March 26, 2009

 

 

 

The Ellettsville, Indiana, Town Council met for a Special Session on Thursday, March 26, 2009, at the Fire Department Training and Conference Room.  Dianna Bastin called the meeting to order at 6:05 p.m. stating Public Comment will not be taken this evening.

 

Town Council Members present were Dianna Bastin, President; David Drake, Vice-President, Scott Oldham and Dan Swafford.  Sandra Hash, Clerk-Treasurer; Mike Spencer, Town Attorney and Rick Coppock, Town Engineer were present.  Phillip Smith arrived at 6:30 p.m.

 

Mike Farmer explained the purpose of tonight’s meeting.  The Town Council approved the utility rate and charge increases; it is important to move forward and implement these new rates.  Northern Richland and Eastern are partners in running the sewer system and it is important to make sure nothing has been left out.  Currently, there are no contracts between the Town and Northern Richland or Eastern with the increased rates.  Mike opened the floor for discussion.

 

Ted Ferguson, Attorney for Eastern Richland Sewer Corporation, submitted a draft of a proposed contract with respect to the phase in of the flow rates.  Language needs to be added stating “we will pursue and use the procedure referred to as the thirty day tracker application”.  They have held off filing this because they want to be relieved of the lawsuit they do not feel they should be involved in where Northern sued the Town and the Town sued Eastern.  Mr. Ferguson believes Eastern is ready to proceed with pursuing the amendment and getting the tracking factor ready on the flow rate based on the understanding that the Town will dismiss Eastern from the lawsuit.  Mr. Ferguson does not have any problems with Mike’s proposed amendments and will have a rate consultant work on the application.  The proposed contract increasing the flow rates did not say “subject to the IURC (Indiana Utility Regulatory Commission) approvals”.  Mr. Ferguson needs to get a package together and given to their rate consultant with the tracker application on file.

 

Mike Spencer, Town Attorney stated the contract did not allow for getting an approval from the IURC.  Ted Ferguson has come back with a different proposal making the rate dependent upon approval of the IURC but Mike Spencer suggested another option.  The other option (needing approval by the Council) would be getting an approval by the IURC but they would verify that within one week from today’s date they will file for a thirty day tracker with the IURC.  This would incorporate some of Mr. Ferguson’s and Mike Spencer’s language.  It is the same language Mike Spencer has used several months ago.  The other issue is the good faith dismissal of the lawsuit against Eastern.  Mike Spencer had a discussion with Mike Carmin on that issue; it is dependent upon certain things in the Northern lawsuit. 

 

Mike Farmer stated if they (Northern and Eastern) file with the IURC within a week and assuming the IURC comes back in thirty days, the first of May will be when they will get their approval.  The Utilities Department will need a few weeks to set up the software to accommodate their customers with the new rate by May 24th for the June bills.

 

Richard Sanders, NRSC submitted a proposed contract amendment to Mike Spencer quite some time ago with language in it saying it had to be approved.  Northern’s request for a rate increase has to be approved by the IURC and they would not be prepared to pay anything other than the contracted rate until the first billing period after the IURC approved their request for the rate increase.  NRSC has a rate consultant working for them. Mike Spencer took the “language”, removed the business about being approved by the IURC receiving approval and substituted it with a May 1st date.  NRSC can not comply with that because they are under the IURC and they have to have approval from them before they can change the rate.  NRSC can not afford to pay Ellettsville Utilities a rate without the approval from the IURC for the rate increase.   

 

Dan Swafford explained that is what Mike Spencer and Ted Ferguson are trying to accomplish with this evenings meeting.  Mike Spencer stated that one of the proposals he submitted had “the very language in it”.  That proposal was not accepted.  Mr. Carmin sent an earlier proposal, Mike Spencer submitted it to the board and they rejected it.  Mike Spencer took Mr. Carmin’s proposal (the board suggested “simple contract”) made a few changes and sent it back to him.  The changes were based upon the motions the Council made on Monday.   In terms of the tracking factor application, Mike Spencer spoke with the IURC who explained a tracking factor would take 30 -60 days, from the time they receive the application.  The wholesale customers will have to provide a notice to their customers.  The increase had to be published in the paper.  The IURC said the application was very simple and “usually” always get approved.  As soon as the wholesale customers know the rate of the increase, with the ordinance, they could apply.  What Mike Spencer and Ted Ferguson are proposing is language to satisfy the Council’s concern of getting the rates implemented as quickly as possible. 

