9/27/04

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

Vice President Sandra Bishop was excused.

Others present: Randy Berggren, Debra Smith, Jim Origliosso, and Krista Hince of the EWEB staff.

AGENDA CHECK

President Lanning called the Special Board Meeting of the Eugene Water & Electric Board (EWEB) to order at 11:30 a.m. He determined the Commissioners had no changes to offer to the agenda.

PUBLIC INPUT

No one was present to offer public input.

APPROVAL OF CONSENT CALENDAR

The Consent Calendar was presented

Commissioner Menegat, seconded by Commissioner Farmer, moved to approve the Consent Calendar as presented. The motion passed unanimously, 4:0.

ITEMS FROM BOARD MEMBERS

Board members had no items.

CORRESPONDENCE

General Manager Randy Berggren noted the upcoming October 28 retreat and alerted Commissioners to the possibility that he would ask them to convene in Executive Session soon to discuss site acquisition issues. Commissioner Farmer recalled Commissioner Bishop's concerns about when Executive Sessions were scheduled and suggested that Mr. Berggren touch base with Commissioner Bishop about that issue.

BOARD AGENDAS

Mr. Berggren noted that the schedule of upcoming meetings included some proposed changes that he intended to confirm with President Lanning.

MCKENZIE-WILLAMETTE HOSPITAL/TRIAD CONTRACT OF SALE OFFER

Mr. Berggren reported that since the Board last discussed the topic, he had met with representatives of McKenzie-Willamette/Triad to review the Board's initial discussion on the topic and the staff's response to the offer tendered by McKenzie-Willamette/Triad. At that time, the two parties discussed getting their respective staffs together for a more intensive discussion sometime the first week of October 2004 with the goal of developing a purchase/sale contract.

Mr. Berggren referred members to a September 23, 2004, memorandum from himself and Debra Smith, Assistant to the General Manager, entitled McKenzie-Willamette Hospital/Triad Contract of Sales Offer. The memorandum contained staff's summation of EWEB's policy positions in regard to a number of issues. He requested Board comment on the staff summation.

Price

Mr. Berggren reported that the price was offered at $38.5 million, representing the net out-of-pocket cost to EWEB after it refinanced the debt on the headquarters building. He said it was a conceptual estimate but represented EWEB's best projection at this time. He acknowledged that any sales transaction would depend on the actual number. He asked if the figure should be retained, and if it should be tied to some sort of "right to exit" the deal on both sides.

Commissioner Farmer asked that staff attempt to calculate the added value created by the City of Eugene's willingness to allow commercial development on land now zoned for multi-family residential use. That was something that was not enjoyed by other potential buyers.

Commissioner Farmer was uncomfortable stating any particular purchase price at this time because EWEB's costs could be less or it could be more. He said if EWEB was to use that figure to further discussion as opposed to representing it as a final sales price, he would be more comfortable. Mr. Berggren concurred. He said once the number was refined, both parties could determine at that point if the deal still made sense.

Commissioner Farmer indicated he was willing to look at the incremental costs that would be created by building facilities that were a substantially better value than what EWEB currently had.

Commissioners indicated acceptance of the staff-recommended price, with Commissioner Anderson and President Lanning emphasizing that a major criterion for proceeding was that the ratepayers not bear the cost of moving EWEB off the site. President Lanning noted as a caveat to his comments his concerns about the cost of maintaining the facilities at the existing site. Commissioner Menegat said he was looking for an indication that McKenzie-Willamette/Triad was willing to negotiate once the two parties determine what an appropriate price is. Mr. Berggren agreed that it was important to get an indication from McKenzie-Willamette/Triad that there was a willingness to negotiate above the initial price.

Timing

Mr. Berggren said EWEB would stipulate a 210-day due diligence period for its chosen site, with a 60-day extension if necessary.

Commissioner Anderson asked what would happen if it took EWEB longer to find another site. Mr. Berggren anticipated that when the sales agreement was negotiated, EWEB would know more about the new site and could adjust the schedule at that time.

