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Home My WebLink About03-10-2010 CAPE FEAR PUBLIC UTILITY AUTHORITY REGULAR MEETING MARCH 10, 2010 Members Present: Gene Renzaglia, Chairman Jim Hunter, Vice-Chairman Kathryn Johnston, Secretary Burrows Smith, Treasurer Bill Caster, Commissioner Ron Sparks, Councilman Charlie Rivenbark, Councilman J.C. Hearne, II John Tunstall Jim Quinn Member Absent: Bobby Greer, Commissioner Staff Present: Matt Jordan, CEO Nancy Gallinaro, COO Cheryl Spivey, CFO Beth Eckert, Safety & Environment Director Martha Zeigler, Customer Service Director Frank Styers, Director of Engineering Tom Morgan, Human Resources Director Karen Durso, Assistant to Mr. Jordan Carey Disney Ricks, PIO/PR Haskell Rhett, Strategic Planning Officer Steve Mongeau, Procurement Manager Jim Flechtner, Engineering Manager Bill Pinnix, Engineering Manager Chris Bowling, Project Manager Jim Craig, Utility Services Superintendent Robert Daughtry, Utilities Collection Systems Manager Donna S. Pope, Clerk Ó¿®½¸ ïðô îðïðô ÝÚÐËß Î»¹«´¿® Ó»»¬·²¹ ³·²«¬» Ð¿¹» ï Guests Present: Linda A. Miles, Consulting Attorney s Tyler Newman, Cape Fear Homebuilders Association Jim Iannuci, New Hanover County Eric Williams, HDR Chris Ford, Kimley-Horn and Associates, Inc. Michael Gosey, IBM Call to Order and Determination of a Quorum: Mr. Renzaglia called the meeting to order at 9:07 a.m. and declared a quorum present. Adoption of the Agenda: Mr. Jordan recommended one addition to the Agenda, that being an update on the Ogden Interceptor and a Special Request report on Environment and Safety. Mr. Smith moved to adopt the Agenda with the recommended addition. Mr. Caster seconded the motion, and it passed unanimously. Minutes Correction and Adoption: Ms. Johnston submitted the minutes for approval and stated that she and the Clerk had reviewed and corrected typographical errors on pages 2, 3, 5, and 6. Mr. Smith moved to approve the corrected minutes. Mr. Caster seconded the motion, and it passed unanimously. Oath of Office: Ms. Pope administered the Oath of Office as an Authority member to Jim Quinn. Mr. Quinn will complete the term vacated by Charles Wells, which will expire on June 30, 2010. Public Comments: he tiered rate system, stating that it discriminated against families. He presented a power point in support of his comments. -sharing agreements to extend service. He stated that he had read the proposed agreement and ordinance change and believed it Ó¿®½¸ ïðô îðïðô ÝÚÐËß Î»¹«´¿® Ó»»¬·²¹ ³·²«¬» Ð¿¹» î could be simplified. Messrs. Renzaglia and Sparks requested that copies of agreements and ordinances from other governmental units that might be applicable be given to the Long-Range Planning Committee. The proposed agreement and ordinance revisions have been disseminated to stakeholder groups, with a deadline of March 25 for comments. Mr. Jordan stated that, if feedback indicated stakeholders needed further time to respond, it would be taken into consideration. Consent Agenda: The Consent Agenda was presented for approval, as follows: (1)Authorization for the CEO to execute a contract amendment with Kimley-Horn and Associates, Inc, for the Northeast Interceptor Improvements Project, not to exceed $45,000.00, as provided in the Capital Improvements Plan; (2)Amendment to Ordinance to allow collection of past-due customer accounts after a customer has established service at a new location; and (3)Resolution to approve the CFPUA 2008 Local Water Supply Plan. Mr. Caster asked for clarification regarding the letter from N.C. DENR attached to Item (3). Mr. Caster then moved to approve the Consent Agenda, and Mr. Smith seconded the motion. The Consent Agenda was approved and adopted unanimously. Administrative Reports: Engineering: 1.Request for Authorization for the Chief Executive Officer to execute a Construction Contract with Water and Waste Systems Construction, Inc., in the amount of $2,657,000.00, for Odor and Corrosion Control Facilities. Mr. Styers presented this item for consideration. The Northeast Interceptor was constructed by New Hanover County and transferred to the City of Wilmington, with the requirement for a Technical Review Committee to determine how to control odor and corrosion on the nine-mile line. Within six years of construction, there were failures in the NEI line, with a Sanitary Sewer Overflow (SSO) in 2005. The NEI is primarily constructed of ductile iron pipe. Kimley-Horn inspected the pipe and determined that hydrogen sulfide was out of equilibrium and recommended improvement to Odor and Corrosion Control (OCC) facilities, to include the Total Base Bid, plus Alternates 1, 2, and 3. Ó¿®½¸ ïðô îðïðô ÝÚÐËß Î»¹«´¿® Ó»»¬·²¹ ³·²«¬» Ð¿¹» í The contract under consideration will allow the Authority to develop and build new OCC facilities and dosing with chemicals that are more effective than the hydrogen peroxide which is currently in use. The contract was advertised