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HomeMy WebLinkAbout2002-05-13 RMLD Board of Commissioners MinutesReading Municipal Light Board of Commissioners Regular Session RECEIVED. 230 Ash Street j 0 t CLERK Reading, MA 01867 1-E A D 1 G May 13, 2002 MASS" Start Time of Regular Session: 7:46 p.m. End Time of Regular Session: 10:35 p.m. 7001 JUL 10 A 11: 31 Attendees Commissioners: Messrs. Ames, Pacino, Hughes and Herlihy RMLD Staff: Mr. Cameron, Acting General Manager, Messrs. Blomley and Fournier Mses. Antonio, Cavagnaro and Gottwald CAB: Mr. Lessard RMLD Employees: Ms. Blomley Mr. and Mrs. Hadley Mr. Hodges Guests: Mr. Barna, Rubin and Rudman Mr. Nelson, Nelson, Adam & Dickson, P.C. Ms. Poladian, Nelson, Adam & Dickson, P.C. This meeting is being video taped for distribution to the community television stations in Reading, North Reading, Wilmington and Lynnfield. Tapes of this meeting can be purchased from RCTV ($2 tape). Mr. Hughes, Chairman of the Board, called the meeting to order at 7:46 p.m. Report of the Chairman of the Board Mr. Hughes stated Commissioner Soli would be on vacation from May 9`i' to May 21 S` In order to accommodate Nelson, Adam & Dickson this item was taken out of order on the agenda. Action Item Nelson, Adam & Dickson Audit Review Mr. Hughes noted prior to the RMLD Board of Commissioners meeting, Messrs. Ames and Pacino of the Audit Subcommittee met with Nelson, Adam & Dickson, P.C. Mr. Pacino noted he had met with Nelson, Adam & Dickson, P.C. prior to the meeting and reviewed the financial statements and are recommending the Commission accept the financial statements as presented however, there is one change which is going to be made and Mr. Nelson will be addressing this. Mr. Nelson noted Messrs. Ames and Pacino requested the objective of this audit in light of the issue (IG), which came up this year be considered. Mr. Nelson pointed out in the engagement letter it outlines what the objective of the audit is, because an audit is designed to provide reasonable but not absolute assurance and because Nelson, Adam & Dickson, P.C. did not perform a detailed examination of all transactions. There is a risk that material misstatements made with and may not be detected by them. In addition an audit is not designed to detect immaterial misstatements or violations of laws or governmental regulations, which do not have a direct material, affect on the financial statement. Mr. Nelson noted they are trying to provide a reasonable assurance about the materiality of the financial statements, that no misstatements occurred their audit is designed to look at those issues where material dollars are being expended, focusing on such items as accounts receivable, sales and the cut off between the two to make sure there is proper revenue recognition, cost of sales and accounts payable to make sure they have proper costs and appropriate cut offs, accounts receivable, cash, major items that would be represented in the financial statement. Any areas which do not have material dollar amounts in them they do not look to be an area where they could have a material misstatement as they do not to get as much attention as there is not a lot of dollars going through the types of expenses that were in fact called into question in any given year so they will not specifically looked at individually. Moreover, the Department has controls in place that should have addressed those issues but for the fact they were being overruled by management, which is, obviously difficult to detect when that happens. - Mr. Pacino asked Mr. Nelson "at any-point-during the audit did anyone bring any items up to him, either from the Town side or the Department side, in terms items he was specifically asked to look at in this area?" Mr. Nelson replied, "no one asked us." -5 u.u. vv.-- --...r lull..l Ll o May 13, 2002 Action Item Nelson, Adam & Dickson Audit Review Mr. Pacino also asked about management overriding the controls. Mr. Nelson noted where there are controls in place and it is assumed that management is going to make sure every effort to ensure those controls are exercised and controls were in place if upper management followed those controls, this would not of been an issue. On other aspects of the audit Mr. Ames noted, there were two areas the audit addressed one the principles of an audit and secondly is specifically the issues relative to the IG Report. In the Audit Subcommittee meeting prior to the RMLD Board of Commissioners meeting it was pointed out there has been a change in GASB 34, which has brought interesting changes, which appears on page two and its impact on the presentation of surplus items. Mr. Nelson briefly went over the surplus area what was previously reported as unappropriated earned surplus has now been broken down into two categories. The amount of surplus that