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COMMISSIONERS OF PUBLIC WORKS The regular meeting of the Board of Commissioners of Public Works was held on Thursday, June 28, 2007, at 3:00 p.m., In attendance:
Commissioner Monaghan referred to the cover letter included with the financial statement and asked for an explanation. Ms. Ogletree referred to a previous discussion with Sheree Brown when it was decided to bring market financial reports to a full accrual basis. She noted that in the past, revenues were based on what was billed in that month, but as of this report were brought to a full accrual basis. Commissioner Monaghan asked if what is reported as income for this month is what they think they will bill half of next month. Ms. Ogletree responded that it is not exactly half because in the past months it would be “trued up” for what the system shows as unbilled revenues; they can generate a report showing that as well as unbilled revenues, and noted that is roughly calculable monthly. Commissioner Monaghan asked about a separate line, and Ms. Ogletree responded that it would actually be included in the sales. Commissioner Monaghan indicated his understanding of a separate line for unbilled revenue. Ms. Ogletree responded that it was all included this month in each line by customer type, such as sales to residential; the unbilled revenues for next month were included; and unbilled revenues in December billed in January were pulled out, bringing it to a full accrual basis. Commissioner Monaghan asked for an explanation of what was meant in the letter where is stated “budget as allocated monthly based on a three-year average of how we actually earn or spent funds”. Ms. Ogletree reminded Commissioner Monaghan of a request to make it closer to how the budget was actually spent instead of splitting the budget 1/12, noting that they had looked back three years. Commissioner Monaghan pointed out the tremendous variances throughout and asked if those were a result of the switch around. Ms. Ogletree responded that it is showed what is actually happening now and swings in revenues. She noted that expenses had always been on an accrual basis but the swings in revenues are caused more by consumption. She offered to provide charts showing what had happened last year versus this year with consumption. Commissioner Monaghan referred to budget variances shown on page 7 of 169%, 176%, and 1,292%. He added that it may be that it was not a variance, but where they had overspent the budget by 1,292%. You should be on budget by 41% and anything less or above 41% is a variance. Ms. Ogletree reminded Commissioner Monaghan that all salaries and fringe benefits are budgeted in the main account, for example, all of the electric department salaries and fringes are budgeted in department 71 but are allocated into the departments that locate the work as they are spent. For instance, it may be that department 81 is allocated to that department, but there may be a capital project that they worked on and the salary and fringe benefits were allocated to that department. Commissioner Monaghan noted an example of electric street lighting showing 1,817% of the budget was already spent. Mr. Meredith responded that the only thing allocated in street lighting was for repairs; materials were allocated for repairs with no labor allocated at all. He stated that what was shown was where they had worked on repairing street lights and actually allocated the labor throughout the year, and Ms. Ogletree is picking that up in the reports provided to the Commissioners. You are then comparing materials and labor against the “materials only” estimation for the year. Manager Reeves stated that they may still want to look at that because it was showing $140,000 expended-to-date in department 86. Mr. Meredith explained that some of that would be for all of the new street lights; over 70 street lights were purchased at $2,000 each. He noted that only about 16 of those had been put up but it took a lot of labor to put them up. He added that those street lights are ordered under the specific account and are not inventoried and then pulled out as needed. Commissioner Monaghan asked if we are comparing “apples to apples”, noting that if you budget one way, you do not want to report a different way. Ms. Ogletree responded that this was discussed previously when in the past they had tried to budget out the salaries and fringes to those departments. It was later decided to pull them back into the main department because you cannot necessarily say how much labor will be allocated. Manager Reeves noted that the only way to do what Commissioner Monaghan was asking would be to keep the budget as it was currently formulated and report labor under the category that it is budgeted. For reporting purposes, we would not break it out into the various categories, but keep it that way for audit purposes. Ms. Ogletree reminded them that this was addressed when page 19 of the financial report was prepared showing the effect with strictly salaries and fringe benefits. Commissioner Monaghan noted that if you follow the budget and go down each budget line and see a variance, that should indicate there is a problem, but if you cannot do that, then this report is not doing the job. Manager Reeves stated that the easiest way to correct that would be to budget to each category, but that is an inexact science. He provided an example whereby Mr. Meredith probably would not have budgeted much money for street lights or labor, and then it turned out to be a great deal. He pointed out that there would still be a variance, and there is not a way to know from one year to the next. Commissioner Monaghan asked about putting labor in a separate category. Manager Reeves responded that we had done that but are reporting it to the actual department in which it was used, but since nothing was budgeted in street lighting for labor, it was all put in one category, but now that labor was used in street lighting it was allocated out. Mr. Patrick stated that it would help if it could be reported by the same method as it is budgeted. With labor, for