Loading...
HomeMy WebLinkAbout2012-02-08 Finance Committee Minutes Finance Committee Meeting February 8, 2012 The meeting convened at 7:30 p.m. in the Selectmen’s Meeting Room, 16 Lowell Street, Present were Finance Committee Chair Marsie West, Vice-Chair Reading, Massachusetts. David Greenfield, members Barry Berman, Jeanne Borawski, Paula Perry and Hal Torman ; Town Manager Peter Hechenbleikner, Assistant Town Manager/Finance Director Bob LeLacheur, RMLD General Manager Vin Cameron, and four members of the RMLD Board: Richard Hahn, Mary Ellen O’Neill, Phil Pacino and Bob Soli. Ms. West said the first item of business would be a discussion with the RMLD General Manager about the recent decision by the RMLD Board to retire RECs. She said since she is a candidate for the RMLD Board she would yield the Chair duties to Vice Chair David Greenfield, and she would recuse herself. RMLD RECs Mr. Greenfield reviewed his understanding of the broad issue that RECs are certificates that allow the holder a legal claim to be ‘green’ – i.e. in favor of renewable energy. This claim is valid in Massachusetts because a Renewable Portfolio Standards set by the state. In the case of RMLD, these RECs have been purchased as part of the package deal to buy actual green power. Mr. Cameron described that RMLD was involved in two large ‘green’ projects: Swift River where four facilities produces 7 megawatts of power for RMLD, and Concord (NH) Steam biomass, where RMLD purchases 5 megawatts, or about 1/3 of the output. He said that as part of the deal the green renewable energy certificates were acquired. He noted that in Massachusetts that the investor-owned utilities were required by law to buy 7% of green power per year, and these RECS are the proof required of meeting that standard. He said that RECs trade in the open market, and holders therefore have the option to sell or retire the RECS – the latter being simply to let them expire as financially worthless instead of selling them. He said that the RMLD Board directed RMLD to go green, and that staff agrees with that premise for several reasons, including preparing RMLD for the future which would likely have some requirements for green power for municipal utilities, and that as a matter of policy it is a good idea to lower dependence on fossil Mr. Mark Dockser fuels. FINCOM member joined the meeting. Mr. Greenfield gave a broad overview with his concluding opinion that the RECs themselves were less important than the actual purchase of green power. He understood that by selling them RMLD is effectively allowing someone else that may not be complying with the law by purchasing 7% green power to claim that they are. He said it should not be up to the RMLD ratepayers to be social policemen, and that a fiduciary duty to the ratepayers was a concern to him when the RMLD Board voted to let 15 years worth of RECs expire as financially worthless when a decision to sell the RECs could have either reduced rates or provided re-investment capital for further green energy efforts. Ms. West agreed with this opinion. Mr. Berman asked if the cost of green power was higher, and Mr. Cameron answered that it was. Ms. Borawski asked what the size of the certificate market was, to get a sense of how RMLD’s decision might affect the prices. Mr. Cameron indicated that he would determine an answer and Finance Committee Meeting – January 3, 2012 – page 2 respond to FINCOM. The Swift River RECs were worth about $500k-$600k per year, and the Concord Steam RECs were worth about $1.0 to 1.2 million per year, for a total of $1.6 million or so per year. Mr. Greenfield asked if the ratepayer foots the bill for this green power premium cost through the fuel charge, and Mr. Cameron replied that they did pay about $2/month. Mr. Greenfield cited that the Town is a customer of RMLD. Mr. Dockser asked how many customers signed up for the Green Choice program, and Mr. Cameron replied that about 250 units total across the 28,500 customer base, which generated about $9,000/year at $3/month/customer. He said that RMLD has gone out in the market and purchased RECs with these funds. Ms. Perry asked what the negative impact of selling the RECs is since RMLD is not required to retire them. Mr. Cameron said that if the RECs are sold one cannot legally claim to have green and renewable power. Mr. Greenfield inquired if RMLD asked the ratepayers