Budget Committee Meeting
Draft Minutes
May 5, 2004, 7:00pm
Civic Center Council Chambers, 1175 East Main Street

CALL TO ORDER
Chairman Marty Levine called the Budget Committee meeting to order at 7:04 p.m. on May 5, 2004 in the Civic Center Council Chambers, 1175 E. Main Street Ashland, Oregon.

ROLL CALL: Councilor Amarotico, Jackson, Laws, and Hearn were present. Budget Committee Member Olsen, Moore, Silbiger, Williams, and Christensen were present.
ABSENT: Mayor DeBoer, Councilor Hartzell, Morrison and Budget Committee Member Stepahin were absent.

APPROVAL OF MINUTES
Approval of minutes from previous Budget Committee meetings dated:

000004/29/04 Budget Committee Meeting
000005/3/04 Budget Committee Meeting

The Committee decided to postpone approving the minutes until next meeting on May 6, 2004.

PUBLIC INPUT
None

ELECTRIC, AFN, COMPUTERS 0000000000 3-103 to 3-115

00000Departmental Presentation

Dick Wanderscheid, Electric and Telecommunication Director presented the Electric budget. He expressed the need to discuss the rates that are set.

Electric Division

They have implemented a tree-trimming program recently, which is a 6-8 month per year position. The Tree Commission commended them recently for their accomplishments. They have begun: a program for safety concerning overhead lines, requiring developers to put the conduit in themselves rather than the City, including an engineering fee to all subdivisions beginning this next year, coordinating the GIS and mapping system, and are looking at improving the inventory system that is currently in place.

During the last budget year they hired a consultant, ESA, to do an electric system study which was the first study since 1989. They are pleased with the results and found out that system is in relatively good position and are not looking at a significant amount of capital over next several years to upgrade the system.

They are working with Planning on the Dark Sky Initiative. They are installing new streetlights that are Dark Sky certified and have begun a program to replace overhead streetlights with a flat glass to force light downward rather than out.

The fees for new developments will be over $350,000. In FY03-04, $2.1 million will be generated for the General Fund by the electric users tax and another $1 million dollars will be paid to the City by franchise fees.

They have proposed a 6% rate increase. See attachment A. Bonneville did a study and identified that they were 3000 MWh short in supply availability in 2001 thus causing a rate increase. The City came up with the BPA surcharge that was not subject to users tax that helped to even out the fee that was charged by Bonneville. Bonneville asked their customers if they could reduce their use. PacifiCorp and Puget gave power back to Bonneville in exchange for money. Public Power sewed Bonneville for over allocating the system. PacifiCorp and Puget negotiated in their contract that if Bonneville could not dissolve the lawsuits, they would have to pay $200 million. The Electric Department took to Council on May 4, 2004 a proposal for the Mayor to send to Bonneville to try to negotiate the $200 million out of the next rate period. That would cause the blue bar to drop 6% in October 2004. They have run the rate model based on that reduction, which would be a savings of $599,000 over the 2 year period. They should know about the settlement in a month. If it doesn't happen, then they will go back to Council to increase rates in October 2004. Mr. Wanderscheid spoke to 4-42 long-term plan. In 2004-05, they are under $112,000 in revenue than needed. That is why they need the rate increase. The rate increase will increase franchise fees and electric users tax. They will leave the BPA surcharge at 20.8%, unless the settlement fails, than they will have to make up the $300,000.

They are proposing to refinance AFN and proposing a rate design change. See attachment B. They are proposing to go to a flat rate year round and a 6% rate increase. They will give the customer the rate that is related to the cost of service, make utility billing simpler, and improve cash flow. The Committee asked Mr. Wanderscheid to provide the average rate of use for the full year.

Conservation Division

Mr. Wanderscheid spoke to the new Earth Advantage program. There is a minor change in personnel; the energy analyst will be devoting one day a week to the Building Division for inspections. There is a reduction in Central Service fees and overall the Conservation Division has decreased $15,000 from FY 03-04.

Electric Division

The Supply Division is made up of BPA costs, Central Service, Rental Repair and Maintenance costs. The Transmission Division has a separate bill from Bonneville in it, which has decreased from 03-04. The Distribution Division increased $66,000 in salaries and wages. There is an additional $15,000 for a temporary tree trimming position. Materials and Service has increased due to the increase in franchise fees.

