchase price as follows:

                                                 
The total payment of $830,000 is subject to clarification from the appraiser as to whether or not the appraisal assumed that the Board of Water and Light would pay to relocate overhead utilities.

Aye:                 Callen, Calkins, Graves, Haggart, Joseph, Rios, Smith, Wonch

Nay:                 None

Absent: None

impression 5 science center project

Communications Director John Strickler introduced John LeFevre, President of the Impression 5 Science Center.  Mr. LeFevre thanked the Board of Commissioners for their support of the Impression 5 Water Room, which has been a popular exhibit that serves over 75,000 people annually and continues to grow in popularity.  He introduced Eric Larson, Executive Director of Impression 5.  Mr. Larson reported that since the opening of the Water Room in 2001, the staff of Impression 5 has been consistently requesting feedback from teachers, parents and kids about the effectiveness of the exhibit.  While the exhibit as a whole has been very successful, the staff has identified a number of factors that they believe will greatly improve the visitor’s learning experience.  In response to feedback received, Impression 5 proposes to create several new components to Phase #1, the existing space.  A Phase #2 exhibit would contribute to children’s understanding of hydrology, propulsion, buoyancy, construction of plumbing systems and other scientific principles associated with water.  Cyrus Miller, Exhibits Officer of Impression 5 was introduced who then explained the planned changes to the Water Room using a hands-on exhibit for the Commissioners to view.  Mr. Miller reported that Phase #2 would be an expansion of the existing space with the addition of more water-related components and an opportunity to explore more complex ideas such as underground utilities, groundwater and water transport.  General Manager Novick stated that the Impression 5 Science Center is very impressive and that a BWL sponsorship of Phase #2 at a cost of $21,000 would be a very positive capital investment in education for this community. 

There was discussion on how the BWL would be recognized for the sponsorship.  Mr. Larsen told the Commissioners that the BWL would be prominently recognized within the exhibit area and on their new sponsorship recognition board that is currently being designed.  Recognition in all related marketing materials and advertisements would also be arranged.  Following discussion, the Commissioners unanimously endorsed the sponsorship proposal. 

It was moved by Commissioner Smith, seconded by Commissioner Wonch to authorize the General Manager to bring forth a resolution to the Board on the corporate sponsorship of the Impression 5 Phase #2 water exhibit.

Aye:                 Callen, Calkins, Graves, Haggart, Joseph, Rios, Smith, Wonch

Nay:                 None

Absent: None

Fiscal Year 2006 Financial Plan and Preliminary Budget

Senior Vice President of Finance and Administration Dennis McFarland reported that FY 2006 will be a challenging year for the BWL.  He noted that since his last financial report to the Board in March 2005, significant cost increases have transpired due to inflation in the areas of labor and health care costs for both existing and retired employees.  Further, the recently announced early shutdown of two General Motors (GM) Lansing Car Assembly plants in the City of Lansing will adversely affect the BWL’s sales forecast at least until the two new plants in Delta Township come on line at the end of 2006. 

Mr. McFarland reviewed the FY 2006 financial goals.  He stressed that the BWL’s credit quality is an indication of our financial strength.  The BWL is currently rated AA by all the major rating agencies; however, this rating was assigned in 2003 at which time our financial strength was better than it is today.  He noted that liquidity does remain strong in the current financial plan; however, cash reserves accumulated over the years will be used to mitigate the level of rate increases that need to be requested.  It is estimated that for FY 2006, $16 million of the cash reserves will be used, which is consistent with the BWL’s strategic plan.  This takes advantage of the initially strong financial position that the BWL is in.  Mr. McFarland stated that the BWL currently has a rate advantage in comparison to electric bills from Consumers Energy of approximately 14%.  Consumers Energy has a rate increase pending before the Michigan Public Service Commissioner, significantly more than what the BWL is proposing.  He also reported that BWL strives to use capital in the most efficient and appropriate manner to support the maintenance and expansion of facilities.  The BWL has been burdened by costs associated with the CSO project and the accelerated lead replacement project.  He also said that the BWL’s goal is to maintain financially independent utilities; namely, electric, water, steam and chilled water.  It is the intent that all four of those utilities should be independent on both an income basis and cash basis, and that, in part, is the reason for the differential rate increase being requested between electric and water.

