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HomeMy WebLinkAbout5-24-22 Board of Water and Light Approved by the Board of Commissioners 07-26-22 MINUTES OF THE BOARD OF COMMISSIONERS MEETING LANSING BOARD OF WATER AND LIGHT _________________________________ May 24, 2022 _________________________________ The Board of Commissioners met at the Lansing Board of Water and Light (BWL) Headquarters-REO Town Depot located at 1201 S. Washington Ave., Lansing, MI, at 5:30 p.m. on Tuesday, May 24, 2022. Chairperson David Price called the meeting to order at 5:30 p.m. Acting Corporate Secretary, Maria Koutsoukos, called the roll. Present: Commissioners David Price, Beth Graham, Dusty Horwitt, Tony Mullen, Tracy Thomas, and Sandra Zerkle. Non-Voting Commissioners present: Douglas Jester (East Lansing), Larry Merrill (Delta Township), and Brian Ross (DeWitt Township) Absent: Commissioners Semone James and DeShon Leek Acting Corporate Secretary Koutsoukos declared a quorum. The meeting attendees recited the Pledge of Allegiance. APPROVAL OF MINUTES Motion by Commissioner Thomas, Seconded by Commissioner Graham, to approve the Board Meeting Minutes of March 22, 2022; the Special Board Meeting Minutes of April 26, 2022 and the Special Board Meeting Minutes of May 3, 2022. Action: Motion Carried. PUBLIC COMMENTS ON AGENDA ITEMS Randy Dykhuis, Lansing, MI, requested slides from the presentations at the May 10, 2022 COW meeting to be placed on BWL website. COMMUNICATIONS Electronic mail received from Gerald Williams regarding recent power outage. - Referred to Management. Received and Placed on File. Electronic mail received from Aaron Jackson regarding Smart meter installation. - Referred to Management. Received and Placed on File. Electronic mail received from Dana Perrien regarding Smart meter installation. - Referred to Management. Received and Placed on File. Electronic mail received from Jessica Melendez regarding water bill. - Referred to Management. Received and Placed on File. Electronic mail received from Heather Douglas regarding BWL renewable energy. - Referred to Management. Received and Placed on File. COMMITTEE REPORTS Human Resources Committee Chairperson Tracy Thomas presented the following Human Resources Committee Reports: HUMAN COMMITTEE Meeting Minutes March 31, 2022 The Human Resources Committee of the Lansing Board of Water and Light (BWL) met at the BWL Headquarters-REO Town Depot located at 1201 S. Washington Ave., Lansing, MI, at 4:00 p.m. on Thursday, March 31, 2022. Human Resources (HR) Committee Chairperson Tracy Thomas called the meeting to order at 4:01pm and asked the Acting Corporate Secretary to call the roll. The following members were present: Commissioners Tracy Thomas, Dusty Horwitt, DeShon Leek, David Price and Voting Alternate Commissioner Sandra Zerkle. Also, present: Commissioner Semone James, Executive Director of Human Resources and Labor Relations, Michael Flowers and Global Business Resource Group, William Brewer. There was a quorum for the March 31, 2022, HR Committee meeting. Absent: None Public Comments There were no public comments. Motion by Commissioner Thomas to remove the minutes from the agenda to allow for amendments to be made. Seconded by Commissioner Price. Motion passes. Interview Candidates for the Charter Appointed Position of Corporate Secretary The Human Resources (HR) Committee interviewed three candidates for the Charter Appointed position of Corporate Secretary, in accordance with Section 5-202.2 of the Lansing City Charter, which states: “The Board shall appoint a Corporate Secretary who shall report directly to the Board. The Corporate Secretary shall serve at the pleasure of the Board.” Mr. Brewer discussed with the Commissioners the process for interviewing the three candidates. Commissioner Thomas covered with the committee the agenda, timing, importance of this position and the next steps for the Corporate Secretary role. The HR Committee members presented the three candidates with hypothetical situational questions as well as questions about previous experiences in particular work areas. At the liberty of HR Committee Chair Thomas, the Human Resources Committee meeting recessed upon the conclusion of each interview to allow the interviewing candidate to exit. Upon conclusion of each interview, the Human Resources Committee completed the rubrics scoring and deliberated on each candidate. The meeting reconvened at the arrival of the next interviewing candidate. Once all three interviews were completed, the following motion was offered upon conclusion of deliberations: to forward Ms. LaVella J. Todd for full board review for Corporate Secretary for fiscal year of 2022 with clarification from Mr. Matus (BWL General Counsel) on review of timing. Mr. Flowers will check with Mr. Matus and report back to HR Chair Thomas. Motion made by Commissioner Price, Seconded by Commissioner Horwitt to submit by Resolution the selected candidate for the Charter appointed position of Corporate Secretary, to the full Board for consideration. Motion passes. Should there be a special meeting in April for full board review? Before the COW meeting? Yes, there should be a special meeting for full board review. Still to be completed before position is offered will be: Mr. Matus to review timing/contract References checked Background check completed Other None Adjourn Motion made by Commissioner Thomas, Seconded by Commissioner Leek, to adjourn the meeting. Action: Motion Carried Meeting adjourned at 7:01p.m. Respectfully Submitted, Tracy Thomas, Chair Human Resources Committee HUMAN COMMITTEE Meeting Minutes April 26, 2022 The Human Resources Committee of the Lansing Board of Water and Light (BWL) met at the BWL Headquarters-REO Town Depot located at 1201 S. Washington Ave., Lansing, MI, at 1:00 p.m. on Tuesday, April 26, 2022. Human Resources (HR) Committee Chairperson Tracy Thomas called the meeting to order at 1:00 p.m. and asked the Interim Corporate Secretary to call the roll. The following members were present: Commissioners Tracy Thomas, Dusty Horwitt (arrived at 1:01 p.m.), DeShon Leek, David Price and Voting Alternate Commissioner Sandra Zerkle. Also, present: Commissioner Semone James, Executive Director of Human Resources and Labor Relations, Michael Flowers, Global Business Resource Group CEO, William Brewer, and CFO Heather Shawa. There was a quorum for the April 26, 2022, HR Committee meeting. Absent: None Public Comments