instance, not charge it to the street lighting line item. Manager Reeves stated that it could be done in that way for reporting purposes and tracked for audit purposes. Ms. Ogletree asked for guidance with whether the Commissioners would still like to receive page 19 showing a breakout of salaries and fringe. The Commissioners were in agreement to eliminate page 19 from the financial report. Commissioner Monaghan asked if year-to-date actual net income was correct. Ms. Ogletree responded that it may adjust slightly because of estimating the next month and taking what had actually been billed through the date the report is prepared causing slight fluctuation. Commissioner Monaghan asked where impact fees would be shown and stated a preference to have them shown separately. Manager Reeves stated that initially it would be a small amount but would eventually build sufficient funds that it should be a separate line item anyway. Ms. Ogletree stated that it would fall under the miscellaneous category but would have its own line. Commissioner Hancock added that impact fees would have to be used over time for plant upkeep or something similar and cannot be built up. Commissioner Monaghan noted that any new construction would be eligible. Commissioner Monaghan noted past discussion about combining the electric, gas, and water ten-year plans into one document. Manager Reeves stated that he would get with Ms. Ogletree and Mr. Barnett to work in that direction. Chairman Watts referred to interest income on page 2 and asked if interest earnings were allocated equally to each department. Ms. Ogletree noted that water gets 34% and the other two departments get 33% due to rounding off. Commissioner Monaghan noted something needed to be done with the over recovery. Mr. Lemon responded that would be a Board decision but his recommendation would be to rebate it through PGC to the people using it now because that is essentially who had paid for it. He explained how the problem is caused by a huge under collection accumulated in the winter months when people use a lot of gas, and then the people getting charged the over collection are those using gas now with hot water heaters, etc. Commissioner Monaghan stated there had to be some kind of a true-up deadline. He stated that the end of June and first of July was the true-up deadline to decide what to do with those funds. Manager Reeves noted that since we are not through June, that had not been reported yet. He asked if that amount was anticipated to be added or subtracted from the number shown. Mr. Lemon responded that it would be in the neighborhood of $22,000 to $23,000 putting the number somewhere around $560,000. Mr. Lemon noted that was a direct result of the Board telling him to collect early and collect a lot. Manager Reeves stated that collecting early starts in July and does not start in March, April and May. Mr. Lemon stated that he could not do it in July. Manager Reeves stated that if you have a true-up period that ends in June, he did not know how you could collect early and true-up at the end of June. Commissioner Hancock stated that you would get your revenue in November and December and that is when you under collect, so each one of the summer months you will not be out but maybe $10,000 to $15,000 the other way. Commissioner Monaghan stated his understanding that we would adjust the formula every month. Ms. Ogletree stated that was done through the PGC. Commissioner Monaghan then stated his understanding that it used to be done quarterly. He stated that if it were adjusted monthly, then we would factor in what we were over and under the prior month and take care of it the following month. Mr. Lemon responded that in May we basically trued-up what was done in March; therefore, March was billed half in March and half in April. In May, he found out what was actually done in March so he is running two months behind, adding that is just the way the billing cycle and averaging works. Commissioner Monaghan asked for an explanation of why we are running two months behind. Mr. Lemon responded that it is essentially a 50/50 split. He collects half of the March revenues in April, so that at the end of April he will have collected March so on the last day of April and then in May we know what we had collected for March. Without doing daily readings, it is impossible to do it otherwise. Mr. Lemon pointed out that we also had an anomaly this year where March and April sold 50% to 75% of historical averages. He and Ms. Ogletree worked it out and then looked at the average number. We had much colder weather than expected and sold more gas, so they over collected on more gas than expected so that in May they get this huge number. Commissioner Monaghan asked if there was a way to cut it off without doing the half and half, just doing it on a calendar. Mr. Barnett stated that the reason for the problem is that if a meter runs from March 15 to April 15, the March usage paid for at March prices will not be seen through billing until the end of April. The bill in April is half of March. As long we are billing in cycles and trying to match up the cost of gas versus when that gas is actually used, you will always have that issue. If you could read all of the meters at the end of the month, you could do that, but otherwise you cannot. Commissioner Monaghan asked if a full sequence would be from the first half of June to the second half of June and to the first of July. Mr. Barnett responded that for some, that would be a full sequence. Commissioner Monaghan asked why it would not be adjusted then rather than the end of the month. Ms. Ogletree responded that they have to get the PGC (purchased gas cost adjustment) to Vickie Gorham at the first of the month for billing because it is effective for that calendar month. Mr. Lemon added that when they send the July PGC to Steve for approval, they have within a very small percentage the actual cost of gas during the month of June. That actual number is used to estimate July’s number, recognizing there will be some fixed price, some index, and some gas daily. Gas daily is an estimate of what