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CFPUA 04 13 2011 Regular Meeting CAPE FEAR PUBLIC UTILITY AUTHORITY REGULAR MEETING APRIL 13, 2011 Members Present: Gene Renzaglia, Chairman J.C. Hearne, II, Vice-Chairman Michael C. Brown, Secretary Burrows Smith, Treasurer Cynthia Wolf Patricia Kusek Jim Quinn Ron Sparks, City Councilman Charlie Rivenbark, City Councilman Rick Catlin, County Commissioner Brian Berger, County Commissioner Staff Present: Matt Jordan, Chief Executive Officer Nancy Gallinaro, Chief Operating Officer Cheryl Spivey, Chief Financial Officer Karen Durso, Assistant to the CEO Beth Eckert, Safety & Environmental Director Frank Styers, Engineering Director Tom Morgan, H.R. Director Jim Flechtner, Engineering Manager Christene Mitchell, Engineering Manager Mike Richardson, Water Treatment Superintendent Ken Vogt, Wastewater Treatment Superintendent Jim Craig, Utility Services Superintendent Craig Lundin, Project Manager Cord Ellison, I.T. Manager Julia Vosnock, Procurement Manager Lori Potter, Billing & Collections Manager Chris Johnson, Laboratory Supervisor Donna S. Pope, Clerk Attorney Present: Linda A. Miles, the Miles Firm PLLC CFPUA APRIL 13, 2011 MINUTES Page 1 Guests Present: Bob Wallen Kevin Mauer, Wilmington Star-News Patricia Matson, Lumina News Jim Iannucci, New Hanover County Engineering Department Eric Williams, HDR Tyler Newman, BASE Opening Comments, Determination of a Quorum, and Adoption of the Agenda: Mr. Renzaglia called the meeting to order at 9:00 a.m. and declared a quorum present. Mr. Jordan reported an addition to the Agenda in the Engineering report, as Item ii, that being the River Road Force Main Repair. Mr. Rivenbark moved to adopt the Agenda with the recommended revision. Mr. Brown seconded the motion, and it passed unanimously. Approval of Minutes: Mr. Brown presented the minutes of the March 9, 2011, Regular Meeting and moved for their approval. Ms. Wolf seconded the motion, and it passed unanimously. Oath of Office for Patricia Kusek: The Clerk administered the Oath of Office as an Authority member to Ms. Kusek, the joint County-City Appointee. Mr. Renzaglia welcomed Ms. Kusek to the Board. Public Comments: Mr. Wallen thanked the Authority for the quality of service. He then offered input on recent items that had come before the Board. block rates and Authority philosophy. A copy of his powerpoint presentation is incorporated by reference. CFPUA APRIL 13, 2011 MINUTES Page 2 Consent Agenda: Mr. Renzaglia presented the Consent Agenda, as follows: 1.Authorization for the CEO to execute a contract with Southeast Pipe Survey, Inc., for the Sanitary Sewer Pipe Inflow & Infiltration, Camera and Cleaning contract, at a cost of $319,445, provided for in the CIP budget; 2.Authorization for the CEO to execute a contract with Hughes Brothers, Inc., for routine maintenance for gasoline engine vehicles, non-routine maintenance for gasoline engine vehicles, and tire repair and replacement for all small to medium-sized vehicles for 12 months, with the option to renew for up to four additional 12-month terms; 3.Authorization for Procurement staff to advertise and sell surplus items on Govdeals; and 4.Authorization to select McGladrey & Pullen, LLC, as the Independent Auditor for the Annual Financial Audit for the Fiscal Year ending June 30, 2011, at a cost of $37,900. Regarding Item 3, Mr. Quinn suggested that the Authority consider a policy permitting donations of surplus items to non-profit organizations. There were clarification questions regarding Item 4. Mr. Rivenbark moved to approve the Consent Agenda. Mr. Hearne seconded the motion, and it passed unanimously. New Business, Administrative Reports. Engineering Report: Authorization for the CEO to execute Contract Amendment #6 with Black & Veatch for professional services associated with the expansion of the Sweeney Water Treatment Plant, not to exceed $664,000, provided for in the CIP budget. Mr. Lundin reported that the Sweeney expansion is on schedule and should be completed by July 2012. The plant has continued to operate, processing and delivering water while demolition and construction have been ongoing. CFPUA APRIL 13, 2011 MINUTES Page 3 Extension of the construction schedule from 42 to 46 months; An additional engineer onsite to support the peak in observation required by the aggressive Phase 3 schedule and start-up; Warranty services for equipment and worked completed during Phases 1 and 2; and Special inspection requirements. There were questions from Authority members regarding water use, plant capacity, and the need for expansion. Mr. Richardson explained that the plant expansion project had progressed too far to be stopped and that increased capacity is needed for peak demands. Messrs. Quinn and Sparks added that future