There were no public comments. Approval of Minutes Motion by Commissioner Price, Seconded by Commissioner Leek to approve the minutes from the March 17, 2022 and March 31, 2022 HR Committee Meetings. Action: Motion carried. Interview Candidates for the Charter Appointed Position of Internal Auditor The Human Resources (HR) Committee interviewed two candidates for the Charter Appointed position of Internal Auditor, in accordance with Section 5-202.2 of the Lansing City Charter, which states: “The Board shall appoint an Internal Auditor who shall report directly to the Board. The Internal Auditor shall serve at the pleasure of the Board.” Mr. Brewer discussed with the Commissioners the process for interviewing the two candidates. The HR Committee members presented the two candidates with hypothetical situational questions as well as questions about previous experiences in particular work areas. HR Committee Chair Thomas recessed the Human Resources Committee meeting upon the conclusion of each interview to allow the interviewing candidate to exit. Upon conclusion of each interview, the Human Resources Committee completed the rubrics scoring and deliberated on each candidate. The meeting reconvened at the arrival of the next interviewing candidate. Once both interviews were completed, a motion was offered upon conclusion of deliberations to recommend Mr. Frank Macciocca to the full board to review and approve as Internal Auditor for fiscal year of 2022-2023. Motion made by Commissioner Price, Seconded by Commissioner Leek to recommend Mr. Frank Macciocca for the Charter appointed position of Internal Auditor by Resolution and forward to the full Board for consideration. Action: Motion carried. The Commissioner discussed that the candidate will be given a conditional offer of employment, references will be checked, a background check will be completed and a pre-employment physical will be required. Other There was no other business. Adjourn Motion made by Commissioner Price to adjourn the meeting, Seconded by Commissioner Leek. Action: Motion Carried The meeting was adjourned at 4:47 p.m. Respectfully Submitted, Tracy Thomas, Chair Human Resources Committee Committee of the Whole Chairperson Sandra Zerkle presented the Human Committee of the Whole Report: COMMITTEE OF THE WHOLE Meeting Minutes May 10, 2022 The Committee of the Whole of the Lansing Board of Water and Light (BWL) met at the BWL Headquarters-REO Town Depot located at 1201 S. Washington Ave., Lansing, MI, on Tuesday, May 10, 2022. Committee of the Whole Chair Sandra Zerkle called the meeting to order at 5:30 p.m. and asked the Acting Corporate Secretary to call the roll. Present: Commissioners Sandra Zerkle, Beth Graham, Semone James, DeShon Leek, Tony Mullen, David Price and Tracy Thomas, and Non-Voting Members: Larry Merrill (Delta Township), Douglas Jester (East Lansing), and Brian Ross (DeWitt Township) Absent: Commissioner Dusty Horwitt The Acting Corporate Secretary declared a quorum. Public Comments There were no public comments. Approval of Minutes Motion by Commissioner James, Seconded by Commissioner Thomas, to approve the Committee of the Whole Meeting minutes of March 8, 2022. Action: Motion carried. The minutes were approved. Chair Zerkle introduced and welcomed the new Corporate Secretary, Ms. LaVella Todd, and the new Internal Auditor, Mr. Frank Macciocca. Energy Presentation General Manager Dick Peffley provided a background of BWL’s move toward carbon neutrality and presented market structure and requirements, current market conditions, technology comparison and the BWL portfolio on energy. GM Peffley highlighted the following: 1) the regulatory framework and the MISO market footprint under market structure and requirements which includes delivering electricity to customers and reserving enough generation for peak demand; 2) the average cost of energy supply, recent market changes in energy prices, the costs of capacity and transmission under current market conditions which includes noting that energy, capacity and transmission prices are increasing, and that local energy and capacity avoids expensive transmission; 3) energy output and energy profiles under technology comparisons which includes intermittent energy, limited credit for capacity given by MISO, and external sourcing being needed due to size of land for solar and wind, and; 4) current and projected energy and capacity needs under the BWL portfolio which includes BWL experiencing an unprecedented load growth, and the acceleration of coal plant retirements requiring replacement. GM stated that BWL’s goal of carbon neutrality by 2040 will be met. Vice Chair Zerkle asked whether there would be a rate increase with the recent market, energy, and technology changes. GM Peffley responded that there wouldn’t be a rate increase for customers due to the changes but there will be a minimum increase in the electric rate discussed in the Finance Committee Meeting. Vice Chair Zerkle asked whether customers would incur any of the costs for the new plants. GM Peffley responded that BWL is looking into purchase power contracts to absorb the costs. Commissioner Mullen asked what carbon neutrality means for the BWL. General Counsel Mark Matus responded that the BWL will capture as much carbon as is emitted for a net zero effect on the environment. Mr. Matus stated that there is emerging technology for the sequestration of gases from power plants, the filtering of carbon in the air and turning it into rock, and the purchasing of trees to capture carbon. Commissioner Jester commented that storage technology will address some of the gaps and the higher price of energy on the grid is driven by natural gas prices. Return on Equity (ROE) CFO Shawa stated that the recommendation for the two-year extension, Amendment No. 6 to the Return on Equity agreement with the City of Lansing, requests a rate of 6.0% of gross revenue, excluding inner utility revenue, and that quarterly payments rather than biannual payments are being recommended. If an adjustment is needed, it will be made in the fourth quarter. Motion by Commissioner James, Seconded by Commissioner Price to approve the resolution for the Return on Equity agreement with the City of Lansing. Action: Motion Carried Commissioner Merrill commented that return on equity agreements, payments in lieu of taxes, may cause some divisiveness between the municipality and the community of customers as the payment