Minutes

These minutes are the official minutes of the MSC's June 2008 meeting held June 11, 2008 as approved at the Commission's July 22, 2008 meeting.

Minutes of the regular monthly meeting of the Municipal Services Commission held June 11, 2008 at the office of the Commission, 216 Chestnut Street.

The meeting was called to order at 9:30 A.M. with Robert S. Appleby, President, Commissioner, presiding.

Attendance Report:
Present:

Robert S. Appleby, President, Commissioner
H. Hickman Rowland, Commissioner
Daniel F. Knox, Commissioner
Francis L. Patterson, IV, Secretary

Special Guest: Donald A. Reese, Councilman

MINUTES

With the concurrence of all the Commissioners the minutes of the May 13, 2008 regular monthly meeting were approved without alterations.

SECRETARY'S REPORT

Secretary Patterson reported Commissioner Appleby and he attended the Delmarva Power customer meeting in Ocean City Maryland on May 15, 2008. The Secretary said Delmarva discussed the transmission upgrades they have made on the Delmarva Peninsula and their MAPP project which proposes to build a transmission line from Calvert Cliffs in Maryland across the Chesapeake Bay to the Delmarva Peninsula. They also presented their case for buying energy from land based wind projects versus the offshore Blue Water Wind project. Delmarva told the audience they are preparing to enter into 15 to 20 year contracts for land based wind energy and felt that this satisfies their obligation under state legislation which required them to negotiate with Blue Water Wind but to take price to the customer into consideration in acquiring energy supply.

The Secretary said at the May 21, 2008 DEMEC meeting in Smyrna President McCullar made a presentation on energy supply. He illustrated how the cost of fuel is affecting the ability to purchase congestion hedges and how it is affecting the price DEMEC must pay in congestion charges. The Secretary said he forwarded the Commissioners an electronic copy of President McCullar’s power point presentation. DEMEC requested a raise in energy charges from $83.95 to $88.90 a megawatt hour. The Secretary said a portion of the increase is capacity charges which are expected to continue to increase. The Secretary said the participating Municipal Board members who receive power supply from DEMEC approved the increase.

The Secretary said the issue of whether DEMEC should purchase an office building and warehouse in the Smyrna Business Park was the next most important item on the DEMEC agenda. Each member was polled on their opinion and in a roll call vote seven of nine members voted yes with Newark and Clayton voting no. The Secretary said the opinion of most members was the building is a bargain, financing was at an all time low, and there were tenants to offset the expense which made it a good investment as well as serving a need of providing DEMEC with offices.

The Secretary said Supervisor Spicer and Supervisor Guyer met with Bob Cannon of Carew Associates on Thursday June 5, 2008 to discuss electric issues surrounding service to Riverbend in Old New Castle subdivision. The Secretary said he was attending a meeting in Dover and did not participate. The Secretary said Mr. William Witches and a Delmarva Power gas representative also attended the meeting. Supervisor Spicer said the conceptual plans which were presented did not include items Mr. Witches and Mr. Capano have been told in the past they must include, such as access roads which will allow the MSC to service the underground electric. Subsequent to that meeting Supervisor Guyer reported he received a call from Mr. Capano the afternoon of June 5, 2008 where her felt Mr. Capano was trying to bully and dictate to him what the MSC was going to accept for the supply of water. Supervisor Guyer said he told Mr. Capano what the MSC requires and Mr. Capano said he would have a plan in seven days. Commissioner Appleby asked if Mr. Capano provided the $75,000 for construction of the aerial electric service from Washington Street to below Dobbinsville. Secretary Patterson said he did not. The Secretary told the Commissioners as a courtesy he sent an e-mail to Mr. Corrado of Parkway Gravel reminding him of the Commission’s offer and that the offer expires June 6, 2008. The Secretary added Mr. Corrado forwarded the e-mail to Mr. Capano but the Commission never received a check.