Mr. McFarland reported that the forecast for FY 2006 includes the proposed rate increases for water and electricity.  He noted that net income figures would be dramatically lower without the increases.  Also, the significant difference between the forecast reported at the March Committee of the Whole meeting was due to electric and rate increase proposals having been set in motion before the GM plant closings were announced. 

Mr. McFarland compared FY 2005 with the FY 2006 forecast:  The effect of lower retail electric sales due to GM plant closings will be offset by higher wholesale sales.  General Manager Novick emphasized that participating in the wholesale market can be a risky venture, thus the BWL intends to stay out of the wholesale market and not become dependent on it.  Staff will continue to look for new revenue streams, but challenges are anticipated.

 (Commissioner Callen left the Committee of the Whole meeting at 7:05 p.m.)

Commissioner Graves raised a procedural concern with regard to the proposed rate increases that are part of the FY 2006 Budget presentation.  He stated that to take informal action as a committee on the budget that includes the proposed rate increases prior to the public hearing would send the wrong message.  He said that the public has a right to express their concerns and present their issues regarding the rate increases at the May 10^th public hearing.  Commissioner Rios agreed and remarked that the proposed budget should be part of answering the question as to why the rate increases are needed.  He stated that the public hearing would provide staff an opportunity to present the rationale for proposing the increases in electric and water rates.  The public would then be given a chance to comment on the proposal at the hearing.  Commissioner Calkins asked if an alternative budget has been prepared in the event the rate increases are not approved.  Mr. McFarland responded that presentations previously made to the Board from December 2004 through March 2005 clearly demonstrated the consequences without rate increases.  Commissioner Wonch noted that the results would be worse now because of recent GM plant closings.  Mr. McFarland reminded the Commissioners that the Charter requires the Board to adopt its annual budget by June 1 and filed with the City Clerk within ten days after adoption.

(Commissioner Rios left the Committee of the Whole meeting at 7:15 p.m.)

Following lengthy discussion, the consensus was to defer the FY 2006 Budget discussions until after the Public Hearing.  The proposed budget will be presented at the next Board meeting after the recommended rate increases are considered.

(Commissioner Haggart left the Committee of the Whole meeting at 7:28 p.m.)

Rules and Regulations for Utility Services

Senior Vice President of Operations Bill Cook introduced Director of Engineering Doug Wood who presented the annual update to the Rules and Regulations for electric, water, steam and chilled water, including fees and charges.  A summary of the recommended FY 2006 changes was presented as follows:

Electric, Water and Steam and Chilled Water

·        Revision of Rule 7.4 “Account Security Deposits” to strengthen the ability to collect a deposit for service when there is lack of credit history established with the Board of Water and Light.

·        A “Connect Fee” was established for customers requesting their service turned on after normal business hours and on weekends or holidays.

·        Updated fees and charges.

·        Several minor housekeeping issues to format and consistency of text.

Electric

·        A statement to require Board approved terminations when connecting customer cable to Board owned transformers was added to Rule 11.6 “Commercial and Industrial Services.”

Water

·        A definition was added to define “Meter Set.”

·        Modification to “Customer Connection to Board Facilities” to clarify customer responsibility at the outlet of Meter tile or manhole utilizing the Meter Set definition. (11.3.B)

Steam

·        No significant changes.

Chilled Water

·        No significant changes.

It was moved by Commissioner Calkins, seconded by Commissioner Smith to authorize the General Manager to present a resolution at the next Board meeting on amending the Rules and Regulations for Electric, Water, Steam and Chilled Water Services, including fees and charges for Electric and Water Services, with an effective date of July 1, 2005.

Aye:                 Calkins, Graves, Joseph, Smith, Wonch

Nay:                 None

Absent: Callen (left at 7:05 p.m.), Haggart (left at 7:28 p.m.), Rios (left at 7:15 p.m.)

march financial report

(Commissioners Smith and Wonch left the Committee of the Whole meeting at 7:38 p.m.)

Chair Pro Tem Joseph announced that due to loss of quorum, the Committee of the Whole meeting would continue, but only for informational purposes, and that no further action would be considered.

