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HomeMy Public PortalAbout12-02-1996 PROCEEDINGS OF THE COMMON COUNCIL OF THE CITY OF RICHMOND,INDIANA,SERVING AS A BOARD IN CHARGE OF THE OPERATION OF THE RICHMOND POWER&LIGHT PLANT MONDAY. DECEMBER 2,1996 • 1 The Common Council of the City of Richmond, Indiana, serving as a Board in charge of the operations of the 2 Richmond Power & Light Plant met in regular session at 7 p.m. Monday, December 2, 1996, in the Council 3 Chambers in the Municipal Building in said City. Chairperson Larry Parker presided with the following 4 Councilmembers in attendance: Howard "Jack" Elstro, Bruce Wissel, Sarah "Sally" Hutton, Robert Dickman, 5 Alan Stamper, Bing Welch and Geneva "Gene" Allen. Absent was Etta Lundy. The following business was had 6 to-wit: 7 8 APPROVAL OF MINUTES OF NOVEMBER 21.1996 9 10 Councilmember Hutton moved the minutes be approved, second by Councilmember Wissel and the motion was 11 carried on a unanimous voice vote. 12 13 AP ROVAL OF BILLS, INVESTMENTS AND TRANSFERS 14 15 Upon recommendation of the Finance Committee,Councilmember Stamper moved to approve the following bills 16 for payment,seconded by Councilmember Wissel and by unanimous voice vote the motion carried. 17 18 Bills Already Paid 19 Payroll and Deductions 230,599.78 20 21 Investments Purchased From: 22 Cash Operating Fund 23 Bond Sinking Fund 24 Utility Bond Reserve Fund 25 Depreciation Reserve Fund 91,000.00 26 Insurance Reserve Fund 27 Consumer Deposit Fund 28 Cash Reserve Fund 168,025.00 29 Group Insurance Fund 30 31 Total Investments 259,025.00 32 33 Transfer from Cash Operating Fund to: 34 Cash Reserve Fund for Payment 168,025.00 35 to City in lieu of taxes 36 37 Transfer from Cash Operating Fund to: 38 Depreciation Reserve Fund 91,000.00 39 for Property&Plant 40 41 Transfers from Depreciation Reserve to: 42 Cash Operating Fund 43 44 Transfers from Consumer Deposit to: 45 Cash Operating Fund 46 47 Transfers from Utility Bond Reserve Fund to; 48 Bond Sinking Fund 49 50 Transfers from Cash Operating to : 51 Interest and Bond Principal 52 Bond Sinking Fund 53 Cash Reserve Fund 54 Utilty Bond Sinking Fund 55 56 Depreciation Reserve Fund Insurance Reserve Fund 57 Consumer Deposit Fund 58 Interest and Bond Principal 59 End of Month Petty Cash 60 Revenue Bonds - 61 Interest Coupons Redeemed 62 Bond Coupons 63 Miscellaneous Prepaid Invoices 234,274.42 64 Total Prepaid Invoices 982,924.20 65 Less EFT/Direct Deposit of Payroll (43,929.23) Total Prepaid Invoices 938,994.97 Total Bills Not Paid 719,749.78 Grand Total 1,658,744.75 RP&L Minutes Cont'd December 2, 1996 Page 2 1 REMARKS BY CHAIRPERSON 2 3 ChairpersonParker welcomed Scout Troops 119 and 110, asking each member to step forward to introduce 4 themselves. 5 6 Chairperson Parker announced that, at the request of Mayor Dennis Andrews, he had two items to add to the 7 agenda. These were Resolution No. 7- 1996, which is the transfer of $439,586 from RP & L to provide the City 8 the requested lease payoff dollars, and Resolution No. 8- 1996,which is the$50,000 transfer to the City as RP& 9 L's share in the G.I.S.system. Councilmember Hutton moved to approve the request, second by Councilmember 10 Wissel and the motion was carried on the unanimous voice vote. 11 12 Chairperson Parker commented that there were 10 items on the agenda and asked for guidance from Board 13 members as to whether or not to forego some for another meeting date. Councilmember Dickman stated that 14 there were a few people in the audience waiting for some of the items to be discussed. President Parker said, 15 keeping that in mind, the agenda would be followed as planned and Council would probably not convene until 16 about 8 p.m. 17 18 UNFINISHED BUSINESS 19 20 There was none. 21 22 STREET LIGHT COMMITTEE REPORT 23 24 There was none. 25 26 MISCELLANEOUS BUSINESS 27 28 There was none. 29 30 REPORT BY GENERAL MANAGER 31 32 General Manager,Irving Huffman said the first agenda item was the salary ordinance for the present RP&L 33 contract just settled with the union and the raises granted for salaried employees.He said Board members had 34 been given copies of Resolution No.6-1996 and they had been sent to the City Attorney along with a listing of 35 classifications and the salaries. Councilmember Dickman moved for approval of the resolution, second by 36 Councilmember Hutton and the motion was carried on a unanimous voice vote. 37 38 Huffman announced that of the three bids received at the November 18 meeting for the 1997 one-ton cargo van, 39 the bid from Brookbank Auto Center for$20,306.90, less the$1,200 trade in, resulting in a net price of 40 $19,106.90,was the lowest and best and he recommended the Board's approval.Councilmember Hutton so 41 moved,second by Councilmember Welch and the motion was carried on a unanimous voice vote. 42 43 Huffman asked for the acceptance of the proof of publication for two utility trucks to replace No. 17 and No.28. 