The Secretary informed the Commissioners that Burris Logistics executed and returned the water and electric interconnection easement documents for Centerpoint Business Park and Riverbend in Old New Castle. The Secretary had President Appleby sign the easement on behalf of the MSC. The Secretary said he has not heard from Paul McConnell’s representative Shona Grace regarding the easement sent to her. The Commissioners directed the Secretary to have City Solicitor Roger Akin contact Mr. McConnell.

The Secretary told the Commissioners Supervisors Guyer, Spicer and he met with David Sills and Thad Kush of Daystar Sills and Jeff Bergstrom, Building Official June 2, 2008. Mr. Sills asked the Commission to waive it rules of service and allow the Pencader Charter School serve water and electric from one subdivided lot to another subdivided lot. Commissioner Appleby explained the issues behind the request and expressed his opinion about the problems this creates for the MSC. Upon motion made and unanimous approval the Commissioners denied Mr. Sills request. Secretary Patterson said there is an outstanding issue where Mr. Sill’s electric contractor Kevin Creek promised to provide a replacement switch gear if the MSC allowed Mr. Sills to use its switch position for the Parole and Probation Building. Mr. Sills said he never ordered the switch gear Mr. Creek promised.

The Secretary asked Councilman Reese if he had any updates from Council to report. Councilman Reese told the Commissioners about different housing projects the city has been asked, or may be asked to act on, in the west and south ends of the city. The Commissioners speculated on the number of housing units the MSC will need to provide for. A discussion of the timely need for construction of the new substation to meet the growing demand ensued. Secretary Patterson said he is working with City Administrator Thomas on the Cricket and Metro cell tower support facilities leases.

The Secretary updated the Commissioners on developing a quarterly public relations news letter and said that City Administrator Thomas had broached the subject with Council. The Secretary said he felt the city could replace the annual calendar with something that was more current. The Commissioners asked if it would replace the monthly letter the City Administrator encloses in the MSC billing. The Secretary said he didn’t think so but that would need to be decided. The Secretary said he is trying to arrange a meeting with Cynthia Marshall and possible City Administrator Thomas and maybe Secretary McDonough of the Trustees to discuss the size and scope of a quarterly report. The Secretary said the design and size affect whether this can be published in house or must be sent to a printer. The Secretary added he talked with Ricoh Copier and they have increased the size of the unit they would recommend if the MSC publishes in house, which adds an additional six thousand dollars to the price of a new unit.

The Secretary gave the Commissioners a written report from Supervisor Spicer on electric and Supervisor Guyer on water to read at their convenience. The Secretary said Supervisor Guyer is moving ahead on the buildings for Frenchtown Road and Gray Street. Design materials were submitted to the Trustees and after consultation with Mike Cirillo of Cirillo Brothers, Inc. Supervisor Guyer decided to sub out the excavation work at Gray Street. After a site meeting with MSC’s water engineering consultants it has been decided an addition to the School Lane facility will not be necessary. The engineers feel they can reconfigure all the necessary piping and controls and treatments  within the existing buildings.

The Secretary concluded by telling the Commissioners a Delmarva Power electric outage is most likely responsible for a relay failure at School Lane treatment facility which has shut down the pump on the School Lane well. The Secretary said Supervisor Guyer is operating off the Frenchtown Road well and is trying to make up water in the million gallon water tank.

OLD BUSINESS

The Secretary reported on the progress for the new substation. He told the Commissioners he received two contracts from Norm Baron of Quad 3 Group for engineering services. One quote is for the portion the MSC is responsible for and the other is for the portion DEMEC is building. The quotes are FOURTY THOUSAND and ONE HUNDRED NINETY THOUSAND DOLLARS respectively. The Commissioners questioned the scope of services and said they felt it was reasonable. The Secretary said he would review the contract with Supervisor Spicer and President McCullar of DEMEC.  The Secretary said he had an initial meeting with the Commission’s attorney Dan McCollom regarding the Service Agreement DEMEC drafted for the new substation which resulted in a subsequent meeting with Patrick McCullar of DEMEC, Tim Frey of Saul, Ewing, Dan McCollom of Morris James and Comptroller Patone and himself. The Secretary said the discussion was to clarify how the Service Agreement should be worded to conform with DEMEC’s and the MSC’s charters and to reflect the obligations for the maintenance and operation of the substation and payments to retire the bonds DEMEC will issue to build the substation. Tim Frey said that DEMEC’s charter had to prevail since they would build and own the substation. The question of whether the agreement constituted a capital lease arose and was discussed at length.
 

