Approved by the Board: September 25, 2007
_________________________
Tuesday, July 24,
2007
_________________________
The Board of Commissioners met in the Boardroom of the
Administrative Offices,
Present: Commissioners Gary Calkins, Robert
Cochran, Semone James,
Absent: Commissioner Joseph Graves
The Secretary declared a quorum present.
Chairperson Smith asked all to rise for the Pledge of Allegiance to the Flag.
Chairperson Smith called the meeting to order at 5:30 p.m.
By motion of Commissioner Cochran, seconded by Commissioner Rodocker the minutes of the May 22, 2007 regular meeting were unanimously approved.
By motion of Commissioner Cochran, seconded by Commissioner James the minutes of the June 5, 2007 Special Board meeting were unanimously approved.
By motion of Commissioner Calkins, seconded by Commissioner Cochran the minutes of the June 15, 2007 Special Board meeting were unanimously approved.
THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBJECT AND ANYONE WISHING TO COMMENT ON ANY MATTER NOT ON THE AGENDA MAY DO SO IMMEDIATELY PRIOR TO ADJOURNMENT.
Jim Sturdevant with Land Use Specialists, Inc. is the
project planner for the Trans Development Group who is developing a piece of
property in
Commissioner Smith thanked Mr. Sturdevant for appearing before the Board and advised that she would refer the matter to the General Manager and staff for due diligence. At this time, the Board is not in a position to make a motion or ruling as it relates to the project because they do not have the information. Commissioner Smith thanked Mr. Studevant for providing information relative to the timetable for a fall project and acknowledged that the Board does have the ability to hold a Special Board meeting to make any rulings that might need to occur as it relates to this project or any other matter that comes before the Board.
Mr. Studevant clarified that he has submitted a set of engineering drawings and a cover letter for said project to Brandie Ekren Associate Attorney, Rhonda Jones Corporate Secretary and Mark Witalec Surveyor.
Commissioner Rios asked staff to respond quickly to the request and noted that he wants to ensure that the BWL has enough information to act. He advised Mr. Sturdevant that it would be up to him to ensure that the BWL has everything it needs, and went onto strongly suggest that Mr. Sturdevant communicate with whomever at the BWL is going to oversee the project.
None.
June 11, 2007
The Finance Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 11:30 a.m. on Monday, June 11, 2007.
Finance Committee Chair, Semone James called the meeting to order and asked the secretary to call the roll. The following committee members were present: Commissioners Gary Calkins, Semone James, Robin Smith and Sandra Zerkle. Commissioner Robert Cochran was also present.
Absent: None.
There were no public comments.
Susan Pifer, Director of Internal Audit presented the Internal Audit Report that gave an update for activities pertaining to coal inventory control, capital assets, internal controls –SAP, cash management and other audit business. Ms. Pifer noted the following items:
·
The coal program is complete. Fieldwork has been scheduled with Bob
VanElls, Interim Director of Production and the audit will be done in
conjunction with year-end evaluation procedures. The Internal Audit Department (IAD) will also
participate in the fly over, four bore samples, and calculations for the
valuation of coal inventory as of June 30, 2007.
·
Charles Moore, Interim Internal Auditor will
work on the peer impaired asset review in conjunction with the year-end
valuation for Stores inventory. The
fieldwork will be conducted on the morning of June 13, 2007. At which time, tests will be conducted to
determine how Stores accounts for warehouse inventory. They have received a preliminary schedule of
adjustments from Plante & Moran for $440,000. However, they expect a smaller number than
what has been presented thus far.
·
Plante & Moran are bringing in new auditors
to assist with the fiscal year 2007 audit, as there are 9-months worth of
transactions in the legacy system and 3-months in SAP. The new auditor staff will partake in a plant
tour on June 13, 2007 hosted by
· A presentation to City Council’s Ways and Means Committee will take place June 19th for the fiscal year 2006 audit. The activity is perfunctory but was previously postponed because the Board of Water and Light (BWL) did not have an Internal Auditor.
· The Associate Internal Auditor position was posted in the Lansing State Journal on June 10th. An office space is reserved across from Customer Service and their preliminary assignment will involve the cash areas.
· IAD anticipates utilizing Mr. Moore’s services through September 2007 to address warehouse issues, as there is a new manager in the area and there was an adjustment made last year by the external auditors. This topic has been discussed with Mr. Moore and no further plans have been made for his services at this time.
