COMMISSIONERS OF PUBLIC WORKS

Minutes of May 23, 2005

The regular meeting of the Board of Commissioners of Public Works was held on Monday, May 23, 2005, at 4:00 p.m., in the boardroom at 121 West Court Avenue. 

In attendance:

Michael G. Monaghan, Steve D. Reeves, Jr., Scott Banks,

Allison Holland, Henry O. Watts, Kenneth Barnett

Jeff Meredith, Amy Ashley, Denise Giannetti, Jeff Auman

Jeff Fowler, Vickie Gorham, Stacia May, Laurie Smith

Bill Patrick, Melinda Bishop, Dan Mullenix, Jim Manley

I.              Chairman Monaghan called the meeting to order and Mr. Barnett gave the invocation.

II.                 Chairman Monaghan gave the statement of compliance with the notification provision of the Freedom of Information Act.  Chairman Monaghan stated a change to the agenda order beginning with New Business, a report from Mr. Jeff Fowler; followed by an audit presentation from Elliott Davis & Company.

III.               A. Mr. Jeff Fowler informed the Commissioners of 16 industrial prospects since the beginning of the year; 12 generated by them; two by the Department of Commerce; and two by the Upstate Alliance. He stated that one of those was recently announced and will create around 10 to 15 new jobs and around a $2 million investment located across from Anderson Metals. He stated that of the 16 projects, five had been lost for various reasons. There have been 25 industrial leads, out of those seven have been lost and the rest are ongoing. He stated that leads are not people who they know have projects but people who have actually contacted them about projects. There have been four existing industry projects and three have been landed, with one in final reading at County Council. There is one existing industry lead (expansion). There have been three commercial projects that have all been closed out, with two won and one lost who could not get a business plan up and running. There is one commercial lead that could be pretty substantial. Job creation wise on the industrial side there are about 15 jobs; 95 new jobs will be created within the next couple of months within existing industry; there is another possibility that would create another 90 jobs. He stated that three prospects came from a recent trip to San Francisco and proposals have been submitted for all three. Two will make visits here and we will be the state’s point of contact for the other. Trips are planned in June to the Baltimore area and back to California in July.  Mr. Fowler stated that the City and County both voted to have the accommodations tax that will give a tremendous amount of leverage to market commercial and retail areas. He stated they will be developing some of the marketing materials. There is a $350,000 grant request in to the Department of Commerce to up fit the Federal Building and put the visitors and regional tourism center there.  He informed the Commissioners of upcoming outside events on the third Thursday of every month. The City has agreed to furnish tents for those that are scheduled when rain showers are forecast. The website is currently being redone and should be up before ETV visits in June. It will be very user friendly and geared toward three types of people, investors and internal people, and corporate decision makers, and the site consultants. Data will be kept current and will tie into the GIS system with the County. The investor portion will be more of activities being done and also to promote investors. ETV Road Show has approached us about being a program sponsor. They did not really need recognition on the Partnership side because the audience is more external and not tourism related, more industrial related. John Lawrey got the City, the County, the Self   Foundation, and the Chamber to pool their money to have a clip like a mini commercial rather than having their logo at the end as a sponsor. He stated that the Investor Relations Program has been kicked  off and is doing a printed piece for investors to go out and actively recruit  more investors. He stated that the marketing plan is coming along well.  There is a dual concept of taking what they knew were short-term targets.  Clemson is helping to develop criteria that are applied across NISC codes to determine who has the most likelihood of expansion or relocation. They look at both ends of the spectrum, companies that are looking good on their balance sheets and those who are not but have a good long-term outlook.  

