HomeMy WebLinkAbout1988 Board of Water and Light Annual ReportSHARING THE SUCCESS
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the Board of Water and Light serves Lansing, Michigan, and
surrounding areas with electricity, water and steam. Founded in 1885 as the Water Board, the BWL entered the electric business
in 1892 and has provided steam to industry, state government and downtown businesses since early in the century.
The BWL is a public power utility, owned by the citizens of Lansing. Policy is set by an eight -person board of commissioners,
whose members are appointed by the mayor and confirmed by city council. Policy is carried out by a staff of 956 employees. 1988
marked the year that the BWL brought all employees of the utility into its strategic planning process.
Through a unique gain sharing program called Share the Success, BWL employees were challenged to work
toward common, tangible goals with a promise of financial reward when those goals were met or exceeded.
Program specifics and first year results are detailed inside this year's annual report.
EMPLOYEE INVOLVEMENT:
A STAKE IN OUR
UTILITY'S SUCCESS
•
�n 1988 BWL
employees inherited a tangible stake in the success
of their utility. Through implementation of a gain
sharing program, a portion of employees' pay is
flexible, and moves up or down with the success of
the utility. We call the program, Share the Success.
Employees focus on twenty-five goals, taken from
the utility's strategic business plan. These goals, or
performance standards, include four general areas:
COST OF SERVICE
QUALITY AND RELIABILITY OF SERVICE
PROMOTION OF A POSITIVE IMAGE
EMPLOYEE PRODUCTIVITY
Seven of the 25 performance standards are
direct financial measurements. The rest target
quality, service and other less tangible but equally
important issues. Bonuses range from zero to five
percent of base pay, based on the utility's final
score at the end of the fiscal year.
Although the Share the Success program
was devised by BWL management, it is a program
that depends upon consensus, not management
directive. All 956 employees participate, including
some 540 union members represented by the
International Brotherhood of Electrical Workers (IBEW).
An Employee Measures Committee reviews
proposed performance standards, rejecting some
and adding others. The committee is equally divided
between bargaining and non -bargaining
employees chosen to serve by their fellow workers.
Monthly program results are reviewed with the
committee and communicated to all employees.
Departments are encouraged to discuss with their
employees specific ways they can affect
individual performance standards.
4
each of the 25
performance standards includes a base, a goal
and a set of four scoring ranges.
The base represents a level of
performance that has been achieved in the past
or is an industry average. The goal, in most cases,
represents an improvement in the base.
A scoring system totaling 500 points
weights each performance standard according
to its relative importance. If the utility reaches
its goals in all areas, a total of 375 points results.
That translates to a 3.75 percent bonus at the end
of the fiscal year. The payment slides up or down
proportionately, to a minimum of zero and
a maximum of five percent.
A second employee committee
recommends benefits that employees can buy
with their bonus. In 1988 employees could choose
cash, more vacation time, vision or long-term
disability insurance or deferred compensation.
They could also choose to establish
a pre-tax flexible spending account to be
used for child care, health care expenses
or group insurance premiums.
Our internal program for improving
our performance has been extremely successful
and is detailed in the General Manager's report
on page 7. The ultimate goal of our program is
to serve our customer -owners better, so that
they may share the rewards of better
service and a tighter rein on utility rates.
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COMMUNITY PARTICIPATION:
A STAKE IN OUR COMMUNITY
or the BWL,
priorities are different from
those of a private, investor -
owned utility. Because our
customers are also our owners,
we have a special incentive
to hold down rates, making only
enough net income to make
system improvements.
Our public ownership also entails
added responsibility to be active
members in our community.
In essence, sensitivity to the needs
of our community is nothing less
than good stockholder relations.
The following are some of the
community programs in which the
BWL participated during 1988.
From December through
February each year, the BWL
joins with others to solicit help for
those without funds to meet
basic needs in the critical winter
months. Customers are invited to
make tax-free donations to the
Lansing Area Energy Bank to help
needy families pay for utility bills.
The program is administered
by the Community Service and
Referral Center with free
accounting services provided
by Clinton Bank and Trust
Company. In 1988, BWL
customers donated more than
$30,000 and helped nearly 2,000
individuals through this effort.
The BWL carried a message
of electrical safety to Lansing
area youngsters throughout the
school year. Aided by a cartoon
character called Louie the
Lightning Bug, Line Department
employees presented the
program to 106 classes and
to nearly 3,000 students.
the BWL and
dozens of other companies joined
hands to fight crime through
a program called "Eyes and Ears."
Participating companies feature
a distinctive logo on the sides of
company vehicles equipped
with two-way radios. Drivers
are instructed to report crimes
or suspicious activity they may
observe, and school children
are told they can look for the
Eyes and Ears logo if they
need help.
Once a month, some 45 BWL
employees give up a lunch hour
to deliver hot meals to home-
bound older citizens in the greater
Lansing area. The program is run
by the Tri-County Office on Aging.
It helps elderly people lead more
independent lives while
staying in their own homes.
In October, 1987, Lansing and
2,200 other local communities
celebrated the first annual Public
Power Week. The BWL observed
the occasion by donating a new
$100,000 floating fountain to
Lansing's citizens. The fountain is
placed in the Grand River and
has quickly become an attraction
to visitors and workers in the
downtown area. The dedication
ceremonies were followed
by an open house of the
Ottawa Station power plant.
Each month on the fourth
Tuesday, BWL commissioners meet
in public session to act upon
recommendations and establish
policy for the utility. The public is
invited to attend these meetings,
which begin at 5:30 p.m. on the
second floor of the BWL office
building, 123 West Ottawa.
5
ADDRESSING THE ISSUES
A STAKE IN OUR FUTURE
In 1989 the BWL will continue
efforts to keep costs down by
making the most effective
use of our resources.
Our Steam Utility will
investigate possibilities for
balancing load between winter
and summer seasons. Although
some of our commercial
customers use steam for cooling,
most use it for winter heating.
In 1989 we will study the feasibility
of a chilled water district in
downtown Lansing. Under this
concept, chilled water for air
conditioning would be provided
from a centralized source.
Customers would be spared
the capital costs of providing
their own air conditioning
equipment, and a single, large
steam -driven chiller would
provide air conditioning at costs
that are competitive with
other energy sources.