· A draft copy of the request for proposal (RFP) for an internal control assessment for the Board’s SAP Enterprise Risk Planning (ERP) Financials implementation was included in the Finance Committee packet materials. It is believed that the BWL can consolidate the Defined Benefit (DB) and VEBA plan solicitations through a single RFP. The Finance Committee’s approval will allow the BWL to launch an open ended RFP for advisory services whose responses maybe educational in nature.
On motion by Commissioner Smith, seconded by Commissioner Zerkle, the Finance Committee agreed to the proposed committee action allowing the Internal Auditor to move forward with its solicitation and evaluation of proposals for the Internal Control Assessment for the Board’s SAP Enterprise Risk Planning (ERP) Financial implementation.
Discussion: IAD confirmed that the RFP is inline with American Public Power Association (APPA) recommendations recently received at an APPA conference.
Commissioner James advised the committee members that the materials were brought before the committee because Ms. Pifer was asked to bring forth a plan to the Board of Commissioners for review and discussion.
Action: Carried unanimously.
A draft copy of the RFP entitled, Pension and Benefit Plan
Advisor was included in the Finance Committee packet materials, along with a
copy of the sub-committee’s plan of action.
Ms. Pifer reviewed the plan of action compiled by the sub-committee,
which consists of Sue Flores, Charles Moore and Susan Pifer. It is feasible to combine the Defined Benefit
Contribution and VEBA 457 Plans and, as such the sub-committee
prepared a RFP to that effect. The RFP
findings will be reported to the Finance Committee on July 10th. Listed below is the sub-committee’s proposed
plan of action.
a. Act on one or more proposals, or
b. Extend the expiring purchase order for current advisory services related to the DB plan, pending further review of the investment solutions offered in the proposals.
On motion by Commissioner Calkins, seconded by Commissioner Smith, the Finance Committee agreed with the proposed committee action allowing the sub-committee to move forward with the solicitation of a request for proposal (RFP) for banking and investment services, and report said findings to the Finance Committee.
Discussion: Commissioner Smith asked Susan Pifer if there is a cost savings?
Ms. Pifer replied yes, as they are combining their dollars. She also noted that they do not have a monetary savings figure at this time.
Action: Carried unanimously.
Denise Mulder, Director of Human Resources advised that Mr.
Oxender met with union leadership to review the survey results. The results were contradictory to what was
originally indicated and in essence revealed that employees are generally happy
with the plan and are in need of additional education. Mr. Oxender is beginning to move in that
direction and will have the vendors visit additional BWL locations aside from
Charles Moore suggested that a copy of the survey be included with the Investment and Banking Services RFP for informational purposes only.
Commissioner Smith expressed concern that in light of the survey results, persons maybe happy with what they have because they do not know what else is available, which maybe a reason why there is some negative feedback. An employee may think that they are receiving a limited amount of information and would prefer more in order to have a better grasp of the subject.
Ms. Mulder noted that that it is part of the additional education that employees need. Compared to the private sector the pension plans are exceedingly robust and possess a broad base of offerings with high contribution levels. A part of the education piece is educating employees on what they have and what they can do with it.
After further discussion, the Commissioners advised that
there maybe complacency at the BWL in that it has had a certain plan for so
long that there is no longer the drive to seek better opportunities. It was also noted that union leadership was
surprised by the results and had perhaps misread the employees. The results are clear in that the BWL does
not have a problem. However, improvement
can be reached through additional education. Employee concerns may also arise
due to the transitional phase of going from a defined benefit to a defined
contribution program. The committee
commended staff on the survey and asked that
Mr. Moore advised that they could meet with the union leadership as a part of the education piece when they send out the RFP for the Investment and Banking Services.
Bill Cook, Senior Vice President of Operations noted that he and Mr. Peffley could speak with Ms. Mulder to determine how best to communicate the pension survey results to all employees. He also advised that they could respond to the union’s initial pension plan letter relative to the survey results and ask that any remaining issues be brought forward.
Staff also clarified that they cannot track the difference between bargaining and non-bargaining responses while continuing to maintain confidentiality.
Commissioner Smith asked 1) if lowering the pension age was something they could look into and 2) is additional planning that specifically directs employee’s investments going to be a challenge?
Sue Flores presented an overview of the fixed income investment manager search for asset allocation rebalancing, which included a review of the LCG Associates - Investment Manager Selection Report, Fixed Income Manager Search. As such, the following information regarding asset allocation rebalancing was presented to the committee for review.
