COMMISSIONERS OF PUBLIC WORKS
Minutes of August 10, 2006

A regular meeting of the Board of Commissioners of Public Works was held on Thursday, August 10, 2006, at 10:15 p.m., in the Boardroom of the Greenwood Commissioners of Public Works at 121 Court Avenue.

In attendance:

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

1. New Business:

1. Chairman Hancock stated that bids were opened prior to the meeting for 33 each 24-in. augers and one dirt head and entertained a motion to approve the bid. It was noted that we have a McLaughlin machine and, therefore, need to purchase McLaughlin augers for this unit. McLaughlin is located in Greenville, S.C. and has elected to sell only through Ditch Witch who is a national distributor of these parts. A motion was made by Commissioner Watts, seconded by Commissioner Monaghan, and unanimously approved to accept the low bid from Ditch Witch at a total cost of $17,403.17.

 

1. Ms. Laurie Smith with Elliott, Davis & Company presented an overview of the audit for 2005. She stated that she would be focusing on new accounting standards that are a couple of years out and will be impacting the CPW. She noted that Elliot, Davis as the external audit firm issued an “Unqualified Opinion” on the financial statements, which is a clean opinion that the financial information was fairly presented in accordance with accounting standards for governmental accounting. She then referred to the “Statement of Net Assets” which is a condensed version of page 7, the Balance Sheet in the actual audit. She reported that total assets for the year ended at $107.1 million as compared to $106.2 million last year, which is up about .8%. She noted two significant assets are grouped under current and other assets, which is the cash accounts receivables and is up 9.8% over last year, or about $3 million. The major driving factor there was gas accounts receivable at year end, and there was also a $1 million rebate due from SCE&G that was a receivable at year end that was not there the prior year. She stated that accounts receivables related to gas were up about $3 million and $1 million in accounts receivable, all of which have been collected. In looking at subsequent receipts they felt receivables were fairly stated. Commissioner Monaghan asked if bad debt is in receivables. Ms. Smith responded that there is an allowance, or an estimate of what they think might be uncollectible of around $600,000. She stated that in looking at bad debt expense on the income statement, it actually went down for this audit period in comparison to last year. Capital assets, which are net of accumulated appreciation and the largest grouping of assets, ended up with about a 3% decrease for the year.  She stated that additions to capital assets were less than charge-off on depreciation for the year, with accumulated right at $5 million, and additions right at $4 million. She noted that capital assets were consumed faster than they were replaced during this year. In looking back over past years, some years you will be replacing more than were consumed during that year. She stated the need to look at the replacement policy on capital assets to make sure that for a period of time (three to five years) you continue to replace assets. Commissioner Monaghan asked how fully depreciated assets are treated. Ms. Smith responded that fully depreciated assets that are still in use remain on depreciation schedules but do not really impact the financial statements. The ones that are not fully depreciated but become obsolete are written off at their net book value. Commissioner Monaghan asked if they are still listed on the balance sheet at the original price if they are fully depreciated. Ms. Smith responded that if you are still using them, they are on the balance sheet at historical cost and they are accumulated and reflected the same number as historical cost. They are not there in the total assets because they are netted in that same section. Ms. Smith then reported that total liabilities went down 11% for the year because of paying off the bond indebtedness at about $3 million per year. Accounts payables were up a little but total long-term liabilities were down 11%, also other liabilities and there was a little bit of increase in accounts payable. Total liabilities were flat for the year $40.2 million as compared to $40 million the year before. She then referred to net assets and the unrestricted line at $13.8 million and noted that the prior year was at $13.4 million. There was an increase of about 3% for the year in unrestricted net assets, or in equity. Ms. Smith then referred to the “Changes in Net Assets” page that focuses on revenues and the following page showing expenses. She stated that total revenues compared to prior year are up 26.8%, which is roughly $16 million. The major driving force was the gas unit revenues. In looking at changes in net asset expenses, they are up 28.3% for the year compared to prior year, which is $69 million compared to $54 million. She reported that dollar wise that is about $15.3 million up in expenses compared to about $15.9 up