We plan to intensify our
efforts to provide our customers
with friendly, caring service in
all aspects of our business.
Among other things, we will ask
our employees to identify rules,
policies and procedures that
make it harder for them to serve
customer needs. We will examine
those matters and eliminate
roadblocks to quality service.
We will continue to survey
our residential customers annually
to get a feel for their opinions
about the BWL, its products and
services. For the first time in 1989,
we will also survey commercial
and industrial customers In both
our electric and water utilities.
We plan to learn more about
how these customers use water
and electricity so that we can
structure rates and services that
will best meet customer
and BWL needs.
Through our monthly
newsletter we will share with our
customers what we learn about
their opinions and usage patterns.
We will communicate with
them about important issues
affecting utility services. Things
such as the Environmental
Protection Agency's proposed
lead standards for drinking
water and the utility's plans for
protecting our water resources.
We will continue our strategic
planning process, annually
scanning our environment, our
competition, our internal strengths
and weaknesses. Through this we
will ensure that the Board of
Water and Light continues to
meet the needs of its owners and
customers — the citizens of the
Greater Lansing area.
0
MEASURES OF SUCCESS
As the Board of Water and Light
entered its second century
of service to the greater
Lansing community, new
challenges and opportunities
emerged as part of our future.
Our 101st fiscal year brought
strategic planning, as we
measured our past performance
and began to develop goals and
objectives to secure our future.
Our 102nd fiscal year saw an
evolving participative
management — a new style, and
a new culture, which sought
to involve employees in the
decisions which would affect them
and their company
And our 103rd fiscal year, which
is the subject of this report, brought
together participation from all the
employees in efforts to improve on
planned performance measures —
Share the Success.
Through this improvement
incentive program, BWL
employees more than met goals in
a number of areas, and the
benefits were shared by all.
The utility and its customers netted
savings of more than one million
dollars, after distributing bonus
payments totaling more than a
million dollars to employees.
Employees should be especially
proud of progress in reducing
our electric cost of service, and
increasing reliability for electric,
water and steam delivery. Cost
saving suggestions from employees
increased significantly, and
success included achievement of
our affirmative action goals.
The BWL can take special pride
in Share the Success in that it is a
new program. There is no model to
follow, and it is unique among
public power systems.
Although we were in our first
year, the 364 points achieved
indicate we met or exceeded two-
thirds of our program goals.
Of 24 performance measures:
11 were exceeded,
5 were within goal range,
7 were within base values,
and 1 was below base.
As we continue to monitor and
refine this program and our future
plans, we expect further
improvements based on five
essential components of a
successful organization.
QUALITY
To make our services the best
they can be requires constant
improvement, innovation,
and examination.
2
LOW COST
Which results from quality —
doing things right the first time.
3
CUSTOMER FOCUS
Understanding and fulfilling
our customer -owners' present
needs and their future concerns.
4
INVOLVED EMPLOYEES
Our most important resource.
Our long-term investment in
skilled employees is essential.
5
CONTINUOUS IMPROVEMENT
Which is the very essence of Share
the Success — striving for
perfection.
When you are among the best, the
challenge is to stay at the top for
the long term. The employees of
the BWL have to maintain the high
level of respect and responsibility
that accompanies it.
Joseph Pandy, Jr.
BOARD OF WATER AND LIGHT COMMISSIONERS EXECUTIVE STAFF
COMMISSIONERS AND
Phillip E. Hassler
Joseph Pandy, Jr.
EXECUTIVE STAFF Chairman
General Manager
JUNE 30, 1 9 8 8 Jack R. Sebolt
Joseph D. Wolfe
Vice Chairman
Assistant General Manager
Gerald W. Williams
Wallace R. Nourse
Chairman Pro Tern
Treasurer/Controller
Sister Mary Janice Belen, R.S.M.
Clyde R. Dugan
Director, Water Utility
Eva L. Evans
Roy E. Peffley
E. Lane Jessop
Director, Electric Utility
Bruce E. McComb
Joette C. Woodard-Yauk
R. John Strolle
Director, Steam Utility
John Elashkar
Director, Engineering
Terry D. Graham
Director, Administrative Services
Neal Housler
Director, Consumer Services
Oliver O. Kingsbury
Director, Information Systems
Roger A. Ophaug
Director, Engineering Planning
Richard A. Sevic
Director, Electric Utility
Coordination
John Strickler
Director, Communications
and Marketing
Dana W. Tousley
Director, Financial Planning
Mark Vander Jagt
Director, Human Resources
Lawrence H. Wilhite
Staff Attorney, Special Assistant
City Attorney
Mary E. Sova
Secretary of the Board
Kellie L. Willson
Internal Auditor
FINANCIAL
REPORT
INDEPENDENT AUDITOR'S REPORT
Honorable Mayor,
Members of City Council
and Commissioners of the
Board of Water and Light
We have audited the
accompanying balance sheets of
the Board of Water and Light —
City of Lansing as of June 30, 1988
and 1987, and the related
statements of income, changes
in city equity, and changes in
financial position for the years
then ended. These financial
statements are the responsibility
of the Board's management.
Our responsibility is to express an
opinion on these financial
statements based on our audits.
We conducted our audits in
accordance with generally
accepted auditing standards.
Those standards require that
we plan and perform the audit to
obtain reasonable assurance
about whether the financial
statements are free of material
misstatement. An audit includes
examining, on a test basis,
evidence supporting the amounts
and disclosures in the financial
statements. An audit also includes
assessing the accounting
principles used and significant
estimates made by management,
as well as evaluating the overall
financial statement presentation.
We believe that our audits
provide a reasonable basis
for our opinion.
Lansing, Michigan
August 31, 1988
In our opinion, the financial
statements referred to above
present fairly, in all material
respects, the financial position of
the Board of Water and Light —
City of Lansing, as of June 30, 1988
and 1987, and the results of its
operations and changes in
financial position for the years
then ended in conformity
with generally accepted
accounting principles.
Our examinations of the financial
statements of the Board of Water
and Light — City of Lansing for the
years ended June 30, 1988 and
1987, were made for the purpose
of forming an opinion on the basic
financial statements taken as
a whole. The information on
pages 18 through 23 is presented
for purposes of additional analysis
and is not a required part of the
basic financial statements.