B.       Ms. Laurie Smith with Elliott Davis & Company presented the 2004 audit. She introduced the audit team members Jim Manley, Senior Manager, and Dan Mullenix. Ms. Smith stated that copies of the audit report had already been distributed to Commissioners and staff. She then presented highlights of the audit beginning with an explanation of the audit process. She stated that the team comes in and looks at information, internal control systems and from that they plan how to approach the audit by designing certain audit tests that would be efficient. They hit the material areas of not only financial presentation as far as the balance sheet, but also the results of operations. She stated that since there is a requirement to have an annual audit, the main concern within the audit report is the Auditor’s Opinion. She stated there was an “Unqualified Opinion” on the financial statements, which means they are fairly presented in accordance with governmental accounting standards. She then reported on highlights from the balance sheet, statement of net assets. She referred to page 7 of the Financial Report showing that total assets decreased 2.1% or about $2.4 million. She defined the biggest drivers on total assets as cash and investments that totaled about $20.2 million. Those decreased by about $1.9 million because at the end of 2003 there were some construction funds; they took some bond monies in 2003 and did some capital items.  She referred to Note Disclosure 3 regarding cash and investments of $20.2 million at the end of December 2004 that simply states that all cash and investments were collateralized in compliance with laws and regulations as authorized to invest. She then explained capital assets showing capital assets net of depreciation went down about $617,000, which is less than 1%. She referred to Schedule 6 in the audited financial statements summary showing $2 million in capital assets added during the year and $2.4 million in construction in progress, with the biggest over $1 million in water line systems. She stated the depreciation for the year was right at $5 million, so that is a net number. Capital assets before depreciation increased about $4.4 million and depreciation expense of about $4.9 million. Ms. Smith stated you always want to see that you are replacing capital items faster than you are consuming and at some point you want to watch that to be sure that additions are in line with how capital assets are consumed. Capital assets at year end were right at $75.6 million, net of depreciation.  

      Ms. Smith stated that there was a significant bad debt in 2003 but no significant bad debts for this year. In looking at subsequent receipts on accounts receivable, net of the allowance they were right over $7.7 million at year end.

      Ms. Smith referred to total liability on the balance sheet showing a decrease by about $2.5 million, or right at 6%. She added that the biggest component was paying off revenue bonds with a little over $3 million in debt paid off.

      Ms. Smith referred to the bottom line, total net assets, the price on the assets less liabilities, and stated they were up 1.5%. She pointed out that net assets are comprised of three different categories where the biggest thing to look at is the unrestricted category and that improved from $8.1 million to $13.4 million at the end of 2004. This is an equivalent of right at three months of operations which is a prudent place to be as far as an equity position in the governmental sector.

      She then looked at operations comparing revenues to last year and noted a 3.4% increase. The biggest component in operating revenue was the electric unit which was up 9.4%. Expenses were only up 2.9% but the electric unit was up 10.6%. This is all relative to prior year. In looking at each division, she referred to page 30, Schedule 3 with revenues and expenses for electric compared to prior year. She stated there was not a lot of change with assets increase of little over a billion this year and right at a billion this year.

      Ms. Smith referred to page 9 showing a breakdown of the water unit.  Prior year had a decrease in those assets of right over $1 million; at the end of 2004 there was only a decrease of $320,000. The biggest driver was interest expense prior year at $1.3 million and $624,000 in the current year.

      Ms. Smith referred to page 31 showing a breakdown of the gas compared to prior year. The biggest swing is seen here in looking at the change in net assets. Prior year net change (revenue plus expenses) were up $1.1 million and this year up $900,000. Revenues were up about $670,000 but gas purchase for resale was up $1.4 with gas purchases driving this change.

      Ms. Smith referred to page 28 showing all three units and adds them together. At the end of 2003 that decrease in assets of $200,000; at the end of 2004 a positive increase of $90,000, or a roughly $300,000 increase in net assets.

