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HomeMy WebLinkAbout2003-01-08 ad Hoc - RMLD Governance Advisory Committee MinutesED ERK RMLD Governance Advisory Committee Meeting Cl January 8, 2003 - L,~ .,-1 --5 ; It- 35 The meeting convened at 7:30 p.m. in the Town Hall Conference Room, 16 Lowell Street, Reading, Massachusetts. Present were Chairman Dan Ensminger, Members Jim Francis, John Carpenter, Doug Cowell, Travis Miller, George Theophanis and Board of Selectmen Vice Chairman Matthew Cummings. Also present were Town Manager Peter Hechenbleikner, RMLB Member Phil Pacino, Accounting Manager Bob Former and Acting General Manager Vinnie Cameron. On motion by Carpenter seconded by Miller, the minutes of December 14, 2002 were approved as submitted by a vote of 7-0-0. On motion by Carpenter seconded by Miller, the minutes of November 20, 2002 were approved as submitted by a vote of 7-0-0. Matthew Cummings reported on the results of the working group and the draft recommendations that they had developed. He also gave the Advisory Committee a copy of the resolution in support of the 20 Year Agreement approved and signed by the Board of Selectmen. - Discussion/Action Items Discussion with RMLB/RMLD on Fiscal Year Change - Vinnie Cameron, the Acting General Manager, noted that in November the Reading Municipal Light Board voted to go to the Town's Fiscal year subject to: 1. Understanding of the requirement for State reports 2. Understanding for Federal reports 3. CAB recommendations The CAB asked the RMLD to talk to Municipals Light Departments on a fiscal year basis. The Department reported those discussions back to the CAB. The Light Department does not feel that it is in the best interest of the RMLD to change their fiscal year. Bob Fournier indicated that they had to do reports for FERC and for the State DTE. Of the two FERC reports, one could be on the fiscal year and the other has to be calendar year. The DTE requires to report on the calendar year basis. The three Municipal Light Departments who use a fiscal year indicated that it is "painful" to keep two sets of books. The concerns are that: 1. Two reports would be unaudited. 2. The cash is currently audited two times a year at the end of the calendar year and at the end of the fiscal year, and this is a good thing. RMLD Governance Advisory Committee Meeting - January 8, 2003 - Page 2 3. The Light Department uses a depreciation fund to generally fund capital and if the Light Department does the fiscal year, this may create a problem for DTE certifying their depreciation fund. 4. The idea of keeping two sets of books does not sit well. George Theophanis asked about keeping "two sets of books." The Town Accountant is able to do reports at different times with little effort. Bob Fournier noted that he does not want to provide unaudited figures to any of the State or Federal Agencies. It was pointed out that he already does this. Matthew Cummings asked what the FERC and DTE reports required for, and it was noted that the FERC reports are primarily for data gathering. He also asked when was the last time the Light Department applied for a higher depreciation, and it was noted that nine of the last 20 years were at the minimum depreciation level of 3%. In 1995, the Department applied for 5% depreciation and this was kept in the capital fund to cover the cost of building a North Reading Substation. Capital funds are generated through the Capital Fund, budgeting and depreciation. 1% of a depreciation equals $900,000. If they could not set aside money from the depreciation fund, then they would have to bond more. Dan Ensminger felt that the fiscal year ought to be kept as part of the recommendations. John Carpenter felt that it was more important to align all Town functions so that the auditing process can be aligned, and to increase visibility, scrutiny and insight. Vinnie Cameron noted that the Town audit report reflects language relative to the RMLD audit report that "we did not audit the electric fund." It was noted that the CAB has real concerns about the cost of changing fiscal year and about the depreciation issues. John Carpenter noted that with a new accounting system, the Light Department is paying approximately $2.4 million, and these reports should be automated. Vinnie Cameron noted that there is a lot of initial time to make spreadsheets conform to the reports required. Phil Pacino noted that requiring the change in the fiscal year would require the Accounting Manager to go to closings of the books per year. The CAB is concerned about the time and cost. Travis Miller felt that they might be savings in the auditing costs. John Carpenter asked about the new accounting system, and it was noted that it was