HomeMy Public PortalAbout04-19-1993 PROCEEDINGS OF THE COMMON COUNCIL OF THe
CITY OF RICHMOND.INDIANA.SERVING AS A BOARD
JN CHARGE OF THE OPERATION OF THE RICHMOND POWER&UGHT PLANT
MONDAY.APRIL 19.1993
I1
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,April 19, 1993, in the Municipal Buiding
3 in said City. Chairperson Brookbank presided with the following Councilmembers in attendance: Elstro, Lundy,
4 Donat, McBride,Parker, Allen, Dickman and Hutton. The following business was had to-wit:
5
6 APPROVAL OF MINUTES OF APRI'L 5.1993
7
8 Councilmember McBride moved to approve the minutes of the previous meeting as prepared, seconded by
9 Councilmember Donat 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 Dickman and by unanimous voice vote the motion carried.
15
16 Bills Already Paid
17 Payroll and Deductions 210,135.43
18
19
20 Investments Purchased From:
21 Cash Operating Fund 625,000.00
22 Bond Sinking Fund
23 Utility Bond Reserve Fund
24 Depreciation Reserve Fund 1,297,289.37
25 Insurance Reserve Fund
26 Consumer Deposit Fund
27 28
Cash Reserve Fund 137,500.00
Group Insurance Fund
29
30 Total Investments 2,059,789.37
31
'32
33 Transfer to City in Lieu of Taxes;
34
35 Transfer from Cash Operating Fund to;
36 Payroll Deduction Fund
37
38
39 Transfers from Depreciation Reserve to:
40 Cash Operating Fund
41
42 Transfers from Consumer Deposit to:
43 Cash Operating Fund
44
45 Transfers from Utility Bond Reserve Fund to:
46 Bond Sinking Fund
47
48 Transfers from Cash Operating ;
49 Interest and Bond Principal
50 Bond Sinking Fund
51 Cash Reserve Fund 137,500.00
52 Utility Bond Sinking Fund
53 Depreciation Reserve Fund 91,000.00
54 Insurance Reserve Fund
55 Consumer Deposit Fund
56
57 Interest and Bond Principal
58
59 End of Month Petty Cash
60 Revenue Bonds
61 Interest Coupons Redeemed
62 Bond Coupons
63 Miscellaneous Bills Already Paid 116,987.01
64 Total prepaid invoices 2,615,411.81
65 Total Ns Not Paid 730,667.03
Grand Total 3,346,078.84
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RP&L Minutes Cont'd
April 19, 1993
Page 2
1 REMARKS BY CHAIRPERSON
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3 None were made.
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5 NEW BUSINESS
6
7 The Clerk read Resolution No.3-1993,which was a proposal to distribute money to the City to fund the purchase
8 of industrial property. (See signed and adopted py of Resolution No. 3 - 1993 - A RESOLUTION OF THE
9 BOARD OF DIRECTORS OF RICHMOND POWE &LIGHT FOR A LOAN TO THE CITY GENERAL FUND- in
10 the RP&L files).
11
12 James Kinnett, Economic Director of the City of Richmond, explained that the resolution would authorize
13 appropriation of funds to the City to enter into a contract on the former Wayne Corp. facility. He said there has
14 been an accepted offer of$2,500,000.Giving some background on the issue, Kinnett saidnegotiations had been
15 going on for four months with Carpenter Bus Manufacturing Corporation out of Mitchell. The Wayne Corp.
16 equipment had been purchased by BMY out of Ohio but a month and a half ago BMY announced it was going to
17 offer the remaining assets at an additional auction. At that time the City made a proposal to Carpenter which is
18 owned by Servaas Inc. out of Indianapolis to enter into a long-term agreement to operate a manufacturing facility
19 in the Richmond/Wayne County area. The items discussed, Kinnett said, included providing a lease to the
20 company and the City as a community would purchase the facility.A minimum requirement of 200,000 square feet
21 in the first year would be leased to Carpenter Inc. and a purchase of the property would enter into a
22 lease/purchase scenario. At a future date Carpenter could entertain a purchase of the facility at current market
23 prices.
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25 Carpenter would also have the first right of refusal for the remaining 300,000 square feet.The City also committed
26 to providing personal property tax abatement on new equipment only and enterteraining a loan from the
27 Richmond Revolving Loan Fund for seven years. In addition,the City would entertain with them application to the
28 state of Indiana for training assistance.The City expects Carpenter to use a minimum of 200,000 square feet and
29 employ a minimum of 100 people within the first year of operation. Kinnett said that was the basic proposal that
30 went out March 11 and on March 26 the City received an acceptance. He added that the City maintains the right
31 to sublet from month to month the remaining square footage while Carpenter is gearing up to utilization of the
32 area.
33
34 Kinnett told Councilmembers they had a number of options,one of which was to appropriate the funds to allow the
35 City to enter into the final stage which is to obtain the property and that is spelled_out in Resolution 3- 1993:He
36 said Carpenter has obtained the remaining equipment at the Wayne Corp. site and entered into a contract with
37 the union that formerly served the Wayne Corp. Kinnett said one of the options-is-for Richmond Power& Light to
38 up-front the money, another is for RP& L to up-front the money which would be paid back over the next series of
39 months and another is a straight out bond issue. He added that the last option is the most cumbersome and least
40 advantageous. He said there could be some activity in the building by the middle or end of May if the offer goes
41 through.
42
43 Milligan said if RP & L appropriates the money to the City the lease payments would go to the city. There would
44 be a question as to whether or not the City would have an obligation to repay RP& L since those assets belong to
45 the City. He added that it would be a question as to whether or not the City pays itself. He said it would be rather
46 wasteful to borrow money and turn around and pay all the funding costs for a bond issue and pay yourself interest
47 when the funds could be made available for this use and simply have the rent payment coming directly to the City.
48 He explained that RP & L would not own the plant and it would not show up on its balance sheet. It would simply
49 be a transfer of funds to the City'as the return on investment. The City would take title to the property. The offer
50 Kinnett referred to, Milligan said, was made by Industries Inc. The present owner of the property is U.S. Steel
51 Carnegie Pension Trust.The plan would be for Industries Inc.to assign their contract for purchase to the City and
52 the City would close,then,with funds made available by Resolution 3-1993.
