HomeMy WebLinkAboutLCMIN008/22/2011Mansfield Municipal Electric Depart ; @t► RECEIVED
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Minutes of Light Commissioner Mee mg
August 22, 2011 2011 SEP 21 A 10. 3b
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Present: Chairman George Dentino, Vice Chairman Kevin Wi`an,'C�1�ilk`(frliw�e�P
Kozlowski, Commissioner Jess Aptowitz, Town Manager William Ross,
Director Gary Babin, Staff Accountant Ken Thomson, and Engineer Chris
Cox
Chairman Dentino opened the meeting with the Pledge of Alliance.
Chairman Dentino stated that the meeting was going to be cut short in anticipation of a
lengthy Board of Selectmen meeting to follow.
Motion: To approve the minutes of July 20, 2011 (Aptowitz/Kozlowski) 4:0 passes
Chairman Dentino asked if there was any discussion. No one had any, but Chairman
Dentino directed a question to Director Babin regarding tracking vehicle use on
individual's timesheets. Chairman Dentino asked Director Babin if the meeting minutes
were correct on that issue. He also asked if any individual was assigned a vehicle.
Director Babin acknowledged that this was correct. He clarified that individuals use only
the vehicle assigned to them. Chairman Dentino then referenced the second paragraph
that states that Director Babin routinely lets Town Manager Ross know when he will be
out of the office and for what purpose. Chairman Dentino asked Director Babin and
Town Manager Ross if that was correct. Both confirmed that this was correct. .
Director's Report
FY11 Financial Results - Director Babin indicated that he will start with the financial
reporting on the results of FYI l Capital and Operating budgets. Engineer Cox presented
the Capital budget and Ken Thomson discussed the Operating budget.
Engineer Cox highlighted the Fl l Capital Expenditures. The FYI l Capital budget was
approved for $1,305,868 while the expenditure was $903,244. There is an FY10
carryover project under "New Vehicles" with an expenditure of $220,229 for a bucket
truck that was budgeted for in FYI but received and paid for in FYI 1. That payment is
included with the FYI l total expenditure of $903,244. The budgeted amount for the
vehicle, however, is not included in the FYI I budget.
As a result, the actual expenditure for FYI l projects alone was $683,015 versus a budget
of $1,305,868 or $622,853 below budget. The fact that the actual cost came in less than
the budget was due primarily to three individual projects. Of the capital projects slated to
be completed, all of them were completed with the exception of three projects.
1. The Otis Street duct line project was budgeted at $300,000 for Phase 1. The work
started on June 13 but because the project was not completed until FY12, the
project was combined with the FY12 authorized amount to get a better price and
make it easier for the neighborhood. As a result it came in $284,764 below the
FYI 1 budgeted amount.
2. During construction of the Riverside and Basin Direct Buried Conduit project, it
was determined during construction that extensive conduit already existed in the
area so the project scope of conduit installation was decreased by 65 %. This
resulted in the project coming in $126,918 under budget.
3. The number of small overhead projects required under the Additional Poles and
Overhead Conductors was far less than projected so this item carne in $115,170
under budget. This was because there was sufficient work to keep the crews
occupied for the year. $82,000 and 411 man hours were charged to this item
These three items totaled $526,852 of the $622,853 for which MMED came in under
budget.
Other projects undertaken were the Balcom Street three phase upgrade project which was
completed; the Maple Street three phase upgrade, performed in preparation of the new
East Mansfield substation, was completed; the East Street three phase upgrade was also
completed; the Riverside and Basin direct buried project was completed thereby
increasing the reliability in this area by putting the underground cable in conduit. The
Otis Street conduit project, Phase I, was not completed during the FYI l year. Instead the
entire Otis Street conduit project has been complete and paid for in FY12. Other notable
work was pole replacement where 45 poles were replaced, 5 over the budgeted 40;
because pole replacement is a good fill -in project.
Director Babin noted that the reimbursable hours tripled. These are the hours MMED
bills the DPW for snow plowing due to the extremely bad winter.
Commissioner Moran questioned how long ago the conduit was put in on Riverside.