44 Councilmember Welch so moved,second by Councilmember Wissel and the motion was carried on a unanimous 45 voice vote.The three bids received included a bid from Brookbank Chevrolet for$57,418.53, less a trade in of 46 $1,700,resulting in a net total of$55,718.53 for the power unit and$36,727.53, less a trade in of$2,200,for a net 47 total of$34,527.53 for the second unit; Fred First Ford for$58,590, less a trade in of$3,000,for a net total of 48 $55,590 for the power unit, and a net total bid of$34,874 for the second unit;and Studebaker Buick for$55,249, 49 less a trade in of$2,200,for a net total of$53,049 for the power unit, and$34,471,less a trade in of$2,000,with 50 a net total of$32,471 for the second unit. Councilmember Wissel moved to refer the bids to Huffman for 51 tabulation, recommendation and evaluation,second by Councilmember Elstro and the motion was carried on a 52 unanimous voice vote. 53 54 Councilmember Welch moved to accept the proof of publication for the service building air conditioner chiller, 55 second by Councilmember Hutton and the motion was carried on a unanimous voice vote. Huffman announced 56 that only one bid had been received and that was from Advanced Environmental for$36,536 with a six-week 57 delivery date. Councilmember Hutton moved to refer the bid to Huffman for evaluation, recommendation and 58 tabulation,second by Councilmember Welch and the motion was carried on a unanimous voice vote. 59 60 Huffman asked for authorization from the Board to receive bids for a single man bucket truck to replace Unit No.5 61 which is a 1983 bucket truck with 120,981 miles.Councilmember Wissel so moved,second by Councilmember 62 Elstro and the motion was carried on a unanimous voice vote. 63 64 Huffman reported that quotations had been sent out to receive bids for a contract crew for the winter tree trimming 65 and replies had been received from Nelson Tree Trimming of Dayton;Ohio;Whitewater Valley Tree Experts;and Asplen Tree. He said all had been evaluated and the lowest was Asplen Tree. RP&L Minutes Cont'd December 2, 1996 Page 3 1 He asked the Board for authorization to accept the bid made by Asplen Tree, noting that the amount was in the 2 budget. He said they will be used for a three-month period.Councilmember Dickman asked the amount of the bid 3 and Huffman commented that he would rather not give those amounts. He then changed his mind and stated that the 4 bids were for$70 per crew hour,$69, and$65.50. Councilmember Elstro moved to approve the bid made by Asplen 5 Tree for the winter tree trimming contract,second by Councilmember Welch and the motion was carried on a 6 unanimous voice vote.City Attorney Bob Bever asked if there was a cap on the amount of the contract and Huffman 7 said the amount budgeted was$30,000, adding that he would not expect it to be nearly that amount. Bever then 8 asked if the cap would be included in the motion. Councilmember Elstro so moved,second by Councilmember Weld. 9 and the motion was carried on a unanimous voice vote. 10 11 Huffman asked to add two items to the agenda which included the signing of the consent decree and an amendment 12 to a resolution that was not completed because of the lack of a signature for the previous year's salary ordinance. He 13 also asked approval'of the expense and the capital budget. In answer to a question by Councilmember Allen, 14 Huffman said that included both the expense and the capital budgets. 15 16 Councilmember Allen stated that she felt the G.I.S.is extremely important to the City as well as the County, noting 17 that the City is a beneficiary, and she would very much like to see it in the RP&L budget. She said last year 18 $150,000 was budgeted for G.I.S.and only a small amount was used and this year there is no budget for G.I.S.She 19 said she believed the Board should put$37,500 in the budget which would be RP&L's third of what it should be.Shi 20 added that if the Board anticipates other utilities not owned by the City to participate, how can that be expected if the 21 City-owned utility which is RP& L will not participate.She moved to add to the budget the$37,500 for G.I.S.;second 22 by Councilmember Dickman and the motion failed on a roll call vote which was a four-four tie.Voting for the motion 23 were Allen, Dickman,Wissel and Stamper.Voting against it were Elstro,Hutton,Welch and Parker.Absent was 24 Lundy. 