COMMISSIONERS OF PUBLIC WORKS

Minutes of April 24, 2006 

The regular meeting of the Board of Commissioners of Public Works was held on Monday, April 24, 2006, at 4:00 p.m., in the boardroom at 121 West Court Avenue. 

In attendance:                                                                                   

Gene P. Hancock   Steve D. Reeves, Jr.      Scott Banks

Vickie Gorham       Michael G. Monaghan   Denise Giannetti

Jeff Auman             Ron Lemon                   Henry O. Watts

Jeff Meredith          Stacia May                    Lee Roper

Ken Barnett            Richard Gentry              Mark Amick

Curtis Burnett          Ken Whittle                  Michael Nix

Jean Martin                                                                                                                                                                         

I.              Chairman Monaghan called the meeting to order. The invocation was given by Commissioner Hancock. 

II.                 Chairman Monaghan gave the statement of compliance with the notification provision of the Freedom of Information Act.           

III.               A motion was made by Commissioner Hancock and seconded by Commissioner Watts to approve the minutes of the March 27, 2006 regular meeting; and the April 13, 2006 work session. The motion was unanimously approved.           

IV.              New Business: 

            At the suggestion of Commissioner Watts, Chairman Monaghan changed the agenda order to allow Mr. Nix to give his quarterly report.   

A.     Mr. Michael Nix with Greenwood Capital reported on the CPW Investment Account. Mr. Nix distributed copies of quarterly reports through the third quarter of the fiscal year. He referred to page 1, “Realized Gains and Losses” and noted that these bonds have either been called or matured during this fiscal year period. He pointed out that a loss shown in the “realized gain/loss” column or net gain/losses from those positions is attributable to a premium that was paid. He referred to “Unrealized Gains and Losses” which is essentially an appraisal or statement of where CPW stands as of March 21, 2006. He stated that the cash position at that time was $803,945.51. Mr. Nix added that he had discussed the cash position and reinvestment with Ms. Giannetti. He stated that a little over $1 million will mature in May and the goal is to reposition those assets and stack some maturities up in the February to March timeframe in case we are faced with a situation like this year where the money might be needed. They plan to have somewhere between $1 million and $2 million that will mature in that window. The balance would be placed elsewhere to move out with an interest rate cycle. Chairman Monaghan asked about the Federated Treasury Obligations Fund. Mr. Nix explained that it is a money market fund that is a basic daily sweep with any assets in the account that are not actually invested in a bond swept into a money market account. Federated is the chosen money market account with the current yield right around 4.3% on a cash account, which is a very favorable rate from a money market perspective. Mr. Nix stated that we are not at risk and added that there are restrictions with investments and this meets the requirements. He stated that this is a little more than we would usually keep in cash. He stated that he had discussed with Ms. Giannetti expenses that might be incurred over the coming months and we are not aware of anything at this point in time.  He then referred to the last page of the report which is a “snapshot” of the fiscal year period showing portfolio value, withdrawals, which are the fees associated with the Countybank fee and Greenwood Capital fee, realized and unrealized gains and losses, interest the account has generated through this period, and change in value. He explained the reasons for the large negative number for unrealized gains and the good and the bad of this type of interest rate cycle where rates rise. The bad is the value of the bonds that you own tend to go down; the good is that as you are reinvesting, you are reinvesting at higher rates. Right now, the overall yield on the account is right at 4.3%; for the maturity that is coming due, rates about twelve months from now are going to be somewhere around 5% to 5.25 %. Mr. Nix stated that given the current interest rate cycle, and going back a couple of years, rates that have come from very low levels of 1% have moved up significantly. The prime rate right now is at 7.75% and the fed is expected to raise rates again by 25 basis points at their meeting in May. He stated that it is likely that the fed funds rates will continue to increase, the prime rate will continue to increase, and most likely short-term rates will increase. He stated that there is also an expectation that we are probably getting close to the end. There is some anticipation of rates going as high as 5.50%; the other side is that they are probably going to start lowering the rates this time next year. Mr. Nix stated that in looking back at history, the average period between them stopping raising rates and starting to lower rates is about six months, and has been as short as three months and as long as two years. He stated that there will probably be a very volatile period in interest rates over the next twelve months. He summed up by stating that as the feds start lowering rates, you will see rates start to move down again; that is bad from the reinvestment perspective because you will be reinvesting at lower rates. It is good from the standpoint of value that you hold because the value of those bonds will actually go up. Mr. Nix stated that they tend to ladder the portfolio with maturities going from six months out to six or seven years. They will probably step out a little bit, keeping in mind that there might be short-term needs but recognizing that rates are more likely to be going down than up in twelve months. Mr. Nix stated they will probably want to lock-in some more favorable rates for a five or six year period versus trying to do what they have done over the past eighteen months which is staying pretty short so they can reinvest quicker. He concluded by expressing that they are comfortable with the position and that with about a tenth of the account either in cash or coming due in the next month they will be able to reposition at higher rates. That will definitely benefit the cash flow perspective. By the end of this fiscal year we are looking at about 4.5% to 4.7 % yield. Commissioner Watts asked about training that was mentioned earlier for Commissioners. Mr. Nix responded that they had mentioned doing some sort of training session and will work on that within the next couple of months. He added that Greenwood Capital recently hired a new fixed income manager to help build resources who will be a tremendous resource and they are waiting for him to come on board.  