Senior Vice President of Finance and Administration Dennis McFarland presented a financial report for March.  He reported that the budget is three quarters of the way through FY 2005, with the results reasonably well known, but typically some surprises at year-end surfaced that were not planned.  He noted that operationally, it was a poor year.  A total of $2.5 million was lost due to weather, O&M expenses were up $1 million because of higher maintenance costs at the Erickson Power Station; net income is over budget by $2 million for labor costs as a result of the contract settlement.  Mr. McFarland noted that the saving grace for the year was the one-time cash infusion dollars due to excess interest earnings on the Belle River Project Account returned by the Michigan Public Power Agency (MPPA). 

operational performance report

General Manager Novick told the Commissioners that it is staff’s intent to address the Board’s expressed interest in receiving operational reporting in addition to financial reporting.  Operations Director Bill Cook was asked to present a status report of the BWL operations for the nine-month period ended March 31, 2005.  He presented a high level overview of BWL’s Hometown Scorecard that measures in the area of financial performance, customer service, operational excellence and people excellence.  He reported that through the first nine months of the 2005 fiscal year, the BWL was meeting or exceeding performance targets in seven areas, but was below target on nine measures.  In general, performance continues to lag in the financial area, but excel in the customer service area.  Performance in Operational and People Excellence is mixed.  Mr. Cook reviewed the results on each of the 16 performance measures through March 31.  He also reported on the status of significant events related to the Erickson Station conversion project.

additional information concerning
recommended skill family range adjustments

Human Resources Director Mary Dwyer reported that at the April 12, 2005 Human Resources Committee meeting, an item that should have been mentioned was inadvertently overlooked.  She reported that four years ago when the Board adopted the Non-Bargaining unit compensation plan, 53 employees were above their skill family range maximum.  The Board at that time adopted a resolution to allow those employees, if they qualified, to receive variable rate pay as part of their performance compensation.  After four years, staff anticipated that all 53 employees would have either retired or the salary range would have caught up with their maximum.  That is the case for all but four employees.  Those four employees will not be eligible for any type of variable rate pay because their range maximum has not caught up. 

On motion by Commissioner Calkins, seconded by Commissioner Graves, the Committee of the Whole meeting adjourned at 8:09 p.m.

Respectfully submitted,

Ifield P. Joseph, Chair Pro Tem
Committee of the Whole

Motion by Commissioner Joseph, seconded by Commissioner Calkins, to receive the Committee of the Whole reports of May 3 and May 24, 2005 as presented.

Action:  Carried unanimously.

MANAGER’S RECOMMENDATIONS

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

Comments Regarding Proposed Rate Increases.  General Manager Novick reported that on March 10, 2005, staff recommended to the Committee of the Whole that the BWL’s electric and water rates be increased and that a public hearing be set to consider public input on the recommendation.  The Committee of the Whole sent this recommendation to the full Board for action at its March 22, 2005 meeting to file notice with the City Clerk and to set a public hearing on the rate increases.  On March 16, 2005, staff sent a letter to every customer explaining the proposed rate increases, the reasons they are needed, and the impact on the customers.  On March 24, 2005, the BWL filed the recommended rate changes with the City Clerk, set a public hearing for 5:30 p.m. on May 10, 2005, and posted a public notice.  In the April bills, the BWL Connections newsletter highlighted the public hearing and also discussed the proposal and its impact.  On April 28, 2005, the BWL published a public notice of the hearing with the Lansing State Journal and the public hearing was held on May 10, 2005.  At the public hearing, seven individuals spoke to the issue of the rate increases.  Mr. Novick noted that the Board meeting packet includes a transcript of the hearing, a copy of Mr. McFarland’s presentation at the hearing explaining why staff is making its recommendations, and a written response on behalf of staff to issues and questions raised by the seven individuals who spoke.  A copy of the written response was also mailed to each of the speakers.  The written response has been made a part of the permanent record and is filed with the Corporate Secretary.  Mr. Novick stated that the rate increase recommendation is necessary for the long-term financial health of the BWL. 

