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HomeMy WebLinkAbout04-09-1996 i CITY COUNCIL AGENDA PACKET April 9, 1996 ~tgen9a tlo. ' 0/57- Agenda Item call YLJI =1L'~ AGENDA CITY OF DENTON CITY COUNCIL April 9, 1996 Closed Meeting of the City of Denton City Council on Tuesday, Apri; 91 1996 at 5:15 p.m. in the Civil Defense Room of City Hall, 215 E. McKinney, Denton, Texas, at which the following items will be considered: NOTE: THE CITY COUNCIL RESERVES THE RIGHT TO ADJOURN INTO CLOSED MEETING AT ANY TIME REGARDING ANY ITEM FOR WHICH IT IS LEGALLY PERMISSIBLE. 5:15 p.m. 1. Closed Meeting: A. Legal Matters Under TEX. GOVT CODE Sec. 551.071 1. Consider settlement of Carreiro claim. B. Real Estate Under TEX. GOVT CODE Sec. 551.072 1. Discuss the acquisition of property for expansion of the city's landfill and wastewater treatment plant. C. Personnel/Beard Appointments Under TEX. GOVT CODE Sec. 551.074 1. Deliberate and consider the appointment of the Board of Directors of the Economic Development Corporation of Denton, Inc. Work Session of the City of Denton City Council on Tuesday, April 9, 1996 at 6:00 p.m. in the City Council Chambers of City Hall, 215 E. McKinney, Denton, Texas at which the following item will be considered: 6:00 p.m. 1. Receive a report, hold a discussion with staff, the consultant, and the Planning and Zoning commission concerning the re-write of the zoning ordinance. Special Call Meeting of the City of Denton City Council on Tuesday, April 9, 1996 at 7:30 p.m. in the Council Chambers of City Hall, 215 E. McKinney, Denton, Texas at which the following items will be considered: 1. Presentation by Paul J. Cowan. 2. Consider a request for exception to the noise ordinance for the Denton Gospel Mission on Thursday, April 11, 1996, from 6:30 p.m. until 12:00 midnight. Agenda No O Agenda t City of Denton City Council Agenda Date April 9, 1996 Page 2 ' 3. Public Hearings A. Hold a public hearing and consider adoption of an ordinance to rezone 0.9485 acres from the Single Family 7 (SF-7) zoning district to the Commercial (C) zoning district and Multi-Family 1 (MF-1) zoning district. The property is located on the north side of Dallas Drive, at the intersection of Cook Street. Z-96-009 (The Planning and Zoning Commission recommends approval 7-0.) B. Hold a public hearing and consider adoption of an ordinance to rezone 3.1176 acres from the Agricultural (A) zoning district to the Commercial (C) zoning district. The property is located on the north side of University Drive (US 380), 580 feet west of Cooper Creek Road. Z-96-006 (The Planning and Zoning Commission recommends approval 7-0.) C. Hold a public hearing and consider adoption of an ordinance to rezone 1.211 acres from the Single Family 7 (SF-7) zoning district to the Office Conditioned (0(c)) zoning district. The property is located on the west side of Hinkle Drive, approximately 500 feet south of Haggard Lane. Z-96-003 (The Planning and Zoning Commission recommends approval 7-0.) 4. Ordinances A. Consider adoption of an ordinance authorizing the city Manager to execute a real estate contract between the City of Denton and Robert W. Callahan, James E. Callahan and Ann C. Stark. B. Consider adoption of an ordinance retaining Wayne Paul Frank to provide part-time Municipal Court prosecutorial services on certain dates between April 15, 1996 and May 30, 1996. C. Consider adoption of an ordinance authorizing the Mayor to execute Amendment No. 3 to an agreement between the City of Denton, the Denton Chamber of Commerce, and the Economic Development Corporation of Denton, Inc. for the purpose of providing a program to promote economic development. Agenda No Agentla to _7_~_.