Board Members present: Dorothy Anderson, Susie Smith, Peter Bartel, Patrick Lanning, and Sandra Bishop.
Others present: Randy Berggren, JoAnn Andersen, Debra Brewer, Tom Buckhouse, Marty Douglass, Dick Helgeson, Jim Origliosso, Mark Oberle, Roseanna McArthur, Lance Robertson, Dick Varner, and Krista Hince of the EWEB staff; Scott Maben, representing the Register-Guard; members of the public, and Kim Young, City of Eugene Minutes Recorder.
President Anderson called the Work Session to order at 6:30 p.m.
MASTER PLAN ECONOMIC ANALYSIS
Master Plan Project Manager Deborrah Brewer and consultant Eric Hovee of HD Hovee & Company joined the Board for the presentation. Appraiser John Brown was also present to answer questions.
General Manager Randy Berggren emphasized the future-looking orientation of the presentation.
Ms. Brewer provided some brief background on the project, which was initiated in 1998 to address space planning concerns.
Mr. Hovee over viewed the summary report. He reviewed key goals for the project, which were to minimize rate impacts and enhance operating efficiencies, and to enhance the environment on the site.
Mr. Hovee recalled the assumptions developed by the Board in regard to the master plan. He said that staff used those assumptions when developing all the options. He briefly reviewed the assumptions.
Mr. Hovee reviewed the options developed by the project team: A) organization to remain at the current site; B-1) move operations and administrative functions from the site but keep the Midgleys Building as a downtown presence; B-2) move and sell the Midgleys Building and lease space in the downtown for meeting and downtown office space; and C) split organization so that operations relocate to a new site and administrative functions remain at the current site. Mr. Hovee provided additional details regarding the acreage required for each option, the potential lands sales and purchases involved, and the costs of each option. He indicated that the least costly options appeared to be options B-1 and B-2, at a cost of about $1.85 million to $1.86 million yearly. Mr. Hovee said that the costs were inclusive, and included maintenance, operating costs, and debt service on the bonds for new facilities. He noted that the most expensive option was Option A.
Mr. Hovee briefly reviewed the analysis methodology used by the consultant team, reflected on page 2 of the consultant report, EWEB Headquarters Facilities Economic Analysis, and called attention to the sensitivity analysis performed by the consultants (pages 18-19).
Mr. Hovee said that the consultant team also had done a qualitative analysis of the options, reflected on pages 20-24 of the report. He concluded from the results of the analysis that Option B provided the greatest level of operating efficiency in terms of getting equipment to and from work sites and consolidated all EWEB personnel at the same site, a strong organizational value. Option A allowed all employees to remain at the same site, but the same operating inefficiencies continued. Option B was also a stronger option operationally than Option A, but split the organization.
Mr. Hovee said that from a customer service standpoint, Option C offered customers the greatest access and was closest to areas of greater growth. It also maintained a downtown presence.
Mr. Hovee said from an environmental standpoint, Option C achieved the most in terms of environmental values. It would result in environmental improvements both at the existing headquarters site and at the new site, although at a higher cost. He deferred the evaluation of community values to the Board.
Mr. Hovee reviewed the consultant team's conclusions, saying that the relocation of the current headquarters could be recommended for both financial and nonfinancial reasons. The financial advantage realized by EWEB would hinge on the utility's ability to realize full market value for its vacated properties. He said that while a clear preference for Option B-1 or Option B-2 over Option C was not immediately apparent; while Option B appeared to be less expensive, it did not take many adjustments to the financial assumptions to bring the options closer together in costs. In addition, Option C had qualitative benefits that Option B did not.
Mr. Hovee said that the consultant team did not believe a choice was immediately clear. However, the Board could approach the issue using a phased approach, beginning with the Option C recommendation to move the warehouse and operations facility to the alternative site, and determine later whether to move the headquarters to that location. Mr. Hovee suggested that if the Board decided to proceed with a full or partial relocation, it would create pressure on the utility to resolve the future of the steam plant and substation uses.
Mr. Hovee invited questions, comments, and suggestions for additional analysis.
Commissioner Lanning asked about the usable acreage on the alternative site. Staff indicated the site was 22 acres, basically in a rectangular shape. Commissioner Lanning asked about the impact of the wetland delineation on the site. Staff indicated the anticipated impact was about one acre of wetlands, and the wetland could have value to EWEB in terms of its function as it could be used for a bioswale, dependent on its location.