Chair Robin Smith stated that over the last several months the Commissioners have wrestled with the issue of expenses and revenues at the BWL.  She said it has been made clear by staff that the BWL faces a future of flat to declining sales with rising costs.  This is a situation that is not expected to correct itself, at least over the short term.  She indicated that the Board has directed staff to continue to look for areas where expenses can be cut without impacting service or reliability to customers, and those efforts are expected to continue.  She noted that given the magnitude of the situation, however, budget cuts alone will not be sufficient to match revenues with expenses.  Staff has presented the Board with specific actions taken to notify customers of the proposal before the Board of Commissioners.  Also, a public hearing was held in order to provide customers an opportunity to speak directly to the Commissioners on this matter and staff has provided responses to those customers who had questions at the public hearing.

Resolution 2005-5-4

WHEREAS, the staff of the BWL, in the course of its financial planning process, has determined that the electric and water utilities will experience significant revenue shortfalls in Fiscal Year 2006 and beyond; and

WHEREAS, such revenue shortfalls are caused primarily by the combination of very modest revenue growth over the last four years and rising costs due to higher labor and heath care costs as well as overall inflation; and

WHEREAS, the last general rate increases in the electric and water utilities occurred in January 2003; and

WHEREAS, the staff of the BWL has proposed a general rate increase of 3% for the electric utility effective July 1, 2005, an increase of 6.5% for the water utility effective July 1, 2005 and another increase of 6.5% for the water utility effective July 1, 2006; and

WHEREAS, notice of the proposed increases were communicated to all customers by mail on March 16, 2005, public notice was made on April 28, 2005, and a public hearing was held on May 10, 2005 to receive comments on the proposed increases; and

WHEREAS, the Board of Commissioners has considered the comments of the public as well as the recommendations made by BWL.

RESOLVED, That the electric and water rate schedules listed below and detailed in the attached rate schedules be adopted and made effective for electric and water consumption on or after July 1, 2005.

ELECTRIC:  (Attachment A)

Residential Service – Rate 1

General Service – Rate 3

Large General Service – Rate 4

Primary Service – Rate 5

Municipal Water Pumping Service – Rate 7

Large Capacity Service – Rate 8

Outdoor Lighting Service – Rate 9

Traffic Light Service – Rate 11

Space Conditioning and Electric Water Heating Service – Rate 12

Residential Senior Citizen - Rate 21

Street Lighting Service – Rate 31

Street Lighting Service – Rate 32

WATER:  (Attachment B)

Residential Water Service – Rate 1

General Water Service – Rate 2

Fire Service – Rate 4

Lawn Sprinkling Water Service – Rate 5

Fire Hydrant Charges – Rate 6

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

Discussion:  Commissioner Wonch stated that she plans to vote for the increase, however, she is doing so reluctantly because of comments heard at the public hearing from senior citizens and others on fixed incomes regarding their difficulty in managing increasing costs.  She noted that the BWL does offer a discounted electric rate for senior citizens and asked staff to investigate the implementation of a discounted water rate for seniors.  She acknowledged the BWL’s financial position and the necessity to raise electric and water rates.  She also pointed out that BWL rates are still lower than private utilities

Commissioner Graves stated that he was recently appointed to the Board after the Commissioners had spent months discussing and examining its financial outlook and the need to raise electric and water rates.  He reported that upon joining the Board, he scheduled a number of meetings with staff and spoke with a couple of Commissioners to bring himself up to speed on the BWL’s financial status and the rationale for the proposed increases.  Commissioner Graves stated that he plans to support the proposal but would like to explore differential rates for the following customer classifications:  (1) residential versus commercial and industrial customers; (2) senior citizens on fixed incomes and low-income customers living below the poverty level; and (3) customers outside of the City of Lansing.

Commissioner Rios stated that he intends to support the resolution because of the level of confidence he has in the work that has been done by staff since he has been on the Board.  He expressed appreciation for the overall professionalism in which the task of reviewing the necessity for a rate increase was conducted.  He thanked the General Manager and his staff for using performance accountability standards and noted that measurement tools are important to improve efficiencies for the success of the BWL to continue to be a reliable resource in this community.  Commissioner Rios also commended Internal Auditor Glenn Holloway’s input in this process.  He further stated that in times of financial crises, it is imperative to look at alternatives to continue to deal with change in such areas as union contract negotiations to evaluate the benefits provided by decisions made that directly impact rates.

