CANBY UTILITY REGULAR BOARD MEETING

MAY 27, 2014 7:00 P.M.

AGENDA

I. CALL TO ORDER

II. AGENDA Additions, Deletions or Corrections to the Meeting Agenda

III. CONSENT AGENDA Approval of May 27, 2014 Agenda Approval of Regular Board Meeting & Executive Session Minutes of May

13, 2014

IV. CITIZEN INPUT ON NON-AGENDA ITEMS

V. RESOLUTION NO. 271 Revising Canby Utility’s Water System Development Charges – Carol Sullivan, Finance Manager (pp. 1-5)

VI. STAFF REPORTS Operations Superintendent: May 17 Momentary Power Interruption

General Manager Updates: Northwest RiverPartners Clean Hydro Campaign (pp. 5-21) Refunding 2004 Water Revenue Bonds (pp. 22-23)

VII. EXECUTIVE SESSION The Canby Utility Board will adjourn its regular meeting to go into executive session pursuant to ORS 192.660(2)(i) to discuss performance of a public employee. Upon completion of the executive session the Board will return to its regular meeting.

VIII. ADJOURN

CANBY UTILITY REGULAR BOARD MEETING MINUTES

MAY 13, 2014 PRESENT: Chairman Cornelius; Members Wagner, Maxwell, Potter and Daniels;

Matt Michel, General Manager; and Barbara Benson, Board Secretary ALSO PRESENT: Carol Sullivan, Finance Manager; Larry Hepler, Operations

Superintendent; and Dee Anne Wunder, Customer Service Supervisor Chairman Cornelius called the Regular Board Meeting to order at 7:02 p.m. Chairman Cornelius presented the meeting agenda for consideration. He asked for any additions, deletions or corrections to the meeting agenda and there were none. A discussion ensued regarding clarifying information presented in the financial reports; however, the discussion was tabled until Carol Sullivan, Finance Manager, presented the quarterly report during her staff report. Chairman Cornelius presented the consent agenda for approval. Member Wagner made the *MOTION to Approve the Consent Agenda, Consisting of the Meeting Agenda, Regular and Executive Meeting Minutes of April 22, 2014, Write-Offs in the Amount of $4,202.67, Payment of the Electric and Water Department Bills in the Amount of $860,022.57 with Carry-Ins in the Amount of $10,333.09, for a Total of $870,355.66. Member Maxwell seconded, and the motion passed unanimously. Chairman Cornelius asked for citizen input on non-agenda items and there was none. Barbara Benson, Board Secretary, introduced the idea of the Board considering use of electronic tablet devices for meetings. She noted that a while back, a board member inquired on the potential use of tablets and that this idea was tabled until recently so that our new board member would be involved in the decision. She noted that tablets are gaining interest among governing bodies for various reasons, such as “going green” and reducing paper waste, reduction in staff time with distributing materials and to lessen impact on personally owned equipment for business related functions. This may be of importance with potential public records requests. Board members could decide if they want to use the device at home to access CU email and related materials or keep them at CU and use only for Board meetings. Barbara and Dee Anne Wunder, Customer Service Supervisor, brought in five personal tablets for Board members to experiment with during the meeting. She explained the different ways Board members may utilize the device, including accessing email. The City of Canby recently transitioned City Councilors to electronic tablets for city business. Tim Dale, the Board’s liaison to the Council, was unable to be at the meeting; however, he provided Barbara with information to share regarding their experience with using the Apple iPad, which is the brand that the city decided was the best option. These devices cost about $500. Computek, the utility’s IT consultant, also recommended the iPad for its ease of use. Member Wagner stated that he favors the Samsung

