9/21/04

Board Members present: Patrick Lanning, Sandra Bishop, Dorothy Anderson, Mel Menegat, and Ron Farmer.

Others present: Jim Wiley, Mel Damewood, Jim Origliosso, Dick Varner, Debra Smith, Tom Buckhouse, Roseanna McArthur, Marty Douglass, Lance Robertson, Terry Bequette, and Krista Hince of the EWEB staff; Ruth Atcherson, City of Eugene Minutes Recorder; and John Simpson, Commissioner-elect.

AGENDA CHECK

President Lanning called the Special Board Meeting of the Eugene Water & Electric Board (EWEB) to order at 7:32 p.m. He recommended changing the order of the agenda so that Item 9 preceded Item 8. The Board was amenable to the change.

PUBLIC INPUT

No one was present to offer public input.

CONSENT CALENDAR

Minutes

Re-submitted minutes of the July 6, 2004, Work Session, Regular Board Meeting, and the July 29, 2004, Special Board Meeting, and the Minutes of the August 3, 2004, Regular Board Meeting, and the August 3, 2004, Special Board Meeting.

Business Service Agreements

2G Construction - Hayden Bridge Filter Rebuild - Water Division - $408,820
Iris Communications - Web Site Maintenance Services - General Manager's Division - $40,000
Lane Council of Governments - PAN Telecommunications Consulting - Electric Division - $35,001

Resolutions

Trojan Project Revenue Bond Resolution - Master bond resolution that specifies the terms and conditions under which any Trojan bonds will be issued.
First Supplemental Resolution Authorizing Trojan project Revenue Bonds Series 2004A and Series 2004B - Directs staff to proceed with the refinancing of the Trojan bonds pursuant to prior authorizations of the Board and the City Council.

Vice President Bishop pulled the minutes from the Work Session held on July 6, 2004.

Vice President Bishop, seconded by Commissioner Farmer, moved approval of the Consent Calendar with the exception of the aforementioned minutes. The motion passed unanimously, 5:0.

ITEMS FROM BOARD MEMBERS

Vice President Bishop had thought there would be an agenda item for the present meeting on the potential purchase and sale of land. She wished to advocate for holding real estate discussions in Executive Session.

Vice President Bishop suggested that the Board set a date by which it should wrap up its negotiations with McKenzie-Willamette/Triad hospital.

Continuing, Vice President Bishop expressed her distaste for taking an entire day for a retreat. She explained it was difficult to give up a whole day of work.

Vice President Bishop announced that she hired an assistant who would be handling some of the administrative aspects of her work as a Commissioner.

CORRESPONDENCE

Electric Division Director Jim Wiley provided the report on correspondence in General Manager Randy Berggren's absence. He reported the following:

The next McKenzie River Valley community meeting was scheduled for September 23 at 7 p.m. in the Vida Community Center to discuss the construction projects at the Leaburg dam and powerhouse and the status of chevron work. The next meeting was scheduled for October.
A tour of the Carmen Smith facilities was scheduled for September 24, leaving EWEB at 8:15 a.m. Commissioners were welcome to attend.
He acknowledged the staff that worked the Oasis Booth at the Eugene Celebration. He noted that the rain had hurt attendance, but members of the public did seek shelter in the EWEB booth.
A letter was received in the previous week from Mr. Yerkie, of Weyerhaeuser, regarding negotiations EWEB had with them. The contract expires in May of 2005. Power Resources Director Dick Helgeson was drafting a response to it and staff was continuing to meet with them.

BOARD AGENDAS

Mr. Wiley reported no outstanding issues in future board agendas. He discussed upcoming Board Agendas, as outlined in the attachment entitled Eugene Water & Electric Board, Board Agenda Report dated September 21, 2004.

President Lanning asked for input on how to prioritize pending agenda items.

Commissioner Farmer felt future agenda item (4) should be given the highest priority as it pertained to the weighting of General Manager's goals.

Mr. Wiley noted that the next meeting of the EWEB Board was scheduled for September 27 at 11:30 a.m.

Commissioner Menegat conveyed his support for having a February meeting at the Vida Community Center. He underscored the importance of continuing to meet there while EWEB undertook the Leaburg Lake raise.