      Mr. Mullenix presented graphs showing analytical data for residential, commercial, and industrial prices and trends comparing CPW with South Carolina and the rest of the nation. He stated that information was gathered from the Department of Energy website using comparisons to the average U. S. city gate price.  He then provided information showing comparisons since 2000 by department of gross profit based on operating revenue and expenses. Ms. Smith noted that all of the graphs show that the CPW system is very proactive in watching price structures and maintaining margins. Commissioner Watts asked for copies of the graphs and Mr. Mullenix stated they would be provided via e-mail to Ms. Giannetti.  He then presented graphs showing debt service coverage ratio from 1999 to 2005. He noted that CPW is well funded to pay off debt and is well above the requirement for debt service coverage. Mr. Patrick stated the importance to remember the trend and is you get too close to that when you get ready to issue bonds the next time, you will likely have problems maintaining the rating. Ms. Smith explained slides on GASB starting with note disclosure related to deposits and investments risk that will require disclosure of cash or demand deposits or investments but also separate those by interest risk and credit risk, effective in 2006. She then stated that GASB 43 and 45 will have an implementation date of 2008 and will require some actuarial calculation. These are basically requirements to make us account and report for other post employment benefits. This is aimed at making you accrue a liability for employees while they are working for you to fund however you are planning on funding their post employment benefits. If you are planning on covering part of the insurance, each year you would adjust that liability for all employees to what you project that to be. This may require looking at what is offered for retiree benefits. She then explained GASB 44 that it is aimed at adding more to the statistical section, probably doubles what is provided now and will also be effective in 2006. She referred to tables with information in the back of the financial statements showing ten-year trend information. Commissioner Monaghan asked about the internal audit and management letter. Ms. Smith stated that during the course of the audit,    they looked at internal controls and document systems by comparing how they are working with how we say they are working. She stated there were no material weaknesses or reportable conditions so there is no management letter “per se”. She then referred to an “other comments” management letter that alludes to recently issued accounting standards, when they will impact us and how. The letter also refers to capital assets; the possibility of construction in progress when completed go ahead and set that into the depreciation schedule instead of making that adjustment to expense at year end. The last comment in the letter relates to looking at employee benefit costs, mainly insurance. She explained a new requirement relating to management letters starting next year requiring a separate letter that will detail every finding be presented, whether immaterial weakness or non-reportable condition. She concluded the presentation by stating that staff was very cooperative and organized which helped the audit to go smoothly.           

IV.              After a brief recess, the meeting was resumed. A motion was made by Commissioner Watts and seconded by Chairman Monaghan to approve the minutes of the April 12, 2005 work session; the April 25, 2005 regular meeting; the May 3, 2005 special meeting; and the May 4, 2005 public hearing. The motion was unanimously approved.   

V.                 Chairman Monaghan asked if there were any questions about the financial statement. Commissioner Watts inquired about charges for a grill on the credit card bill. Mr. Reeves responded that it was for parts for consumer repairs.  Chairman Monaghan noted that gas sales industrial interruptible were up $1.5 million more than last year and whether that was a continuing thing. Mr. Barnett stated it was probably a little of both volume and price. We are actually keeping them doing more things like when we went to the hospital and said if you want to fix the price we can do that. With the price of oil going up, the price of gas looks a lot more attractive to them so they are not switching. Chairman Monaghan inquired about collection of bad debt of $100,000 last month. Ms. Giannetti stated that Ms. Gorham writes off bad debts quarterly and last month would have been the end of the quarter. Chairman Monaghan noted $2.5 million net income for a little over a quarter and asked about expectations of what will draw that down. Mr. Barnett noted that the biggest part was gas and that happens every year because the biggest part of gas sales is in the winter. That falls off somewhat in the summer, but electric will pick up. Some of that will go down simply because it looks good at first because the majority of sales in gas are early on. The margin you are making on residential sales versus industrial is a lot more. Every year at the first of the year, the gas margin is large; then it closes, and you will see electric and water thin. Then when you get into summer months, water will actually go up a little and electric will go up. Mr. Barnett stated that based on current budget, we should see a negative net income at year end and the $2.5 million should go away. Chairman Monaghan asked if interest income went from $1 to $5 million from last year to this year. Ms. Giannetti stated it was because it was all in a government advantage account last year. This year it is in the sweep accounts and also in investments and we are earning a higher rate of interest. Chairman Monaghan stated that only $80 was spent in propane tank and noted that he remembered the “OK” to proceed being given. Mr. Reeves responded that all department heads were told that if there was a need, go ahead and spend accordingly. He would find out from Mr. Whittle why only $80 of the budgeted amount was spent. Chairman Monaghan asked about cash showing $10 million and expenses at $5 million and whether more could be put into investments. Ms. Giannetti responded that they were looking at putting another $5 million into investment. Chairman Monaghan asked about purchased gas cost recovery. He noted the loss shown of about $100,000 per month under-recovery money. Ms. Giannetti stated that with the way the gas costs are paid and billed, because we are splitting half of one month and half of another but what we are paying is actually in calendar month, this might be lagging behind a little. Ms. Giannetti stated her comfort with the formulas and noted the numbers had been double-checked.