is a benefit to the municipality. Representing that payment is consistent to what other communities nationwide pay is necessary for the recognition of equity and fairness. Rate Structures Commissioner Jester introduced Ms. Janice Beecher, Director of Institute of Public Utilities at MSU, who presented on water affordability and pricing modes. Ms. Beecher provides continuing education to utility regulators, conducts research, and provides publications. Ms. Beecher spoke about pricing models and shared a detailed supporting slide deck; household utility expenditures; trends for utilities; pressures on water utility costs, prices, and affordability; reasons for cost and price disparity; shifts in infrastructure funding and financing; and sustainable systems. Commissioner Zerkle commended the BWL on providing assistance to customers that needed help paying bills. Commissioner Merrill asked whether the BWL has considered a cost or fee structure based on income rather than usage, requested information regarding the Bolt v. City of Lansing court constraints on enterprise services prices, and whether Lansing Fire compensates the BWL for the extra capacity of the system to provide for fire protection through hydrant rental or other system of transfer. GM Peffley responded that a water rate recommendation will be provided during the Finance Committee meeting, new ideas are being explored comparable to what Ms. Beecher presented, and BWL has looked into access to funding. GM Peffley added that the City’s fire protection is part of the rate for usage and additionally there is a distribution system similar to hydrant rental. GM Peffley responded that BWL is exploring enterprise services prices and usage rewards. Commissioner James commended CFO Shawa and GM Peffley on the energy presentation. GM Peffley responded that a copy of the presentation would be sent to the Commissioners with an audio. Commissioner James also commended GM Peffley on the 100% renewable agreement with General Motors and would like information on how it will be met. GM Peffley responded that the 100% renewable was not in the request from General Motors due to an additional premium, but renewables will be negotiated and details provided to the Commissioners thereafter. Commissioner James inquired about DEI training that is provided to regular BWL employees being provided to the two new appointed employees. GM Peffley responded that training is available and will be provided. Other Motion by Commissioner James, Seconded by Commissioner Graham for an excused absence for Commissioner Dusty Horwitt. Action: Motion Carried. Adjourn Chair Zerkle adjourned the meeting at 7:05 p.m. Respectfully Submitted Sandra Zerkle, Chairperson Committee of the Whole Finance Committee Chairperson Tony Mullen presented the Finance Committee Report: FINANCE COMMITTEE Meeting Minutes May 10, 2022 The Finance Committee of the Board of Water and Light (BWL) met at the BWL Headquarters – REO Town Depot, located at 1201 S. Washington Ave., Lansing, MI on Tuesday, May 10, 2022. Finance Committee Chairperson Tony Mullen called the meeting to order at 7:15 p.m. and asked the Acting Corporate Secretary to call the roll. Present: Commissioners Tony Mullen, Beth Graham, Semone James, David Price and Sandra Zerkle. Also, present: Commissioners Tracy Thomas and Non-Voting Commissioners Douglas Jester (East Lansing), Larry Merrill (Delta Township) and Brian Ross (DeWitt Township) Absent: None The Acting Corporate Secretary declared a quorum. Chairperson Mullen requested a postponement of the Internal Audit Status Report. Public Comments There were no public comments. Approval of Minutes Motion by Commissioner Price, Seconded by Commissioner James to approve the Finance Committee meeting minutes of February 22, 2022. Action: Motion Carried. March YTD Financial Summary CFO Heather Shawa gave a review of the March 2022 Year-to-date Financial Summary. Total Cash, Days Cash on Hand, and Debt Service Coverage are strong at $275 million, 257 and 2.49 respectively. On the Income Statement YTD, Total Revenue is slightly over budget and positive at 1%, Operating Expenses is at 11% underspend, and Non-Operating Income/Expense is 15% overspend, resulting in a Net Income YTD of $30 million compared to the Budget YTD of $6 million. The FY 2022 Budget Net Income is just above $568,000 and any known adjustments will be forecasted at the start of the fourth quarter in the April dashboard. Capital budget YTD is underspend due to labor constraints and supply chain impacts. Capital budget YTD on Delta Energy Park is near budget. The project is on track for closeout at the end of June 2022 and the first full month of depreciation will be indicated on the April dashboard. Two of the five ratios are below target. Debt to Total Assets is driven by the debt incurred with the Delta Energy Plant. Days Sales Outstanding is affected by giving longer payment plans to customers and non-shutoff plans during the pandemic. Employee count and payroll data are consistent with previous data. The increase in overtime is due to the broken poles and train incident. Benefit costs are over budget due to medical costs for increased claims but will be offset by a stop loss payment for large claims. Chairperson Mullen requested a presentation on depreciation at a future meeting. CFO Shaw responded that a presentation will be provided at the July Finance meeting. Retirement Plan Committee (RPC) Updates CFO Heather Shawa presented the Retirement Plan Committee (RPC) investment and administrative activity updates. The RPC has recently completed a periodic review of the DB and VEBA plans investment policy statements and recommended reducing the target return for the DB Plan from 6.5% to 6%, reduce the target return for the VEBA Plan from 7% to 6.5%, and revising certain language to better represent the role of the plan advisor as well as the delegations to the RPC. The final steps of the corrective action plan have now been completed for the VCP Submission to the IRS for our 401(a) plans. The required notifications have been sent to the affected participants. The RPC is reviewing the restatement of Nationwide’s 401(a) prototype plan documents which are preapproved by the IRS. The IRS requires Plan Sponsors using preapproved plan documents to be restated every 6 years to incorporate all legislative and regulatory changes in the law. The updated 401(a) plan documents for DC Plan 2 will be brought