~ ^ City of Denton City Council Agenda Date April 9, 1996 Page 3 5. Resolutions A. Consider approval of a resolution authorizing the creation of the Economic Development Corporation of Denton, Inc. as an instrumentality of the City of Denton; approving bylaws and articles of incorporation; and containing other provisions relating to the subject. B. Consider approval of a resolution supporting the design and development of U. S. Highway 77 as proposed by the Texas Department of Transportation. 6. Receive a report, hold a discussion and give staff direction regarding the TMPA/Denton Power Sales Agreement. A. Consider approval of a resolution requesting the Board of Directors of the Texas Municipal Power Agency to reduce electric rates to actual costs of operations. 7. Receive a report, hold a discussion on deregulation of the electric industry and its effects on Denton. 8. Receive a report, hold a discussion and give staff direction regarding the expansion of the Occupational Health Nurse services contract. 9. Receive recommendations and annual report frc*n the Juvenile Crime Interagency Coalition. C E R T I F I C A T E I certify that the above notice of meeting was posted on the bulletin board at the City Hall of the City of Denton, Texas, on the day of , 1996 at o'clock (a.m.) (P.m.) - CITY SECRETARY NOTE: THE CITY OF DENTON CITY COUNCIL CHAMBERS IS ACCESSIBLE IN ACCORDANCE WITH THE AMERICANS WITH DISABILITIES ACT. THE CITY WILL PROVIDE SIGN LANGUAGE INTERPRETERS FOR THE HEARING IMPAIRED IF REQUESTED AT LEAST 48 HOURS IN ADVANCE OF THE SCHEDULED MEETING. PLEASE CALI. THE CITY SECRETARY'S OFFICE AT 566-8309 OR USE TELECOMMUNICATIONS DEVICES FOR THE DEAF (TDD) BY CALLING 1-800-RELAY-TX SO THAT A SIGN LANGUAGE INTERPRETER CAN BE SCHEDULED THROUGH THE CITY SECRETARY'S OFFICE. ACC002FA ' . Apen~tr ltern oZ Dry CITY OF DENTON, TEXAS MUNICIPAL BUILDING DENTON, TEXAS 76201 TELEPHONE (817) 566-8307 Office of the City Manager CITY COUNCIL REPORT TO: Mayor and Members of the City Council FROM: Rick Svehla, Acting City Manager DATE: April 9, 1996 SUBJECT: Request For Exception to the Nr,ise Ordinance for the Denton Gospel Mission on Thursday, April 11, 1996, from 6r30 p.m. to 12:00 midnight. BACKGROUND Alan Bias, representing the Denton Gospel Mission has requested that the City Council grant an exception to the noise ordinance for the use of amplified sound for a concert until 12:00 midnight on Thursday, April 11, 1996. The concert is scheduled to take place at the intersection of Hickory and Fry Streets from 6:30 p.m. until 12:00 midnight. (Attachment 1). As you know, the noise ordinance declares loudspeakers, amplifiers, and musical instruments a noise nuisance, particularly after 10:00 p.m. Monday through Saturday and anytime on Sunday (Attachment 2). The ordinance does, however, provide that the City Council may make exceptions when the public interest is served. You may recall that the City Council approved a similar request for the Denton Gospel Mission last year. In addition to the request for an exception to the noise ordinance the organization is also requesting that a portion of Avenue A be closed for the concert thetpublictstr3). The reuested eet / 101- 03 Avenue o A, is d ailed on proximately the 0atfeet of tached map (Attachment 4). In effect, the closure results in the loss of approximately six metered parking spaces for the duration of the event. The property owners affected by the closure have signed the organizations request and no opposition was noted. PROGRAMS, DEPARTMENTS Olt GROUPS AFFECTED: Area Busf.nesses and Residents. "Dedicated to Quality Srrvice" Agenda No. W geida It m Fiscal Impact r Date Revenue from six metered parking spaces. Please advise if I can provide additional information. RESPECTFULLY SUBMITTED: I Rick Svehla 62 Acting City Manager Prepared By: Veronica S. Rolen Administrative Assistant II Appro7ed By: osep Portugal Assistant to the Cit Manager Attachments: 1. Request from Denton Gospel Mission 2. Noise Ordinance 3. Request for Street Closure 4. Map DENTON GOSPEL MISSIQ~aNo. W HOMELESS SHELTER ING:''ja" INN Dale LETTER OF REQUEST TO: The City Manager FROM: Alan J. Bias President Denton Gospel Mission