Such information has been
subjected to the auditing
procedures applied in the
examination of the basic financial
statements and, in our opinion,
the information is fairly stated in
all material respects in relation
to the basic financial
statements taken
as a whole.
"o 0,',- X , 6 , � (.
Touche Ross
Certified Public Accountants
6
BALANCE SHEETS
ASSETS
UTILITY PLANT (Note A):
Water
Electric
Steam
Common facilities
$368,592,595
Less accumulated depreciation 199,291,588
JUNE 30
Construction in progress (Note C)
NONCURRENT RESTRICTED FUNDS (Notes D and K)
OTHER ASSETS:
Project funds (Notes C and K)
Deferred compensation plan assets (Notes A and J)
Deferred costs (Note A)
Other work in progress
CURRENT ASSETS:
Demand deposits (Note K)
Other cash and securities (Notes A and K)
Accounts receivable, less allowance for uncollectible accounts
of $615,000 in 1988 and 1987
Interest and dividends receivable
Inventories (Note A)
Prepaid expenses
Restricted funds (Notes D and K)
1987
$ 57,018,850
250,834,610
18,669,765
25,143,340
$351,666,565
188,965,460
$162,701,105
11,684,907
$174,386,012
0,060,803
$ 11,780,337
7,442,452
2,990,854
306,531
$ 22,520,174
$ 30,500
21,258,292
12,218,008
405,982
18,136,946
100,682
14,919,091
1,776,406
Total Curret Assets $ 71,574,461 $ 68,845,907
$287,515,813 $271,812,896
$169,301,007
15,429,697
$ 84,730,704
7,089,762
$ 12,830,156
8,721,395
2,392,704
176,631
$ 24,120,886
$ 30,500
22,787,360
13,109,018
444,853
17,540,122
175,696
15,728,992
1,757,920
10
CITY EQUITY AND LIABILITIES
CITY EQUITY:
Contributions in aid of construction
Retained income
LONG-TERM DEBT, LESS CURRENT PORTION (Note E)
DEFERRED COMPENSATION (Notes A and J)
ADVANCES FOR CONSTRUCTION
CURRENT LIABILITIES:
Accounts payable
Compensation and related amounts withheld
Customer deposits and related accrued interest
Accrued compensated absences
Accrued interest
Current portion of long-term debt
CONTINGENCIES (Note H)
See notes to financial statements.
Total City Equity
Total Current Liabilities
JUNE 30
1988
$ 17,329,387
237,547,260
$254,876,647
9,466,351
8,721,395
107,547
$ 7,524,071
1,355,748
1,371,417
1,757,920
232,116
2,102,601
$ 14,343,873
$287,515,813
1987
$ 16,471,018
220,417,965
$236,888,983
11,396,592
7,442,452
130,110
$ 9,405,372
1,124,508
1,294,864
1,776,406
268,357
2,085,252
$ 15,954,759
$271,812,896
11
STATEMENTS OF INCOME
d
OF
OT
IN1
YEAR ENDED JUNE 30
1988
ERATING REVENUES:
Water
$
11,799,140
Electric
122,906,297
Steam
11,867,399
$146,572,836
ERATING EXPENSES:
Production:
Fuel and other operating expenses
$
77,017,549
Maintenance
8,614,986
Transmission and distribution:
Operating expenses
3,783,041
Maintenance
2,777,794
Administrative and general
24,538,035
Depreciation
12,314,071
$129,045,476
Operating Income
$
17,527,360
iER INCOME:
Interest
$
4,435,926
Other
525,638
$
4,961,564
EREST EXPENSE:
Bonded debt
$
405,000
Other
308,375
$
713,375
Net Income
$
21,775,549
STATEMENTS OF CHANGES IN CITY EQUITY
1987
8 10,990,574
110,003,542
$131,933,950
$ 74,724,032
8,023,492
3,465,464
2,297,455
22,104,094
11,712,744
$122,327,281
$ 9,606,669
$ 3,989,030
$ 4,455,069
$ 503,000
267,739
$ 770,739
1 $ 13,290,999
CONTRIBUTIONS
IN AID OF
RETAINED
CONSTRUCTION
INCOME
TOTAL
Balances at July 1, 1986
$ 15,469,059
$ 211,201,116
$ 226,670,175
Contributions
1,001,959
1,001,959
Net income
13,290,999
13,290,999
(4,074,150)
(4,074,150
Equity returned to City (Note F)
Balances at June 30,1987
$16,471,018
$220,417,965
$236,888,983
Contributions
858,369
858,369
Net income
21,775,549
21,775,549
(4,646,254)
(4,646,254
Equity returned to City (Note F)
Balances at June 30, 1988
$17,329,387
$237,547,260
$254,876,647
See notes to financial statements.
IRA
STATEMENTS OF CHANGES
IN FINANCIAL POSITION
SOURCES OF WORKING CAPITAL:
Net income
Charge to income not affecting working capital:
Depreciation
Amortization of deferred costs
YEAR ENDED JUNE 30
$ 21,775,549
Total from Operations
Decrease (increase) other work in progress
Increase in deferred compensation
Contributions in aid of water construction
Increases in long-term debt
$34,687,770
129,900
1,278,943
858,369
183,270
$37,138,252
USES OF WORKING CAPITAL:
Additions to utility plant and construction in progress
(net of electric and steam contributions in aid of construction
of $883,724 in 1988 and $453,948 in 1987)
$ 22,658,763
Payments of long-term debt
2,113,511
Increase in noncurrent restricted funds
1,028,959
Increase in deferred compensation plan assets
1,278,943
Increase (decrease) in project funds
1,049,819
Decrease in advances for construction
22,563
Equity returned to City
4,646,254
$32,798,812
Increase in Working Capital
WORKING CAPITAL AT BEGINNING OF YEAR
$ 4,339,440
52,891,148
WORKING CAPITAL AT END OF YEAR
$57,230,588
CHANGES IN COMPONENTS OF WORKING CAPITAL:
Increase (decrease) in current assets:
Other cash and securities
$ 1,529,068
Accounts receivable
891,010
Interest and dividends receivable
38,871
Inventories
(596,824)
Prepaid expenses
75,014
Restricted funds
809,901
Deferred compensated absences
(18,486)
Increase (decrease) in current liabilities:
Accounts payable
Compensation and related amounts withheld
Customer deposits
Accrued compensated absences
Accrued interest
Current portion of lono-term debt
See notes to fmancial statements.