and bid twice. The first advertisement received four bids; the second received one bid. Messrs. Styers, Bowling, and Mongeau answered clarification questions from the Board about Item (1). Mr. Ford of Kimley-Horn was available to provide further information. Mr. Smith asked why there was only one bid the second time. Mr. Quinn asked if this saved money. The contract parameters were restructured for the second round of bids, and one bid was received. The Authority will be treating more of the system and doing so in a more efficient and effective method than it used previously. The total cost of the contract is more than in the past because more treatment will be done, but the cost of chemicals per unit is expected to drop dramatically. The treatment will reduce corrosion throughout the system through the use of three separate chemicals and will reduce costs over time by helping to maintain the pipes. The cost includes infrastructure. Ms. Johnston asked how the project was funded. Mr. Styers explained that money comes from the NEI rehabilitation project and from the OCC system-wide project, consistent with the CIP. Mr. Caster asked how the line had failed. Mr. Ford explained that the liner used in the 1980s was a type which could develop air bubbles, and that over time the bubbles would burst, leaving the interior of the pipe exposed to gases, specifically hydrogen sulfide, which could corrode the pipe. Mr. Rivenbark questioned the liner failure and stated that he had never heard this before and was angry to learn of defective materials. He felt strongly that someone should take responsibility for failing, defective materials in the system, such as the NEI and the Ogden Interceptor. Mr. Sparks asked what percentage of hydrogen peroxide had been going into the system. Staff responded that it was around 50 percent. Mr. Sparks stated that hydrogen peroxide could be explosive, and he encouraged the use of less volatile chemicals. He stated that ductile iron should not be exposed to hydrogen sulfide un suggestion for further investigation regarding responsibility. He asked if the company which recommended the NEI liner in the 1980s still did work for the Authority. Mr. Renzaglia reminded the Board that there was a time and place to discuss the items being brought forward, but that the current item under consideration should be addressed. He restated Ó¿®½¸ ïðô îðïðô ÝÚÐËß Î»¹«´¿® Ó»»¬·²¹ ³·²«¬» Ð¿¹» ì contract with Water & Waste Systems Construction, Inc., in the amount of $2,657,000.00 for Odor and Corrosion Control Facilities, to include the Total Base Bid plus Alternates 1, 2, and 3. Mr. Rivenbark seconded the motion. There was no further discussion from the Board, and the motion passed unanimously. Mr. Renzaglia instructed the Clerk to capture the discussion by Messrs. Rivenbark and Sparks, as it is important to have a full understanding and do the right things going forward regarding what happened in the past, addressing past issues, and providing the right engineering up front for projects in the future to ensure that systems maintain their full, useful lives. Mr. Jordan added that staff looks for sustainability through the entire system and works hard on a daily basis to ensure the life of the system. Over time, products change, and better solutions may be available. Staff is researching the history of the Ogden Interceptor to determine the cause of that failure and will provide anything to the Board that is needed. Ms. Johnston stated that she knew the vote had just been made, but she would like to ask if Item (1) was not immediate maintenance or emergency repair could it be delayed a couple of months without additional risk or cost, if doing so would save money? Staff explained that infrastructure must be in place before the new chemicals are introduced into the system for odor and corrosion control. The infrastructure is provided for in the current CIP. The chemical costs will not be incurred until FY 2011, so there is no impact to the current operating budget. Mr. Quinn stated that he agreed with Mr. Rivenbark that the Authority should investigation legal remedies on line failures. He added that he believed the Authority was taking a proactive look at lines. Ms. Miles reminded the Board that Odor and Corrosion Control would be a part of the EPA Consent decree. She advised the Board that it could enter into closed session to discuss possible legal action. Mr. Jordan reported that staff is reviewing the CIP. Funding for the immediate need for the Ogden Interceptor repair has been identified, and a revised CIP will be presented to the Long- Range Planning Committee in April. He and Ms. Miles reported that staff is continuing to investigate and research possible liability issues and will give the Authority a full report when research is complete. Ó¿®½¸ ïðô îðïðô ÝÚÐËß Î»¹«´¿® Ó»»¬·²¹ ³·²«¬» Ð¿¹» ë Ms. Ricks announced the results of a contest to name the road leading to