Commissioner Joseph stated that he is also prepared to support the rate increase.  He echoed Commissioner Graves’ opinion with respect to differential rates for owners and non-owners of this utility.  He noted that staff is in the process of re-evaluating long-term utility contracts with surrounding townships.  Commissioner Joseph emphasized the importance of reducing costs where possible in order to balance outside factors of which the BWL has no control, such as GM’s decision to move up its schedule to close the Lansing Car Assembly. Plants. 

Action:  Carried unanimously.

Resolution 2005-5-5

RESOLVED, That amendments to the Rules and Regulations for Electric, Water, Steam and Chilled Water Utility Services be approved as presented, effective July 1, 2005. 

The Rules and Regulations are filed with the Corporate Secretary and are posted on the BWL Internet. 

Attachment C – Electric
Attachment D – Water
Attachment E – Steam
Attachment F – Chilled Water

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

Discussion: General Manager Novick noted that in accordance with Board Policies 19-05 (Electric) 19-13 (Water), 19-15 (Steam), and 19-16 (Chilled Water), the Utility Rules and Regulations are subject to review and modification by the Commissioners.  The proposed changes are recommended to better enforce standards and update fees and charges.

Action:  Carried unanimously.

Resolution 2005-5-6

RESOLVED, That the Board of Water and Light is authorized to sponsor the Impression 5 Science Center Water Room expansion project at a cost of $21,000.

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

Discussion:  General Manager Novick commented that staff presented this proposal to the Committee of the Whole on May 5, 2005 and it was unanimously supported.  He stated that the expansion enhances an existing and popular Impression 5 exhibit that features scientific properties of water.  The exhibit contributes to children’s understanding of hydrology, propulsion, buoyancy, construction of plumbing systems and other scientific principles associated with water.  More than 75,000 people per year visit the current exhibit.  The Phase 1 expansion, which the proposed sponsorship will finance, is based on feedback from teachers, parents and children and will improve the visitors’ learning experience.  The sponsorship represents an investment in scientific education that will benefit children and the Greater Lansing community.  A BWL sponsorship in 2001 helped finance the original construction of the Impression 5 Water Room exhibit.

Action:  Carried unanimously.

Resolution 2005-5-7

The Board of Commissioners is responsible for setting salary ranges for the Board of Water and Light Non-Bargaining Unit employees. 

The Human Resources Director, with the concurrence of the General Manager, has recommended to the Human Resources Committee that the Board of Commissioners approve an adjustment to the skill family salary ranges.

The Board of Commissioners has been advised as to the necessity of such an adjustment and has had an opportunity to discuss its merits.

RESOLVED, That the Board of Commissioners shall adopt the attached adjustment to the Non-Bargaining Unit skill family salary ranges.  (See Attachment G)

RESOLVED FURTHER, That the General Manager is authorized to develop all procedures necessary for its implementation.

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

Discussion:  This item was discussed with the Human Resources Committee on April 12, 2005.

Action:  Carried unanimously.

Resolution 2005-5-8

The Board of Commissioners is responsible for determining the performance increase matrix for the Board of Water and Light’s Non-Bargaining Unit employees.

The Human Resources Director, with the concurrence of the General Manager, has recommended to the Human Resources Committee that the Board of Commissioners adopt a new performance increase matrix.

The Board of Commissioners has been advised as to the necessity of such a revision, and has had an opportunity to discuss its merits.

RESOLVED, That the Board of Commissioners shall adopt the attached revisions to the Non-Bargaining Unit performance increase matrix.  (See Attachment G)

RESOLVED FURTHER, That the General Manager is authorized to develop all procedures necessary for its implementation.

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

Discussion:  This item was discussed with the Human Resources Committee on April 12, 2005.

Action:  Carried unanimously.

Fiscal Year 2006 Budget Presentation:

General Manager Novick reported that the final item under the Manager’s Recommendations is the budget for FY 2006, consisting of both operating and capital.  He noted that staff has been discussing the BWL’s financial situation with the Board for a number of months and more recently at the Committee of the Whole meeting on May 3, 2005.  It was decided at that meeting to defer FY 2006 budget discussions until after the May 10, 2005 public hearing. 