growth would necessitate increased capacity. Mr. Sparks suggested a site visit to the Sweeney project for Board members. Staff answered questions from Authority members regarding the extension of the construction spections and observation. Mr. Jordan explained that he had asked staff to look ahead on all projects and assess and anticipate long-term projections and needs to be brought to the Board before funds were needed. He assured the Board that staff would work toward a successful completion of the Sweeney project. Contract Amendment 6 with Black & Veatch. Ms. Kusek seconded the motion. Mr. Rivenbark asked what Flechtner reported that funding would run out in eight months, and we would have four months without engineering and inspection support. Mr. Richardson stated that his staff would still be responsible for producing water and making the plant work, meaning they would do their regular jobs and additional work involved with the plant expansion. Mr. Jordan added that staff looks for all efficiencies and is trying to stay ahead of needs. Mr. Catlin recommended coming back to the board for additional funding when needed, stating that he was not against inspections and suggested increments. Ms. Wolf offered a substitute motion to approve only the contract extension portion of the request, in amount of $420,000. Mr. Rivenbark seconded the substitute motion. Mr. Sparks suggested that staff report in three months and show progress, stating that he did not want work to stop or to cut staff off at the knees. He supported the contract extension. CFPUA APRIL 13, 2011 MINUTES Page 4 Mr. Smith expressed concerns and requested more information regarding the change order. He agreed that a site visit for the Board would be informative. Mr. Quinn did not feel that the Board had sufficient information to vote at this time. Mr. Jordan explained that staff would answer any questions the Board had and this was the reason the change order had been brought forward eight months ahead of schedule. Ms. Wolf stated that she was willing to withdraw her substitute motion. Mr. Rivenbark agreed to withdraw the motion. Mr. Brown asked Mr. Catlin if he would agree to amend his motion to bring the contract back at a date certain and suggested a time frame of three months. Mr. Catlin agreed and amended his motion to continue the change order request until the July 2011 meeting. He added that he would also like to visit the Sweeney site. Ms. Kusek agreed to the amended motion. Mr. Renzaglia called the question, and the motion to continue the Black & Veatch contract amendment until the July 2011 Authority meeting passed unanimously. The Authority recessed at 10:35 a.m. and reconvened at 10:45 a.m. Engineering Report, continued: Authorization for the CEO to execute a $412,260 construction contract change order with State Utility Contractors, Inc., for bypass work associated with the River Road Force Main repair project, with sufficient funds in the CIP for the project. Mr. Styers presented this item. Following a 2006 force main break which occurred during a Progress Energy construction project, the City repaired the wastewater force main on River road at its intersection with Shipyard Blvd. A more extensive, permanent repair is needed, and staff had identified a bypass path which would reduce risk by moving the excavation, separating the bypass system from the repair work, and provide for removal of wastewater from the site if necessary. Staff presented a map showing the recommended bypass and answered clarification questions from Authority members regarding the project and risk factors. Mr. Hearne moved to authorize the change order with State Utility Contractors, Inc. Mr. Sparks seconded the motion, and it passed unanimously. CFPUA APRIL 13, 2011 MINUTES Page 5 Environment and Safety Management Report: Ms. Eckert reviewed the accident rates from March 2010 through February 2011. A copy of the reference. Mr. Renzaglia observed that he believed the Authority had an accident trend in the wrong Jordan has met with several departments to discuss safety, all accidents are reviewed, and steps taken to support safety and eliminate accidents. Ms. Eckert reported that there were two sanitary sewer overflows (SSOs) in February, one a 40- gallon spill caused by paper products and the other a 47-gallon spill caused by grease and roots. Compliance staff mailed educational materials to the customers in the affected areas. Ms. Eckert and Mr. Vogt answered clarification questions from Board members regarding plant data in the report. Ms. Eckert and Mr. Johnson presented the following staff recommendation: Authorization for the CEO to enter into a contract with PerkinsElmer Health Sciences, Inc., for the purchase of an Inductively Coupled Plasma/Mass Spectrometer without a