The Board of Commissioners met in rescheduled regular session at 5:30 p.m., in the Main Office Building, 123 West Ottawa Street, Lansing, Michigan. The meeting was called to order by the Chair, David O’Leary.

Present: Commissioners Christian, Graves, O’Leary, Pratt, Royal, Strolle and Werbelow.

Absent: None

The Secretary declared a quorum present.

The invocation was delivered by the Chair.

The Pledge of Allegiance was said by all.

Adopted unanimously.

CHAIR O’LEARY 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.

No communications.

PERSONNEL COMMITTEE REPORT

The Personnel Committee met on September 4, 1997, to receive the following documents for review and discussion:

Present were Commissioners Strolle as chair, Graves, O’Leary and Pratt.

Pension Plan Documents. The Commissioners received the following Board of Water and Light Pension Plan documents prior to the meeting for review and discussion:

• Defined Benefit Plan and Summary Description as of December 1, 1997
• Defined Contribution Plan and Summary Description as of December 1, 1997
• Defined Contribution Plan Trust Agreement

Treasurer/Controller Dana Tousley presented a comparative summary of changes made to the Defined Benefit Pension Plan. He reported that some of the changes came about as a result of union negotiations; some were made to make the Plan as comparable as possible to the new Defined Contribution Plan; and others were made to comply with governmental pension plan requirements.

The features of the Defined Contribution Plan were also reviewed and discussed.

The Personnel Committee recommends, adoption of the following resolution:

Authorization to Establish the

Employees’ Defined Contribution Pension Trust Plan

WHEREAS, the Board of Water and Light Commissioners on November 26, 1996, (Resolution 96-11-8) adopted, subject to legal review, a new Defined Contribution Pension Plan effective July 1, 1996, and expiring June 30, 2002, and

WHEREAS, the new Defined Contribution Plan requires a trust be created to receive employer contributions and hold employee assets.

IT IS RESOLVED, That the Employees’ Defined Contribution Pension Trust Agreement, a copy of which is attached to these minutes, is adopted and the Employees’ Defined Contribution Pension Trust is established and shall be administered according to the trust agreement.

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Adopted by the following vote:

YEAS: Christian, Graves, Strolle, O’Leary, Pratt, Royal, Werbelow

NAYS: None

ABSENT: None

Performance Appraisals. The Personnel Committee met with Steve Pollo, Human Resources Employment/Compensation Administrator, to review the results of job performance appraisals for the three appointed staff positions.

The Personnel Committee recommends adoption of the following resolution:

Resolution authorizing Performance Appraisals

recommended by personnel committee

WHEREAS, performance appraisals and salary increases for the three positions reporting to the Board are administered according to the Board of Water and Light wage and salary plan for non-bargaining unit administrative employees; be it

IT IS RESOLVED, That the General Manager, Corporate Secretary and Internal Auditor are eligible to receive salary increases effective as of July 1, 1997, according to the 1996-97 Performance Increase Matrix; and

RESOLVED FURTHER, That the ratings for the three persons reporting to the Board be hereby confirmed and approved as follows:

Adopted by the following vote:

YEAS: Christian, Graves, Strolle, O’Leary, Pratt, Royal, Werbelow

NAYS: None

ABSENT: None

* * * *

The Committee of the Whole met on September 16, 1997, at 5:30 p.m. to receive status reports on electric utility deregulation and other matters of importance to the Commissioners.

Present were Commissioners O’Leary, Pratt, Royal, Strolle, and Werbelow.

Excused absences: Commissioners Christian and Graves.

Electric Utility Deregulation. Bill Cook, Director of Electric System Support Division, presented a chronology of key events that have occurred on electric utility restructuring since the Board’s last update in June, 1997. He reported that Senator Mat Dunaskiss is prepared to introduce legislation on electric restructuring at the onset of the Fall legislative session to begin September 23, 1997. Other reports and issues reviewed included:

• A comparison of the Pro-Competition Coalition Bill with the Michigan Public Service Commission (MPSC) Restructuring Order, dated June 5, 1997.
• Delivery Service Territory
• Stranded Cost Recovery

John Davis and Ralph Ostling, representing Kheder and Associates, presented an overview of their activities in assisting the BWL with representation before the Michigan Legislature on electric restructuring issues.