if they wished to hold or sell the RECs. Mr. Cameron said the RMLD did a customer survey several years ago in which about 75% of the replies supported purchasing green power. Mr. Dockser asked that if the RECs were sold, was the remaining net cost of the green power competitive. Mr. Cameron said it would still be a bit more expensive than other sources of power. Mr. Greenfield said that the most important step towards green energy was the contracts signed with the two producers Mr. Cameron mentioned earlier. He said that selling the RECs was entirely a different issue. He said his opinion was to let the state force others to behave, and that he preferred lower electric rates. Mr. Dockser asked what other municipal utilities do. Mr. Cameron said that Concord, Wellesley, Princeton and Ipswich all sell RECs. Mr. Hahn characterized their mission as low and stable rates. He said holding the RECs helped stabilize rates. Mr. Greenfield said that signing the contracts did that, but holding the RECs played no role. Ms. Perry said keeping the RECs seemed designed to be for public relations. Mr. Hahn said this is what the ratepayers want. Mr. Greenfield asked Mr. Cameron if this is what the ratepayers want. Mr. Hahn said that they did through a survey done several years ago, and even if they had not in his view it was the prudent thing to do. Ms. Perry asked why RMLD had to serve as the policeman by keeping the RECs to enforce their beliefs on other utilities. Ms. West question the validity of an old questionnaire that did not specifically ask customers if they were willing to pay a premium for green energy, and further to let certificates that had significant Mr. John Arena financial value expire as worthless. FINCOM member joined the meeting. Mr. Hechenbleikner said that the decision to hold or sell the RECs was not an all-or-none one, and Mr. Cameron agreed. Mr. Berman concluded that this issue is really one for the ratepayer and RMLD to solve, and the incremental cost to the Town was not great enough to warrant the FINCOM to be involved any further. Mr. Soli said that the entire North Reading Board of selectmen asked the RMLD Board to reconsider their actions. He gave a brief history of RMLD including some legal actions and subsequent costs in the mid 1980s. Because of this legal issue the Citizen Advisory Board (CAB) was formed. No other municipal utility in the state has such a body. He handed out a one page summary. Mr. Greenfield agreed with Mr. Berman that after this conversation it was clear that the issue did not rise to a level where FINCOM should be further involved. Mr. Arena asked if there were potential long-term costs here over the issue, such as if a Town decided to leave the service territory. Mr. Hahn noted that the CAB voted 4-1 to retire the Finance Committee Meeting – January 3, 2012 – page 3 RECs. Mr. Pacino said the motion was to retire the RECs for fifteen years, not just for one year. Now the Board has revisited the issue and agreed not to sell/retire any RECs until June 15, 2012. He said he was very distressed that the CAB members did not consult with their communities prior to their vote. Mr. Hechenbleikner agreed that no CAB member got any input from their respective communities. Reserve Fund Transfers Ms. West resumed her role as FINCOM Chair. Mr. LeLacheur reviewed three Reserve Fund transfer requests: 1) $25,000 for Town facilities to replace the security card access system at the Police station; 2) $5,000 for appraisal and cost of selling land; and 3) $4,000 to complete funding for a Town Forest Master Plan. Ms. Perry asked if the first request was for capital or a technology expense, and Mr. LeLacheur replied that it was for Town Facilities capital as it met the criteria of an expected life of three years and a minimum cost of $10,000. FINCOM had a discussion about why the School Department did not build in more reserves for the various buildings as this was one of several requests from the past year or two. Mr. LeLacheur said that they did build in a contingency for each building, and further held back an amount each year for such unexpected circumstances. He stated that these amounts were relatively small however, and could not address $25,000 to $50,000 issues such as 1) above or the recent request for a drainage issue at the Police Station. The committee agreed to hold more discussion with