 

Mike Farmer stated it is not uncommon for wholesale users to lag behind the service provider who raises the rates.  Everyone in the local area is wholesale users of the City of Bloomington.  When they increased their rates, several of the water companies lagged behind a few months causing the City of Bloomington to lose money.  It was their responsibility to stay closely in line with the rate increase.  The reason the Utilities Department is having a rate increase is because it is necessary.  Every month the rate increase is not implemented with the wholesales customers are months the Ellettsville customers are bearing the cost.  This process started over a year ago and the Utilities Department has been up front with everyone on what would be necessary.  They knew their “feet would be held to the fire” about presenting all the facts and information.  Professionals were hired to go through the books and provide a good basis for why a rate increase was needed.  The fact that it has been ten years is common sense enough that the increase is needed.  The Utilities Department can not wait any longer. 

 

Richard Sanders does not see the Utilities Department “bearing the brunt” themselves and that all three sets of customers are bearing it.  He does not feel that it is fair the Utilities Department is expecting the two wholesale customers to lose money for two or three months because the Utilities Department does not want to lose money.  Mike Farmer stated this is why NRSC needs to be in sync with what the Utilities Department is doing.  Mr. Sanders can not be in sync because there is a contract and the Utilities Department can not change contract laws because they want a different date.  Mike Farmer believes the contracts states the rates can be raised.

 

Jeff Farmer would like to try a different approach.  Find out what the difference is between the contracts sent to Eastern.  Mike Spencer stated they are close to finalizing a contract with Eastern but it would require the Town Council to back off a little bit on their motion on Monday.  Jeff clarified that if there is an agreement with Eastern tonight; we may or may not meet the May 1st billing, it will depend on the IURC.  If the IURC gets back with an answer in 30 days then the Utilities Department will be right in line but if it takes 60 days they will be one month behind.  There is still the notice requirement too. 

 

Ted Ferguson stated they are working on their end to complete requirements with the applications. 

 

Jeff Farmer said the ordinance was passed in January and it will not go into effect until May.  At some point, the Utilities Department needs to move forward.  If the two wholesale customers want to drag their feet, the Utilities Department still needs to move forward. 

 

Richard Sanders does not believe that everyone agreed to this, as Jeff Farmer is stating.  Passing an ordinance does not change the contract.  NRSC submitted a proposed amendment to Mike Spencer.  They submitted their package and their application are being worked on by a rate consultant.  Mr. Sanders was under the impression the Council was informed of the agreement between the Utilities Department and the wholesale customers when the ordinance was passed.  There was no agreement.  Jeff Farmer stated there was an understanding the rate increase was fair and equitable for everyone. 

 

Mike Farmer stated this is why we need to move forward because of this impact and ambiguity on what and when anything will take place that will allow us to move forward with the rates and provide service to our customers.  Mike Farmer felt it was necessary to have this meeting. 

 

Richard Sanders was under the understanding that Eastern wanted to be sure they had approval from the IURC before they agreed to anything.  Mike Spencer asked Ted Ferguson to show Richard Sanders the contract he is proposing for Eastern so he can see the language.  Mr. Sanders said it was not ambiguous, he clarified they were moving ahead with their request for the rate increase and they would implement the first billing after receiving the regulatory commission approval.

 

Curt Hayes, Eastern Richland Sewer Corporation Secretary made a general comment for those who are newer to the boards.  The old contract was a good contract.  It is in place and still has years to go.  There are places in it to have rate increases.  The rates are going to go up due to treatment and maintenance.  It is okay to have rate increases.  It is wonderful there were not any increases for ten years but that may have been too long.  Eastern is willing to present this to the State of Indiana for approval.  They are willing to pass this on to our membership with proper notification and get the job done based on the fact the rates are good rates.  ERSC independently hired Buzz Krohn to review the rates and he stated the rates were really close.  Eastern was comfortable with the rate increase but the lawsuits and the changes with the contracts has caused their delay in an agreement.  Curt Hayes recommended using the old contracts, make amendments, get a fair rate, make sure the accountants sign off on the rate, present to the state, present to the membership and then “rock n’ roll”.  The lawsuits were crazy and frivolous.  It was clarified there were 2-3 proposed contracts presented.

