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HomeMy WebLinkAbout2002-10-15 ad Hoc - RMLD Governance Advisory Committee MinutesAd Hoc RMLD Governance Advisory Committee October 1.5, 2002 T 6~,i W CLEI iK t` DI G, MASS: A The meeting was convened at 7:30 p.m. in the Conference Room, 16 Lowell 58 ~ecLing, Massachusetts, Present were Chairman Dan Ensminger, members Jim Francis, John Carpenter, Matt Cummings, George Theophanis, Doug Cowell. Also present were Town Manager Peter Hechenbleikner and the following list of interested parties: Joe Donahoe, Craig Owen, Paul Carson, Tom Davis, Sylvia Vaccaro, Tony Butler, Steve Deferrari, Deedee Ahearn, Bill Hughes, Peter Price, Laurie Amt Sylvia, Paula O'Leary, Roger Lessard, Vinnie Cameron, Stephen Karanjian, John Shea, Beth Antonio, Allan Ames. Approval of Minutes On motion by Cowell seconded by Francis the Committee approved the minutes of September 25, 2002 by a vote of 6-0-0. On motion by Francis seconded by Carpenter the Committee approve the minutes of October 3, 2002 by a vote of 6-0-0. Response to John Carpenter's Request for Information from the RMLD Vinme Cameron reviewed material submitted in response to John Carpenter's memo. Carpenter asked how professional services were secured for those on the professional services list which were not part of purchase orders. Cameron noted that Beek was a company with whom the Light Department has an ongoing business relationship. They don't go out to bid for professional services. Carpenter questioned the legal bills - he noted that there was a huge amount spent on a few things. Cameron gave us some of the history of fighting the Stoneybrook decision of providing gas service to this facility. The decision to fight this was the decision of the ex-General `Manager. Bill Hughes noted that the Board was given two presentations and was told that it "could be very expensive, but the legal effort would be worth it to the rate payers." These expenses were "above the line." Carpenter further questioned general labor and employee legal issues. He asked about hiring of Choate, Hall, Stewart. He asked further about the Tine retirement case which Bill Hughes and Vimiie Cameron noted is currently "in litigation" and, therefore, they can not discuss it. Allan Ames noted that there was Board discussion on this matter, and the Board was "warned that this could become expensive." Carpenter asked if Cameron could describe the other purchases and asked if all of the other material would line up in accordance with the purchase order list. Cameron noted that it should have matched except for purchases under $25,000. Carpenter also noted that he has questions about the decisions of the General Manager. He noted that all consultant contracts are non-bid items. Carpenter asked if the Light Department has looked at the possibility of going out to bid for legal services. Cameron noted that it is difficult Ad Hoc RMLD Governance Advisory Committee - October 15, 2002 - 2 to advertise for legal matters, but that they are considering soliciting proposals at the end of this - year. Matt Cummings asked what Policy 15 was, and it was noted that it was the Light Department's Sexual Harassment Policy. Ensminger asked about the carpet and tile bid, and Cameron noted that there was a question with the bond. Cummings noted that in 2000 there were expenses for Rubin and Rudman relative the I.G. investigation. Does this mean that the Light Department was aware prior to December 2001 about concerns regarding credit card and travel reimbursement. Matt Cummings asked if their payments were cash disbursements that would appear anywhere else that were related to legal cases? The Town Manager noted that there would be - legal settlements being paid out of payroll or other accounts payable would not show up in the legal services area. John Carpenter thanked the Acting General Manager for the information that he put together and hoped that it did not take a lot of time and was available through the computer process. Vinnie Cameron noted that this was a huge effort - that it tools two to three people full-time since last Tuesday to get this information together. Vinnie Cameron went on to make some general comments which are attached to and made a part of these minutes. Tony Butler, speaking for the employees of the Light Department made a statement which is attached to and made a part of these minutes. Bill Hughes made a statement on behalf of the Light Board which is attached to and made a part of these minutes. The Ad Hoc Committee noted that the issues of concern here are of senior executive and policy malting levels, and that the Light Department employees continue to do an excellent job. A question was raised as to when the Union was founded, and the consensus was that it was in the early 1970's. This apparently did not then have any relationship to the ex-Acting General Manager. Jim Francis asked if the policies in place in the Light Department that the employees are uncomfortable with. Tony Butler noted that the procedures are in place, but at some levels the procedures get lost. Paul Carson noted that none of the policies existed before the ex-General Manager. Some of the - policies isolated the staff and were intended to initiate a cultural change. This was intentional on the part of the ex-General Manager. Ad Hoc RMLD Governance Advisory Committee- October 15, 2002 - 3 George Theophanis asked if there would be a value