CONFERENCE CALL TO PARTICIPATE IN A SPECIAL BOARD MEETING OF DEMEC TO DISCUSS DEMEC’S ENERGY PURCHASE AGREEMENT WITH BLUE WATER WIND

The Commissioners interrupted their Board meeting to participate in a Board meeting of DEMEC by telephone to discuss negotiations State Senator DeLuca was conducting between, Blue Water Wind, Delmarva Power, DEMEC and the State of Delaware to bring about an agreement which would result in the construction of a wind powered resource being built off the coast of Delaware.

President McCullar described the original negotiations between DEMEC and Blue Water Wind and DEMEC’s subsequent agreement to purchase power should the project be built. He than described the nature of current negotiations and Senator DeLuca’s request that DEMEC increase the amount of energy they would purchase from Blue Water Wind.

The DEMEC Board discussed the request and what DEMEC could do to further the negotiations with out over committing the Municipalities to an inequitable share of the project. After a lengthy discussion the DEMEC Board authorized President to increase the share of Blue Water Wind energy the Municipalities were willing to purchase.

RESUMPTION OF OLD BUSINESS

Secretary Patterson said he received a copy of a complaint and the filed decree in the Carolina Transformer matter from the MSC’s attorney Matthew Lintner at Morris, James. Mr. Litner said he will forward the final decree as soon as he gets it. The Secretary said the complaint is filed against those parties who refused to participate in the settlement offer. The Secretary said Newark, Dover, Middletown and New Castle settled.

NEW BUSINESS

The Secretary directed the Commissioners attention to the Summit Financial actuarial report. The Secretary said the Commission’s obligation is fully funded and there is a decrease to meet the current year’s obligation. The Commissioners directed the Secretary to fund the current year’s pension contribution in accordance with the amount recommended in the report. The Secretary said he also enclosed a copy of a review of the Commission’s pension investments for their evaluation.

The Secretary told the Commissioners he reinvested a portion of the Commission’s reserve in a six month CD at 3.05% interest.

The Secretary described his actions in regards to an expansion of the Farmer’s Market which was brought to his attention by Mr. Richard Stat who is the principal of 326 Associates. Mr. Stat’s plan calls for a new electric service for the Framer’s Market and the new addition. The issue the Secretary said was whether the nature of the change was sufficient to require Mr. Stat to become a customer of the MSC. The Secretary said from his perspective it was and he met with Delmarva Power to discuss this. The Secretary said Delmarva Power disagreed and felt though it is clearly the MSC’s service territory it is still a grandfathered service subject to the buyout provisions MSC and Delmarva are a party too. The Commissioners discussed the logistics of serving the Farmer’s Market and other businesses in the Airport Plaza complex. The Secretary said he requested Supervisor Spicer get a number from Delmarva Power on the cost to rebuild their pole line along Route 273 from Centerpoint Blvd. to Quigley Blvd so the MSC can under-build and pick up on its system the Frenchtown Road well and be in a position to serve other Airport Plaza properties. The Secretary said Delmarva Power estimated $280,000 to replace the poles. He continued and said he doesn’t have numbers for the MSC’s portion. The Commissioners expressed interest in completing the electric loop they started and being in a position to serve additional properties but asked the Secretary to develop additional numbers for their consideration.