53
54 Councilmember Hutton asked if RP& L could out-and-out buy the property and Milligan responded that RP& L's
55 assets are dedicated to its function and use as an electric utility. He added that there are problems with RP & L
56 buying assets that are not related to the production of electric utility or future use. He noted that the most recent
57 purchase outside was the land purchased from Alcoa which was to be an alternate site for the generating station
58 that went on Gates Road. There was no question then but what that land became available for economic
59 development when that station was located on Gates Road in Center Township. This is an area, Milligan said,
60 where he could not recommend RP& L take title. Councilmember Parker asked if there was an escalation rate in
61 the 10-year lease offered to Carpenter.Kinnett answered that there was none offered and Carpenter could rent
62 the space for 50 cents a foot for the next 10 years. He added that the City would pick up the insurance of$7,000
63 per year and would pay all maintenance of the facility. Milligan.said the taxes would be pro-rated for the year in
64 which it was purchased because it had already been assessed but as of March 1, 1994, it would go off the tax
65 roles because it would be owned by the City.
RP&L Minutes Cont'd
April 19, 1993
Page 3•
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1 Kinnett said there would also be a reduction of taxes on the facility from the present$169,000 down by$79,000
2 which would come out to around $89,000. He explained further that that is the entire tax and the City's share
3 would be only a fraction of that figure because it would affect all tax spending units.
4
5 In answer to a question by Councilmember Elstro, Kinnett said the 90 acres goes-with the sale of the property.
6 That includes the area on both sides of the railroad track and the area down to Industries Road. He added that the
7 City hopes to be able to negotiate whereas it could possibly sell out some parcels of the property if Carpenter
8 doesn't need the full 90 acres.Milligan said the principal discussion thus far has dealt only with the square footage
9 of the plant and office space. Answering Councilmember Parker's question whether or not the plan asked for
10 rental or lease on the land, Kinnett said that would be included in the lease. Councilmember Dickman asked if
11 Wayne Corp. had utilized all 90 acres and Kinnett answered there were times when all the chassis and al the
12 finished buses took up the space. He added that when Carpenter is up to full speed it may have a need for all the
13 area.
14
15 Councilmember Donat commented that if the idea here is economic development then why wouldn't a fourth
16 option be for RP& L to buy the land, enter into a contract with Carpenter and retain the property as an asset with
17 the lease payments going to RP&L. She added that if the idea was to encourage economic growth she didn't see
18 what difference it makes as to whether or not the City or RP&L owns the property if RP&L puts up the money.
19
20 Milligan explained that it gets back to an issue that has been asked time after time, noting that RP & L simply
21 does not exist as an entity. It is a part of the City of Richmond. It is not an executive department. He said under
22 the state law in 1935, Council took over the direct management as a Board of Directors. He said RP&L does not
23 exist in and of itself, has no existence and no corporation charter. He added that Council has never seen such a
24 document because one doesn't exist. He said as the Board of Directors of RP & L the Councilmembers have
25 control over RP & L's assets but the ownership of those assets belongs to the City of Richmond. That has been
26 the case since 1902 and will always be, unless they, as the Board of Directors, elect to sell it to an outside party.
27 He added that he would like to,simply,for one last time,let everyone in this community know that RP&L is a part
28 of the City and all of its assets are owned by the City of Richmond.
29
30 Councilmember Elstro asked if the only way to get the $2,500,000 is the way Councilmember Donat suggested
31 why wouldn't that be a way to go. Milligan said he would not advise the RP& L Board to take RP& L assets and
32 put them into a venture that does not relate to the production or distribution and transmission of electric power. He
33 noted that a look back over the years would show that RP & L has never acquired assets for any other purpose
34 than what is related to the production,distribution and transmission of power.
35
36 Councilmember Donat asked if they were breaking the law by owning the land on which Amcast is built? Milligan
37 answered in the negative, explaining that it was purchased with the idea that it would be used possibly as a
38 location for the Indiana Municipal Power Association peaking station. Giving another example of a purpose for a
39 particular area that turned into something else was the purchase of the Chrysler tract by the Park Department as
40 an expansion for the parks.The parks turned it around and made it available to Hill's Pet Foods but legally it was
41 purchased for an expansion of the parks. The reason he brought it up, he said, was to refresh the memories of
42 those Councilmembers who were involved in that purchase on how you get from Point A to Point B.He added that
43 there is no way to do that here because an existing industrial manufacturing facility in no way can be termed a
44 potential asset for the purpose of generation,distribution and transmission of electric power.
45
46 Councilmember Lundy commented that when she met with Kinnett earlier and discussed the three options she left
47 with the impression that the third option was that RP & L could buy the building and lease it. Kinnett apologized,
48 saying that was his mistake in telling her.that. Councilmember Dickman asked General Manager Irving Huffman
49 what potential that plant had in electric use and how big of a customer would it be. Huffman answered that he
50 didn't remember the figures, but added that it was sizeable and among the top five in electric use. However, with
51 the new operation covering only 200,000 square feet, Huffman said it would use far less, perhaps no more than
52 1,000 kilowatt load. In answer to a question about a time line, Kinnett said that Carpenter has verbally commkted
53 to 24 months to 30 months before it has 100 percent utilization and with that comes more jobs.
54
55 Councilmember Elstro said when the land was purchased from Alcoa it was bought for anybody who wanted to
56 come to town. Councilmember Brookbank said it was a backup in case they had a lot of difficulty with the location
57 of the IMPA station. Councilmember Elstro disagreed, saying the IMPA station was well on its way when they
58 made the purchase. Huffman noted that they bought the property on the basis that it was available. He added that
59 IMPA had the original option but rather than allow the property to go to just anybody, he had expressed to the
60 Board that it be taken on as an industrial development property. That way they would have something that could
61 be made available or at least they could make sure there was ground reasonably.priced within the community for
62 any new industry coming into the area. He said the Board could justify the use of the ground if necessary to the
63 Public Service Commission by saying it was a remote site for warehousing of poles and transformers.
64 Councilmember Hutton agreed with Councilmember Lundy's statement earlier, that she, too, had left Kinnett's
65 office thinking that RP&L could buy the building and lease it.
