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20100623 Regular City Council Meeting - MinutesMINUTES OF THE SPECIAL CITY COUNCIL MEETING OF THE CITY OF VERNON HELD WEDNESDAY, JUNE 23, 2010, IN THE COUNCIL CHAMBER OF THE CITY HALL LOCATED AT 4305 SANTA FE AVENUE, VERNON, CALIFORNIA MEMBERS PRESENT: Gonzales, McCormick, Davis, Maisano, Newmire MEMBERS ABSENT: None The meeting was called to order at 2:34 p.m. by Mayor Gonzales. The City Clerk advised that there were no changes to the agenda. The City Clerk announced that this was the time allotted for public comments. The Mayor asked if there was anyone in the audience who wished to address the City Council. No one responded. DISCUSSIONS 1. Review of the proposed budget for the City of Vernon for fiscal year 2010-2011. City Administrator Donal O'Callaghan provided the following additional clarifications to some of the questions/comments raised at the June 16, 2010 budget review meeting: 1. Capital Expenditures: The capital budget is not included in the operating budget in order to enforce strict monetary control over capital spending. It is intended that City Council approval will be requested for any capital spending based on priority of needs and funding availability. The proposed fund allocation for capital outlays will likely be provided to the Council in the next couple of weeks. This is the second year this approach of separating capital projects from the operating budget has been used. 2. Revenues: A revenue matrix is currently being compiled for analysis of existing and potential revenues. It is intended that a full report of the analysis will be prepared. Options for raising revenues include training programs, establishing fees for services currently provided free of charge, and raising existing fees. 3. Personnel: The psychiatric evaluation costs were removed from Personnel and reallocated to the Police Department's asset forfeiture funds. 4. Redevelopment: The City is responsible for paying the property tax under its lease with Austin Trucking. 5. Industrial Development: The Industrial Development Fund is owned by the General Fund and will be budgeted as such. 6. City Attorney: The contract with Avigal Horrow is in effect until April 6, 2012. Ms. Horrow was working with the City Attorney on various matters, but ways to Special City Council Meeting Minutes June 23, 2010 rectify the situation are being examined based on the current level of production. 7. Street Lighting: As outlined in the memo from Engineering Manager Ali Nour to O'Callaghan, dated June 23, 2010, the Light & Power Department recommends waiting until LED products improve and costs decrease before such replacements are considered. At such a time, grant funding options will also be explored. Current estimates place the initial conversion costs at approximately $1,600,000 with a 10-year payback schedule based on the estimated $160,000 in annual savings. 8. Water and Recycled Water: O'Callaghan deferred to Director of Community Services & Water Kevin Wilson to summarize his memo to O'Callaghan, dated June 21, 2010, respecting proposed water rate increases. Wilson advised that staff would be recommending an overall increase of approximately 4.40, which consists of a 10.69% increase to the commodity rate, a 7.9% to the square footage rate, and no change to the meter rate. Recent increases to the City's costs for water from WRD and MWD have been somewhat offset by decreased usage. Central Basin's rate increases for the coming fiscal year, one on July 1, 2010 and the second on January 1, 2011, have already been set and are not expected to change. Wilson confirmed that those increases, as well as anticipated capital needs, had been factored into the proposed budget. 9. Haz Mat - Health: These fees are generally not up-to- date, but will be included in the revenue matrix assessment previously described, and appropriate changes will be recommended. O'Callaghan confirmed with the Council that each member received the revised budget pages for the Police Department, which reflected a $2 million reduction, rather than the $3.4 million reduction originally sought. This change would require a transfer in of $14.5 million, as opposed to the $13 million originally projected, requiring a bit more diligence on the City's part. O'Callaghan gave an overall summary of the Light & Power budget. Proposed revenues are $133 million, up from $126 million in 2010, and proposed expenditures are $132 million, up from $118 million in 2010, including a $7.8 million increase in natural gas and capacity costs, a $3 million increase in transmission expenses, and increases resulting from the decentralization of employee benefits. These increases are offset by a $3.6 million reduction in interest expense and a $1.5 million reduction in professional services. The decision to terminate the Citigroup swaps in April 2010 was a good one, but deciding not to terminate the Morgan Stanley swaps is costing the City money every week. The Citigroup swaps were the costlier of the two. At this point, the Mayor continued with the department by department review. Page 2 of 5 Special City Council Meeting Minutes June 23, 2010 1. Station A: The Mayor stated this was the first year he had seen this section and asked what Station A is. O'Callaghan advised that Station A is the old building that houses the smaller turbine generators. The Mayor asked if this is the diesel plant. O'Callaghan confirmed that it is and that it has always been budgeted separately. 