VI.              Old Business:       

A.     Chairman Monaghan stated that he needed more time on the Fiscal Year 2005 Budget and Commissioner Watts stated his agreement. Action on the budget was deferred to allow more time to see if more money could be saved and to answer additional questions. He added that more time was needed to review insurance and what will be done there. He stated that the City had hired a consulting firm and Mr. Brown said they found they could get the same benefits for less. Fuji and the County have also used this firm. Chairman Monaghan stated that before doing anything dramatic with insurance benefits, he would like to see a study. Mr. Reeves responded that Mr. John Phillips will provide information giving an indication of what the cost savings would be on the plan if we changed the deductible, the employee’s family portion on family coverage, added a small piece to each employee, and changed the drug card. He is to give a breakdown of savings for each one.

      Mr. Patrick referred again to the chart on debt service coverage ratio in the audit presentation. He commented that there are a number of coverage ratios in the bond issue and stated his confidence that we are not bumping up on any of them now, but that over the next six months it would be appropriate to ask the finance department and Charles Schulze to analyze those things and look at trends to have more information to go forward so when there is a need for another bond issue, these things do not come as a surprise. He stated that rating agencies are much tougher now and particularly if they look at Greenwood County’s unemployment.

      Chairman Monaghan noted that Charles Schulze was also going to do a study on the payback on economic incentives and how long it takes us to regain that and if it is worth our while.

VII.            New Business:

            B. Mr. Reeves stated that it was time to renew the annual contract with Cornerstone for the Employee Assistance Program at a price of $4,000.  He noted that Cornerstone provides various counseling services for employees and there were 17 referrals last year. A motion was made by Commissioner Watts, seconded by Chairman Monaghan, and unanimously approved to renew the contract with Cornerstone.

C.       Mr. Reeves stated that it is time to renew the agreement with Family Traditions for another two-year period to provide the booklet, Eight Keys for a Better Me. This booklet has been provided for the last six years to all elementary schools and is distributed to third graders. The cost is $1.67 per book at an expectation of approximately 900 books per year and an approximate total cost of $1,503 per year. This could vary by plus or minus 50 books. Mr. Reeves noted that this booklet has been well received by both teachers and students. A motion was made by Commissioner Watts, seconded by Chairman Monaghan, and unanimously approved to renew the agreement with Family Traditions for a two-year period.

D.      Mr. Reeves explained the request for consideration of bids for an insert and postage machine. He noted that included in the package were a memorandum, detailed cost comparisons, and surveys from other businesses. He stated that we have used Pitney Bowes machines for quite some time and have experienced a number of problems. Also, during the demonstration of units supplied by both low bidders, the Pitney Bowes machine had numerous jams whereas the recommended machine only experienced one jam. Mr. Reeves also asked for authorization to advertise for disposal of the existing unit. A motion was made by Commissioner Watts, seconded by Chairman Monaghan, and unanimously approved to purchase the Neopost equipment with a service agreement from Major Business Machines for a total of $42,877.80, and to dispose of the existing unit. It was noted that there were three bidders with the other bid so high it was not included in the demo unit.

