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CFPUA 01 11 2012 REGULAR MEETING CAPE FEAR PUBLIC UTILITY AUTHORITY REGULAR MEETING JANUARY 11, 2012 Members Present: James Quinn, Chairman Mike Brown, Vice-Chairman Patricia Kusek, Secretary Burrows Smith, Treasurer Cynthia Wolf Gene Renzaglia Ronald Sparks Charlie Rivenbark, Councilman Richard Catlin, Commissioner Jason Thompson, Commissioner Member Absent: J.C. Hearne, II Staff Present: Matt Jordan, CEO Jim Flechtner, COO Cheryl Spivey, CFO Frank Styers, Director of Engineering Tom Morgan, Human Resources Director Beth Eckert, Environmental and Safety Director Carey Disney Ricks, CCO Nancy Johnson, Customer Service Director Karen Durso, Assistant to Mr. Jordan Christene Pyne Mitchell, Engineering Manager Jim Craig, Utility Services Superintendent Mike Richardson, Water Treatment Superintendent Ken Vogt, Wastewater Treatment Superintendent Jamison Fair, Project Manager Donna S. Pope, Clerk Attorney Present: Linda A. Miles, the Miles Firm, PLLC CFPUA Regular Meeting 1.11.2012 Page 1 Guests Present: Bob Wallen Erick Williams, HDR Kelly Derk, Brown & Caldwell Jim Ianucci, New Hanover County Ray Cox, Highfill Engineering Carter Hubert, W.K. Dickson Kevin Maurer, 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 declared a quorum present. He announced that Mr. Hearne was unable to attend the meeting. Mr. Rivenbark moved to excuse Mr. Hearne. Ms. Wolf seconded the motion, and it passed unanimously. In opening comments, Mr. Quinn addressed the role of the Authority in reaching out to members of the community having difficulty paying their bills. Under state law, the Authority is only able to produce clean water and treat sewer and cannot do other things that cities and counties are able to do, including social service progr conjunction with the United Way and Salvation Army. Employees and Board members donated money for assistance, which is administered by the Salvation Army. Mr. Quinn reported that Commissioner Catlin had reached out to help citizens and would provide additional information later in the meeting. Mr. Quinn reported that the Authority will be talking with the City and County to try to set up a program to allow the City and/or County to assist customers. The City and County previously had assistance programs, and the City continued its contributions for one year after the Authority was formed. in as an Authority member. Mr. Sparks seconded the motion, and it passed unanimously. Mr. Thompson was sworn in by the Clerk. Mr. Thompson stated that he was glad to be back on the Authority Board. Minutes Correction and Approval. Ms. Kusek presented the minutes and noted typographical corrections on Pages 3, and 6. She moved to approve the minutes, as corrected. Mr. Smith seconded the motion, and it passed unanimously. CFPUA Regular Meeting 1.11.2012 Page 2 Public Comment. Mr. Wallen spoke regarding pump station upgrades and the Blue Point force main. He suggested variable speed motors to help alleviate problems. Consent Agenda. The Consent Agenda was presented, as follows: 1.Authorization for procurement staff to advertise and sell items on GovDeals and to donate items that do not sell to local non-profits. Revenue received from sale would go into the general operating fund. 2.Authorization for the CEO to enter into a unit price contract with vendors for procurement of aluminum sulfate and sulfuric acid from January 11, 2012, through December 31, 2012, at a budget impact of $359,829.06 (estimated based on expected usage). 3.Authorization for the CEO to execute a change order with T.A. Loving Company for additional emergency work on the St. James area collection system, at a budget impact of $20,300.00, provided in the CIP. 4.Authorization for the CEO to include Sensus brand as a sole source alternate bid for up to 1,000 water meters, at budget impact of approximately $120,000, provided in the operating budget. Mr. Renzaglia moved to approve the Consent Agenda as presented. Mr. Sparks seconded the motion, and it passed unanimously. New Business, Administrative Reports. Engineering: 1.Authorization for the CEO to execute a contract amendment with HDR, Inc. for professional design services for pump station upgrades and construction phase services for the new force main and pump station upgrades at the Country Haven Pump Station, at a budget impact of $281,700, provided in the CIP. Mr. Fair presented Item (1) and provided an aerial photograph showing the route of the force main, which would be rerouted from Blue Point to Country Haven. The amendment covered $42,800 for the force main and $238,900 for the pump station. CFPUA Regular Meeting 1.11.2012 Page 3 Mr. Catlin expressed concern about the alignment of the new force main route and suggested using the old railroad right of way which ran parallel to the highway. Ms. Wolf and and Messrs. Smith and Flechtner pointed out that an East Coast fiberoptic cable runs under the right of way, and it is used by the Federal government. Water and gasoline lines also run through the right of way area, and the property reverted to adjoining property owners after the railroad line was removed. Ms. Wolf moved to approve the recommended contract amendment with HDR. Ms. Kusek seconded the motion, and it passed unanimously. 