WILLAMETTE WATER COMPANY ACQUISITION

Water & Steam Division Director Tom Buckhouse referred to the backgrounder on the potential acquisition of the water company entitled Willamette Water Company Acquisition. He said EWEB had talked periodically with Willamette Water Company almost since its inception about potentially selling to EWEB.

Mr. Buckhouse showed the area that the company served with a slide of the map. He noted that one portion of its service area in the Jasper area had been sold to SUB in 1997, an area scheduled to be annexed into the City of Springfield. He listed the major assumptions, as follows:

If acquired, the existing EWEB water customers would not pay any additional water rates to acquire the system;
The purchase price would be paid back within ten years;
Mr. Buckhouse stated that water systems tended to carry a fairly high debt ratio because they were designed and built for 90 to 100 years service. He said the Willamette Water Company system had been built to EWEB specifications and with the best quality lined pipe, with a depreciated value of $1.9 million.

Regarding due diligence, Mr. Buckhouse reported that Brown and Caldwell had completed an assessment of the system and determined it was in good shape. He explained that there were 115 three-quarter inch residential meters, 39 commercial/industrial services that ranged from one inch to three eight inch services. He said there was approximately 40,000 linear feet of duct, line, and pipe, all of it deemed to have a minimum 90 year lifetime. He noted one deficiency in the system; fire flows in the Shade Oaks area that did not meet the standards EWEB held for residential areas inside city limits.

Mr. Buckhouse related that the Hayden Bridge staff had taken water samples and determined that water quality was acceptable, though some operational procedures would be adopted after the purchase to improve water quality, at little cost. He stated that staff looked at customer service and whether EWEB could handle additional customers. At this point, he said, it looked very favorable.

In closing, Mr. Buckhouse explained that the City of Eugene, the Boundary Commission, the Public Utility Commission, and, most importantly, the Board of EWEB would have to approve of the sale.

Commissioner Anderson asked if it was known whether EWEB could place a surcharge on the system should it be determined to cost more for service delivery. Mr. Buckhouse replied that the assumption staff was working from was that the existing rate structure for those customers, which included a surcharge, would remain in place.

In response to a question from Commissioner Anderson, Mr. Buckhouse affirmed that the City had to weigh in because the water company was outside of the existing boundaries of the City

Commissioner Menegat asked what benefit the acquisition provided the utility. Mr. Buckhouse responded that the benefit was not great, though it was connected to the existing water system. He said it could be detrimental to EWEB's system should the water company fail to take care of its system because the Willamette Water Company system was "dead-ended." He felt that having control over that water system provided benefits in that EWEB could better control water quality seeping back from the Willamette Water system.

Commissioner Menegat asked what staff planned to do to address the area that did not have sufficient fire flow. Mr. Buckhouse replied that he had discussed this with the local fire authority, the Goshen Fire District, and they had indicated that the fire flow was sufficient for their needs. He added that additional development in that area could require improvement of the fire flow. Commissioner Menegat wondered what it would take to bring it to EWEB standards. Mr. Buckhouse thought several strategically located fire pumps would create an adequate fire flow.

In response to a question from Vice President Bishop, Mr. Buckhouse stated that all of the bodies whose approval was required were "anxious" to get Willamette Water out of the business and were not likely to raise any issues during the acquisition. Water Engineering Manager Mel Damewood added that the Lane Council of Governments (LCOG) had identified the Lane Community College basin as property that would ultimately be brought within the UGB.

Commissioner Farmer asked what the earnings before interest, taxes, and depreciation was for the company. Mr. Buckhouse responded that he did not immediately know the answer. Commissioner Farmer stated that the company was a private business and, as such, EWEB should pay a fair and reasonable price for it. He recommended that EWEB look at the gross earnings of the company to determine a fair price. He likened looking at paying for it over a ten-year period to buying a car from a car salesman. He said he would only support the purchase of the company based on determination of a fair price first. Mr. Buckhouse responded that an economic analysis would be conducted prior to the sale.

President Lanning concurred with Commissioner Farmer's request for data.

Vice President Bishop expressed concern about providing service outside EWEB's boundaries. She asked if staff thought this would force EWEB to serve other entities outside of the service boundaries. Mr. Damewood responded that when EWEB had purchased other service districts, the City had directed the utility to serve only those districts. He anticipated that the instructions would be the same for Willamette Water Company pending changes in the urban growth boundary (UGB). Should the UGB change, the City could instruct EWEB to increase its service.