President Anderson acknowledged the operational inefficiency of the present site but pointed out that it contained more acreage. She asked what, besides access, made one site preferable over another in terms of operational efficiency. Mr. Hovee said that another factor was from the standpoint of existing buildings. In Option A, the facilities would be reconfigured for greater efficiency, but that left two relatively large buildings that were probably in the wrong location. Staff pointed out that location in the area where the most growth was anticipated also kept the "windshield time" down. The new site had a card lock location in the next block, eliminating refueling compliance problems at the current site. President Anderson pointed out that the utility would then be farther away from the south end of the community, so she questioned whether much would be gained or lost either way.
In response to a question from Commissioner Lanning, Mr. Hovee said that the themes were taken from the old surveys. He said that there appeared to be a shift over time among employees regarding the operational efficiency of the site in comparison to other sites, and growing awareness of the difficulty of continued operations at the site, particularly in terms of vehicular access. Commissioner Lanning suggested that vehicle travel times and equipment efficiencies were quantitative factors and when mixed in with the staff surveys did not appear to be a good fit with the qualitative assessment. He suggested more analysis was needed, particularly when the Board started to delineate between options B and C. Mr. Hovee agreed. Responding to a question from Ms. Brewer, Commissioner Lanning indicated that he would provide staff with some more qualitative characteristics to be included in the analysis of operational efficiencies.
Commissioner Bishop asked about the distance between the current and alternative site. Mr. Brown indicated that the distance was slightly more than two miles. He said that distance was also a function of travel times. He had hoped to be able to review data about service calls to be able to more closely track those times, and believed that with some research that information could be gathered. Mr. Brown noted that the geographic center of Eugene is roughly at 2nd Avenue and Chambers Street.
Commissioner Lanning suggested that the fueling issue needed to be considered in light of the fact that the fueling situation would not be the same over a 30-year period, particularly as the utility moved toward greater use of hybrid vehicles. Mr. Hovee concurred, saying that the issue was minor compared to the access issue.
President Anderson suggested that EWEB's continued need for access to infrastructure on the site would constrain its use, and asked how that was accounted for in the property's valuation. Mr. Brown said that for the purpose of the analysis, he assumed normal utilities, because there was nothing of record to indicate an easement of where those facilities were; further, it had not been determined which facilities would remain and which would be removed. If EWEB determined there was a utility such as a water main that could not be removed, that would affect the value of that portion of the property. Mr. Hovee noted that issue had been financially factored into the analysis.
Commissioner Bishop asked if staff considered the known and potential environmental clean-up requirements for the current site in its analysis. Mr. Brown said that had not been either quantified or qualified. He had assumed any of those costs would be an appropriate deduction, but they were not known. Staff indicated that environmental issues related to the steam plant had not been considered in the evaluation.
Responding to a question from Vice President Bartel, Mr. Brown said there were no C-3 riverfront properties to compare the EWEB property to. In terms of downtown core properties, there were transactions that ranged from $20 to $30 per square foot, which fell within the highest values included in the analysis. He said that the range on the 4th Avenue and Mill Street property could be from a low of $4 to $6 per square foot to a high of $25 per square foot. He emphasized that there were special land use requirements that had not been resolved. In terms of public properties, the new federal court house was estimated to cost around $11 per square foot.
Vice President Bartel determined from staff that EWEB paid about $125 per square foot for its existing headquarters.
Commissioner Smith indicated appreciation for the analysis. She said that it was good to have the potential of a phased option so that the Board could see if the property valuations mean a full move makes sense. In addition, it provided EWEB with the opportunity to test the assumptions behind the analysis and gave the utility a chance to re-evaluate the assumptions as time went on.
Vice President Bartel commended the work of the Facilities Planning Committee, staff, and the consultant team. He said that Mr. Hovee did a great job.
Commissioner Bishop anticipated that the assumptions underlying the analysis would change over time as conditions changed and the Board should be prepared for that. She did not think the Board was willing to create negative ramifications on the ratepayers in order to facilitate a move. She suggested the Board needed further discussion of how the BPA substation would be redeveloped and who would pay for its relocation. She expressed appreciation for all the work done by the staff and consultant team.
Commissioner Lanning also thanked staff and the consultant staff. He indicated he would send his suggestions for changes to Ms. Brewer and the other Board members.
The meeting adjourned at 7:25 p.m.
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Assistant Secretary President