Increase in Working Capital
$ 2,728,554
$ (1,881,301)
231,240
76,553
(18,486)
(36,241)
17,349
$ (1,610,886)
$ 4,339,440
1987
$ 13,290,999
11,712,744
$25,003,743
(146,682)
1,562,369
1,001,959
$27,421,889
$ 20,356,430
2,085,252
545,492
1,562,869
(7,150,564)
5,616
4,074,150
$21,479,245
$ 5,942,644
46,948,504
$52,891,148
$ 865,860
1,200,565
14,703
4,013,295
(147,112)
250,123
$ 6,340,119
$ 242,503
(190,535)
247,912
142,685
(50,009)
4,919
$ 397,475
$ 5,942,644
13
YEARS ENDED JUNE 30, 1988 AND 1987
NOTE A —SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY — The financial statements include the financial activities of the water, electric, and steam operations of the Board of Water and
Light (Board). The Charter of the City of Lansing established the Board to manage the utility systems of the City, and the commissioners of the
governing board are appointed by the Mayor with approval of the City Council. The Board of Water and Light, by City charter, is an agency of the City
but is not included in the financial statements of the City. The Board is exempt from taxes on income because it is a municipal entity.
SYSTEM OF ACCOUNTS — The Board's accounts are maintained substantially in accordance with the Uniform Systems of Accounts of the Federal
Energy Regulatory Commission for the electric and steam systems and in accordance with the Uniform Systems of Accounts of the National Association
of Regulatory Utility Commissioners for the water system.
UTILITY PLANT — Utility plant is stated on the basis of cost, which includes expenditures for new facilities and those which extend the useful life of
existing facilities and equipment. Expenditures for normal repairs and maintenance are charged to maintenance expense as incurred.
DEPRECIATION — Depreciation of utility plant is computed using the straight-line method based on estimated useful lives. The resulting provisions for
depreciation in 1988 and 1987 expressed as a percentage of the average depreciable cost of the related assets are as follows:
CLASSIFICATION OF
AVERAGE RATE
UTILITY PLANT
1988
1987
Water
2.1%
2.2%
Electric
3.3
3.4
Steam
1.8
1.4
Common facilities
7.3
6.8
When units of property are retired, their cost is removed from utility plant and charged to accumulated depreciation.
INVENTORIES — Inventories are stated at weighted average cost and consist of the following at June 30:
Coal
Materials and supplies
1988
$ 13,426,186
4,113,936
$17,540,122
1987
$ 14,057,947
4,078,999
$18,136,946
CONTRIBUTIONS IN AID OF CONSTRUCTION — Contributions in aid of construction represent nonrefundable amounts received from customers for
construction of utility plant. In accordance with Board policy, contributions for water are credited to city equity upon receipt and electric and steam
contributions are credited against the related assets.
REVENUE — Revenue is recorded when the customer is billed. Accordingly, the current year revenue from customers whose billing period ends after
June 30 will be recognize when billed.
The water, electric, and steam operations of the Board bill each other for services provided, and these services are reported as revenue to the
generating operation and expense to the consuming operation. Such internal billings aggregated $4,319,000 and $3,075,000 in 1988 and 1987,
respectively.
DEFERRED COMPENSATION — In accordance with the provisions of Governmental Accounting Standards Board Statement (GASB) No. 2 (which became
effective December 15, 1986), deferred compensation funds and the associated liability (see Note J) are reflected in the financial statements.
DEFERRED COSTS — The Board has adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 71, which provides for the
deferral of costs which will be recovered through future rate increases. The Board began amortizing deferred costs on the straight-line basis over five
years effective with the June 1987 rate increase. Total deferred costs as of June 30, 1988 and 1987 were $2,392,704 and $2,990,854 respectively.
OTHER CASH AND SECURITIES — The Board has established special purpose cash funds designated to meet specific operating requirements. These funds
consist of cash, certificates of deposit, and United States Government securities and are segregated as follows:
DESIGNATED PURPOSE
Coal inventory fluctuation
Litigation, environmental, and uninsured losses
Future power requirements
Generalpurpose
CARRYING VALUE AT JUNE 30
1988
$ 3,142,002
6,451,832
11,461,366
1,732,160
1987
$ 6,503,184
6,006,657
7,676,423
1,072,028
$22,787,360 I $21,258,292
14
NOTE B — RATE MATTERS
Rates charged to customers are established solely by the governing board. The Board has agreed to charge rates sufficient to meet certain requirements of
the bond ordinances for the outstanding revenue bonds.
NOTE C — CONSTRUCTION IN PROGRESS
Construction in progress consists of major projects for expansion or addition to utility plant. The estimated additional cost to complete these projects,
based on Board authorizations, approximates $41,800,000, including commitments on existing construction contracts approximating $12,200,000. These
projects will be funded through operational cash flow, including the project funds reported as other assets.
NOTE D — RESTRICTED FUNDS
The restricted funds are required under Revenue Bond Ordinances 18A, 18B and 26A. These funds consist of cash, certificates of deposit, and United
States Government securities and are segregated into the following funds:
CU
1IA6
CARRYING VALUE
REQUIRED AT AT JUNE
30
JUNE 30, 1988
1988
1987
RRENT:
Operation and Maintenance Fund
$9,867,000
$ 12,250,075
$ 11,734,066
Bond and Interest Redemption Fund
2,355,000
3,478,917
3,185,025
Total Current
$15,728,992
$14,919,091
NCURRENT:
Bond Reserve Account
2,355,000
$ 5,295,434
$ 4,615,227
Depreciation, Extension and Improvement Fund
1,440,000
1,794,328
$ 7,089,762
1,445,576
Total Noncurrent
$ 6,060,803
$22,818,754
$20,979,894
The restrictions of the various funds are as follows:
• Operations and Maintenance Fund — By the end of each month, this fund shall include sufficient funds to provide for the payment of the succeeding
month's expenses.