Senior Vice President of Finance Dennis McFarland reviewed the FY 2006 Financial Plan.  The Plan includes the rate increases approved by the Board earlier this evening.  The rate relief was necessitated by what had been a flat revenue curve over the last few years, which has now become a declining revenue curve as a result of the shutdown of the two General Motors Car Assembly plants.  Continued cost pressures are being experienced in labor, health care and other areas.  Mr. McFarland updated the Commissioners on the five financial goals of the BWL:  1) Credit Quality, 2) Liquidity, 3) Rate Competitiveness, 4) Efficient and Appropriate Use of Capital, and 5) Financially Independent Utilities.  He noted that the allocation of overhead costs to appropriately distribute costs to all the utilities has been revised.  Staff will be reporting on each of the four utilities independently; namely, electric, water, steam, and chilled water.  Mr. McFarland reported that the BWL currently has an AA rating, assigned in 2003.  He noted that based on current projections, the BWL is in fact in a weaker position than it was in 2003.  Despite the approved electric and water rate increases, the BWL’s liquidity at the beginning of the year remained strong; however, the financial plan projects $16 million in cash reserves will be spent over the next 12 months.

Mr. McFarland reported on the Sales Forecast:

Electric:

• RCI (excl. GM) on historical growth rates normalized for weather
• Trended growth rates:  Residential=1.5%, Commercial=2.05%, Industrial=0.60%
• Revised Forecast includes net GM reduction of 235,000 mwh due to plants 1 & 6 closing
• Wholesale based on remaining generation & purchased power availability anticipated to increase in FY’06

Water:

• RCI based on historical growth rates: Residential=0.98%, Commercial=0.19%, Industrial=0.0%
• Revised Forecast includes net GM reduction of 325,000 ccf due to plant 1 & 6 closing
• Wholesale based on historical commodities, revised to include lower anticipated sales to East Lansing-Meridian Water Authority

Steam:

• Significant reduction due to GM plants 1 & 6 closing, total GM reduction is 906,600 mlb

Chilled Water:

• Based on Minimum bill levels

Mr. McFarland highlighted the Revenue Assumptions:

• Rate increases effective July 1, 2005 (Electric 3% and Water 6.5%)
• Steam includes current contract terms for General Motors
• Chilled Water based on minimum bill levels
• Stable electric wholesale prices
• Year two of City of Lansing Rider includes revenue reduction of $750,000

Mr. McFarland summarized the Operating Expenses:

• Decrease of 4 full time employees through the result of operating efficiencies
• Salary Increases:

- Bargaining Unit = 3.1% increase effective 11/1/05 pursuant to the contract
- Non-Bargaining = 3.1% increase effective 7/1/05 included in the overall labor budget

• A 6% increase in health care costs is being recognized
• Includes additional $3.7 million for Retiree Health Care due to recognition on the Balance Sheet (GASB 45) of $180 million unfunded liability.

Mr. McFarland noted that over the past few years, the VEBA (Voluntary Employee Benefit Account) was established to hold unfunded health care dollars, and in the last few years $2 million per year has been set aside.  That will continue plus the $3.7 million for retiree health care; consequently, a total of $5.7 million of operating revenues is being reserved to take care of the unfunded liability.  Also, when possible, funds from the Defined Benefit Pension Plan are being transferred to further retiree health care.

Mr. McFarland presented an overview of Capital Expenditures:

• Revenue producing capital additions justified by cost/benefit analysis = $7.1 million.
• Remaining capital less than annual depreciation expense = $26.5 million
• Includes 10 year Lead Service Replacement Program:  FY’06 = $3.5 million, $1 million higher than FY’05
• Includes work associated with the City’s CSO and street reconstruction project:  FY’06 = $5.8 million, $1 million higher than FY’05

Mr. McFarland reviewed the Income Statement comparing FY 2004, FY 2005 and FY 2006.  He explained the business reasons for the change from the FY 2005 Budgeted Net Income of $2.4 million to a loss of $2 million in the FY 2006 Budgeted Net Income.