is directly related to capital assets and net of its related debt has now been separately stated and shows up in the report as $42,094,000.02. That same GASB also affects the presentation of the statement of cash flows basically the methodology being used is now the direct method versus the indirect method, which makes it easier to understand, and this presentation reflects this change. Mr. Pacino made a motion, seconded by Mr. Ames that 2001 Audited Financial Statements from Nelson, Adam & Dickson, P.C., be accepted on the recommendation of the RMLD Board of Commissioners Audit Subcommittee. Motion carried 4:0:0. Mr. Pacino made a motion, seconded by Mr. Ames that 2001 Employees' Retirement Trust Statements from Nelson, Adam & Dickson, P.C., be accepted on the recommendation of the RMLD Board of Commissioners Audit Subcommittee, acting as trustees of the pension trust. Motion carried 4:0:0. Mr. Pacino noted the Commissioners are also trustees of the pension trust, accepting as the trustees of the pension trust. Mr. Hughes inquired if the two new members of the Commission are covered. Mr. Ames replied it is automatic. Mr. Hughes thanked Nelson, Adam &Dickson, P.C. for their presentation and assistance. Report of the Chairman of the Board General Manager Search Discussion Mr. Hughes noted at the last RMLD Board of Commissioners meeting the Mr. Cummings, Selectmen Liaison from the Town of Reading requested to hold off the GM Search Committee until May 30th to accommodate the Selectmen. Mr. Hughes discussed this with the Acting General Manager noting the time involved, it would take four to six months in order to get a new General Manager on board. Mr. Hughes noted it would take time to advertise and interview for this position. Mr. Hughes as Chair of the Board solicited conversation with Chairman Board of Selectmen Mr. George Hines and attempted to communicate with him on five different occasions with no reply. Mr. Hughes would like to proceed forward and put the GM Search Committee in place, get the public relations part of this selection completed, bearing in mind it will take four to six months to get a formative General Manager on board. Mr. Ames noted he is not sure what the Selectmen had in mind by way of their request, however he does know from the Task Force agenda they are considering structural changes of the Board, this may have consequences. Mr. Ames also noted the need exists to look seriously at what the committee should look like. Mr. Ames received a letter from Mr. Butler in the Department. Mr. Ames pointed out the first question is how to proceed, as there are also a number of issues to resolve. Mr. Hughes replied he has selected a committee by names to be presented to the Board to agree upon as a whole that will compromise the GM Search Committee. Messrs. Hughes and Pacino are representative of the Commission; a CAB representative, an employee of the Department has asked to have one union and one management employee and solicit two other municipality general managers and a former Commission member these are who will comprise the GM Search Committee. Mr. Hughes noted the members would be assigned task. Mr. Ames expects, he would like to see this all written down, should be part of the agenda for discussion next time around. May 13, 2002 Report of the Chairman of the Board General Manager Search Discussion Mr. Ames suggested the next step assuming you have buy in from all the various parties involved, next thing to do is getting a general budget to work with because you need to go out for advertising, hire a consultant, have a preliminary budget to get started. Mr. Ames needs to see this laid out before he could approve it, as this is a fairly complex undertaking. Mr. Hughes was seeking the basic establishment of the GM Search Committee to set up guidelines, ideas as to what they are looking for, expenses incurred, advertising and present these at the next RMLD Board of Commissioners meeting. Mr. Ames reminded Mr. Hughes a request was received from Town Hall to defer specific action. Mr. Hughes reiterated he wanted to get this committee established. Mr. Herlihy pointed out it would be best to hold off a few more days until after the Task Force which meets on Thursday night two days from now. Mr. Herlihy has found the Board of Selectmen and Mr. Hines very responsive. Mr. Herlihy suggested waiting until the Task Force has made a decision one recommendation is making the Town Manager the General Manager. It is best to send the signal you are willing to wait for the Task Force. Mr. Herlihy replied it is one proposal being looking at. Mr. Herlihy noted it is best to wait as it can set off a chain of events, which limits their options; it is best to hold off until the next meeting. Waiting a couple of weeks is a sign of good faith; he cannot support any action at this