2. Authorization to revise Ordinance to allow full credit to properties of previously paid System Development Charges (SDCs) when reassessing current System Development Charges. Ms. Mitchell presented Item (2). She explained the reasoning behind the recommended Ordinance revision and requested Board direction regarding enforcing the revisions retroactively. Mr. Brown asked to be recused from the discussion and vote because the Ordinance revision could affect one of his clients. Mr. Sparks moved to recuse Mr. Brown. Mr. Catlin seconded the motion, and it passed unanimously. Ms. Mitchell explained that a property owner who paid less for SDCs in the past who wished to upgrade would not be required to pay the difference between the previous payment and what for the current amount of SDC for existing service, and the customer would pay for any upgrade. Owens who had paid more for SDCs in the past than is currently charged for the same service would receive full credit for all monies paid. Customers would receive credits only and no refunds. Ms. Miles reported that, if the Board chose to make the Ordinance and policy change effective retroactively, staff would need to determine the costs for credits back to July 1, 2008. Ms. Mitchell reported that staff had researched and found one other customer to whom the revision would apply, and there are two other properties that have the potential to be affected. Mr. Quinn stated that Ms. Miles should review the item and bring it back to the Board for action. Mr. Smith moved to revise the Ordinance and policy as recommended by staff, making it retroactively effective to July 1, 2008. He believed the monetary effect on the Authority would be minor. Mr. Sparks seconded the motion. CFPUA Regular Meeting 1.11.2012 Page 4 Mr. Thompson stated that knowing the financial impact was important but, if the revision was critical to a customer, the Board could move forward today. Mr. Jordan suggested that the Board could approve the Ordinance revision for today and going forward, with staff researching the financial impact of making the change retroactive and bringing that data back to the Board in February. Mr. Catlin supported making the revision effective retroactively. Mr. Quinn restated the motion and called for a vote. Ms. Kusek, Ms. Wolf, and Messrs. Renzaglia, Smith, Quinn, Catlin, Rivenbark, and Sparks voted in favor of the motion. Mr. Thompson voted against the motion. Mr. Brown did not vote. Motion carried, eight to one. Public Relations Report. Ms. Ricks reported that the Authority collected 693 pounds of food during the annual food drive in 2011 and staff had donated approximately 1700 pounds of food to the Food Bank over three years. The Board commended staff on their efforts. Ms. Ricks reported on CFPUA Assist, a partnership with the United Way and Salvation Army instituted in late 2009. Donations were collected in 2010, and assistance began in 2011. Employees contributed $6,000, the United Way contributed $3,000, a private donor gave $10,000 in December, and the City of Wilmington approved a $10,000 contribution at its last meeting. Attorney Report. Ms. Miles reported that the Board would need to have a closed session at the end of the meeting to discuss a lawsuit brought by Tommy Davis Construction Company. CEO Report. Mr. Jordan referred the Board to Exhibit 7 in the Agenda, the Environmental and Safety report. Ms. Eckert was available to answer questions. There were four Sanitary Sewer Overflows in November totaling 15,158 gallons. The overflows were from the Blue Point force main, which has been taken out of service. CFPUA Regular Meeting 1.11.2012 Page 5 Committee Reports. Executive Committee: Mr. Quinn reported that the Executive Committee had selected Mr. Catlin to serve on the Long Range Planning Committee and Mr. Thompson to serve on the Finance Committee. Mr. Quinn reported that there are two issues for assistance to customers, the first being emergency assistance and the second long-term assistance. Ms. Ricks and Messrs. Catlin and contribution of $10,000 to pay for stormwater and trash fees so that CFPUA Assist funds could be used for water and sewer charges. Mr. Quinn reported that the City previously subsidized utility bills for some customers on a long- term basis. Messrs. Quinn, Catlin, Rivenbark, and Thompson will set up a meeting with the goal of developing a long-range assistance program. Mr. Quinn recognized Mr. Catlin. Mr. Catlin reported that it is an extraordinarily complex issue without an easy solution. He reported that there were 517 occupied buildings without water service, 484 of which were dwellings. The cost of their unpaid water and sewer charges were $147,000. Mr. Catlin reported that, by contrast, Pender County had 12 customers without water and Brunswick approximately 100. Mr. Catlin supported the elected officials on the Authority identifying a long-term solution, funding, and a mechanism to screen qualified recipients. He discussed the ways in which the City and County had previously assisted their utility customers. He thanked Mr. Rivenbark for supporting and spearheading the recent City contribution. Mr. Catlin supported the Authority waiving