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RP&L.Board Cont'd •
April 19, 1993 • •
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1 Answering Councilmember Hutton as to why it took so long to get this information to the Board since it was
2 received March 26, Kinnett explained that putting together the package, running the numbers and working on some
3. other details was a time consuming process. He said no specific date was mentioned to give Carpenter an answer
4 but he would like to have everything in place within the next 30 days. Councilmember Allen asked if all the EPA
5 issues were taken care of. Kinnett answered that part of the agreement document includes a complete
6 environmental inspection and study and that will have to be taking place before finalizing the agreement.
7
8 Kinnett said the agreement doesn't restrict the month to month leasing for storage purposes nor preclude the
9 negotiating of the final stance if it is decided to sell off some of the property if that becomes a good idea. However,
10 as far as Carpenter's utilization of the land,that would be included in their orginal lease cost. Councilmember Allen
11 also asked about the use of the Revolving Loan Fund money. Kinnett explained that it would be used to allow
12 Carpenter to go in and purchase additional equipment.
13
14 Councilmember Elstro said in a conversation he had with Charlie Mosey he was told to make sure to get a Phase I
15 and Phase II closure on the property before buying it. Councilmember Donat said she had talked with a certified
16 environmental consultant who advised her that Phase I and Phase II is only a part of what is needed.She said what
17 is really necessary is a clean closure statement.She added that the consultant told her that the Indiana Department
18 of Environmental Management has listed Wayne Corp. as a large quantity generator of hazardous waste. He told
19 her,she said,that this could cost whoever purchased the land millions of dollars.
20
21 She said she wants to purchase the property to get people back to work but doesn't want the taxpayers to bear the
22 burden of millions of dollars for cleanup.She added that she wants to be absolutely sure that the Board has a clean
23 closure document in hand. She commented that it seemed to her that the precedent had already been set with the
24 purchase of Amcast but if the City insists that RP& L up front the money and option two would be that it would be
25 paid back would-that be with.bonds? If so, what would that mean to the taxpayers and to the City's bond paying
26 capabilities for other projects and who would write the bonds?
27
28 Kinnett said either the City proper,the Board of Public Works and Safety or the Redevelopment Commission would
29 issue the bonds and the bond writing would have to be contracted out. Councilmember Donat asked if she would
30 be correct in assuming that the bond counsel would be a member of what is known as the Red Book of Bond
31 Counseling. She added that she had spoken to the Indianapolis firm of Baker& Daniels and was informed that al
32 municipalities should have counsel from the Red Book of Bond Counseling. Kinnett noted that most of the bonds, i1
33 not all issued by the City, have gone to outside bond counsel. He added that the last two had been done by Baker
34 &Daniels. Milligan said before bond counsel was chosen that would come before the.Council.
35
36 Milligan reminded Board members that Resolution 3 - 1993 has nothing to do with bonds. He commented tc
37 Councilmember Donat that Richard Starkey, the individual she talked with, had discussed her telephone call with
38 him. Milligan explained that bonds are issued in the financial market and as a result are rated by the consultants
39 that rate municipal bonds throughout the country.Those consultants, he said,are in New York and those New York
40 consultants basically originated the Red Book. He added that there are several firms in Indiana that are rated and
41 Baker& Daniels is one. He said each local unit of government that issues bonds utilizes one of these accredited
42 bond counsels, adding that is their specialty. He said there has never been any thought that would be done locally
43 but the bond opinion which the underwriters use to go to the potential buyers of these bonds is written by the
44 recognized bond counsel and that has always been the case.
45
46 Kinnett said to issue a general revenue bond as opposed to a general obligation bond that goes directly on the tax
47 base, would be looking at having to issue,for a$2,500,000 purchase, approximatley$4,200,000 in bonds to cover
48 that cost which becomes a 49 percent cost for funds. He explained that much more has to be issued to cover the
49 cost of those bonds because they are not tax backed. However, if a tax backed revenue bond is used,that cost of
50 funds would equal to about 6 percent,which would add on a cost of about$147,000 which includes such issues as
51 loan contingencies, bond issuance cost and bond counsel. He said those two scenarios do bring with them some
52 cost.
53 -
54 Councilmember Lundy said she also called about the•condition of the land and was told that Congressman Phi
55 Sharp had sent a letter to Mayor Cornett saying it is clear. Milligan said he has not seen anything in the terms of an
56 environmental audit which indicates the types of things Councilmember Donat is referring to and not until those field
57 tests are done by qualified individuals will it be known what's out there. He added that under the terms of the
58 purchasing agreement,the seller does pay for the conducting of the Phase I and Phase II environmental audit. In
59 answer to Councilmember Parker's questions, Kinnett said the actual lease payment would be offered at 50 cents
60 per square foot. Commenting on whether or not the E.D.I.T. tax money could be used to help pay back the loan,
61 Kinnett said part of the stipulation is that there be no long-term debts. Milligan said the Council could appropriate
62 the money and basically earmark it for bond payment but the agreement was signed by the Wayne County
63 Commissioners on the basis that it is not permitted to obligate the E.D.I.T.tax anymore than 36 months. He added
64 that Council can appropriate those funds and that would be an alternative. Kinnett added, however,that by doing sc
65 it restricts the City to a limited degree from doing other things should other situations arise.
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RP&L Minutes Cont'd
April 19, 1993
Page 5
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1 In answer to Councilmember Hutton's question, Milligan said it would be possible for RP&L to lend the money to
2 the City and the payments could come back to RP&L each year. He added that it would be very expensive to
3 bond$2,500,000. Huffman asked for a breakdown on the cost of bonding. Kinnett responded that he found for the
4 initial need for$2,500,000 there would have to be a 5 percent allowance for a debt service reserve account which
5 is 10 percent of the bonds that would have to be made available for the general revenue at$250,000;according
6 to bonds and the people who issue and rate the bonds,to have coverage to make sure the bonds can be paid off
7 and make contingencies for non-payment you have to typically do anywhere from 1.5 to 2.0 above the initial bond
8 issuance to cover the initial cost of pay back. He said that is on a general revenue bond that is not tax backed.
9 When it gets to tax backed,both the debt service reserve as well as the capitalized interest expense are removed.
10 Those numbers come out because you're guaranteeing that if something would happen and payment was not
11 made that tax would kick in to cover the cost of the bonds.