25 26 Councilmember Stamper commented that looking at construction projects and transmission lines projects in the 27 capital budget,he noticed that RP& L is installing 138 transmission line to replace the 69 that has been used in the 28 past. He said it was his understanding that according to Indiana law there needs to be a certificate of need from the 29 I.U.R.C.before installing 138. He asked Huffman if that had been done. Huffman responded that RP& L has a long 30 range plan to convert its system ultimately to 138 and these sections of line have to be rebuilt. He said when RP&L 31 intends to convert to 138 they have to get acceptance for it. He added that he is unaware of any rule that requires 32 that the utility go before the commission to get approval to upgrade a line from 69 to 139. He said when they get a 33 new line they will have to go to the I.U.R.C.Councilmember Stamper then questioned as to whether or not RP&L 34 has what he called a long term strategic plan, noting that as a Board member he has seen no goals or strategy. 35 36 Huffman responded that the budget is prepared that answers all that criteria.Councilmember Stamper questioned 37 Huffman about the Board's involvement and Huffman said if the Board wants to get involved he looks forward to that. 38 He added that usually the Board asks the manager to come up with recommendations because he has more 39 expertise in that area. He added that if the Board wants the policy changed, it may do so. Councilmember Stamper 40 stated that he has been on the Board for a year and hasn't seen a single strategic plan and he still hasn't seen what 41 his job is as a Board member.Taking that into consideration, he said, it had made it a difficult decision to go along 42 with this budget. He said it is really tough without experience. Councilmember Dickman commented that he is 43 disappointed that RP&L is not interested in participating in G.I.S., and noted that down the road, long term,he feels 44 it would be a good investment. He pointed out that there is$40,000 in the budget to continue the security fencing 45 south of town and it hasn't been fenced in 80 years. He said he thought they had priorities mixed up.He was 46 surprised there is not interest. 47 48 Huffman said RP&L has$1 million wrapped up in our mapping system and it would take four years of debugging to 49 go into a different system and they would have to scrap that. He added that it is not just$37,000but they would have 50 to scrap a$1 million system and pay another$500,000 to get into a new system.Councilmember Dickman asked if 51 anyone had said the system could not be integrated. Huffman said he asked if they could take that data and come 52 out with their system and they said it would make no difference as to whether they said no or not. 53 54 Huffman said that is the pleasure of the Board and he added that he would resist scrapping what is already there. He 55 said the benefit to RP&L would be minimal, but if the Board desires that it should be done,that is up to the Board. 56 Councilmember Allen said that is the whole point,it would be of minimal benefit to RP&L, but a great benefk for the 57 whole City and citizens. He said there would be a ton of information going to be gathered from that system. , 58 Councilmember Elstro said the telephone company,and the gas company have been asked to join the G.I.S. 59 Councilmember Allen said they are going to be asked, and Councilmember Elstro said that maybe down the road RF 60 &L will change its mind.Councilmember Allen said RP&L should be the leader.Councilmember Dickman asked if 61 anyone wanted to change their vote. No one answered. . 62 63 Councilmember Elstro moved to approve the budget as presented,second by Councilmember Welch and the motion 64 was defeated on a roll call vote which resulted in a four-four tie.Voting for the motion were Elstro, Hutton,Welch and 65 Parker.Voting against were Wissel, Dickman,Allen and Stamper.Absent was Lundy. • • RP&L Minutes Cont'd • December 2, 1996 Page 4 • • . • • 1 Discussion centered around the signing of the consent decree. Huffman said a copy had been sent to the City 2 Attorney Bob Bever and he had asked permission for the Mayor and himself to sign the consent to EPA. Bever said 3 this needed to be added to the agenda. Bever said he had reviewed the decree and finds no problems with it and 4 recommends passage and approval of signing it.Councilmember Welch stated that reading through the decree, he 5 noticed the times frames and stipulations by the U.S.Attorney,saying they are strict requirements around testing 6 emissions and time lines of those emissions. He asked Huffman if he envisioned any problems of RP& L 7 