Commissioners had no objection to the staff recommendation for this area.

Representations and Warranties of Seller

Mr. Berggren noted the industrial uses that proceeded EWEB's use of the property and reported for that reason, EWEB would be unable to warrant the property and staff proposed to sell it "as is."

Commissioner Farmer determined from Mr. Berggren that EWEB's legal counsel had not yet reviewed the memorandum's terms as yet, and advised staff to seek such a review.

Commissioners had no objection to the staff recommendation for this area.

Transitional Move

Mr. Berggren noted the staff recommendation for a three-year minimum period to move EWEB operations and a five-year minimum period for the move of administrative functions. A leaseback was a required term of the contract for EWEB. He said the schedule would need to be "tied down."

Commissioner Farmer suggested that staff wait for McKenzie-Willamette/Triad to offer a schedule before offering EWEB's schedule.

Commissioner Anderson expressed concern about giving up the administrative buildings, noting public criticism of the buildings when first constructed that she feared would be repeated if EWEB sold the site. She also was concerned that EWEB and the public were giving up a lot when giving up the site. She said that perhaps another site would make sense, but that decision had not been made yet. She was reluctant to commit to give up the administrative buildings in particular before EWEB knew more about how operations and administration would work together in the future. The costs of the leaseback were also an issue for her. Mr. Berggren agreed with Commissioner Anderson that those were concerns, but McKenzie-Willamette/Triad had been clear it needed the whole site. He thought reluctance on the part of EWEB to sell the entire site would be the end of negotiations.

Commissioner Farmer acknowledged Commissioner Anderson's concerns but reminded her that the Board had voted to move forward with selling the entire site. He said if EWEB did not proceed on that basis in its negotiations, it would be negotiating in bad faith in a very public way. Commissioner Anderson agreed with Commissioner Farmer about the Board's actions, but she thought it had been taken because Board members believed EWEB could find a suitable site on which administrative and operational functions could be located. She did not think such a site had been found. In addition, she questioned whether EWEB's administrative functions should be located at a site such as the Roosevelt site. Mr. Berggren noted the Roosevelt site had been the priority site for the Board majority, and he was still considering it as a potential future long-term consolidated site on which administrative and operational functions would be located.

President Lanning shared Commissioner Anderson's concerns, suggesting that EWEB might consider maintaining a centralized customer service center separate from other administrative functions. Mr. Berggren reminded the board that throughout its discussions of other sites, it had discussed maintaining a downtown presence for such things as public meetings, bill paying, etc.

Commissioner Menegat indicated his concurrence with the remarks of Commissioner Farmer, noting that EWEB had been discussing such a move for a long time. He did not think the Board's position had changed.

Commissioners had no objection to the staff recommendation for this area.

Steam Plant Option

Mr. Berggren noted that the Steam Utility was not for sale, although EWEB would provide the hospital with an option to sell, predicated upon its ability to find another site and on the City of Eugene's deciding against taking advantage of its right of first refusal. EWEB was also proposing to retain the Willamette River water claim and easement to move the water to a treatment facility.

Commissioners had no objection to the staff recommendation for this area.

Contract Cancellation Terms

Mr. Berggren reviewed the contract cancellation terms, which included EWEB's failure to secure an alternative site, dissatisfaction on EWEB's part with the due diligence report for the alternative site, dissatisfaction on McKenzie-Willamette/Triad's part with the due diligence report on the EWEB site, and a finding in the Financial Feasibility Study that the offer price would not shield EWEB's customers from a rate increase or the price recommended in the study offered was not acceptable to either party.

Commissioners had no objection to the staff recommendation for this area.

Mr. Berggren indicated staff would likely return for direction on other issues.

Commissioner Farmer advocated for any necessary Executive Sessions to be held soon.

ITEMS REMOVED FROM CONSENT CALENDAR

No items were removed from the Consent Calendar.

President Lanning adjourned the meeting at 12:30 p.m.

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Assistant Secretary President