Reconciliation of Budgeted Net Income:

Senior Vice President of Operations Bill Cook presented the proposed Capital Budget for Fiscal Year 2006 and reported on the following assumptions:

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

·        Remaining capital targeted at less than annual depreciation expense

·        Lead service replacement program budgeted at $3,500,000 per year for the period. 
(FY 2006 incremental impact from FY 2005:  $1,000,000)

·        CSO and street reconstruction related expenses budgeted to coincide with the most recent City of Lansing schedule.  The City as part of this effort is moving into older parts of the BWL system and impacting more streets.  This has resulted in an increase of $1,400,000 in FY 2006.

·        Steam production forecast expenses reflect initial response to GM plant closings.  The Integrated Resource Plan will modify these values in next year’s forecast.

Mr. Cook also compared Capital Budget projections for FY 2005 vs. FY 2006 and reviewed the six-year forecast covering FY 2006 – 2011.

Following discussion, the following resolution was presented:

Resolution 2005-5-9

RESOLVED, That the annual Operating and Maintenance Budget covering Fiscal Year 2006 is hereby approved as presented.

RESOLVED, That the Capital Budget for Fiscal Year 2006 is hereby approved as presented.

RESOLVED, That the Forecast for Capital Expenditures for Fiscal Years 2006-2011 is hereby accepted as presented.

RESOLVED FURTHER, That the Corporate Secretary is directed to make the appropriate filings with the City of Lansing City Clerk’s Office and the Mayor’s Office in accordance with the Lansing City Charter regarding the above actions. 

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

Discussion.  See Attachment H for a summary of the Fiscal Year 2006 Operating and Maintenance Budget of $193.2 and Capital Program of $33.5 million for the same period.  Such authorizations will enable the BWL to both maintain ongoing service to its customers and maintain and enhance its facilities for continued future use.  Capital expenditures for the Fiscal Years 2006-2011 are estimated to be $201 million.

Action:  Carried unanimously.

UNFINISHED BUSINESS

No unfinished business.

NEW BUSINESS

No new business.

RESOLUTIONS

By the Committee of the Whole

Resolution 2005-5-10

RESOLUTION TO AMEND PURCHASE AGREEMENT REGARDING FORMER COAL STORAGE PROPERTY AT 312 NORTH GRAND (“TRIANGLE PROPERTY”)

WHEREAS, the Board of Water and Light (“BWL”) and River Street Triangle, LLC (“Developer”) are parties to an agreement dated May 17, 2001 (“Agreement”) whereby Developer agreed to purchase certain BWL property located at the corner of Shiawassee and North Grand Avenue in Lansing (“Property”) for $1,997,070.00; and

WHEREAS, the parties would like to amend the Agreement to permit the Developer to purchase a smaller parcel of property, known in the Agreement as Parcel A, depicted in Exhibit 1, and defined as:

A part of the parcel surveyed and described in L. 5, PP. 608-610 of Ingham County Certified Survey Maps, said part of said surveyed parcel being particularly described as follows: Beginning at the southeast corner of the intersection of N. Grand Avenue and E. Shiawassee Street, said Point of Beginning now marked by a chiseled “x” in the concrete sidewalk; thence along the south line of E. Shiawassee Street (82.5 ft. wide) S 89°58’00” E 221.35 ft.; thence along a line that is 25 ft., more or less, westerly of and parallel to the concrete retaining wall on the west side of the Grand River the following four (4) courses: S 45°00’36” E 56.87 ft.; S 07°00’36” E 173.29 ft.; S 17°19’58” E 75.72 ft.; S 01°08’14” E 11.78 ft.; thence along the centerline of a common party wall and it’s extension N 89°58’00” W 305.60 ft. to a point on the east line of N. Grand Avenue (82.5 ft. wide); thence along the east line of N. Grand Avenue N 00°01’02” E 296.21 ft. to the Point of Beginning (a chiseled “x” in the concrete sidewalk), being on part of Block 66 of the Original Plat of Lansing, L. 2, PP. 36-38 of Ingham County Deeds, and containing 81,363 sq. ft. or 1.8678 acres of land, more or less, and subject to easements and restrictions.

WHEREAS, a portion of Parcel A, excluding a 75-foot strip immediately south of Shiawassee Street, was appraised in 2001.  In 2005, the remaining 75-foot strip was also appraised, including the reservation of an easement on a minimum 45-foot strip for the City of Lansing’s existing box culvert sewer.