time. Mr. Pacino is in favor of going forward, however the Commission made a promise with the Selectmen they would wait until the end of the month. The Commission can start to put an action plan, it will take some time to find a General Manager there is no harm in putting in some sort of potential process and reporting back at the next meeting put in motion. This would occur after the end of the month, currently it is a zero dollar issue no to go forward and execute anything. Mr. Ames suggested Commissioners Hughes and Pacino draft up a process, which can be accepted, having a plan damages no one. Mr. Pacino noted the GM Subcommittee would not meet until after Thursday. r' Mr. Hughes agreed the GM Subcommittee would go on pending the meeting on Thursday. Mr. Pacino pointed out they will step very carefully, not overstepping power, however a process needs to be put in place an action plan is needed. Mr. Lessard noted it is appropriate to establish a criterion for General Manager, soliciting for advertisement after May 30`h' as there will be some response as far as a representative from the Town. Mr. Lessard noted the GM Search Committee should go forward, if you wait, you prolong the agony. Mr. Herlihy noted people in the Town have not seen a difference in service without a General Manager. Mr. Pacino replied this is a tribute to the people who work in the Department. Letter from Leonard D. Rucker relative to Energy New England (ENE) ENE Board of Director's Position, Letter from Mr. Leonard D. Rucker to Chairman Bill Hughes. Mr. Hughes noted he received this letter at his home on April 30`h. Mr. Hughes read the letter: "Mr. William J. Hughes Chairman RMLD Board of Commissioners Dear Mr. Hughes: Though I have resigned as General Manager of the RMLD, I still serve on the Board of Directors for Energy New England, LLC (ENE). I-have -already resigned my positions as an APPA Director, a NEPPA Director and as a Director on the Public Power Incorporated Board. The ENE position was separately voted by your Board of Commissioners as provided for in the Operating Agreement between ENE and the RMLD. May 13, 2002 Report of the Chairman of the Board Letter from Leonard D. Rucker relative to Energy New England (ENE) ENE Board of Director's Position, Letter from Mr. Leonard D. Rucker to Chairman Bill Hughes. I am willing to continue in this position but presume that the RMLD Commission wants the option of appointing another qualified director (the agreement allows the RMLD Commission to appoint anyone to represent their interests). According to section 5, paragraph 5.1; my resignation must be delivered to an ENE officer or the ENE Board of Directors and not to the RMLD Commission. I request a recorded majority vote from the Commission should you wish for me to resign. I will then implement the needed actions. Should you wish for me to continue, a vote is not needed - simply contact Leo Swift, ENE's CEO at 508-698-0000 and let him know. The main reason for my finishing my existing term as Director is to allow the ENE Board to keep its current cohesiveness through this sensitive time in the energy markets. ENE is in the second year of continuing to implement a new strategy that has thus far returned the organization to a healthy financial position. The main argument for not continuing is that our past difficulties with each other make it difficult for me to fairly represent the RMLD. As a professional, I would fulfill my obligations credibly but I can readily understand the sensitives of the Commission. In any case, the decision is yours to make. Sincerely, Leonard D. Rucker". Mr. Pacino noted the question of Mr. Rucker's differences were very pronounced, he should be removed. Mr. Pacino is concerned with coverage by the Department. Mr. Cameron noted the next scheduled meeting is May 21s` as he received e-mail information this afternoon from Leo Swift of ENE and he could attend this meeting. Mr. Pacino inquired if Mr. Rucker is asked to resign, how would the Department cover this? Mr. Cameron replied he could cover this obligation to ENE. Mr. Herlihy inquired is the General Manager's representation needed on this Board and what are the ramifications if there is no representation? Mr. Cameron replied there needs to be representation from the RMLD as the other systems, which are in the mix at ENE, have generation, the Department does not. The issues of the members are not quite the same. Mr. Cameron pointed out NEPPA is concerned the Department is covered by legal counsel and on the national side there is FERC and APPA, this is the short answer. The law firm of Duncan and Allen intervenes on the Department's behalf and there is cost containment as their legal services are performed in conjunction with other companies with similar issues. Mr. Pacino inquired as to what the role of the PPI Board