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HomeMy WebLinkAboutMinutes 06/05/1995UTILITY ADVISORY COMMITTEE Port Angeles, Washington June 5, 1995 /. Call to Order: Chairman Myers called the meeting to order at 1:04 p.m. Roll Call: Members Present: Members Absent: Staff Present: Gary Braun, Cathleen McKeown, Joe Michalczik, and Bill Myers. Larry Schueler. J. Pomeranz, C. Knutson, K. Godbey, C. Hagar, J. Pittis, B. Titus, R. Ellsworth, G. leaf, B. Upton, Y. Ziomkowski, C. Kasicki, S. Kenyon, S. Hursh, and S. McLain. 111. Approval of Minutes: Joe Michaiczik moved to approve the minutes of the May 8, 1995, meeting as written. Councilman Braun seconded the motion. Mr. Myers pointed out two errors on Page one. The meeting was called to order by Chairman Myers, and the year should read 1995, not 1994. A vote was taken on the motion, which carried unanimously. Public Works Director Pittis asked to add a brief discussion of the Water Comprehensive Plan as a late item. This was agreed to by the Committee. IV. Discussion Items: A. Presentation on the lnterfund Allocation Finance Director Godbey reminded the Committee, that at its last meeting, Mr. Michalczik requested information on the administrative allocation. Director Godbey stated that administrative allocation is misnamed as it is more than administrative expenses. It includes services that directly benefit the utilities, services that are vital to the function of the utility, such as accounting, investment services, accounts payable/receivable, etc. It is really an interfund allocation. Director Godbey then introduced the Finance Department Division Managers, and each gave a brief synopsis of their division's duties. Director Godbey stated the allocation is approximately $1.5 million paid to the General Fund on behalf of the utilities and other -1- Utility Advisory Committee June 5, 1995 funds. She reviewed and explained the information she had provided in the packet, and stated that what the City of Port Angeles charges per customer, per year, is comparative to what other utilities charge. Director Godbey explained that the Finance Department's allocation was the most complicated one, as it deals with many, many functions. Using the overhead projector, Director Godbey showed the department's organization chart and explained what services were provided by the several divisions and how costs were allocated to each. Director Godbey then responded to questions directed by the committee. Bill Myers felt it was not possible to reduce this figure without giving up something. B. Options Regarding Water and Wastewater Rate Increase At the last meeting, the Committee requested options regarding water/wastewater rates. Finance Director Godbey explained that current rates are driven by the Bond Ordinance passed last November authorizing the issuance of water and wastewater bonds in the amount of $10,000,000. Net revenues must be sufficient to cover debt times two. Debt coverage is necessary in the event of unforeseen emergencies, or in case of unanticipated revenue shortfalls. It ensures that debts are paid. Bond holders want to be assured that they will be paid. A coverage ratio of two is a sign of financial strength; to lessen the coverage would weaken the integrity of the City. Therefore, reducing the proposed water/wastewater rates would weaken the system financially. Joe Michalczik inquired as to total bond indebtedness for the utilities. Director Godbey responded that bonds total more than $20 million, which assumes a $3 million Light Revenue Bond. She stated the City has been fortunate in obtaining several low interest Public Works Trust Fund Loans which total approximately $5 million. Mr. Michalczik asked what the Baal bond rating the City received on its utility revenue bonds meant, and Director Godbey responded. Director Godbey stated that she had spoken to the City's financial advisor and did not advise the UAC to recommend rates any lower at this point, unless it is willing to make a dollar for dollar exchange. Discussion ensued and City Manager Pomeranz pointed out that the City has promised the bond holders to maintain a certain coverage. If the City does not maintain that coverage, it is a technical default on the bonds, and all bondholders will have to be notified that coverage has been violated. This could lead to a string of litigations. The city must retain the coverage ratios. After further limited discussion, Councihnan Braun moved to reconunend approval of a two-year rate increase as presented at the May 8 UAC meeting. Councihnember McKeown seconded the motion, which carried unanimously. C. Change to City Light Policy and Procedure Light Director Titus explained that this policy deals with undergrounding of overhead -2- Utility Advisory Committee June 5, 1995 facilities in landlocked area. He reminded the Committee that there was considerable discussion of this issue at the last UAC meeting, and the Committee requested recommendations from staff, which would involve some property owner participation, while retaining the majority of the expense to City Light. Staff devised a deferred option, wherein the property owner would be responsible for landscaping and possibly the cost of changing the service entrance. The City would provide all the materials and dig the trench. Other options previously discussed required City Light to pick up all costs, or asking the property owner for an easement that would allow the City to open up the alley so the overhead poles could be maintained. This option is only viable if all neighbors agreed. These options are only in cases where City Light is initiating the conversions. City Manager Pomeranz felt that if the City decided the conversion was mandatory, it would be unfair to penalize the property owners. Manager Pomeranz and the Councilmembers on the Committee had received complaints from property owners in landlocked areas. Manager Pomeranz felt this move would destroy the City's public relations with the area under discussion. He further stated