• Bond and Interest Redemption Fund — This fund is restricted for payment of the current portion of bond principal and interest.
• Bond Reserve Account — This account shall include sufficient funds to cover the maximum annual principal and interest requirements for the
outstanding bonds.
• Depreciation, Extension, and Improvement Fund — This fund is restricted for major repairs, replacements, improvements, enlargements, and
extensions of the utility.
NOTE E — LONG-TERM DEBT
Long-term debt as of June 30 consists of the following:
City Utilities System Revenue Bonds, Series 1973, due serially through
July 1, 1991, plus interest at rates ranging from 4.3% to 5.0%
City Utilities System Revenue Bonds, Series 1976, due serially through
July 1, 1991, plus interest at rates ranging from 4.75% to 5.2%
8.0% land contract, due in annual installments of $40,000, including
interest, through July 26, 1994
Amount due Plan for Employee's Pensions in annual installments of
$242,500, including interest at 5.5%, through June 30, 2012
Note payable, due in annual installments of $31,245, including imputed
interest at 7.0%, with final payment September 30, 1996
Less current
$11,568,952
2.102.601
$ 9,466,351
1987
$ 5,000,000
5,000,000
229,867
3,251,977
$13,481,844
2,085,252
$11,396,592
15
NOTE E (CONTINUED)
Aggregate annual principal payments applicable to long-term debt are as follows:
1989
$ 2,102,601
1990
2,109,506
1991
2,116,912
1992
2,124,860
1993
133,393
$11,568,952
All City Utilities System Revenue Bonds were issued by authority of the City of Lansing, Michigan and are subject to the requirements of the
appropriate bond ordinances. These bonds were issued on a parity basis and are payable solely from net revenues of combined water, electric, and
steam operations of the City.
The Board may redeem outstanding City Utilities System Revenue Bonds prior to maturity at a premium and in the manner specified in the ordinances.
NOTE F — TRANSACTIONS WITH THE CITY OF LANSING, MICHIGAN
OPERATIONS — The Board recognized revenues of $5,004,565 and $3,996,354 in 1988 and 1987, respectively, for water, electric, and steam services
provided to the City. The Board recognized expenses for sewerage services purchased from the City of $183,751 and $183,985 in 1988 and 1987,
respectively.
EQUITY RETURNED — The Board returned to the City $4,646,254 in 1988 and $4,074,150 in 1987 of operational cash flow in excess of debt service
requirements.
NOTE G — RETIREMENT PLAN
The Board has a noncontributory pension plan covering substantially all full-time employees. Total pension expense was $3,413,062 in 1988 and
$3,355,480 in 1987. Contributions to the plan were determined by an actuarial valuation of the Plan as of February 28, 1987 and 1986.
The pension benefit obligation information, as estimated by consulting actuaries, which takes into consideration future service of current employees
and related salary increases, and plan net assets were:
JUNE 30
Pension benefit obligation:
Retirees and beneficiaries currentlyreceiving benefits and terminated
employees with vested benefits
Current employees:
Vested benefits
Nonvested benefits
TOTAL PENSION BENEFIT OBLIGATION I $78,467,688
NET ASSETS AVAILABLE FOR BENEFITS
$85,945,213
1987
$ 26,240,476
39,256,994
6,083,998
$71,581,468
$80,536,399
Significant actuarial assumptions used in determining the pension benefit obligation include a) a rate of return on the investment of present and future
assets of 7.5% in 1988 and 1987 compounded annually, b) projected salary increases of 5.5% in 1988 and 1987 compounded annually, attributable to
inflation, c) additional projected salary increases ranging from 0.0% to 5.3% in 1988 and 1987, depending on age, attributable to seniority/merit, and
d) the assumption that benefits will not increase after retirement.
The amount due the pension plan (see Note E) results from unfunded current service costs for the years 1968 through 1972 and is included in plan
assets for actuarial valuation purposes.
In addition to providing pension benefits, the Board provides certain hospitalization, major medical, and life insurance benefits for retired employees.
Substantially all of the Board's employees may become eligible for these benefits if they reach normal retirement age while working for the Board. These
benefits are provided through an insurance company whose premiums are based on the benefits paid during the year. The Board recognizes the cost of
providing these benefits by expensing the annual insurance premiums, which were $866,880 for 1988 and $652,184 for 1987.
16
NOTE H — CONTINGENCIES
The Board is involved in various legal actions which have arisen in the normal course of business. Such actions are usually brought for claims in excess
of possible settlement or awards, if any, that may result. After taking into consideration legal counsel's evaluation of pending actions, management is of
the opinion that the outcome thereof will not have a material effect on the financial position of the Board.
NOTE I — POWER SUPPLY PURCHASE
In 1983, the Board entered into power supply and project support contracts with the Michigan Public Power Agency (MPPA), of which the Board is a
member. Under the agreement, the Board will purchase 64.29% of the energy generated by MPPAs 37.22% ownership in Detroit Edison's Belle River
Unit #1, which became operational in August 1984. These contracts require the Board to purchase approximately 15 megawatts of power in 1991,
increasing to 156 megawatts in 1995 and thereafter. Detroit Edison has agreed to repurchase 100% of MPPA s entitlement from 1984 to 1991. The price
of this power will be calculated on a basis, as specified in the contracts, to enable MPPA to recover its production, transmission, and debt service costs.
During the repurchase period, MPPA will use the net cash flow generated from the sell back to Edison to retire a portion of the outstanding bonds.
In connection with the Belle River purchase, MPPA issued $590,000,000 of Belle River Project Revenue Bonds in September 1983. In March 1986,
MPPA defeased $335,000,000 of the initial Revenue bonds with interest rates ranging from 10-3/8% to 10-5/8% through the sale of $369,365,000 of
refunding bonds with interest rates ranging from 5% to 7-3/8%.
