LANSING BOARD OF WATER AND LIGHT
_______________________________
Monday, August 14, 2006
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The Board of Commissioners met in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan.
Present: Commissioners Gary Calkins, Ron Callen, Robert Cochran, Joseph Graves, Semone James (arrived at 9:16 a.m.), Santiago Rios, and Robin Smith.
(Note: 2nd Ward Vacancy exists.)
Absent: None.
The Secretary declared a quorum present.
Chairperson Smith asked all to rise for the Pledge of Allegiance to the Flag.
Chairperson Smith called the Special Meeting to order at 9:02 a.m.
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.
None.
A letter dated July 27, 2006 from a BWL employee in support of the General Manager.
Received and placed on file.
A letter dated July 29, 2006 from Jack Hill, Director of Environmental, Health and Safety in support of renewing the General Manager’s contract.
Received and placed on file.
A letter dated August 4, 2006 from former commissioner Nancy Duncan asking for renewal of the General Manager’s contract.
Received and placed on file.
A letter dated August 8, 2006 from retiree Ron Brynes responding to unsigned letter from a BWL retiree.
Received and placed on file.
A letter dated August 10, 2006 from Bill Maier, BWL employee in support of renewing the General Manager’s contract.
Received and placed on file.
A letter dated August 10, 2006 from Gail Peterson, BWL employee in support of renewing the General Manager’s contract.
Received and placed on file.
August 1, 2006
The Executive Committee met on Tuesday, August 1, 2006 at 4:00 p.m. to discuss two items – Interim Internal Auditor and Human Resource Audit Parameters.
Present: Commissioners Smith, Calkins, Cochran, and Rios.
There were no public comments.
At the executive committee meeting the Commissioners discussed the interview and selection process of the Interim Internal Auditor. It was determined that they will interview (schedule permitting) the two candidates on Tuesday, August 15th at 3:00 and 4:00 p.m. prior to the rate deliberation meeting. Commissioner Rios handed out a scope of work, which he suggested could be used as a guide in defining specific tasks for this project. The Commissioners will also review previous Internal Auditor, Glen Holloway’s list of unresolved items as a template for determining the projects that the Interim Internal Auditor may address and also as a basis for creating scenario questions during the interview. The scenario questions will be provided to the candidates prior to the interview so that they may have a chance to think about the answer and respond. During the discussion the Commissioners suggested contacting the Purchasing Department to ensure that their process is compliant with current purchasing policy.
The Commissioners also asked about the financial implications of hiring an Interim Internal Auditor, as this position was not included in the budget. General Manager, Sandy Novick answered by stating that the Commissioners will be over budget, as a salary for this position was not taken into consideration.
The Commissioners discussed the presentations of both candidates, Bee Tree Consulting, Ltd. and Growth Strategies Consulting, Inc. After discussion, it was decided that the Executive Committee would bring forth a recommendation to the Board for a vote on Monday, August 14, 2006 to award the RFP for the HR Audit to Growth Strategies Consulting, Inc.
Respectfully submitted,
Robin Smith, Chair
Executive Committee
Motion by Commissioner Smith, second by Commissioner Graves to approve the report as presented.
PROPOSED RESOLUTION
HUMAN RESOURCE AUDIT SELECTION
WHEREAS, the Committee of the Whole of the Board of Commissioners of the Board of Water and Light met and interviewed each candidate for the Human Resource Audit on July 24, 2006; and
WHEREAS, the Executive Committee of the Board of Commissioners of the Board of Water and Light met and discussed each candidate’s presentation and credentials on August 1, 2006.
RESOLVED, That the Executive Committee recommends that the Request for Proposal award for the Human Resource Audit be granted to Growth Strategies Consulting, Incorporated.
Motion by Commissioner Smith, second by Commissioner Rios to approve the resolution as presented.
Action: Carried unanimously
Sandy Novick, General Manager will have management contact Growth Strategies Consulting, Incorporated and advise them of the RFP selection, Commissioner Smith concurred.
Commissioner Smith stated that they did not have a resolution to present at this time. However, she instead asked that each Commissioner present their evaluation of General Manager, Sandy Novick in a roundtable format.