Inc. SUBJ: Request for Street Closure The Denton Gospel Mission is requesting a temporary street closure of the no thru traffic portion of Ave A in front of 1st. State Bank, near the corner of Fry St. and Hickory St. This is not the section of Ave A leading up to the intersection of Fry St. and Hickory St. This will not hinder the flow of traffic to the Fry St., Hickory St., Ave A St. intersection. We would like this portion of street to be closed on April 11th, from 6:30 p.m. to 12:00 a.m. This includes the time from, the beginning of set-up to the end of the free concert. We intend to have a live band performing from 8:30 p.m. to 12:00 a.m. The band will conclude at 12:00 a.m. sharp and clean-up will begin. The purpose of this event is to increase awareness of the Denton Gospel Mission in the community and specifically among the students of U.N.T. Tnis will be a free event and we will not be selling anything. We do not antit4pate a large gathering of people. Typically, only a few people gather at one time and then they move on. I have given a copy of this letter to each of the businesses who signed the attz:hed form. If you require any further information, please contact ne at 566-7942. We thank you for your consideration in this matter Singerrely, Alan J ia~ A{~6BdD Nb. •4• A9end lam Data ' ~ .Sl._ Chapter 20 NUISANCES• Art. I. in General, if 20.1-20.30 Art. 11. Abandoned Property, If 20.31-20.70 Div. 1. Generally, 4$ 20.31-20.40 Div. 2. Motor Vehicles, If 20.41-20.70 Art. III. Greas and Weeds, 00 20.71-20.73 ARTICLE 1. IN GENERAL. Sec. 20.1. Notae. (a) It shall be unlawful for any person to make or cause any unreasonably loud, dis- turbing, unnecessary noise which causes or may cause material distress, discomfort or injury to persons of ordinary sensibilities in the immediate vicinity thereof. ~b) It shall be unlawful for any person to make or cause any noise of such character, intensity and continued duratian as to substantially interfere with the comfortable enjoyment of private homes by persons of )rdinary sensibilities. )c) The following acts, among others, are declared to be noise nuisances in violation of th`s Code, but such enumeration shall not be deemed to be exclusive: 1) The playing of any phonograph, television, radio or any musical instrument in such manner or with such volume, particularly between the hours of 10:00 p.m. and 1.00 a, m., as to annoy or disturb the quiet, comfort or repose of persons of ordinary sen• sibilities in any dwelling, hotel or other type or residence; 4) The use of any stationary loudspeaker, amplifier or musical instrument in such manner or with such volume as to annoy or disturb persona of ordinary sensibilities in the immediate vicinity thereof, particularly between the hours of 10:00 p.m. and 7 00 a.m., or the operation of such loudspeaker, amplifier or musical instrument at any time on Sunday; provided, however, that the city council may make exceptions upon application when the public interest will-be served thereby; (3) The blowing of any steam whistle attached to any stationary boiler or the blowing of any other loud or far-reaching steam whistle within the city limits, except to give notice of the time to begin or stop work or as a warning of danger, (4) The erection, excavation, demolition, alteration or repair work on any building at any time other than between the hours of 7:00 a.m. and 8:30 p.m., Monday through •Croes references-Protected migratory bird roosts declared nuisance, 16-87; inspection and abatement warrants, 4 19.88 at seq,; insect and rodent control in mobile home and rec- reational vehicle parks, 132-91. Supp. No. 1 1389 Agenda No,- 120-1 DENTON CODE Agenda If-em _ Data.!V I Saturday; provided, however, that the city council may issue special permits for such work at other hours in case of urgent necessity and in the interest of public safety and convenience; (5) The creation of any loud and excessive noise in