IT IS THEREFORE RESOLVED, That the Board authorizes the General Manager or his designee to negotiate and sign an Amended Purchase Agreement with the Developer for the sale of Parcel A at the price of $1,032,500.00.  The Developer shall assume all costs to raze the building on the property and to move overhead and underground utilities. The Board also authorizes modifications to the remainder of the Agreement to make it consistent with this resolution.

RESOLVED FURTHER, That a non-refundable $100,000.00 deposit shall be paid by the Developer to the BWL within five (5) days after passage of this resolution to effectuate this transaction.

BE IT FINALLY RESOLVED, That the proceeds from the sale of the property shall remain with the funds and accounts of the Board of Water and Light.  This sale is subject and contingent upon the approval of the Lansing City Council.

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

Action:  Adopted by the following vote:

GENERAL MANAGER’S REMARKS

Operational Performance Report.  General Manager Novick commented that at the Committee of the Whole meeting held May 3, 2005, several Commissioners left the meeting early and missed the operational performance presentation.  He asked Senior Vice President of Operations Bill Cook to present the highlights of his report for the benefit of those who did not hear it.  Mr. Cook gave a high level overview of the BWL’s Hometown Scorecard that measures in the area of financial performance, customer service, operational excellence and people excellence.  He also reviewed the results of each of the 16 performance measures and reported on the status of significant events related to the Erickson Station conversion project.

COMMISSIONERS’ COMMENTS

Commissioner Wonch commended staff for the readable and understandable financial and operational reports.  She also thanked the employees for their excellent job in addressing the lead situation and for working through the CSO problems.  She noted that these efforts clearly demonstrate the commitment and loyalty the employees have to the BWL and this community.

Commissioner Rios congratulated staff on a successful Twenty-Five Year Award Dinner.  He said it was heartwarming to hear the antidotes and stores told about the inductees.  He noted that it was particularly inspiring to see the 80 and 90 years olds attend the dinner and wanting to be part of the group.  This is a positive reflection on the good work that is being done at the BWL.

Commissioner Joseph echoed the positive remarks made earlier about the employees.  He remarked that while attending the BWL’s Twenty-Five Year Award Dinner, he observed the number of employees who are nearing retirement.  He emphasized the importance of succession planning and preparing employees for the anticipated openings that will result from these retirements.

Commissioner Haggart welcomed Commissioner Graves on his return to the Board.

Chair Smith also remarked about the Twenty-Five Year Dinner and the pride she observed that BWL employees have in their jobs and the Board of Water and Light.  She congratulated Corporate Secretary Mary Sova on her induction to the Twenty-Five Year Club.   Commissioner Smith announced the following committee appointments to fill vacancies for the remainder of this fiscal year ending June 30th:  Commissioners Gary Calkins and Santiago Rios to the Nominating Committee and Commissioner Joseph Graves, Jr. to the Finance Committee.

ABSENCES

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

Carried unanimously.

PUBLIC COMMENTS

Joseph Davis, Business Manager for IBEW Local 352, reported that he recently returned from a utilities conference and had an opportunity to visit the old converted power plant at the Baltimore Harbor.  He noted that the Baltimore redevelopment plan is perfect for the Ottawa Station.  Mr. Davis also spoke on the BWL’s transition over the years with various organizational programs to improve operational effectiveness, quality, customer focus, customer satisfaction and alignment of organizational goals to achieve the best in class.  He noted that most BWL employees choose service over self-interest which is important for the future direction of the organization.  He expressed concern with the aging workforce noting that the average age of utility workers in this country is 49 years and the average retirement age is 55.  He said this reinforces the importance of training and succession planning.  He also encouraged management’s continued dialogue with all employees on issues affecting the BWL and its impact on employees.  More discussion is needed on what actions should be taken and how each employee can make a difference to meet the challenges facing the BWL and the utility industry.

ADJOURNMENT

On motion by Commissioner Joseph, seconded by Commissioner Rios, the meeting adjourned at 7:47 p.m.

/s/ Mary E. Sova, Secretary
Filed with Lansing City Clerk
June 3, 2006