 

Dianna Bastin recessed the meeting to ask the Attorney a question. 

 

Dianna Bastin spoke with the Attorney and reviewed the language. Dianna Bastin said (with the help of Mike Spencer) “the Ellettsville Town Council would like to move that we rescind the order from Monday night reference the due date for our Utility partners and then I make a motion to approve this contract as amended with Eastern and all of our Board members have had a chance to read it”.  Scott Oldham seconded.  Roll call vote:  Dianna Bastin – yes; David Drake – yes; Scott Oldham – yes; Phillip Smith – yes; Dan Swafford – yes.  Motion carried 5-0.

 

The following discussion took place before the vote

 

Dianna explained a motion was made at the Town Council meeting Monday night for a May 1st deadline.  May 1st may not be timely for the “tracker”.  We still want to proceed as quickly as possible with the tracker which is what Eastern is going to do.  Mr. Ferguson explained it might not happen by May 1st. 

 

Richard Sanders stated NRSC informed Mr. Ferguson this is what they were doing also when they gave him the proposed amendment.  Dan Swafford is confused because he does not know what either wholesale customer is wanting. 

 

Ted Ferguson said we are moving towards this as a goal.  It is his understanding the new rates have not been implemented and there needs to be a date to implement the rate change for the Town customers.  Mike Farmer would like to know when Eastern applies for the rate change so he can anticipate software updates for the wholesale customers’ billing rates. 

 

Curt Hayes asked if the members will receive proper notification.  Mike Farmer said this will be discussed after the motion on the table is voted on.

 

Dianna Bastin clarified the Town Council rescinding the motion is a “good faith act” for the contract she has from Eastern.  Mike Farmer further explained they are rescinding to proceed with the May 1st date (June 1st billing).  Dan Swafford asked at the Monday night meeting when the wholesale customers would be able to bill their customers so everyone starts on the same time and that is when the 30 day tracker was placed.  Mike Farmer stated the May 1st usage is billed June 1st. 

 

The vote was now taken. 

 

Dianna Bastin now moves that we accept an amendment to Sewage Treatment purchase contract with Eastern Richland Sewer Corporation. (Dan Swafford clarified we are voting on a contract between Eastern and Ellettsville only).  David Drake seconded.  Roll call vote:  Dianna Bastin – yes; David Drake – yes; Scott Oldham – yes; Phillip Smith – yes; Dan Swafford – yes.  Motion carried 5-0.

 

The following discussion took place before the vote

 

Curt Hayes asked Mr. Sanders if he looked at the rewording of the Eastern and Ellettsville contract.  Is it something NRSC could be comfortable with presenting to the State of Indiana and making this happen?  Are there other issues?  Mr. Sanders submitted a proposed amendment that “essentially embraced that”.  The language stated “not until the first billing period after the Regulatory Commission”.  The language he is “hearing” is “which ever is later”.  The entire NRSC Board is not present and Mr. Sanders is not in the position to make any decisions tonight.  NRSC already proposed an amendment (to certain terms of the original contract) with the same language, with respect to the sewer treatment. 

 

The vote was taken.

 

Mike Spencer stated there is still an issue with NRSC.  They can be given a copy of the Eastern contract and talk to their Attorney.  The contract with Eastern does not include the “billing”.  Mike Spencer suggested to the Council to make a motion “if NRSC submitted a contract that had the same language as the Eastern contract they would approve that or if it were submitted within one week, they would approve that”.  Dan Swafford clarified to Mr. Sanders NRSC is not bound to anything.  NRSC can agree to the contract within a week, send it to the Council and no other meeting is needed.  If NRSC does not agree to the contract, another meeting will be needed.  David Drake made the motion.  Dan Swafford seconded.  Roll call vote: Dianna Bastin – yes; David Drake – yes; Scott Oldham – yes; Phillip Smith – yes; Dan Swafford – yes.  Motion carried 5-0.

 

Mike Farmer pointed out this is why the Council was asked to make all the approvals at Monday night’s meeting to proceed. 

 

The vote was taken. 

