MEMO

Background

Over the past several months staff has been evaluating the organizational structure of the Ashland Fiber Network (AFN) with a particular emphasis on its location in the overall city structure. Lee Tuneberg, Dick Wanderscheid, and Tina Gray participated in the evaluation.

AFN is currently a part of the Electric Department and under the responsibility of the Electric and Telecommunications Director. Until recently, a "shared" AFN sales position located at City Hall was under the Direction of the Finance Director but is now part of the Electric Department. Billing and collection are the responsibility of the Finance Department. Potential AFN customers first contact the city to purchase city utilities by contacting the Finance Department.

The group of employees that provides support to the city's computer systems, networks, personal computers, and phones is under the direction of Telecommunications Engineer. The Telecommunications Engineer's time is split between AFN and computer services. This position reports to the Electric and Telecommunications Director.

Discussion

The Electric Department and AFN represent significant responsibilities. Electric fund expenditures are approximately $11 million with 21 employees. AFN is a business with expenditures of $2.6 million with 8 employees. The expertise to manage the city's electric utility and AFN are different. Initially, during the construction phase of AFN, the experience and knowledge needed to manage both were in better alignment. However, now that the construction of the AFN system, with exception of providing service to new developments, is complete, it is time to shift the emphasis of the management of AFN to maintaining the existing infrastructure; keeping current with the ever changing world of technology; increasing the customer base for the current AFN products; and evaluating new AFN products that will improve the Financial condition of AFN. There are also a number of challenges and opportunities facing the Electric Department that will require the full time attention of the Electric and Telecommunications Director. Those challenges and opportunities include the evaluation and implementation of a SCADA system, implementing the new rate structure from BPA, purchase of the Mountain Avenue substation, re-negotiation of BPA contract and succession planning for key positions.

In short, AFN and the Electric Department require the attention of full time managers.

Potential customers of AFN are people who are currently subscribers to the competing providers of cable television and internet services. Recent marketing efforts have shown that it is difficult to move customers from the competition to AFN. The best opportunity to bring a new customer to AFN is when they come to the city to establish utility services. This activity occurs in the Finance Department. Placing employees that have the greatest opportunity to obtain additional customers in the same department, under the same leadership with the other AFN employees increases the ability to obtain new customers and to provide consistently good customer service.

AFN relies heavily on the Finance Department to prepare financial information used to make short and long term revenue and expenditure projections. This reliance on the Finance Department exceeds what is required by most city departments. This is due to the fact that there is a lack of staff time available within AFN to evaluate and prepare financial information. As information flows between the two departments it increases the probability that errors will occur.

Propose Organizational Structure

It is proposed that the Electric and Telecommunications Director dedicate 100% of his time to the management of the Electric Department.

The responsibility for the management of AFN be assigned to a newly created position. The tentative title for this position is IT/Telecommunications Manager.

The IT/Telecommunications Manager will report to the Finance Director.

The proposed organizational structure will require the elimination of the Telecommunication Technician in AFN. This is being done in order to accommodate the increased cost associated with having a full time manager of AFN. The Telecommunication Technician position is currently vacant.

A Controller position will need to be added to the Finance Department in order to backfill for the time that the Finance Director will need to spend on AFN and Computer Services issues. The Controller position will also assist the Finance Department in completing critical tasks that they are not able to complete at this time.

Financial Impact

It is anticipated that the financial impact to AFN will be almost neutral due to the savings from an eliminated positions and recognizing corresponding changes in Central Service Charges. The impact on the Central Service Fund is an increase of approximately $40,000 that will be shared by all departments benefiting by added support from the Controller.

Future Issues

The impact of the elimination of the Telecommunication Technician will need to be carefully monitored. It is critical that the reliability of the AFN network be maintained and that customer service requests are addressed promptly.

The knowledge, skills and abilities of the new manager position will need to be carefully crafted. It is anticipated that there will be an emphasis on selecting a person with direct experience managing a private or public system similar to the size and scope of AFN.

Alternatives Considered but Rejected

All of the alternatives considered other than maintain the status quo, included dedicated 100% of the time of the Electric and Telecommunications Director to the Electric Department and creating the AFN/Computer Services Manager.

Several alternatives that were rejected involved variations on how to absorb the impact of moving AFN under the Finance Director. The variable for these alternatives revolved around the number of staff to add to the Finance Department.

Moving AFN under the City Administrator was evaluated but rejected due to the increased workload it created by adding an additional position reporting to the City Administrator.

Separating Computer Services from AFN and creating a separate Computer Services Department was also rejected due to the overlapping responsibilities between AFN and Computer Services. The two could be split bit it would result in increased costs for both AFN and Computer Services.

A more comprehensive reorganization involving the creation of an Administrative Service Department was rejected to the relatively high cost of the alternative.

Implementation Timeline

Full implementation of the proposed organizational structure cannot take place until the 2005-06 budget is approved. However, staff will be proceeding with the recruitment of the AFN/Computer Services Manager as soon as possible so that the position can be filled shortly after July 1st. The interim transition of AFN to the Finance department will begin immediately and will require moving ahead with steps to backfill the Finance Director to enable this transition.

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