Engineer Cox believes it was put in the 70's. He believes it was put in with the intention
of using it at that time but never did. Gary D'Ambra, who knows the system the best, did
not even know of its existence. Commissioner Moran also asked if MMED anticipated
doing more cable and pole work in the coming year in FY12 and whether we need to
budget at the same levels. Engineer Cox said he reduced the budgets for both those
categories in the FY12.
Chairman Dentino questioned if cable was in the conduit. He asked if it was utilized and
what type of conduit. Engineer Cox said that it was suitable to be used, if not it would
have been replaced. The budget called for installation of concrete encased conduit. Test
pits were dug before the project started and existing conduit was found. It was inspected
and was deemed to be suitable for use now.
Town Manager Ross suggested that going forward when we install conduit we will add it
to our GIS system so we know where it is. For example, the conduit that was recently
installed on Otis St. should be included. Engineer Cox responded that it had been
included on GIS.
Chairman Dentin asked Director Babin, regarding the bucket truck that was budgeted in
FY10 but received and paid in FYI 1, what was the budget for it in FY10. He answered
that it was $200,000, but after we got the bids, we came back and asked the Board for an
additional $25,000. Ken Thomas verified that it was originally budgeted at $175,000.
Chairman Dentino questioned where the $175,000 went that was in the FY 10 budget.
Director Babin indicated that it was an FY10 catty over project. Chairman Dentino
questioned why MMED was under the restrictions of a fiscal year versus a calendar year
budget. Director Babin answered that the DPU mandates reporting on a calendar year
basis but years ago MMED changed to a fiscal year to coincide with the town. The DPU
told MMED that it is not limited and can do budgeting on fiscal year basis. It was noted
that Ken Thomson does keep the calendar year figures.
Town Manager Ross indicated that the actual payment of invoices was in FYI 1. The
$175,000 was carried forward as cash that was not expensed in FYIO and we do not
encumber items that we do not have invoices for so we carried the $175,000 forward. It
shows rip in the FYI expenditures along with the additional $55,000 to get it to the
actual purchase price in that year.
Town Manager Ross indicated there are two different scenarios. You have a reporting
year with the DPU where MMED does the financials for the calendar year. But the
budget itself is on the same fiscal year as the town, so the reporting MMED does for the
budget is based on the town's fiscal year and coincides with the town meeting where the
light plant's expenditures are approved. Town Manager Ross stated that anticipated
expenses can only be encumbered on a fiscal year but not calendar year.
Chairman Dentino moved on to question Engineer Cox about the Otis Street duct line
project. He wanted to know why the $300,000 budgeted in FYI has jumped over to
FY12, causing it to be $284,764 below the FYI budgeted amount. Engineer Cox
explained to Chairman Dentino that the work only started on June 13 and the contractor
did not bill MMED for the work until late July.
Chairman Dentin questioned Engineer Cox as why he did not ask the contractor for the
invoices as of June 30 and why the work started so late. Engineer Cox explained that the
bid was a unit price contract. Invoices came in after FYI l was closed. Director Babin
noted that MMED gave the contractor the option to submit progress payment requests,
but they declined to do so. MMED neglected to ask for invoices to close out the year end
and Director Babin indicated MMED can improve in that area.
Chairman Dentino continued to ask why the work was started so late. Engineer Cox
explained that when MMED met with DPW, it was suggested at that time to do the work
during one construction season. MMED had previously told the Board when the FY12
budget was presented that the Manhole and Conduit would be installed in the summer of
2011 but the work would be done at the end of one fiscal year and continue into another.
Director Babin added that the logic was to bid both sections at once in order to achieve a
price advantage. Chairman Dentino asked what the $300,000 figure was based on.
Engineer Cox explained that was for Phase I of a multi year project. In FY12 MMED
budgeted the remaining $750,000 for Phase 2 to complete the Manhole and Conduits on
Otis Street. The FY12 budget was completed before the FYI l project for Otis Street was
bid so there was no cost information available when we did FY12 budget, only the
estimated cost.
Chairman Dentino then went back to ask questions about the bucket truck expense of
$220,229. He noted that the actual expenditure for FYI l was only $683,015 versus a
budget of $1,305,868, or $622,853 below budget. The Otis Street project was budgeted
in FYI at $300,000 and the actual expense was $284,764 under budget so the actual
expense in FYI l was only $15,236.
