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CFPUA 04 11 2012 CAPE FEAR PUBLIC UTILITY AUTHORITY REGULAR MEETING APRIL 11, 2012 Members Present: Jim Quinn, Chairman Patricia Kusek, Vice-Chair Gene Renzaglia, Secretary Mike Brown, Treasurer Cindee Wolf Larry Sneeden Charlie Rivenbark Neil Anderson Rick Catlin Jason Thompson Staff Present: Matt Jordan, CEO Jim Flechtner, COO Cheryl Spivey, CFO Karen Durso, Assistant to the CEO Carey Disney Ricks, CCO Beth Eckert, Environment and Safety Director Nancy Johnson, Customer Service Director Tom Morgan, H.R. Director Frank Styers, Director of Engineering Christene Mitchell, Engineering Manager Kent Harrell, Engineering Manager Gary McSmith, Senior Project Engineer Ken Vogt, Wastewater Treatment Superintendent Melinda Hoggard, Accounting Manager Julie McLawhon, Finance and Accounting Manager Jim Craig, Utility Services Superintendent Attorney Present: Linda A. Miles, the Miles Firm, PLLC Guests Present: Matt Davis, NHC Fire Services Frank Blackley, City of Wilmington Fire Department CFPUA 4.11.2012 MINUTES Page 1 Tyler Newman, BASE Lawless Bean, City of Wilmington Tom Freshwater, UNC-W Eric Williams, HDR Engineering Bob Wallen Chad 0'Shields Kate Queram, Wilmington Star News Call to Order, Determination of a Quorum, and Opening Comments. Mr. Quinn called the meeting to order at 9:00 a.m. and determined a quorum present. Mr. Quinn thanked the board for their attendance and discussion at the March 26 workshop on growth and capital improvements. Adoption of the Agenda. Mr. Rivenbark moved to adopt the Agenda. Ms. Kusek seconded the motion, and it passed unanimously. Approval of Minutes. Mr. Renzaglia presented the minutes of the March 14 meeting. There were no corrections, and Mr. Renzaglia moved for approval. Ms. Kusek seconded the motion, and it passed unanimously. Public Comments. Mr. O'Shields addressed the Board and asked that public hearings be held at night and be more widely advertised to encourage greater customer attendance. He further stated that he believed the tiered structure to be punitive. Consent Agenda. 1. Authorization for the CEO to change the Authority's merchant services vendor and enter into a N.C. State contract with SunTrust Merchant Services, LTC, and approval of the associated Resolution designating SunTrust Bank as an official depository, at an estimated annual savings of 812,352.00. 2. Authorization for the CEO to purchase ten (10) FC300 handheld meter reading devices and two (2)five-bay multi-docking stations for the Meter Reading Division, at a budget impact of 850,826.84. CFPUA 4.11.2012 MINUTES Page 2 3. Authorization to revise the Authority Fee Schedule to provide for a one-inch single family residential ivith fire sprinkler rate. Mr. Renzaglia moved to approve the Consent Agenda as presented and recommended by staff. Ms. Kusek seconded the motion, and it passed unanimously. New Business,Administrative Reports. Public Relations Report: Ms. Ricks reported on the Authority's participation in the Junior League's "Touch a Truck" event for children at the Mayfaire shopping center. She thanked Kathy Willis and Kipp Glazier for their work at the event. Ms. Ricks reported on a partnership with the U.S. Geological Service regarding groundwater mapping. Attorney's Report: Mr. Quinn asked Mr. Catlin to address the County Commissioners' Legislative Goals. Mr. Catlin reported that attorneys for both boards needed to discuss the topic further, and the goals may be amended. Ms. Miles did not have any further report. CEO Report: Mr. Jordan presented the Environmental and Safety Management Report. Mr. Vogt answered questions from Board members regarding a Biochemical Oxygen Demand violation at the Walnut Hills package plant. Ms. Eckert answered questions regarding accident rates. Mr. Renzaglia stated that the accident rate was trending in the wrong direction and reminded staff to be aware and vigilant. Ms. Eckert and Mr. Jordan summarized the accident review and staff education process of the Authority Safety Committee. Messrs. Jordan and Flechtner reported on the Barnards Creek force main sanitary sewer overflow. Staff continues to provide information to State authorities to aid in the analysis of the spill. The state has issued a Notice of Violation and intent to issue a civil penalty to the Authority. Mr. Flechtner provided an overview of the issues for which State officials had requested more data. The first item of concern was the six-hour time lapse between the detection of low flow at the Southside plant and a staff response. Training and procedures have been reviewed and