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HomeMy WebLinkAbout2018-11-29 RMLD Board of Commissioners Minutes� or ��. Town of Reading Meeting Minutes Board - Committee - Commission - council: RMLD Board of Commissioners Date: 2018-11-29 Time: 06:00 PM i<ECEIVELJ IOWN CLERK READING, MA. 2823 JUN 20 PH 2 06 Building: Reading Municipal Light Building Location: General Managers Conference Room Address: 230 Ash Street Session: Joint Meeting Purpose: RMLD Audit Version: Final Attendees: Members - Present: David Hennessy, Chair; David Talbot, Vice Chair; John Stempeck, Commissioner; Tom O'Rourke, Commissioner; Philip B. Pacino, Commissioner Members - Not Present: Others Present: Town of Reading Audit Committee: Eric Burkhart, Financial Committee; Nicholas Bolvin, School Committee; Elaine Webb, School Committee; Stephen Herrick, Select Board; Mark Dockser, Financial Committee. RMLD Staff: Coleen O'Brien, General Manager; Hamid Jaffari, Director of Engineering and Operations; Charles Underhill, Director of Integrated Resources; Wendy Markiewicz, Director of Business, Finance, and Technology; Tracy Schultz, Executive Assistant Melanson & Heath: Zackary Fentross Town of Reading: Vanessa Alvarado, Select Board Andy Friedmann, Select Board KP Law: Christopher Pollart, Attorney Minutes Respectfully Submitted By: Philip B. Pacino Topics of Discussion: Call Meeting to Order The meeting was called to order. All present introduced themselves. Review June 30, 2018 Audit Findings with Melanson, Heath & Company, PC and the Town of Reading's Audit Committee (Attachment) Mr. Fentross began to review the RMLD's FY 2018 financial statements. Mr. Fentross explained that the financial statements are not final because Government Accounting Standards Board (GASB) Statement 74 Information Is not included - highlighted in yellow in the report. Mr. Fentross explained that the financial statements are normally presented in a comparative format. Due to the implementation of GASB Statement 75 that Is not the case this year. Mr. Fentross stated that RMLD received a clean opinion, meaning there are no Page I t exceptions, and Is the same opinion that RMLD, has received in the past. It is the best opinion that can be received from an independent auditing firm. Mr. Fentross directed the group's attention to RMLD's Statement of Net Position. The 2018 pension trust and enterprise fund are consolidated and presented In one column. Mr. Fentross stated that under "Capital Assets" the Net Accumulated Depreciation has a balance of $76 million. This is a $2.1 million increase and represents the Department's investments in capital assets. The major capital item was the completion of the LED streetlight project. Mr. Fentross then reviewed non-current liabilities and explained that the net pension liability has a balance of $10 million which represents RMLD's portion of the unfunded liability of the Reading Contributory Retirement System. RMLD's portion of the unfunded liability is about 29 percent. RMLD has an additional $5.7 million set aside. Despite the money set aside, Accounting Standards state that the liability cannot be reduced on the financial statement. So, technically the statement shows about $10 million but the $5.7 million that has been set aside brings the amount down to about $5.1 million. Liability decreased by about $2.3 million compared to the prior year due to strong investment results of the Reading Contributory Retirement System in CY 2017. In CY17 the Reading Contributory Retirement System received $11.7 million in Investment results greater than what was anticipated. The Reading Contributory Retirement System is currently funded at about 79 percent. The net Other Post -Employment Benefits (OPEB) is the liability area affected by the implementation of GASB Standard 75. That resulted in a $7 million Increase from the prior year. In the past this line Item was presented In accordance with GASB Statement 45 and was recognized over a thirty-year period. Statement 75, which is being implemented by all municipalities in 2018, no longer recognizes the liability over 30 years: it is recognized in full. RMLD has always been aware of the total liability, but now it Is brought to the front of the financial statements. Mr. Fentross then discussed the Schedule of Net OPEB Liability Contributions and Investment Returns. The 2018 column is highlighted in yellow because that Information is not available yet. Mr. Fentross discussed 2017's numbers. Mr. Dockser asked If the schedule of contributions is on track. Mr. Fentross affirmed. Mr. Fentross then discussed the Statement of Fiduciary Net Position