· With the approval of the LBWL investment policy in November, 2004, the LBWL began the process of moving away from holding individual securities in its Defined Benefit Pension fund and began utilizing investment managers or managed funds to meet its approved target asset allocation
· Since that time, six investment managers/manager funds have been recommended by staff in conjunction with our Investment Advisor LCG Associates, and approved by the Human Resources Committee
· The six previously selected managers are in the following categories of assets: Large Cap Growth, Large Cap Value, Small Cap Growth, Small Cap Value and International
· During the Defined Benefit Fund quarterly performance review held February 7, 2007 with Investment Advisor, LCG Associates, review of the portfolio revealed that rebalancing and other adjustments were needed including:
§ Fixed income holdings needed to be increased from 25.1% to the 30-40% target range
§ International holdings were slightly over target allocation at 20.3% compared to the 10-20%
§ The remaining large cap core individual equity holdings should be liquated due to underperformance to generate the cash for the needed fixed income statement
· LCG Associates proceeded with a search in accordance with policy guidelines for a Fixed Income Manager to supplement the current fixed income holdings and staff proceeded with the other fund adjustments with a goal of having the rebalancing complete by June 30, 2006
· The five candidates presented by LCG for consideration were reviewed by an internal group consisting of employees of Internal Audit, Finance, Human Resources and Operations on May 15, 2007
· The consensus of the group was Western Asset Core Plus due to its history of returns, strong performance against benchmarks and size
Following the presentation, the Finance Committee took the following action.
On motion by Commissioner Calkins, seconded by Commissioner Cochran, the Finance Committee agreed with the proposed committee action in which to recommend that Western Asset Core Plus be retained to manage a portion of the Defined Benefit Pension Fund in accordance with the Fund’s investment policy.
Discussion: Commissioner Cochran noted the current asset allocation rebalancing policy is in place for a reason and, as such he would like to see it left alone and in place.
Commissioner James asked Charles Moore if the Board should ask staff to conduct a feasibility study?
Mr. Moore responded that the BWL would probably receive one anyway and that it would be based on data and background information. He noted that although he was not a part of the asset allocation rebalance, he supports its position, and believes that the Board should wait until they receive the RFP recommendations before providing additional direction.
Action: Carried unanimously.
Copies of the LCG Associates - Investment Manager Selection Report, Fixed Income Manager Search dated April 2007 is on file in the Office of the Corporate Secretary.
Board Compensation
Q: Is compensation for the Board of Water and Light members legally permissible?
A: Yes. Unlike other boards, the Board of Water and Light, Board of Commissioners is an administrative board (as opposed to an advisory board). As such, there is no specific language in the Lansing City Charter, which is the operative legal document that prohibits compensation for administrative boards.
Q: Who decides whether the Board of Water and Light members will receive compensation, and in what amount?
A: City Council would decide if BWL board members would receive compensation and if so, for what amount. They would also have to pass an ordinance subject to a public hearing to authorize such a measure.
Commissioner Cochran asked whether or not a procedure regarding this matter currently exist? He also noted that the board compensation data is for informational purposes only, as there is no proposal before the Board at this time.
In response to Commissioner Cochran’s question, Ms. Cavanaugh advised that she was unable to locate a procedural document regarding the above matter.
Commissioner James noted that the board compensation inquiry was forwarded to the Finance Committee by the Committee of the Whole and as such, they are responding to the question. Commissioner James went on record stating that she had no opinion one way or the other and further noted that it was neither a good idea nor the appropriate time to ask such a question.
After further discussion, the Finance Committee took the following action:
On motion by Commissioner Cochran, seconded by Commissioner Smith, the Finance Committee unanimously agreed to table the board compensation item at the Finance Committee.
General Manager (GM) Employment Contract. Commissioner Smith advised committee members that a review of the GM’s employment contract is needed in preparation for hiring a new GM. She also clarified that it has traditionally been the role of the Executive Committee to address such matters.
After brief discussion, the Finance Committee agreed that
they would prefer to use a firm that they have dealt with in the past regarding
such matters. In absence of
There being no further business, the meeting adjourned at 12:45 p.m.
Respectfully submitted
Semone M. James, Chair
Finance Committee
Motion by Commissioner James, Commissioner Calkins, to receive the Finance Committee report as presented.
Action: Carried unanimously.
June 19, 2007
The Executive Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 4:00 P.M. on Tuesday, June 19, 2007.
Executive Committee Chair, Robin Smith called the meeting to order and asked the secretary to call the roll. The following committee members were present: Commissioners Gary Calkins, Robert Cochran, Santiago Rios and Robin Smith.