appropriate action taken with employees. Secondly, the State has requested immediate notification of spills to the Division of Water Quality in the future. Staff reported the Barnards Creek spill well within the 24 hours required. Authority staff is still investigating the cause of the spill. Once the Barnards Creek construction is complete, the line that failed can be fully CFPUA 4.11.2012 MINUTES Page 3 analyzed. Messrs. Flechtner and Jordan and Ms. Miles answered clarification questions from Authority members. Mr. Catlin strongly objected to a civil penalty and stated that the Authority should appeal the penalty, stating that a penalty would punish the ratepayers. Mr. Renzaglia suggested letting the process run its due course and decide on a course action after hearing back from State officials. New Business, Committee Reports. Executive Committee: Mr. Quinn reported that Ms. Kusek had agreed to chair the Human Resources Committee. Ms. Kusek reported that Mr. Anderson had joined the Human Resources Committee. Mr. Brown asked for members for the Public Relations Committee. Mr. Quinn reported that he would serve on the Nominating Committee, along with one City Councilmember and one County Commissioner from the Board. The Nominating Committee will prepare a slate of officers for Fiscal Year 2013, to be voted upon at the July meeting. Long Range Planning Committee: Ms. Wolf thanked Mr. Quinn for presiding over the Committee meetings in her absence. Mr. Styers summarized the March 22 Long Range Planning Committee meeting. The Committee reviewed the following items: • A request by Meridian Senior Living representative for water and sewer services. Ms. Ricks will share information with Mr. White of Meridian Senior Living regarding other stakeholders in the area who may have water and sewer extensions planned. • Growth and CIP workshop agendas. • Monthly billing. Staff recommended that the current bimonthly meter reading and billing process continue. • Strategic Plan review. Ms. Johnson answered questions from Authority members regarding the research and analysis on the monthly billing question. Adding additional staff for monthly meter reading and billing would cost$800,000 annually, and mailing an estimated bill in between billing cycles would cost $400,000 annually. A customer survey conducted by staff over several months did not indicate any overwhelming desire for monthly billing. Staff believed it was best to review monthly billing at a time when technology would be upgraded. The consensus of Board members was to leave monthly billing as an item for the Long Range Planning Committee to review in the future. Mr. Catlin suggested that Engineering staff research the existence of a force main along Highway 132 that may have been built by the developers of Northchase to accommodate a package plant some years ago. CFPUA 4.11.2012 MINUTES Page 4 The Authority recessed at 10:10 a.m. and reconvened at 10:30 a.m. Finance Committee, Rate Discussion: Ms. Spivey and Mr. Brown reported that the Finance Committee met on April 4. Mr. Brown reminded the Board that the budget calendar includes a public hearing for May 16, with the budget presented for a vote at the June meeting. The Finance Committee voted to hold the hearing at night to facilitate customer attendance. The hearing has been scheduled for Wednesday, May 16, at 6:00 p.m. in the Harrell Conference Room in the NHC Administrative building at 230 Government Center Drive, which is the room and building where the Authority holds its monthly meetings. Mr. Quinn advised that he would not be available on May 16 and asked if any other Board members had a conflict. No other members mentioned a scheduling conflict. Ms. Spivey reported that the Committee had recommended some modifications to the rates since the March meeting. The total recommended increase is 4.7 percent for an average residential bill. The Committee recommended that water going through an irrigation meter be charged at its actual cost of $3.36 per 1,000 gallons and that the increased irrigation revenue offset the fixed charge on water. The fixed charge for a 5/8-inch meter(typical residential size) would be $25.81 bimonthly, an increase of 82 cents or 3.3 percent. The recommended increase to the fixed charge for water will be applied to all meter sizes. No increase is recommended for the sewer fixed charge. The bimonthly usage rate for sewer will increase by 45 cents to $4.04/1,000. A residential customer with a 5/8 inch meter using 10,000 bimonthly would see a bill increase of $5.32. The Board discussed the increased rate for irrigation