An action plan detailing BWL government relations strategy over the course of the next several months to address electric industry restructuring concerns was handed out for review. Following discussion, the Commissioners expressed their interest in taking a more active role in meeting with legislators to convey the BWL’s position on electric deregulation. Senator Dianne Byrum’s efforts in becoming well informed on electric restructuring issues were recognized by the Commissioners, and a letter conveying the Board of Water and Light’s appreciation is being sent to her.

Other matters before the Committee of the Whole included:

Main Office Building Sale . A letter from Capitol Annex, L.L.C. , dated September 10, 1997, was received regarding the status of negotiations in securing a tenant for the BWL main office building. This matter was deferred until such time that the developer and the City have discussed details of the agreement.

City Study of BWL. The City is finalizing the scope of their study of the BWL. As currently written, Phase I of the study would be a competitive assessment of the electric utility. All four phases of the study would cost an estimated $250,000 in labor plus expenses.

Rotary Tower Dedication. The Commissioners were invited to attend the Rotary Tower dedication on September 19. The Rotary Tower (steam clock) is a $150,000 gift to the City of Lansing financed entirely by donations from members of the Rotary Club of Lansing.

Ottawa Station Development Negotiations. The Commissioners discussed the merits of meeting with Thomas J. Coates on September 19 due to recent developments on the loss of his financial backing, per letter received from Waycor Corporation (a Barden Affiliate), dated August 27, 1997. Following discussion, there was consensus that the decision should be left to the "Special Committee on Ottawa" as to whether or not the meeting with Mr. Coates should be held. Commissioner Werbelow suggested that due to time demands and development complexities of projects of this type, he would prefer engaging the services of a consultant to coordinate the project development instead of burdening staff with additional responsibilities. This matter will be discussed further at a future date.

Status of General Motors’ (GM) 20" Steam Main. Steam Utility Director Joette Woodard-Yauk presented an update on problems encountered with Pipe Systems, the company contracted to design and build the steam main project to serve GM’s Verlinden Street Body Plant. The following documents were handed out and reviewed:

• Copy of a memo to General Manager Pandy from Joette Woodard-Yauk, dated September 16, 1997, summarizing the status of GM’s Steam Main.
• Schematic of the underground portion of the steam line, experiencing joint problems.
• Summary report on the expansion joints, location, type, field observations, alignment data, joint damage, etc.

Ms. Woodard-Yauk briefed the Commissioners on discussions held between the BWL and Pipe Systems to keep them on the job. She reported that to date negotiations to resolve differences relative to engineering design issues and the schedule proposed for the redesign work and project completion have been unsuccessful. Known exposures to date for the BWL were reviewed.

Staff reported that the BWL is prepared to take over the project if Pipe Systems shows no action within the next couple of days. Following lengthy discussion, the Commissioners concurred that the first priority is to serve the customer and to honor the agreement with GM. The Commissioners supported staff’s proposal to retain one or more substitute contractors to complete the construction project, with construction management to be handled by the Project Engineering Department. This is an alternative if staff determines that further efforts to attempt to utilize Pipe Systems to complete the project are unproductive.

Commissioner Strolle reported on the most recent development between the BWL and Pipe Systems since the Committee of the Whole Report was written. He noted that Agreement has been reached with Pipe Systems, Inc. for completion of the Steam Pipeline Interconnect to GM Plant #6. The BWL and Pipe Systems have signed a Memorandum of Understanding which resolves the various issues. Pipe Systems is proceeding to make modifications to the system under the design direction of Stanley Consultants.

Steam Utility Director Joette Woodard-Yauk also reported that the Memorandum of Understanding has been an effective means to achieve the BWL’s primary goal of completing the project quickly and providing steam service to GM at the earliest possible date.

Adopted by the following vote:

YEAS: Christian, Graves, Strolle, O’Leary, Pratt, Royal, Werbelow

NAYS: None

ABSENT: None

* * * *

WHEREAS, Andrew Andersen and Helen M. Andersen, executed a certain easement, dated June 10, 1952, conveying and warranting to the Board of Water and Light (BWL) forever, such rights as recorded in Liber 53 of Miscellaneous Records, Pages 323-324, in the Register of Deeds, Ingham County, Michigan, and

WHEREAS, Foster, Swift, Collins & Smith, representing 3500 South MLK, LLC, Owner of part of Block 3500 South Martin Luther King Boulevard, City of Lansing, has requested the release of said easement, more specifically described as follows:

WHEREAS, this easement as specifically described above is not needed to continue the operations of the BWL, and

WHEREAS, 3500 South MLK, LLC (Owner) has agreed to grant a new easement to the BWL in exchange of the existing easement, subject to acceptance by the BWL, and

WHEREAS, execution of the replacement easement by 3500 South MLK, LLC is deemed a condition precedent to the BWL’s declaration above that its easement is unnecessary for BWL purposes.