B.     Manager Reeves asked the Commissioners about rescheduling the November regular meeting. Mr. Reeves noted that with moving the regular meeting day to the fourth Thursday of each month, the meeting would fall on Thanksgiving Day. The Commissioners agreed to move the meeting to November 30 at 10:00 a.m.  

C.     Manager Reeves recommended acceptance of the low bid from Powers Solutions in the amount of $18,476.40 for bill forms and envelopes. A motion to accept the low bid was made by Commissioner Hancock, seconded by Commissioner Watts, and unanimously approved.   

D.    Manager Reeves recommended acceptance of the bid from Linder Industrial Machinery Company in the amount of $48,800.00 for an excavator in the water department. Mr. Reeves stated his agreement with Mr. Banks’ recommendation and added that this is not the low bid. Although this bid is $770 higher, this machine comes with a digging capacity that far exceeds the low bidder. A motion to approve the bid from Linder Industrial Machinery Company based on the extra digging capacity was made by Commissioner Hancock, seconded by Commissioner Watts, and unanimously approved. 

E.     Manager Reeves reminded the Commissioners of a demonstration provided at the last work session by Mr. Brad Jeffares with GST Consulting.  Mr. Reeves stated his desire to continue the efforts made over the past year on the GIS system and to move into the next phase of development. He stated that $60,000 was budgeted for this purpose this year. Mr. Reeves recommended the per hour rate proposed in Mr. Jeffares’ April 12 letter, not to exceed the $60,000 budgeted amount. A motion was made by Commissioner Watts, seconded by Commissioner Hancock, and unanimously approved.   

F.      Mr. Richard Gentry reported on grant activity, adding that the biggest is for $500,000 for water in the East Cambridge area. He stated that 350 houses had to be surveyed which required the help of a number of people. The Department of Commerce will come for a site visit on May 11. He reported on two competitive grants, one for Metro and one for CPW waterline replacement on Highway 254. Mr. Gentry reported that he had worked with Metro on the Planning Committee Earth Day Week. He referred to the third installment of the newspaper ad and added that it was to have been in the main section but was on the back page instead. He stated that he has the assurance of the newspaper that if we continue these type of ads, it will be in the main section. Commissioner Hancock suggested running something in the Ninety Six newspaper. Mr. Gentry stated that ads for both Metro and CPW will be in the Chamber guidebook. He is working with Jeff and David on the redesign of the annual water report, and will work with David Nelson on the redesign of the website. Chairman Monaghan noted that he did not see any links on the Greenwood County or Partnership websites for CPW utilities. Mr. Reeves relayed his appreciation to those employees from Mr. Banks’ and Ms. Gorham’s departments who helped to survey 350 homes for the water grant.  