meters. In calendar year 2011, 1,100 customers used irrigation meters, with an average usage of 100,000 gallons per customer for the year. The increased irrigation rate would cost a user of 100,000 gallons an additional $72 per year. The reduced irrigation rate last year was intended to discourage the digging of wells for irrigation. Twelve new irrigation meters have been installed since irrigation rates were reduced to the first tier rate in 2011. Some customers who inquired about irrigation meters could not install them because their homes were connected to double taps which had the maximum of two connections already installed. Three customers paid for additional taps for irrigation meters. Sewer is not charged for irrigation meters. Mr. Catlin expressed concern for groundwater aquifers and reminded the Board that aquifers are limited resources. He asked if staff could determine how many irrigation wells had been dug. Mr. Styers reported that the number of wells could be obtained from the Health Department but the amount of water being used from the wells could not be ascertained. Mr. Rivenbark added CFPUA 4.11.2012 MINUTES Page 5 that there were many properties in the 1995 and 1998 annexation areas where drinking water wells were converted to irrigation use after the residents received public water. Mr. Renzaglia reminded the Board that its intent in lowering the irrigation rate last year was to discourage well digging in addition to selling more water but the intent was not realized. The new rate proposed by the Finance Committee would allow discretionary use revenues from irrigation to lower the rates for ratepayers for their essential use. He added that shallow wells were required in his subdivision for irrigation, some shallow wells had gone dry, and people were digging deeper irrigation wells. Mr. Styers reported that Mr. McSmith would meet with the U.S. Geological Service on April 13 regarding groundwater mapping and aquifers. Mr. Sneeden observed that we have two finite resources for our water, groundwater and surface water. He stated that it did not make much sense to encourage the use of treated drinking water for irrigation and perhaps the rate would discourage some irrigation. Mr. Brown asked staff to explore the possibility of installing subtract meters for residential irrigation use and report back to the Finance Committee on the topic. Ms. Spivey continued with the rate presentation and showed Board members data comparing the Authority's rates with other utilities in the state. She referred Board members to an interactive website sponsored by the UNC Environmental Finance Center showing water and wastewater rates and other information on utilities throughout North Carolina. Mr. Renzaglia moved to adopt the rates as presented and recommended by the Finance Committee for bills issued on and after May 1, 2012. Mr. Brown seconded the motion. Mr. Catlin pointed out that the rate increases were driven by debt coverage for the Capital Improvements from FY2011. Mr. Quinn called for a vote, and the rates were approved unanimously. Ms. Spivey provided data which had been requested by the Board of the projected effects on rates for each additional customers added. System Development Charges: The Finance Committee had reviewed the current System Development Charges (SDCs) of $2,000 for water and $2,500 for sewer and staff's determination of the current costs of connection. The Committee recommended an increase to $2,131 for water and $2,688 for sewer, to be included in the FY2013 Budget. CFPUA 4.11.2012 MINUTES Page 6 Mr. Brown stated that he had voted against increasing the System Development Charges. He believed that the growth of the system and addition of new customers was more important than getting an increased SDC at time of construction and reminded the Board that developers build infrastructure and give it to the Authority. Ms. Spivey answered clarification questions from Board members regarding the SDC calculations. Mr. Renzaglia moved to approve the recommended System Development Charges of$2,131 for water and $2,688 for sewer, to be included in the FY2013 Budget. Ms. Kusek seconded the motion. Ms. Kusek and Messrs. Renzaglia and Sneeden voted in favor of the motion. Ms. Wolf and Messrs. Brown, Catlin, Thompson, Rivenbark, Anderson, and Quinn were opposed. Motion defeated, seven to three. Mr. Renzaglia stated that leaving the SDCs at the current rate passed along approximately $300 per each permitted building to other ratepayers. Budget Update: Ms. Spivey updated the Board on budget preparations for FY2013. The budget was