Thermoelectrically-Cooled Spray Chamber, at a cost of $129,127.75. Mr. Smith moved to authorize the contract. Mr. Sparks seconded the motion. Following clarification questions, Mr. Renzaglia called the question. Ms. Wolf, Ms. Kusek, and Messrs. Renzaglia, Smith, Hearne, Brown, Quinn, Rivenbark, Sparks, and Berger voted in favor of the motion. Mr. Catlin was opposed. The motion carried, ten to one. Public Relations Report: Ms. Ricks updated the Board on the road closure on North Kerr Avenue. Authority has material in Kidsville , a publication for local school children. Staff will participate in the April 30 Earth Day activities at Hugh McRae Park. Authority environmental, safety, and compliance staff recently joined in a National Guard exercise for hurricane preparedness. CFPUA APRIL 13, 2011 MINUTES Page 6 Ms. Miles stated that she had no report at this time but would need a closed session for the Authority to seek legal advice on a potential claim and the validity of a contract. CEO Report: Mr. Jordan requested clarification regarding the Sweeney expansion. He stated that staff plans to provide the level of service needed to comply and complete the project and wanted to make sure that the Board was not directing staff to do otherwise. Board direction was to proceed at the current level of service. Mr. Jordan reported that Ms. Ricks has accepted an expanded role at the Authority, to include stakeholder communications and discussions with potential bulk sale customers. New Business, Committee Reports. Human Resources Committee: Health Insurance Recommendation: Mr. Hearne asked Mr. Morgan to present the report and committee recommendations. Mr. Board members were invited to the meeting and the data and information that the Committee had reviewed during its March 2 meeting had been provided to all Board members. The Committee report and minutes were in the Agenda packet and are incorporated by reference. At its March - 80/20 Authority/Employee funding split, with a 13.61 percent increase in premiums to the Authority of $245,081.76. Employees would see a 16.12 37.46 percent premium increase depending on their levels of coverage, and plan benefits would remain the same as for FY2011. The Committee recognized savings in the life insurance/accidental death and dismemberment coverage which would offset increase for dental coverage. There were questions from Board members regarding the premiums for dependent coverage. Mr. Morgan reported that the Authority pays 80 percent for employee and dependent coverage and that requiring an employee to pay 100 percent for dependent coverage would represent a 189 percent increase in cost to an employee with family coverage. Mr. Catlin believed that the CFPUA APRIL 13, 2011 MINUTES Page 7 discussion among Board members regarding levels of insurance coverage provided by private industry. - Committee. Mr. Sparks seconded the motion. Mr. Sparks reported that the Committee had studied the benefit package options extensively and had met twice to discuss benefits. He stated that employees have little hope of raises and that he did not want to shift additional burdens to them. Health savings accounts were discussed. Mr. Morgan answered questions regarding costs of various coverage plans. Mr. Morgan requested that Mr. Hearne modify his motion to authorize the Chairman to sign the contracts for insurance coverage. Mr. Hearne modified his motion accordingly, and Mr. Sparks consented to the change. Mr. Renzaglia called the question. Ms. Wolf and Messrs. Renzaglia, Smith, Quinn, Sparks, and - the Chairman to sign the appropriate documents. Ms. Kusek and Messrs. Berger, Rivenbark, Catlin, and Brown voted against the motion. Motion carried, six to five. Pay Plan Review: The Committee had asked Mr. Morgan to research the consumer price index for March 2011. Mr. Morgan reported that the March, 2011, CPI would not be released until April 15, bu that the February CPI was 2.2 percent for Southern Urban areas. Long Range Planning Committee: Mr. Quinn asked Mr. Styers to present the Committee report. The Committee met on April 7, 2011, and discussed the following items: System Growth: Utility Advisors Network consultants joined the meeting via conference call to explain a model they had prepared to calculate the profit margins for new customers. The model projected how long it would take to pay for extensions through customer charges. Automated Meter Reading and Monthly Billing: The Committee received a report from I.T. Manager Ellison regarding automated meter reading, which would generate monthly bills. The Committee also received a report from Ms. Potter, Billing and Collections Manager, regarding options that are currently available to produce monthly billings. The Committee intends to develop a schedule for meter replacement to