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HomeMy WebLinkAboutLight Comm Minutes 3/31/1999Light Commissioners Minutes March 31,199 , _ • „ _ i',; i „ r i s i .r r. u Present: Chairman McCarter, Commissioners Amoroso, Robinson, Royle and Wills John D'Agostino, Town Manager i „ i I Jack Beliveau, Director, Light Department Kimberly Stoyle, Accounting Officer, Light Department Jim Noris, Chairman, Finance Committee 1. The meeting was called to order at 7:30PM followed by the pledge of allegiance. 2. Questions and Comments from the Public Regarding Great Waves. (See separate minutes composed by Tracy Perriera) 3. Reorganization of Light Commission Board Chairman Commissioner Amoroso nominated Commissioner Robinson and Commissioner Wills nominated former Chaiman McCarter for Chairman. All were in favor of Commissioner Robinson becoming Chairman of the Light Commission, Clerk Commissioner Royle nominated former Chairman McCarter and former Chairman McCarter nominated Commissioner Amoroso for Clerk. All were in favor of Commissioner Amoroso becoming Clerk of the Light Commission. 4. Pilot Formula Discussion with Jim Noris, Chairman, Finance Committee At our last meeting, we discussed increasing the Light Department's payment in lieu of taxes for fiscal 2000. Two questions were raised, what payments were we making to the Treasurer's office and other town Departments and what were other Municipal Light Department's paying to their host municipalities. With respect to other payments we have made to the Town, I reviewed this with our auditor, Jim Goulet and asked what was common practice in other municipalities regarding payments in lieu of taxes and payments for "town Services ". Of the twelve municipalities Mr. Goulet audits, none separate charges for payments in lieu of taxes and "other payments to the town" as we have in the past. Therefore, I have reclassified expenses in our financial statements to better present the actual payments in lieu of taxes. Last year, we paid the town $631,000 on June 30, 1999. This figure included approximately $320,000 for health insurance, pensions, payroll taxes, workman's compensation insurance and other expenses directly related to payroll. We have classified these expenses as part of our payroll costs. The remainder represents $150,000 in payment in lieu of taxes and approximately $170,000 in other services such as data processing, treasurer's office and the town Accountant. As these charges are part of the services the town provides "in lieu of taxes ", I have classified them as "payments in lieu of taxes ", thus bringing our current total contribution to $320,000 annually. In my discussions with our auditors and other Municipal managers, this methodology is consistent with practice in other towns. With respect to what other Municipal Light Departments are paying to their host communities, North Attleboro is paying $240,000 annually based upon their net plant value of $13,968,000 times the established town tax rate. Hingham is paying $245,000 based upon a plant value of $15,388,295. Shrewsbury is paying $175,000 on a net plant value of $17,000,000. If a similar calculation were used for Mansfield Electric our tax responsibility would be $73,000. Our net plant value is $4,273,000 with a tax rate of $17.07/$1,000. Thus, if Massachusetts Electric, for example, owned the Department, the Town would receive $73,000 in taxes for the plant and equipment located in Mansfield. Conversely, Taunton Electric contributes $2.4 million annually to the city of Taunton based upon a net plant value of $48,000,000 and nothing to the other three communities they partially serve. The contribution by Taunton Electric is in excess of the tax rate. Light Commissioners Mtg. Page I of 3 03/31/99 Shrewsbury contributes a total of $985,000 based upon a net plant value of $17,000,000 as detailed on the attached sheet. $175,000 of this amount is cash and the remainder is through subsidization of streetlights and other services. The Cable operation of Shrewsbury also contributes $550,000 per year. While our cash current contribution is approximately $320,000 and we contribute at least an additional $200,000 in other services. We can afford to increase this amount by $150,000 for the next fiscal year without difficulty. Alternatively, the Light Department is a partner in several Capital Improvement Projects with the town such as a new radio system, telephone system, and global Information system (GIS). If so desired, the Light Department could assume a greater share of support for these projects as an alternative to increasing the payment in lieu of taxes. Other Rational: Mansfield Municipal Light Department is owned by the taxpayers of Mansfield. As such, the taxpayers should expect a return on their investment consistent with a return any other business would produce. This return on investment can be realized both as earnings and dividends. Mansfield's equity interest (or surplus) at year -end was $13,141,045. Last year, our net earnings were $1,070,000 before taxes or 8.1 %, a reasonable return on investment. For a mature business, it is not unusual to pay 50% of earnings in the form of dividends. Thus, Mansfield's taxpayers could reasonably expect a $500,000 return in payments in lieu of taxes and other services provided by the Light Department with the remainder being reserved for capital expansion As our capital expansion budget has been approximately $600,000 per year, a $500,000 payment in lieu of taxes is reasonable. Proposal: To generate the most efficient use of funds, it is proposed that Mansfield Electric Department provide to the Town of Mansfield 40% of its annual earnings in the form of cash and other services. "Other Services" would be calculated annually in accordance with