IT IS RESOLVED, That the Board release, discharge and vacate said easement on the above described property, and that the General Manager and Corporate Secretary be authorized to enter into agreement for the release of easement, subject to the requirements of State Law, the Lansing City Charter and Codified Ordinances and conditioned upon the granting of a replacement easement. Further that the Corporate Secretary be directed to record the release of easement with the Ingham County Register of Deeds.

RESOLVED FURTHER, That in consideration of this exchange, 3500 South MLK, LLC has agreed to provide a replacement easement described as follows:

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The owner of the property requests the abandonment of this easement to remove an encumbrance created by the existing easement located down the center of the parcel, including a building standing over the easement. The existing easement was not utilized or required. The BWL’s current and new facilities will be located within the new easement.

* * * *

Whereas, on July 25, 1995 (Resolution 95-7-3), the Board declared real property commonly known as 1020 Filley Street, Lansing as surplus and not required for Board of Water and Light (BWL) operations, and

Whereas, the property is being purchased by the adjoining property owner, Maurer Enterprises, Inc., to maintain access and allow for future expansion of the business, and

Whereas, the City of Lansing Assessor’s Office has advised us that a discrepancy exists in the description of the adjoining properties such that the BWL may be deemed to have an interest in the parcel described below, and

Whereas, since the BWL is one of three parties involved in the conveyance of above-mentioned parcel pursuant to previous deeds that were recorded, it may have an interest in the 10.8 foot strip of property, which is not needed for its operations.

IT IS RESOLVED, That the following described 10.8 foot parcel of property be declared as surplus and not required for BWL Operations:

RESOLVED FURTHER, That a Quit Claim deed be provided to Maurer Enterprises, Inc. conveying the above described parcel.

RESOLVED FURTHER, That the General Manager and Corporate Secretary be authorized to enter into agreement for the disposition of this property, subject to the requirements of State Law, the Lansing City Charter and Codified Ordinances.

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The BWL is interested in assisting Maurer Enterprises to resolve the measurement discrepancy problem without having to file a quiet title action. Specifically, there seems to have been a general underestimation of the sizes of the parcels in this vicinity. The City of Lansing bought a 200 foot parcel from the Township of Lansing in 1982, Liber 1388, page 602. The City sold the west 100 feet of that to the BWL in 1985 (Liber 1520, page 1279), and the East 100 feet of the 200 feet to Maurer Enterprises in 1994 (Liber 2209, page 883). The problem arises with a 1988 survey along the North line of the former fire station performed by a survey performed by Fred White Survey Engineering Company, which states the dimension is 210.8 feet, leaving a gap of 10.8 feet in between the as-surveyed "gravel" drive and the west property line of the land conveyed to the BWL by the City of Lansing in 1985. The owner, Lawrence Maurer, is also attempting to obtain quit claim deeds from the Township of Lansing and the City of Lansing.

In addition, this resolution will allow the Contract for Sale of Real Estate between the BWL and Maurer Enterprises, Inc. that is pending to be executed.

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YEAS: Christian, Graves, Strolle, O’Leary, Pratt, Royal, Werbelow

NAYS: None

ABSENT: None

* * * *

RESOLVED, that the current Chemical Commodity Supplier and Chemical Consultant Agreement with Betz (Eckert and Moores Park Stations) and Nalco (Erickson Station) be extended for three years, July 1, 1998 to June 30, 2001. This will minimize BWL exposure to price increases.

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The current agreements, which expire June 30, 1998, held fixed prices for all three years and were awarded based on lowest and best evaluated bids. These suppliers have done commendable consulting work, and would extend contracts based on weighted average price increases of 1.69% per year, below the average annual inflation rate of 3%.