to the Board for approval in July. Commissioner Zerkle asked the reason for reducing the target return in the RPC investment goals. CFO Shawa responded the reduction follows the guidance of the state of Michigan for public pension plans. Director of Finance, Accounting and Planning, Mr. Scott Taylor, added that the liability for the DB plan is increased by $1.7 million and by $7.7 million for the VEBA plan. Motion by Commissioner Price, Seconded by Commissioner James to forward the Revised Defined Benefit Plan Investment Policy Statement Resolution to the full Board for consideration. Action: Motion carried. Motion by Commissioner Price, Seconded by Commissioner James to forward the Revised VEBA Investment Policy Resolution to the full Board for consideration. Action: Motion carried. General Manager Recommendation for RPC Appointment Change GM Peffley asked for approval of replacing the appointment of the Manager of Finance on the Retirement Plan Committee with the appointment of the Director of Finance, Accounting and Planning. Motion by Commissioner Price, Seconded by Commissioner James to forward the Resolution for the Retirement Plan Committee Appointment Change to the full Board for consideration. Action: Motion carried. Drinking Water State Revolving Fund (DWSRF) Director of Accounting, Finance and Planning, Scott Taylor, presented the program plan for the Drinking Water State Revolving Fund and requested approval of the presented resolution to adopt the final project plan for water system improvements and designate an authorized project representative. The plan was published on April 8, 2022, and a public hearing was held on May 9, 2022 at which the plan was explained. Mr. Taylor stated that this resolution is for approval to submit the plan for evaluation for funding, ranking and possible forgiveness, and then projects with which to move forward will be determined. Chairperson Mullen commented that a proposal was made last year that was turned down and the Finance Team worked with DWSRF to construct a better plan. Commissioner Thomas asked what the prospective outcome of receiving funding was. Mr. Taylor responded that a better than 50/50 chance was expected for being accepted for the borrowing program and 20-30% chance of receiving forgiveness through the grant. Motion by Commissioner Price, Seconded by Commissioner James to forward the Resolution for Adopting a Final Project Plan for Water System and Improvements and Designating an Authorized Project Representative to the full Board for consideration. Action: Motion carried. Chairperson Mullen commented that he believes water is a human right and that payment has to be received whether from the customer or from funding. In addition, Chairperson Mullen stated that the administration works with those who cooperate with the BWL to keep their water from being shut off. GM Peffley responded that creative ideas and funding are being explored and if any payment is given water isn’t shut off. Commissioner James asked if rates based on income were being considered yet. GM Peffley responded that they weren’t yet, but it is being studied, along with other options. Commissioner Zerkle asked whether an explanation was given to customers regarding the beneficial use of Smartmeters. GM Peffley responded that Smartmeters indicate whether there is a waste of water which is beneficial to the customers and the more education given to the customers the better. FY23 Operating Budget and FY23-28 Forecast Presentation CFO Shawa presented the FY23 Operating Budget and FY23-28 Forecast. CFO Shawa highlighted strategic objectives, key budget and forecast assumptions, sales volume history and forecast by utility, and the operating budget and forecast. CFO Shawa covered FY 2022 accomplishments, target metrics, and the focus of the budget and forecast cycle under strategic objectives; plus, water main replacements, investment returns, rate changes and structure refinement, and Return on Equity under key budget and forecast assumptions. Director of Finance, Accounting and Planning, Scott Taylor highlighted the following items in the capital budget and forecast: the increase in the Water T&D portfolio in FY 2028 with the completion of the 8 mile per year water pipeline replacement; the addition to the Capital Forecast of the phase process where projects have reached the design and construction stage where the final budget amount of the project is determined; and the next steps in the process of the forecast including verifying department spend aligns with capital spend, verifying metrics hit planned targets, and requesting Board approval and submission of the forecast to the city. CFO Shawa requested approval of the resolution for the Fiscal Year 2023-2028 Budget and Forecast. GM Peffley stated that the strategic objectives plan information would be continually provided to the employees to emphasize the importance of the implementation of the plan. Commissioner Mullen asked for the definition of the terminology workforce engagement. CFO Shawa responded that workforce engagement included workforce development, the leadership academy, retention and recruiting career development, and the Gallup best practice and national benchmark for workforce development. Commissioner Zerkle asked for information on COVID-19 recovery regarding health costs, lost worktime and costs for the next couple of years. GM Peffley responded that the workforce is back to the new normal which includes a work-from -home policy. CFO Shawa responded that the two key financial areas are supply chain disruptions and past due accounts. Finance is working on bringing the past due and uncollectable accounts to pre-pandemic numbers. GM Peffley responded that he has requested a policy to be made by the executive staff for the purchasing of only American-made products when possible, to reverse the negative impact on the generating portfolio. Commissioner Zerkle commented that income from electricity carries the BWL utility and asked why this transpires as rate increases have occurred for each type of utility service. GM Peffley responded that the customer base is smaller for the non-electric utility services and that electricity is also sold wholesale. GM Peffley added that the water rates for other utility companies in Michigan are higher than the rates of the BWL. Commissioner Merrill asked whether the 9.5% increase in water rates would be the same for the wholesale and