Canby Utility Regular Board Meeting Minutes May 13, 2014 Page 2 of 4 Galaxy Note Pro, which can also be purchased for around that amount; however, they offer a larger 12.2” screen version that costs around $800 and shared the reasons he prefers that device. Barbara noted that she has tentatively budgeted $800 for each device, which is the high end of the price range, as a placeholder for each board member’s tablet. She asked for some general feedback regarding their interest in using electronic devices: would the utility purchase devices for all Board members, would they want all the same brand, and input on policy development. She distributed a copy of the city’s policy as an example. The Board supported transitioning to electronic tablet devices. They agreed that the devices needed to be the same type; however, the model they choose would be decided later. They agreed that Board members could use the devices at home to access email and conduct utility related business. The policy should include use of a utility provided wireless router if needed. Chairman Cornelius asked if staff members also needed an electronic tablet and discussion ensued regarding use of tablets versus laptop computers and that the purpose of this discussion was to determine budget needs for the Board in the next fiscal year. Carol Sullivan, Finance Manager, presented the third quarter financial report through the month of March 2014. This was a continuation from the discussion that was held at the beginning of the meeting. She began with a review of a chart that showed the electric cumulative year-to-date by month revenue and expense data overview, noting that the information excludes capital contributions. Expenses are over budget, primarily due to the unbudgeted BPA rate increase, which was offset by Canby Utility’s rate increase. She noted that the revenues are above budget, which is mostly a result of the retail rate increase and cold weather. Carol responded to Member Maxwell’s question regarding other electric revenues that related to the BPA energy efficiency programs. She reviewed a chart showing the cash balances above the end-of-year target level. Member Wagner requested the charts be placed together in the presentation materials for viewing convenience. Carol then reviewed the statement of operations and changes in net assets and highlighted the drivers for items that were significantly over or under budget for electric. Carol then reviewed the financial reports for water, starting with a review of a chart that showed the water cumulative year-to-date by month revenue and expense data overview, noting that the information excludes capital contributions. The expenses are below budget and the revenues are above budget. She reviewed the cash reserve target for year end, showing that current cash is above the targeted budget. She then reviewed the statement of operations and changes in net assets and highlighted the drivers for items that were significantly over or under budget for water. Member Daniels asked for clarification of what the water sales in cubic feet and water sales revenue are compared to and Carol explained what each amount represents. Carol Sullivan, Finance Manager, gave an update on the fiscal year budget process timeline. She noted that the proposed budgets would now be presented to the Board on June 10 and the recommended budgets would be presented on June 24 for final approval. This change was made so that staff had more time to prepare their budgets. Carol Sullivan, Finance Manager, presented staff’s recommendation for the Board to consider adjusting the water system development charges (SDC). Every year, this recommendation is

Canby Utility Regular Board Meeting Minutes May 13, 2014 Page 3 of 4 presented to the Board based on an inflationary index. She reviewed the chart that identifies the change based on customer class and meter size. The 5/8 x 3/4 inch water meter would have an increase of $95, which equates to 2.79%. Carol stated that with the Board’s consent, staff will notify contractors of the proposed changes and prepare a resolution to adjust rates at the May 27th meeting. The notification to contractors will give them time to provide comments on the proposed changes prior to the final Board action. Member Wagner asked about a new development in Canby and the type of customer class that would be considered. The new development is going to be a multi-family and qualifying small-lot PUD, therefore being charged 0.7 percent of a single dwelling unit equivalent for each unit. Member Potter noted that the method in which the adjustments are made is mechanical in nature since the percentage is based on the Engineering News Record’s Construction Cost Index. Matt Michel, General Manager, noted that SDC adjustments are not an automatic process and requires Board action. He noted that in 2009, the Board made the decision to not increase SDCs based on the recession. The Board gave consensus to have staff prepare for the increase and to move forward with notifying interested parties. Matt Michel, General Manager, presented his quarterly time away from the office report. He offered to elaborate on any questions they had. Chairman Cornelius noted that the report provides the Board with an excellent summary of the activities he’s involved with. Chairman Cornelius asked the Board if they wanted Matt to continue providing this report on a quarterly basis and they gave consensus to have him continue. Matt Michel, General Manager, highlighted an article in the Northwest Public Power Association’s Bulletin magazine regarding the Northwest RiverPartners’ Clean Hydro advertisement program. Matt asked if the Board would be interested in contributing to the regional campaign to raise awareness of the hydro system to the region. He shared that utilities are contributing funds to the campaign. Matt feels that it is beneficial and asked if the Board wanted to learn more about it. Matt offered to reach out to other municipal utilities and find out how much they are contributing. The Board felt the information would be helpful for them to decide if they want to contribute to the campaign. Member Daniels made the *MOTION to go into Executive Session according to ORS 192.660(2)(d), (i) to Discuss Labor Negotiations and Performance of a Public Employee. Member Potter seconded, and the motion passed unanimously. The regular meeting was recessed at 8:14 p.m. The regular meeting was reconvened at 9:07 p.m. Following executive session, Matt Michel, General Manager, and Barbara Benson, Board Secretary, returned. Carol Sullivan, Finance Manager; Larry Hepler, Operations Superintendent; and Dee Anne Wunder, Customer Service Supervisor did not return for the remainder of the meeting.