the Nano-Filtration Plant. Out of 50 names submitted by staff members, a staff committee selected the name the Authority recognized Mr. Craig for this honor. Ms. Ricks reported on outreach efforts. Several staff members from Engineering and Operations have spoken to school classes, and Ms. Gallinaro has investigated a high-school internship with the Authority. Staff members participated in Scout Day. Ms. Ricks showed a slide show of progress on the Sweeney Plant project. Mr. Renzaglia asked Board members what direction they wished to take when media reports contained incorrect information regarding the Authority. The consensus was that factual errors should be corrected, and corrections should be handled by Ms. Ricks. Several Board members recommended filming Authority meetings. Mr. Renzaglia advised that staff was investigating filming and broadcasting. He reminded the Board that audio recordings of Authority meetings are made available upon request, and that minutes are also available to anyone and are posted on the website once approved. Ms. Pope explained that the cost of Ms. Miles had nothing to report. She advised that the Board could go into closed session to discuss the Ogden Interceptor, but she recommended waiting until the April meeting to do so, as that would allow staff more time to research the issues. Board consensus was to wait until April to discuss legal issues associated with the Ogden Interceptor. The Authority recessed at 9:58 a.m. and reconvened at 10:10 a.m. Mr. Jordan thanked Ms. Ricks for her representation of the Authority to media outlets. Environmental and Safety Report: The Environmental and Safety Report was distributed to Authority members. There were two accidents in February and four SSOs. Ms. Eckert was available to answer questions. Ó¿®½¸ ïðô îðïðô ÝÚÐËß Î»¹«´¿® Ó»»¬·²¹ ³·²«¬» Ð¿¹» ê Mr. Smith directed a comment to the WECT-TV reporter who was present. He requested that system as advertised and are a cause of blockages and overflows. Ogden Interceptor Report: Mr. Jordan introduced Mr. Craig and praised him and Utility Operations staff for their dedication and tireless efforts in addressing issues with the Ogden Interceptor. Messrs. Craig and Daughtry provided information regarding the Ogden Interceptor failures and the recommended repairs. The Hobas pipe is being inspected with sonar by Compliance Envirosystems, and the inspection allowable degree of deflection in the pipe is 5 to 6 percent. The portions of the interceptor that have been analyzed show a deflection of almost 15 percent. Mr. Craig described the pipe as being shaped like a football. Mr. Daughtry reported that he had saved segments of pipe from each failure, and they all appeared to have the same problem. When the pipe has failed, it has collapsed from the top and fallen in on itself, without a major leak. The cause of the failures has not yet been determined. The Ogden Interceptor is the only part of the system which contains Hobas pipe. Messrs. Smith and Sparks asked if the line was large enough for future flows. Mr. Craig believed it was a good size at 2mgd, because the basin that drains into it is largely developed. The interceptor is located in wetlands with tidal flows, including lunar high tides. Staff recommended bypass pumping of the entire length of the interceptor and complete replacement of the line. The existing manholes will be used because they are in good condition. Because of development in the area and adjacent wetlands, rerouting the line is not feasible. Messrs. Tunstall, Hunter, and Sparks asked for further information about the installation and the bedding installed to hold the line. Mr. Craig stated that the bedding and pipe were installed in Mr. Renzaglia reminded the Board that, while there are theories of what caused the line failure, staff needed time to fully investigate and analyze the failures. Mr. Flechtner explained what steps need to be taken to successfully complete the Ogden repairs. Factors to be considered include: constructability, wetlands sensitivity; pipe longetivity; cost; and the environment in which the work will be completed. Ó¿®½¸ ïðô îðïðô ÝÚÐËß Î»¹«´¿® Ó»»¬·²¹ ³·²«¬» Ð¿¹» é Design and permitting are the first steps. Staff is working closely with regulatory agencies. The Authority has funds to complete the design work, which is estimated at $500,000. That funding will come from the CIP project for Ogden Interceptor manhole replacement. Hard choices will need to be made to determine a funding source for construction, which is estimated at $5-6 million. Funds will be taken from existing capital projects. Staff is analyzing the CIP and expects to bring recommendations to the Long Range Planning Committee in April. Messrs. Flechtner and Jordan presented to items for Board consideration: (1)Request to designate repairs to the Ogden Interceptor a Special Emergency. (2)Request to authorize the CEO to execute design, material, construction, and