20100802 Regular City Council Meeting - MinutesMINUTES OF THE REGULAR CITY COUNCIL -
LIGHT & POWER MEETING OF THE CITY OF VERNON
HELD MONDAY, AUGUST 2, 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 8:03 a.m. by Mayor Gonzales.
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.
CONSENT CALENDAR
1. Approval of Light & Power Warrant Register No. 284,
totaling $5,485,923.76, which covers the period of July 13
through July 26, 2010, and consists of the following:
a. Ratification of wire transfers totaling $5,236,604.96;
b. Ratification of the issuance of early checks totaling
$10,145.80; and
c. Authorization to issue pending checks totaling
$239,173.00.
2. Approval of Gas Warrant Register No. 72, totaling
$200,420.62, which covers the period of July 13 through
July 26, 2010, and consists of the following:
a. Ratification of wire transfers totaling $130,428.63;
b. Ratification of the issuance of early checks totaling
$26,425.53; and
c. Authorization to issue pending checks totaling
$43,566.46.
It was moved by McCormick and seconded by Davis, that the
matters on the Consent Calendar be approved as recommended.
Motion carried, 5-0.
DISCUSSIONS
I.Project Gust: Update on the progress and process of the
sale of the remaining renewable project land in Tehachapi.
Donal O'Callaghan, Director of Light & Power, reported on
the preparation and marketing of Project Gust, the
remaining Vernon renewable land located in Kern County.
Barclays Capital sent out Confidentially Agreements to 36
companies. Project Gust was reportedly moving on schedule.
2. Project Volt Financial Objectives: Includes discussion of
the current financial position of the City and status of
bonded indebtedness, electric utility rate projections and
needs, and financial opportunities for the City's utility
enterprises.
Regular City Council - Light & Power Meeting Minutes
August 2, 2010
Eric Fresch, Legal Services Consultant for the City's Light
& Power and Gas Departments, reported financial objectives
of the City in pursuing Project Volt. The City of Vernon
along with many other cities, have a need for revenues both
in the general fund, as well as the Light & Power side.
Light & Power rates have never been adequate to cover
expenses. For three years, the City used its reserves of
over $50 million dollars to cover costs during the energy
market collapse. The City also used its reserves when gas
prices increased substantially after a hurricane to act as
an insulator, thereby saving the rate payers.
After the collapse of the 2008 capital markets, the City
again used its reserves to insulate the rate payers. Those
reserves paid for bonds that jumped from 1�40-. to 150.
Everything is tight at the City level because its receipts
are down, and usage is down.
Reserves are in danger of falling below a safe level;
adjusting rates is recommended. The City's revenues never
covered its expenses. The City exists to provide essential
governmental services to the business community.. The
question remains as to how to structure the City. The
options are to use the voter base to increase taxes which
breaks the social contracts with land owners who are the
real constituents that do not live in the City or (2)
should the City look at things like fire protection
districts to increase the general fund revenue or (3) do we
go over to the Light & Power side where your rate structure
is significantly less than all the surrounding area
utilities?
Project Volt is about trying to tap a market during this
disequilibrium. The disequilibrium is caused because
people are not familiar with the financial space. A bond
holder is looking for security. A pension fund in an
insurance company is looking for an equity investment they
are going to ride with the economic fortunes of your
system.
New power plants in Arizona and Nevada are available at 40
to 600 of their value with lower environmental permitting
costs. Estimated permitting costs for Vernon are $100
million dollars. Offsite improvements for reclaimed water,
natural gas leaks, sewers and the light were nearly $100
million dollars. The generators in Arizona generated 300
to 400 mega watts. Vernon can get something for less than
half that is nearly new and preserve its rate structures,
but this was described as a rather bold transaction with a
lot of intangibles.
In order for Light & Power revenues to support the
general fund, rates need to be adjusted whether or not
there is a Project Volt. The sale of the remaining wind
property would add to the reserves, but is not a revenue
generating activity.
Project Volt looks toward partnering up with a big pension
fund for Vernon's electric system as an equity investor,
not as a bond holder. Pension funds are not able to buy or
own the City's electrical system as an equity investor.
Page 2 of 4
Regular City Council - Light & Power Meeting Minutes
August 2, 2010
RESOLUTIONS
I.RESOLUTION NO. 2010-99 - A Resolution of the City Council
of the City of Vernon Approving and Authorizing the
Execution of First Amendments to the Property Management
Agreement and Lease with Renu Resources, LLC for the
Management and Use of the Tehachapi Wind Resource Area.
It was moved by Davis and seconded by Maisano, that
Resolution No. 2010-99 be approved and adopted. Motion
carried, 5-0.
2. RESOLUTION NO. 2010-100 - A Resolution of the City Council
of the City of Vernon Approving and Authorizing the
Execution of a Professional Services Agreement By and
Between the City of Vernon and Environmental Management
Professionals, LLC for Environmental Regulatory Compliance
Services.
It was moved by McCormick and seconded by Davis, that
Resolution No. 2010-100 be approved and adopted. Motion
carried, 5-0.
3. RESOLUTION NO. 2010-101 - A Resolution of the City Council
of the City of Vernon Approving and Authorizing the
Execution of a Professional Services Agreement with Port
Canaveral Power Consultants, Inc. for Energy Project
Management and Engineering Services.
It was moved by McCormick and seconded by Newmire, that
Resolution No. 2010-101 be approved and adopted. Motion
carried, 5-0.
4. RESOLUTION NO. 2010-102 - A Resolution of the City Council
of the City of Vernon Approving a Form of Confidentiality
Agreement for Project Gust regarding the Sale of the
Tehachapi Renewable Energy Land,and Authorizing the
Director of Light and Power to Execute Confidentiality
Agreements for Project Gust.
It was moved by Maisano and seconded by Davis, that
Resolution No. 2010-102 be approved and adopted. Motion
carried, 5-0.
5. RESOLUTION NO. 2010-103 - A Resolution of the City Council
of the City of Vernon Approving and Authorizing the
Execution of an Agreement by and between the City of Vernon
and BLX Group, LLC for Financial Advisory Services in
Connection with Project Volt.
It was moved by McCormick and seconded by Newmire, that
Resolution No. 2010-103 be approved and adopted. Motion
carried, 5-0.
ORAL REPORTS
1. Brief reports and announcements from the Director of Light
& Power.
A power outage occurred on August 1st when a car hit a pole
causing Feeders 58, 59 and 64 to go down.
Page 3 of 4
Regular City Council - Light & Power Meeting Minutes
August 2, 2010
The City Clerk announced that there were no further items on the
agenda.
At 8:36 a.m., it was moved by McCormick and seconded by Maisano,
that the meeting be adjourned. Motion carried.
ATTEST:
Willard G. Y 41 W4(teu)h i
City Clerk
Hilario Gonza es
Mayor
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