in having a whistle blower protection policy in place for the Light Department. It was noted that there is a state policy dealing with this issue. The Board moved on to interview representatives from other Light Departments. Wes Merrill from Peabody and Savo Danos from Littleton Electric and Water Department were present. Interview Representatives from other Light Departments Peabody - Peabody is not in the cable TV or internet business. They serve a portion of the Town of Lynnfield which is less than 10% of the system. They are a $48 million line of business, with 40% being residential and 60% being commercial and industrial. They have 65 employees and a five member elected board. There is no advisory board. Merrill does have an employment agreement. They use the City Auditor for their accounting work - within the Light Department they have a couple of people who do book keeping. Of the 23,000 customers served, 6.5% are outside of Peabody. They do no other services besides electricity. They have internal generation - 68 megawatts of generation capacity. The Board hires the General Manager, conducts oversight, approves and signs all contracts including Union contracts and contracts for legal and accounting services. They approve the budget. Auditor's services are bid out and hired by the Light Board. This is a past practice. The Board does not sign the payroll or accounts payable warrants. They do rate setting, and they also develop policies. Peabody has one and one half financial persons. They do the bill schedules, invoices, etc. Bills are approved by the General Manager with a copy to the Board for their information. Bills go to the City Auditor for payment. The City Auditor pays all bills and cuts all checks. They have their own financial computer system. The human resources function is conducted by the Light Department, but they have a good relationship with the city including doing joint training. The General Manager hires all employees. Bonding is done by the city. The city has a GIS system which is used by the Light Department. The fire alarm system is on Peabody Light Department poles, but it is separately administered by the Fire Department. The fire alarm department also does traffic signals. All bids are done on a free and open basis, or they utilize the state contract. All purchases over $15,000 limit are done by bids. They follow the state bid laws. Generally, services are bid and awarded by the board in an open meeting. Smaller items the Light Department takes three quotes on. The Light Department does not have credit cards, but they do have charge cards at places like Staples for the Light Department. They do not participate in much out of state conferences. The Light Board are lay people: the current Board is made up of an auto mechanic, an accountant, a retired store owner, etc. They are elected for six year staggered terms. Counsel is hired by the General Manager. They've had the same attorney since 1991. Special counsel is also hired by the General Manager. For travel and expenses the Board just approves the budget for these items, and the General Manager infonns them of any major meetings or conferences he is going to. The total budget is $18,000 for FY2002 for all professional development. Elected board members general do not attend although they have attended meetings in the past. " There is no advisorv board and no Ad Hoc RMLD Governance Advisory Committee - October 15, 2002 - 4 representative for the light system from the Town of Lynnfield. There is no contract or agreement in place for the service of Lynnfield. Dan Ensminger noted that it seems like there is a collegial relationship between the General Manager and the Board. The General Manager noted that he's been General Manager for one and one half year, but has spent his entire career with the Peabody Municipal Light Department. Peabody does their power purchase through MWEC or off chutes of MWEC. Peabody and nine other light departments have developed an offshoot of MWEC to do load and resources management. Littleton Samos Danos from Littleton gave an overview of Littleton Light and Water Department. He is not from an engineering background - he's from an environmental background. They serve Littleton, Boxboro and Fort Devens on a five year bid contract (Devens purchases their own power and contract with Littleton to provide for daily operations and management, emergency repairs, billing, etc. Devens is not contiguous to Littleton). The customers are 75% in Littleton and 25% in Boxboro, but the power sales are about 50% in each community. Danos has worked for Littleton for 20 years, and has been General Manager for six years. There is no in lieu of tax payment to Boxboro - Boxboro doesn't want it. They've been part of the Littleton service area since 1926, and are very happy with the service and rates. Littleton has developed a limited partnership to develop fiber optic capability among municipal buildings. They hope to get their local cable provider to buy in. They are planning on extending this service to Boxboro. They operate a wireless SCADIA System, but will consider transferring that to fiber optic. Littleton buys all power under contract. They are no longer a member of MWEC. They have a consultant to do their trading. They have the fourth lowest residential rates of municipal light departments in Massachusetts. There was discussion as to the lowest rates, and the consensus was that