connection with the loading or un- loading of any vehicle or the opening or destruction of bales, boxes, crates or con- tainers; (6) The use of any drum, loudspeaker or other instrument or device for the purpose of attracting attention by the creation of noises to any performance, show, theatre, motion picture house, We of merchandise or display which causes crowds or people to block or congregate upon the sidewalks or streets near or adjacent thereto. (Code 1966, if 14.20, 14.21) Cross reference-Animal noise, f 6.26. Sec. 20.9. Odors. (a) It shelf be unlawful for say person to create or caws any unreuonably noxious, unpleasant or strong odor which causes material distress, discomfort or injury to, persons of ordinary sensibilities in the immediate vicinity thereof. (b) It shall be unlawful for any person to create or cause any odor, stench or smell of such character, strength or co-Anued duration as to substantially interfere with the comfortable t enjoyment of private homas by persons of ordinary sensibilities. (c) The following acts or conditions, among others, are declared to be odor nuisances in %iolation of this Code, but such enumeration shall not be deemed to be exclusive: (1) Offensive odors from cow lots, hog pens, fowl coops and other similar places where animals are kept or fed which disturb the comfort and repose of persons of ordinary sensibilities; (2) Offensive odors from privies and other similesur places; (3) Offem ive odors nom the use or possession of chemicals or from industrial processes or activities which disturb the oomfort and repou of persons of ordinary sensibilities; (4) Offensive odors from smoke from the burning of trash, rubbish, rubber, chemicals or other things or rAwtaocye, (5) Offensive odors nom stagnant pools allowed to remain on any premises or from rotting garbage, reflt^ offal or dead animals on any premises . (Code 1960, If 14.22, 14.23) Sec. 20.3. Garbais, trash and rubbish nuisanoa-Generally. (a) Storing or peeping jw*ags, trash and rubbish. The storing or keeping of any and all stacks, heaps or piles of old lumber, refuse, junk, old car, or machinery or pasts thereof, garbage, truh, rubbish, scrap material, ruins, demolished or partly demolished structures or buildings, piles of stones, bricks or broken rocks on any premises bordering any public street I Supp. No. 1 1390 I REQUEST FOR STREET CLOSURE Agenda Na Agenda i m Dale Person or Persona Requesting street Closure: A1dR J. Bias Organized= Denton Gospel Mission Homeless Shelter Inc. (D. G. M. Afton: 715 welch St. ~1Ofe ~xrt»r 566-7942 Name/PlwneNumber AhernstsContact Parson: Lucie A. Bias 387-0021 I ''I The no thur traffic orti o Ave. A, in ron s . State street To as closed: ank, near the corner of ~ry St. ana Hic ory S~. Data and April Ilth, 1996. From 6:30 p.m. to 12:00 a.m. Tine To Be Closed: Intersecting Streets: None Reason For Closure: stage for live music. RoWest must be sccompented by 6gnaturas of all aNected property owners. (See Attaelmerttl Plaaeei~ttypl~,,trM~~9" "duck°B'Pfff'1d`Y°I~ be la n p yig, with information about D.G.M. given during the breaks, to increase awareness of U.G.M. THIS SECTION FOR STAFF USE ONLY OEPART7NENTAL REVIEW COMMENTS APPROVING SIGGNATUREEITTTLE CITY MANAGER'S OFFICE K A ` 1, °y C>t i vs Q . Ad w„' FIRE DEPARTMENT g?- oK m.Q POLICE DEPARTMENT c K TRANSPORTATION/ENGINEERING M~% 4 C, k-u- O'li-- Mali,lntS~rEAn~o-F r ~i c- C NV DOES THIS REQUEST REQUIRE: YES NO City Council Approval? 00100 Exception to the Noise ✓ Ordinance? Parade Permit? t/ Other ConditionslRaquirementsl Re , at Approved By: amefFit~ faifrb'Tion: x rrrp~f r upfl.wn. COON "Al 101 e.aeansl m rprft}lry WWVPularo rra off Wod Cepr"o W • • ALL wooanv awnara ardia unanta affected OY d+a aoM cloawa MUST be contacted and mua} f1~ OI baMnq in favor or m OPPOJdon to MN strM Cbalaa. rl I I V. Hama of Pr Agendtem ap" Ownarl Address Awdv tM ,;a, r.na,x of Pio"TV signor. 