fees and penalties associated with water turnoffs. Mr. Quinn asked Mr. Jordan and Ms. Miles to review the question of fees and penalties. Ms. Miles reported that she had begun research and had not found any cases regarding fees and penalties. She stated that there are laws stating that fees and penalties must be applied consistently throughout the system. The Authority can waive late fees once a year. The CFPUA Assist program can only be used by a customer once a year. Mr. Renzaglia asked that staff review the process leading up to service disconnection. Mr. Jordan reported that a customer receives a bill with a due date of 30 days. After the 30 days has expired, a late fee is assessed. Thirty days after the due date, which is 60 days after the bill was mailed, water is turned off. A delinquent notice is sent to the customer that notifies him of the CFPUA Regular Meeting 1.11.2012 Page 6 cutoff date. Mr. Brown observed that, because the Authority uses a bimonthly cycle, the customer would be 120 days into water use by the time of turn off. Ms. Kusek asked if staff encouraged customers to arrange payment plans. Ms. Johnson reported that the notice requests customers to contact Customer Service to make payment. Mr. Catlin asked if customers continue to receive a bill for the availability charge after water is turned off, and Ms. Johnson confirmed that the base charge continues to be billed. Mr. Catlin cited an example of a customer with no water service for three years whose bill is now over $2,000. Ms. Johnson reported that water is scheduled for turnoff 61 days after the bill is produced. Meter readers verify the turnoff to make sure the water has not been reconnected illegally. If a customer reconnects without paying, the meter is locked or removed. The types of fees assessed are late fees, $50 premise visit fees, and $500 illegal tampering citations. Mr. Catlin suggested waiving fees temporarily while developing a long-term solution and supported waiving some fees other than the late fee. He intended to ask the County Commissioners to provide funding for assistance. Mr. Rivenbark added that City Council would not want the City contributions to go towards fees. Mr. Rivenbark asked if fees were required by law, and Ms. Miles reported that we have the authority under law to assess fees but are not required to have fees in our ordinances. Mr. Jordan reported that the Authority could work with the once per year late fee waiver in the short term, while continuing to research the implications of continued fee waivers. Mr. Sparks reminded the Board that there had been money at the Federal level which might still be available and suggested that Congressional representatives be contacted. The Board discussed the method by which the City had provided grant assistance and general fund assistance to customers, which was then paid through the water-sewer operating fund. Ms. Miles will continue to research questions brought forward by Board members. Long Range Planning Committee: Ms. Wolf and Mr. Styers reported on the December 15, 2011, Long Range Planning Committee meeting. The Committee reviewed the following items: CFPUA Regular Meeting 1.11.2012 Page 7 Raw Water Supply Update. Jeff Coggins of Black & Veatch discussed the Raw Water water demands, as follows: (1) th the Lower Cape Fear Water and Sewer Authority, expand the CFPUA raw water system, and build a raw water booster pump station on Highway 421 at the raw water vault; and (2)m its own intake and participate in expansion of the Lower Cape Fear raw water system, renegotiating the agreement with Lower Cape Fear, with the booster station at the Lower Cape Fear intake site. Either approach would involve a capital investment, either through Authority capital projects or through rates paid to Lower Cape Fear. Staff representatives of the customers of Lower Cape Fear Water and Sewer Authority will meet on January 25 at 9:00 a.m. in the Lower Cape Fear offices to discuss options and develop a path forward. Board members discussed logistical, financial, and philosophical concerns related to the raw water supply discussion, including duplication of infrastructure, redundancy for emergency use, peak shaving, use of capacity after the Sweeney expansion, the Authority owning and controlling its water supply, costs of water production, and costs of expansion related to both raw water systems. Strategic Plan Review. The Long Range Planning Committee will continue its discussion of the Committee Meeting Calendar. The Long Range Planning Committee approved its meeting calendar for 2012. Ms. Wolf welcomed Mr. Catlin to the Committee. -evaluation of water allocation and projected demands show that water needs will become an issue within 15 years. The Board recessed at 10:25 a.m. and reconvened at 10:40 a.m. Committee reports continued. Finance Committee: Resale Bulk Rates and Irrigation Rates. Mr. Smith reported that the Committee had discussed resale bulk rates with the purpose of resale to municipalities or other entities with their own water distribution systems. The Committee also discussed irrigation rates. CFPUA Regular Meeting 1.11.2012 Page 8 Rate Model Considerations and FY2013 Budget. Ms. Spivey reviewed considerations for