and explained that it's where the other post - employment trust fund is presented in the financial statements. As of June 30, 2018, the balance is $3,519,000. Mr. Fentross explained that it's in cash and short-term Investments. Mr. Fentross clarified that he is not telling RMLD what to invest in. Mr. Fentross explained the actuaries are using a 7.5 percent investment rate of return and a short-term Investment returning 7.5 percent is unlikely. Recommendation to consider changing the investments or changing the discount rate to reflect what Is going on with the OPEB trust fund. Mr. Herrick asked about how the OPEB liability Is determined, which Mr. Fentross explained. Mr. Fentross stated that the OPEB trust fund for RMLD currently has $1.9 million sitting in MMDT, $1.5 million in a CD with the Northern Bank Trust Company and $64,000 sitting in money market. Mr. Fentross explained that the Investments of $3.5 million only earned $55,517, which is low. Ms. Marklewi¢ clarified that the Investments are determined by the Town of Reading, who invests the funds for RMLD. Ms. Markiewicz stated that the 7.5 percent, which comes from the actuary, is also determined by the Town of Reading; RMLD is not part of that decision-making process. Mr. Fentross stated that there are no big swings. Costs for current employee benefits pay-as-you-go expenses are incurred as operating expenses. Discussion followed as when is the tipping point of fully covered self-supporting funds. Mr. Fentross stated It is a management decision - two Items highlighted tell what pay-as-you-go transfer and how much. Mr. Pacino clarified that if money Is put aside it can cover maybe 20 years. Mr. Fentross said that the actuary never coming to a zero -balance fund will never run out of money, it creates a fully funded date In 15 years. Mr. O'Rourke commented about changing the Investment profile, is it an action item for the committee? Mr. Pacino said that the committee would like to give that instruction to the Page 1 2 commission. Mr. Stempeck said that must be assessed with the risk. Ms. Webb said that the committee should go back to the town to adjust the rate. Mr. Dockser added that the discussion should be balance change asset classes. Mr. Stempeck questioned the 7.5 percent. Mr. Fentross said that 7.5 percent is the average for the actuarial assumptions. Mr. Herrick clarified there are restrictions on the way monies are invested. Mr. Fentross responded, yes. Ms. Webb said that the restrictions forcing more conservative Investments. Mr. Dockser commented that the net effect is that it drives the funding liability and requirements through the roof. Mr. Stempeck added that It is a function of how much risk you want, however, it Is worth reviewing. Mr. Pacino said the sense of the committee Is to look at some evaluation of actuarial recommendations with no motion. A discussion of the CD with a little more aggressive actual rate of return. Discussion then addressed the Investments fees assessed to be checked with the Town of Reading. Mr. Stempeck asked who would provide Information on the funds form a historical perspective with the asset classes. Mr. Fentross suggested that Retirement Board may be able to provide that Information as well. Discussion followed on using the OPEB funds as a funding mechanism. Attorney Pollart stated that relative to the OPEB funds he would have to look into It. The idea of the Ught Department lending money to the Town, he does not think that you can do it with above the line maybe below -the -line he will have to Investigate this. Ms. Markiewicz said that RMLD has no control of cash. Ms. Markiewicz stated that a couple of years ago RMLD performed a power supply audit, which is RMLD's big ticket Item. Mr. Talbot suggested performing it regularly where it Is a large portion of the budget. There will be two audits this year due to the transitioning from fiscal year to calendar year. Ms. Markiewicz said that it with power suppliers It will work better with the calendar year as well as for better budget processes. Mr. Fentross said that there is no management letter this year and has not been one for a number of years, it demonstrates Mses. O'Brien and Marklewicz commitment to internal controls they take it very seriously which they do a great job on. Discussion followed on RMLD compared to other electric municipalitles. Mr. Fentross pointed out to ensure that there are appropriate funds on hand to cover expenses. The unrestricted cash and receivables are $23 million then taken out are accounts payable $5.3 million, the result, $17 million. Take three months' operating expenses $91 million divided by, twelve, months multiplied by 3 equals $22.8 million. RMLD has about 2.3 months of assets on hand. We recommend three but 2.3 is above average compared to other municipalities. Ms. Markiewicz said that if an involce is not process immediately, there Is a problem with the thirty -day parameters due to the two-week lag time in processing. RMLD's vendors are aware of the process, so RMLD will not Incur penalties with exception of power supply. Power supply there Is a two percent penalty if late more than twice annually. The penalty can be $600,000 to $2 million on any given wire. RMLD pays it power supply by wires. Ms. Markiewicz explained the wire process utilized for the power supply. Ms. Markiewicz reported that with the auto -debit there was a slip-up, not enough money in account several months ago on a transition. They met with the Town Manager to discuss this. A suggestion was made to look at the process. Ms. Markiewicz said that they have met on this over the last couple of years. They have met with the Ms. Angstrom and Mr. Kume as well. Pape 13 Mr. Pacino made a motion seconded by Ms. Webb that the Town of Reading Audit Committee accept the Audit Report as presented. Motion carried 4:0:0. Mr. Pacino made a motion, seconded by Mr. Stempeck that the RMLD Board of Commissioners Audit Committee recommends to the RMLD Board of Commissioners to accept the Audit Report as presented. Motion carried 2:0:0. Mr. Fentross thanked Mses. Markiewicz and O'Brien for everything they do. The records were ready the first week of August. Ms. Markiewicz said that the Melanson team is a big help as well as staff at RMLD. Mr. Dockser asked about the capital assets which are up $2.1 million how Is that compared to other utilities. Mr. Fentross said that he will get that Information and provide it to Ms. Markiewicz. Mr. Dockser commented relative to the December close - the GASB 75 comparatives Mr. Fentross said that the information on the December report will be the same presented here. Mr. Fentross suggested showing comparatives for December 31, 2019. Discussion then addressed the Town of Reading audit. The three Items that have been asked, for are the discount rate why is 7.5% utilized, benchmarking other community's asset mixes asset set class allocation, fees associated with each asset class - management fees for the funds. Ms. O'Brien clarified that should Attorney Pollart look at borrowing any other funds other than the pension. There was agreement. Mr. Hennessy clarified that the three -months of cash on hand Is the standard per Mr. Fentross, how Is that determined. Mr. Fentross explained that it is the municipal industry standard. Discussion then addressed if hypothetically there was a system failure, funding undertakings. Ms. O'Brien responded that she and Mr. Jaffari perform single failure analysis and substation failure analysis. They also consult with Ms. Markiewicz to ensure there is enough cash on hand but RMLD does not have a separate contingency fund. To keep the power going in a system failure would require getting mobile units in place to assist in the restoration of power. Ms. O'Brien added that she and Mr. Jaffari conducted a thorough engineering analysis of all RMLD substations. If you look at RMLD's capital plan, is laid out in a six-year plan which shows maintenance it is very transparent. We are proceeding at an expedited pace to get maintenance up to where it needs to be. We have fixed the substations to sustain the RMLD. The reliability is excellent therefore the maintenance items are in the capital plan. If there any questions, please reach out to Ms. O'Brien on any of the capital projects. Mr. Dockser asked if there is utility software to help with maintenance and scheduling. The Town of Reading has added software that has successfully changed the maintenance programs and systems. Ms. O'Brien said that RMLD do have systems in place. Mr. Jaffan explained that a study for transformers 25 years and older was performed in 2015 as part of a reliability study performed by Booth (an outside consultant). Based on the findings that represents $9 million In assets need to be addressed. In the next three years, it will be required. In addition, meter replacement is necessary for the outage management system with a cost of $2 million. Mr. Jaffari reported that $1 million was spent cleaning up leaking transformers which they are trying to decrease this with the Improved maintenance. Motion to Adjourn At 7:16 p.m. Mr. Pacino made a motion seconded by Mr. Stempeck to adjourn the meeting. Motion carried 2:0:0. As approved on June 15, 2023 Page 1 4