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I: rl~ Yn { lit f r r tr I t I t! it :7 1 tl ii f tr: it \W/ t it Ill I is It i~: :7 I.. t 1 l { it I L.;. l 0 I ~ I I ApAda No. W996 A?!nda (tam Dare _ DATE: CITY COUNCIL REPORT FORMAT TO: Mayor and Members of the City Council FROM. Rick Svehla, Acting City Manager SUBJECT: Hold a public hearing and consider an ordinance rezoning 0.9485 acres from the Single Family 7 (SF-7) zoning district to the Commercial (C) zoning district and the Multi-Family 1 (MF-1) zoning district. The subject property is located on the north side of Dallas Drive, at the intersection of Cook Street. RECOMMENDATION: The Planning and Zoning Commission recommends approval of the request, seven in favor, none opposed (7-0). I SUMMARY: See Planning and Zoning Commission Report. BACKGROUND: See Planning and Zoning Commission Report. PROGRAMS DEPARTMENTS OR GROUPS AFFECTED: Not applicable. FISCAL IMPACT: None. Respec0ully submitted: Pic-kS4vrehla Acting City Manager h "t agenda No. S Agenda it m Date • Prepared by: Walter E. Reaves, Jr. Urban Planner Approved: Frank Robbins, AICP Director Planning and Development Attachment #1: Planning and Zoning Commission Report. Attachment #2: Ordinance. Attachment #3: Draft minutes of the March 27, 1996, P & Z meeting. ,r i • • DENTON PLANNING AND ZONING COMMISS104 t hl~ To: Denton City Council From: Denton Planning and Zoning Commission Date: April 9, 1996 Subject: Z-96-009 GENERAL INFORMATION Applicant: Mr. Rob Rayner 1108 Dallas Drive, #310 Denton, Texas 76205 Owner: E.W. Belcher RR 2 Box 350 Sanger, Texas 76266 Action: Request change in zoning for 0.9382 acres from the Single Family 7 (SF-7) zoning district to the Commercial (C) zoning district, and 0.0103 acres from the Single Family 7 (SF-7) zoning district to the Multi-Family 1 (MF-1) zoning district. Location: The subject property is located on the north side of the intersection of Dallas Drive, and Cook Street. (See Attachment 1) Surrounding Zoning and Land Use: North: Mixed residential and commercial uses, MF-1 zoning. South: Commercial use and zoning. East: Residential use and SF-7 zoning. West: Commercial use and zoning. Denton Development Plan: Low Intensity Area #52 (129% allocated). SPECIAL INFORMATION The subject property is in the process of being platted. Public improvements will include dedication of right-of-way along Dallas Drive, two additional fire hydrants, and sidewalks on all street frontages. BACKGROUND The following will provide a brief history of the area under consideration. 1969 Ordinance 69-01 adopting a Comprehensive Zoning Ordinance and Map designates the property as being in the Single-Family 5 (SF-5) zoning district. At some point between the passage of Ordinance 69-01 and April 20, 1976, the zoning ordinance is Page 1 APR-05-1996 09:0? CITY OF DENTON PLANNING P.03/05 e amended removing the Single Family 5 (SF-5) zoning dlstrictA~ I property game Single Family 7 (SF-7) property. Dale April 20, 1976 Lots 3 and 4, Block 14, of the Alex Robertson Addition are rezoned from the Single Family 7 (SF-7) zoning district to the Office (0) zoning district. September 7, 1976 Lot 4, Block 14 is rezoned from the Office (O) zoning district to the Commercial (C) zoning district. j August 5, 1980 Lot 3, Block 14 is rezoned from the Office (0) zoning district to the Commercial (C) zoning district. NOTICE Twenty-four (24) notices were mailed on March 15, 1996. No replies were received. ALYS S The table below will provide a summary of the Plan related analysis for this project, Denton Development Plan Policy Analysis Summary Low Intensity Area Z-96-009 Development Rating YS Potioy POLICY COMMENTS ov W'" swp. a c< Aft" eeariNw aaands~eu To be oonafslenl with the Plan, a Allocaisd intensity - 57 intansityy tips. development should not oxcaed its Amal fnronsity ■ 612 Intensity trips, x altocow InteneNy, strict sits plan Control within t,ftpo There N rssldentlal use within, 1,100 feet of feet of "sling low density the project x rosidental. Traffic design to ensure that MuN- The property has dirocf across to Oallas Family or Non-posidentlal uses have Drive, acau to coltsctors or targsr x aftrials with no drect access through raldendaf streets, Sufficient green spare, recfval5onal Landscaping will be provided as required by fecllilos and diversity of parks are the Landscaping, Scrooning, and Tmo x provded, Presevation OrBnanco, 63 appffcable during the permlrting prooess, Input Into planning by nefghboTood A neighborhood mooting was Wd on March asSooatbne and oounoIs Is 21, 1996, x encouraged Page 2 APR-05-1996 09:0? CITY OF DENTON PLANNING P.04i05 s Neighborhood sewica center The site Is 0,iii acres, Plan allows up to Agenda tam X ooncentratian five acres along an arterial Dallas Drive is classified as a pdmay aReriat. Date Separation The subject pmp" is within t2 mile of other corn narcial owcontrabore. X Any farm of continuous stop This area of Dallas 06a c lays the conmerdat development Is strongly charadodstkt associated with strip dsoouraged in or near low intensity commercii i development However, dw areas, reason for this request Is that a zoning map error was docoveeed. Nomraly, stall would be recommending additional landscaping to X break-up' the strip commercial raturo of Ito proposad devaloprrent, however, due b the reason behind the rerluest shit is malting no such rocommeMatlon Location TTe property is located along Dallas Drive. a rr*f arlotial. and is In what is normalry regarded as 'commercial' sites. Topography Ti subject property Is largely level, and there are no topographic features that would constrain devalopmant Land use in pleming area and North Is mixed commercial and surrounding uses. residential use, i zoning. South is Commer" zoning and vse. East Is Cook street residential use and SF-7 zoning. West is Commarciat zoning and use. To recap, the property was Incorrectly Identified on an earlier zoning map as being entirely within the Commercial (C) zoning district. In fact, part of the property is in the Single Family 7 (SF-7) zoning district, and cannot be developed as proposed. Thus, the reason for the rezoning request. The analysis for the rezoning Is marginal, but the Commission is recommending for approval, However, if there were no map error, there would have been conditions recommended by the staif to the Commission for additional landscaping to offset the strip commercial nature of development along this street. However, in light of the circumstances surrounding this case, the Commission is recommending approval without conditions. RECOMMENDgTION The Planning and Zoning Commission recommends approval of this request. ALTERNATIVES 1. Approve as recommended. 2. Approve with conditions. 3. Deny. 4. Postpone consideration. Page 3 v APR-05-1996 09:06 CITY OF DENTON PLW41NG P.05i05 ATTACHMENTS Agenda No, % 1. Zoning exhibit. Agend f m 2. Area map. Date I Page 4 TOTAL P.05 i O/ j ZONEDi MF-1 I I I I Ag1 endm i 61OCX112 ZONED SF-7 ZONED MF-r Dale 20NED NF -1 I I PROPOSED MF 0.0703 AC. ; ' 1 Z EAST 30.00' I I I I EilST1171.00' I SOUTH 30.00' STREET 5 45'00'00' f N 4500'00' W Rt+tti S RLjT4 T 42'43' 41'43' RUTH STREET II VOL. 1356, PG. 979. R.P.R. r ZONED: SF-7 PROPOSED COMMERCAL n ZONED SF-7 0 7 : 0 9SbZ 2 N BLOCK : 14 LC'L. I, PC :19. P.R. V~ g VJ s~I: i SOUTH 9.$0' WEST 99.00' ~C wrsf Woo' v q h " 3 jig x ZONED: COMMERCIAL N 4J30'25' W 23.24' i ~s O ' F ALEX ROBERTSON ADDITION CITY AND COUNTY OF DENTON, TEXAS _ Lift 11 AUEnd NO ■ moll- An ~ilk" ~0-i L_ _ Mu S7 i R F now ■ RUTH I ~ SIMMONS SIMMONS 1 11 mi L E _ IMF CHAMBERS f~ SMITH 9MRH - own Mi low a PBcZ Minutes agenda No, ~ DRAFT March i2 7, 1996 n es p.gendNo Page 2 Mr. Salmon: The southern portion is currently outside of the city limits so we don't have control over the name of that street but we would do that when and if we annexed that property. Mr. Powell: I move that we recommend to the City