12
13 Charles Dugger,an international representative of the U.A.W.to plants in Wayne County,told Board members he
14 is a 30-year employee of Dana Corp. He said from the time of the announced closing of Wayne Corp.the union
15 has met with numerous people looking at this operation of a building facility to come into Richmond.He added
16 that most of them didn't have the money and weren't sound investors. He explained that the reason the union was
17 contacted is that U.A.W. has a contract with Carpenter in Mitchell where they build bus bodies and Carpenter did
18 not want to come into Richmond and make an investment here without having the questions answered as to what
19 the union activity would be. He added that Carpenter would rather sit down with the union to see if an agreement
20 could be worked out.That meeting did take place, Dugger said,and an agreement was worked out that would
21 bring a chassis operation into the Richmond plant. He added that this operation comes from three small plants
22 Carpenter owns.One is in Oklahoma City,another is in Illinois and still another is in New York state.Their desire,
23 he said,is to locate somewhere in the Indianapolis vicinity,in the radius around Indianapolis,to have a facility
24 where they can produce their own chassis rather than ship them to three different states.
25
26 Continuing,Dugger said Carpenter assured the union that there is a long list of communities who would like to
27 have them locate their business in their locales. He said knowing the situation in Richmond and the
28 unemployment,the two factions were able to sit down and negotiate a long term,flexible agreement.Dugger
29 added that had that not happened first,this step tonight would never have taken place,and if this step doesn't
30 take place then Carpenter is going to go away. He said he and other union members have spent the past week
31 filling out appications from local 721 members for the first 100 jobs. He added that he was told by Carpenter that
32 of these 100 people some will go to work immediately,within a year there will be 100 additional jobs and within 30
33 months there will be 300 to 400 people who will be working. He said the agreement the union was able to
34 negotiate will provide wages and benefits for those that are unemployed and citizens of Richmond. He said he
35 has shared the tears and fears of those who have been unemployed,adding that someone has to step out and do
36 something if it's jobs we want. He said he stood before his international executive board to make the same pitch
37 that he is making to Council and was told that talking about a long term flexible agreement has never been done
38 before. He added that he felt that he has done everything possible to get the jobs in here and it is his hope that
39 the Councilmembers will take the action that needs to be taken as quickly as possible. He said Servaas is the
40 owner of Servaas Inc.and is a City Councilperson too,serving 30 years in Indianapolis,and his company has
41 made the decidion to put a chassis plant in and it's going to be done in Richmond or somewhere else. He said
42 he's sure Servaas is not going to delay and wait because there are too many other people who have what
43 Richmond has to offer.But, Richmond does have an opportunity,and that is a facility that is set up and can be
44 quickly put into operation and the people to do it with. Dugger asked Councilmembers to lay aside their own
45 personal feelings and consider the feelings of the unemployed. He noted that back through the years he knows
46 there have been times when this Council has taken the initiative and taken a vote maybe not knowing all the
47 answers.He added that he doesn't know all the answers as to what it's going to be under this agreement,but he
48 knows if he doesn't have the people there the agreements don't amount to anything anyway and if the jobs aren't
49 out there the building is going to grow up in weeds and it's not going to do anybody any good.
50
51 He said he came tonight to support the resolution and urged Councilmembers to get it done quickly. He said he
52 had sent the mayor a copy of the letter written by Congressman Sharp which he wasn't sure had had time to get
53 to him yet.The letter was one that Sharp had sent to John Woods,president of BMY,when the union was dealing
54 with him,trying to get them to stay here rather than move the facility to Marysville,Ohio. He read a paragraph of
55 that letter:"Our understanding is that BMY may not start production at the Richmond plant for fear that the
56 environmental conditions at the facility do not meet the current EPA regulations. In this connection my staff
57 contacted the Indiana Department of Environmental Management to determine if this agency is aware of any
58 specific violations which would restrict the use of the facility by BMY or any other manufacturer.The response
59 from the I.D.E.M.was very positive and they indicated there are no findings which would restrict the use of the
60 facility for manufacturing."
61
62 Bill Clarke, RP&L's Assistant Manager,commented that he has been in Richmond with RP& L for two and
63 one-half years.He said he was impressed when he came to interview with the Board that there was a lot of
64 discussion that RP&L was thought of as a business.One of the questions he said he has is that nobody has
65 asked what the impact will be to RP& L if you take$2,500,000 out of it today.
RP&L Minutes Cont'd
April 19, 1993 •
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1 He read a statement in the resolution:"Whereas the Depreciation Reserve Fund of$7.7 million essentially is
2 adequate to meet the contingencies of equipment and plant repairs and replacement and the requirements of
3 equipment acquisition and plant expansion." He said he has yet to see a question come to the operators of the
4 companies to asked what the future plans are in the way of cash requirements and what kind of contingencies it
5 needs to plan for.A year ago,Clarke said,he and his staff did a long term six-year plan for plant expansion to
6 maintain the facilities in a good reliable level and to meet the needs of the existing customers and they took that
7 plan and put dollars to it and that came out close to$26 million.He said that raised a question of how many
8 businesses in town or anywhere else make decisions on how much money is transferred from cash reserves or
9 make changes in retained earnings without really coming to the company and doing an investigation to see what
10 kind of money it needs for operations to maintain reliability and maintain the credibility as a company that RP&L
11 has in this community.
12
13 Clarke added that if funds are drawn away from RP&L without knowing what the impact is going to be,it may
14 work today and it may work tomorrow,but if it's not known what the impact will be on,the rates,that can have a
15 bearing on economic development.also.Clarke asked Kinnett how often he comes to him at RP&.L and asks
16 what the rates are going to be for a specific business and how often are RP& L's rates compared with other
17 communities.He asked at what point,or is it known,that if the practice of drawing money away from retained
18 earnings is continued or changing the amount of money available for operations is it known what the impact will
19 be on rates in the future and the impact on economic development. He pointed out that whether or not RP&L is
20 owned by the City,it is still a business and has business issues that have to be resolved that he feels are not
21 being addressed.
22
23 Councilmember Allen commented that that is something this Board has to determine.That is why she asked for a
24 policy statement She said with$8 million in the depreciation reserves there had been no reason in the last 10
25 years to get into the emergency reserves.And in the capitalized equipment there has been what is needed every
26 year in the budget to capitalize the ongoing utility. In 1993 there is$5 million budgeted to do capital equipment
27 and those are major expenditures.What is needed,she said, is a reserve for emergencies and it has to be
28 determined by the Board just how much is needed.