Rowley, Chicopee and Braintree have the lowest rates and Peabody and Reading are somewhere around fourth place. Danos presented a written summary of answers to the Ad Hoc Committee's questions. The have a municipal and school special rate in Littleton. They provide the same rate structure throughout the service area, so that the served community of Boxboro also gets the lower municipal and school rates. Basically, the municipal and school rates is 70% of the conventional rate. Littleton has their own accounting staff and computer system. They have their own human resources people. The Board hires their General Manager and their Environmental Manager. The staff makes recommendations for rates and the Board sets the rates. FinCom reviews their budget as a courtesy. They don't have an annual report - they did away with it several years ago because it's too expensive. Littleton has approximately $1.5 million worth of debt - Peabody has $11 - $12 million. They use MEPA bids for materials. They have longstanding relationships with - attorneys-and-vendors. Town Counsel takes care of a lot of the "local issues," but they do use Ad Hoc RMLD Governance Advisory Committee - October 15, 2002 - 5 special counsel for power contracts, etc. They have separate counsel for labor issues and separate counsel for water issues. The Board gives the General Manager authority to sign contracts - the contracts are approved by the Board and the General Manager is authorized to sign them. Roger Lessard asked if either community has a formula by which to determine their payment in lieu of taxes. Peabody indicated that they have formula with a minimum level and the remainder to be based on income. Littleton has the same kind of system and is reviewed every three years in dialogue with the Board of Selectmen, the Finance Committee and the Light Board. Both communities have rate stabilization funds. In Peabody they actually have two separate accounts. One is to manage the fuel adjustments and one earmarked to pay down debt ahead of schedule. Littleton has a 3% - 5% depreciation fiend with the remainder to go to free cash. The Town keeps the interest on these accounts. This is to avoid the Town having to borrow. The rate stabilization fund is in place to avoid rate shock. The Advisory Committee thanked Messrs. Merrill and Danos for coming in and sharing the information with them. After a brief recess, the Board reviewed the results of the Selectmen's meeting on October 8, 2002. The Board gave some specific direction where they could. Doug Cowell suggested doing an organizational chart of options, and the Advisory Committee agreed and asked him to world on that. The Advisory Committee agreed that they could start narrowing down the options. George Theophanis felt the changes should be kept to a minimum. Doug Cowell disagreed. Cowell thought there were feasible opportunities for change. Jim Francis feels that that whatever we do we should keep it simple. We should get to the heart of the matter. We should look at ways to improve the system when appropriate. He feels that we are somewhat suffocated by Chapter 164. He feels we should focus on a couple of meaningful changes. Matt Cummings feels that there are several fundamental issues. A major one is whether or not the Advisory Committee accepts that the responsibility for what has gone wrong was that solely of the former General Manager and that since he has left everything is know okay. All members of the Advisory Committee agree that is not the case. Additionally, Cummings felt that we should outline some of the truisms. Among them is that the Municipal Light Department is owned by the Town of Reading. That the Town of Reading is entitled to payments from the Light Department as the owner of the Light Department. That the problem was remedied by the resignation of two employees. That adequate policies are in place. That $500,000 was spent to "chase $28,000" in problems. Ad Hoc RMLD Governance Advisory Committee - October 15, 2002 - 6 John Carpenter noted that it is good to review the operation of the Light Department in any case. Regularly there are recommendations by Town Meeting to sell the Light Department. These issues are not because of one person. There are institutional issues. There is a general frustration in dealing with the Reading Municipal Light Department. Dan Ensminger handed out an outline of how the report might be structured. Assignments were made as follows: Summary of interviews with RMLD Acting General Manager - Jim Francis; Summary of interviews with Town Accountant Audit Committee - Doug Cowell; Summary of interviews with RMLB - Matt Cummings; Summary of Survey of Massachusetts Light Boards and Departments - Travis Miller; Summary of interviews with four town CAB - Dan Ensminger; Summary of interviews with Peabody, Littleton, Concord and Danvers Light Boards/departments - John Carpenter; feedback from Board of Selectmen at 9/24 and 10/8 meetings - Dan Ensminger. Dan Ensminger will also work on the Executive Summary. Additional comments were that the Advisory Committee is not trying to micromanage the department. They are trying to improve the visibility, openness and accountability of the department. They are also trying to improve the relationship between the Town and the Light Board. They are trying to improve structure and efficiency. They are trying to enhance accountability. The focus should be on improvements that will not harm