G.    Manager Reeves asked Mr. Ron Lemon to explain what he and Mr. Gentry had determined for gas incentives for piping and other offerings. Mr. Gentry distributed a handout and Mr. Lemon stated that they began by first surveying other local utilities. Then they developed a program and came up with recommendations for new construction and existing customers. Mr. Lemon stated that with new construction, they are recommending a rebate directly to the builder; and a rebate in equal installments or credits as part of their bill with existing customers. He stated that they looked at the two large devices, the primary heat source and the hot water heater. The incentives recommended are $250 for a furnace and $150 for a hot water heater because this is close to the cost difference between those two units to the builder, and is very similar to what others in the area are doing. Chairman Monaghan asked about the average cost of a gas furnace. Mr. Gentry distributed pages to the Commissioners showing some appliance costs. Chairman Monaghan noted that furnace costs were not shown. Commissioner Hancock asked about the terminology for the hot water heaters and noted they are shown in cubic feet rather than by size. Mr. Lemon stated they went to Lowe’s to compare prices and took a cross section of retail prices. He stated that they did not have information on gas furnaces; he pointed out the difference in the price of an electric furnace and gas heater of about $250.00, with electric being cheaper. Mr. Whittle added that he thought heat pumps started at about $1,110.00. The Commissioners asked for more information for further discussion at the next work session to include the cost of gas furnaces, gas packs, split units, and heat pumps with a backup. Mr. Reeves noted that for a better comparison, units usually come with an average annual cost for energy consumption based on a price per kilowatt hour or price per therm of gas. That information can be converted over to our rates. Chairman Monaghan asked for information on the payback for the incentives for each appliance. Chairman Monaghan stated that he was thrown off because the policy on piping would not change. Mr. Reeves stated that the policy for piping within the house has already changed; the Board has not changed the policy on the service line to the house. He added that nothing can be changed without a Board vote. He suggested that if the Board wishes to readdress the incentives, they could also make a proposal on the service line charges at the same time. Chairman Monaghan stated he thought that was already done. Mr. Reeves responded that they discussed it but nothing was voted on by the Board. Commissioner Hancock stated that they talked about going 200 feet and no one had a problem with it. Mr. Barnett stated that they may want to look at it in conjunction with both because it may come down to deciding we could give them “either/or”. Depending on the cost to a person that needs gas that extra 300 feet, that cost may be in putting in the service line and it may be we can either put in the service line for the extra 300 feet to encourage them to come in, or we can give the rebate on the appliances. It all depends on how long it takes to recover the cost so we may want to combine everything to have some options from which to choose. Chairman Monaghan stated he would prefer to have it straight forward and offer the rebates and the service lines. Commissioner Hancock noted that right now it is 100 feet at no charge and $0.50 per foot after that, and that does not come close to covering the cost. He suggested going to 200 feet and if they wanted to go further, it would not cost all that much to get it to the rest. He added that 200 feet is a long service line and there are not many that would go over that. Chairman Monaghan stated his belief that it should go all the way to the house unless it is some distance such as two miles. Mr. Lemon stated they would re-address the comparison and include expected usage rates and apply the anticipated result “margin-wise” over a year. Mr. Reeves suggested having no charge up to 400 feet with the service line; that would cover 98% of  situations and anything over 400 feet we could make it $0.50 or even $1.00 per foot.  Mr. Reeves suggested bringing this before the Board as a combined policy change or they could address the service line today. Chairman Monaghan stated that could be done at the next work session. Commissioner Hancock stated the desire to proceed with the gas service line and made a  motion to change the Gas Piping Policy to run up to 400 feet of gas pipe to any customer and $1.00 per foot thereafter; the motion was seconded by Commissioner Watts, and unanimously approved.  

H.    Commissioner Monaghan made a motion to elect Commissioner Hancock as Chairman, Commissioner Watts seconded, and the motion was unanimously approved. 

      A motion was made by Commissioner Hancock to elect Commissioner Watts as Vice Chairman; the motion was seconded by Commissioner Monaghan, and unanimously approved. 

      A motion was made by Commissioner Hancock to elect Commissioner Monaghan as Secretary; the motion was seconded by Commissioner Watts and unanimously approved. 