29
30 Clarke said he questions when looking at the issue of loaning money to the city and having the option of paying it
31 back at a later point.When loaning$2,500,000 without knowing the impact,he said,what is it going to do to
32 reserves and rates at a future point. He added that if$1 is taken away from the operations it has to be made up in
33 some point in time.When it's taken away, he said,it means a rate increase or something.
34
35 In answer to a question by Councilmember Lundy, Milligan said there are other alternatives to consider.He said a
36 loan of some type could be made from an RP&L account to the City for another purpose to the General Fund
37 and the resolution could be modified to that extent. But, he added,the idea of having to pay it back immediately
38 with a bond issue is outrageously expensive and not a wise proposition. He added that the better idea would be
39 paying it back over time,or at least with RP&L realizing the income from the lease,which would have to be the
40 income net and the insurance expenses.
41
42 Milligan said a motion could be made that RP& L simply enter into an arrangement whereby the$2,500,000 be
43 loaned to the City for economic development with the payback coming from the lease payment net the insurance
44 payments on the building.Councilmember Parker said he would have no problem with.that but would like to see
45 both the resolution and the amendment side by side so he could have an opportunity to read it and compare the
46 two.Councilmember Elstro commented that he would like to see RP&L have full jurisdiction over the property.
47 Councilmember McBride asked why the lease couldn't be paid back to RP& L and eliminate the need for a bond
48 issue.Councilmember Parker said it appears that if payments come back to RP& L at a rate of$100,000 a year it
49 would never get paid back so it has to be made as a loan to the City with the City making the payments back to
50 RP&L over whatever period of time can be agreed upon.
51
52 Kinnett said through conversation with Carpenter that$100,000 annually will rise, estimating the rate will go to
53 $175,000 in year two and year three and thereafter the lease payment would be in the range of$266,000 annually
54 over 10 years.Councilmember Dickman asked what would be the advantages and risks for RP&L to have its
55 name on the line.Answering Councilmember Elstro's question about what would happen if the mayor said the City
56 didn't have the money for payment, Milligan said the payment would be the income off the property and the Board
57 controls that.
58
59 Huffman said if RP&L's revenue get to$40 million this year,for every$1 million that goes out of RP&L,it
60 means a two and one half percent increase to its ratepayers.At giving up$2,500,000 that amounts to 7 percent.
61 He said one half of RP& L's revenues come from its industrial customers. Noting that he had observed
62 representatives from some of those industries in the audience, Huffman said when money goes out of RP&L it
63 has to be replaced and the only place RP&L gets its money from is its customers. He gave Mansville-Schuler as
64 an example.He said they worked with their emloyees to take concessions,with the Gas Company,with
65 everybody to try to be able to be competitive.-
RP&L Minutes Cont'd
April 19, 1993
Page 7 -
1 He said it is a team effort to be very competitive to keep these people in this community.The company decided to
2 stay,Huffman said,based on all these factors and RP&L played a major role in this decision. Many times,he said,
3 Dana Corp. has made the same comments.You have to be competitive on the world wide market.They have an
4 electric furnace and their electric bill is over$100,000 a year every month.When their bill is increased, Huffman
5 said he wonders if RP&L is going to be able to keep those customers here and employees working for those
6 companies. He added that RP&L and others would like to see the deal in question work because they would like
7 to have the revenue. However, he said, RP&L has to at least try to work within the framework that is permissible
8 by the Public Service Commission of Indiana and if they look at this and think ft looks like the money is being
9 thrown away, it only takes one ratepayer to make a complaint for the Commission to ask RP& L to show cause
10 why it doesn't give the money back to the ratepayers rather than than giving it to some entity.
11
12
13 Huffman said RP&L wants to see this plan work but he feels what is needed is to sit down together and ask
14 questions about impact. He added that at no time was RP&L brought into any such discussion.The only thing he
15 was asked, he said,was how this could be done and his answer was to do it legally was for RP&L to loan the
16 money to the City paying it back within the calendar year.He added that that would give the city sufficient time to
17 issue bonds and then the bonds be retired. He said there is no other legal way to make the transfer. If the money is
18 taken from RP&L and transferred to the City, he said, it can be spent for anything the Board chooses,but one
19 thing to remember is that if that money is taken away it's being taken from the ratepayer and it has to be replaced
20 by the ratepayer and that mean the rates will have to be raised sooner than anticipated.
21
22
23 Councilmember McBride said he didn't believe RP&L would be giving the money away,but would be investing the
24 money.Councilmember Brookbank said the City's rates were raised 27 percent for street lights.Huffman explained
25 that the ratepayers were subsidizing the city for street lights and the Commission was insisting that the City not be
26 subsidized,that the amount of money paid for the street lights should be paid by the taxpayer, not the ratepayer.
27
28
29 Byron Klute of 323 South 19th Street,former Richmond mayor,spoke in favor of the resolution, noting that there is
30 a serious unemployment problem in Richmond and Wayne County which is second only to Randolph County in this
31 immediate area. He said he couldn't understand the concern about a two and one half percent increase in the
32 power rates when there are people in this area who don't have jobs.He said people in this room tonight have the
33 ability to decide something very positive for this community. He said the decision had to be made whether or not
34 they were going to be bold enough to take the action to make a real difference in the lives of people and not be
35 greedy or feel like they have to protect everything that could possibly in any way jeopardize the community or to
36 take a risk. He said he had known almost everybody on the Board for a period of time and it was hard for him to
37 believe some of the comments being made were really coming from their hearts. He added that he would never
38 have believed he would hear some of the things he had heard tonight. He concluded that he feels people need to
39 take a look at their own lives and see how the people in this community can be helped so they can earn a living.
40
41
42 Tom Stiens,speaking for the Richmond Energy Group as well as Dana Corp.,said he knew a lot of work and a lot
43 of detail had gone into these proposals presented tonight. He added that he can point out that 100 jobs could be a
44 very fragile thing. He said a year and a half ago there were 220 employed at Dana and recently employment had
45 risen to 310 because Dana was able to offer lucrative proposals to take business away from others. In doing so,
46 nearly 100 jobs had been added. He said things have been happening in the automotive industry.These customers
47 of Dana have lost money in recent years and they're wanting price decreases because they are paying more for
48 medical services, labor and electrical service.He said these are the things that have to be considered when an
49 issue such as this arises. He added that he wanted to make sure that Councilmembers understood that 100 jobs
50 might be brought into this community if another plant is brought into Richmond,but maybe next year or three years
51 down the road 100 jobs could be lost at Belden, Dana or Mansville. Councilmember McBride noted that this Board
52 has to give Huffman permission to ask for another increase and that Stiens is speculating like everyone else.Stiens
53 said if getting the$2,500,000 doesn't bother the electric rates then he thinks the Board ought to go for it.