Council the name change of this street to Westcourt Road. Mr. Cochran: I'll second. Ms. Russell: Any discussion? All in favor please raise your right hand. Opposed same sign. Approved. (6-0) Ms, Flemming arrived at 5:12 p.m. III. Auto Zone located on the north side of the intersection of Dallas Drive and Cook Street. a. Hold a public hearing and consider a request to rezone 0.9485 acres from the Single Family 7 (SF-7) zoning district to the Commercial © zoning district and the Multi- Family 1 (MF-1) zoning district. Z-96-009 Ms. Russell read the rules of procedure for the public hearing and opened the public hearing. Mr. Reeves: This is a rezoning of 9.382 acres from the Single Family 7 zoning district to the Commercial zoning district and.0103 acres from the Single Family 7 zoning district to the KIM- Family 1 zoning district. Basically there was an error on our map and it showed this property as being Commercially zoned. When we checked to make sure that the property was zoned Commercial we found that it was zoned Single Family 7. The applicant in this case is Auto Zone and they were somewhat upset to find that it was not Commercially zoned. We did mail out twenty-four notices and we did not receive any replies. We held a neighborhood meeting on the 21st and there were five people there, one of those being Councilman Young. The people that did come expressed concern in that they thought the property was being rezoned for multi-family use. When it was explained that wasn't the case then there wasn't a problem. Staff is recommending approval of this rezoning request as presented, Mr. Cochran: There is a large open section that goes back a ways, I can't tell from this map where that open section stops. Mr. Reeves: It is vacant all the way back to where this house is and there is a lot that has a fence. Ms. Russell: Would the petitioner care to speak? Mr. Robert Raynor: My name is Robert Raynor and my office is at 1108 Dallas Drive, Suite 310. Mr. Belcher is doing the zoning on this property for the simply to clarify a mistake that was done many years ago. As far as the fence that you are talking about, there is a wood fence that backs up to that house that is Mr. Standbury's house and we went and visited him because he couldn't make the neighborhood meeting. We are having that zoned so we can put an auto parts store there I agenAF P&Z Minutes Agen March 27, 1996 DO E Page3 Dale think that it was good to have the Councilman for that area to be present at the neighborhood meeting. It does help the neighbors to see that the city really does care about what is going on. Mr. Cochran: Would there be any access from industrial Street? Mr. Raynor: No there will not be any access from Industrial Street. Mr. Powell: Are you planning on building apartments here? Mr. Raynor. No we don't plan to build any apartment here. This is strictly a rezoning for an automotive store. Ms. Russell: Is there anyone to speak in favor of the petition? Is there anyone to speak in opposition to the petition? We will close the public hearing. Are there any final remarks? Mr. Reeves: There is already Multi-Family zoning north of the gray area on the map and on the north side of Ruth. Mr. Cochran: Will there be access on Cook Street? Mr. Raynor: There will be a curb cut on Cook Street and that will be addressed when you see the preliminary plat. Ms. Schertz: I move we recommend approval of the request to change the zoning for.9382 acres from the Single Family 7 zoning district to the Commercial zoning district and .0103 acres from the Single Family 7 zoning district to the Multi-Family I zoning district. Ms. Flemming: I'll second. Ms. Russell: Any discussion? All in favor please raise your right hand. Opposed same sign. (7-0) b. Hold a public hearing and consider the preliminary plat of the Auto Zone Addition being a replat of '/S Lot 1, Block 12 and Lot 2, Block 12 and Lots 1-4, Block 14 of the Alex Robertson Addition