NOTE J — DEFERRED COMPENSATION
The Board of Water and Light offers its employees a deferred compensation plan created in accordance with I.R.C. Section 457. All amounts of
compensation deferred under the plan have been recorded as Board assets (Note A) and all property rights purchased with such amounts, and all
income attributable to such amounts, property, or rights are (until made available to the employee or other beneficiary) solely the property and rights
of the Board of Water and Light and (without being restricted to the provisions of benefits under the plan) subject only to the claims of the Board of
Water and Light's general creditors. In the past, the plan assets have been used only to pay benefits. The Board of Water and Light believes it is
unlikely that it will use the assets to satisfy the claims of general creditors in the future. The plan is administered by a trustee, The International City
Management Association Retirement Corporation. The value of the plan assets at June 30, 1988 and 1987, was $8,721,395 and $7,442,452, respectively.
NOTE K — CASH AND INVESTMENTS
The Board maintains special purpose cash and investment funds designated to meet specific operating requirements. The total of these special purpose
funds is displayed on the combined balance sheet as "Other cash and securities." In addition, investments are separately held by several of the Board's
funds.
The captions on the June 30, 1988, balance sheet related to cash and investments are as follows:
Other cash and securities
Current restricted funds
Project funds
Noncurrent restricted funds
Demand deposits
$ 22,787,360
15,728,992
12,830,156
7,089,762
30,500
$58,466,770
DEPOSITS — At year-end, the carrying amount of the Board's deposits was $41,675,480. Of the amount, $800,000 was covered by federal depository
insurance and $40,875,480 was uninsured and uncollateralized. Collateral is not required for deposits not covered by federal deposit insurance.
INVESTMENTS — Statutes limit the Board to investing in the obligations of'the United-Stiites Osvernment-and-its-agencies.
The Board's investments are categorized in the following table to give an indication of the level of risk assumed by the Board at year-end. Category 1
includes investments that are insured or registered or for which the securities are held by the Board or its agent in the Board's name. Category 2
includes uninsured and unregistered investments for which the securities are held by the bank's trust department or agent in the Board's name.
Category 3 includes uninsured and unregistered investments for which the securities are held by the bank or by its trust department or agent but not in
the Board's name.
CATEGORY
1
2
3
CARRYING
MARKET
AMOUNT
VALUE
U.S. Government
Securities
$300,000
$8,872,477
$7,618,813
$16,791,290
$16,736,638
Due to higher cash flows at certain times of the year, the Board's investment in uncollateralized deposits, unregistered securities, and in repurchase
agreements for which the underlying securities were held by the bank increased significantly at times. The maximum amount during the year of
"Uninsured and unregistered" securities was $16,491,290, and "Uninsured and uncollateralized" deposits was $48,883,555.
The Board did not violate any legal or contractual provisions for deposits and investments during the year.
17
DETAILS OF COMBINED ELIMINATIONS
STATEMENTS OF INCOME YEAR ENDED JUNE 30 YEAR ENDED JUNE 30
1988
1987
1988
1987
OPERATING REVENUES:
Water
$ 11,799,140
8 10,990,574
Electric:
Retail
112,311,505
98,126,961
Sales for resale
10,594,792
11,876,581
Steam
11,867,399
10,939,834
$146,572,836
$131,933,950
OPERATING EXPENSES:
Production:
Fuel and other operating expenses
$ 77,017,549
$ 74,724,032
Maintenance
8,614,986
8,023,492
Transmission and distribution:
Operating expenses
3,783,041
3,465,464
Maintenance
2,777,794
2,297,455
Administrative and general
24,538,035
22,104,094
Depreciation
12,314,071
11,712,744
$ 129,045,476
$ 122,327,281
$ 9,606,669
Operating Income
$ 17,527,360
OTHER INCOME:
Interest
$ 4,435,926
$ 3,989,030
$(515,252)
$(491,828
Other
525,638
466,039
$(491,828
$ 4,961,564
8 4,455,069
$(515,252)
INTEREST EXPENSE:
Bonded debt
$ 405,000
$ 503,000
Other
308,375
267,739
$(515,252)
$(491,828
8(491,828
$ 0
$ 713,375
$ 770,739
$(515,252)
Net Income
$ 21,775,549
$ 13,290,999
$ 0
DETAILS OF STATEMENTS
OF CHANGES IN CITY EQUITY
COMBINED
WATER
CONTRIBUTIONS
CONTRIBUTIONS
IN AID OF
RETAINED
IN AID OF
RETAINED
CONSTRUCTION
INCOME
CONSTRUCTION
INCOME
Balances at July 1,1986
$ 15,469,059
$ 211,201,116
$ 15,469,059
$ 4,515,352
Contributions
1,001,959
1,001,959
Net income
13,290,999
2,587,122
Equity returned to City
$ 16,471,018
(4,074,150)
$ 16,471,018
(373,933
Balances at June 30, 1987
8 220,417,965
8 6,728,541
Contributions
858,369
858,369
Net income
21,775,549
1,892,112
Equity returned to City
(4,646,254)
$17,329,387
(410,154
Balances at June 30, 1988
$ 17,329,387
$237,547,260
$8,210,499
V.