retail customer and when was the anticipated day for the increase to go into effect. CFO Shawa responded that input will be requested from Commissioners in July 2022, a public hearing will be held in September 2022, and the rate increase would go into effect on November 1, 2022. GM Peffley added that there are four industrial entities looking to enter the BWL service territory and that will also benefit the income for water service if any of them do. Commissioner Jester asked about the prices for chilled water not being raised aggressively. CFO Shawa responded that the price increase for chilled water in the current forecast is the first increase since 2014. CFO Shawa added there are efficiency projects being planned, there are 19 customers for chilled water and the impact on them is not known yet. Commissioner Price asked what the differential is between the rates for the closest competitor and BWL. GM Peffley responded that rates on residential for the closest competitor is 14% with a rate hike of greater than 2% and BWL. GM Peffley responded that the BWL was demonstrating the value of locating to the Lansing area. Commissioner Zerkle asked whether electricity service could subsidize water service. GM Peffley responded that is against the law because classes of utility services can’t be mixed. GM Peffley noted that the BWL typically replaces a mile and a half of the water pipeline per year but due to the pandemic is a little delayed. Commissioner Jester asked whether there is an opportunity for the water pipeline replacement to be coordinated with street repair that needs to be done. GM Peffley replied that BWL is working to coordinate with the CSO project and if the City is working on an area of road where the water pipeline needs to be repaired, BWL will repair that area of the pipeline. Commissioner James asked how the ratings by the credit rating agencies could be improved. Mr. Taylor responded that the key items that the agencies review are days cash on hand and debt service coverage. The agencies also look at the area served, the overall makeup of utility service, and the diversity of customers serviced. GM Peffley responded that BWL is in the top 20% of utilities across the country. CFO Shawa responded that agencies look at the governing board, the support of steady increases, and City ratings. Commissioner Zerkle asked if a presentation could be made relaying what will be done with the rate increase as the Commissioners could provide input on what customers would like. CFO Shawa responded that the presentation will be made at the July Finance Committee meeting. Motion by Commissioner James, Seconded by Commissioner Price to forward the FY 2023-2028 Budget and Forecast Resolution to the full Board for consideration. Action: Motion Carried. Other There was no other business. Adjourn Chairperson Tony Mullen adjourned the meeting at 8:42 p.m. Respectfully submitted Tony Mullen, Chairperson Finance Committee MANAGER’S RECOMMENDATIONS There were no Manager’s Recommendations. UNFINISHED BUSINESS There was no unfinished business. NEW BUSINESS There was no new business. RESOLUTIONS RESOLUTION 2022-05-02 Return on Equity (ROE) Renewal WHEREAS, the City of Lansing has expressed a desire to continue the Agreement Between the City of Lansing and The Board of Water & Light dated June 30, 1992 (the Agreement), which has been subsequently extended by means of five Amendments thereto in 2001, 2012, 2013, 2018 and 2020, respectively; WHEREAS, the Board of Commissioners Committee of the Whole (COW) considered the City of Lansing’s request on May 10, 2022; WHEREAS, the General Manager recommended the Agreement be extended by two (2) years at a rate of 6% of total operating revenues, excluding inter-utility sales, which would be memorialized as Amendment No. 6; WHEREAS, the COW has considered the proposed Amendment No. 6, agreed with the General Manager’s recommendation and approved the Amendment, including authorization for the General Manager to execute the Amendment, and the Amendment shall be forwarded to the Board of Commissioners for approval at the May 24, 2022 meeting. RESOLVED, the proposed Amendment No. 6 to the Agreement Between the City of Lansing and The Board of Water & Light dated June 30, 1992 is approved by the COW, including authorization for the General Manager to execute the Amendment, and shall be forwarded to the Board of Commissioners for approval at the May 24, 2022 meeting. Motion by Commissioner Graham, Seconded by Commissioner Horwitt, to approve the Return on Equity (ROE) Renewal. Action: Motion Carried. AMENDMENT NO. 6 TO AGREEMENT BETWEEN THE CITY OF LANSING AND THE BOARD OF WATER & LIGHT This Amendment No. 6 is entered as of this __day of ____, 2022, by and between the City of Lansing, 124 W. Michigan Ave., Lansing, MI 48933, hereinafter referred to as “City,” and the Board of Water & Light, 1201 South Washington Ave., Lansing, Michigan 48910, hereinafter referred to as “Board.” The City and the Board are each a “Party” and, collectively are the “Parties.” STATEMENT OF PURPOSE A. The Parties entered into an Agreement dated June 30, 1992 (the “Agreement”), a copy of which is attached as Exhibit A; B. The Parties entered into Amendment No. 1 to the Agreement on December 17th, 2001, which expired June 30, 2012, a copy of which is attached as Exhibit B; C. The Parties entered into Amendment No. 2 to the Agreement on June 30, 2012, which expired June 30, 2017, a copy of which is attached as Exhibit C; D. The Parties entered into Amendment No. 3 to the Agreement on December 23, 2013, which increased the Board’s annual payment to the City to 6.1% of its revenue from retail and wholesale sales of chilled water, electric, steam, heat and water utilities for the preceding 12- month period ending May 31st of each year (the “Payment”). A copy of Amendment No. 3 is attached as Exhibit D; E. Amendment No. 3 also extended the term of the Agreement for an additional year beyond that provided for in Amendment No. 2, such that the Agreement expired June 30, 2018, unless extended in writing by the Board of Commissioners and the City Council of Lansing; F. The Parties entered into Amendment No. 4 to the Agreement on July 1, 2018. Amendment No. 4 extended the terms and provisions of the Agreement by an additional two years such that the Agreement expired June 20, 2020, unless extended in writing by the Commissioners of the Board and the City Council of Lansing. A copy of