Board Members present: Susie Smith, Mike Dyer, Sandra Bishop, Dorothy Anderson, and Peter Bartel.

Others present: Randy Berggren, Dean Ahlsten, Gale Banry, Cathy Bloom, Tom Buckhouse, Mel Damewood, Marty Douglass, Cathy Hamilton, Dick Helgeson, Everett Jordan, Garry Kunkel, Mat Northway, Jim Origliosso, Scott Spettel, Dick Varner, Debra Wright, John Yanov, and Krista Hince of the EWEB staff; and Daniel Lindstrom, Minutes Recorder.

President Smith called the Work Session of the Eugene Water & Electric Board (EWEB) to order at 5:40 p.m.

General Manager Randy Berggren stated that the purpose of the Work Session was to provide Commissioners an update on the Capital Work Plan. He said such plans were relatively new at EWEB - the Electric Division created a five-year plan three years ago, the Water Division in 1998. He recommended that the Board adopt the plan as part of its budget development process. He said presentations would compare plans for 2000 established in 1998 and 1999.

ELECTRIC DIVISION CAPITAL WORK PLAN

Energy Resource Project Manager Gale Banry referred to the memorandum dated October 4 regarding five-year capital plans distributed at the beginning of the meeting. He reviewed information it contained regarding the plan of the Electric Division, highlighting the following:

• Delaying start of projects related to re-licensing at Leaburg and Walterville until 2001-2002.
• Including $3 million over three years to acquire transmission right-of-way in west Eugene.
• Adding $20 million in bond authorization and nearly $30 million in debt issues to cover re-licensing and transmission right of way expenses.
• Painting Leaburg Dam, Land Trust contribution, and any mismatch between WindPower costs and revenues will be covered.
• Temporary reductions in funding in 2000 and 2001 will coincide with projected reductions in customer related capital expenditures and shifting of labor to Operation and Maintenance.
• Capital Reserves will be used to buy-down EWEB's Public Employees Retirement System (PERS) liability.

Fiscal Services Supervisor Dick Varner reviewed plans for financing the Electric Division Capital Plan, as described in the memorandum.

Commissioner Dyer asked why the proposed contribution to a land trust was considered Capital expense. President Smith replied that she believed it was correctly identified because it was a major land purchase. Commissioner Dyer replied that the purchase would not be owned by EWEB. Mr. Varner stated that while it would be recorded as an expense, it had many of the features of a capital expenditure.

Commissioner Bartel asked for an explanation of the funding identified as "Financial Strategy #10." Treasurer Jim Origliosso replied that the strategy referred to reduction of PERS liability and would lead to a ten percent reduction in EWEB's PERS rate of which by 2001 would otherwise be nearly 30 percent.

Commissioner Bishop asked for an explanation of the term "bonding limit." Mr. Origliosso replied that it was a ratio of debt service and assets.

WATER DIVISION CAPITAL WORK PLAN

Water Engineering Manager Mel Damewood provided highlights of the five-year Water Division Capital Projects Work Plan, as follows:

• Approximately $45.7 million of projects is planned
• $32.5 million are related to the Supply Plan
• The remainder are part of regular annual capital work
• Year 2000 marks the start of construction on Supply Plan initiatives
• Current five-year Capital Improvement Plan reflects 2000 proposed budget
• Expenditures of $70 million projected through 2010

Mr. Damewood said that major changes from the 1998 five-year plan included:

• An increase of $38.2 million in projected expenditures
• Treatment Plant expansion study identified optimization measures for filters and addition of liquid chemical feed building
• Distribution system plan refined increase in main replacement costs, more reservoir work, and higher general plant costs
• Hayden Bridge expansion and seismic study, College hill structural and seismic evaluation, and inventory replacement studies have impacts

Commissioner Bishop asked for an explanation of expenditures included in the five-year plan for Water Property Acquisitions. Mr. Damewood replied that the expenditures were related to well field development.

Commissioner Bishop suggested that the well field development expenditures should be identified as not having received full approval by the Board. Water Division Director Dick Helgeson replied that development of a ground water resource had been the most controversial of the recommendations of the Water Supply Plan. He said that a "full-blown assessment" and decision about development of the resource would be made in 2000. He said determining to not develop well field resources would require identification and development of an alternative backup supply. He suggested that it would be important to be clear with the public regarding the need for a back-up resource.

Mr. Varner reviewed plans for financing the Water Division Capital Plan, as described in the October 4 memorandum.

President Smith asked if Capital Improvement Plan projects were normally completed during the time projected. Mr. Banry replied that the Electric Division needed to "catch up" on some non-distribution projects. Mr. Damewood replied that the Electric Division was current on all projects.

President Smith asked how uncompleted projects were managed. Mr. Varner replied that such projects were required to be re-budgeted in subsequent Capital Improvement Plans and unspent funds were included in budget beginning balances. He said there was no guarantee that a project uncompleted in a year for which it was budgeted would be included in the plan for the next year.

Commissioner Bartel said he would be interested in a report of actual expenditures compared to budgets. Mr. Varner replied that the most significant current variances were created by delays in re-licensing projects and customer demand for conservation and loans.

The work session adjourned at 7:20 p.m.

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Assistant Secretary President