is? Mr. Cameron noted it is an offshoot of the APPA Board. Mr. Hughes inquired and he has asked this question two or three times, what is the revenue return from ENE? Mr. Cameron replied the Department has not had a return from ENE, each member initially funded ENE with $500,000. This year there were retained earnings of $197,000 this was the first year there was a profit however, no vote has been taken to release these earnings, and the Department has not received a dividend. Mr. Ames pointed out that ENE was founded as it manipulated power costs due to NEPOOL restructuring. Mr. Cameron noted ENE first started up to take advantage of the NEPOOL rules by putting four systems together, Reading, Braintree, Taunton and CMEEC, as one entity this was to create synergies under the NEPOOL rules. ENE has evolved to portfolio management managing the power supplies of Braintree, Taunton, Middleborough and Burlington, VT. ENE also performs residential conservation programs as the Commonwealth of Massachusetts mandates this. Mr. Pacino noted ENE was formed as a cooperative with special legislation. Mr. Hughes reiterated the profit side, is there any benefit in paying the membership? a~vfju vvouavaa ara~.~.~uas avuuu~w May 13, 2002 Report of the Chairman of the Board Letter from Leonard D. Rucker relative to Energy New England (ENE) ENE Board of Director's Position, Letter from Mr. Leonard D. Rucker to Chairman Bill Hughes. Mr. Cameron replied they are reevaluating the benefit of ENE right now, as there are different NEPOOL issues out there. Discussion ensued relative to ENE. Mr. Pacino would like to invite someone from ENE, if not be provided with financial information, as the Commission has not seen anything since year-end. The audited information would be another item the Commission would like to see. Mr. Cameron replied it would be prudent to provide this information, as it is a public part of the agenda. Mr. Herlihy inquired does the need exist to have a representative from the Department show up at these meeting when the Department will get its twenty five percent? Mr. Cameron pointed out the fundamental difference is the power supply. The other members Braintree and Taunton generate and CMEEC is a joint action agency and there is some generation. RMLD is the largest single municipal utility in New England, it is an anomaly, it does not own generation its power the RMLD's interest are different than the others on the ENE Board. Mr. Pacino made a motion, seconded by Mr. Ames that the RMLD Board of Commissioners requests the resignation of Leonard D. Rucker as Reading Municipal Light Department's Appointed Director to the Energy New England, LLC Board of Directors. Motion carried 4:0:0. RMLD Reimbursement for Melanson Heath Audit Mr. Pacino noted Mr. Hechenbleikner is looking for reimbursement of $45,000 for the Melanson Heath audit. Mr. Pacino is waiting for the opinion of the CAB. Mr. Pacino is on record as stating if the Commission gets a positive recommendation from the CAB he would be behind a motion to provide for reimbursement. The Town is seeking reimbursement as their fiscal year ends in June. Mr. Ames noted the CAB approves the unappropriated surplus, it is a capital item, and the CAB ties the Commission's hands until the vote. Mr. Lessard pointed out he prefers all members of the CAB to be present for this vote. Mr. Lessard noted due to scheduling conflicts the next meeting would be June 4 h. Mr. Hughes noted he is displeased in Mr. Hechenbleikner's letter "The Town of Reading's position is very simple - we would not have to do the audit had the issues not been created by the Light Department." Land's End Clothing Mr. Hughes inquired of the RMLD Board of Commissioners or CAB members interested in purchasing Land's End clothing as this can done in a bulk order through the Department. Mr. Pacino reaffirmed his stand on this position, as this can be viewed as a benefit and does not have any intention of purchasing any items. The sense of the Commission members present was there was no interest in purchasing any Land's End clothing. Mr. Hughes noted he would be attending the MMWEC meeting on May 16`h. Mr. Hughes asked the Commission if there was any interest. There was no interest expressed by any of the Commission to participate at this meeting. Citizens' Advisory Board, Selectmen Liaison, and Customer Comments Chairman Hughes polled all in attendance; there were no comments at this time. May 13, 2002 Acting General Manager's Report Motion from Frederick Van Magness, Precinct 8 on Article 3 Mr. Cameron noted he put this on the agenda as an information item and he will have the information available for the Chair as requested in the motion. Mr. Pacino commented at the fall Town Meeting the Department presents the financial information. Mr. Pacino noted the street lighting program has