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YEAS: Christian, Graves, Strolle, O’Leary, Pratt, Royal, Werbelow

NAYS: None

ABSENT: None

* * * *

RESOLVED, That the Lansing Board of Water and Light Employees’ Defined Contribution Pension Plan Funding Policy Statement with attached Schedule A is hereby adopted effective December 1, 1997; and

FURTHER RESOLVED, That the Treasurer/Controller and Chief Financial Officer of the Lansing Board of Water and Light is authorized to act in accordance with Section IV of said Investment Policy Statement with regard to specific participant investment options available under the Lansing Board of Water and Light Employee’s Defined Contribution Pension Plan; and

FURTHER RESOLVED, That the General Manager and the Corporate Secretary of the Board of Commissioners are authorized to execute said Funding Policy Statement and Schedule A on behalf of the Lansing Board of Water and Light.

General Accounting Manager David Cluley reviewed the process by which employees will receive information on the Defined Benefit Pension Plan and the Defined Contribution Pension Plan. The BWL is sponsoring mandatory classes in October to educate all employees on the differences between the two pension plans. Employees will have until November 21, 1997, to analyze the information-- individually or with their financial consultant--and notify management if they wish to convert to the Defined Contribution Pension Plan. The Board emphasized the importance for employees to receive adequate information on the investment option selection process and the attributes of both plans.

Adopted by the following vote:

YEAS: Christian, Graves, Strolle, O’Leary, Pratt, Royal, Werbelow

NAYS: None

ABSENT: None

* * * *

Chairman O’Leary reported that the previous Nominating Committee appointed on May 20, 1997, is being dissolved, and a new committee is being appointed to nominate Board officer candidates for Fiscal Year 1997-98. New members are:

Commissioners Jud Werbelow (chair), Joseph Graves, and Peter Pratt.

The Nominating Committee was requested to present their slate of officers at a Special Board Meeting to be held October 14, 1997, for consideration.

Ottawa Station Development. Commissioner Christian, Chairperson of the Ottawa Station Development Special Committee, presented a report on their meeting with developer Thomas J. Coates on September 19, 1997. In summary, Mr. Coates is still proposing a mixed use development with the same proposed tenants (hotel, sports bar, theater complex, health club, as well as a separate residential development. A significant change discussed by Mr. Coates is that he has an undisclosed equity source to stand in the stead of the Barden group. Several questions Mr. Coates had for the committee dealt with the availability of the land, subordination of the ground lease, and environmental issues upon the property. Mr. Coates indicated that the Magic Johnson Group is still interested as a partner in the Ottawa Station development. Magic Johnson sees at least two leasing opportunities: (1) the theater complex conditioned on a favorable feasibility study by Sony and (2) the sports bar conditioned on the feasibility of the theater complex. These two leases would provide Mr. Coates with 30 percent occupancy pre-leasing, which would render the project viable.

The Board engaged in lengthy discussion regarding two important phases involved in the redevelopment of the Ottawa Station:

Phase 1: Equipment Removal and Salvage. General Manager Pandy distributed copies of a tabulation compiled in June 1995 of bids received on equipment removal and salvage within the walls of the Ottawa Station. Following discussion, there was Board concurrence for staff to seek new bids on removal of equipment and salvage of the building. Staff is to report back at the next Board meeting.

Phase 2: Development of Master Plan. In the event the theater marketing study is negative, General Manager Pandy suggested a conceptual contingency plan as a development alternative for the Ottawa Station starting with a top, down approach. The BWL would essentially take responsibility for developing the building, and would commit to occupying the top floor with up to 6,000 square feet for office space. Also, the BWL would negotiate leases with businesses that have previously indicated an interest in the project for space on the several top floors.

Following discussion, staff was directed to prepare a comprehensive report for review and consideration at the next Board meeting detailing a comparative cost analysis on issues such as:

RESOLVED, That the Board hereby wishes to advise Thomas J. Coates to proceed with the Sony review on the feasibility of the theater complex. The Board would expect to receive a copy of Sony’s written analysis by January 1, 1998, and

RESOLVED FURTHER, That the estimated time deemed necessary to prepare Ottawa Station for development, such as demolition and/or removal of equipment, is nine (9) months, and

RESOLVED FURTHER, That the Board of Water and Light would expect to take 6,000 square feet of space in the Ottawa Station project for offices.