work towards Automated Meters and monthly CFPUA APRIL 13, 2011 MINUTES Page 8 billing. Mr. Renzaglia asked if the Committee would have that information available within the next three months, and Mr. Quinn believed that was possible. Committee Objectives: Committee members identified items they each felt to priorities for the Committee to explore. Liaison Projects: Ms. Ricks reported on discussions with stakeholders and potential bulk water sale customers, including other governmental units. The Authority recessed at 12:10 p.m. and reconvened at 12:20 p.m. Finance Committee: Revenue Discussion and Vote: Mr. Smith recommended that the Authority pass an Ordinance for rates to produce a 13.1 revenue increase, for bills generated on or after May 1, 2011. Mr. Sparks seconded the motion. Ms. Spivey and Mr. Smith answered questions from Authority members regarding efficiencies, debt coverage, and future bond issuance. Mr. Catlin offered an amendment to the motion stating that the rates could be amended if the pending efficiency study indicated savings that could offset rates. Mr. Smith did not accept the amendment to his Mr. Renzaglia called the question on the amendment. Ms. Wolf, Ms. Kusek, and Messrs. Renzaglia, Berger, Rivenbark, Quinn, Catlin, Brown, Hearne, and Sparks voted in favor of the amendment. Mr. Smith was opposed. Motion carried, ten to one. Mr. Renzaglia called the question on the amended motion. Ms. Kusek, Ms. Wolfe and Messrs. Renzaglia, Smith, Rivenbark, Quinn, Catlin, Brown, Hearne, and Sparks voted in favor of the amended motion. Mr. Berger was opposed. Amended motion carried, ten to one. Rate Tier Discussion and Vote: Mr. Smith reported that the Committee recognized a desire to increase the gallons available in usage tiers and that there was some sentiment in support of uniform rates. Mr. Sparks moved to adopt the Ordinance as recommended by the Committee, with the following tier distinctions: CFPUA APRIL 13, 2011 MINUTES Page 9 0-12,000 gallons/12,000 24,000 gallons/24,001 and over/eliminate fixed charge for irrigation meters where there is a primary water meter. Mr. Smith seconded the motion. Mr. Catlin expressed concern regarding potential saltwater intrusion into the aquifers stemming from irrigation wells. He offered a substitute motion for a uniform rate without tiers. Mr. Rivenbark seconded the motion. There was a discussion regarding uniform rates and whether it was appropriate to go to a uniform rate at this time or at a future point. Board members also discussed the increased cost to customers under a uniform rate, and the conservation of water as a natural resource. Mr. Renzaglia called the question on the substitute motion to adopt a uniform rate with no tiers. Ms. Wolf and Messrs. Berger, Rivenbark, Catlin, and Brown voted in favor of the motion. Ms. Kusek and Messrs. Renzaglia, Smith, Quinn, Sparks, and Hearne voted against the motion. The substitute motion was defeated, six to five. Mr. Catlin offered a second substitute motion, with tiers as follows: 0-18,000 gallons/18,001-36,000 gallons/36,000 and over. Mr. Jordan reminded the Board that, as the amount of water in each tier increased, the cost of each tier would increase, and staff did not have a model showing costs for this proposed tier. Mr. Brown offere tier and eliminating the fixed charge for irrigation meters. Mr. Catlin agreed, and Mr. Brown seconded the motion. Mr. Sparks stated that he would need to see the rates associated with this proposal. Mr. Catlin said he did not realize we did not have the figures for that variation and would withdraw his motion. Mr. Brown agreed with the withdrawal. : 0-12,000 gallons/12,001-24,000 gallons/24,001 and over/eliminate the fixed charge for irrigation meters where there is a primary water meter/placed metered irrigation in the 0-12,000 gallon tier. CFPUA APRIL 13, 2011 MINUTES Page 10 Mr. Catlin stated that he wished to discourage wells. Mr. Smith suggested placing irrigation in Mr. Quinn questioned the impact of the irrigation charges and suggested adopting the Finance Committee recommendation and amending the irrigation tier after analyzing what the rates would be. Mr. Smith recommended addressing the irrigation tier at the May Authority meeting after running the rate model with the suggested possibilities. Mr. Jordan reminded the Board that changes in rates result in changes in customer behavior and use patterns. Irrigation in the lowest tier could also lower revenue. Mr. Jordan cautioned the Board to look carefully at the options. Ms. Spivey added that once rates are sets, each billing account must be adjusted accordingly, which is labor intensive. Mr. Rivenbark called the question on Mr. Catlin Messrs. Berger, Rivenbark, Catlin, and Brown voted in favor of the amendment. Messrs. Renzaglia, Smith, Quinn, Sparks, and