Commissioner Cochran stated that there have been issues with the relationships involving the Board, the City of Lansing and the Mayor. There were repeated attempts by the Union to resolve issues involving the Call Center. Additionally, the Union agreed to volunteer their time at a firing range but was asked by Mr. Novick how they would address workmen’s comp insurance. Commissioner Cochran stated that shortly thereafter, Mr. Novick advised him that the BWL is self-insured and the Director of Human Resources, Mary Dwyer confirmed it a few days later. Commissioner Cochran stated that issues of this nature cause irritation within the organization.
Commissioner Cochran also stated that after speaking with the FBI regarding the recording and/or monitoring issues in the Call Center, Mr. Novick stated that he was unaware of the matter; only later to find out that he had accepted credit for Call Center improvements. Commissioner Cochran stated that he believes leadership begins at the top and when issues such as sexual harassment and intimidation arise they are a reflection of the leader. He also thought it poor judgment to use a potential plant sell as a financial consideration. Moreover, he also stated that he did not understand the theory behind maintaining the utilities as separate entities and believes we need to work as partners with the residents, City, and State to build a viable economic environment. Commissioner Cochran stated that the results of the Safety Council were not presented by management but by the union and believes that management is presenting selective information to the Board.
Commissioner Callen asked to review history in which he stated that the situation with the former General Manager was intolerable because it involved a number of items that were unacceptable and this is not the current case. Commissioner Callen went onto say that when the General Manager position was posted they received approximately 100 applicants and Sandy Novick was selected. Upon Mr. Novick’s entry into the BWL it was his idea to prioritize safety, develop an organizational diversity program, and an employee incentive plan in addition to the items requested by the Commissioners that included employee development, training, specific assignments, and strategic planning. Commissioner Callen stated that although, there are problems, some things are being done well and others need improvement. He also went onto state that the Commissioners appear to be focusing on the negative without any attention to the positive changes that have occurred. Namely, leadership of the MPPA issues, long-term planning, succession planning, management training, introduction of the Safety Council evaluation, frequent financial analysis, balanced scorecard measures, meetings with the union, “Breakfast with Sandy”, City Council meetings, IRP results, and the current IT program.
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Commissioner Callen also stated that improvements are necessary and needed and he feels that the Commissioners should focus on that aspect. He also agrees that although, the BWL is not an authority on economic development we can certainly make a positive impact. Commissioner Callen also stated that he does not believe that firing the General Manager makes sense at this time and feels that BWL has not reached that point.
Commissioner Graves asked if they would be given opportunity to discuss one another’s comments.
Commissioner Smith responded by stating that they would conduct a roundtable that will allow each Commissioner to present their evaluation; after which time the General Manager would be allowed to make comments and they will decide on how to proceed from there.
Commissioner Graves then went onto to state that the Commissioners and the General Manager agreed on a very specific performance evaluation effective February 1, 2006. The current evaluation period in question is for six-months. Commissioner Graves then stated that some of the comments being made are not based on the objectives. He also said that he used the performance objectives as a basis to write his evaluation and some of the comments have already been spoken. However, some of the items referenced in his evaluation include the completion of the IRP, six-year financial forecast, and the invitation to the Safety Council to review BWL practices of which the Council commended the BWL and stated that it would take seven years to turn things around.
Commissioner Graves also stated that Mr. Novick constantly references the need for safety and its improvement. He also gives Mr. Novick high remarks for communication and believes that he is 97% on target with the agreed upon objectives. Commissioner Graves stated that the performance objectives were given six-months ago and believes that the evaluation should cover a one year period.
Commissioner James stated that she has not been with the BWL for very long. However, she stated that in this short period of time she has made some distressing observations. Areas of concern involve employees’ lack of trust for staff and middle managers that act inappropriately without fear of corrective measures. Commissioner James stated that she lacks confidence in what she sees especially, in the financial areas. She asked management to decrease cost and as a result the number of contractors were reduced and based on this occurrence it appears that there maybe some ‘fluff’ in the budget. Commissioner James also stated that it was not clearly indicated to the Commissioners that a 35% steam rate increase had been placed on the table. Therefore, they were not adequately aware of the ramifications of increasing the steam rate to 65%. There is a lack of communication with the General Manager. Commissioner James stated that she asked for the negative media to stop and it did not, including comments made by the Commissioners. She also stated concerns regarding the cost overrun with the Blackstart project and feels that there needs to be some accountability within the organization.