use in determining the rate model and rates, in preparation for the FY2013 budget. The Financial Feasibility Report prepared for the 2011 bond sale anticipated a 5 percent rate increase for FY2013. Rates are based on revenue requirements. The Finance Committee had reviewed the rate considerations and provided feedback to staff. Ms. Spivey reported that $1.2 million is currently budgeted for late fees and premise fees. If the Board chooses to change or eliminate those fees, staff would need to know the changes for FY2013 budget preparations. The Committee approved a Budget Calendar for FY2013. The Budget will be presented for adoption in May 2012. Retiree Health Insurance Benefits (OPEB = Other Post Employment Benefits). Employees have asked about the trust fund for retiree health insurance, which is required by the Interlocal Agreement. $4.2 was transferred into a revocable trust fund, a separate accounting fund of the Authority, in 2008. Ms. Spivey reported on the actuarial studies done by the County and City completed in 2010. The Committee recommended no change in OPEB funding or accounts. Loan Subordination Policy. policy has been not to subordinate Authority loans when a customer refinances his or her first mortgage. The current economy makes it difficult for customers to obtain a loan without the , and the customer could lose the opportunity to refinance. Staff has determined that it would be beneficial to customers for the Authority to subordinate its and the Authority would still hold a note from the customer, but the Authority would not require its loan to be paid in full at the time of refinance. The Committee approved recommendation to subordinate loans. Ms. Spivey and Ms. Johnson answered clarification questions from Board members. Ms. Johnson reported that the Authority holds 1083 loans, many of which were transferred from New Hanover County. She has received six requests for loan subordination in the nine months she has worked for the Authority. Ms. Spivey explained that Authority staff does not become oval process. Staff believed that the Authority should not hinder a customer who can obtain a loan. Monthly Finance Reports. Ms. Spivey referred the Board to the December financial reports and Customer Service update in the Agenda packet. The Authority is meeting its revenue targets. CFPUA Regular Meeting 1.11.2012 Page 9 With 50 percent of the fiscal year lapsed, revenues are at 51.92 percent of budget and expenditures are at 38.37 percent of budget. Water production is slightly lower than last year at the same time. The monthly financials will be posted on the Authority website. Loan Subordination Discussion, continued. Mr. Quinn asked if the full Board should vote on the subordination policy. Mr. Smith stated that the Committee considered it to be an internal policy for staff to administer. Ms. Miles added that the Board could choose to make it a Board policy and vote on it. Mr. Sparks moved to endorse the staff and Finance Committee recommendation for loan subordination. Mr. Rivenbark seconded the motion, and it passed unanimously. Miscellaneous Finance Discussion. Mr. Catlin requested a summary of how much debt service the Authority would pay down over time. Ms. Spivey will summarize the information from the December Board meeting and email it. Old Business. There was no old business. Questions and Answers and Closing Comments. Mr. Renzaglia shared a newspaper article about infrastructure needs and associated rate increases for the Hampton Roads Virginia Sewer District. He reminded the Board that its rate increases have been Mr. Quinn reminded those present that relief for customer bills is a cooperative effort between the Authority, the United Way, and Salvation Army, with the later two agencies administering the funds. The Authority cannot advertise, promote, or collect funds for the program. He stated that City, County, or private entities represented on the board could encourage donations. Ms. Ricks added that a link to the program for donations is on the Authority website. Closed Session. Mr. Rivenbark moved to enter closed session to discuss Tommy Davis Construction v. CFPUA. Mr. Sparks seconded the motion, and it passed unanimously. The Authority entered closed session at 11:15 a.m. Ms. Miles, Ms. Spivey, Ms. Pope, and Messrs. Jordan, Flechtner, Styers, and Craig remained in the meeting. The Board received reports from staff and Ms. Miles, and provided direction to its attorney, Ms. Miles. CFPUA Regular Meeting 1.11.2012 Page 10 Return to Open Session and Adjournment. Mr. Rivenbark moved to return to open session. Mr. Thompson seconded the motion, and it passed unanimously. The Authority returned to open session at 11:39 a.m. Mr. Rivenbark moved to adjourn. Mr. Thompson seconded the motion, and it passed unanimously. The Authority adjourned at 11:40 a.m. The next meeting of the Cape Fear Public Utility Authority will be Wednesday, February 8, 2011. The meeting will commence at 9:00 a.m. and will be held in the Lucie Harrell Conference Room of the New Hanover County Administration Building, 230 Government Center Drive, Wilmington, North Carolina. Respectfully submitted, Donna S. Pope Clerk to the Board CFPUA Regular Meeting 1.11.2012 Page 11