Amendment No. 4 is attached as Exhibit E; and G. The Parties entered into Amendment No. 5 to the Agreement on July 1, 2020. Amendment No. 5 extended the terms and provisions of the Agreement by an additional two (2) years. Further, the Parties agreed that the Board would pay to the City a fixed dollar amount for each of the Fiscal Years 2020, 2021, and 2022 as follows: FY2020 $23,100,000: FY2021 $25,000,000: and FY2022 $25,000,000. It was also agreed that in addition to the amounts described in the preceding paragraph, for each of FY2021 and FY2022, the Board would pay to the City an amount determined as follows: (the Board’s revenue from retail and wholesale sales of chilled water, electric, steam, heat and water utilities for the preceding 12-month period ending May 31st minus $409,836,066) multiplied by 3%). A copy of Amendment No. 5 is attached as Exhibit F. Including as modified by this Amendment No. 6, and by the prior Amendments Nos. 1-5, the Parties desire to extend the term and modify the return on equity payment calculation of the Agreement. AGREEMENT The Parties therefore agree as follows: 1) The term of the Agreement is extended by an additional two (2) years, such that the Agreement shall automatically terminate on June 30, 2024, unless extended further by the Commissioners of the Board and the City Council of Lansing. 2) The Board shall make return on equity payments to the City for the two fiscal years commencing on July 1, 2022, in the amount of 6% of total Board operating revenues, excluding inter-utility sales, as reported in the Board’s audited financial statements. 3) Payments shall be made quarterly within 30 days after each quarter’s end. Any changes to operating revenues or inter-utility sales after a quarterly payment has been made, such as in the case of a year-end audit adjustment, will be adjusted for in the subsequent quarter’s payment. 4) This Agreement as amended contains the entire Agreement and any terms, conditions or provisions not contained in this Agreement as amended are not binding on either Party. 5) This Agreement shall inure to the benefit of the Parties to the Agreement. 6) This Agreement, or any of its terms or provisions, shall not be waived, modified or otherwise altered except as agreed in writing and executed by both Parties. 7) Except as modified in this Amendment No. 6, the Agreement shall remain in full force and effect. Nothing herein releases the Board from any payments it is obligated to make pursuant to the previous amendments to the Agreement. [Signature page follows] IN WITNESS WHEREOF the parties have signed this Amendment No. 5, and it shall become effective on the date first above written. CITY OF LANSING By:___________________________________ Andy Schor, Mayor By: __________________________________ Chris Swope, City Clerk BOARD OF WATER & LIGHT By:___________________________ Richard R. Peffley General Manager By: __________________________ LaVella J. Todd Corporate Secretary Approved as to form only: Approved as to form: ___________________________ __________________________________ City Attorney Board of Water & Light Legal Counsel Approved as availability of funds: Account No. 101-674100 ___________________________ Controller RESOLUTION 2022-05-03 Revised Defined Benefit Plan Investment Policy Statement WHEREAS, the Lansing Board of Water & Light (the “Sponsor”) sponsors the Lansing Board of Water and Light Defined Benefit Plan and Trust for Employees’ Pensions (the “Defined Benefit Plan”); and WHEREAS, the Retirement Plan Committee, established by the Sponsor and delegated certain duties by the Trustees related to the investment of Defined Benefit Plan assets, periodically reviews the target rate of return for each plan and, as the result of its most recent review, recommends the target rate of return for the Defined Benefit Plan be reduced from 6.5% to 6%; and WHEREAS, the Retirement Plan Committee also periodically reviews the investment policy statement, formally known as the Statement of Investment Policies, Procedures and Objectives, for the Defined Benefit Plan and, as the result of its most recent review, recommends revisions to the language within the Defined Benefits Plan’s investment policy statement; and WHEREAS, the Retirement Plan Committee along with the General Manager recommends the Sponsor adopt the revisions which reflect these recommendations in the attached Lansing Board of Water and Light Defined Benefit Plan and Trust for Employees’ Pensions Statement of Investment Policies, Procedures and Objectives; and WHEREAS, the Sponsor wants to adopt the revisions reflected in the attached Lansing Board of Water and Light Defined Benefit Plan and Trust for Employees’ Pensions Statement of Investment Policies, Procedures and Objectives; THEREFORE, it is: RESOLVED, that, after its review, and based on the recommendation from the Retirement Plan Committee along with the General Manager, the Sponsor adopts and approves the attached Lansing Board of Water and Light Defined Benefit Plan and Trust for Employees’ Pensions Statement of Investment Policies, Procedures and Objectives. Motion by Commissioner Mullen, Seconded by Commissioner Graham to approve the Resolution for Revised Defined Benefit Plan Investment Policy Statement. Action: Motion Carried. Commissioner Horwitt inquired about the importance of the resolutions for the DB and VEBA Investment Policy Statements changes. Director of Finance, Accounting and Planning, Scott Taylor responded that there are three primary changes; the lowering of discount rates in the VEBA Investment Policy Statement from 7% to 6. 