lost monies referring to the Audited Financials on page thirteen, he does not visualize any profit in the future, this program needs to be shut down. Mr. Herlihy commented in the past 2001 Town Meeting, the presentation made by the Department, those present were told if there were any questions to look it up. The Commission has a lot of work to do in this area. Northeast Public Power Association (NEPPA) Annual Awards Nominations Mr. Cameron noted NEPPA has these five awards, which are presented at the NEPPA Annual Conference. Mr. Hughes replied he was interested in having the Energy Services Department given recognition. NEPPA Annual Conference, August 18th- 21St in North Conway, NH Mr. Cameron pointed out the NEPPA Annual Conference will be held in North Conway, New Hampshire this year. Mr. Pacino wanted to ensure everyone on the Commission was on the same page relative to non-payment for family and spouses. Although this may be an accepted practice in other utilities it is not acceptable for the RMLD Board of Commissioners. Mr. Pacino had brought his mother in 2001 and paid for her expenses. Mr. Cameron pointed out given the circumstances the Commissioners should re-think paying for spouses, including meals. Commissioners Pacino and Hughes noted they would be attending. Mr. Pacino inquired who was attending from the Department. Mr. Cameron replied he was attending. Mr. Hughes asked of Mr. Lessard who would be attending from the CAB Mr. Lessard responded he would let them know at the next meeting. Mr. Pacino noted he was golfing this year and would pay for this himself. Mr. Pacino noted each Commissioner has an amount to spend on training this is an appropriate expenditure Former General Manager's Legal Bills Mr. Cameron noted this could involve legal action it needs to be deferred to Executive Session. Warrant Concerns from April 30, 2002 Selectmen's Meeting Mr. Cameron noted there were discussions at the Selectmen's meeting relative to the warrants and the Department did not provide the originals to Town Hall. Messrs. Cameron and Fournier met with Messrs. Hechenbleikner and Foley relative to this issue demonstrating to them the original warrants were needed for the RMLD's own audit. The other areas of the Town with exception of the Housing Department do not have to comply in the same manner as the RMLD. A letter from Nelson, Adam & Dickson to the Town will explain this. Board Discussion RMLD Oversight Task Force The next RMLD Oversight Task Force is scheduled for Thursday, May 16th at 7:30 p.m. Commissioners Ames and Herilihy will be attending. Policies Review Discussion (Commissioner Ames) Mr. Ames pointed out every account including cell phones represent an accrued liability without oversight. - - - May 13, 2002 Policies Review Discussion (Commissioner Ames) Mr. Ames is working with the Department to work on revamping policies. On another matter, Mr. Ames addressed the reconsideration of the role of the warrants, as it is a sterile exercise, the Department and Town need to address this. Commissioners Ames and Herlihy will be working with the Department on policy changes. Mr. Pacino passed out to the Commission a handout of salary studies. Mr. Pacino is seeking a salary set at $120,000 retroactive to the time Mr. Cameron took over. Mr. Pacino noted he is not looking for a formal vote at this time. Board Discussion Acting General Manager's Salary Mr. Hughes did a comparison of eight other municipal managers to come up with the amount of $120,000. Mr. Pacino noted the Assistant General Manager is currently at $114,667 and the former General Manager was at $140,000 this represents an in between the two ranges. Mr. Herlihy noted he would prefer to wait until the next meeting when Commissioner Soli is present. Mr. Herlihy inquired when the last time the Department has performed energy audits at the schools. Mr. Cameron told Mr. Herlihy he would get back to him on this. Next Meeting Date The next meeting was scheduled for Monday, June 3, 2002. Mr. Hughes pointed out it has been past precedent by the Commission during the summer to have one meeting per month. Mr. Hughes will adhere to this practice unless it has a negative impact on the Department. Executive Session At 9:12 p.m. Mr. Pacino made a motion seconded by Mr. Ames to enter into Executive Session to discuss strategy with respect to litigation and return to the Regular Session for the sole purpose of adjourning. Motion to Adjourn At 10:35 p.m., Mr. Pacino made a motion seconded by Mr. Ames to adjourn the Regular Session. Motion carried by a show of hands 4:0:0. The Chair called for a poll of the vote: Mr. Ames, Aye; Mr. Pacino, Aye; Mr. Hughes; Aye and Mr. Herlihy; Aye. A true copy of the RMLD Board of Commissioners minutes as approved by a majority of the Commission. Philip B. Pacino Secretary RMLD Board of Commissioners