other contracts up to a total of $7 million as needed to complete the repairs, recognizing that time is of the essence. Mr. Flechtner explained that declaring the repairs a special emergency may expedite the process. Mr. Jordan added that the costs are estimated at this point and assured Board members that they will be able to work with staff regarding the recommendations of projects identified as sources for re-allocation of funding. Ms. Miles explained that, under state law, only the failed portions of the line can be declared a Special Emergency in order to go outside of the bid laws, but that the declaration will allow Mr. Jordan to enter into contracts, which will then come to the Board for ratification. The sections of the pipe that have not failed cannot be considered an emergency, and the Authority will follow the bid laws for the rest of the line. Ms. Miles has received this opinion from the North Carolina School of Government. Mr. Renzaglia asked questions regarding the bypass pumping operation. Mr. Craig explained that a full bypass will require ten bypass pumps and tie-ins. The bypass pumps will be leased. Staff is investigating the feasibility of buying the bypass pipes versus renting them. Mr. Quinn observed that the community will expect the Authority to protect the environment and solve the problem with the line. Mr. Renzaglia recommended that the Long Range Planning Committee meet earlier than its usual April date if needed. Mr. Jordan assured him he would request a committee meeting whenever necessary and timely. There was a brief discussion of the merits of lined ductile iron pipes. Ó¿®½¸ ïðô îðïðô ÝÚÐËß Î»¹«´¿® Ó»»¬·²¹ ³·²«¬» Ð¿¹» è Mr. Hunter moved that the Authority declare the Ogden Interceptor failure a Special Emergency and authorize the CEO to approve associated expenditures up to $7,000,000. Mr. Rivenbark seconded the motion, and it passed unanimously. Long Range Planning Committee Report: Mr. Hunter apologized that the Committee did not meet early enough to have a report or minutes in the Agenda packet. He stated that he might move the timing of the Committee meeting to an earlier date. The Long Range Planning Committee met on March 8, 2010, and reviewed the following items: A request from Pender County for bulk water sales; An update on the Highway 421 Wastewater treatment facility; A query from the Town of Carolina Beach regarding the possibility of bulk water sales; Asset Management update; Monthly date on the Capital Improvement Plan; Figure 8 Island and Figure 8 Harbour water line update; and Update on the Ogden Interceptor. The Committee also received the proposed language for a non-standard development agreement and associated ordinance revision, and heard comment from a guest, Michael Lee, regarding the agreement and ordinance. The draft agreement has gone to outside agencies and stakeholders for review and feedback. Finance Committee Report: Ms. Spivey provided the full Authority Board with the financial information reviewed by the Committee at its March 3, 2010, meeting. A copy of the Financial Report is attached hereto and incorporated by reference. The Authority received an additional invoice from its FY 2009 Auditor for additional testing and services outside the scope of the original contract. The Committee met with representatives of the auditing group and directed Ms. Spivey and Ms. Miles to meet with them, review the documentation, and report to the Committee in April. Ms. Spivey presented the February financial statements. The Authority had a positive change in its cash position in February. With 67 percent of the fiscal year complete, 62 percent of the budget revenues have been earned, and 63 percent of the budgeted expenditures have been spent or encumbered. Ó¿®½¸ ïðô îðïðô ÝÚÐËß Î»¹«´¿® Ó»»¬·²¹ ³·²«¬» Ð¿¹» ç There are 16 frozen staff positions. Additional expenditure controls are in place. The Committee did not want employee compensation reduced this year. Investment earnings have gone down. With the decrease in investment earnings and a very tight budget, the Authority is at risk of not meeting its required 1.0 debt coverage for this fiscal year (FY 2010). Ms. Spivey presented the first rate model for Fiscal Year 2011 and reviewed the assumptions used to develop the rate model. The model employed conservative figures, with zero percent growth and zero percent increase in consumption, interest earnings of 0.5 percent, an estimated increase in expenditures of three percent, and a 2.5 percent uncollectible debt, which is the industry standard. In the February Authority meeting, staff was directed to prepare the budget to accomplish a 1.20 debt coverage ratio for FY 2011, which would make it possible for the Authority to issue bonds in FY 2012. Mr. He amounts. Ms. Spivey stated that she would research the question and report back to him. Ms. Spivey explained Item 5.15 of the Financial report, the debt coverage