complying with those tests and timing and Huffman answered that RP&L has accepted that the number of tests is 8 excessive but will accept them and has no fear of meeting the standards. Councilmember Welch asked if RP& L 9 can do the tests with the understanding that EPA will accept the test data?Huffman said a consultant will do this 10 and EPA will be notified ahead of time any time a test is going to be conducted so they may send a representative if 11 they wish. 12 13 Councilmember Stamper said he wanted to make sure that people knew what was being discussed,asking if this is 14 over the$200,000 RP&L is paying for environmental problems that RP& L had relating to the clean air act. 15 Huffman correcting him,saying that the problems are alleged,adding that RP&L is saying RP&L does not have 16 the problems and the EPA is saying it will cost RP&L more to litigate it than to settle,so RP &L is paying to drop 17 the case.Bever said one of the first paragraphs talks about-this payment and it is not in any way an admission of 18 liability and payment is being made solely for the purpose of settling the.complaint filed by the U.S.Attorney's 19 office. 20 21 Councilmember Allen said she looked at the compliance program and asked about the rate of compliance and the 22 new particulate limits.She said she noticed there are some stiff penalties if RP&L doesn't comply. Huffman went 23 back over the problem,stating that the limits RP&L was supposed to have were there,then for some reason the 24 state people came along and said RP& L had to meet new source performance standards. He continued that RP& 25 L also was told by the state that was really in error and the utility did not have to meet that. He said the state then 26 recognized that they had made an error and put the standards back to where they were supposed to be which RP 27 &L had been meeting all along and can meet. He said during that time frame, EPA took the attitude that between 28 one date to the next date until the state changed it,the utility was in violation,thus the fine. 29 30 He said RP&L has contended all along there was no valid reason to change those standards and the state 31 admitted that.He said they reverted RP&L back to the standards..Councilmember Allen asked if he knew what 32 they were. Huffman said the particulate formula contained emission limits of.4 pounds per million BTU for boiler 33 No. 1 and.07 per pound per million BTU for boiler No.2.Councilmember Allen commented that these were not 34 being met and Huffman said he wished she would have raised the question at another time and assured her of the 35 exact standard they will be meeting and said they will meet the existing standards that any existing utility is to meet. 36 Councilmember Allen asked what rate of interest RP& L will be paying from January 1 for the$200,000. Huffman 37 said he would get that information for her.Councilmember Allen moved to place the item on the agenda,second by 38 Councilmember Wissel and the motion was carried on a unanimous voice vote. Before making his motion to 39 approve the signing of the consent to pay EPA, Councilmember Dickman commented that he certainly did not like 40 having ever gotten involved in this but if this is what it takes to get out of it he would make the motion,second by 41 Councilmember Welch and the motion was carried on a unanimous.voice vote. 42 43 Chairperson Parker commented that the Board was made aware of this problem as soon as it existed and was kept 44 abreast of it all along. He reiterated the problem exactly as Huffman did earlier. Councilmember Dickman asked if 45 anyone had kept track of the other costs to defend this case the entire time it has been in court and Huffman said 46 that could be calculated,adding that it had been very expensive. President Parker said that,in reality,this expense 47 should have been borne by the state. : 48 49 Huffman gave some background on Resolution No:6-1995, noting that it needed to be approved and signed, 50 adding that it was missing from the files. He said Board members had copies that were distributed tonight and what 51 was needed was a resolution amending Resolution No:6-1995..Councilmember Hutton said she thought in 1995 52 the actual resolution was put in the salary ordinance.Huffman said it was not put in correctly. Councilmember • 53 Elstro moved to add the resolution to the agenda,second by,Councilmember Hutton and the motion was carried on 54 a unanimous voice vote.Amended Resolution No. 6-1996 was accepted and signed by the chairman of RP&L 55 through a motion made by Councilmember Welch,second by Councilmember Elstro and the motion was carried on 56 a 7-1 vote,with Councilmember Allen voting against. 