Canby Utility Regular Board Meeting Minutes May 13, 2014 Page 4 of 4 Chairman Cornelius presented the recommendation to ratify the collective bargaining agreement for the electrical workers. Member Daniels made the *MOTION to Authorize the General Manager to Sign the Collective Bargaining Agreement with the International Brotherhood of Electrical Workers. Member Potter seconded the motion and the roll call ballot was as follows: Member Potter, aye; Member Wagner, aye; Member Maxwell, aye; Member Daniels, aye; and Chairman Cornelius, aye. The motion passed 5 to 0. Member Daniels made the *MOTION to Adjourn the Meeting. Member Maxwell seconded, and the motion passed unanimously. There being no further business, the meeting was adjourned at 9:08 p.m. Bob Cornelius, Chairman Robert Maxwell, Member Gary Potter, Member Walt Daniels, Member Todd Wagner, Member Barbara Benson, Board Secretary

CANBY UTILITY

EXECUTIVE SESSION MINUTES MAY 13, 2014

PRESENT: Chairman Cornelius; Members Wagner, Maxwell, Potter and

Daniels; Matt Michel, General Manager; and Barbara Benson, Board Secretary

ALSO PRESENT: Carol Sullivan, Finance Manager; Larry Hepler, Operations

Superintendent; Dee Anne Wunder, Customer Service Supervisor; The Executive Session was opened at 8:14 p.m. by Chairman Cornelius, in the Conference Room of the Canby Utility Board office, pursuant to ORS 192.660(2) (d), (i) for the purpose of discussing labor negotiations and performance of public employee. The Board excused all staff at 8:31p.m. for the discussion on performance of a public employee. There being no further business, the Executive Session was adjourned at 9:06 p.m. Bob Cornelius, Chairman Robert Maxwell, Member Gary Potter, Member Walt Daniels, Member Todd Wagner, Member Barbara Benson, Board Secretary

MEMORANDUM

May 22, 2014 TO: Chairman Cornelius, Member Wagner, Member Maxwell, Member Potter and

Member Daniels FROM: Carol Sullivan, Finance Manager SUBJECT: Water System Development Charge Annual Inflationary Adjustment Update

Recommendation: Adopt Resolution 271 adjusting Canby Utility’s Water System Development Charges by the prescribed inflationary amount effective July 1st. Background: Each year the Board is presented with a staff recommendation regarding Canby Utility’s Water System Development Charges (SDC) based on an inflationary index adjustments. SDC’s account for new development impacts on water infrastructure needs and planning. When a new water connection is made—residential or commercial—the SDC must be paid to buy-in to the existing infrastructure and the capital reserves planning for future water needs. Infrastructure costs, both existing and future, are calculated in our 2010 Water Master Plan. The amount of a SDC paid corresponds to the size of meter requested, based on water consumption needs calibrated to a single dwelling unit equivalent (DUE). Canby Utility’s SDC methodology allows for an annual inflation adjustment to the charges using the Engineering News Record’s Construction Cost Index. That proposed adjustment is brought before the Board prior to the beginning of the new fiscal year so that the adjusted SDC amounts can be factored into the new budget. The 2014 inflationary increase is 2.79% for one DUE. Please see the attached Resolution 271 Exhibit A. Due to the increase in construction and development activity, staff has notified a list of interested parties regarding the recommendation to adjust the SDC’s and given them an opportunity to comment on staff’s recommendation that will be presented at the May 27th Board meeting. As of the date of this memorandum, we have had no responses from any interested parties.

Staff will be available to answer questions.