schedule. $55.2 million in operating revenue will be needed in FY 2011 to support expenses and debt service. A 14 percent rate increase is needed to meet expenses and debt service. Item 5.16 showed the projected rate increase in dollar amounts, based on a 5/8-inch residential meter. A customer with bimonthly usage of 12,000 gallons would receive an increase of $13.87 per bimonthly billing cycle, which is $6.94 monthly compared with other utilities. Mr. Smith moved to enact the proposed rate increase effective May 1, 2010. He supported his motion by stating that increasing the rates one billing cycle before the new fiscal year would allow the Authority to meet its required 1.0 bond coverage for FY 2010. If the Authority does not make bond coverage, rates will be raised by the bond trustee or the Local Government Commission. Mr. Smith also asked all Authority members to read the Fitch report on utilities which had been distributed with the Finance Committee report. The report highlights the difficulties with failing infrastructure facing utilities nationwide. Mr. Renzaglia restated the motion to enact a 14 percent rate increase for water and sewer on bills produced on May 1, 2009, and thereafter. Mr. Quinn seconded the motion. Ms. Johnston wanted to make sure that all budget assumptions were correct. Ó¿®½¸ ïðô îðïðô ÝÚÐËß Î»¹«´¿® Ó»»¬·²¹ ³·²«¬» Ð¿¹» ïð Mr. Quinn stated that, although Board members delayed a rate increase at the beginning of FY 2010, they knew that rates would need to be increased. He believed the Authority was mandated by the City, the County, and state and federal agencies to continue the CIP, to maintain the system, and to protect the environment. Mr. Sparks added that the Authority promised bond rating agencies a debt coverage of 1.6 when it issued bonds in 2008. He asked what effect bond coverage would have on our relationship with bond rating agencies. Ms. Spivey responded that there is no guarantee that we will maintain the current rating. Rating agencies have indicated that they will wait until later this year to review our position. Mr. Smith believed that enacting the rate increase at this time would help fulfill our commitment to rating agencies. Ms. Johnston stated that she wanted to make sure that the Authority had done the analysis and made sure it had reduced expenditures as much as possible, including staff reductions, layoffs, and benefit reductions. Mr. Jordan stated that the FY 2010 budget eliminated five job positions. The Authority now has sixteen frozen positions. Capital projects were reduced, and operating expenses were lowered. The Nano-filtration plant opened with no new positions added to staff it. Mr. Renzaglia called the question and restated the motion to enact a 14 percent rate increase for water and sewer on customer bills produced on May 1, 2010, and thereafter. The motion passed unanimously. Mr. Renzaglia stated that the Authority had a $38 million operating budget for FY 2009 but actually spent $32 million that year. The FY 2010 budget was $38.4 million, and the projected expenditures are $35.7 million. The Authority has come in under budget historically, and staff keeps this in mind and monitors expenditures. Additional Item from Chairman: Mr. Renzaglia reminded Committee chairs that it is imperative for the Authority to reach closure on many of the items that come before their Committees and requested their assistance in bring issues to a timely conclusion. Old Business: There was no old business. Mr. Tunstall left at 11:45 a.m. Ó¿®½¸ ïðô îðïðô ÝÚÐËß Î»¹«´¿® Ó»»¬·²¹ ³·²«¬» Ð¿¹» ïï Questions and Answers: Messrs. Quinn and Caster requested that the Authority ensure its representation in discussions with the North Carolina Department of Natural Resources regarding allocation of water from Jordan Lake. Mr. Jordan responded that Messrs. Rhett and Richardson have participated in meetings regarding the Inter-Basin Transfer Requests and will continue to do so. Staff will keep the Board apprised of developments and bring items to the Board as needed. Mr. Quinn recommended that Authority representatives meet with Don Betz of the Lower Cape Fear Water & Sewer Authority so that both Boards can develop a cohesive response. Mr. Renzaglia requested that Mr. Quinn, as a member of the LCFWSA Board, invite Mr. Betz to address the Board at its April 14, 2010, meeting. Mr. Rivenbark asked if the Board could move into a closed session to discuss a Committee matter. Ms. Miles explained that closed sessions may be used to discuss real estate acquisition, personnel matters, and to obtain advice related to litigation. Mr. Rivenbark said that his issue did not fall under those categories and could be discussed in April. There was no further business to come before the Authority, and Mr. Renzaglia adjourned the meeting at 11:53 a.m. Respectfully submitted, Donna S. Pope Clerk to the Board Ó¿®½¸ ïðô îðïðô ÝÚÐËß Î»¹«´¿® Ó»»¬·²¹ ³·²«¬» Ð¿¹» ïî