the excellent operations. The Advisory Committee talked about design goals including some of the above. They talked about developing the background. They also talked about being and explicit that the Town of Reading bears the financial risk of the Light Department; that the problem is deeper than two bad people; and the 20 year agreement will be honored that is currently in place until 2021. On motion by Cowell seconded Francis the Advisory Committee voted to adjourn at 10:45 p.m. Peet 0,submitted, ecreta o 4::7 4/s/02o First I'd like to thank the Ad-Floc Committee for accepting our request to speak this evening. I have great respect for anyone who takes their own personal time for what they believe is a good cause for their community and that includes this committee. My name is Tony Butler; I've been with the Department for over 10 years. I'm also chairperson for the American Federation of State County and Municipal Employees Local 1703. With me is a cross section of employees who represent the RMLD, Union and Management alike. You may think of us all here this evening as employees, but also think of us as neighbors and ratepayers. Over 45% of the employees at the Department reside in Reading or within our service territory and there are approximately 90 people currently employed at the department. It is no secret that for the past 10 months the Department has come under a great amount of scrutiny resulting from the Inspector General's report on inappropriate spending by the RMLD. The employees have endured the butt end of jokes and criticism from time to time over the past 10 months while the offending parties have left and moved on. We feel that the RMLD has internally identified and addressed abuses of existing policies by one or two individuals who are now former employees. The continuing review and discussion by this group and others about changes we feel are unnecessary is demoralizing to the Department as a whole. We feel that enforcing policies already in place as well as the pro-active changes made by the RMLD as suggested by the Town's auditing firm has already provided more effective oversight than would result in an overall change in governance. Before making any final recommendations we would like ~c. lU' ~ ~.JL ~M~ l Before making any final recommendations we would like to extend to members of this committee and any other concerned individuals an invitation to visit the Department, talk to the employees, ask questions, and more importantly, get answers. We believe this would assist anyone in making a well-informed, unbiased opinion based on all the facts. By this committee's own admission, the department has a reputation for service second to none, we concur! You should see first hand my fellow employees respond in an emergency. You say fix it, we have, but please don't blow it up! Thank you very much. ~c /0,06-'a ~Vj~( The RMLD Board and the employees of the RMLD are very concerned with the actions of the Ad Hoc Committee. We are a $70 million a year electric utility, owned by the Town of Reading, with the franchise responsibility to serving the towns of Reading, Wilmington, North Reading and Lynnfield. As in the recent past, the RMLD will furnish any and all information that is required by the Ad Hoc Committee so that an informed decision will be arrived at as to the governance of the RMLD. The RMLD, as the largest municipal electric utility in New England, continues to perform at a high level of professionalism as we have in the past. The employees of the RMLD are to be commended for their performance and high moral over the last ten months. The issues raised in the Inspector General's report have been addressed and the RMLD's cooperation and openness with the Town is at the highest level it has ever been in recent memory. I would hope that the recommendations from this committee would focus on measures that will not intrude upon the operations of RMLD which provides reliable electric service, stable rates and exemplary customer service to the four town in our service territory as it's most important job. V . Cow Ad Hoc Committee Meeting 10/15/02 I am available to answer any questions about the information you received on Friday. About the RMLD The RMLD is the largest municipal electric utility in New England with respect to revenues ($70 million) and peak demand (157 MW in the summer). The RMLD serves electricity to ratepayers in the towns of Reading, Wilmington, North Reading and Lynnfield Center. According to the twenty-year agreement the towns are bound through 2021. The revenue requirements of the RMLD are 100% funded by the ratepayers of the four towns. The RMLD returned $1.7 million to the Town of Reading in 2001. Since 1980 the RMLD has returned $28.3 million to the Town of Reading. The RMLD also pays the Town of Reading $167,000 in "above the line" payments, annually. Additionally, the RMLD pays the Town of Reading approximately $600,000 for administration costs including accounting functions, billing, payroll, insurance, and printing costs. The RMLD pays its way fully for any expenses it incurs with the Town of Reading. The RMLD has a fully funded retirement trust for its employees, which is separate from the Town of Reading. As of the August financials the RMLD is $971,333 above its net income budget figure. The base revenues are within .13% of the budget target, the fuel expenses are 17% below the budget target, purchase power expenses are $1.6 million lower than the budget. Additionally, the RMLD's Purchased Power Adjustment has returned $1.6 million to the ratepayers since June of this year. The RMLD is also in the process of returning $3 million to its ratepayers in November, a one time credit. The power supply expense is 75% of the Operating Expenses of the RMLD. The RMLD has $15.5 in the Rate Stabilization Fund. This money belongs to the ratepayers of the RMLD and not to the Town of Reading. The RMLD should remain autonomous given the fact it is a multi-town system and the RMLD is about 20% of the load. The Town related debt incurred by the RMLD is approximately $5.5 million. upon. The RMLD also has about $84 million in power supply bonds through the Massachusetts Municpal Wholesale Electric Company (MMWEC). This debt was incurred in the late 1970s and early 1980s. The debt service annually is $8.2 million a year. $18 million of bonds will be defeased by 2008. The remaining $66.6 million will be defeased in 2017. If a default occurs on those bonds then there is a provision for the other bonds holders (28 other municipals) to pick up these costs. The RMLD operates in a very competitive market with respect to power supply and equipment purchases (transformers, switches, cable, poles). The RMLD also has to deal with issues concerning construction, engineering, labor issues, New England Power Pool (Standard Market Design, congestion costs, transmission issues, FERC issues, etc.), system outages, rates, operating and capital budgets and monthly financial reviews. Policies The Inspector General's report was about "Credit Cards, Entertainment and Travel". Melanson Heath report questioned $28K of expenditures between 1998 and 2001. The problems that occurred have been taken care of and some employees have left. The RMLD has asked, and in some cases received, restitution from individuals. The total restitution was requested was less than $1 OK, based on a model of what could possibly be obtained through legal means. The Melanson Heath report also stated that the RMLD's policies were adequate but were not followed by a few individuals. The RMLD has changed its policies and the credit cards were eliminated, the travel has been cut back, petty cash has not been used and is limited to payroll mistakes as is similar to the Town's practice and storm expenses. The RMLD is looking at its policies and has updated three and added one to date. RMLD Warrant The RMLD warrant had little comment from the Town of Reading either prior to the IG report or after. The RMLD has put into place an exception report model with respect to the payables. The RMLD has an exception sheet, which is a vehicle used by the RMLD's Accounting Manager to directly alert the RMLD Board to questionable payables. The Board also has an exception sheet that goes to the Accounting Manager and the General Manager asking for explanation or more detail on any payables. The Accounting Manager may also go to the Town Accountant and Town have the last say on payables as they have had in the past. (Marblehead) Financials The monthly financials have remained in the same format over the years except for additional pages of analysis required by the Board. I have copies with tabs to show certain pages. The Professional Services is analyzed in the last few pages of the monthly financials. The RMLD has to report to the DTE on an annual basis. All municipals have to comply with this reporting. Template for filing with the DTE has been in place for over twenty years. Show the handouts for 1988 and 2001. Table of contents is tabbed. Audits The RMLD's audited financials are included in the Town's annual report. The RMLD has no problem with using the Town's auditor and having an audit done twice a year (Town fiscal and calendar year). An additional audit may, however, create additional costs. Checks and Balances The model that was in place for examining payables included the RMLD's Accountant, Chief Accountant, General Manager, three Board members, the fraudulent, excessive or illegal). Would it be prudent to have the CAB get involved in reviewing the payables with respect to appropriateness and the budget? Stoneham Stoneham former TM contacted the RMLD's XGM two years ago about the possibility of serving Stoneham. This was discussed at the October 3, 2002 Ad Hoc meeting. No reciprocity. The Stoneham system was in poor condition and needed about five years of work. The Power supply would have been difficult because there is no bulk transmission into Stoneham. Risk The Town of Reading guarantees the bonds but the RMLD has a revenue base upon which to spread out the debt. As long as the RMLD has customers then the bonds, and all other expenses, will be paid. Relationship Building I believe that "relationship building" should be large part of the effort to ensure that the troubles that occurred do not re-occur. Selectmen - Board Town Hall - Light Department Light Department and Outside Town Hall (CAB) Planning, real estate, Rotary, COC, construction programs, forced accounts, similar government issues, etc. LELWU 39 Ayer Road, R. O. Box 2406 Littleton, MA 01460-3406 Telephone (978) 486-3104 Fax (978) 486-8549 www.lelwd.com Savas C. Danos, General Manager October 15, 2002 * Littleton/Boxboro: 6,290 * Devens: 285 * Littleton Water Dept: 2,675 Boxboro has been part of the Littleton service territory since 1926 when Boxboro took two town meeting votes. Boxboro accounts for approximately 