in revenues, which means we netted about $600,000 increase revenues over expenses before depreciation for the year. Ms. Smith noted that most of this is due to the function of gas, with $500,000 of the $600,000 increase attributed to gas. Ms. Smith then went to the next page of the report showing a graph on debt service coverage for the last ten years. She stated that there is a compliance requirement to stay at 115% in the bond covenants, and we are at 186% for this year end. Ms. Smith then explained new accounting standards starting with GASB 40, effective in 2005 which require disclosure of a little more about cash investments and to quantify risk associated with those investments. She then referred to page 14 of the audit report and stated that in taking the bond portfolio and segregating it by maturities, most of the bonds are short, running from one to five years. She suggested staying short on bonds always keeping very little in the five to ten year range. She noted that part of this disclosure is to advise from a maturity standpoint of the risk of being long-term on investments. Commissioner Monaghan stated he was confused because he thought investments are at $10 million. Ms. Smith responded that $7.5 million are in repurchase agreements which are overnight, sweep accounts. On the statement of assets, that would be in cash. She then explained two new upcoming standards and noted that GASB 44 will have to be applied next year. This relates to the updating of tables in the statistical section. She added it will not have a major impact, but will give Denise and her team the opportunity to add more information to show statistical trends related to operations. Ms. Smith stated that the other standards needing to be focused on are GASB 43 & 45. This is a new standard that will apply in 2008, but will have a major impact. She explained that CPW is full accrual basis accounting, and being enterprise driven, it will affect liabilities. Commissioner Monaghan stated that a judge ruled we are not a special purpose district, we are a municipal government. Ms. Smith stated that because CPW is a business type operation, we report full accrual. The goal is to cover costs by the rates that are charged. She stated that based upon being full accrual, this standard will require us to book a liability in the year 2008. She referred to handouts showing examples of how the standard will work. She explained that if someone retires and you offer employees benefits, for example, medical insurance coverage, and if you provide that to retirees, they want us to start accruing for that as that employee works their years of service versus actually funding it after they retire. She stated this is a very complicated standard that is driven off actuarial tables, mortality discount rates, etc. In the first year that the standard is implemented, they will require that you report a liability based on time from the age of that employee and their date of hire to retirement. You will estimate what that cost is and prorate it; but, you have to play “catch up” the first year you implement. This means that based on the example with having 100 employees, in the year of implementation you would book a liability of about $4.8 million. Commissioner Monaghan asked if booking the liability meant that you had to have the funds in a separate account. Ms. Smith responded that you would be booking a liability that would impact unrestricted funds that would be a direct hit to the $13 million currently in unrestricted funds. You do not have to fund the liability; however, it will affect the bottom line and have a direct impact on your statement of net assets and unrestricted funds. You would still have to fund it on a cash basis as you pay each year as done in the past. She stated that this is a recording to make sure that governments record those benefits offered to employees once they retire, and they record them over the course of time worked versus after retirement. She further explained the example with 100 employees where implementation would be right at $5 million, and would accrue around $320,000 thereafter on an annual basis after the year of implementation. Commissioner Monaghan referred to the example and asked when they reach age 81 if you would take it off your books. Ms. Smith responded that you would take them off at that point or at their death. She stated that although there is still plenty of time, it will be necessary to get an actuarial type firm involved to make sure the numbers are fairly stated. She stated that some entities have already looked at this and are having to adjust their benefits because of the way the numbers are coming out. Ms. Giannetti stated that she had already spoken with someone at the Municipal Association and GFOA where they are trying to combine with the actuarial to get a better rate. Ms. Smith concluded by stating that this is the biggest thing to be concerned about, and encouraged going ahead and developing an internal task force to look at the impact. Commissioner Monaghan noted that he would have more questions for Ms. Giannetti at a later time.