Secretary Patterson addressed the DEMEC cost of power increase from $83.95 a megawatt hour to $88.90 a megawatt hour which was approved at the May 21, 2008 DEMEC Board meeting. The Secretary told the Commissioners he inquired how other Municipalities intended to pass the increase on to their customers. The Secretary said many intended to pass it on through the Purchase Power Adjustment (PPA) clause of their tariff. The Secretary said he felt the PPA was designed to address spikes in power cost that are considered to be of a short duration. The Secretary continued and said he does not believe the current increase is of that nature but reflects a new base level of the cost of energy which will continue to climb. He recommended the Commissioners adjust rates instead of passing the increase on through the PPA. The Secretary told the Commissioners that the Greenhouse Gas Initiative is likely to add additional energy costs by December of 2008. The Commissioners discussed their options and expressed concern that customers may perceive the increase is due to the cost to build a new substation. The Secretary said he addressed this in his announcement to the public about the new substation that the Commission will not increase operational cost to pay for the substation but will only adjust rates for increases in the cost of energy. The Commissioners reviewed revenues from different classes of customers and asked the Secretary to develop some options for their consideration  

REVIEW OF FINANCIAL REPORT

The Secretary advised the Commissioners that Comptroller Patone and Bookkeeper Mary Jane Stubs will be attending an ADS accounting software conference in Maine. The Secretary said they will leave June 19^th and return June 20, 2008. The Secretary also advised the Commissioners that in July he will be on vacation a part of the month and has a medical procedure at the end of the month that will take him out of the office for 5 days. Comptroller Patone joined the meeting to present the monthly financial statements.

The Secretary asked Comptroller Patone to discuss what constituted a capital lease with the Commissioners before she started her financial report. Comptroller Patone reviewed with the Commissioners accounting principals and what constitutes a capital lease. The Secretary said Comptroller Patone questioned the nature of the Service Agreement and whether it was a capital lease. Secretary Patterson said since the Commission does not take ownership of assets, they reside in the name of the Mayor and Council of New Castle, the Service Agreement should be booked as an operational expense. Comptroller Patone said this is consistent with the way the accountants have treated the Utility Building at 100 Municipal Blvd. The Commissioners agreed and said at the end of the Service Agreement DEMEC will turn the substation over to the Mayor and Council of the City of New Castle.

Comptroller Patone reviewed the monthly financial statement and said she added several footnotes to explain some differences the Commissioners will notice from the previous month’s statement. The first she said is the Developer’s Deposits which have been adjusted downward to account for fiscal year 2008 activities and the second was a minor adjustment of $376.52 from the previous months report.

Upon motion made and unanimous approval, the Commissioners accepted the financial report for the month of May and approved the payment of the May bills attached hereto.

Comptroller Patone gave the Commissioners an update on the audit. She told them that field work began May 28 and ended June 10, 2008. She continued and said both the auditors and she felt things went smoothly and Michelle Cross who is the manager of the project will now review the field work. Comptroller Patone added there are adjustments which will need to be made to address accounting practices which the MSC has had in place but need to be corrected which will be addressed as she has more time to work with staff.

The Secretary and Comptroller informed the Commissioners they have sought an opinion from the MSC’s attorney regarding their obligations under the State of Delaware escheat laws to address deposits and over payments the Commission has been carrying on its books.

The Comptroller said at the last meeting she mentioned fixed assets and inventory. She added she found some inventory that had not been but on the books which should lessen the adjustment to reconcile the two. Commissioner Knox asked if she still expected to restate last year’s earnings. The Comptroller said she did expect to restate the previous year’s earnings and the Commissioners will be able to review a list of any adjustments that have been made.

Commissioner Appleby asked when she expected the audit will be complete. She said the Commissioners should see a draft by their next meeting and it should be complete by the end of July.

JUNE MEETING

The Commissioners set the date of the next monthly meeting to be July 17, 2008 at the office of the Commission, 216 Chestnut Street.

ADJOURNMENT

By motion made and unanimous approval, the Commissioners voted to adjourn.

 

 

 

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