VIII.         Other Business:

1.      Mr. Reeves stated the need to change the June meeting from June 27 to June 20. A motion was made to change the meeting date by Commissioner Watts, seconded by Chairman Monaghan, and unanimously approved. 

2.      Mr. Reeves reminded the Commissioners of the mandatory pre-bid conference at the water treatment plant on May 31, at 10:00 a.m. He reminded them that June 7 is the bid opening for the projects and Commissioner Hancock will be the attending Commissioner. He stated that the work session would be on June 14, at 3:00 p.m.

3.      Mr. Reeves stated that based on the audit presentation today, it would be appropriate to consider a resolution for the transfer of checks with the City of Greenwood. He stated that the resolution is identical to last year and authorizes the exchange of checks with the City in the amount of $530,086.21 for the usage of various utilities by the City, plus the $400,000 the Board had previously authorized as a transfer, for a total of $930,086.21. A motion was made by Commissioner Watts, seconded by Chairman Monaghan, and unanimously approved to adopt the resolution to proceed with the exchange of checks with the City of Greenwood.  

4.      Chairman Monaghan asked about the Marketing and Grants Coordinator position. Mr. Reeves stated that Mr. Barnett had met with Jeff Fowler and Ruth LaForge who are putting together interview questions. He added that interviews are currently being scheduled for June 7 and 8. Chairman Monaghan asked about the replacement for the computer position. Mr. Auman stated that there is a question with the job description that could change the pay grade. Mr. Reeves added that an accurate job description should be available to potential employees.

5.      Chairman Monaghan inquired about progress on a dinner with the City. Mr. Reeves stated he had talked with Mr. Brown and is waiting for some dates. He stated that he informed Mr. Brown that CPW would provide the meal at the COC.  

6.      Chairman Monaghan inquired about SCE&G and whether they can forecast the fuel adjustment. Mr. Meredith stated that they have already provided a projected 2005 fuel cost used in the rate design just presented and approved.  

7.      Chairman Monaghan inquired about the balance of the Solutia debt. Mr. Patrick stated that the remainder due is still pending. For some reason, when Solutia filed their schedule, they showed around $700,000 and we showed approximately $900,000. We filed our claim for the full amount and they have not taken any steps to disallow that amount; the time has technically passed for them to disallow it. It seems to be a technical matter of timing with the bankruptcy court when that other gets approved. We do not have a firm agreement to sell the amount that has not been approved yet; when it gets to be finally approved by the bankruptcy court then we can see at that point if we want to try and sell it to somebody at the then current market rate or if at that point we want to try and collect it through the bankruptcy court.  

8.      Chairman Monaghan asked about the Grace Street property. Mr. Reeves stated he had tried to get Steve Davis recently to get with the architect that did the original drawing to work out changes to be made to the pond. He added he was trying to get an idea of that cost before we formally agree to move forward. Chairman Monaghan stated that we should get someone else if Mr. Davis is not going to do it. Mr. Reeves stated he has not been able to get in touch with him so they have not been able to discuss it.  

9.      Chairman Monaghan inquired about the gas contract and Mr. Barnett responded they are still waiting between Jim Byrd and Pat Smith of SEMI to iron out several differences. Mr. Patrick added there has been no particular problem; it has just taken some time to iron out these items and they are putting together a contract that will be good for the long term.            

IX.               Mr. Reeves stated that he did not have anything for Executive Session. Chairman Monaghan stated that he had an item for discussion. A motion was made by Commissioner Watts, seconded by Chairman Monaghan, and unanimously approved to go into Executive Session to discuss a contractual matter.            

X.                 With no further business, the meeting was adjourned.