Director Babin said that those were costs attributed to the project leading up to the
construction. Director Babin responded that MMED presents the budget 18 months
before the work was done and it was a very complex specification but Chairman Dentin
still questioned being $126,000 under budget.
Chairman Dentino moved on to question why MMED was $115,170 under budget for the
( Additional Poles and Overhead Conductors although he realizes that not as many poles
were installed. Chairman Dentino summarized that MMED was far under budget. This
fact bothers him and lie feels it is not good to be 40% under budget. Chairman Dentino is
concerned about carrying over money from one fiscal year to the next because you keep
accumulating money in free cash due to budgeting far over cost.
Engineer Cox stated that MMED has typically used the additional overhead conductors
and underground cable in accounts 364, 365, 366 and 367 as projects to let the line
department have some flexibility during the course of the budget season to add in smaller
projects that don't rise to the level of a large individually budgeted project.
Engineer Cox mentioned that MMED has a schedule of milestones and he was aware that
there was enough money left in the budget. Chairman Dentino reiterated that these were
the MMED's three biggest projects. Director Babin said that MMED will be more
careful with the invoices for projects that may carry over into the new fiscal year. He
indicated MMED should have carried over the money for the bucket truck to FYI 1. He
also noted that MMED staff doesn't overestimate jobs and uses the best information
available. Director Babin feels Engineer Cox and Gary D'Ambra do a very good job in
defining projects and budgeting for these jobs. Estimates for the underground contractors
are currently very low because contractors want to keep their crews working. Director
Babin mentioned that the staff was surprised with the prices received. He expressed to
the Board that he feels MMED does a good job at calculating the budgets.
Chairman Dentino appreciates and is glad that Director Babin will take all his comments
into consideration.
Commissioner Aptowitz stated that the MMED prepares a Capital and Operating Budget,
but does not do a cash flow budget analysis or a monthly or quarterly analysis of
beginning cash and the change of cash in our Capital and Operating budget. There is no
carryover of cash and capital work is performed because we have money in the budget.
Town Manager Ross spoke of the Otis Street project. He stated that when DPW worked
with MMED on that project, DPW was planning to do quite a bit of reconstruction in that
area and asked if the entire project could be completed in one season or one contract.
This was part of the reason for the delay. He noted that the Fiscal Year ends in the
middle of the construction season so it is difficult to get everything done in a single
season by starting in late spring.
Town Manager Ross agreed that working closer with contractors regarding invoices is a
good idea. He also mentioned that the town is receiving excellent bids, not just for
electric work but with the Water Department. He said it's a good time to take advantage
of the situation and get things done at a reasonable cost for the connnunity.
Chairman Dentino reiterated that nothing happened until June 13 °i on Otis Street but went
on to say that the budget went out the previous May. He stated the best season for
construction is August and September season but that nothing happened until June 13°i of
the following year. Chairman Dentino indicated that he will address the bids at a later
time.
Town Manager Ross stated that much of what happened on Otis Sheet was due to
coordinating the work with the DPW to get the extra work done. He stated that he was
involved and felt that it was necessary to do.
Director Babin said that MMED did not just start on June 13, it started six to eight
months before by writing the specification and that Engineer Cox spends a great deal of
time developing the scope of the project, unit pricing, getting the bids, evaluating the
bids. All of this is very time consuming. The process starts far before the construction
starts.
Chairman Dentino indicated that it should not take that long. He feels a large part of the
specification is boiler plate. The aspects of it are items dealt with on a day to day basis.
Director Babin responded that they do the best they can and he feels they do a good job.
Chairman Dentino moved the meeting onto discussion of the Operating Budget.
Ken Thomson, the Staff Accountant presented the Year End Financial Statements to the
Board.
Profit and Loss Statement Highlights
1. Net Income for FYI l was $3,025,578: This represents a 7.6% rate of return. Net
income was $878,000 more than last year.
2. Each of the expense categories; purchased power, transmission, distribution,
customer accounts and A &G were below budget. Depreciation expense was the
same as the budget level.
Purchase Power was under budget by $969,887.
Transmission was under budget by $420,390.
Distribution was under budget by $38,290.
Customer Accounts was under budget by $31,334.
Admin and General were under budget by $127,884.
Depreciation was the same.
3. Total metered sales were up 2.4% despite the fact that the ADM Cocoa plant has
closed during the year.