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RESOLUTION NO. 271

RESOLUTION NO. 271 A RESOLUTION OF THE CANBY UTILITY BOARD ADOPTING REVISED WATER SYSTEM DEVELOPMENT CHARGES REFLECTING ANNUAL ADJUSTMENTS FOR INFLATION, REPEALING RESOLUTION NO. 263.

The CANBY UTILITY BOARD resolves as follows: Section 1. The 2004 Water System Development Charge methodology contains a method of annual adjustment of Water System Development Charges (SDCs) to account for inflation as determined by a known and recognized index, the Engineering News Record Construction Cost Index (CCI). Section 2. The purpose of this Resolution is to apply this index to reflect changes in the index as a proxy for construction-related inflation between now and the last Water Master Plan update in 2010. Section 3. Applying the CCI index change to the current SDC schedule results in inflation-index adjusted Water SDCs as reflected in Exhibit A attached hereto and incorporated herein by reference. The adjusted Water SDCs are set forth in Exhibit B attached hereto and incorporated herein by reference. Section 4. Resolution No. 263 is hereby repealed. Section 5. Effective date. This Resolution shall become effective on the 1st day of July, 2014. THIS RESOLUTION IS ADOPTED BY THE CANBY UTILITY BOARD THIS 27th DAY OF MAY, 2014 ___________________________ ___________________________ Bob Cornelius, Chair Gary Potter, Member ___________________________ ___________________________ Walt Daniels, Member Todd Wagner, Member ___________________________ ___________________________ Robert Maxwell, Member Barbara Benson, Board Secretary

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Class /Meter Size DUEs

CurrentSDC

ProposedSDC Change

%Change

Residential5/8 x 3/4 Inch 1.0 3,409$ 3,504$ 95$ 2.79%1 Inch 1.6 5,454 5,606 152 2.79%

Non Residential5/8 x 3/4 Inch 1.1 3,750$ 3,854$ 104$ 2.77%1 Inch 2.3 7,841 8,059 218 2.78%1.5 Inch 3.9 13,295 13,666 371 2.79%2 Inch 9.4 32,045 32,938 893 2.79%3 Inch 13.9 47,385 48,706 1,321 2.79%4 Inch 20.4 69,544 71,482 1,938 2.79%

Irrigation5/8 x 3/4 Inch 1.6 5,454$ 5,606$ 152$ 2.79%1 Inch 5.6 19,090 19,622 532 2.79%1.5 Inch 5.3 18,068 18,571 503 2.78%2 Inch 8.2 27,954 28,733 779 2.79%3 Inch 13.9 47,385 48,706 1,321 2.79%

Multi-Family and Qualifying Small-Lot PUDSDC per DU 0.7 2,386$ 2,453$ 67$ 2.81%

Note: The Water System Development Charge will increase by $95 for a 1.0 Dwelling Unit Equivalent and by a factor of that amount for all customer classes and meter sizes based upon results of the Red Oak Consultant's study.

System Development Charge - Recommended Adjustment Summary

Exhibit ARESOLUTION NO. 271

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Class SDCResidential

5/8 x 3/4 Inch 3,504$ 1 Inch 5,606

Non Residential5/8 x 3/4 Inch 3,854$ 1 Inch 8,059 1.5 Inch 13,666 2 Inch 32,938 3 Inch 48,706 4 Inch 71,482

Irrigation5/8 x 3/4 Inch 5,606$ 1 Inch 19,622 1.5 Inch 18,571 2 Inch 28,733 3 Inch 48,706

Multi-Family and Qualifying Small-Lot PUDSDC per DU 2,453$

RESOLUTION NO. 271Exhibit B

System Development Charge - Recommended Adjustment Summary

Meter Size

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MEMORANDUM May 21, 2014

TO: Chairman Cornelius, Member Wagner, Member Maxwell, Member Potter, and Member

Daniels FR: Matt Michel, General Manager RE: Northwest RiverPartners Clean Hydro Media Campaign At the last meeting, the Board asked for additional information about Northwest RiverPartners and their CleanHydro campaign. Northwest RiverPartners (NWRP) started engaging the public on federal hydropower issues in 2005 as a public power funded communications effort. At the time, regional environmental advocates were assailing the federal biological opinion concerning the federal hydroelectric dams’ impacts on endangered fish species and public power had no structure to respond to the public perception campaign. NWRP engaged with education campaigns using opinion pieces in regional newspapers, social media, and information materials available to public power agencies that contributed to NWRP’s efforts. Recent polling data revealed a disturbing anti-hydro trend: increasing pressure to reduce power production for little marginal benefit to fish passage, celebrating dam breaching, wind and solar being inaccurately promoted as hydropower replacements, and existing hydropower not being considered “renewable” under state regulations. The pro-active, mass media CleanHydro campaign formed to balance this regional perception with support for hydroelectric system operations. Canby Utility benefits from the CleanHydro campaign because it counters the de-valuing of the federal hydroelectric system that Canby depends upon for reliable, carbon-free power. Public perception of the federal hydroelectric system provides the regional context for BPA decision making, negotiations, and policy decisions on fish mitigation and dam operations. Of our fellow Oregon municipal electric utilities, McMinnville Power & Light and Springfield Utility Board each contributed to the current CleanHydro campaign, and Forest Grove, Ashland, and Milton-Freewater are members of NWRP. Attached is a list of NWRP members and a PowerPoint presentation prepared by NWRP that I will present at the Board meeting. NWRP suggests that a public utility of Canby’s size might contribute an amount up to $5,600 for the 2015 CleanHydro media campaign. I will also have a 4-minute video telling the CleanHydro campaign story. I will be available to answer questions the Board may have.

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MEMORANDUM May 21, 2014

TO: Chairman Cornelius, Member Wagner, Member Maxwell, Member Potter, and Member

Daniels FR: Matt Michel, General Manager Carol Sullivan, Finance Manager RE: Refunding 2004 Water Revenue Bonds Staff plans to budget for engaging consultants to refund 2004 water revenue bonds. Our goal, unless otherwise directed by the Board, is to reduce annual bond payments and maximize the net present value savings. Option B fits the goal. (The net present value savings is the savings over the life of the loan, adjusted by a discount rate, and taking into account the cost of issuance, reserve funding if necessary, and underwriting.) Canby Utility’s existing debt exists in two water bond issues: $2.9 million borrowed in 2004 and $3.2 million borrowed in 2007. Now that ten years has passed on the 2004 issue, the Board may elect to “refund”—that is, issue new debt by paying off the existing debt issue. Carol Sullivan, Finance Manager, and I collaborated with our bond advisor to develop the following four options briefly discussed below and shown on the table that follows. Options Option A pays off the debt 3 years early and with the greatest amount of net present value savings ($137,626 over seven years), but would require larger annual payments (about $50,000/year more) that would stress the water fund budget. Option B achieves the goal of lowering annual bond payments (about $12,000/year) while still providing a net present value savings (a $102,640 savings over ten years). Option C’s lower annual payments (about $80,000/year less) relieves revenue stress on the water budget by extending the debt horizon an additional 10 years at an added interest cost that eliminates any net present value savings (a $ 67,594 loss over twenty years). Finally, Option D keeps annual payments at the current amount over the next twenty years and allows for borrowing an additional $904,320 for capital projects at an added interest cost resulting in the greatest loss of net present value savings of the four options (a $106,431 loss over twenty years).

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Refunding 2004 Water Revenue Bonds Page 2

154 NW First Avenue � PO Box 1070 � Canby, OR 97013 � Tel: 503-266-1156 � Fax: 503-263-8621

TABLE: Bond Refunding Options

NOTE: All numbers are estimates

Payoff Year Interest Rate Annual Debt Service New Money

Net Present Value Savings

Current

2024 3.75% - 4.50% $214,525 - $224,675 $0 $0

Option A

2021 Fixed 2.50% $266,312 - $278,437 $0 $137,626

Option B

2024 Fixed 2.85% $198,592 - $212,992 $0 $102,640

Option C

2034 4.00% - 5.00% $131,150 - $147,350 $0 ($67,594)

Option D

2034 4.00% - 5.00% $205,700 - $217,000 $904,320 ($106,431)

I will present these options to the Board for discussion and Carol and I will be available to answer questions the Board may have.

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