 

Curt Hayes stated that regardless of lawsuits, contracts and “all the stuff coming down” whenever something costs more than what is taken in, something has to change.  When more money is needed to treat the sewer, our accountants need to look at it, present it to the public and make it happen.  Eastern has signed a good contract this evening to make it happen.  Mr. Sanders reiterated NRSC sent Mr. Spencer an amendment with the same figures in it.  Whether the language is identical or not in the two amendments, the charge and amount they pay is the same. 

 

Dan Swafford announced everyone present is representing and protecting the customers.  If we can not provide a service for the customers, we would be lacking.  No one is getting rich off of this.  We are here to protect our customers.  We need to be able to communicate between each other. 

 

Mike Farmer suggested “the next time we have to go through this, I would like the other two boards to come back to us with suggestions on how to start the process and what would make it come to a point at the proper time”. 

 

Phil Schonhoff asked how long it will be before the next increase.  Dan Swafford stated all sewer corporations need to work together and keep informed.  Dan doesn’t know how long it will be.  The Town included others, outside of Umbaugh, to look at the books.  It is not fair to say there will be an increase in another ten years, it will happen as time goes on.  Mr. Schonhoff believes there are “chartable increases”.  He then asked who decided on the water rate increase. 

 

Jeff Farmer answered why the rates when up and how we can track what will happen in the future.  Jeff stated the costs to run the waste water plant increased due to power, insurance and all day to day costs rising.  Sludge used to be fifty cents a ton and is now $23 a ton to haul.  To be responsible Utility Managers, they should start looking at these costs every three years.  Two years ago, the books were running “in the black” they are now “running in the red”.  This does not take into consideration the “retirement of the debt”.  The debt will be retired in another nine years.  The sewer plant is at 55% - 60% capacity. 

 

Mike Farmer stated the rate increases are “math”; there are no secrets.  There has been a lot of water pipes laid and new fire hydrants installed.   The ten year old water tank needs some work; a $200,000 booster pump was installed in Woodgate (for Eastern customers). 

 

There is a master plan available for anyone to review.  The Utilities Department asked for a 27% rate increase and the OUCC agreed to a 23.09% increase.  It needs to go before a judge and then can be put into effect in 30 – 60 days.

 

Phil Schonhoff, from a rate payers stand point, is there a way to make the increases in increments.  Jeff Farmer stated the sewer increase will be done in two increments but not the water.  Mike Farmer said water increases can not be done in increments because the water accounts are running too much in the red.  When the water tower was built, they did not provide for future maintenance.  Phil Schonhoff has noticed a lot of water lines extended west of town.  Mike Farmer explained the master plan, that was developed thirty years ago, shows a loop down Reeves and Starnes for future economic strength to develop a property that will benefit everyone.  The water line, west of town, travels down to the Early Childhood Development Center and loops back around to the school.  The water side of the Utility Department needs the money especially if the town wants quality water and fire protection. 

 

Barbara Davidson asked why so many reports are issued.  Jeff Farmer explained the first report (analysis conducted by Umbaugh) was based on the present flow rate.  Not understanding the contracts, they were asked to go back and put together another report.  They used the old contracts, based on how many Equivalent Dwelling Units (EDU) each entity was given back in 1997, when the amendment was made to the contract.  The third contract was issued because the Equipment Replacement account was going to be raised from $130,000 to $180,000.  Jeff looked at how this was going to affect the rates and he did not see an immediate need for the money.  All the contracts were “tweaked” until there was a contract that was fair and equitable to all customers.  Ms. Davidson questioned why some of the Umbaugh contracts were not signed and were stamped “draft”.  Why did Northern only get the “draft” copies and not the signed one?  Mike Farmer stated all the “drafts” were for Northern’s information and to keep them updated on what was going on.  Ms. Davidson did not get the explanation on what was current or what ordered they were prepared.  Mike Farmer agreed this was the way it was handled and it has been a “lesson learned” for the next time. 