57 58 Chairperson Parker said Resolution No.7-1996 is the request of a transfer of$489,586 from RP&L to provide the 59 City the required lease payoff dollars as requested.Co.uncilmemberAllen explained that the rate of return on street 60 lights which were paid by the City was 8.7 percent and put in perspective,the rate of return for residential 61 customers was.014 percent.She said the streetlight rate was drastically increased with the 1992 rate case,27 62 percent.The RP&L analysis,she said,shows that the street light:gross revenue was$779,226, less cost of 63 service of$583,431,showing a net operating profit of$195,000 just for street lights.She said she is only giving that 64 background to show that the City has subsidized other classes of ratepayers to the tune of$800,000 over the last 65 four years,adding that she thinks it is payback time. ; RP&L Minutes Cont'd December 2, 1996 Page 5 1 Councilmember Allen continued,saying the RP&L proposal for the new rate case on street lights was 5.0 2 percent decrease which the I.U.R.C.proposal for street lights was a decrease of 33.41 percent, and even if that 3 proposal would be utilized,the differencd in the City payment to RP&L would be approximately$55,000 per year, 4 which would still be subsidization. 5 6 Councilmember Wissel asked if this wasn't the same figure in the budget that Council approved 9-0. He said if 7 that was the case,he does not see how they can sit here,the same nine people, and not be able to do it from the 8 other end. He recommended it be passed.Councilmember Welch agreed that it was voted on in the budget, 9 adding that as a Board it was indicated that if the members saw a need for the request, the money could be 10 handled as an emergency appropriation. He said he did not know how this is going to end,but the Board just 11 authorized a$200,000 settlement and just received another request for$37,000 for the G.I.S. He added that he 12 felt there are those who think RP& L is a reserve bank for the City, and it is not. He said if the negotiated 13 settlement in the rate adjustment case comes down the way it may well do, it will mean less revenue for RP&L, 14 less profit,and definitely a direct order for evaluating its cost and expense structure. He added that he felt it would 15 be ill advised to set a precedent to the I.U.R.C.and he advised against honoring the request made by the Mayor. 16 17 Councilmember Allen said she disagreed, noting that the payment in lieu of taxes included in the operating 18 statement is not the way to go anyway. She said the payment in lieu of taxes should be$737,000.The other part 19 of the money,she said,that was obligated to the City was a return on investment and not even the 6.5 percent 20 that the last rate case authorized to the City on that amount. Councilmember Welch responded that state law 21 defines return on investment being plant facility and utility facility and does not talk about any return to the City, 22 but talks about the utility returning on its investment and a fair return and that will be a rate that allows the utility to 23 return depreciation and to pay the operating expenses keeping the utility up to date. He said most businesses and 24 business practices look at a rate of return as what you invest and if you have an investment of$50 million,the 25 rate of return at 6 percent would be about$2 to$3 million. Reading from Brenner's testimony in the rate case, 26 Councilmember Allen stated:"The revenue requirements supporting such a request include a return on the utility 27 plant, elected by petitioners municipal legislative body(Council)."She said it is not the RP&L Board of Directors. 28 29 Councilmember Dickman said he agreed that the City has paid a good premium for street lights and this would 30 about equate to what he feels is there and this is a one time investment that would return those funds and allow 31 the City to unload an extremely heavy burden. He added that all of them as Councilmembers know what has to be 32 done. He said if the RP& L Board is concerned that the utility cannot afford that amount the Board should dig into 33 the budget and shave a couple of hundred dollars out of there and that could be done in no time. He added that 34 RP& L recoups it over and over through streets lights and other electric that the City purchases. 