1. Manager Reeves informed the Commissioners that it was time to consider the annual exchange of checks with the City of Greenwood. He stated that given the audit report, it would be appropriate to adopt a resolution authorizing staff to exchange checks with the City of Greenwood as is done annually. He stated that he had prepared two resolutions and explained that one is under the old methodology where we exchange the cost of utilities plus $400,000 because this is actually for year 2005. He stated that when the $1.2 million max was adopted, it was to have been for 2006. Mr. Reeves asked for guidance from the Commissioners as to whether to go ahead and do it for 2005. Mr. Reeves noted that the amount of utilities was $673,218.95, and if you go with the $1.2 million transfer, that leaves a balance of $526,781.05. We would issue a check to the City in that amount bringing the total transfer to $1.2 million. A motion was made by Commissioner Monaghan to transfer $1.2 million to the City of Greenwood in the annual exchange of checks; the motion was seconded by Commissioner Watts, and unanimously approved.

 

1. Updates were provided on the following issues:

1. Ms. Giannetti stated that she had spoken with the programmer from ASI about credit card payments. He states that he has most of the bugs out of the programming between CPW and SC.Gov and will run live transactions on Monday through the system with the CPW credit card to make sure it completes the loop of information. They process over-the-counter first and then run one through the internet. She stated that should be a two-day process for each one. Once those have cleared, then we can start acceptance of credit cards. Commissioner Monaghan asked about acceptance of electronic transfer payments or online banking through bank websites. Ms. Giannetti stated that should be part of the whole program. She added that we are shooting for September 1 to give time to put out some advertising. She stated that she would find out about the electronic transfers for Commissioner Monaghan.
2. Manager Reeves noted that all updates on annexation were discussed at the joint meeting with City Council on the previous evening.
3. Mr. Gentry reported on a gas ad that ran in the Sunday Accent section of the newspaper and then distributed copies. Mr. Gentry reported that according to Ms. Gorham, they have received and are holding applications for eleven furnaces, seven water heaters, five ranges, one dryer, and two lights. Of those, ten are new gas customers. He reported on a visit to the rural development office in Aiken where he learned about their processes and requirements for any types of grants we may need. Commissioner Monaghan stated that he had a letter from the Laurens CPW where they came into Greenwood County offering the same incentives. Mr. Reeves stated that he had spoken with the Laurens CPW about this and they had done a generic search of home values in their area. Unfortunately, it reached over into Greenwood County for some and they did a broad mail out of letters based on certain criteria. They were very apologetic. They probably don’t want us coming into Laurens to compete because we are usually about 40% less than them on gas rates. Mr. Gentry reported that the well maintenance water system “Get Well” cards are at the printer. He stated that he spoke with Charlie about some type of brochure on the benefits of annexation. The City now has an ISO rating of “2” which should help some with insurance rates.
4. Manager Reeves asked the Commissioners for dates for the annual Safety BBQ. The Commissioners decided on September 14, at 12:00. They also decided to hold the bid opening and meeting prior to the Safety BBQ at 10:00 a.m. at the Central Operations Center.  
5. Manager Reeves reported on an e-mail from Charlie Barrineau whereby they are trying to setup a “kick-off” meeting with the residents around Cambridge Avenue that are involved in the grant project to upgrade the water lines. They wanted to invite the residents for the celebration, which is scheduled for October 10 at 7:00 p.m. in the old Brewer Middle School at the GLEAMS annex. They have asked that the Commissioners attend if possible. Commissioner Monaghan asked if they could schedule it for another date due to a conflict.

 

1. Executive Session:

 

            A motion was made by Commissioner Monaghan, seconded by Commissioner Watts, and unanimously approved to go into Executive Session to discuss a contractual matter.

            The meeting returned to open session. Manager Reeves stated that during Executive Session discussion took place on a potential contract agreement with Embarq to allow for joint use of utility poles and fees associated with those joint use attachments. He stated it would be appropriate for the Board to authorize management to sign a letter of intent for a one-year period for a Pole Attachment Agreement that would then be negotiated into a longer term agreement. A motion was made by Commissioner Watts, seconded by Chairman Hancock, and unanimously approved.
                       

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

 

Approved:                                , 2006                                                                                                                                                                                                  Secretary         

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