Hearne voted against the amendment. Motion carried six to five. Mr. Smith restated his amended motion for tiers, as follows: 0-12,000 gallons/12,001-24,000 gallons/24,001 and over/eliminate the fixed charge for irrigation meters where there is a primary water meter/placed metered irrigation in the 0-12,000 gallon tier. Mr. Smith called the question. Ms. Kusek, Ms. Wolf, and Messrs. Renzaglia, Berger, Smith, Quinn, Catlin, Smith, and Hearne voted in favor of the amended motion. Messrs. Rivenbark and Brown were opposed. The amended motion carried, nine to two. Collection and Treatment Surcharge: Ms. Spivey and Ms. Eckert presented the recommended surcharge for collection and treatment and a list of the customers impacted by the surcharge. Mr. Smith added that the surcharges were part of the recommended rate structure, and the data was presented for clarification. 2011 Bond Sale Financing Team Recommendation: Ms. Spivey presented the Finance hich would utilize the same underwriters and bond counsel as the 2008 bond sale. The recommended team was: Citi Senior Underwriter BB&T Capital Markets, Wachovia/Wells Fargo Co-managers Parker, Poe Bond Counsel CFPUA APRIL 13, 2011 MINUTES Page 11 R.W. Baird & Company Financial Advisor; and Utility Advisors Network Feasibility Consultant. recommendation for the 2011 Bond Sale Financial Team. Mr. Smith seconded the motion, and the motion passed unanimously. Budget Update: There will be a $6,000,000 increase in debt service for FY2012. Staff anticipates no increase in the operating budget. Ms. Spivey recommended a $5,000,000 transfer from the operating budget to the capital budget, which would reduce future bond sales and debt service. The FY2012 Budget will be presented to the Finance Committee on May 4 and to the full Authority on May 11. A budget workshop is scheduled for May 18. Billing Vendor: The billing vendor expires on June 30, 2011. The current vendor did not bid. Staff recommended awarding the contract to PCI Group, and the Committee had endorsed the staff recommendation. Mr. Smith moved to award the billing vendor contract to PCI Group for a period of three years, with the option for two annual renewals. Mr. Sparks seconded the motion. Following clarification questions, Mr. Renzaglia called the question, and the motion passed unanimously. Monthly Financial Reports: Ms. Spivey and Mr. Smith referred Authority members to the monthly financial data available in their Agenda packets. A copy of the financial reports in incorporated reference, and the monthly financial data will be available on the Authority website. Ms. Kusek asked to be excused so that she could leave for an afternoon appointment. Ms. Wolf moved to excuse Ms. Kusek. Mr. Berger seconded the motion, and it passed unanimously. Ms. Kusek left the meeting at 1:40 p.m. Closed Session: Mr. Smith moved to enter closed session to consult with the consulting attorney regarding a contract issue and potential claim. Mr. Berger seconded the motion, and it passed unanimously. The Authority entered closed session at 1:50 p.m. and received a report from legal counsel. The Authority returned to open session at 2:05 p.m. and continued a discussion of a contract with the City of Wilmington regarding the collection of delinquent solid waste accounts. Ms. Spivey joined the meeting. CFPUA APRIL 13, 2011 MINUTES Page 12 Ms. Miles advised the Board on her correspondence and discussions with School of Government Mr. Renzaglia outlined two options as he understood them: 1.waste delinquencies on Chapter 162A; or 2.Contract services back to the City and enter into another Interlocal Agreement for water and sewer provision by the Authority. After discussion, Mr. Smith moved to call a Special Meeting and to invite City management and legal staff to discuss the collection of solid waste delinquencies. Mr. Catlin suggested that County management and legal staff be invited to the meeting as well, and Mr. Smith agreed to amend his motion. Mr. Renzaglia suggested April 27 as the Special Meeting date. Mr. Brown seconded the amended motion, and it passed unanimously. The Interlocal Agreement which created the Authority was briefly discussed. Mr. Smith asked to be excused and was excused at 2:25 p.m. There was no further business to come before the Authority, and Mr. Sparks moved to adjourn. Mr. Catlin seconded the motion, and it passed unanimously. The next regular meeting of the Cape Fear Public Utility Authority will be Wednesday, May 11, 2011, at 9:00 a.m. in the Lucie Harrell Conference Room in the New Hanover County Administration Building. A Special Meeting of the Authority will be held Wednesday, April 27, 2011, at 9:00 a.m., in the Harrell Room. Respectfully submitted, Donna S. Pope Clerk to the Board CFPUA APRIL 13, 2011 MINUTES Page 13