Board Members present: Dorothy Anderson, Patrick Lanning, Sandra Bishops, Ron Farmer, and Paul Conte.

Others present: Randy Berggren, Jim Maloney, Marc Anderson, Marty Douglass, Dick Varner, Jim Origliosso, Cathy Bloom, Jim Wiley, Debra Smith, Mark Oberle, JoAnn Andersen, Dick Helgeson, Roseanna MacArthur, and Krista Hince of the EWEB staff; and Ruth Atcherson, City of Eugene Minutes Recorder.

President Anderson called the Work Session to order at 5:35 p.m.

PUBLIC EMPLOYEES RETIREMENT SYSTEMS (PERS) LEGISLATION

Jim Origliosso, Treasurer, provided a brief presentation on the PERS legislation with the aid of overhead projections. He stated that staff would be returning to the Board on January 7, 2003, to ask for direction on how to proceed and also to discuss current litigation involving PERS.

Mr. Origliosso discussed the PERS issues, which included poor returns on PERS investments, how they distributed funds when there were no earnings to distribute, and the reserve funding, which was the current center of the PERS litigation. The lack of updated mortality tables were also at issue. He added that the possibility of developing an alternate system of retirement benefits was the last "issue" to consider.

Cathy Bloom, Assistant Treasurer, highlighted the various civic and legislative entities that are currently working through the morass of PERS. She explained that the PERS Employer task force was made up of a group of employers from around the state. In response to a question from Commissioner Farmer, she said that the change in administration would very likely change the composition of the task force. Mr. Origliosso commented that he expected there to be some continuity in the task force.

Ms. Bloom stated that although attorneys and union representatives were being very secretive regarding the discussions on the pending litigation that they were involved in with PERS, it was widely thought that the outcome would be new legislation.

In response to a question from Commissioner Conte, Mr. Origliosso clarified that a major contributing factor to the dilemma that PERS was in was caused by the poor performance of its investments. Commissioner Conte commented that, had the PERS Board used a less volatile investment mix, there would have been less risk. Mr. Origliosso stated that another factor was the amount of money being paid out of the system as more people retired.

Commissioner Farmer asked if there had been a significant shift in the PERS investment policy. Mr. Origliosso responded that there had not. Commissioner Conte wondered if there had been any direction on a policy level from the PERS Board. Mr. Origliosso stated that none had been indicated. Ms. Bloom added that PERS was beginning to be concerned because the current portfolio had only a 50 percent chance of putting out 8 percent.

Ms. Bloom noted that the figure for the funded ratio in the year 2000 was misleading as there had been a bond buy-down that had reduced the Unfunded Actuarial Liability (UAL).

Regarding the "unsmoothed" contribution rates, Ms. Bloom explained that the rate that EWEB would contribute for 2001 would be determined in the next week. She predicted the rate would be 20 percent higher for 2002.

In response to a question from Commissioner Farmer, Ms. Bloom said that EWEB had higher rates because employees receive a higher wage and remain in the employment of EWEB longer. She noted, in response to a further question from Commissioner Farmer, that EWEB could not be compared to peers as there were no comparable utilities within the State of Oregon.

Commissioner Farmer asked if there was an option for future employees to opt out. Ms. Bloom replied that, as of yet, they would not be permitted to opt out. Mr. Berggren added that EWEB had looked into that possibility in the early 1990s.

Ms. Bloom said, regarding the deficit reserve account, that there was a statute passed that roughly said that if the account was not paid in five years a balloon payment could be required. She was uncertain as to how this would be pursued in the current situation.

Mr. Origliosso discussed the proposed alternative systems to the PERS system. Then he summarized the PERS employers' legislative agenda. He said that legislative action in the PERS issue was anticipated. He noted that EWEB supported allowing employers to "opt out" of the system, but that this proposal has gone "down in flames" as much of the proposed legislation had.

Commissioner Bishop asked if the negotiated settlement had legal standing. Mr. Origliosso responded that it was negotiated for lawsuit purposes and would likely be included in legislation.

In response to Commissioner Farmer, Ms. Bloom stated that staff would be bringing options and recommendations to the meeting scheduled for January 7, 2003, for Board consideration and action.

GENERAL MANAGER'S COMPENSATION

Vice President Lanning said that he and Commissioner Conte had submitted a draft General Manager's Compensation sheet. He requested that Jean Meyers come forward in order to respond to any questions.

Commissioner Farmer asked, regarding page 3 of the document, what the background of the scope of the studies that were referenced. Ms. Meyers responded that the background to the data was that a previous EWEB Board had adopted a pay system in 1999 in which it had taken a close look at where a general manager would come from and where the utility would lose a general manager to.

Commissioner Conte felt that there was not an adequate amount of data to formulate a mathematical equation to determine the appropriate compensation package for the general manager (GM).

Commissioner Farmer remarked that a comparison of EWEB with national utilities was not an accurate comparison. Ms. Meyers replied that the other utilities that had been considered were all located in the Pacific Northwest. Commissioner Bishop stated that the guiding principle was that EWEB was a nationally known company.

Commissioner Conte encouraged the Board to consider what it would take to find and hire a comparable or better GM, should Mr. Berggren choose to move on to another position. He suggested that each Board member decide how to put together compensation and benefits.

Commissioner Farmer expressed discomfort at participating in the decision making process on compensation for the GM when he had not participated in the evaluation portion of it, as it had occurred prior to his term. He asked why six months had transpired since the evaluation of the GM's work performance had been conducted? Vice President Lanning explained that the decision was made to take a more detailed look at the compensation package in order to analyze it further and possibly tie the compensation for the GM more closely to the philosophy of how the pay structure was formulated for the entire organization.

President Anderson commented that setting the salary for the GM was a very different process from setting salaries for staff. She added that she had difficulty with the evaluation process, that she did not feel comfortable with "exceeds expectations," as her expectations are very high for the GM's job performance. She felt that "consistently out-performs" would express this higher rating better.

Commissioner Bishop suggested that the  Board work on the range of salary and compensation that should be appropriate for the position of general manager of EWEB at its next retreat.

President Anderson advocated for changing the deferred compensation package for the GM work performance. She felt that it was difficult for the public to understand. Vice President Lanning added that, should the deferred compensation package be terminated after five years of its eight year term, it would represent substantial interest savings to the utility.

Commissioner Farmer said that restructuring the compensation package was a much larger issue. He stressed that the Board had an obligation to address the issue of whether or not to increase the current compensation for the GM at the Regular Board meeting to follow the current Work Session, and that changing the compensation should wait for another meeting. Commissioner Conte concurred.

The Commissioners agreed to resume the discussion in the Regular Board meeting.

The meeting adjourned at 7:43 p.m.

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Assistant Secretary President