Absent: None.
There were no public comments.
Moved by Commissioner Calkins, seconded by Commissioner Rios, to go into closed session to discuss a privileged document received from Brandie Ekren, Associate Attorney protected by Open Meetings Act exemption MCL 15.268(h). (4:08 p.m.) The roll was called.
Yeas: Commissioners Calkins, Cochran, Rios, and Smith.
Nays: None
Absent: None
Carried unanimously.
Moved by Commissioner Cochran, seconded by Commissioner Rios, that the Executive Committee meeting return to open session.
Carried unanimously.
The Executive Committee meeting reconvened in open session
at 5:20 p.m.
Commissioner
Smith reported that the Executive Committee discussed parameters regarding the
General Manager’s contract.
There being no further business, the meeting adjourned at 5:21 p.m.
Respectfully submitted
Robin M. Smith, Chair
Executive Committee
Motion by Commissioner James, seconded by Commissioner Rodocker, to receive the Executive Committee report as presented.
Action: Carried unanimously.
COMMITTEE OF THE WHOLE
The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 5:30 p.m. on Tuesday, June 19, 2007.
Committee of the Whole Chair, Santiago Rios called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Gary Calkins, Robert Cochran, Joseph Graves, Santiago Rios, Julee Rodocker, and Sandra Zerkle.
Absent: Commissioners Semone James and Robin Smith
There were no public comments.
Sue Flores, Manager of Finance and Planning gave a brief
overview of the State of
On motion by Commissioner Calkins, seconded by
Commissioner Graves, the Committee of the Whole recommended that the State of
Discussion: Commissioner Rios asked how extensive is the BWL’s use in the State’s program?
Staff replied that the BWL has purchased $27,000 worth of goods over the past 3 years, which typically consists of cold weather items. The BWL has not made a recent purchase. However, staff continues to regularly review the list of items available for sale. It was also noted that there is no monetary cost to the BWL to participate in said program.
Action: Carried unanimously.
Gennie Eva, Manager of Financial Services addressed several questions regarding the status of SAP and its future endeavors. Listed below is a synopsis of those responses.
Q: Why does the BWL need the mainframe for an additional 3½ years?
A: The Customer Information System (CIS) is still on the mainframe and it may take longer to changeover. The mainframe lease will end at approximately the same time and the maintenance agreement is going to increase. The BWL will attempt to extend the maintenance agreement, as the SAP project took longer than expected.
Q: If the Board gave direction to complete the work in 1½ year’s could it be done?
A: No
Q: What are the impairments that make it impossible?
A: Configuration. It took approximately 9-months for General Accounting and Materials Management to be configured with SAP. CIS is a much larger endeavor and the BWL does not have enough trained staff persons for the project. SAP can be configured in many different ways to tailor it to what is best for your business. It would be a large effort to get the system up and running for four (4) different utilities that are all billed differently with separate rate schedules.
Q: Is it a correct observation to say that things are going pretty well?
A: Yes. It is not perfect, as there are some enhancements and changes that staff would like to see implemented to increase efficiencies. Nevertheless, the work is getting done. There will be a dip in productivity because it is a new system and everyone will take longer to process the work. Hopefully, the employees have reached the bottom of the “dip” and are on their way up.
Q: Are the obstacles listed in the presentation past obstacles? The obstacles in the presentation include: weak consultant guidance from finance lead, original unrealistic timeline, delays in hiring Project Manager, and unexpected configuration issues.
A: The team consisted of three (3) parts that included Finance, Materials Management and Technical teams. The consultant for the finance lead was very knowledgeable about SAP but did not guide the BWL down the right path. As such, staff realized that some of the items had to be redone so that it would better suit the business needs of the BWL.
Q: Can it be assumed that SAP is better than the previous system?
A: Yes. Its been said that after the 1st year colleagues will love the system and it will take the rest of the organization a couple of years to realize its benefits.
Q: Are there things that the BWL should do now relative to staffing and training that would help the process? Would it help to have more resources in terms of staff training dollars?
A:
Q: From an infrastructure standpoint and based on the amount of this project, is the BWL doing what it should to implement the program in an efficient manner? Is the BWL doing the minimum or being aggressive?