WATER ELECTRIC STEAM
YEAR ENDED JUNE 30 YEAR ENDED JUNE 30 YEAR ENDED JUNE 30
1988
1987
1988
1987
1988
1987
11,799,140
8
10,990,574
$
112,311,505
$
98,126,961
10,594,792
11,876,581
8
11,867,399
$
10,939,834
$122,906,297
$110,003,542
$11,867,399
$10,939,834
$11,799,140
$10,990,574
8
4,051,441
$
3,192,728
$
65,499,236
64,022,998
$
7,466,872
$
7,508,306
914,590
890,601
6,910,868
6,376,322
789,528
756,569
712,514
605,417
3,011,345
2,812,846
59,182
47,201
653,512
519,402
1,975,547
1,654,311
148,735
123,742
3,025,492
2,504,510
20,862,422
19,077,695
650,121
521,889
1,530,394
1,480,249
$
10,510,891
108,770,309
10,033,300
272,786
199,195
$ 10,887,943
$ 9,192,907
$ 103,977,472
8 9,387,224
$
9,156,902
$
911,197
$
1,797,667
$
14,135,988
$
6,026,070
$
2,480,175
$
1,782,932
$
692,871
8
590,716
$
3,796,498
$
3,530,925
$
461,809
$
359,217
459,056
398,016
66,098
67,095
8
484
462,293
928
$ 1,151,927
$ 988,732
$ 3,862,596
$ 3,598,020
$
360,145
$
128,290
$
159,335
$
269,745
8
335,020
$
6,965
$
8,645
42,722
39,942
253,955
$
215,203
550,223
526,950
504,422
$ 171,012
$ 199,277
$ 523,700
$ 533,915
$
513,067
$
1,892,112
$
2,587,122
$
17,474,884
$
9,073,867
$
2,408,553
$
1,630,010
ELECTRIC
STEAM
CONTRIBUTIONS
CONTRIBUTIONS
IN AID OF
RETAINED
IN AID OF
RETAINED
CONSTRUCTION
INCOME
$ 199,201,207
CONSTRUCTION
INCOME
8 7,484,557
$0
$0
9,073,867
1,630,010
(3,335,109)
$0
(365,108
$0
$ 204,939,965
$ 8,749,459
17,474,884
2,408,553
(3,833,384)
(402,716
$0
$218,581,465
$0
$ 10,755,296
19
DETAILS OF SOURCES AND USES OF CASH (NOTE A)
SOURCES OF CASH:
Net income
Charge to income not affecting cash:
Depreciation
Amoritzation of deferred costs
Contributions in aid of construction
Additional borrowings of long-term debt
Decrease (increase) in inventories
Increase (decrease) in customer deposits
Increase (decrease) in allowance for uncollectible accounts
Decrease (increase) in deferred compensated absences
Total From Operations
Total Sources of Cash
USES OF CASH:
Additions to utility plant —major construction
Additions to (reallocations of )utility plant —normal construction
Payments of long-term debt:
Bonded
Other
Equity returned to the City
Advances between utilities
Increase in accounts receivable
Decrease (increase) in accounts payable and other accrued expenses
Decrease in accrued interest payable
Increase (decrease) in interest and dividends receivable
Increase (decrease) in prepaid expenses
Decrease (increase) in customer advances
Total Uses of Cash
Net Cash Generated (Used)
COMBINED
YEAR ENDED JUNE 30
$34,687,770
858,369
183,270
596,824
76,553
0
18,486
$36,421,272
$ 11,606,939
10,921,924
2,000,000
96,162
4,646,254
0
891,010
1,668,547
36,241
38,871
75,014
22,563
$32,003,525
$ 4,417,747
1987
$ 13,290,999
11,712,744
$25,003,743
1,001,959
(4,013,295)
247,912
0
(142,685)
$22,097,634
$ 10,150,251
10,352,861
2,000,000
80,333
4,074,150
0
1,200,565
(194,653)
50,009
14,703
(147,112)
5,616
$27,586,723
$(5,489,089)
NOTE A — Allocation to water, electric, and steam operations — components affecting cash and funds are allocated to the respective
operation based on actual sources or uses of cash by operation or on a basis derived from an identifiable source or use of cash.
20
WATER ELECTRIC STEAM
YEAR ENDED JUNE 30 YEAR ENDED JUNE 30 YEAR ENDED JUNE 30
1988
1987
1988
1987
1988
1987
8 1,892,112
8 2,587,122
$ 17,474,884
$ 9,073,867
$ 2,408,553
$ 1,630,010
1,530,394
1,480,249
10,510,891
10,033,300
272,786
199,195
598,150
$ 3,422,506
$4,067,371
$28,583,925
$19,107,167
$2,681,339
$1,829,205
858,369
1,001,959
183,270
210,291
(11,491)
625,181
(4,009,144)
(238,648)
7,340
33,136
46,891
59,546
191,093
(16,129)
9,928
(64)
(120)
137
265
(73)
(145)
(29,048)
(11,520)
116,114
(149,116)
(68,580)
17,951
$ 4,495,190
$5,093,090
$29,568,173
$15,140,265
$2,357,909
$1,864,279
8 1,658,827
$ 2,329,937
$ 8,281,117
$ 7,490,239
$ 1,666,995
$ 330,075
3,167,796
2,285,875
8,861,635
7,616,902
(1,107,507)
450,084
633,300
633,300
1,331,700
1,331,700
35,000
35,000
9,235
8,752
83,287
68,131
3,640
3,450
410,154
373,933
3,833,384
3,335,109
402,716
365,108
8,839
50,685
(8,839)
(50,685.
30,163
280,158
766,376
737,925
94,471
182,482
87,239
(127,817)
1,705,012
(266,827)
(123,704)
199,991
15,523
15,367
19,878
33,819
840
823
(3,171)
(980)
24,444
5,756
17,598
9,927
6,709
(7,960)
66,629
(136,907)
1,676
(2,245
11,394
(5,206)
11,169
10,822
$ 6,027,169
$5,785,359
$24,993,470
$20,277,354
$ 982,886
$1,524,010
$ (692,269)
$ 4,574,703
$(5,137,089)
$1,375,023
$ 340,269
$(1,531,979)
INCOME AVAILABLE FOR REVENUE BOND DEBT RETIREMENT
Net income per income statement
Add:
Depreciation expense
Amortization of deferred costs
Interest on long-term debt - notes
Interest on long-term debt - revenue bonds
$ 13,368,705
YEAR ENDED JUNE 30
INCOME AVAILABLE FOR REVENUE BONDS AND INTEREST REDEMPTION $35,144,254
Debt retirement pertaining to revenue bonds:
Principal $ 2,000,000
Interest 405,000
INCOME IN EXCESS OF REVENUE BONDS AND INTEREST REQUIREMENTS I $32,739,254
PERCENT COVERAGE OF REVENUE BONDS AND INTEREST REQUIREMENTS
1,461%
1987
$ 13,290,999
$ 11,712,744
18,523
503,000
$ 12,234,267
$25,525,266
$ 2,000,000
503,000
$ 2,503,000
$23,022,266
1,020%
104
FINANCIAL & STATISTICAL INFORMATION
FISCAL YEAR ENDING JUNE 30
1988
1987
1986
1985
1984
WATER UTILITY
Number of Customers
(Average)
Residential
39,472
39,319
39,152
38,953
38,915
Commercial
4,819
4,765
4,710
4,674
4,468
Industrial
84
73
73
74
74
Total
44,375
44,157
43,935
43,701
43,457
Water Sales (CCF)
Residential
3,796,992
3,560,054
3,748,806
3,636,785
3,536,307
Commercial
3,380,632
3,300,521
3,324,685
3,187,802
3,171,072
Industrial
1,925,283
2,116,538
2,768,810
3,052,057
3,580,659
Other
112,934
112,764
9,089,877
112,764
114,064
117,378
Total
9,215,841
9,955,065
9,990,708
10,405,416
Operating Revenues
Residential
$
5,190,686
$
4,853,182
$
4,749,877
$
4,124,126
8
3,987,390
Commercial
3,818,295
3,432,291
3,123,489
2,641,983
2,543,293
Industrial
1,791,290
1,786,510
2,096,942
2,110,745
2,393,891
Other
998,869
918,591
849,204
749,816
740,824
$
10,990,574
$
10,819,512
$
9,626,670
$
9,665,398
Total
$ 11,799,140
Operating Expenses
(Incl. Depr.)