Commissioner Calkins stated that he looked at the performance objectives as did others and recognize that they are only six-months into the evaluation period. There is a need to look at finances first and build on improving them. Safety improvements have been made and the incident rate has been reduced by 25%. Commission Calkins suggested that they evaluate Mr. Novick based on what they agreed to and that they consider setting new or additional objectives that can be re-reviewed at the end of six-months which will cover an actual year.
Commissioner Calkins went onto state that the comments made thus far have been on issues important to the Commissioners but not on the list of objectives. He believes that those items can be reviewed but does not think that they are worthy of terminating the General Manager.
Commissioner Rios stated that he has several issues with the General Manager which include the FBI investigation and the actual truth of what occurred, financial concerns regarding the memo sent by Dennis McFarland, Vice President and the two-man versus three-man bucket issue that concerns safety. He also stated that he has concerns regarding the validity of the information presented by management. Commission Rios then stated that he often finds that he must do more research to get to the truth. Therefore, his evaluation does not support Mr. Novick at this time.
Additionally, Commissioner Rios stated that he believes that there are two issues before them today, the first of which is the performance evaluation and the second one is contract renewal.
Commissioner Smith stated that she believes the evaluation should include a list of accomplishments and areas of improvement. She also stated that she has issues with the following areas that include, safety of which she commends Mr. Novick for commissioning the report. However, it was used theoretically and not fully implemented. Commissioner Smith also stated concerns regarding union issues, lack of managerial philosophy, the implementation of performance objectives, Blackstart project cost overruns, the fallacy in that the steam rate was presented as an either or situation and trust issues. Commissioner Smith then stated that it is her decision not to reappoint Mr. Novick as the General Manager.
Commissioner Smith asked Mr. Novick if he would like to take the opportunity to respond to the evaluation presented before him today.
Mr. Novick responded by stating that per his contract he is supposed to receive a written summary of the comments, which he has not received thus far. Therefore, he would like a copy so that he may review it.
Commissioner Rios recommended that Mr. Novick be given a copy of the summary and the Special Meeting would break for up to one hour to allow him opportunity to review said material.
Commissioner Graves suggested giving Mr. Novick ample time to receive and review the evaluation.
Commissioner Callen stated that one hour of review time is not sufficient and suggested giving Mr. Novick several days to review the document in all fairness to him.
Motion by Commissioner Smith, second by Commissioner Rios, supported by Commissioner Cochran to give the General Manager four days to review the performance evaluation materials and respond which is equivalent to the time given to the Commissioners to review one another’s evaluations.
Action: Carried unanimously
Commissioner Graves asked to respond to some of the comments previously mentioned and stated that he did not believe a full and complete discussion could take place without Mr. Novick having input. However, he went onto state that low employee morale should not be judged as there is nothing scientific to support its findings. The union survey only represents 15% of the bargaining base and does not include non-bargaining employees. Commissioner Graves then suggested that items of concern be added to Mr. Novick’s objectives and be addressed at that time.
Commissioner Graves also stated that if he recalls correctly, management made an expenditure prior to the Board’s issuance of said budget. He believes that that would answer the question of the cost overrun in regards to the Blackstart project.
Commissioner Graves stated that he was going to read into hearing an excerpt from discussion notes taken by former Corporate Secretary, Mary Sova in regards to a meeting that he had with former Internal Auditor, Glenn Holloway.
General Counsel, Amy Cavanaugh advised that the session in question was not considered a meeting since Commissioner Graves was the only Commissioner present. However, the minutes produced from that meeting were introduced during a closed session because they were of a personal matter. Therefore, Ms. Cavanaugh stated that she would need time to determine whether or not an excerpt of the memo could be introduced during an open session.
Commissioner Graves went onto state that someone chose to include a copy of that memo in Mr. Novick’s evaluation and several Commissioners have made references to the comments made in the memo.
Commissioner Callen stated that he wanted to clarify his characterization of the current and former General Manager as the Chair did not represent his comments correctly. Commissioner Callen also stated that he wanted to make it clear that the current situation with the General Manager is nothing like the previous situation that they addressed with the former General Manager.
He went onto state that he sees opportunity to straighten out the FBI issues and alleged lack of communication. He also agrees that the union survey represents a small body of people and feels that management support of the Mr. Novick is important and should be taken into consideration. Commissioner Callen also stated that he was applauded by Mayor Bernero’s presentation during a previous Board meeting.
Commissioner Smith asked that the Commissioners continue to direct their comments towards Mr. Novick’s evaluation.