Adopted by the following vote:

YEAS: Christian, Graves, Strolle, O’Leary, Pratt, Royal, Werbelow

NAYS: None

ABSENT: None

* * * *

No resolutions.

Sale of Main Office Building Status. General Manager Pandy reported that there is still no word from Capitol Annex, L.L.C. on the purchase of the main office building. The last official communication received from the developer was on September 10, 1997, indicating he was prepared to finalize an agreement to purchase the building.

Following discussion, the Commissioners agreed on the need for a definitive answer in writing from the tenant indicating an intent to proceed with the project. That should be the touch stone as to when staff starts to devote more time on relocation matters.

Commissioner Appointee Rosemary Aquilina Welcomed. General Manager Pandy recognized Commissioner-nominee, Rosemarie Aquilina, who was in the audience as an observer. Ms. Aquilina and nominee Charles Creamer are scheduled to be interviewed by the Council’s Committee of the Whole on October 2.

Electric Restructuring Update. General Manager Pandy distributed a letter written on behalf of the Board of Commissioners to Senator Dianne Byrum in appreciation for her leadership role in electric utility restructuring. The Commissioners have been meeting with staff and Kheder and Associates for briefings on the restructuring process.

Metzler & Associates - Consultant for Austin Electric Utility. A promotional letter from Metzler & Associates was distributed which describes how they assisted Austin Electric Utility in early 1997 to prepare it to succeed in the competitive marketplace. That assignment has already cost Austin $2.2 million, and could cost an additional $3.7 million to complete.

Staff Meets with Wisconsin Power and Light. A meeting was held with representatives from Wisconsin Power and Light who is merging with Iowa utilities to form an interstate energy corporation. They are interested in seeking an alliance with the BWL by helping to acquire fuels at a favorable price. A graph was displayed depicting the delivered cost of coal for large utilities in the Mid-America Interconnect Network (MAIN) and the East Central Area Reliability (ECAR) regions. The average cost per million BTU for Eckert and Erickson Stations and Belle River were compared against the various utilities in the midwest region of the United States. The impact of the BWL lowering its fuel cost by potentially burning Western Powder River Basin coal was also compared. General Manager Pandy pointed out that the BWL’s ability to burn Western fuel is critical to the BWL’s strategic market position.

* * * *

Commissioner Werbelow announced that the Nominating Committee plans to meet shortly to develop the slate of officers. Input by all Commissioners was invited in the nominations process.

Commissioner Graves stated that he would like to receive a report at a future Committee of the Whole meeting on the BWL’s contractual services with women and minority-owned firms.

Commissioner Pratt inquired about the Faith Wesleyan Church communication, dated June 23, 1997, in which an extension is requested on their Agreement for Extension of Water Distribution System.

General Manager Pandy responded that the BWL constructed a distribution system to serve the Church (developer) in 1987. The developer agreed to reimburse the BWL for installation of the system extension. There was only one payback to the developer during the ten-year period of the contract. Mr. Pandy reported that a ten-year limit is common for this type of contract. Staff recommends against extending the contract as it would set a precedent of twenty (20) years to reimburse developers for other similar hookups.

There being no objection, staff ‘s recommendation stands.

Commissioner Pratt stated that a colleague from his firm, Public Sector Consultants, has been engaged by the Michigan Jobs Commission to conduct an analysis on securitization and stranded costs. Commissioner Pratt noted that he is purposely keeping an arm’s length distance on this matter by virtue of his involvement with the BWL on electric restructuring issues. In the spirit of full disclosure he wanted to make this matter known.

Chairman O’Leary remarked that he has collected 15 different news articles relative to the Ottawa Power Station over a two-year period, and commented on the need for the Board to step forward on this project.

Commissioner Christian stated that he recently read an article in the WALL STREET JOURNAL on California’s experience with electric deregulation. The essence of the story was that once all the hoopla was over, the anticipated savings has been disappointing. Initially savings of up to 40 percent were expected, however, approximately 7 percent in savings at a graduated pace is being realized. The article also indicates that businesses in this program probably will not realize cost savings until the year 2002.

CHAIRMAN O’LEARY ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY BOARD OF WATER AND LIGHT SUBJECT.

No persons spoke.

No absences.

There being no further business, the meeting adjourned at 7:10 p.m.

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Marilynn Slade, City Clerk