that if, in the future, the City is going to underground a landlocked facility and charge the property owners for this service, the residents must be informed prior to commencement of the project. Director Titus reminded the committee that it did not feel the rate payers should be billed for these costs, when they received no benefit. He is requesting direction from the Committee as to which direction it would like to proceed. Further discussion followed, and Joe Michalczik expressed concern over all the rate payers being asked to contribute to undergrounding landlocked facilities. He agreed that after the work is completed is the wrong time to implement a policy, however, he is afraid this will lead to another rate increase. Manager Pomeranz suggested that, in the future, neighborhood meetings be held prior to commencement of the project. Benefits, ordinances and policies can be explained to the consumer, and they can be given the opportunity for input. A discussion followed regarding landscaping and the anticipated costs for replacing landscaping, fencing, etc., as well as total cost of undergrounding. Mr. Michalczik again stated that he felt the power poles could be serviced, and he was very much against anything that could lead to another rate increase. Mr. Myers explained why the poles in landlocked areas are impossible to service, and felt the City had some responsibility on the issue, as these landlocked areas were a result of poor planning. After further discussion, Councilman Braun moved to approve the proposal from City Light for sharing the cost of future conversions of overhead services in landlocked areas to underground, providing the cost to the City not exceed $1,000 per household, and that staff amend the current policy and bring it back to the next UAC meeting for approval. Councilmember McKeown seconded the motion. -3- Utility Advisory Committee June 5, 1995 Discussion followed, and Mr. Michaiczik stated he felt he could not vote on this, as the proposal is too vague. He wanted to define "landscaping" to ensure it did not include patios, sidewalks, etc. Mr. Michalczik aiso requested to see some of the landlocked areas. Light Director Titus felt that if the UAC accepted the recommendation with the addition of the $1,000 cap, staff can come back with the actual policy which would contain options and definitions. After further discussion, a vote was taken on the motion, which carried by a majority, with Joe Miehalezik voting in opposition. D. Discussion of City Light Rate Increase and Cost of Service Study Light Director Titus stated that staff held a meeting with industry last week, and the mills still have some concerns which have not yet been completely resolved. He distributed a revised summary of revenue and expenses for the Light Department, explained that the mills were concerned with their ability to cover any costs above the wholesale power cost increase. He reminded the committee that the electric utility has the same debt coverage concerns as the water/wastewater utility. The mills argue that they are not benefiting from any of the capital improvements; therefore, is it appropriate for them to pay? If the mills did not exist, the revenue requirement would be lower, and the City would not need to generate the money. However, the rating agencies will not allow the City to divorce itself from the mills and provide a margin on the non-industriai load. Director Titus then explained the mill's proposal and its alternative. Finance Director Godbey pointed out that, debt not withstanding, the Light Department's reserves have been drawn down and need to be replenished. If one of the mills closed down and was unable to pay a utility bill, the City would need significant cash reserves to make the BPA power payment. Joe Michalczik stated that the City has a very aggressive capital program. The mills are concerned that, as long as the City has this aggressive program, the mills are going to be expected to help replenish reserves through rate increases. Mr. Michalczik asked for clarification on the proposed rate increase, which Director Titus provided. Director Titus also pointed out that many of the capital facilities projects will be completed by 1997, after which time, there will be much less capital spending unless there is significant annexation. Director Titus explained that rates must go to the Council in August in order to give the proper notification period for rates to go into effect in October, when the BPA increases begin. If the Committee would like to see any changes, staff needs direction at this meeting, so it can bring the information back at the July meeting. Further discussion followed, and Director Titus asked if he could conclude that if the City generates rates that provide the required revenues based on a customer charge, an energy charge, possibly a demand charge within parameters similar to existing rates, then the Committee would be satisfied. It was the general consensus that this would be acceptable to the committee. -4- Utility Advisory Committee June 5, 1995 V. Late Items: Water Comprehensive Plan Public Works Director Pittis introduced Ralph Ellsworth, Superintendent of Water, and Dave Peterson from CH2M Hill. Mr. Peterson helped author the Water Comprehensive Plan. Director Pittis stated there are no major changes that have not been previously discussed at a UAC meeting. The Plan will be taken to the Council for adoption at its June 20 meeting and then forwarded on to the State. It then becomes part of the City's growth management strategy. Dave Peterson then gave a brief review of the executive summary of the Water Comprehensive Plan. A brief discussion followed, and Mr. Peterson and staff responded to questions directed by the Committee. There was no action required of the Committee on this issue. VI. Next Meeting: The next meeting of the Utility Advisory Committee will be held on Monday, July 10, 1995, at 4:30 p.m. VII. Adjournment: The meeting adjourned at 3:30 p.m. Chairman Deputy City Clerk -5-