HomeMy Public PortalAbout06-07-1993 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.JUNE 7.1993
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, June 7, 1993 in the Municipal Building in
3 said City. Chairperson Hutton presided with the following Councilmembers in attendance: Elstro, Brookbank,
4 Donat, McBride,Parker, Allen, Dickman and Elstro. The following business was had to-wit:
5
6 APPROVAL OF MINUTES OF MAY 17.1993
7
8 Councilmember McBride moved to approve the minutes of the previous meeting as prepared, seconded by
9 Councilmember Hutton and on unanimous voice vote the motion was carried.
10
11 APPROVAL OF BILLS. INVESTMENTS AND TRANSFERS
12
13 Upon recommendation of the Finance Committee,Councilmember Allen moved to approve the following bills for
14 payment,seconded by Councilmember McBride and by unanimous voice vote the motion carried.
15
16 sills Already Paid
17 Payroll and Deductions 210,309.55
18
19 Investments Purchased From:
20 Cash Operating Fund 2,550,000.00
21 Bond Sinking Fund
22 Utilty Bond Reserve Fund
23 Depreciation Reserve Fund 139,381.91
24 Insurance Reserve Fund 184,981.03
25 Consumer Deposit Fund
26 Cash Reserve Fund
27 Group Insurance Fund
28
29 Total Investments 2,874,362.94
30
31 Transfer to City in Lieu of Taxes:
32
33 Transfer from Gash Operating Fund to:
34 Payroll Deduction Fund
35
36 Transfers from Depreciation Reserve to:
37 Cash Operating Fund
38
39 Transfers from Consumer Deposit to:
40 Cash Operating Fund
41
42 Transfers from Utility Bond Reserve Fund to:
43 Bond Sinking Fund
44
45 Transfers from Cash Operating :
46 Interest and Bond Principal
47 Bond Sinking Fund
48 Cash Reserve Fund
49 Utility Bond Sinking Fund
50 Depreciation Reserve Fund 91,000.00
51 Insurance Reserve Fund
52 Consumer Deposit Fund
53 Interest and Bond Principal
54 End of Month Petty Cash
55 Revenue Bonds
56 Interest Coupons Redeemed
57 Bond Coupons
58 Miscellaneous Bills Already Paid 1,645,243.04
59
60 Total Prepaid Invoices 4,820,915.53
61 Total Bills Not Paid 806.565.26
62
63 Grand Total 5,627,480.79
64
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RP&L Minutes Cont'd
June 7, 1993
Page 2
1 REMARKS BY CHAIRPERSON
2
3 None were made.
4
5 UNFINISHED BUSINESS
6
7 None.
8
9 STREET LIGHT COMMITTEE REPORT
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11 Councilmember McBride informed Councilmembers of the proper procedure for street light requests. He said they
12 must give the petition to him and he, in turn,takes it to Robert Hankosky at RP&L in the engineering department
13 for a recommendation. From there, McBride takes it to the Board of Works which acts on it and agrees to pay the
14 charge,then forwards it to RP&L.
15
16 Councilmember Parker presented a petition for street lights signed by neighbors on the culdesac on Park Terrace
17 Drive.
18
19 REPORT BY GENERAL MANAGER
20
21 General Manager Irving Huffman asked for authorization to receive bids for a 1993 digger to replace a 1981 line
22 truck, noting that delivery time will probably take about two months. He estimated the cost will be about
23 $100,000, noting that the old truck will be traded in. Councilmember Dickman asked if the truck could be used by
24 another department and Huffman answered that it is too large to benefit any other city department.
25 Councilmember Parker moved to authorize Huffman to take bids,second by Councilmember McBride and carried
26 by a unanimous voice vote.