 

Mike Farmer, moving on to another issue, announced the billing contract has not been updated in eleven years and the rate is $1.70.  There are costs associated with wholesale customers’ billing and service and Umbaugh indicated $2.95 (per customer) is needed to “come out even”.  The difference is currently being passed on to Ellettsville customers.  Mike has researched other utilities and found they charge $1.70 just “for the reading”.  Nancy Elkins checked with stated Bean –Blossom Patricksburg (BBP) and they charge 50 cents for the reading.  Mike Farmer stated “with that being said 50 cents does not get the bill out the door”.   There was discussion between Mike Farmer, Richard Sanders and Nancy Elkins.  Nancy Elkins stated BBP sends a bill to Northern for $34.50 and was told Ellettsville Utilities separates the charges.  Mike Farmer explained why the Utilities Department charges a per customer rate.  The Utilities Department collects the data for the usage, attributes it to the sewer, prepares the bills, sends out the bills, handles customer service, collects the money and sends the money back to the wholesale customers.  Mr. Sanders stated there are thirty customers on the water BBP water system; as an example 15 are on Ellettsville sewer and 15 are on Northern, Northern is being charged for all 30.  Mike Farmer said he should have been told. 

 

The point of this meeting is the Utilities Department has costs associated with billing wholesale customers that exceed what is being paid.  The Utilities Department needs an increase and they want to know what is needed to get the increase.  Mr. Sanders asked “do the sewers charges for preparing these bills include any charges related to reading the water meters”?  Mike Farmer stated that is part of the study, the collections of information.  Mr. Sanders said if they are charging for the water meter reading on sewer (only) customers they should not being doing that because it is a water function.

 

Ted Ferguson interrupted the discussion and asked if there is still something that needs to have action taken on this evening?  Jeff Farmer suggested working with Eastern on their contract and then Northern’s billing. 

 

Curt Hayes stated if the Utilities Department needs more money and it can be justified then it needs to be passed.  The public has to have this service.  The water meter needs to be read because there are no sewer meters.  Mr. Hayes does not have a problem with the Utilities Department using the funds to read water meters because it is more accurate for sewer billing. 

 

Mr. Krohn said the only report Eastern had only showed the sewer side and not the water side.  It did not show the split.  Mike Farmer stated all the information was sent to Eastern.  The information showed how the “meter reader” was paid for and the meters.  Eastern talked about doing it themselves.  Mr. Krohn said Eastern wanted to see the total cost on water and waste water and asked how that was being split between the two utilities.  Curt Hayes suggested collecting all the information (meter reading, equipment updating and treatment) from Ellettsville Utilities; present all the information to Mr. Krohn to review and pass on to their board.  They do not have all that information. 

 

Ike Grimes stated Eastern presented a counter proposal.  It was returned to them with the CPI (consumer price index).  They did not want the CPI included. 

 

Curt Hayes feels more comfortable discussing future price increases than using a CPI.  Their contract included the prices for 2009 – 2011 with negotiations in 2012.  Dan Swafford suggested that instead of meeting with “partial boards” they should meet with all board members.  The Council has discussed with two Eastern board members at one time.  Dianna Bastin agreed everyone needs to keep track of each other meetings. 

 

Mike Farmer stated if the CPI was taken out of the contract, the water utilities would run in the red after this year with the increase in everything else. 

 

David Williby felt that $1.70 to $2.95 was excessive. Eastern understands postage increases and employees get raises.  They agreed before the CPI was put into the contract.  Rick Coppock explained the CPI relieves them from having to renegotiate this every year.  The CPI is 3%.  The concern is signing a contract that looks as though the Utilities Department can do whatever they want to every year. 

 

Marlena Allen is concerned with the cost of living sky rocketing; she suggested figuring out what to expect the cost of living percentage to be in three years rather than every year rate increase.  It is time consuming to raise rates every year.  Her recommendation was to raise the rates enough to cover a three year time period.  Mike Farmer agreed and stated the Utilities Department is currently “behind the curve” and trying to get caught up. 

 

David Williby read the language from the agreement concerning the increases.  Mr. Sanders said Northern would like to see specific data on the costs so the water and sewer customers are not being billed for the same charges.  Northern would like to see all the charges associated with preparing, collecting and distributing the bills.  Mike Farmer explained the same meter reader has been doing this for ten years; the Utilities Department has spent money on technology to keep costs down.  Mr. Sanders argued this was a water function.  Mike Farmer asked Mr. Sanders if he would like a flow meter installed for sewer. 