Commissioner Callen agreed and then went onto say that he believed that Mayor Bernero’s accusations against Mr. Novick were unsubstantiated.
Commissioner Cochran made a minor correction by stating that 137 out of 430 bargaining employees participated in the survey, which is approximately 37%, not 15%. He also went onto to state that management advised customers that the rate increase would be 35% but that was not presented to the Board. Commissioner Cochran also stated that the two-man versus three-man bucket situation is still occurring and yet he was advised that the linemen needed a raise and that has not taken place at this time.
Commissioner Calkins stated that a lot of the issues are in reference to human resource concerns and he wondered why comments are being made regarding those issues being that a human resource firm is scheduled to address those matters. He also stated that management proposed the 35% steam rate increase and he did not accept that figure; others had different ideas and some did not.
Commissioner Calkins went onto state that he is willing to take responsibility for recommending the 65% steam rate increase and believe that others are also. He also stated that he believes all of the cost overruns were not based on poor management but on expenditures as previously stated. Commissioner Calkins also indicated that while working at the State of Michigan he evaluated a lot of employees and allowed them the opportunity to make corrections. He did not understand how the Commissioners could recommend terminating the contract without allowing for corrective action.
Commissioner Rios reiterated that there are two issues before the Commissioners that include evaluation and contract renewal. He does not believe that Mr. Novick is exhibiting the leadership skills needed to move forward. He also stated that he found it disappointing for Commissioners to speak ill of the Union and the Mayor. Commissioner Rios went onto state that Mr. Novick does not have the full support of the Board and therefore, he cannot see how they can move forward during these difficult times.
Commissioner Smith stated that she does not believe that the Commissioners are trying to redesign the evaluation. The union had a vote of no confidence and the Board acknowledges management’s support of the General Manager. Commissioner Smith then stated that she was encouraged to see some of the Commissioners acknowledge issues that have been previously presented to them.
Commissioner Smith gathered consensus and reached agreement with the Commissioners to schedule another Special Meeting on Friday, August 18, 2006 at 2:00 p.m. in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. The additional Special Meeting will allow Mr. Novick opportunity to review and respond to his evaluation and continue discussion.
Commissioner Callen stated that he would check his calendar and confirm the special meeting time and date with the Corporate Secretary.
Commissioner Graves stated that in Commissioner Smith’s opening remarks you talked about the steam rate deliberations but in the newspaper she indicated that she would recuse herself from voting. He then asked Commissioner Smith if she is allowed to make comments.
Commissioner Smith answered by stating that she has scheduled a meeting with the Ethics Board to get obtain a decision from them as to whether or not she can participate in the rate discussions.
Commissioner Calkins then asked Commissioner Smith if she is allowed to discuss the budget process at all?
Commissioner Smith responded by stating that the question before the Ethics Board is whether or not she can participate in the rate deliberations. The issue of making statements is somewhat mute as the rate deliberation hearing is upon us.
On request by General Counsel, Amy Cavanaugh, the Commissioners and the Corporate Secretary entered into closed session to discuss her opinion regarding the conflict of interest.
Closed session began at 10:59 a.m.
Open session resumed at 11:15 a.m.
None.
Max Zemer, BWL retiree and former business manager of IBEW Local 352 stated that during his 20 years of experience with management they developed a good working relationship. Although, there were disagreements the relationship they maintained allowed them to work through those issues and unfortunately it appears that that process has changed. In the past, during his leadership they never used an attorney to address issues with BWL and now he sees that the union currently has an attorney on retainer fee.
On a separate issue, Mr. Zemer went onto say that in a previous meeting one of the Commissioners asked for information relative to the budget. As such, he wanted to know if that information has been received as the public has a right to know due to the significance of the amount.
Ron Brynes, BWL retiree stated that he wanted to repeat some of the information that he presented at the Joint City Council/BWL Commissioner meeting because Commissioners Cochran and James left before his public comment. Mr. Brynes went onto say that the BWL promised retirees healthcare for life and he does not understand why it has been suggested that retiree premiums be increased when the BWL has approximately $40 million dedicated for this sole purpose. According to the IRS the money cannot be touched and he feels that it should be used to address the needs of BWL retirees.
On motion by Commissioner Smith, second by Commissioner Cochran the meeting adjourned at 11:42 a.m.
/s/ Rhonda Jones, Corporate Secretary
Filed with Lansing City Clerk
August 23, 2006