a Great Plains Accounting System. It is generic. He felt that setting up a new chart of accounts, which would respond to Town Federal and State reports; can be done with no additional labor costs. RMLD Governance Advisory Committee Meeting - January 8, 2003 - Page 3 Doug Cowell noted that it seems like the main concern by the Light Department is the ability to create capital through depreciation. Why is that a concern. If unaudited reports are submitted, the Light Department claims that this could jeopardize their ability to set up a depreciation fund. If the Light Department applies for an increase in the depreciation rate for the Fiscal Year FY 2003, this should be an only one time transition in this matter. Phil Pacino noted that by statute, the depreciation rates are set on a calendar year basis. Jim Francis wondered if that was a policy of DTE, or a law, or whether it was discretionary. Vinnie Cameron noted that capital dollars are needed for emergencies. Under Chapter 164, 3% is the standard depreciation and it may go as high as 5%. In nine of the past 20 years, the Light Department had a depreciation rate of more than 3%. The following information was requested: How did the other three departments deal with their depreciation fund given the concerns of the RMLD? 2. Will DTE give us their concerns about the depreciation fund in writing? The Town Manager asked the Acting General Manager whether there was an emergency source of capital available to the Light Department, and he indicated that there was. He noted that it appears evident that State law requires Light Departments to be on a fiscal year basis the same as the Town. He also noted that the reasons to consolidate to a single fiscal year would be to facilitate an easier audit, to have a common year end when we go out for debt financing, and to minimize the differences between the Town and the Light Department. Jim Francis noted that he feels that it is reasonable to put the new fiscal year in place, and the Light Department can make it happen. Phil Pacino noted that it they need county year end statements, that could be done without doing a full audit. John Carpenter felt that it was a matter of timing and schedule. The Advisory Committee discussed the CAB's suggestion detailed in their letter of January 6, 2003. Matthew Cummings feels that the report from the Advisory Committee should go to the Board of Selectmen, and the Board of Selectmen may then involve the CAB. The Advisory Committee is advisory to the Reading Board of Selectmen. On motion by Cowell seconded by Miller, the Ad Hoc RMLD Governance Advisory Committee voted to make the recommendations to the Board of Selectmen-, to send a letter to the CAB thanking them for their offer; the Ad Hoc RMLD Governance RMLD Governance Advisory Committee Meeting - January 8, 2003 - Page 4 Advisory Committee will recommend to the Reading Board of Selectmen that they meet with each of the Boards of Selectmen and their CAB representatives. The motion was approved by a vote of 7-0-0. Cummings moved and Miller seconded the motion to recommend the draft recommendations of the Ad Hoc RMLD Governance Advisory Committee _ as submitted. On motion by Francis seconded by McDonald, amendments were approved to Item #4 by a vote of 7-0-0. On motion by Miller seconded by Francis, the words "not less than" were added to Item #4 by a vote of 6-1-0, with Cowell opposed. George Theophanis felt that discussion on the fiscal year was not relevant any more. Doug Cowell felt that Item #1 should be adjusted to have the Board of Selectmen appoint the General Manager. Matthew Cummings felt regarding the fiscal year that the arguments for the Light Department were not compelling. He would like answers to questions raised, and would like Special Counsel to check this matter. On motion by Ensminger seconded by Miller, the Ad Hoc RMLD Governance Advisory Committee agreed to add to Section 3 "as required by Chapter 164." This was approved by a vote of 7-0-0. On motion by Cowell seconded by Ensminger, a motion to amend first bullet to provide that the Light Board would forward to the Board of Selectmen a final group of applicants for General Manager candidates, for the appointment by the Board of Selectmen. The vote on the amendment was one in favor (Cowell) and six opposed. On the main motion, the final recommendations by the Ad Hoc RMLD Advisory Committee were approved by a vote of 6-0-1, with Cowell abstaining. Dan Ensminger and Phil Pacino both thanked the Ad Hoc RMLD Governance Advisory Committee for their hard work and assistance. On motion by Miller seconded by Francis, the RMLD Governance Advisory Committee voted to adjourn their meeting of January 8, 2003 at 10:15 p.m. by a Secretary