54
55
56 Councilmember Allen said it was her understanding that in 1996 RP&L is only going back to reallocate.Huffman
57 said that date was selected, based on two things,which include trying to run the timetable of when the next
58 projected rate increase would have to occur. He said RP&L can say there isn't going to be a rate increase but it is
59 a capital intensive company and cannot just willfully say that. He cautioned that RP&L might look like Fort Wayne
60 or Decatur where there is nothing to expand with until the system falls down and there is not good continuity for its
61 customers.
62
63
64
65
RP&L Minutes Cont'd
April 19, 1993
Page 8
•
1 Speaking against the resolution was Clarence.Blank of 309 South 22nd Street who said he lives in
2 Councilmember Brookbank's district.He asked who Carpenter Inc.was and wondered if they could be relied on to
3 follow through on their agreement. He asked and was told they will be making school buses and he asked if they
4 are going to be around 10 years from now, noting that the public is getting tired of busing and it has ruined our
5 educational system. He wanted to know who bought Wayne Corp.and milked it until it went down.He asked if the
6 man who owns Carpenter is going to be around 10 years from now. He asked if the Economic Development Corp.
7 could give him any answers. He noted this is a gamble and said everybody wants jobs but he felt to gamble
8 $2,500,000 with no return is wrong.
9
10 Fred Davis,a representative of the Wayne/Randolph CAP Council,told Board members he had a personal stake
11 in this issue. He said he has friends who used to work at Wayne Corp.and he worked at Union City Body Corp.
12 He said he had listened to a lot of speculation about raising rates and he said he is still willing to pay taxes to get
13 more jobs. He said he comes from Randolph County where unemployment is 15 percent. He added that life is a
14 gamble.He said Councilmembers will spend$100,000 for surveys and grants and put in sewers and don't get
15 anything but an empty building. He said somebody asked how much Wayne Corp. paid on its electric bill and he
16 heard someone say$50,000 a month,then he asked if it wouldn't be better to have 100 jobs paying city taxes into
17 this community than speculating as to whether the electric rates are going to go up.
18
19 Sandy Legere of Boston Pike asked what the jobs are going to pay. Dugger answered that the lowest,being
20 janitorial jobs,would be$8 an hour,then go to$9.24 and to the skilled at$10.41. He added that most will be the
21 skilled type of jobs and for every year of the agreement there is a 3 percent wage increase.
22
23 Chuck Foster,27 North 19th Street, said he is in favor of jobs,but said he is curious as to what kinds of risks are
24 involved if the City is going to give Carpenter tax incentives and loan them money to buy their equipment and to
25 buy the building for them to put the equipment in.He also asked about collateral and added that it seems
26 questionable as to how long they would last. He said he would like to hear a representative of the company
27 speak,then asked Kinnett if he would address those issues.
28
111
29 Kinnett explained that the only issue before the Board is the purchase of the facility itself.He said Carpenter will
30 be purchasing the equipment outright with the Cuity providing a low interest loan to the tune of$150,000 which is
31 less than 10 percent. In addition,the company has been in existence around 35 to 50 years and operated as the
32 Carpenter Bus Manufacturing Co. in Mitchell. It was purchased four years ago by Servaas Inc.which has sizeable
33 assets.That corporation owns a brass operation in the state,the Saturday Evening Post and a number of other
34 ventures throughout the nation and does have the financial wherewithal to go forth with this deal.Kinnett said
35 entering into this agreement is like any new start up venture where you're putting something into a facility where
36 nothing is going on.There is a start up cost and the City is attempting to address that so it can build employment
37 and investment at a quicker pace.Once Carptenter buys it at market value then it will go on the tax roles.
38
39 Councilmember Donat said if she was one of those 100 people she would want to go to work tomorrow but she
40 also thinks,as representatives of the taxpayers of all of Richmond,Councilmembers need to make a little bit of
41 time to make their decision.She suggested that a meeting be called for tomorrow night where they could come up
42 with a workable resolution that would pass a majority of Councilmembers. She added that she felt it would be
43 worth the extra time to do this rather than take a chance on this resolution failing and starting from ground zero
44 again.
45
46 In answer to Councilmember McBride's question as to what changes she would make,Councilmember Donat said
47 she would like for RP& L to buy it and own it as an asset and others had mentioned they would like to loan the
48 money and have it paid back through bonds and still others have said they would like to loan the money and have
49 a payback through a lease agreement.Councilmember Hutton asked if amendments could be made tonight and
50 Councilmember Allen suggested that the resolution include wording saying that the$2,500,000 be paid from the
51 Cash Operating Fund of RP&L to the Richmond General Fund for the purpose of funding the purchase of Wayne
52 Corporation with the net lease income to be paid to RP&L and the balance paid when that facility is sold.
53
54 Councilmember Parker said he felt some kind of interest should come back to RP& L.Milligan said the present
55 rate on RP&L's CDs which is probably about 3 percent could be used.That would make it somewhere around
56 $90,000. He said it could be set as the prevailing CD rate as the City's other investments and add the part about
57 the net lease income. Milligan asked Chairperson Brookbank to declare a short break to enable the Board to get
58 together on language.