the price is going to be. If we see a hurricane, estimating $7 for gas could be $3 under the actual cost; if we don’t then it could be a good number. Mr. Lemon stated that there is a tendency to err on the positive side. We use actual numbers from the month that we have them in, but they are applied across a billing cycle that is not necessarily in the same sequence in which they are looking. Commissioner Monaghan inquired about putting the billing cycle in the same sequence. Mr. Barnett responded that they do not have a way of reading every meter on June 30 so that you could actually have readings on a calendar month. Commissioner Monaghan noted confusion with a statement made earlier about how they would know everything if both halves were put together. Mr. Barnett responded that they would not know everything and provided an example of the full cycle of thirty days for the person whose reading runs from the 15th to the 15th. Part of that cycle is gas that was bought in July and part was bought in June and could be totally different dollar values. Commissioner Monaghan stated that he would continue the discussion one-on-one with Mr. Lemon. Commissioner Hancock stated that his belief was that you cannot ever come up with a true “true-up” period. He added that it is either too hot or too cold, too much gas, or not enough gas. You are not to keep any money that does not belong above our baseline. That is all the money we keep. We work every month to keep it on that line and have to have enough going into October, November, December, January and February to cover the gas. He stated that it did not matter how many guestimates or how much you slide, that is what you work toward. In one month you could have an extra $1 million. Mr. Lemon noted that it normally happens the other way. Commissioner Hancock stated that before there was a PGA, there was not a way to get the money back to the customers. He stated that the customers did not like PGA, did not like seeing two lines on the bill and wanted to pay by one line, and did not like seeing the fuel cost adjustment. Therefore, they came up with this procedure that is now a balancing act where all they can do it play with it because you do not know how much the gas is going to be, how much you will need, and you never will. Mr. Barnett agreed and added that we will never know exactly, but in looking at how much we will wind up being off, in relationship to that year’s worth of cost, although we would like to be at 100% with gas cost and what was recovered, we are at about 96% to 96.5% for the twelve-month period. Commissioner Monaghan commented that with adjusting every month there would be a swing, but added that it should not be a swing of a half million dollars. Mr. Lemon noted that the half million was accumulated over three to four months. Commissioner Hancock added that it was possible to have that much in just one month. Manager Reeves questioned whether there might be a way to reduce the two-month lag in getting the information. He stated that if the two-month lag could be reduced to a fifteen-day lag, better information would be available before setting the next month’s PGC. Mr. Lemon noted that he and Ms. Ogletree worked hand-in-hand before the PGC numbers are published and make an estimate based off what they had the first ten days and if that is what they will see for the last twenty, always knowing that weather plays a huge part. Manager Reeves acknowledged that it is somewhat of an educated “guestimate”; however, the number is not pulled out of midair, there is some effort made to have accurate information, but they are getting it two months behind time. Manager Reeves directed Mr. Lemon and Ms. Ogletree to at least look into the possibility of reducing the time lag, and Mr. Lemon responded that they would. Commissioner Monaghan asked if the swing was caused more by volume or price, and if one was more dominant. Both Mr. Barnett and Mr. Lemon responded that it is caused by both and provided some examples. Commissioner Monaghan asked for an opinion of what should be done with the $543,000. Manager Reeves responded that a decision would not be made until next month when we would have a final number. He stated that staff would make a recommendation to the Board and they would decide whether to refund the money through the PGC, put it into reserves, or do something else.
A. There was no one in attendance from the Economic Alliance to provide a quarterly report.
Chairman Watts presented a recommendation from staff to accept the low bid for eleven (11) rectifiers to be used for main line cathodic protection in the amount of $16,132 from Maggart & Associates, Inc. A motion was made by Commissioner Hancock and seconded by Commissioner Monaghan to approve the low bid. Commissioner Hancock asked if all rectifiers were being replaced and noted that they should have been changed out a long time ago. Mr. Whittle responded that they were all being changed out. The motion was unanimously approved.
Chairman Watts presented a request for consideration of an Emergency Mutual Aid Assistance Compact as distributed at the annual SCAMPS meeting as a renewal of the Mutual Aid Agreements. A motion was made by Commissioner Monaghan to approve the Compact; the motion was seconded by Commissioner Hancock, and unanimously approved. VI. Other Business:
VII. Executive Session The meeting returned to open session. Chairman Watts noted that discussion took place during Executive Session to review and consider employee pay rate changes. A motion was made by Commissioner Monaghan, seconded by Commissioner Hancock, and unanimously approved to increase employee salaries by an average of 4.15%, to be distributed according to the performance appraisal results; and to increase the on-call pay by 2%, which is the general increase, with an effective date of July 2, 2007. A motion was made by Commissioner Monaghan to increase the General Manager’s salary by 6%; the motion was seconded by Commissioner Hancock, and unanimously approved. VIII. With no further business, the meeting was adjourned.
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