$
10,887,943
$
9,192,907
8
9,229,788
$
9,432,887
8
9,462,048
$
1,797,667
$
1,589,724
$
193,783
8
203,350
Operating Income
$ 911,197
Net Income
8
1,892,112
$
2,587,122
$
2,325,668
8
890,101
$
733,653
ELECTRIC UTILITY
Number of Customers
(Average)
Residential
74,625
73,507
72,569
72,017
71,634
Commercial
10,672
10,470
10,240
10,059
9,873
Industrial
143
149
84,126
150
169
154
Total
85,440
82,959
82,245
81,661
Electric Sales (MWH)
Residential
499,143
467,054
449,082
438,190
450,504
Commercial
855,939
810,016
756,718
723,975
706,342
Industrial
777,907
785,710
803,120
853,884
852,364
Sales for Resale
406,488
491,946
178,160
58,083
34,280
Other
34,672
35,690
35,276
2,222,356
35,374
35,801
Total
2,574,149
2,590,416
2,109,506
2,079,291
Operating Revenues
Residential
$27,534,055
$
24,194,221
8
23,598,597
$
23,980,509
$
24,488,294
Commercial
43,725,161
37,814,429
36,032,832
36,074,460
34,999,004
Industrial
34,790,986
31,772,070
32,956,309
36,865,675
36,588,039
Salesfor Resale
10,594,792
11,876,581
4,283,466
1,724,401
944,410
Other
6,261,303
4,346,241
$110,003,542
5,012,412
4,412,626
4,886,263
Total
$122,906,297
$101,883,616
$103,057,671
$101,906,010
Operating Expenses
(Incl. Depr.)
108,770,309
103,977,472
$
97,012,706
4,870,910
96,481,546
94,187,272
Operating Income
$ 14,135,988
$ 6,026,070
$ 6,576,125
$
7,718,738
Net Income
$
17,474,884
8
9,073,867
$
8,789,896
$
10,237,431
$
11,455,941
22
FINANCIAL & STATISTICAL INFORMATION
FISCAL YEAR ENDING JUNE 30
1988
1987
1986
1985
1984
STEAM UTILITY
Number of Customers
(Average)
Residential
36
38
37
36
37
Commercial
379
381
388
397
407
Industrial
1
1
1
1
434
1
Total
416
420
426
445
Steam Sales (MLB)
Residential
4,033
3,872
4,051
3,839
4,566
Commercial
567,860
493,115
514,173
515,984
607,384
Industrial
928,641
1,016,980
974,561
965,713
1,108,920
Other
46,392
60,501
63,134
64,169
86,344
1,574,468
1,555,919
1,549, 705
1,807,214
Total
1,546,926
Operating Revenues
Residential
$
29,972
$
29,484
$
30,669
$
30,136
$
33,961
Commercial
4,111,781
3,630,298
3,827,901
3,951,431
4,453,724
Industrial
7,369,417
6,929,046
6,651,837
6,852,304
6,275,419
Other
356,229
351,006
359,421
372,373
473,190
$
10,939,834
$
10,869,828
$
11,206,244
Total
$ 11,867,399
$
11,236,294
Operating Expenses
(Inc. Depr.)
9,387,224
9,156,902
9,480,442
9,283,939
9,367,045
Operating Income
$
2,480,175
8
1,782,932
8
1,389,386
8
1,922,305
$
1,869,249
Net Income
$
2,408,553
$
1,630,010
$
1,256,489
8
1,956,061
8
1,944,528
CONSOLIDATED
UTI LITI ES
BALANCE SHEET
Plant in Service
(Intl. Common)
$
368,592,595
$
351,666,565
$
333,196,710
$
323,572,986
$
314,051,586
Reserve for
Depreciation
(199,291,588)
(188,965,460)
(179,329,555)
(169,365,169)
(159,802,465'
Construction Work
in Progress
15,429,697
11,684,907
11,875,170
1,905,638
2,667,787
Current Assets
71,574,461
68,845,907
62,505,788
65,243,155
60,247,793
Other Assets
31,210,648
28,580,977
33,476,498
$261,724,611
22,991,429
$244,348,039
22,134,710
Total
$287,515,813
$271,812,896
$239,299,411
City Equity
8
254,876,647
$
236,888,983
$
226,670,175
$
217,629,876
$
208,192,313
Long Term Debt
9,466,351
11,396,592
13,481,843
15,562,178
17,650,637
Current Liabilities
14,343,873
15,954,759
15,557,284
10,946,021
13,265,086
Other Liabilities
8,828,942
7,572,562
6,015,309
209,964
191,375
Total
$287,515,813
$271,812,896
$261,724,611
$244,348,039
$239,299,411
INCOME
STATEMENT
Operating Revenues
$
146,572,836
$
131,933,950
$
123,572,956
$
123,890,585
$
122,807,702
Operating Expenses
(Intl. Depr.)
129,045,476
122,327,281
115,722,936
115,198,372
113,016,365
Operating Income
$
17,527,360
8
9,606,669
$
7,850,020
$
8,692,213
$
9,791,337
Net Income
$
21,775,549
$
13,290,999
8
12,372,053
$
13,083,593
$
14,134,122
23