5% and in the DB Investment Policy Statement from 6.5% to 6%; making a change to refer to ACG as an advisor rather than a consultant; and making a change to align the responsibilities delegated to the Retirement Plan Committee with the resolutions that was recently passed. Commissioner Horwitt asked whether the lowering of the rate was related to the recent downturn in the financial market. Mr. Taylor replied that the state’s reporting requirements have uniform assumptions that must be met and the allowable return has been gradually decreasing and BWL wanted to align with those values. Mr. Taylor added that ACG also reported lower expectations on returns and BWL would achieve their targets with the lower rates. RESOLUTION 2022-05-04 Revised VEBA Investment Policy Statement WHEREAS, the Lansing Board of Water & Light (the “Sponsor”) sponsors the Post-Retirement Benefit Plan and Trust for Eligible Employees of Lansing Board of Water and Light (the “VEBA”); and WHEREAS, the Retirement Plan Committee, established by the Sponsor and delegated certain duties by the Trustees related to the investment of VEBA assets, periodically reviews the target rate of return for each plan and, as the result of its most recent review, recommends the target rate of return for the VEBA be reduced from 7% to 6.5%; and WHEREAS, the Retirement Plan Committee also periodically reviews the investment policy statement, formally known as the Statement of Investment Policies, Procedures and Objectives, for the VEBA and, as the result of its most recent review, recommends revisions to language within the VEBA’s investment policy statement; and WHEREAS, the Retirement Plan Committee along with the General Manager recommends the Sponsor adopt the revisions which reflect these recommendations in the attached Post-Retirement Benefit Plan and Trust for Eligible Employees of Lansing Board of Water and Light Statement of Investment Policies, Procedures and Objectives; and WHEREAS, the Sponsor wants to adopt the revisions reflected in the attached Post-Retirement Benefit Plan and Trust for Eligible Employees of Lansing Board of Water and Light Statement of Investment Policies, Procedures and Objectives; THEREFORE, it is: RESOLVED, that, after its review, and based on the recommendation from the Retirement Plan Committee along with the General Manager, the Sponsor adopts and approves the attached Post- Retirement Benefit Plan and Trust for Eligible Employees of Lansing Board of Water and Light Statement of Investment Policies, Procedures and Objectives. Motion by Commissioner Thomas, Seconded by Commissioner Mullen to approve the Resolution for Revised VEBA Investment Policy Statement. Action: Motion Carried. RESOLUTION 2022-05-05 Retirement Plan Committee Appointment Change WHEREAS, the Board of Water and Light (the “Sponsor”) sponsors the (a) Lansing Board of Water and Light Defined Benefit Plan and Trust for Employees’ Pensions; (b) Post-Retirement Benefit Plan and Trust for Eligible Employees of Lansing Board of Water and Light; (c) Lansing Board of Water and Light Defined Contribution Plan and Trust 1; (d) Lansing Board of Water and Light Defined Contribution Plan and Trust 2; and (e) Lansing Board of Water and Light 457 Deferred Compensation Plan and Trust (collectively the “Plans”); and WHEREAS, the Sponsor created a formal committee effective September 27, 2016, the name of which is the “Retirement Plan Committee” (the “Committee”), to which the Sponsor delegated discretionary authority and responsibility for the discharge of certain duties, and the Sponsor appointed the following individuals to serve on the Retirement Plan Committee: Chief Financial Officer, Executive Director of Human Resources, and the Manager of Finance. Each Retirement Plan Committee member is appointed to serve on the Committee until his or her resignation or removal from the Committee; and WHEREAS, due to a recent organizational change, the Sponsor has decided to replace the appointment of the Manager of Finance on the Committee with the appointment of the Director of Accounting, Finance, and Planning. THEREFORE, it is: RESOLVED, that the Sponsor replaces the appointment of the Manager of Finance on the Committee with the appointment of the Director of Accounting, Finance, and Planning on the Committee. FURTHER RESOLVED, that the Sponsor now recognizes the following individuals as appointed to serve on the Committee: Chief Financial Officer (Committee Chair), Executive Director of Human Resources, and the Director of Accounting, Finance and Planning. Motion by Commissioner Horwitt, Seconded by Commissioner Graham to approve the Resolution for Retirement Plan Committee Appointment Change. Action: Motion Carried. RESOLUTION 2022-05-06 A Resolution Adopting a Final Project Plan for Water System Improvements and Designating an Authorized Project Representative WHEREAS, the Lansing Board of Water & Light (“BWL”) is seeking low interest funding to assist in its efforts to improve existing raw water supply, water treatment and distribution systems through the State of Michigan, Department of Environmental Quality’s (“EGLE”) Drinking Water State Revolving Fund (“DWSRF”); and WHEREAS, as a requirement of the DWSRF Loan Program, municipalities applying for DWSRF loans are required to submit to EGLE an adopted Project Plan (“Project Plan”) describing the proposed improvement to existing water treatment and distribution systems program projects; and WHEREAS, the purpose of the Project Plan is for raw water supply, water treatment plant and distribution system improvement projects located within the City of Lansing. The projects have several benefits, which include reducing potential safety hazards, as well as improvements to reliability, water quality, and flow efficiencies to ultimately increase public health protection; and WHEREAS, the Project Plan for the majority of the water main replacement projects will be in partnership with the City of Lansing’s Combined Sewer Overflow project among other City of Lansing street rehabilitation projects. Raw water supply and water treatment projects will be done on BWL property; and WHEREAS, the BWL authorized Hubbell, Roth, & Clark, Inc. to prepare a Project Plan, which recommends the construction of the following: Water Treatment Plant Upgrades • Dye WCP – convert ammonia system to aqueous form • Dye WCP – chemical handling project • Wise Rd WCP – new chemical building Operational System Improvements • Elevated storage tank – feasibility study and installation • Well drilling to replace aging wells Water Distribution Improvements • Multiple location of water main replacement projects throughout BWL jurisdiction that includes approximately 14 miles of water main replacement. • Raw water main extension to connect a recently drilled well WHEREAS, the estimated total project cost of the projects listed above is $46.2 Million; and WHEREAS, a Public Hearing to receive public comment on the proposed Project Plan was held on May 9, 2022; and NOW THEREFORE BE IT RESOLVED that the Lansing Board of Water & Light formally adopts the Project Plan and agrees to implement the selected alternative. BE IT FURTHER RESOLVED, that the Water Distribution Principal Engineer, a position currently held by Michael Lehtonen, P.E., is designated as the