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Home My WebLink About2011-05-25 RMLD Budget Committee Minutes Reading Municipal Light Department Board(RMLD) of Commissioners RMLD Board of Commissioners Budget Committee Minutes Wednesday,May 25,2011 RECEIVE[ Start Time of Regular Session: 6.35 p.m. TOWN GLERK End Time of Regular Session: 7:25 p.m. READING, MAG G Attendees: 2011 JUL 12 P 12; 3 u Committee Members: Philip Pacino,Committee Chair Richard Hahn,Member Mary Ellen O'Neill,Member Staff: Vinnie Cameron,General Manager Jane Parenteau,Energy Services Manager Robert Fournier,Accounting/Business Manager Mr.Hahn in called the meeting to order at 6:35 p.m. Transfer to the Pension Fund Mr. Cameron said that the Committee informational package includes a memo explaining that the RMLD's Pension Trust Fund is being depleted due to the economic climate and rising pension expenses. Mr. Cameron further explained that over the past several years, the RMLD has not transferred sufficient funds into the RMLD's Pension Trust Fund in order to sustain it. Mr. Cameron is asking the Budget Committee to accept his recommendation that the RMLD transfer$1 million from the Operating Fund to the Pension Trust for FY11. Discussion followed. Ms.O'Neill made a motion seconded by Mr.Hahn to recommend to the RMLD Board of Commissioners to transfer$1 million from the Operating Fund to the Pension Trust for FY11. Motion carried 2:0:0. Mr.Pacino was not present for the vote. Review of Draft 2 of the FY12 Capital Budget Mr. Cameron said that it was necessary to create a Draft 2 of the FY12 Operating Budget because there were three changes to it. Mr. Cameron said that the fuel portion of the budget needed to be increased by $942,818 because the Swift River Hydro energy costs were not included in the original budget. The increase in the fuel costs occurred because the Swift River energy is more expensive than the spot market energy, which it will replace. Mr. Cameron also explained that$300,000 worth of FPL Capacity costs were not included in the capacity portion of the power supply budget because the expense was not picked up in the formula in budget spreadsheet. The demolition of the Control Center scheduled for FY11 will not occur until FY12 at a cost of$100,000. The bid to perform the asbestos removal portion of the work had to be withdrawn because it did not meet the needs of the RMLD. The work will be re-bid and is scheduled to be performed in FY12. Discussion followed. Mr. Hahn made a motion seconded by Mr. Pacino to recommend to the RMLD Board of Commissioners to accept Draft 2 of the Operating Budget as presented to the Budget Committee with a Net Income of $3,936,043. Motion carried 3:0:0. Budget Committee Meeting 2 May 25,2011 Ms. O'Neill voiced her concerns that the agenda for the RMLD Board meeting did not have sufficient detail related to the Power and Rate Committee and Budget Committee reports. Discussion followed. At 7:25 pm.Mr. Hahn made a motion seconded by Ms. O'Neill to adjourn the meeting. Motion carried 3:0:0. READING MUNICIPAL LIG H DEPARTMENT To: RMLD Board of Commissioners Date:May 1Q 2011 From: Vinnie Cameron Subject 2011 Pension Fund Transfer In 1966, the Reading Municipal Light Department (RMLD) Board of Commissioners created the Town of Reading Municipal Light Department Employee Pension Trust (Frust) for the purpose of funding the RMLD's annual pension expense for retirees. The RMLD has made withdrawals from the Trust to pay for the RMLD's portion of the Town of Reading pension expense. Over the past several years, the RMLD has seen the Trust balance decline due to the economic pressure in 2008, lower interest rates, and contributions to the Trust not equaling the withdrawals. Additionally, the RMLD's pension expense has increased since 2006 by approximately 44% due to an increase in the amount of RMLD retirees. The RMLD needs to increase its annual contributions to the Trust and also determine if there is a better investment strategy that could bolster the earning power of the fund. �1 RMLD Policy 22— Pension Trust Investments includes certain criteria related to the Trust. The intent of Policy 22 is to ensure that the Pension Trust continues to be a resource to fund the RMLD's annual pension expense. Table 1 shows the actual balances and annual activity in the Trust from 2006 through 2010 with 2011 estimated. The balance in the Trust was over $8 million at the beginrdng of 2005 and has declined since then for reasons mentioned above. Additionally, the number of RMLD retirees has increased and will continue to increase in the coming years, which will increase the pension expense. Table 1 also shows the RMLD's contributions,interest/dividend income earned and the annual withdrawals. The 2010 Actuarial Study for the Trust showed that the RMLD should be contributing between $1.1 million and $1.4 million annually in order to keep the Trust at its present balance. Not following the funding prescribed in the actuarial study will deplete the Trust within three to four years. :oj = B ■ ! ! \k � #\ § i■ ` ! . # J § § ( - It ; aL - -& � a ■ ƒ : ! & k ! J } � CMc ! o} ! } ) \ { In \\ \ } \ Jeanne FoU From: Vincent Cameron ent: Friday, May 20, 2011 2.26 PM To: RMLD Board Members Group; carakatsanelaw@comcast.nek ajcarakatsane@venzon.net; ghooper@townotwilmingtonma.com; tony.capobiancol@gmail.com: taollila@venzon.net Cc: Bob Fournier; Jane Parenteau; Joe Donahoe; Kevin Sullivan; Beth Ellen Antonio; Jeanne Fob; Paula O'Leary Subject: Draft 2 FYI Operating Budget-Summary There has been three updates to the FYI Operating Budget,which will warrant a Draft 2. These updates have been added to the Budget Committee meeting agenda for the meeting prior to the Board meeting next Wednesday, May 25. 1. The Fuel Expense and Fuel Revenue will have an addlfional $942,618. This amount represents the fuel expenses related to the new hydro contracts the RMLD signed in March. The change is reflected in the Fuel Expense total with the line items for ISO-NE Energy and Swift River Hydro. ISO-NE cost went down and Swift River was added for a net increase to fuel of$942,818. Since this is a fuel misted expense the increase effects only the Fuel Expense and Revenue and does not effect the Net Income. 2. The demolition of the Control Center is being re-scheduled until FYI and will be in the Building Maintenance Budget. This building needs to be demolished in two phases due to the amount of asbestos in the building. The RMLD had planned the demolition in FYI t but were rejected for non responsiveness of the bidders. The RMLD intends to rebid this project in in FYI and estimates that the entire demolition of the building will be $100,000, which will be added to the Building Maintenance Budget and will increase Operating Expense by$100,000. . The Budget Summary page(Power Supply)for did not pick up FPL Capexpenses of$330,000, which increases the capacity cost to $17,630,016. The net effect of these changes is that Net Income has decreased from $4,366,041 to$3.936,043 or $429,998. A copy of these pages and the Facilities Budget pages will be circulated after the RMLD Board Meeting on Wednesday. The CAB accepted the original FY12 Operating Budget based on no significant changes. I would like to get feedback form the CAB as to their feeling about these changes. The FYI Operating and Capital Budgets are on the agenda for the RMLD Board Meeting on May 25th. 5'23 2011 g;f 45 ! §AR ■ §J| � t } \ § ! §�R � §a| ( ! % } ®a ( ■ � . . | )qS � �q| \ | \ j �� } " � • � § ( \h\ \ ■ � � , � � , Fill! | f fig * 9 \ | / if 9' . . 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