27
28 Minutes of a March 22 meeting were approved through a motion by Councilmember Hutton,second by
29 Councilmember Dickman and carried by a unanimous voice vote.
30
31 A demand side management presentation was made by Assistant Manager Bill Clarke who said RP& L had
32 requested proposals be made by three different engineering consultant firms. He asked Council for its approval to
33 hire a firm called SFT out of Lawrenceburg and if they approve the hiring those presentations will be made to the
34 Board at the June 28 meeting at the RP&L office. Clarke said SFT's bid had been for$8,000 and the other two
35 were for$20,000 and $17,000. Councilmember Elstro moved to approve the hiring of SFT,second by
36 Councilmember Hutton and carried by a unanimous voice vote.
37
38 Huffman said RP&L had been working with the City Attorney to make funds available for the Wayne Corporation
39 loan of$2,500,000. He said RP& L is happy to be a part of the solution to get jobs in the community,but he
40 voiced concern about newspaper articles suggesting the possibility of utilizing some of Richmond Power&Light's
41 funds for other projects or other items. He explained his concern noting that if these funds are utilized for
42 something other than a loan purpose they have to be declared as excess and in doing that,the Board would be
43 saying RP& L has excess money and it doesn't need money for any kinds of emergencies or any future plans. He
44 said,by the same token, it is also telling the Public Service Commission that these are excess funds and they will
45 want to review this.The Commission, he said, has the customer's interest at heart and its view of excess funds is
46 that they belong to the ratepayer. Huffman said any money the utility has, even from the beginning came from the
47 ratepayer. He added that if the Commission thinks if the utility is going to subsidize the taxpayer then maybe the
48 utility has too many funds and maybe those funds should be sent back to the customers as a refund as excess
49 profit to them.
50
51 Councilmember Elstro commented on a letter written about the$2.5 million loan by Herschel Philpot to Huffman
52 and which all Councilmembers received. He asked if the Board could get something in writing and as to whether
53 or not it is legal. Milligan responded that it was, indeed, legal,adding that he is going to comply with the letter
54 received from Philpot for the purposes of RP &L's file. He said RP& L will receive the opinion in writing as well as
55 a promissory note obligation which reflects the terms of the loan.
56
57 Milligan explained the background of the money that is being used for the loan,saying that a year ago 111
58 Councilmembers as a Board through the General Manager and attorneys in Indianapolis,filed a rate case with the
59 Public Service Commission. In filing that case it asked for a$3.2 million return on investment as a part of that.
60 The original proposal placed before the Board on April 19, Milligan continued,talked about this as part of the
61 return on investment. It was not in any way, he added,an encroachment on the various reserve funds. Milligan
62 said Huffman did not see fit to enhance any of the reserve funds in his petition for a rate increase a year ago.All
63 he asked for were additional operating revenues to return an investment to the City of approximately$3.2 million a
64 year. Milligan added that this is City money because it is a City utility.
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RP&L Minutes Cont'd
June 7, 1993
Page 3
I ,
1 Councilmember Elstro asked Milligan if he would give his permission to hire another atorney and Milligan refused.
2 Councilmember Elstro made a motion to take a vote to see how many Councilmembers wanted to hire another
3 attorney.Councilmember Lundy commented that when the Board has a problem it can't seem to get clarification
4 in writing and she feels an impartial outside opinion is needed.Councilmember Hutton seconded the motion.
5
6 In response to a question by Councilmember Allen, Milligan said as Common Council the Councilmembers could
7 hire an attorney without his approval but they cannot hire an attorney for the RP&L Board without his approval.
8 He added that he had given members all of the statutory information before. He said it is in Indiana Code
9 36-49-12 and specifically says that officers,department boards and commissions and other agencies of the City
10 may not employ attorneys without the authorization of the head of the Department of Law and that is the City
11 Attorney. He pointed out that RP&L has attorneys in its employ who have continued to function and he(Milligan)
12 has made contact with the utility's principal lawyer, Mike Craycraft,with regard to affairs before the commisssion
13 and the annexation proposal which makes a good working relationship.