59
60 Following the break, Milligan read the resolution that was put together during the recess with the collective
61 thoughts of the Board members:"Whereas it is desirable to make a loan to the City of Richmond General Fund in
62 the amount of$2,500,000 for the purpose of funding the City's purchase of the former Wayne Corporation bus
63 manufacturing plant and land;
64
65 Now,therefore,be it resolved by the Board of Directors of Richmond Power&Light that a loan of$2,500,000 be
made from Cash Operating Fund Investments to the City of Richmond General Fund,for the purpose of funding
the City's purchase of the former Wayne Corporation bus manufacturing plant and land to be repaid as follows:
RP&L Minutes Cont'd
April 19, 1993
Page 9
1 A.The annual net lease payments received by the City for the facility shall first be applied to interest on the loan
2 principal balance at the prevailing 12 month certificate of deposit rate with the balance to be applied to principal,
3 and
4
5 B.At such time as the facility is sold the principal balance of the loan and all unpaid interest shall be paid to
6 Richmond Power&Light.
7
8 Councilmember Donat asked about the environmental issue, noting that it was really a huge concern for her.She
9 requested a clause in the resolution that would state the contract include wording that the Board would have a
10 clean closure document in its hands when the contract was signed.Councilmember Allen said it would seem
11 inappropriate to state that in the resolution,adding that she felt the place for it would be in the contract yet to be
12 negotiated between the City and Carpenter.Councilmember Donat said she felt this resolution should be
13 contingent upon the clean closure document being in the hands of the Board. Milligan said he deferred to
14 Dugger's mention of Congressman Sharp's letter and asked Klute,who works in Congressman Sharp's office,to
15 step forward. Milligan added that the entire matter is the same as working out the details of the title and survey
16 and is not appropriate to put in an ordinance.Councilmember Donat said the certified environmental consutant
17 she talked with indicated that when Wayne Corp. had to list all the areas where waste might be contamination on
18 closure,they had to file a closure statement telling what had to be cleaned up and after that they would have to
19 fulfill that statement. Upon fulfillment the environmental agency will give to them a clean closure document and
20 that's what she believes the City needs to have to protect itself.
21
22 Milligan asked Klute if Congressman Sharp's letter would indicate that the City would be free and clear of any type
23 of environmental costs. Klute answered that it addressed the issue as to whether or not manufacturing could be
24 continued in that location.He said the owner at the time the property was transferred is supposed to turn it over to
25 the purchaser free and clear of the contaminants that he is aware of at the time.The initial owner has to make
26 certain there is no environmental contamination.Councilmember Donat asked if that letter would serve any
27 purpose and Klute answered that it states only that manufacturing can continue at that location.
28
29 Milligan said it is not appropriate to put the environmental issue in the resolution. He added that the concern about
30 the environmental question should be placed in the ordinance as an instruction to the Board of Works along with
31 the language that is in the draft for requirements for appraisals and other safeguards of the City's interests.
32 Councilmember Donat said she will make the same motion in the Council meeting when the ordinance is
33 discussed.At the request of the Board, Milligan repeated the reading of Resolution 3- 1993 as it had been
34 revised at the suggestion of the Board members.
35
36 Councilmember McBride moved that Resolution 3-1993 be approved with a second by Councilmember Lundy.
37 The resolution was adopted by an 8 to 1 vote,with Councilmember Elstro casting a nay vote.
38
39 The Clerk read Resolution No.4-1993-A RESOLUTION OF THE BOARD OF DIRECTORS OF RICHMOND
40 POWER&LIGHT REQUESTING THE CITY OF RICHMOND, INDIANA,TO CREATE A HOLDING
41 CORPORATION TO OWN AND FINANCE A TELEVISION CABLE, COMMUNICATIONS AND CONTROL
42 SYSTEM (Check RP&L file for Resolution No.4-1993 in its entirety).
43
44 Councilmember McBride asked if the franchise had been approved by the Board of Works and Milligan
45 answered that it is inappropriate to talk about a franchise until this cable corporation comes into existence.
46
47 Councilmember Donat said she had several amendments she wanted to propose however,on the first one she
48 wasn't quite sure of the wording and asked for Milligan's help.She said she believes the communication system
49 RP& L would like to offer the City of Richmond is more of a communications system, a fiberoptic system that
50 would have capabilities for economic development and provide cable TV.She added that it isn't just a cable TV,
51 calling the cable TV the icing on the cake. In the last"whereas"she said the thinks the big thing left out there is
52 economic development, noting that the communication capabilities offered by RP&L will greatly enhance
53 economic development. Milligan noted that the resolution was drafted by him at the request of the Board
54 president,based on the presentation made at the special meeting of the RP&L Board.Councilmember Donat
55 said it was unfortunate that Milligan and Chairperson Brookbank missed the earlier meeting before that special
56 meeting where all the technological advances were detailed.When Chairperson Brookbank asked
57 Councilmember Donat if she was chastizing them, Councilmember Donat answered in the affirmative.She said
58 the result of not being at that meeting is that this resolution does not say all that the RP&L system can do.
59 Milligan said at this point, if anyone wishes to make changes in the resolution that they simply make a motion
60 before the Board and indicate whai the changes are.Councilmember Donat so moved followed by a second by
61 Councilmember Elstro. In helping with the wording at the first part of the resolution, Milligan suggested to
62 Councilmember Donat the use of"fully interactive cable communications and control system"with which she
63 agreed.
64
65 Milligan read the resolution with the changes proposed by Donat.
RP&L Minutes Cont'd
April 19, 1993
Page 10.
1 Councilmember Dickman and Councilmember McBride also suggested some changes in the wording. Milligan
2 noted that Councilmember Donat needed a second for her amendments and Councilmember Hutton complied with
3 the request.The motion was carried by a unanimous voice vote. (See RP&L Board file for Resolution No.4-1993
4 in its entirety as it was revised).
5
6 Chairperson Brookbank declared the resolution on public hearing.
7
8 Speaking in favor of the resolution was Clarence Blank of 309 South 22nd Street,who said he agreed with
9 Councilmember Donat that this is a fiberoptics communication system and:RP&L is going to have to, under law
10 within a few years,actually install this demand side management and cable TV is just a tip of the iceberg. He said
11 President Clinton and Vice President Gore would actually like to see fiberoptics networks plus actually enhanced
12 communications and computer systems promoted in this country. He said the City has a chance to do this at a very
13 low interest rate and beat many of the other communities that don't have the ability that RP&L already has.He
14 added that he felt this is something that actually could develop economic development in this community and called
15 it a look toward the 21 st Century. He said he felt the Board would be remiss it doesn't take this step.
16
17 William L.Jefferies of 523 Northwood Drive said he wanted to thank Huffman and his crew for the good job they do,
18 noting that they bring the best electricity in the country and the best people. He said he was in favor of RP&L
19 going into cable TV and added that he had some background and knowledge of fiberoptics.He said the barbershop
20 near the overpass at the east end of the Main Street bridge cannot get cable TV from TCI unless it pays$1,600. He
21 said he doesn't have any relatives at RP.&L but has friends who work there and added that Huffman is accessible
22 and that he can call him on the telephone any time.