V.                 Financial Statement: 

Commissioner Watts asked about the Combined Department Income Statement on page 2. Chairman Monaghan asked that the pages be numbered straight through in the future to avoid confusion. Commissioner Watts asked if there was a misprint for net income versus budgetary income for March 2006 and if they should be 2005. Mr. Reeves pointed out that it shows net income YTD March 2006 and then the same thing again but there are two different totals. Ms. Giannetti stated that it should be 2005. Chairman Monaghan referred to Bad Debt over 61 Days submitted to the Department of Revenue. Ms. Giannetti explained that a file is sent annually on December 1 to the Municipal Association who in turn transfers that information to the Department of Revenue. Chairman Monaghan asked if it is submitted automatically after 60 days. Ms. Giannetti responded that these are accounts that have been written off up to the point of December 1, not current accounts that are past 60 days. Chairman Monaghan asked if we hold them more than 60 days. Ms. Gorham added that normally you can have some in December where that wouldn’t be the case, but you can have some that are 60 days in the summer months where they have gas only and carry over the gas amounts. We are doing quarterly write-offs now so anything up to that point would include most of them in December. Chairman Monaghan asked about the probability of getting payment once someone is past 60 days. Ms. Gorham said she could not guess; sometimes we collect bills even years later. Ms. Giannetti clarified that if they are a current customer, they are not written off, they would instead have services cut off. Ms. Gorham stated that when we reach the probability that it is a final bill and that customer is gone and services have not been turned back on, then we do write it off to bad debt and it would become part of the set-off debt collection program. Ms. Gorham gave an example where a customer owes $728; it is basically two months past due, but she has been paying three times a month. Her bills have been really high this winter, but historically she has always paid. It may be $300 per month paid in $100 increments throughout the month rather than all at once. Chairman Monaghan asked about the differential for tapping fees between a residential in the city and outside the city. Mr. Banks stated it is $500 in the city and $600 outside for a 3/4-in. line. Ms. Giannetti stated that she had listed these in her response through an e-mail to Chairman Monaghan. Chairman Monaghan asked about old vehicles sitting in the yard and Mr.  Barnett responded that they are all gone. Chairman Monaghan asked if it is our option to put in fiber, say if an outfit doesn’t come into the City and wants fiber, we can say “no”. Mr. Reeves stated we can always say “no” because it is a contract that the Board approves. Chairman Monaghan noted that the Customer Relations Department was $25,000 more than the allowance. Ms. Giannetti responded that is the Engineering department and in the first quarter they started upgrading the GIS. Mr. Reeves stated he thought the account number was mislabeled and Chairman Monaghan asked that it be changed. Chairman Monaghan asked about the gas commodity cost and if we are doing something wrong in the calculations. He then noted a $500,000 hit in December. Mr. Lemon responded that we will not be able to recover this by June 8. He explained that this happened because we used the averaging mechanism and averaged both price and volume. There are months when we billed from low usage to high usage and actually bill for less gas than we consume. In November we used 150 units for the whole system; in December we used 300 units; we average those two and it is 225. That is what is billed because we averaged the prices and the volumes. We then billed for 225 but have actually consumed 300. We then have 75 units at $12.00 that will be billed the next month but did not bill this month. Mr. Barnett explained that because we are on cycle billing, as a residential customer, the bill from SCE&G may be for the 300 units, but it doesn’t all get billed out to the residential customer until it crosses the months. That is why you can see that one month you’re up because it looks like we didn’t get enough gas billed out, then the next month it might be the other way around. Chairman Monaghan stated his concern with being sure the formula is right. Mr. Lemon stated that the three of them have talked at length and have discovered some errors in some numbers. It is not all perfect but these errors were discovered fairly quickly within a month so they are not carried for a prolonged period of time. He stated that they feel that the numbers they have are accurate, it’s just that the inconsistencies in the system as they average an average have caused some problems. Next year, they know the problem is there as they approach November, December and January. They will at least discuss adding to the PGC monies so they will not have that large number. Chairman Monaghan stated his understanding that the end of every cycle which is now every month, they would “true up”. If we lost $40,000, we would add that amount. Mr. Reeves stated that it is an annual “true up”. Chairman Monaghan stated his belief that they were going to adjust monthly. Mr. Reeves stated that is what we are doing. Mr. Lemon noted that it is April now, we haven’t collected all of March’s usage, so it will be May before we actually understand completely what we have billed for and what we receive. There is a lag because of the averaging in the cycle billing. Mr. Reeves stated that it really hits us in high use months in the winter and low months in the summer, and it’s hard to recoup from the high use months. We will start ahead of time next year and try to add a little bit in the October-November timeframe. Mr. Lemon added that will not happen next year without someone knowing about it. Chairman Monaghan stated his understanding is that we take the current price and would estimate what it would be and make our calculation for the price of gas. Mr. Barnett responded that because there are several moving parts, it is hard to say that is absolutely true. Every month when we do a PGC, half the data we know is finished. We don’t know what sales are going to be and we don’t know what the price is going to be, so we have to make an educated estimate based on historical information. Chairman Monaghan asked if the estimate is a little off if you adjust it so you make it back up. Mr. Lemon stated that is true. For instance, when we go to do the May PGC, he will know what error he had in April for price. He will adjust it accordingly, but he will not know what the actual sales were. There is about a two month lag. Mr. Lemon stated that he knows exactly what has been used; but he does not know what has been billed because it is over a two month period of time because they have cycle billed. Chairman Monaghan stated concern because we show we have under recovered $420,000. Mr. Lemon stated that when you put it in perspective, that number represents 3% of the residential commodity charge. It is a big number, but we are right 97% of the time. Commissioner Hancock stated that we need to get ahead in December, a little in January and February and let it slide in March and April. Chairman Monaghan recalled that last year at the true up we were ahead and took that money and put it in the General Fund. He then asked what we will do if we are behind $420,000. Mr. Reeves responded that at the end of the true up year, we will be behind. Mr. Barnett stated that the reason the true up was there, at the end of true up period in July to August timeframe, this was done this way to get away from those months when prices and sales were highest.  The Board has a decision to make; last year we came in very close, but had to do a lot of adjustment for the February, March, April timeframe and we were fortunate because sales during that time period held up. This year they didn’t because we had a very warm winter. The Board will have a decision to make at that point if we are still $420,000 under as to whether to take it as a loss or add a little to make it up for the rest of the year. Chairman Monaghan then asked how we submit to the accounting department of the City for our IS staff’s time spent. Mr. Auman responded that a spreadsheet is kept for each entity and there is a line item for IS services on the monthly bill.  