Balance Sheet Highlights
4. Operating Cash has increased by 48% in FYI I to where the current level is over
$8,500,000.
5. The Depreciation Fund has increased by 27% in FYI l to where its current level is
almost $6,300,000 as opposed to $5,000,000 at the end of FYI 0.
6. In the Liabilities and Surplus section, the Year to Date Charge in Surplus is the
current fiscal year net income. The Unappropriated Earned Surplus represents prior
year's net income accumulated into one number. Some call this Net Worth or
Retained Earnings but we call it Earned Surplus.
Commissioner Aptowitz had a few questions. The first question was regarding the
adjustment for the capitalization of Substation costs, asking whether this should be a
journal entry against Retained Earnings because it was a prior year expense. He noted
the entry was shown in FY11. After discussion this item, it was determined that the
handout had a typo and should read "were capitalized in FY10" not FYI 1.
Commissioner Aptowitz then noted again that the cash is very high at about $14 million.
Chairman Dentino postponed this topic tonight, but Mr. Aptowitz would like it on the
record that we need to look at this. The good thing is that the light department is making
money and giving a return back to the customer. Reducing your expenses is a good
thing. Lastly, Aptowitz asked if MMED was ready for the June 30, 2011 audit. Director
Babin indicated that the inventory check was done with the auditors on July 1. One last
question for Ken Thomson was if he reconciles with the Town Accountant the balance of
cash. Ken acknowledged yes that he does that while Director Babin noted that it was
done on a monthly basis.
Commissioner Moran stated that with the way transmission costs are increasing he was
surprised that it is under budget but this is something to be addressed when the rate study
is performed.
Director Babin said the cost of service assumes a certain level of expenditures on the
capital side as far as your cash requirements. Transmission did come in less than
projected but was still 20% more than the prior year. When the East Mansfield substation
goes into service MMED will have to pay an additional transmission charge for local
network service.
East Mansfield Substation Update - Director Babin then gave a summary of East
Mansfield Substation Project.
He said significant progress has been made in the work required to construct the East
Mansfield substation. The easement agreement with National Grid for the rights to use
the land on Bird Road to construct the substation has been executed and the agreement
was recorded at the Bristol County Registry of Deeds on July 28. It cost MMED
$187,500 for the easement. He noted that Town Counsel worked closely with National
Grid's attorney on the closing.
Director Babin stated that the Bird Road duct line installation project was awarded to
Pavao Construction of Dighton, Massachusetts. The cost of the bid is $368,401, which
was $491,594 less than the budgeted amount of $860,000. This figure does not include
the cost of police details, which MMED will pay directly, or the cost of paving that the
DPW may require above and beyond what is budgeted. The pricing is indicative of the
lack of work available for contractors engaged in this type of activity. This is a
preliminary project cost for manhole and conduit installation. There will be extensive
reconstruction to the street after the conduit is installed. Due to the extensive work, it is
expected that the entire roadway will need to be repaved.
Chairman Dentino questioned sharing the repaving costs with the water department.
Town Manager Ross stated that after the construction, there won't be much roadway left.
It was questioned whose budget the repaving cost will come from.
The bid for the two transformers required for the project was awarded to Virginia
Transformer Corporation of Roanoke, Virginia. The cost of the bid is $1,507,574, which
was $992,426 less than the budgeted amount of $2.5 million.
The Bid for the switchgear required for the project was awarded to AZZ /Central Electric
Company of Fulton, Michigan. The cost of the bid is $1,025,549, which was $134,451
less than the budgeted amount of $1.16 million.
Engineer Cox noted that overall the bids have come in $1.6 million under budget for
major items to date.
Engineer Cox also added that last Wednesday MMED opened the bids for the 15KV
circuit breakers and some outdoor bus work. The budget was $460,000 and he feels the
final cost will be around $430,000. This, too, will be slightly under budget. He noted
that these are all the material and equipment bids to date. Engineer Cox also mentioned
that MMED hoped to start the abutter's plantings this fall. The abutters were notified
MMED would be doing this before construction. This will enable the plantings to get
established before construction begins.
Commissioner Aptowitz questioned what was left to do before construction. He asked
about the wall color and the landscaping.
Engineer Cox indicated that items like the wall color fall under the Construction bid. He
had just received the landscape documents for the abutter's property and will be
reviewing them with Director Babin. After review, Gary and Chris anticipate meeting
again with the abutters.