2. Transmission & Distribution: The Mayor asked for further explanation to the one provided on page 2 relating to the decrease in,the Repairs & Maintenance category. O'Callaghan believed that prior year's costs included capital costs that should not have been budgeted as an expense, but deferred to Transmission & Distribution Manager Carlos Fandino for further explanation. Fandino reiterated Donal's response and gave the following example: if a car hits a pole and the pole needs to be replaced, it is part of the Pole Replacement Program, and becomes a capital expenditure, as anything done to extend the life of any piece of equipment is a capitalized expense. Councilman Davis asked if regular cleaning of the insulators on the street are still being performed and included in the maintenance budget. Fandino advised that the porcelain insulators on the 66 kV system were replaced with polymer insulators, which do not require as much hot washing. Hot washing is done once a year on the 16 kV system and on customer transformers and insulators. 3. Light & Power Administration: The Mayor noted the decrease in professional services previously mentioned, relating to J.D. Hicks & Associates. O'Callaghan explained that the security services provided by J.D. Hicks & Associates would be replaced by a camera and microphone system. The Mayor asked about the 30 of electric sales paid to the General Fund. O'Callaghan advised that this was the required in -lieu tax payment. 4. Light & Power Electrical Engineering: The Mayor asked if there are still a lot of other companies, like AT&T, attaching to the City's poles, and expressed his concern that the attachment of multiple lines does not get to look like spaghetti. Engineering Manager Ali Nour advised that AT&T, Time Warner, XO Communications, and NextG continue to pay to attach to the City's poles, which provides a source of revenue for the City. Page 3 of 5 Special City Council Meeting Minutes June 23, 2010 The Mayor asked about placing attachments underground, but recalled certain safety concerns relating to underground placement that had been discussed over the years. O'Callaghan advised that safety is not a concern as long as the correct materials and components are used for a particular underground location. It's actually safer, and the preferred direction for the future, but costly. One approach to such a transition is to locate as much connection underground for new companies as they come into the City, and then try to work back over the years with the relocation of existing companies' lines. 5. Light & Power Resource Management: The Mayor asked how the City's Palo Verde nuclear plant in Arizona is doing. O'Callaghan deferred to Electrical Resource Planning & Development Manager Abraham Alemu for the last report on the plant. Alemu advised that the plant has performed very well historically and is currently performing very well, but one of the units is out. O'Callaghan and Alemu advised that coolers and pumps were replaced over the last year, and equipment continues to be reused. There is proposed legislation for 2017 that could cause the City to lose some of its existing entitlements, more on the energy side than the capacity side. O'Callaghan explained that one of the reasons for the increase in revenue is because the City has increased its load and will continue to increase its load five to ten megawatts over the next year. Davis asked what the $3 million for Vendor 1 is for. Alemu explained that Vendor 1 is a placeholder for whatever power companies the City ends up buying power from as part of its trades and transactions. Such purchases are only made if there is a profit to be gained by the City in selling the power for a margin in the wholesale market. O'Callaghan pointed out this was an additional revenue -generating prospect. Councilman Newmire asked what an H. Gonzales unit is. O'Callaghan explained it is a smaller unit generating approximately 10 MW of power. 0 Alemu explained that these units help the City meet its capacity requirements under the Cal ISO tariff, relieving the City of having to purchase that additional capacity in the market. The Mayor asked about the MGS capacity payments. Page 4 of 5 Special City Council Meeting Minutes June 23, 2010 Alemu advised that the MGS capacity cost is defined in the PPTA with Bicent. O'Callaghan explained that the two primary payment components of the PPTA, Power Purchase Tolling Agreement, with Bicent are the capacity payment, which accounts for approximately 800-8, and the energy payment, which accounts for approximately 20%. The capacity cost consists of two components, original and additional, and the breakdown relates primarily to the accounting structure and financial management. The Mayor called for any further questions or comments in relation to the review of the proposed budget for fiscal year 2010-2011. None were raised. O'Callaghan reminded the Council that the meeting for adoption of the proposed budget was scheduled for the following day, June 24, 2010, at 9:00 a.m. The use of Monthly Management Reports (MMRs) will begin upon commencement of the new fiscal year to track expenditures in accordance with the adopted budget. At one of the meetings each month, the Council will be given a brief, high-level MMR to assist its members in tracking the City's expenditures and how everything is working. At 3:40 p.m., it was moved by McCormick and seconded by Newmire, that the meeting be adjourned. Motion carried. &44,� ,� Hilario Gonzales Mayor ATTES e Willard G. Yam g chi City Clerk Page 5 of 5