VI.       Other Business:                          

1.   Manager Reeves presented a request from Mr. Charlie Barrineau with the City of Greenwood for formal approval of matching funds for a grant for the Maxwell Avenue area. He reminded the Commissioners of discussion several months ago about the probability of needing around $100,000.00 in matching funds. Mr. Reeves stated that Mr. Barrineau is saying somewhere within the $75,000 - $100,000 range. Mr. Reeves asked the Commissioners for authorization to provide matching funds not to exceed $100,000.00 for the grant application. A motion was made by Commissioner Hancock, seconded by Commissioner Watts, and unanimously approved.

2.   Chairman Monaghan stated that bill inserts should be used to advertise gas. Mr. Reeves added that once the Board approved the incentives, that will be included in an insert as well.

3.   Chairman Monaghan asked about the landfill methane and if the hang-up was the dam rather than the methane. Mr. Reeves responded that it was because the cost for extending the line to one of the industries was in excess of $2 million. At that time, one industry was in bankruptcy and we have since found out that the other industry that had an interest has now downsized considerably. We thought there was too much risk to spend that kind of money for a customer that may or may not be there.

4.   Chairman Monaghan asked about the legality of charging an impact fee for water outside of the city and not inside. Mr. Reeves responded that he was not sure whether this would be illegal but it would raise the issue of non-representation on this Board by outside city constituents. There would likely be a number of outside city residents going to the legislature to change the laws to allow representation on this Board.

5.   Commissioner Watts asked about the status of credit card payments. Ms. Giannetti stated they met with the S. C. State Budget and Control Board who offers the same type of service. Mr. Auman stated that he has been communicating with their IT person about the software part. Mr. Auman added that the cost of their fees is much less than the other company we had talked with before. Ms. Giannetti stated they negotiate for the whole state and can offer a better rate. Mr. Auman stated that we have to find the software to do the processing part and that passes off the transaction piece for them to handle on their end. Ms. Giannetti stated that if we go with them, there will be a two-month implementation period.  