authorized representative for all activities associated with the projects referenced above, including the submittal of said Project Plan as the first step in applying to the State of Michigan for a Drinking Water State Revolving Fund Loan to assist in the implementation of the selected alternative. Motion by Commissioner Thomas, Seconded by Commissioner Mullen to approve the Resolution for Adopting a Final Project Plan for Water System Improvements and Designating an Authorized Project Representative. Yeas (names of Members voting Yes): Commissioners David Price, Beth Graham, Dusty Horwitt, Tony Mullen, Tracy Thomas and Sandra Zerkle Nays (names of Members voting No): None I certify that the above Resolution was adopted by Board of Water & Light Board of Commissioners (the governing body of the applicant) on May 24, 2022. BY: ________________________ ____________________________ LaVella J. Todd Corporate Secretary ______________________ ____________________________ Signature Date RESOLUTION 2022-05-07 Fiscal Year 2023-2028 Budget and Forecast RESOLVED, that the Annual Operating and Capital Budget covering Fiscal Year 2023 is hereby approved as presented; and RESOLVED, that the Operating and Capital Forecast for the Fiscal Years 2024-2028 is hereby accepted as presented; and FURTHER RESOLVED, that the Corporate Secretary be directed to make the appropriate filings with the Lansing City Clerk’s office in accordance with the Lansing City Charter regarding the above actions. Staff Comments: Staff recommends an operating and maintenance budget of $363.0M and a capital budget of $71.8M for Fiscal Year 2023. The Operating and Capital Budget and Forecast for Fiscal Years 2023-2028 includes forecasted rate increases. The forecast rate increases are subject to revision and, in any case, prior to implementation, must be subject to the BWL’s formal rate setting process as per Lansing City Charter, Section 5-205 which refers to the BWL’s authority to set just and reasonable rates and defines the public hearing process. In accordance with the provisions of the Lansing City Charter, Article 5, Chapter 2, Section 5-203.5 and Section 5-203.6, staff recommends the Finance Committee approve the budget and forecast for presentation and adoption by the Board at its May 24, 2022 board meeting. Motion by Commissioner Thomas, Seconded by Commissioner Mullen to approve the Resolution for the Fiscal Year 2023-2028 Budget and Forecast. Action: Motion Carried. MANAGER’S REMARKS General Manager Richard Peffley provided information on the following items: 1. The energy slide presentation from the May 10, 2022 Committee of the Whole meeting will be provided with audio in the packet on the BWL website. 2. An invitation was sent out for the 1st STEP graduation on May 25, 2022 at 5:30 p.m. at the REO Depot. 3. Several employees received recognition during the last two months. a. Customer Experience Team led by Executive Director of Customer Experience, Steve Serkaian i. Kellee Christenson, Director of Strategic Planning received a National Leader Award at the Customer Service Week Conference for the Customer Information Service (CIS) project which was initiated by CFO Heather Shawa; ii. The CIS project was a finalist in projects submitted for customer conference honors. The project was supported by Customer Experience Manager Bob Perialas and Customer Operations Manager Deanna Sparks; iii. Government & Community Relations Manager Breina Pugh received the Capital Area United Way Marian Marshall Award for her community volunteer work; iv. Communications Manager Amy Adamy was honored by Public Relations Society of America (PRSA) for December’s East Lansing train accident video; PRSA also recognized BWL and several employees with a Pinnacle Award for the BWL’s leadership in the pandemic relief fairs; v. Business Developing & Marketing Manager Rhonda Jones was thanked for her efforts and negotiations on the General Motors Ultim contract; vi. BWL employees will be speaking at the APPA Conference in June 2022; vii. Employee awards and recognitions will be in the Pipeline. COMMISSIONERS’ REMARKS Commissioner Mullen requested a presentation with more detail on what BWL will do to reach carbon neutrality by 2050. GM Peffley responded that a presentation would be created and provided. Commissioner Zerkle and Commissioner Thomas thanked DeWitt Township Commissioner Brian Ross for his service on the Board of Commissioners. Commissioner Thomas thanked Executive Director of Human Resources Michael Flowers and Executive Assistant Smiljana Williams for their work with the Human Resources Committee in the hiring of the Corporate Secretary and Internal Auditor. Commissioner Horwitt thanked Chairperson Price for arranging the Diversity, Equity and Inclusion training for the Commissioners. Commissioner Horwitt received a question from a community member about the location of the joint state and BWL solar array that will power the state administration building. GM Peffley responded the location hasn’t been set yet or the buildings that will be powered but he will provide the information as soon as it is available. Commissioner Horwitt asked for an update on the boron testing results at Erickson. GM Peffley responded that samples are continually being taken, letters have been drafted to the 50 homeowners and the elevated levels still appear to be background levels. GM Peffley added that an additional well was drilled at the Erickson Station from which samples are being taken. GM Peffley will provide information to the Commissioners as it becomes available. Commissioner Horwitt requested that the communication received from the EPA be circulated to the Commissioners. GM Peffley responded that he would follow up. Commissioner Horwitt also requested the modeling results that would be presented to EGLE in June be provided to the Commissioners. GM Peffley responded the results would be sent to the Commissioners. EXCUSED ABSENCE Motion by Commissioner Graham, Seconded by Commissioner Thomas, to excuse Commissioners Semone James and DeShon Leek from tonight’s meeting. Action: Motion Carried. PUBLIC COMMENTS There were no public comments. ADJOURNMENT Chairperson Price adjourned the meeting at 5:58 p.m. LaVella J. Todd, Corporate Secretary Preliminary Minutes filed (electronically) with Lansing City Clerk 05-26-22 Approved by the Board of Commissioners: 07-26-22 Official Minutes filed (electronically) with Lansing City Clerk: 08-01-22