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HomeMy WebLinkAbout2019-11-06 Finance Committee Minutes P org Town of Reading ^ au EIVtD Meeting Minutes :r TOkA,114 CLERK TL„M,ea R E `+ " INC. M A 4�- Board - Committee - Commission - Council: 220 FEB 27 Aft 8 40 Finance Committee Date: 2019-11-06 Time: 7:30 PM Building: Reading Town Hall Location: Conference Room Address: 16 Lowell Street Session: Open Session Purpose: General Business Version: Final Attendees: Members - Present: Chair Eric Burkhart, Vice Chair Paula Perry, Dan Dewar, Andrew Mclauchlan, Marc Moll, Shawn Brandt, Ed Ross, Sean Jacobs, Karen Herrick Members- Not Present: None Others Present: School Committee Members: Chair Chuck Robinson, Tom Wise, John Parks; School Superintendent John Doherty, School CFO Gail Dowd, Facilities Director Joe Huggins, Assistant Facilities Director Kevin Cabuzzi, Town Manager Bob LeLacheur, Finance Director Sharon Angstrom; RMLD General Manager Coleen O'Brien, Director of Integrated Resources Chuck Underhill, Director of Business Finance Wendy Markiewicz Minutes Respectfully Submitted By: Jacquelyn La Verde Topics of Discussion: Chair Eric Burkhart called the meeting to order at 7:33pm. The School Committee was already in session. Vote on Elementary School Space Line Items of Subsequent Town Meeting Articles 3 &4 The School Committee convened just prior to the start of the Finance Committee to discuss the need for more elementary classroom space. John Doherty stated that the School Committee just voted 5-0 to recommend $1.25 million for modular classrooms pending Finance Committee and Town Meeting support for Birch Meadow Elementary School for the 2021 school year. Dr. Doherty recommended moving forward with three classrooms Instead of two as originally planned. Joe Huggins explained that the Facilities department considered many options to create more classroom space including modifying stage and library space at Birch Meadow. However, with the help of a cost estimator, it was ultimately decided the most cost effective and best way to maintain equal amenities across all elementary schools was to add modular classrooms. Mr. Dewar asked if the modular classrooms are intended to be a permanent solution and how long they are expected to last. Dr. Doherty stated that the modular classrooms can last 20 to 25 years. The School Committee is scheduled to meet again tomorrow evening where they plan to discuss long term solutions. Dr. Doherty and Mr. Huggins explained how the buildings would be constructed and that they will be outfitted with the same security measures as other modular spaces. Ms. Perry asked if the funding for this project will come from free cash. Mr. Lelacheur stated that yes, it will come from free cash. Ms. Angstrom confirmed that free cash was certified this morning at $15.41 million. Page I I On a motion by Ms. Perry, seconded by Mr. Brandt, the Finance Committee voted to reconsider and recommend Article 3 to Town Meeting with the addition of$1.25 million for Elementary School space in FY20 by a vote of 9-0-0. Mr. LeLacheur noted that the updated amount to use from free cash for this article is $1,761,765. On a motion by Ms. Perry, seconded by Ms. Herrick, the Finance Committee voted to reconsider and recommend Article 4 to Town Meeting with the addition of$1.25 million for Elementary School space in FY20 by a vote of 9-0-0. School Committee adjourned at 7:52pm. Discuss FY21 Budaet Community Priority HR Position Mr. LeLacheur stated that the HR Generalist was a shared position that supported both the Town Human Resources Department for three days a week, and the School Human Resources Department two days a week. Because the person who performed that position recently left to become an Assistant Town Manager in another community, the position is now vacant. Following his departure, both Town and School sides feel that they each need their own full time HR Generalist. The Town already has the funds to fill the position and the School Department has enough money in their budget to fund a newly added full-time position for the remainder of FY20. In FY21, Schools will add $60,000 to the budget to fully fund the position. RMLD Overview Finance Committee Members submitted questions to RMLD so they could prepare answers ahead of tonight's meeting. General Manager Coleen O'Brien, Integrated Resources Director Chuck Underhill, and CFO Wendy Markewicz of RMLD were present to answer those questions. Does RMLD have connections, resources and expertise to assist the Town in setting up a solar garden, parking structure or a deep energy retrofit like the needed HVAC at Coolidge?If so what would be the process for undertaking a project like this? Mr. Huggins explained that there is $225,000 in the capital plan to replace the hot water condenser with two condensing boilers to provide heat to the back of the building. The project has already been completely designed and is ready to begin once funds are approved. Mr. Underhill stated that there is not much RMLD can do because it is a natural gas fired system. However, because the service is supplied by National Grid, the Town can apply to MassSave for financial assistance with the project. Mr. Huggins noted that they do work with MassSave and will be getting $20,000 back on this project. For solar gardens and parking structures, RMLD is currently scouting locations and working with vendors to support upcoming projects. Could you please bring a current example of a RMLD municipality or resident using solar net metering and show the savings to the municipality or the resident? Mr. Underhill stated that under the current rates, the average residential customer bill is $1,641 per year. When solar is added, there are two impacts: a portion of the bill Is reduced when energy is produced at the time the customer is using it, and when excess energy is produced, the customer receives payment. Those two factors bring the average customer bill down to $877 for the year, yielding a net savings of$764 per year for the customer. What kinds of projects could RMLD partner on in Reading to achieve our goal of increasing the use of renewable energy? What is the process for getting a project started? Mr. Underhill