35 36 Mayor Dennis Andrews stepped forward,stating that he was not there to persuade the Board to do anything. He 37 said he appreciated their willingness to finally bring this to a vote after many discussions and correspondence.He 38 said in his initial correspondence he asked the Board to please achieve a common understanding of rate of return, 39 reasonable return, and payment in lieu of taxes, in a setting separate from dollars and cents. He added that it was 40 evident that that had not been done and until that happens, he said, he feels there will be continued disagreement 41 over what the amount should be when there is not an agreement on what the terms mean.He said he knew of 42 nothing he could do to try to promote that agreement on the terms, adding that it is ultimately a function of 43 interpreting the law and there are experts to do that, some on the staff of the City and some on staff at RP & L. He 44 said he did not know whether they agree or not, noting that is the foundation for the disagreement that comes up 45 every year. 46 47 The Mayor said that on the City side,the budget was unquestionably established where each of the nine 48 members of Council voted to include that in the budget knowing that was needed. He said at the same time he 49 does view the question as to whether or not it should be funded dependent upon whether or not there would be an 50 adverse impact on the utility and it was presented in that framework. He added that, if indeed,there is an adverse 51 impact no one would begin to propose the transfer should be approved.There are other contentions, he said,the 52 one Councilmember Welch mentioned,the proposed rate case,including cash reserves and other elements that 53 are being examined. He added that he is not an expert on those matters so he would leave well enough alone and 54 let the Board vote. 55 56 Bever said he thinks the statutes are clear,that for a municipally-owned utility profit that is anticipated for rate of 57 returns goes to who owns the utility and that would go to the City. He said he does not know how one can make a 58 legal argument otherwise as to who owns the utility and therefore as to who a rate of return of the profit goes to 59 recognizing there are other items that would be in the budget and would be necessary down the road. Bever said 60 he also directed this question to Craycraft, regarding whether this vote for the transfer would have any impact on 61 the rate case that is going before the commission now, and Craycraft said that is a political decision but in his 62 opinion he could not see how this could adversely affect the outcome of it since the state is already questioning 63 how much capital surplus RP&L has, how much surplus it has in revenue,that to spend some of that certainly 64 would not be problematic to what the state would come out with on this hearing. He asked that the Board 65 members consider that in their deliberation. • • RP&L Minutes Cont'd .. December.2,"1996 ' • Page 6. .'.. • • • 1 Councilmember Wissel said since this is a request for transfer for capital use, he pointed out the plan for this 2 money is to buy fire trucks and police cars. He added that he feels that even though all nine of them sit on the RP 3 &L Board and the Council it is their responsibility to make the City function in the best manner and it is their 4 responsibility.in the interest of public safety to pass this. 5 6 Councilmember Welch said this request for$439,000 is to pay off lease purchase agreements incurred by the City 7 in the time frame prior to this administration and he said he has to commend the staff and Mayor for the budget 8 they tried to prepare this year,correcting and generating dollars to clarify their operating balances. However, he 9 said,they cannot correct all the problems created by the previous administration and previous Councils by 10 authorizing this transfer of$439,000 in one year. 11 12 Councilmember Stamper moved to approve the request,second by Allen and the motion failed on a four-four tie 13 vote with Councilmembers Elstro, Hutton,Welch and Parker voting against and Wissel, Dickman,Stamper and 14 Allen voting for. 15 16 Councilmember Dickman moved to scrap Resolution No.8- 1996,but Bever advised against that since that 17 resolution contains the same elements as the amendment to the capital budget which ended in a 4-4 tie vote. He 18 suggested they might possibly want to table that resolution in hopes that all nine members might be present when 19 the amendment to the capital budget is revisited. Councilmember Dickman agreed,taking Bever's suggestion to 20 table the resolution. 21 22 NEW BUSINESS 23 24 There was none. 25 26 PUBLIC COMMENTS 27 28 There were none. 29 30 ADJOURNMENT 31 32 There being no further business,on a motion duly made,seconded and passed the meeting was 33 adjourned. 34 5 35 36 37 . 38 39 40 41 42 • 43 44 Larry Parker, Chairperson 45 46 47 48 . 49 ATTEST: 50 Norma Schroeder, Clerk 51 52 53 54 55 56 57 58 59 60 61 62 63 • 64 65 .