14
15 Councilmember McBride noted that with that explanation it appeared that there would be no purpose to going
16 forth with the motion. Councilmember Lundy questioned the motion if the City Attorney would not allow the Board
17 to hire another attorney and also where the funds would come from to pay such an attorney. Milligan said the
18 motion is a legal motion and that the Board could vote to hire an attorney but before it can expend funds and enter
19 into the contract the Board will have to secure his approval. He added the he is simply telling them ahead of time
20 that he will not give that approval. He said the only way to change that is to go to the State Legislature.
21
22 Councilmember Donat asked Milligan what he was afraid of and Milligan responded that he was afraid of nothing.
23 Milligan added that he has practiced law for 34 years and it is not a new experience for an attorney to have a
24 client who will not accept his advice.He added that it is also not a new experience to be in a situation where you
25 give people answers that you know they don't want to hear and he has done that repeatedly with this Board,with
26 certain members, and her in particular. He explained that the law is a system of rules.The Mayor has the
27 authority to appoint the City Attorney and in this situation he is involved in the Board's action as the City Attorney
28 and he is involved in this at the instigation of Chairperson Brookbank who is the Board's presiding officer. He said
29 he would not authorize the payment of unnecessary legal fees and thereby dissipate the money that belongs to
30 the City of Richmond,and that it would be an unnecessary and completely unfounded expenditure. He said if the
31 Board has a problem accepting his legal opinions and his advice it has the opportunity to spend its own funds and
32 dispute that but that same Board is not going to spend the funds of the City in the utility's account.
33
34 Councilmember Lundy requested that Huffman and Milligan bring the Board written documents that say the City
35 owns the utility. Milligan explained that is very simple and he will prepare an abstract of all the minutes going back
36 to 1901. He said in May of 1901 there was a referendum by the citizens of Richmond on whether or not the City
37 should enter into a project whereby they would generate their own electricity.They were already distributing
38 electricity because there were street lights and there were various electrified appliances in business and industry
39 and some homes. But, in May of 1901 there was a referendum held,and the citizens instructed the 14-member
40 Common Council as to how RP&L should be developed and it was developed with City funds.Milligan said it
41 was clearly set forth that it was an investment of City funds, all approved by Common Council,and it was
42 administered by the Board of Works until February 1935.That is when Council, under the modification of the
43 Indiana statute,chose to become a part of the management of RP&L by becoming its nine-person Board.So,as
44 a Board,the members are part of the management and work with Huffman and others on his staff as managers.
45 However,wkh regard to City business,the members are not managers.The Mayor and the Clerk discharge the
46 executive functions of the City.Council is legislative and members pass on policy and primarily control
47 expenditures and thereby effect policy but does not manage the City's affairs.
48
49 Councilmember Elstro commented that he felt the Board needs its own attorney and he had made the motion
50 because he wants to show that it's more than just him who feels that way. Councilmember Hutton said she felt at
51 this point it was not important who owns RP&L.
52
53 Councilmember Donat said she felt that it is a disservice to the City and ratepayers,_particularly to the
54 constitutents who elected the nine Councilmembers,that one appointed individual can tie the hands of those
55 people the citizens voted for to make decisions for them. She said she felt it might be well to go ahead and vote,
56 to see if the majority of the Board wants another opinion,another counselor. In doing that,she said,she felt they
57 would be doing what the voters expected them to do when they voted for them and that is to lead. Chairperson
58 Brookbank said she thinks that is what the Board is doing-leading.She recalled when Council hired an outside
59 attorney because of its difference with the Mayor and lost,adding that you would think it had learned a lesson.
60 Councilmember Dickman said he disagreed that the Board's hands are tied and asked that the motion be
61 withdrawn.Councilmember Elstro said he had made the motion, it was seconded and he wanted the vote.