25% of Littleton's billing and customer base. Devens is under contract to LELD for operations and capital improvement services. The contract is for 5-years, and is currently under negotiation for the next term, beginning in 2004. Population served is significantly greater in the day then evening. Littleton's population is approximately 15,000 during the day and 8,200 at night. Boxboro's population is approximately 10,000 during the day and 3,500 at night while the Devens population is approximately 15-20,000 during the day. * Littleton/Boxboro: $ 18,700,000 * Devens: $ 1,350,000 * Littleton Water: $ 1,740,000 - E as g zatio : 0 5 elected Board Members increased from 3 in the early 1990s. Each board member runs for both Water and Electric Commissioner. Only once, since ® 1. PRINTED ON RECYCLED PAPER • The Board is the policy and procedures setting organization for LELWD. • Staff makes recommendations for the Board's approval including rates, budgets and dept. policies. • The Board reviews the recommendations of the GM and staff for all positions, although the Board itself does not hire, other than the GM. • The GM signs payroll. • All warrants are reviewed and signed by the GM and at least 3 board members (all 5 if there is a Board meeting that week). Gene • The GM serves the Light and Water Departments as well as serves as the environmental/land use liaison for the Planning Board and Conservation Commission; is the advisor to the Clean Lakes Committee; serves on the Financial Governance, Open Space, Master Plan and Storm Water Regulations Committees; is the Manager of Cell Tower contracts and income that is earmarked for open space purchase; manages economic development activities for the Towns; and manages the fiber/cable partnership between the town and a third party vendor. • The Board of Electric Light and Water Commissioners appoint the GM. • The GM has a contract that is currently under review for renewal. • The Light Dept. is on a calendar year budget while the Water Dept. is on a fiscal year budget • Light and Water Departments have our own auditing firm. Each dept. is audited independently and our audit reports are submitted to the town. In addition, the Board reviews an audit letter and policy changes are made accordingly. • Audit firm has been working for the depts. for many years. Approximately 6 years ago, Board asked for RFQs and reappointed current firm. • LELWD has our own accounting staff. All our records, however, go to the Town Treasurer and/or Accountant for final processing and bill paying/check writing. • The Town Treasurer and Accountant act as our "bank" for all LELWD transactions. • The GM hires all positions for the Light and Water Departments with recommendations from supervisors. • Final review and acknowledgement of all positions by the Board. • All annual reviews and raises are by supervisor recommendation (within guidelines approved by the Board) to the GM, with final approval by the Board. 2. • The Light Dept. budget is approved by the Board and is reviewed and discussed with the Finance Committee "as a courtesy". A majority of the discussion with the Finance Committee relates to "in-lieu of tax payments" and other contributions/support by LELWD to the town and includes the Selectmen. In addition, discussions of issues of mutual interest (i.e. development in town, open space planning/preservation, bond debt support, cost of insurance, personnel policy, etc.) are discussed by the three Boards on a quarterly basis. • Counsel for LELWD comes in many forms and is approved by the Board through GM recommendation. • Town Counsel supports the departments with easement review and filing, real estate transactions, foreclosures/bankruptcy issues, environmental issues and town meeting warrant article review. • Additional attorneys include personnel attorney; LELD power contract counsel; LELD general counsel; insurance trust counsel; and Washington D.C. law firm that supports Departments' Light, water/environmental and FERC issues. • GM reviews all attorneys' bills and a summary is included with the warrant for Board review and approval. Other Services tw(-, - _ 5: V 044 Water; Municipal Fiber; Street Lighting Coj$ act (Acton); GIS Mapping and land use planning support; Assessors Data Base'Support and large format copying for town departments; Environmental compliance monitoring and assistance; Energy Management of Municipal Buildings; Cell tower contracts and income; Lo- Internet/town network oversight; Municipal Space Lighting Design and Installation support; Land/Open Space acquisition; Economic Development Oversi t. L 7 3. HECE]VED TORN CLERK"EADIRG, MASS. Ad Hoc RMLD Governance Advisory Committee October 3, 2002 ZOOZ OCT 21 A 5b The meeting convened at 7:30 p.m. in the Conference Room, 16 Lowell Street, Reading, Massachusetts. Present were Chairman Dan Ensminger, members John Carpenter, Doug Cowell, Jim Francis, George Theophanis, Travis Miller, Town Manager Peter Hechenblelkner and the following list interested parties: John Norton, CAB member from North Reading, Roger Stephenson CAB member from Wilmington, Roger Lessard, CAB member from Wilmington, John Corbett, CAB member from Reading, Arthur Carakotsone, CAB member from Lynnfield, Selectman George Hines, Ron Wood and North Reading Selectmen Joe Veno. The Advisory Committee discussed John Carpenter's request for infonnation from the RMLD. The Advisory Committee asked the Town Manager to