Mr. Wanderscheid spoke to how their rates compare to the local area. Pacific power is about $1 more than compared to Ashland, but with users tax, Ashland is $13 more.

Computer Services Division

Mr. Wanderscheid explained that they have added a position for a Network Administrator. Navigant consulting suggested increase in position, one for AFN and one for Computer Services. The cost is $74,000 per year split between the two divisions. Computer Technician has increased one position. They had a contract in the past with SOU helpdesk, and will eliminate that in place for another technician. The additional Database Programmer is new due to the auditor's comment about the lack of back up for the utility billing system. They are proposing to add one person to learn the software. The limited increase is due to the decrease that was budgeted for temporary employees in 03-04. Contractual Service is down for the reduction in the help desk. Central Services and Equipment has decreased. Russ Silbiger, Budget Committee Member clarified that Navigant recommended .5 increase in AFN. The Committee asked what the life span of the computers are and Richard Holbo, Telecommunication Engineer responded that it is 4 years and the cost of replacement comes out of the Computer budget unless it is a new computer that a department purchases.

Telecommunication Division

Mr. Wanderscheid spoke to the challenge to raise revenue by $566,000 from the FY 03-04 budget. They hired a consultant to research how to increase the customer base. The Navigant plan relies on rate increases and attraction of new customers with higher level of service. The new pro forma increase in accounts is achievable. The plan requires an increase of 1.5 FTE in AFN and $74,542 in promotion money. The .5 is the increase of the Network Administrator, and an AFN Support Technician. Personnel costs have increased. Materials and Services decreased. The franchise fees have been eliminated and they no longer are in general fund due to a recent Resolution. The revenue in 2005 will increase $496,000 more than 2004. They have passed a rate increase to help with revenues. They will consolidate debt into a revenue bond for $15 million. Lee Tuneberg, Finance Director spoke to the debt restructuring. There are two bank loans that will be paid off and internal borrowings will be paid back. This needs to happen so funds can operate effectively. They cannot borrow more internally. The taxable revenue bonds are tax exempt and can be used for any kind of financing: capital and operational. They look at it as a long-term asset to the City. The Committee asked what the Debt Service would be on the loan. Mr. Tuneberg responded approximately $1 million to $1.3 million per year.

Mr. Wanderscheid spoke to the Build out. He pointed to a map on the wall showing not serviced areas, some not serviceable. All new construction will have AFN.

00000Committee Questions

The Committee questioned the possibility of selling AFN. Mr. Wanderscheid spoke to the recent sale of a Municipal fiber system in Marietta, Georgia to a private company. It sold for $2.2 million cash. They have 450 miles of cable; we have 35 miles, 117 miles of coax. They have 40,000 electric meters and we have 10,000. They assume Marietta is 4 times larger than Ashland. Navigant stated that the best price that they would expect to sell for would be $1500 per subscriber. The Committee referred to an elected official who alluded to two possible buyers for AFN. The Committee emphasized the need to know if it is a credible option or forget about the option. Mr. Wanderscheid added that the technology that they have currently is useful for many years to come. He also added that he would research the possibility of selling AFN and report back to the Committee. Don Laws, Councilor, wants to wait before selling because debt would only increase $1 million before it starts to decrease. Mr. Levine stated that the savings of rates is less than the Debt Service cost per person. Kate Jackson, Councilor, is in favor of keeping AFN and supporting it.

Mr. Silbiger stated that he believes that the 2002-03 Capital Outlay on page 4-46 is estimated poorly. Mr. Tuneberg responded that was what was capitalized when the year ended. Mr. Wanderscheid added that they used Hunter Communication at the end of year. Mr. Silbiger added that the AFN Support Technician was not discussed in the advisory committee. Mr. Wanderscheid explained that it was added to achieve Navigant's suggestions. Mr. Silbiger added that he believes that Navigant is underestimating the impact of HDTV. The Committee asked what the cost of HDTV would be. Mr. Holbo responded $2000 per station.

00000Public Input

Ron Roth/6950 Old Highway 99/ spoke of the tough question about borrowing for AFN. The only choice is to do a long-term borrowing. He supports paying back the Interfund Loans.

00000Approval of Departmental Budget

Williams/Amarotico m/s to tentatively accept the budget as presented. All Ayes

ADJOURNMENT
The meeting was adjourned at 9:15 p.m.

Respectfully Submitted,
Bryn Morrison
Administrative Secretary, Finance Department

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