 

Dianna Bastin asked Eastern if they are proposing to take out the terms “CPI”.  Mike Farmer agreed and stated if the language solves it for three years.  Curt Hayes thinks this is what should be done; as prices go up then in a timely fashion the increases could be passed on.  When the next increase gets closer, the Utilities Department will meet with Eastern board members as a work group to share information. 

 

Nancy Elkins does not want a contract where it could be raised every year no matter what. 

 

Mike Spencer reviewed the “general language” of the contract.  His concern is that it has taken so long to resolve these issues, if someone does not want to work towards a resolution, it will not happen. 

 

Dianna Bastin announced the attorney is reviewing the billing costs with Eastern; they will make a copy and allow Mr. Ferguson to review it. 

 

Dianna Bastin called a five minute recess.

 

Dianna Bastin announced Mr. Spencer and Mr. Ferguson have made some changes to Mr. Williby’s document.  They have a billing agreement with Eastern beginning today (March 26, 2008).  Dianna Bastin went over some of changes; Eastern will pay the Town a base charge plus a postage charge for each of Eastern’s customers for who the Town provides wastewater treatment services. The rates for 2009 – 2011 are listed in the agreement.  Beginning in 2011 and no more frequently thereafter than two years since any prior increase or decrease in the base charge, either party may request that the parties review the Town’s billing and collection services to determine whether to increase or decrease the base charge, or to change the billing methodology and to outsource some or all of the billing procedure.

 

David Drake made a motion we approve the amended Sewage Treatment Purchase Contract (the billing contract) with Eastern Richland as just stated.  Dan Swafford seconded.  Dianna Bastin tabled this motion.  There were two motions Monday night; one to make the water rate effective and one to make the billing charges effective.

 

Dianna Bastin asked for a motion to rescind Monday night’s vote.  Phillip Smith motioned.  Dan Swafford seconded.  Roll call vote:  Dianna Bastin – yes; David Drake – yes; Scott Oldham – yes; Phillip Smith – yes; Dan Swafford – yes.  Motion carried 5-0.

 

Dianna Bastin went back to the amendment for the Sewage Treatment Purchase Contract (the billing contract) for a discussion.  Eastern is happy with the contract.  Roll call vote: Dianna Bastin – yes; David Drake – yes; Scott Oldham – yes; Phillip Smith – yes; Dan Swafford – yes.  Motion carried 5-0.

 

Dan Swafford asked Northern if they would like to use the same agreement.  Richard Sanders would like to have time for their legal representative to review it.  The entire Northern Board will meet to discuss it.

 

Dan Swafford made a motion that we give Northern Sewer Company one week to look over the proposal.  If they agree, then we will agree too (if it is the same verbiage as the Eastern contract).  David Drake seconded.  Dianna Bastin asked if it will be feasible that it could be done in a week.  Roll call vote:  Dianna Bastin – yes; David Drake – yes; Scott Oldham – yes; Phillip Smith – yes; Dan Swafford – yes.  Motion carried 5-0.

 

Mike Farmer asked when the billing will take effect.  Mike Farmer understands Eastern will be doing a “tracker” for the rate increase meaning no other costs will be added in.  If Eastern does not use a “tracker” then they will do “a full blown rate study”.  Buzz said they are doing both and the “tracker” forms are ready to file.  The agreement goes into effect March 26th. 

 

Mike Farmer stated the rate increase will start May 1st instead of April 1st.  They will expect to have the same start date with Northern also. 

 

Dan Swafford made a motion the billing starts and is in effect May 1st; the billing rate for our wholesale customers.  Phillip Smith seconded.  Roll call vote:  Dianna Bastin – yes; David Drake – yes; Scott Oldham – yes; Phillip Smith – yes; Dan Swafford – yes.  Motion carried 5-0.

 

Richard Sanders asked Eastern if they are prepared to “eat the increase” in billing costs and is the Town expecting Northern to “eat the cost” also.  The tracker can not be amended to include costs.  Jeff Farmer stated Ellettsville has been eating the cost for several years. 

 

Mike Farmer appreciates everyone who attended the meeting this evening. 

 

Dianna Bastin told Mr. Williby that Town Council members will try to occasionally attend Eastern’s board meeting. 

 

Adjournment

 

Dianna Bastin motioned to adjourn.  David Drake made the motion.  Scott Oldham seconded.  Motion carried.  Meeting adjourned 7:55 p.m.