the School Department during their March budget meeting. Mr. Hechenbleikner reviewed the land issue and explained that at Pearl Street two abutters had interest in acquiring a portion of the land, which would still leave a buildable lot for the Town to sell. He explained that for the Lothrop parcel that first the Town would seek a variance from the ZBA because of the 50-foot frontage for the lot versus the 100-ft zoning requirement. He said that the Oakland Road issue would take between one and two more years. Mr. Berman asked if the timber und could pay for the third request, and Mr. Hechenbleikner said there were no funds available yet because no timber had been sold. He said once the Master Plan was complete, selective tree cutting and subsequent sales would result. Mr. Arena asked if there should be an advance made from the revolving fund, but then agreed due to the small amount it was not needed. On a motion by Mr. Greenfield seconded by Mr. Berman, FINCOM voted 8-0 to endorse all three Reserve Fund transfer requests as presented. Budget update Mr. LeLacheur reviewed a budget handout with the FINCOM. Operating budgets are now +3.6% compared to last fall when the outlook was closer to +2%. This still uses the $1.5 million in free cash, but that amount will be reduced because health insurance bids came in below budget. He said that about $1 million of reserves would be needed in the FY13 budget, assuming level funded state aid. If state aid proved higher as in the Governor’s budget, then less free cash would be used. Of the $1 million in free cash, about half was spent on Community Priorities regarding substance abuse prevention. These funds would very likely be available from new growth Finance Committee Meeting – January 3, 2012 – page 4 because of some large projects in town, but this fact would not be certified until next fall. The other half is set aside as an OPEB contribution. Mr. Hechenbleikner added that another $500,000 was to be set aside at April 2012 Town Meeting for OPEB, so within a year the balance of the fund (if established and funded by Town Meeting) would be about $1 million. While the current actuarial need is closer to $2 million/year, these two deposits were an important beginning to address this long term liability. Mr. LeLacheur said that by setting aside 5% of expected health insurance premiums each year for OPEB, this in effect created a reserve in years where health insurance costs came in above budget. Premiums are estimated in late fall but not established until mid-February when School and Town budgets have already been fully reviewed by constituents. Thus the 5% could be used to offset higher costs, or deposited into OPEB each spring if not needed. Mr. Greenfield agreed with the Community Priorities, but wondered if they could have been funded in part by a reduction in Police details. Ms. West said that the FY12 benefits presentation was excellent and that while as much detail may not be needed this year, she requested that last year’s material be made available to FINCOM. Town Accountant Screening Committee Ms. West said the FINCOM was to appoint one member of this ad hoc committee, and Ms. Ferrari (absent) member) was mentioned because of her experience in School budgets. Mr. Berman made a motion to nominate Marie Ferrari but further discussion ensued before this was seconded. Ms. Borawski gave some of her qualifications and background and volunteered to serve as the FINCOM representative, and Mr. Berman withdrew his motion. On a motion by Ms. Perry and seconded by Mr. Greenfield, FINCOM selected Jeanne Borawski to serve on the ad hoc Town Accountant screening committee by a vote of 8-0. On a motion by Mr. Arena, seconded by Ms. Perry, FINCOM approved the Minutes of October 12, 2011 by a vote of 7-0-1 (Ms. Borawski abstained). On a motion by Mr. Berman seconded by Mr. Dockser, FINCOM approved the Minutes of October 19, 2011 by a vote of 7-0-1 (Ms. Borawski abstained). On a motion by Ms. Perry, seconded by Mr. Greenfield, FINCOM approved the Minutes of November 14, 2011 by a vote of 7-0-1 (Ms. Borawski abstained). On a motion by Mr. Torman, seconded by Ms. Perry, FINCOM approved the Minutes of January 3, 2012 by a vote of 6-0-2 (Mr. Torman and Ms. Borawski abstained). On a motion by Mr. Torman seconded by Mr. Berman, FINCOM voted 8-0 to adjourn at 10:10pm Respectfully submitted, Secretary