check with Town Counsel and see if the RMLD is bound by Chapter 30B for acquisitions. The Ad Hoc Advisory Committee noted that they would take the information requested by Mr. Carpenter in pieces if it can not be all done at one time. The Advisory Committee reviewed the schedule. Dan Ensminger will have an outline of draft report for discussion on the 15t'' Interview representatives from CAB. The CAB members introduced themselves. They were asked what their working relationship is with the RMLB and how they conduct the budget process for the Reading Municipal Light Department. Roger Lessard indicated that they review the operations and capital budgets submitted by the Light Department. They have 30 days to do it, and have public hearings in all four towns. If the CAB has no recommendations within 30 days, then the budget as proposed stands. The CAB has subcommittees on the operating budget and the capital budget. Lessard noted that the working relationship with the Light Board is "better." The CAB previously was not well received. He felt that it was a shame that what happened, happened and that the Department is suffering for it. He feels that the communities get good service, responsive service and fairly good rates especially compared to N-Star. Jim Francis asked if the CAB has had discussion about the situation with regard to governance. Lessard noted that they talked briefly, but defer to the Ad Hoc Advisory Committee for that. He noted that some of the policies have changed since the former General Manager had left - generally for the better. George Theophanis asked how they have changed for the better, and Lessard noted that the credit card policies and other policies have improved. Arthur Carakotsone noted that there are two basic questions. At the last CAB meetings they talked about two issues. One was a model that would be more fair for the surrounding communities regarding input from the surrounding towns. He had attended the Reading Selectmen's meeting when the Ad Hoc Advisory Committee was established, and heard comments about risk of the Town of Reading regarding the _ Light Department, but did not Light Department. He disagreed that the Town of Reading is the stockholders. He feels that the Ad Hoc RMLD Governance Advisory Committee - October 3, 2002 - page 2 ratepayers are the stockholders. He would advocate for more representation on the Governing Board by the communities served, as voting members of the Light Board. He noted a word of caution that any changes contemplated in the governance of the Light Department has to go through the other three towns. They can veto any changes. Mr. Carakotsone indicated that he got interested in the issue because of the Inspector General's report. He has been pleasantly surprised since then. They are a very open staff and Board. He is pleased that the Board has taken actions that they have. He is pleased with the actions of the Acting General Manager. He had some concerns about outside contracts, but his suspicions have been drastically reduced. He was pleased that the RMLB declined to go outside to evaluate the second Inspector General's report - they sent it to the Ethics Commission where it belongs. He noted that existing counsel is talented in some very special areas like rates, etc. He noted that the Acting General Manager's philosophy on budgets is to provide zero based budgets. He noted that the Town of Reading can set up any form of governance, but its only as good as its people. He has seen plenty of cities and towns with the Light Department serving directly under the Town. He is a member of the General Manager Search Committee and noted that this is a very deliberate process. There was discussion about the General search process wand whether it should be moving forward. Mr. Carakotsone indicated that he felt the Governance Advisory Committee would be done before the initial screening on the General Manager Search Committee. John Carpenter noted that any changes that the Advisory Committee will be talking about will be structural changes. The Light Department has become more open because it is under scrutiny. He wants the structure of the Light Department to require openness, rather than to be open because the General Manager wants to. He agrees that the Light Department is a very well run department in terms of the line and staff people who are working day to day. Jim Francis noted that the impact of the Light Department on bond ratings swings both ways. As well as being an advantage, the Town is exposed. The Town Manager noted that most of the questions raised by bond rating agencies for the Town of Reading are about the Light Department. It is not his impression that the Light Department is always viewed as a positive. He cited MWEC as an example. Travers Miller noted that the liability is Reading's. If the bond rating declined because of the Light Department, that would affect Reading only - not Lynnfield, North Reading or Wilmington. Roger Lessard noted that he agrees that the Town of Reading has a liability, which is why he voted against reimbursing the Town of Reading for the Melanson and Heath audit. With regards to comments previously made that 80% of the authority has been seeded to the CAB, if that was the case, the Town of Reading would not have received the reimbursement for the forensic audit. The CAB has made recommendations in accordance with the 20 year agreement and CAB CAB members felt they