Director Babin added that the Wednesday following this meeting, Engineer Cox has set
up a meeting with the Police, Fire, the bus company, and the School Department to
discuss the major rerouting of the traffic on Bird Road to accommodate construction
during the work day. MMED has placed a notice in the local paper and on the local cable
station informing the residents about the road closure. Engineer Cox plans to meet with
the appropriate parties for the detour route. This will all be done after reviewing the plan
with the School Department.
Commissioner Kozlowski asked Engineer Cox why the transformer bid came in 60%
lower than anticipated.
Engineer Cox responded that the engineering consultant PLM had told him it was so low
due to the manufacturer having a slot in their production schedule. In fact,. the
transformer is scheduled to be ready a month before we need it so MMED was lucky with
their plant scheduling. He also noted that the transformers will be shipped by truck
versus rail. Town Manager Ross mentioned that the manufacturer had very good
references.
Commissioner Moran stated that he is still in disbelief that the construction is really
starting since it's been 4 years in planning. He asked Director Babin and Engineer Cox
how long the construction process for the Bird Road ductline will take. They responded
that they thought it was a 8 to 12 week timefiame. Engineer Cox did indicate that they
may hold off construction until after the first week of school to be considerate to the
parents. Commissioner Moran questioned if National Grid will be ready when the
construction was complete to tie the lines into the substation.
Director Babin said that he has no doubt that National Grid will be ready. They have a
six step approval process and they have known about this project well in advance. He
feels that National Grid did a great job with their DPU filing and he is confident that they
will do a good job.
Commissioner Aptowitz noted that the bids are significantly under budget but his concern
is who will be responsible for quality control on the project.
Engineer Cox responded that witness testing will take place before the transformer is
shipped. Allan Rice from PLM has experience in this area but it has not been discussed
who will go. This will be added expense to go to the factory but it has been budgeted. It
was asked why only MMED wouldn't go but Director Babin indicated that MMED does
not have the expertise with such testing.
Chairman Dentino raised many questions regarding the bids. He stated that all the bids
came in under budget. The duct line project 57% under budget and the transformer bid
was 40% under and that the switchgear bid was low. He found it hard to believe that the
bids were so low. His opinion is that it is not because the market is soft; it is because the
budgets were so much higher than they should have been.
Town Manager Ross said that he can't argue with the Chairman Dentino's statements but
these estimates were done by our consultants, not by staff. Staff did review them but the
actual budget amounts came from our consulting engineer who had previous experience
with building projects of this nature.
Town Manager Ross did indicate that after reviewing all the bids, several of the
transformer bids were much closer to the estimates. He added that there is a significant
mark tip on these items when the economy is good. Chairman Dentino still argued that
consultants are known to build up their numbers. Commissioner Moran added that there
will be other costs for asphalt, 12 weeks of police details and other restoration costs for
the Bird Road ductline project. Director Babin added that extra costs could occur due to
unforeseen problems such as boulders underground, uneven paving, etc.
Town Manager William Ross thought that once we have all the construction costs, the
staff needs to provide a complete analysis along with any additional costs. It would then
be revisited with respect to how to plan to pay for this and whether to borrow part of it
because the costs are coming in far less than what was expected. The Light Commission
needs to give us their view on the bond issue or paying cash since it is coming is so much
lower.
Old and New Business - Chairman Dentino asked if any old or new business.
Commissioner Aptowitz mentioned that he has spoken with Town Manager Ross about
the street light issues and that he had received many calls from residents complaining.
Town Manager William Ross commented that he has spoken with the Police Department
asking that they report to MMED any lights that are out. He would like to provide more
feedback to the Police if a light is permanently off and get the lights fixed as soon as
possible. He also mentioned that State Law mandates that streets lights have to be paid
from the General Fund and that regardless of how much money the Light Department
has, taxpayers have to pay for them.
Olivier Kozlowski questioned the solar bids due date. He questioned if there were
enough time to award and have work performed by the end of the year.
Director Babin and Town William Ross assured him that there was enough time.
Motion to Recess at 8:25 PM (5:0 passes)
Respectfully submitted: Nancy Olson 9/12/11
Signature of Clerk Date of Approval