President Lanning asked how many staff people worked for the company. Mr. Buckhouse responded that the water company currently employed two part-time people.

BUDGET AMENDMENT #4 - TROJAN REFINANCING

Treasurer Jim Origliosso presented the budget amendment, per the new request that such amendments come before the Board. He said the bonds could now be refinanced at one or two percent. He explained that EWEB had never been able to "get on the same page" as the BPA. He related that the utility had exchanged letters with the BPA in April and it was one of the projects they wanted to move forward with. He said they indicated EWEB had a legal commitment to refinance and cooperate in determining the feasibility of refinancing. He stated that EWEB had agreed to do so, but only if the BPA would compensate EWEB for any risk taken on.

Mr. Origliosso said this had set off quite a discussion among attorneys and the result was the basis for the security built into the agreements. Having worked through all of the issues that EWEB could think of, staff was still looking for additional potential risk, but currently had not come upon any. He said staff had come to realize that the $1 million placed into the budget for potential revenues from this were not going to materialize. As the utility did not have the funding balance, he said working capital would have to be reduced by $1 million.

Commissioner Farmer moved to approve Budget Amendment #4. Vice President Bishop provided the second. The motion carried unanimously, 5:0.

2005 GOALS AND INITIATIVES

Assistant to the General Manger Debra Smith directed Board members to look over the proposed Eugene Water & Electric Board 2005 Goals and Initiatives. Members of the Executive Management Team spoke about the goals they were charged with overseeing. Mr. Wiley addressed Goal 1, which spoke to the relationship between EWEB operations and actions and customer expectations.

Regarding Goal 1 Initiative 1.2, Commissioner Menegat asked Mr. Wiley to explain the Web-based consumption history. Mr. Wiley clarified that it duplicated the information on the paper bill.

President Lanning asked if the Web-based Start/Stop Service was functioning. Mr. Wiley replied that the customer service representatives (CSRs) were working with the program to find the bugs before launching the program to the public. President Lanning remarked that he thought it would be functioning already. Ms. Smith explained that it was slated to be on line by the end of the year.

Corporate Services Director Roseanna McArthur spoke about Goal 2, the employee goal.

Vice President Bishop asked if there was a goal for succession planning. Ms. McArthur responded that, because it was not a full program, it was part of part of Initiative 2.2 and 2.4. Vice President Bishop opined that the goals did not speak to respect for employees. She recommended there be an initiative included in the next annual goals document that addressed this issue.

Ms. Smith spoke about Goal 3, which sought to maintain an adequate source of supply for electric and water utilities, as Power Resources Director Dick Helgeson was unable to attend due to illness.

Commissioner Farmer said, regarding Initiative 3.2, he hoped EWEB was working with others to influence BPA contracts and regional issues discussions. Mr. Wiley responded that EWEB had many partners. He added that EWEB was well-respected and other power entities looked to join EWEB in its endeavors because of its reputation. Ms. Smith added that Mr. Helgeson would be providing a presentation on regional issues at the meeting on October 19.

President Lanning asked what opportunities existed for staff to provide ideas and concepts that could be developed into initiatives at this level. Ms. Smith replied that initiatives came primarily through the Strategic Thinking Group.

Mr. Origliosso spoke about Goal 4, which sought to stabilize customer rates and funding for EWEB operations.

Vice President Bishop commented that there had been a lot of diversity and inclusiveness in the goal-making process. She felt staff was actualizing things and doing a good job.

Ms. Smith added that staff had enjoyed the joint meeting with the Board.

Vice President Bishop, seconded by Commissioner Menegat, moved to approve the 2005 Goals and Initiatives.

Commissioner Farmer underscored the importance of not formulating goals that were not backed up by funds.

The motion passed unanimously, 5:0.

ITEMS REMOVED FROM CONSENT CALENDAR

Vice President Bishop provided the following correction to the minutes of the Work Session held on July 6, 2004:

Page 5, paragraph 4: "Vice President Bishop asked if there was a way to determine if there were divisions or work groups that were ~~better than others~~ perceived by the public as providing better service than others."

Vice President Bishop moved to approve the minutes from the Work Session of July 6, 2004, as amended. Commissioner Farmer provided the second. The motion passed unanimously, 5:0.

President Lanning adjourned the meeting at 9:10 p.m.

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Assistant Secretary President