6. Chairman Monaghan noted that the administration department was $366,000 more this year than last yet. Ms. Giannetti stated that was for total general administration and explained that it is made up of several different components such as an additional insurance reserve payment; the Greenwood Partnership payment made in March this year as opposed to April last year; the meter readers department purchased meters and attachments to upgrade ERT meters; an increase in salary and fringe benefits paid for additional staff in the IS department; equipment purchases not made last year; additional expenses related to temp services in the accounting department; and overall because of the general salary increase. She then reminded Chairman Monaghan that the budget had not been passed last year at this time and departments were holding back on spending some of the funds.

7. Chairman Monaghan asked about the Senate Bill before Congress co-sponsored by Lindsey Graham to allow and open up telecommunications business to all entities. Mr. Reeves stated that it was still in a subcommittee and he would check on the status.

8. Chairman Monaghan noted that Councilman Jennings would like to get money from the County for water and has asked if CPW would be willing to go over and above our normal formula. Mr. Banks responded that Mr. Jennings had asked for costs for several different segments and he had provided information. Mr. Jennings was also going to survey some folks near Nation Road with wells that have gone bad. Mr. Banks stated that he informed Mr. Jennings that they could be eligible for grant money through DHEC.  Mr. Jennings was to evaluate the information and get back to us. Mr. Banks pointed out that if the County gets bond monies for water lines, we will need to address who will operate them versus how that money is procured.

9. Chairman Monaghan noted that a letter to the editor was in The Index Journal this week from a lady who asked why we don’t trim trees. Mr. Meredith stated that he was aware there was a letter but did not know which system the lady is on. Mr. Meredith stated that we have never told a customer that we would come back at our convenience. We tell them we will drop the line for them if they are trying to cut down a tree and then come back when they are finished. We come back as soon as we are called and put the line up; we never say we will get it when we can. Mr. Meredith noted that we will trim out secondary lines when they are a hazard and we are already in the area.

10. Commissioner Hancock stated his belief that when there is a piece of property that is contiguous to the City and they are going to have another little “donut” sitting there because they don’t want to pay City taxes and we are going to furnish services, they ought to come into the City. We don’t get the electricity unless they annex and we are not going to get anything out of it except a little something on the water. He stated his belief that if they do not want to annex, we should deny them any service. We have paid a bunch of money to move sewer lines and electric lines out there to annex that property and this customer is getting all of the benefits of all we have done but does not want to do anything within the City of Greenwood. He stated that he only needed one other Commissioner’s vote for that to happen. Commissioner Hancock made a motion that CPW not serve anybody off this system who is contiguous to the City of Greenwood unless they annex. Mr. Reeves noted that other municipalities do this such as Greenville and the Grand Strand Water Authority in the Myrtle Beach area. He added that it is legal but is more a political issue than operational. Chairman Monaghan stated that what Commissioner Hancock is saying is correct. He stated that Mr. Reeves made a good point and the politics of the thing is what is best for CPW. He stated there would be a lot of pressure on the legislature to make a bill. He stated his belief that this would be a bad move at this time for CPW and therefore, he would not be in favor of the motion at this point. Commissioner Hancock noted that this one instance is going to happen and we will never get this property. One customer is going to reap all of the benefits from everything that has been spent and this is not right. The motion made by Commissioner Hancock died for lack of a second. Commissioner Watts made a motion to table the topic and the motion was unanimously approved.   

VII.      Executive Session

            A motion was made by Commissioner Hancock, seconded by Commissioner Watts, and unanimously approved to go into Executive Session to discuss a contractual matter pertaining to a fiber optic contract with Spirit Telecom; a contract with Greenwood Metropolitan District; and a personnel matter pertaining to the Moonlighting Policy.  

The meeting returned to open session. Mr. Reeves noted discussion during Executive Session pertaining to a revision to the current Moonlight Policy previously adopted by the Board. A motion was made by Commissioner Hancock, seconded by Commissioner Watts, and unanimously approved to revise the policy to read as follows: “No CPW employee may do work for or be an owner or employee of a business that does work for: a business that performs work for CPW, a business whose work must be reviewed, inspected, or approved by CPW, a developer that receives incentives from CPW”; and “No employee may purchase property from CPW or be an owner or employee of a business that purchases property from CPW”.

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