stated that RMLD gets a rebate on carbon that it does not produce in an incentive to focus on renewable and efficient energy usage. They offer efficiency programs that will fit with what municipalities are doing, for example lighting retrofits or alternative energy projects. As electric vehicles and HVAC are added, they make sure that they add enough non-carbon emitting resources to serve the vehicles. Efforts are made to source non-carbon emitting power, such as solar, wind, and hydroelectric, as much as possible. With nuclear sources in their portfolio, they want that to count as non-carbon sources. What are our sister communities doing that Reading could be doing? Ms. O'Brien stated that other communities have Economic Development Committees. Representatives from RMLD sit on North Reading's Committee, and would like to sit on Page 1 2 Wilmington's, Reading's, and Lynnfleld's Economic Development Committees as well. They have knowledge and programs to offer that can benefit rate payers. Has RMLD completed an analysis of the Green communities program?Do all 5 RMLD communities need to join or can they decide individually? What is required to join Green Communities? Ms. O'Brien stated that RMLD Is exploring access to REGI and VW funds and is working cooperatively with Green Communities. If National Grid services any of the communities serviced by RMLD, each of the towns individually can join Green Communities, though not all of them have to. Reading deserves to get money back from REGI and VW funds, but RMLD does not pay Into other funds that Green Communities are using. They are trying to find a way to access those two funds without having to become part of a perpetual membership that will generate an additional charge to the customer that RMLD cannot regulate. What kinds of electric vehicles are available for municipal use?Has RMLD implemented any hybrid or electric vehicles and what has been the impact on fuel and maintenance costs? Ms. O'Brien stated that a lot of electric utility vehicles have not come out yet. Organizations are skipping over the hybrid models in favor of all-electric. Once those become available, RMLD will begin a fleet transition program. RMLD currently has charging stations available. Typical Installation costs are approximately $20,000 per station. Finance 101 What is the nature of the financial relationship between RMLD and the Town of Reading?Please provide an overview of financial interdependencies including things like pensions, health insurance, OPEB, cash deposits. Ms. O'Brien explained that RMLD is a business entity which Is a subset of municipal government. Ms. Markewl¢ explained the financial relationship and interdependencies with the Town. RMLD has no check-writing capabilities. All checks are Issued by the Town accounting department as requested by RMLD, including payroll. For OPEB and pension, RMLD shares the actuary with the Town and the Town Treasurer acts as custodian. Benefits, including Health Insurance, are covered by the Town's benefits. RMLD pays the Town and the employee contributions are deducted from employee paychecks. The annual payment from RMLD to the Town is to cover check writing and support services. As of Dec 2018, unrestricted cash balance was approx $21M. How does that balance change over time?(does it trend over time or fluctuate significantly month to month.) Ms. Markewl¢ stated that RMLD accrues a lot of expenses, but also a lot of revenue. Balances are not measured month-to-month. RMLD operates on a calendar year and revenues and expenses are calculated at the end of the year. The unrestricted cash final balance ended up being $18.3 million last year. Any funds leftover in the depreciation fund carries over into the next capital improvement schedule. Deferred fuel costs are budgeted to protect against fluctuation In market prices. A risk mitigation strategy is an effective way to purchase power by utilizing TFA to purchase power in tranches based on a four-year average. When and how does RMLD make a decision to borrow capital to finance major projects vs. spend from revolving accounts?Even though there are significant projects in the pipeline for infrastructure and substation improvements - as of 12/31/18 RMLD had no debt. Why not leverage historically low borrowing rates? RMLD uses a risk mitigation strategy when determining financial planning for capital projects. Bonding is used when all other operating constraints, such as fuel pricing, capacity pricing, and transmission pricing, are lessened. Capital projects are prioritized according to need and condition. Does RMLD have unique financial regulatory requirements that a municipality like Reading does not as they pertain to cash reserves or debt? Ms. O'Brien stated that municipal light plants are governed by MGL 164 which is not applicable to cities and towns. It provides a different level of financing that allows recovery cost for production that takes debt authorizations into account. Huge debts can be a factor with power contracts. RMLD has "proprietary restricted cash and investments'accounts some of which have significant balances (Depreciation Fund, Deferred Fuel Reserve, Rate Stabilization Fund) that according to the RMLD Board appear to not be accessed very often. Are there specific projects that will use funds from these accounts? What are industry best practices Page 1 3 for the relative size of these types of accounts?Are these accounts standard for the industry or created by policy? The depreciation fund is by statute applicable to municipal light plants which requires a 3% plant reserve. The construction fund can be utilized to meet long term capital improvements. The funds RMLD has are typical for utilities to have, including a rate stabilization fund and a depreciation fund per the Department of Public Utilities. RMLD has an excellent 5&P rating which is important when buying power supply and affects how good a contract they can get. Minute On a motion by Ms. Perry, seconded by Ms. Herrick, the Finance Committee voted to approve the meeting minutes of October 16, 2019 by a vote of 9-0-0. On a motion by Ms. Herrick, seconded by Mr. Jacobs, the Finance Committee voted to adjourn at 9:29pm by a vote of 9-0-0. Page 1 4