A: Denise Mulder, Director of Human Resources (HR) commented that she had previous experience implementing a portion of the SAP system that involved HR and payroll. As such, bringing in new staff from outside is of no use because one must configure the system to the way you want it to operate. The only way to accomplish those goals is with current staff and modules. Three staff members have been identified who would be available and able to assist with the program. Therefore, adding additional staff in HR would be of no benefit. SAP has given a list of training courses that would be exceedingly beneficial for HR to take before they start the process versus afterwards.
Commissioner Cochran advised staff that if they would like to do something for the good of the company then the Board would be open to the idea. He also noted that the Board made a note to themselves to submit a modified budget to the city, which would include a contingency clause.
Corporate Sponsorship Policy
Mark Nixon, Communications Director reviewed the community sponsorship policy that essentially formalizes a currently existing practice. The policy and a request form (filled out by all organizations requesting a donation) would help define what is permissible relative to donations for nonprofit organizations in the community. Sponsorships may include acting as a program sponsor, providing in-kind services, or paying for a specific attribute of a program or event, such as advertising. Sponsorships and contributions shall be given to nonprofit organizations that benefit the greater Lansing area, but do not advance a religious or political viewpoint.
The Board noted that they understood the policy but the verbiage located in the third sentence of the proposed resolution needs grammatical correction. After brief discussion, the Board took the following action:
On motion by Commissioner Calkins, seconded by Commissioner Cochran, the Committee of the Whole agreed to move the proposed resolution for the Community Sponsorship Policy to the full Board for consideration subject to grammatical changes.
Action: Carried unanimously.
Jan Nelson, Principle Engineer presented an overview of the BWL Steam Utility Plan. The presentation contained information pertinent to an action plan requested by the Board of Commissioners that would address rate issues, cost reductions, service improvements, plant retirements and other viable options. Listed below are highlighted exerts from the presentation materials.
Economic evaluation of “stay in business” options
|
Option |
|
Primary Steam |
Backup Steam |
% Change From Base w/o
Electric Sales Impact 20-Year Analysis |
% Change From Base
w/Electric Sales Impact 20-Year Analysis |
% Change From Base w/o
Electric Sales Impact 5-Year Analysis |
% Change From Base
w/Electric Sales Impact 5-Year Analysis |
|
1 |
Status Quo |
Moores Pk |
Moores Pk |
Base |
Base |
Base |
Base |
|
2 |
Retire
MP |
Eckert 1-3 |
Eckert 4-6* |
-10.4 |
-1.0 |
-2.3 |
3.9 |
|
3 |
Retire MP |
Eckert 1-3 |
Eckert 4-6** |
-11.0 |
-2.1 |
-4.4 |
1.9 |
|
4 |
Retire MP |
Eckert 1-3 |
Gas Boiler |
-1.5 |
6.0 |
3.0 |
9.3 |
|
5 |
Retire
MP |
Gas
Boiler |
Eckert 1-3 |
41.7 |
44.4 |
29.1 |
31.0 |
|
6 |
Lay-up one MP boiler |
Moores Pk |
Moores Park/Eckert 1-3 |
-2.4 |
-2.4 |
-3.4 |
-3.4 |
|
7 |
Lay-up two MP boilers |
Moores Pk |
Moores Park/Eckert 1-3 |
-2.8 |
-2.3 |
-3.7 |
-3.1 |
|
8 |
Out of the steam business
in 10 years |
Moores Pk |
Moores Park/Eckert 1-3 |
|
|
|
|
|
9 |
Partial steam system |
Moores Pk |
Moores Park/Eckert 1-3 |
|
|
|
|
*
Individual Present Value of Revenue **
Headered Present Value of Revenue
BWL Steam Utility Plan – Assumptions for a reduced
steam system:
· Assumed that 117 services cannot be converted to gas
· 35 other services are located along the steam mains that serve the non-convertible services
· Estimated cost to convert remaining 94 services is $3,100,000
· Total services reduced from 246 to 152
Economic evaluation to reduce steam system (20 year analysis):
|
Option |
|
% Change From Base w/o
Electric Sales Impact |
% Change From Base
w/Electric Sales Impact |
|
1 |
Status Quo |
Base |
Base |
|
6 |
Lay-up one MP boiler |
-2.4 |
-2.4 |
|
9 |
Reduced steam system |
-6.7 |
-6.2 |
MP –
Moores Park
Conclusions regarding a reduced steam system:
· Over the long term, this scenario is expected to have the lowest revenue requirements
· In the short run, it is slightly better than a breakeven with the status quo
· Based on the economic analysis, it is reasonable to move in the direction of a smaller steam system
Getting out of the steam business: