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HomeMy WebLinkAbout1999-12-01 Min - Board REGULAR MEETING December 1, 1999 In accordance with District Code Section 2.08.010 the TDPUD minutes are action only minutes. All Board meetings are recorded on audio tapes which are preserved perpetually and made available for listening to any interested party upon their request The regular meeting of the Board of Directors of the Truckee Donner Public Utility District was called to order at approximately 7:09 PM in the TDPUD Board Room by President Jones. ROLL CALL: Directors Joe Aguera, Ron Hemig, Bob Jones, Patricia Sutton and James Maass were present. EMPLOYEES PRESENT: : Mary Chapman, Susan Craig, Alan Harry, Peter Holzmeister, Neil Kaufman, Bob Quinn and Ed Taylor. CONSULTANTS PRESENT: Consulting Engineer Keith Knibb and District Counsel, Steve Gross. OTHERS PRESENT: Roger Terneuzen of USA Media. PUBLIC INPUT There was no public input. ELECTION OF BOARD OFFICERS Director Jones nominated Ron Hemig for president. Director Aguera seconded the motion and moved that nominations be closed. President Hemig assumed the chair. Director Sutton nominated Joe Aguera for vice president. Director Maass seconded the motion and moved that nominations be closed. PUBLIC HEARING ON THE DRAFT 2000 BUDGET AND POSSIBLE WATER RATE INCREASE The public hearing was opened at 7:12 PM. Manager Holzmeister presented an overview of the electric and water budgets and the budget priorities. He also explained the revised format and reviewed the major cost items. Staff is proposing a water rate increase that would amount to about $1.90 per month for residential customers and approximately 5% on commercial accounts. There hasn't been a water rate increase for three years. There was no public comment and the hearing was closed at 7:25 PM. CONSIDERATION OF APPROVING THE BUDGET FOR 2000 AND POSSIBLE ADOPTION OF BUDGET OVERHEAD RATES j F 12/1/99 Page 1 s t Director Maass moved, and Director Jones seconded, that the Board adopt Resolution No. 9919 approving the 2000 budget and budget overheads. ROLL CALL: all Directors, aye. SO RESOLVED. CONSIDERATION OF AN ORDINANCE INCREASING WATER RATES; POSSIBLE ADOPTION Director Jones moved, and Director Maass seconded, that the Board adopt Ordinance 9903 establishing water rates. ROLL CALL: all Directors, aye. SO ORDAINED. BROCKWAY WELL PROJECT Authorization to file the proposed negative declaration and environmental initial study with the office of the Nevada County Clerk Authorization to circulate the proposed negative declaration and environmental initial study with responsible and interested agencies and with the State of California Authorization to publish a notice of public review period and public hearing on the proposed negative declaration Authorization to schedule a public hearing for the proposed negative declaration at the regular Board meeting of January 5, 2000 Sauers Engineering has completed the proposed negative declaration and environmental initial study for the Brockway Well. These documents need to be circulated to responsible and interested agencies and made available for public review. The District also needs to schedule a public hearing to receive comments. Filing the documents with the County Clerk and State Clearinghouse will trigger a 30 day review period. Director Maass moved, and Director Aguera seconded, that the Board authorize the filing of the proposed negative declaration and environmental initial study with the office of the Nevada County Clerk; authorize staff to circulate the proposed negative declaration and environmental initial study with responsible and interested agencies and with the State of California; authorize staff to publish a notice of public review period and public hearing on the proposed negative declaration; authorize staff to schedule a public hearing for the proposed negative declaration at the regular Board meeting of January 5, 2000. ROLL CALL: all Directors, aye. SO MOVED. TELECOMMUNICATIONS BUSINESS PLAN — CONSIDERATION AND POSSIBLE APPROVAL The Telecommunications Manager answered questions that were posed at an earlier meeting. 1. Does Telecomm work without CATV? The District's Telecomm Business Plan focuses on a three-step process for the provision of telecommunications services. First, the construction of a fiber optic backbone throughout the District's service area; second, constructing a distribution system s providing every home in the District the opportunity to connect to the backbone; and third providing District customers with the choice to subscribe to alternative high speed data and cable television services. i 12/1/99 Page 2 If the provision of CATV (cable television) services were removed from the District's business plan, and the system build out continued to include all of the District's service area (versus constructing the system in high density portions of the District), initial capital costs would decrease by approximately $800,000. Conversely, revenues generated by CATV services would not be realized, thus a positive cash flow would not be realized until year 16. 2. Could we do a survey of customer demand? Yes. District staff has contacted a firm previously used by the District to conduct a customer survey to ascertain their availability to conduct a telecommunications related telephone survey, or focus groups. It is estimated that a telephone survey would take 5 weeks, while focus groups could be completed within 3 weeks. 3. What is the cost to construct overhead where the Williams conduit is in place? Compare to use of conduit. The TDPUD network utilizes an aerial system. An alternative, underground route is also available along Donner Pass Road. Consideration was given to utilization of this underground route as a means of cost reduction and construction avoidance. Use of underground facilities is not recommended for the following reasons: Y Construction cost savings would not be material. The cost of fiber would be virtually the same, whether underground or aerial infrastructures were utilized. Savings in f; fiber placement on the TDPUD's existing poles would be offset by the costs of pulling fiber and installation of additional attach points (involving manholes or handholds). ➢ Use of conduit for the backbone could result in stranded capacity for long-haul telecommunications network applications. As such, the opportunity costs of tying-up conduit capacity would overshadow any short-term benefits. • The potential value of TDPUD's two two-inch conduits should be considered from a construction-avoidance perspective. • An equivalent 16-mile two-inch conduit would at a cost of approximately $30 per foot to construct, with a corresponding construction avoidance value of approximately $2.5 million for each conduit pathway. If, during the next several years, these two conduits were sold at a construction avoidance value of $5 million (or more), these revenues could be applied to retire TDPUD's Certificate of Participation obligation. If this were realized, the net cost of TDPUD telecommunications network would, in effect, would be reduced accordingly. 4. Can Telecomm profits be used to support water and electric systems? District staff has been in contact with the District's Legal Counsel and Auditor regarding the use of telecomm revenues. As of the Board's December 1s` meeting a complete answer has not been received. Staff will continue to research this question and bring the answer to the Board as soon as it is received. 5. What are the potential glitches in the Business Plan? 12/1/99 Page 3 Sensitivity analyses were undertaken to assess the impact of possible shortfalls in revenues due to lower revenue per household and lower than anticipated subscriber demand. 30 Percent Reduction in Revenues Per Subscriber In this scenario, fierce competition from Satellite Television and the incumbent carrier forces a 30 percent reduction in average revenue per subscriber to hold market share. In this case total annual revenues increase from $1.0 million in Year 1 (versus $1.3 million in the base case) to $3.5 million annually in Year 15 (versus $4.8 million in the base case). Operating expenses increase from $1.0 million (versus $1.1 million) to $2.1 million (versus $2.3 million) during the corresponding period. Operating margins, the difference between Revenues and Operating expenses are positive throughout the period, increasing from $ $15,000 (versus $236,000) to $1.5 million (versus $2.4 million) during this time span. Net Income, including loan origination fees and interest payments, is negative for the initial four-year period, but turns positive in the fifth year and continues to increase over the 15-year horizon. Earning approach $500,000 by the eighth year, $800,000 in the 11`" year, and more than $1.1 million in the 131" year. 75 Percent Reduction in Subscribers in First Year 50 Percent Reduction in Subscribers in Tenth year In this scenario, due to competitive forces and lack of subscriber interest, adequate demand fails to materialize, particularly in the formative years. Only 25 percent of the estimated subscriber base are realized in the startup phase (6 percent of homes passed), reaching only half of the estimated subscriber base in the tenth year (25 percent of homes passed). in this case total annual revenues increase from $500,000 in Year 1 (versus $1.3 million) to $3.1 million annually in Year 15 (versus $4.8 million). Operating expenses increase from $800,000 (versus $1.1 million) to $1.9 million (versus $2.3 million) during the corresponding period. Operating margins are negative for the initial four-year period, with losses decreasing from $300,000 to $100,000 during the period; but margins turns positive in the fifth year and continue to increase over the 15- year horizon, from $ $11,000 (versus $236,000) to $1.2 million (versus $2.4 million) during this time span. Net Income, including loan origination fees and interest payments, is negative for the initial nine-year period, but turns positive in the tenth year and continues to increase over the 15-year horizon. Losses are over $900,000 in the first year, but decrease to $200,000 by the eighth year. Earnings approach $200,000 in the 111h year, and reach more than $600,000 in the 131' year. The sensitivity analysis indicates that there is substantial latitude in achieving business success. Even revenues are slashed by 30 percent to business is viable. It would take drastic reductions in estimated subscribership to undermine the viability of the telecommunications enterprise over the long term. The staying power of the TDPUD can sustain the business during unanticipated problems encountered during the formative years, until the business matures and revenues are secured. 12/1/99 Page 4 6. What is the skill set we need for Telecomm technical staff, and can we find them in `• _ Truckee? Skills would include an overall knowledge of the technical aspects of the cable television industry, including the ability to splice fiber optic & coax cable, repair line and headend electronics, and design standard line extensions. Due to resent mergers and acquisitions within the cable industry, District staff are confident that appropriately trained personnel are available within a forty-five minute commute. 7. Does the community want a governmental agency (TDPUD) to compete with private business (USA Media)? To date District staff is not aware of any comments in opposition to the District's Telecommunication Business Plan. Comments have been received via e-mail, fax and "on the street" in support of the Plan. So as to gain a more statistically sound understanding as to the feelings of the Truckee community, staff sees the use of telephone surveys and focus groups as being the most appropriate method. Staff will bring the Board a proposal for such services at their next meeting. 8. Can the District get someone to lend us the money for Telecomm, plus that needed for water lines? Staff has been in contact with representatives of George K. Baum & Company, Investment Bankers, and has been advised that rating agencies have been contacted and see the provision of Telecommunications services as a natural extension for electric utilities. Further, District staff have been advised that these agencies are comfortable with rating such an undertaking quite high as long as it is being run by a sound utility operation. A more detailed memo, authored by George K. Baum & Company representatives, will be provided to the Board once received. 9. How can Telecomm profits be folded into electric and water revenues (capital, rates operations)? Will bonding companies look at Telecomm revenues as a positive thing? District staff has been in contact with District Legal and Bond Counsel regarding this question. As of the Board's December is` meeting a complete answer has not been received. Staff will continue to research this question and bring the answer to the Board as soon as it is received. 10, Verify when TDPUD went into water business. Staff has reviewed numerous District documents and has not as yet found the date on which the District entered into the business of providing water to Truckee residents. 11. Who, if anyone, has recently bought out Williams Communications? Staff has contacted Williams Communication, and visited their web sight, and have found that they have not been purchased. 12/1/99 Page 5 i S 12. Where is Navigant headquartered? B Navigant headquarters are located in Chicago, Illinois. The local office working with the District is located in Rancho Cordova, California. 13. Report on TDPUD SCADA system — and what is our plan — does it need to be a whole new system? (reliability, productivity) Electric Division staff has advised that existing SCADA equipment is fully compatible with the fiber optic system proposed in the District's Telecommunication Business Plan. Water Division staff has advised that portions of their SCADA equipment is compatible, however, the majority of the system will require replacement due to its proprietary nature. Mr. Harry is still researching some of these items and will bring information back to the Board. The Manager was directed to proceed with the LAFCo process. If the Board decides not to enter the telecommunications business, the latent power can be turned back. CONSIDERATION OF THE MINUTES OF NOVEMBER 3, 17 AND 22, 1999; POSSIBLE APPROVAL Director Maass moved, and Director Jones seconded, that the Board approve the minutes of November 3 and 17, 1999. All Directors, aye, by voice vote. SO MOVED. (It was determined the November 22, 1999 meeting was not a properly called meeting of the Board.) TREASURER'S REPORT — APPROVAL OF THE MONTHLY REPORT — APPROVAL OF DISBURSEMENTS Director Maass moved, and Director Jones seconded, that the Board approve the monthly Treasurer's report. All Directors, aye, by voice vote. SO MOVED. Director Maass moved, and Director Aguera seconded, that the Board approve the disbursements. ROLL CALL: Aguera, Jones, Maass and Hemig, aye; Sutton, no, based on Section 16116, Division 7, Article 5, of the Public Utilities Code (copy attached). SO MOVED. CLOSED SESSION Conference with legal counsel — existing litigation — pursuant to Subdivision (a) of Section 54956.9; one case, TDPUD vs. USA Media Conference with real property negotiator under Government Code Section 54956.8. Property, APN 19-450-41. Negotiating parties: Peter Hoizmeister representing the District and various parties interested in purchasing the property. Under negotiation: price and terms of payment The Board adjourned to closed session at 9:52 PM. RETURN TO PUBLIC SESSION The Board returned to public session at approximately 10: 40 PM. 12/1/99 Page 6 ADJOURNMENT There being no further business before the Board, the meeting was adjourned at 10:41 PM. TRUCKEE DONNE",, BLIC UTtL V DISTRICT J. R, n HeMig, President r �w Prepared by Susan M. Craig, Deputy District Clerk smc 12/1/99 Page 7