the APPA guide. Shrewsbury, for example already completes such a calculation. Currently, Mansfield Electric is providing approximately $320,000 in cash payments to the town and other services such as street light subsidies, fire alarm maintenance, traffic light maintenance, Christmas Lighting, and reduced cost of electricity to Municipal facilities. When actual expenses and expenditures are identified, the Town was given an amount that likely approached $500,000 last year. If, in the future, this amount is detailed as a total contribution from the Light Department as a fraction of total earnings, the Selectmen may then decide if they wish to devote a portion of that total, street light subsidization and other services traditionally provided and how much they wish to retain in the form of cash to reduce overall Town budgetary expenditures. This method provides better control over actual expenditures and allows market forces to improve efficiency. Before our next meeting, I will provide a complete cost breakdown of the services provided to the Town by the Electric Light Department in accordance with the APPA guide provided to you by Mr. D'Agostino. I will provide a formula, which will reasonably sustain our ability to expand and provide the town with a reasonable return on investment. In the interim, I believe we can provide the $150,000 additional cash payment that the financial committee is seeking for next year. Mr. Noris was asked to speak on a pilot formula for the Light Department. Currently the payment in lieu of taxes are $150,000., Mr. D'Agostino has proposed that that number be increased for FY 2000 to $300,000. Mr. Noris proposed several formulas for calculating payment in lieu of taxes. It was suggested that a meeting between Mr. D'Agostino, Mr. Beliveau, Ms. Stoyle and Ms. Kearney, the Town Accountant be arranged to discuss this further. 5. Discussion with Light Department Director Jack Beliveau Mr. Beliveau updated the Light Commissioners on the status of the following, while referencing his report " Board of Light Commissioners Meeting — 3/31/99" • Generation Issues Next month Seabrook Nuclear will be out of service for a six -week period for refueling. This will be followed by Millstone being out of service for maintenance for six weeks. We receive approximately 50% of our energy from Seabrook. Our marginal cost of power from Seabrook is 0.5 cents per kilowatt-hour. We will have to replace this power at market rates of approximately 2.7 cents per kilowatt-hour. Thus, our cost of purchased power will increase ( by approximately $300,000 as a result of these outages. This cost will directly reduce our earnings. Additionally, on May 1, New England is scheduled to introduce a competitive market for wholesale generation. Purchases on the spot market will become more volatile. Light Commissioners Mtg. Page 2 of 3 03/31/99 Over the past six months, we purchased approximately 25% of our power on a daily basis. This saved us several hundred thousand dollars over utilizing our existing contract with Northeast Utilities, which is priced at approximately 5 cents per kilowatt-hour. Over the next several weeks, I will be working with MMWEC to find the best mix of power commitments to both minimize our cost and minimize our risks. As several million dollars are transacted, effective management in this area will result in several hundred thousand dollars in savings to Mansfield Electric. • Financials This evening we welcome Kimberly Stoyle, our now Accounting Officer, who will present our February financial results. Our February results are $107,336 before taxes and $74,354 after payments in lieu of taxes. Our year to date earnings results are $430,434 before taxes and $372,180 after payments in lieu of taxes. We are currently ahead of our projections for 1999. 6. Review Minutes of February 08,1999 and March 03,1999 Motion: To approve the minutes of February 08, 1999 with the amendment. (Amoruso — Royle) All in favor. Passes Motion: To approve the minutes of March 03, 1999. (Amoruso — Royle) All in favor. Passes 7. Old Business A. Commissioners Commissioner Robinson inquired about the Conservation Audit that was to be done on a residence on Canoe River Road. Mr. Beliveau believes that the audit was performed sometime last week but will follow -up on that with the Conservation Group. B. Director - None 8. New Business A. Director Ray Gouley is, for the sixth year, visiting the Mansfield Schools with his Electrical Safety Program. He has offered to again conduct one for Mansfield's Senior Citizens. In the past it has been presented during a buffet luncheon. The Commissioners agreed that this is a necessary program. There have been some changes to the wording of our bills, which should make it easier for our customers to understand. Citizens will be able to download necessary forms from the WebSite. We are receiving compliments from our customers regarding the timely repair of streetlights. We will notify customers of scheduled power outages on the Web Site. B. Commissioners Commissioner Wills wanted to confirm the Selectmen's Tour scheduled for Saturday, April 10 from 9am -1 lam. Commissioner Amoruso will not be able to attend on that date. Tour rescheduled for Saturday, April 20, Commissioner Robinson noticed on his morning run that the plastic covering on the wires has cracked on a pole at the corner of Essex and Jonathan. He will make note of the pole number tomorrow morning and report such to Mr. Beliveau. C. Date of Next Meeting The next meeting of the Mansfield Light Commissioners is scheduled for Monday, May 3, 1999 at 730pm 9. Adjournment 9:58 PM Motion: To adjourn. (Boyle - McCarter) All in Favor. Passes. Respectfully Submitted, NN Laurie M. Anderson Light Commissioners Mtg. Page 3 of 3 03131/9