62
63 Councilmember Lundy noted that she thinks who owns RP&L is the crux of the whole issue and once that is
64 resolved the Board can go from there. Milligan pointed out that if Board members look at the balance sheet they
65 receive each month and look at the equity section of that sheet they will find no outstanding stock there so it is not
RP&L Minutes Cont't
June 7, 1993
Page 4
111 1 investor owned and there are no outstanding patronage dividends or patronage distribution owed to ratepayers. So
2 it is not a cooperative like REMC.There is no ownership other than the City. He added that it has always been that
3 way, and will always continue to be that way until such time as the Board disbands and sells it to somebody else.
4 He noted that one simply has to look at the balance sheet and the proprietorship section will show that RP&L is
5 capitalized entirely by retained earnings. He noted that is what Huffman refers to,the retained earnings were there
6 by virtue of the action of the Board of Works representing the City because they kept reinvesting all the profits of
7 the Muncipal Electric Light and Power Plant in the utility and it has been totally financed over the years,capitalized
8 through those earnings.
9
10 Huffman had some additional comments on the rate case. He said, in reference to the$3.6 million returned for
11 investment,out of that$3.6 million, RP&L had to pay$1,650,000 to the City which left less than$2 million.That is
12 used to make some capital expenditures and also keep the utility prosperous, he said. He added that the original
13 bond issue of$212,000 was retired by the ratepayer and if the City had any investment prior to the$212,000 it
14 would be extremely minimal. He said,whether the utility belongs to the taxpayer or the ratepayer,the Commission
15 is only interested in who put the money in. He also agreed it would be good to have another opinion basically to
16 verify just why there is such a difference of opinion. He added that it isn't the ownership so much as the$3.6
17 million. He said if that means the City gets to take the$3.6 million then the utility has to take$1,650,000 out of the
18 reserves to pay its dividends which it is obligated to the pay the City. He added that that money can not be plucked
19 out and used for whatever may come about downstream.
20
21 Milligan responded to Huffman's comments,saying that the General Manager's arithmetic omitted the fact that in
22 that same rate petition there was$545,000 for a payment in lieu of taxes as well as a$3.2 million request for a
23 return on investment which was approximately$3.6 million available.Of that amount last year, he said, RP&L
24 returned$1,500,000 approximately to the City as a dividend,paid$140,000 to the City for economic development,
25 and paid$10,000 directly to the Chamber for another project there,so it is a total of$1,650,000 of which$545,000
26 is RP&L's payment in lieu of taxes and$3.2 million is available for the difference which is$1.1 million.That leaves
27 over$2 million still in the utility from this year's operations as projected in the very petition that RP&L filed and
28 upon which the ruling was entered.
29
30 Huffman said RP&L did not file in this case a dividend to the City other than making the payment in lieu of taxes
31 and was not charged an expense item in the filing with the Commission because RP&L knows the Commission
32 does not permit that type of expense to be listed ahead of time. Milligan responded that a dividend to the City is not
33 an expense item, adding that the utility has never been able to expense a dividend.
34
35 Chairperson Brookbank commented that it was necessary to read the entire law to understand that procedure.She
36 called for a roll call vote on the motion on the floor made by Councilmember Elstro to hire another attorney.The
37 motion was adopted on the following call of the roll:
38
39 Ayes:Elstro, Lundy, Donat, Parker and Hutton (5)
40 Nays:McBride,Allen, Dickman and Brookbank(4)
41
42 Directing his comment to Milligan Councilmember Elstro said that he (Milligan)had been mistaken when he said
43 earlier that Common Council could sell RP& L,adding that it has to go on a referendum to be sold. Milligan's
44 response was that his statement only served to prove the point he had been trying to make and that is the citizens
45 of the City own RP&L and that is why it take a referendum of their votes.
46
47 ADJOURNMENT
48
49 There being no further business,on a motion duly made,seconded and passed the meeting was adjourned.
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55
56 Jane Brookbank,Chairperson
57
58
59
60
61 ATTEST:
62 Norma Carnes,City Clerk
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