had, and there was no response. Ad Hoc RMLD Governance Advisory Committee - October 3, 2002 - page 3 John Norton indicated that he was new on the CAB representing North Reading, but he has been involved in North Reading government for a number of years. At one time he indicated that the North Reading Board of Selectmen sponsored a motion to pull out of the RMLD. The issue was the payment in lieu of taxes, and governance. Now he hears from his constituents - "why don't the three outside communities have a vote on the RMLD." He would hope that whatever final outcome would be reviewed with the CAB. He is not totally in agreement with an appointed board. He noted that the governance is up to the Town of Reading, but at some point the issue has to be dealt with regarding members from the outside communities having a specific voice on the Reading Municipal Light Board. Doug Cowell asked how the other communities could justify having a vote, without having any investment. He compared it to a corporation, where the stockholders have the vote - the customers do not. John Corbett indicated that he felt that the Reading Municipal Light Department should be cooperative. The other communities could "buy out" or reduce Reading's debt. Corbett agreed that this would be a long-term issue - not something that could be dealt with immediately. The Town Manager raised the question as to who would be watching such a board. If there was a problem with the Reading Municipal Light Board as a Reading board, nobody would be watching the board if it was a cooperative. Jim Francis noted that he feels that customers are stakeholders, not shareholders. He asked whether the CAB members felt that they should be shareholders and have a vote on N-Star, or other utilities. The way things have been run with the Town of Reading as the owners, serving the customers has been pretty good except for recent events. Arthur Carakotsone noted that if the Town is considering options it should consider a cooperative. John Carpenter reminded the CAB that there have been at least a half dozen motions in the 16 years that he's been a Town Meeting Member to sell the Light Department. Arthur noted that we should put into place a system that stands the best chance of "doing it right." Roger Lessard noted that he felt a seven member Board with three from Lynnfield, Wilmington and North Reading and four from Reading would be appropriate. John Norton from North Reading noted that the CAB has not fully discussed this issue. He feels that the payment in lieu of taxes has helped the situation with the served communities. Enhanced distribution serving North Reading and Lynnfield has also helped. The Light Department has taken strides in reducing frustrations. The Ad Hoc Committee's process has opened a lot doors. Travis Miller does not feel that changing the method of appointment of the General Manager will solve the issue. The problem is that the General Manager, whoever it is, has too much authority. Unless something is done to curtail the outrageous authority of the General Manager, we will not Town functions at all. Ad Hoc RMLD Governance Advisory Committee - October 3, 2002 - page 4 i Doug Cowell noted that if the served communities were going to shop for electricity, what would they look for. They would look for cost and service. All agree that the cost and service of the Reading Municipal Light Department are excellent. Therefore, even though they may not participate in the governance, why would the communities think of going anywhere else? What the Advisory Committee is looking for is any improvements in the manner in which the Reading Municipal Light Department is governed. That benefits the Town of Reading, the other three communities and all customers. Jim Francis asked the CAB if they felt they should be elected. He feels that the CAB is advisory and appointment of an advisory committee works well. Appointment of a Light Board might work well also. The Advisory Committee proceeded to review with the CAB the list of governance options to get their input. The CAB seemed to be in favor of changing to a July I fiscal year, to have the Accounting Manager appointed by either the Town Accountant or the Light Board and to request a simplified and easier to read budget at least in summary form. Other comments were that the RMLB needs to exercise their responsibility to sign warrants and not to delegate this to the General Manager. The CAB was asked if they had discussion on the "outside businesses." They indicated that Rucker had brought the issue to the CAB. It looked like a good package for the RMLD to enhance their services. The CAB was not aware of the General Manager's contract. Joe Veno asked if the discussion on policies was outside the scope of the Ad Hoc Advisory Committee. The Advisory Committee felt that any discussion on these policies would be advisory in nature. The Ad Hoc Advisory Committee noted that they would like Town Counsel to fill in the "legal means" column, but it was suggested that this be deferred until the Advisory Committee narrowed the options down. Jim Francis noted that he was impressed with the CAB and their dedication. Cowell noted that he thought they were a hard working body. Theophanis noted that they did not seem to care if the Light Department was "merged" with the Town. On motion by Francis seconded by Miller the Advisory Committee voted to adjourn at 10:10 p.jq: on a vote of 6-0-0. submitted,