developed using actual current and previous years' expenditures. The Operating Budget is $36.7 million, which is $300,000 less than the FY2012 Operating Budget. Debt service (bond payments) will increase by $1.5 million. Additions to the Operating Budget include salary adjustments, the addition of one fulltime and one parttime employee, property and liability insurance, an interactive voice response system for Customer Service, a scanning project for required document retention, and IT license fees. Budget savings have been realized in supplies and materials, electrical costs, repairs, maintenance, service contracts, lease buyouts, postage and bill print services. The budget includes an $800,000 contingency for emergencies, which requires Board approval before use. Ms. Spivey reported that the contingency is more likely to be needed with a tighter budget. Ms. Spivey and Messrs. Jordan and Flechtner answered clarification questions and received feedback from Board members. The budget hearing and workshop are scheduled for 6:00 p.m. on May 16, with the budget scheduled for a vote at the June 13 Authority meeting. FY2013 Capital Improvements Budget: Mr. Styers presented the recommended Capital Improvements for FY2013. The total recommended capital budget is $22,966,000. The plan includes $928,000 for upsizing the water trunk line serving the Monkey Junction area. In 2009, CFPUA 4.11.2012 MINUTES Page 7 the Authority entered into an Interlocal Agreement with the City of Wilmington for the service area to be annexed by the City. The City would pay for the extensions and system development charges for its new residents, and the Authority would pay to upsize a 12-inch water line to a 24- inch line, to address pressure and flow issues to the Authority service area. Board members discussed the status of the City's annexation plans and the recent judgment in its favor. They debated whether or not the line upsize by the Authority could be considered a growth project. Mr. Jordan explained that the Authority's original CIP for FY2013 did not include the line upsize in the Monkey Junction area. Staff has learned that the City plans to go forward and meet its obligations from the Interlocal Agreement. Even if the City's plans for annexation are not completed, Authority staff believes that the upsize of the trunk line is a valid project and should be recognized as a budget obligation under the terms of the Interlocal Agreement. He added there is a maintenance component in the project for the Authority, as well as 88 customers being added. After discussion, Ms. Wolf moved to approve the Capital Improvement Budget for FY2013. Mr. Renzaglia seconded the motion. Ms. Wolf, Ms. Kusek, and Messrs. Quinn, Renzaglia, Brown, Sneeden, Rivenbark and Anderson voted in favor of the motion. Messrs. Catlin and Thompson were opposed. Motion carried, eight to two. March Financial Reports: Ms. Spivey summarized the monthly financial data and referred the Board to the full report in the agenda. With 75 percent of the year lapsed, revenues are at 75.1 percent of budget, and expenditures are at 58.4 percent of budget. Water and wastewater revenues have decreased, but System Development Charges have increased. Ms. Johnson provided the Customer Service update and summarized items presented to the Finance Committee on April 4, which included a subtract meter policy, small claims court policy and procedures on active sewer-only accounts, and an update on the Authority's loan policy to include the preparation and recordation of a deed of trust. Ms. Johnson answered clarification questions, and the Board discussed the possibility of utilizing of subtract meters for domestic irrigation. Old Business. There was no old business. CFPUA 4.11.2012 MINUTES Page 8 Closing Comments. Mr. Quinn expressed pleasure that the Third Street project had progressed so that the street was open for the Azalea Festival and parade. Mr. Rivenbark thanked his fellow Authority members and staff for the collaboration with the City on Third Street. Mr. Quinn asked that photographs of old pipes that were unearthed be made available. There was no further business to come before the Authority, and Mr. Rivenbark moved to adjourn. Ms. Kusek seconded the motion, and it passed unanimously. The Authority adjourned at 12:05 p.m. The next regular meeting of the Cape Fear Public Utility Authority will be Wednesday, May 9, 2012, at 9:00 a.m. in the Lucie Harrell Conference Room, 230 Government Center Drive, Wilmington, North Carolina. Respectfully submitted, Donna S. Pope Clerk to the Board CFPUA 4.11.2012 MINUTES Page 9