UTILITY COMMITTEE

The Utility Committee Meeting was held on November 10, 2008 at 5:00 p.m. with Chairman Ruane presiding. Members present were Mr. McGiffin, Mrs. Williams (arrived at 5:19 p.m.), Major Kosior, and Mr. Snaman. Mr. Leary (arrived at 5:33 p.m.), Mr. Hogan (arrived at 5:18 p.m.) and Mayor Carey (arrived at 5:25 p.m.) were also present.

Mr. Ruane welcomed Major Richard Kosior as a member of the committee.

AGENDA ADDITIONS/DELETIONS

Mr. McGiffin moved for approval of the agenda, seconded by Mr. Snaman and unanimously carried.

Electric Projects - Financing

Mrs. Mitchell, Controller/Treasurer, reviewed the Electric Projects Financing Presentation (Attachment #1). She reminded members that during this past year, the City issued bonds in the amount of $22,200,000 to finance certain electric projects. She advised members that due to project estimating and a reduction in the estimated bond financing costs, there are excess bond proceeds. She reviewed the revised budgeted estimated project costs, revised bond financing costs, and the proposed use of the excess bond proceeds.

Mrs. Mitchell noted that the FY2009 Budget included a $3M transfer from the Future Capacity Reserve, which has been eliminated from the revised FY2009 Budget (for this presentation) since it is no longer necessary. She advised members that, although this transfer has been eliminated for this presentation, this revision will require Council approval and stated that a budget revision will be presented to Council for adoption.

Responding to Mr. Ruane, Mrs. Mitchell confirmed that the Pollution Remediation Project is the result of the 1146 Regulation, which is a State mandate to reduce emissions (air quality).

Referring to the ineligible costs listed on the 2008 Bonds Proceeds table, Mrs. Mitchell explained that Council adopted a Resolution that would reimburse the City for any money spent prior to completing the bond issue; however, the Resolution only provided for the reimbursement of expenses 90 days prior to the adoption date of the Resolution. She stated that there were monies spent on projects prior to the 90 day window; therefore, the City was not eligible for reimbursement of these costs.

Responding to Mr. Ruane, Mrs. Mitchell stated that these necessary funds were obtained from the Fund Balance for the Improvement and Extension Fund, which has been replenished. She explained that the original budget provided for an ending budget balance in the amount of $5,395,920; therefore, the $5M provided by the transfers from the Depreciation Reserve and Future Capacity Reserve is not necessary. Although staff is proposing to eliminate the $3M transfer from the Future Capacity Reserve, the $2M transfer from the Depreciation Reserve is being maintained to cover the excess that was necessary to cover the budget balance.

Referring to the Contingency for Bonded Projects listed on the 2008 Bond Proceeds table, Mrs. Mitchell advised members that there are three (3) options: 1) the City could pay back on the bonds and payoff some of the bonds; 2) the City could correlate pieces of the projects that are related and add them to the projects; or 3) a Resolution could be presented to Council for adoption that would add unrelated projects to the bond issue. Action regarding these options is pending receipt of bids for the projects.

Responding to Mr. Ruane, Mrs. Mitchell stated that, for arbitrage reasons, the City is given three (3) years from the date of the issue to expend the bond monies. She assured members that staff is aware of the three (3) year time frame.

With regards to the options, Mrs. Mitchell stated that once the bids for the projects have been received and the amounts are final, she would like for a decision to be made prior to the end of December. She assured members that a recommendation will be forwarded to the committee for their review and recommendation to Council.

Mr. Ruane requested that Mrs. Mitchell provide a schedule for the presentation of issues involving the bond issue, as well as other items to be brought before the committee.

Being a new member of the committee, Mr. Ruane suggested that Major Kosior meet with Mrs. Mitchell regarding the various issues to be brought before the committee.

PACE/NAES Monthly Report (July, August, and September)

Members were provided the PACE/NAES Monthly Reports for July, August, and September 2008. The reports are being provided to allow members the opportunity to monitor what is being sold in electric and the revenues received, which will give members a better understanding of any fluctuations and make improvements if deemed necessary. Although it was not staff’s intention to make a presentation of the report, they welcomed any questions.

Responding to Mr. Ruane, Mrs. Mitchell stated that her only concern is in regards to the emissions sales. Referring to the September Report, she noted that the 2^nd paragraph of page 3, under Emissions and Allowance Management, indicates that it has been reported that “this would result in an $844,000 unfavorable variance for the emissions allowance.” She advised members that there was a planned emissions last year that was not sold in the amount of $200,000; therefore, the total variance is actually $1,044,000. Mrs. Mitchell stated that the current plan is to hold the credits in hopes that the market will improve.

Mr. Ruane suggested that a presentation of the Greenhouse Gas Reduction Grant be made to members during their meeting in January 2009.

Mr. Snaman moved to recommend acceptance of the PACE/NAES Monthly Reports for July, August, and September 2008, seconded by Mr. McGiffin and unanimously carried.

Mr. McGiffin moved for adjournment, seconded by Mr. Snaman and unanimously carried.

Meeting Adjourned at 5:48 P.M.

                                                                                    Respectfully submitted,

                                                                                    Eugene B. Ruane

                                                                                    Chairman

EBR/AC/jg

S:ClerksOfficeAgendas&MinutesCommittee-Minutes200811-10-2008 UTILITY.wpd

Attachments (to original and file copy)

Attachment #1 - Electric Projects Financing Presentation