23
24 Debbie Brim of 1813 South West E Street commented on a letter which appeared in the Letters To The Editor
25 section of today's Palladium-Item where the writer stated that the City already has one cable TV and questioned as
26 to why it needed another. Brim said if the City took that attitude we wouldn't have Landis and Primex Plastics nor
27 Kmart and Walmart.She added that she didn't understand the logic of the letter.She urged Board members before
28 making any decision to look at the track record of what it is they're making a decision on.She said all of them were
29 elected or re-elected based on a track record.She noted that when a business man decides to expand you look at
30 his track record in sales,profits,etc. In pointing out RP&L's track record,Brim said that the facility has been
31 described as the single, most valuable asset this community has. Its rates cannot compare with other utilities within
32 the area or even on a broader basis. It is profitable and dependable and it didn't get that way by accident.She said
33 it has not only good management and leadership but an excellent and dedicated staff.She said when it was
34 learned that RP&L was interested in going into the cable industry there was concern that electric rates might go up
35 and concern about property taxes being raised which,along with other things,clouded the issue. However,she
36 said she didn't see this concern when it was learned about the giant office building that's proposed for the
37 downtown area at a cost of$30 million and backed by property taxes.She said she appreciated Councilmembers'
38 concern over some of the issues but she thinks their track record is inconsistent when it comes to new issues.She
39 stated that she felt if the City doesn't go into cable TV it will lose a very valuable economic development tool.
40
41 Mary Kay Tolen of 3419 Glen Hills Drive spoke in favor of the resolution.She said it didn't say anything about a
42 franchise and she knows it is the next step.She said she thought a franchise was for a business wanting to come
43 into your area,to go over your streets and string lines over your property for a fee. Her question was,if the City
44 already owns RP&L,why is a franchise needed.She added that,perhaps this is a step that could be eliminated.
45 Milligan answered that a franchise is required because the present agreement between the City and TCI requires
46 that the same conditions and requirements be imposed on any other persons or entitity that provides the service.
47 Huffman said there is still some question as to why a franchise is needed,adding that RP&L has submitted a
48 franchise for the City's review although the name of the utility and company has not been selected. He said it is his
49 intent to have the Telecommunications Council to start reviewing it.
50
51 Wayne Tolen of 3419 Glen Hills Drive asked the Board to give some thought to the fact that in an earlier meeting it
52 was brought out that it took two years to hammer out an agreement with TCI,then when RP&L announced it was
53 going to get into the business TCI very quickly lowered the rates for its basic service.Jefferies was recognized
54 again and commented that people are always urged to buy American so why not urge them to buy their hometown.
55 He added that he thinks people of Richmond will buy from RP& L because it will benefit them.
56
57 Hearing no comments against the resolution Councilmember Hutton moved for adoption of Resolution 4-1993 with
58 the changes that were made.The motion was seconded by Councilmember Elstro.
59
60 Councilmember Allen said she was privileged to watch a TCI presentation recently about what they are putting in
61 currently which she feels encompasses all the things mentioned here by RP&L. Her question was whether the City
62 needs to spend money for something that it already has. She said TCI is going to have the same technology that
63 she saw presented at the special meeting at RP&L.Councilmember Donat said at the TCI meeting she asked
64 three times what its system was going to cost and got no answers.She asked that question of Rich Cody, Manager
65 of TCI,after the meeting and his answer was that the cost had not been determined.
RP&L Minutes Cont'd
April 19, 1993
Page 11
1 Councilmember Allen said it is her understanding that RP& L is going to have the capabilities but it is not going to
2 be free.Clarke said the RP&L system that is going into place is more extensive technology than what TCI is
3 putting in. He said there is more redundancy into the TCI system and RP&L's will have better reliability.When
4 you talk about capability,Clarke said,TCI has an older generation system whereas RP&L's is a state of the art
5 system.He added that TCI talks about 500 channels but RP&L can offer more if that's what the public wants.He
6 said TCI would hit the ceiling of frequency long before RP&L would. He said the cable TV will just provide
7 another source of revenue to offset the cost of down side management or other services the RP&L system ends
8 up providing.
9
10 Councilmember Dickman said in the projections there are two things for concern and those are that 50 percent
11 penetration of the market at a price of$16.50 is a great price,but if both of these don't occur,the debts can't be
12 paid and the payments can't be made without having to rely on the tax backup. Based on the competition, he said
13 he thinks the Board will have to think about that question.Councilmember McBride commented that TCI is
14 stringing fiberoptics all over town and Clarke answered that it was not to the extent that RP&L is doing.He
15 added that TCI is doing a rebuild of its system.
16
17 Resolution No.4-1993 was adopted by the following call of the roll:
18
19 Ayes: Elstro,Parker,Donat, Lundy and Hutton.
20 Nays: McBride,Allen, Dickman and Brookbank.
21
22 Don Eliason,a resident of Eliason Road,appeared before the Board giving some background on the happenings
23 during the time the IMPA station was built on Gates Road. He told of the disagreements between Huffman and
24 several residents in the area, noting that he, along with them,spent around$20,000 fighting it but to no avail. He
25 said it all started November 20, 1989 and voiced his displeasure with how the residents were treated during that
26 time.
27
28 Councilmember Hutton made a motion to allow the General Manager to receive bids for a cargo van,second by
29 Councilmember McBride and carried by a unanimous voice vote.
30
31 Huffman said the franchise agreement had been submitted and he felt it should be recognized and be put in a
32 motion for consideration adding that it was his feeling any delay on that would be wrong.He said it would be his
33 recommendation that this Board send to the Board of Works and Safety the instruction that it would like for them
34 to get on with the consideration of this franchise.
35
36 Councilmember Donal moved that the Board of Works consider the franchise agreement for a two-way fully
37 interactive cable communications and control system that has been submitted by Richmond Power&Light,
38 second by Councilmember Hutton and carried by a unanimous voice vote.
39
40 ADJOURNMENT
41
42 There being no further business,on a motion made by Councilmember McBride,second by Councilmember
43 Hutton and carried by a unanimous voice vote,the meeting was adjourned.
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49 Jane Brookbank, Chairperson
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54 ATTEST:
55 Norma Games,City Clerk
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