and unplatted land in the Alex Hill Survey and consists of 2.8936 acres. Ms. Russell opened the public hearing. Mr. Reeves: This is the preliminary replat of the Auto Zone Addition. There will be some public improvements associated with the final plat, those being sidewalks along the street frontages, the installation of two fire hydrants, and a ten foot right-of-way dedication along Dallas Drive. What you will see at the next meeting will be the final plat of Lot 1, Block l which is the big lot right in the middle. There will be access on Cook Street and on Dallas Drive, The applicants have already peen to the Traffic Safety Commission and have obtained permission for that driveway on Dallas Drivo, DRC recommends approval. .2-95 -,C C3 hQz+~da No. ' aDenda ! m Dale_ ~ ORDINANCE NO. AN ORDINANCE OF THE CITY OF DENTON, TEXAS, PROVIDING FOR A CHANGE FROM THE SINGLE FAMILY 7 (SF-7) ZONING DISTRICT CLASSIFICATION AND USE DESIGNATION TO THE COMMERCIAL (C) ZONING DISTRICT CLASSIFICA- TION AND USE DESIGNATION FOR 0.9382 ACRES OF LAND, AND FROM THE SINGLE FAMILY 7 (SF-7) ZONING DISTRICT CLASSIFICATION AND USE DESIGNATION TO THE MULTI-FAMILY 1 (MF-1) ZONING DISTRICT CLASSIFI- CATION AND USE DESIGNATION FOR 0.0103 ACRES OF LAND LOCATED ON THE NORTH SIDE OF THE INTERSECTION OF DALLAS DRIVE AND COOK STREET; PROVIDING FOR A PENALTY IN THE MAXIMUM AMOUNT OF $2,000.00 FOR VIO- LATIONS THEREOF; AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, Mr. Rob Raynor, on behalf of E.W. Belcher, initiated a change in zoning for 0.9382 acres of land from the Single Family 7 (SF-7) zoning district classification and use designation to the Commercial (C) zoning district classification and use designation, and for 0.0103 acres of land from the Single Family 7 (SF-7) zoning district classification and use designation to the Multi-Family 1 (MF-1) zoning district classification and use designation; and WHEREAS, on March 27, 1996, the Planning and Zoning Commission recommended approval of the requested changes in zoning; and WHEREAS, the City Council finds that these changes in zoning will be in compliance with the Denton Development Plan; NOW, THEREFORE THE COUNCIL Of' THE CITY OF DENTON HERE8Y ORDAINS: SECTION I. That the zoning district classification and use designation of the 0.9382 acres of land described in Exhibit 1 is changed from the Single Family 7 (SF-7) zoning district classifi- cation and use designation to the Commercial (C) zoning district classification and use designation S- CTIO II. That the zoning district classification and use designation of the 0.0103 acres of land described in Exhibit 2 is changed from the Single Family 7 (SF-7) zoning district classifica- tion and use designation to the Multi-Family 1 (MF-1) zoning dist- rict classification and use designation under the comprehensive zoning ordinance of the City of Denton, Texas. SECTI ON 11 I. That the City's official zoning map is hereby amended to show the change in zoning district classification. SECTION IV. That any person violating any provision of this ordinance shall, upon conviction, be fined a sum not exceeding $2,000.00. Each day that a provision of this ordinance is violated shall constitute a separate and distinct offense. Agenda No. ~o t Agenda t ml Date . PASSED AND APPROVED this the day of 1996. ' BOB CASTLEBERRY, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: APPROVED AS TO LEGAL FORM: HERBERT L. PROUTY, CITY ATTORNEY i Agenda No,_ 7V ftdior j Agenda ni , Gate DESCRIPTION OF 0.9382 ACRE IN THE ALEXANDER HILL SURVEY, ABSTRACT NUMBER 623, CITY AND COUNTY OF DENTON, TEXAS. ALL THAT CERTAIN TRACT OR PARCEL OF LAND LYING AND BEING SITUATED IN THE ALEXANDER HILL SURVEY, ABSTRACT NUMBER 623, CITY AND COUNTI OF DENTON, TEXAS, BEING PART OF RUTH STREET AS CLOSED AND RECORDED IN VOLUME 1356, PAGE 979, REAL PROPERTY RECORDS OF DENTON COUNTY, TEXAS, ALL OF LOTS 1 AND 2 AND PART OF LOTS 3 AND 4, BLOCK 14, ALEX ROBERTSON ADDITION, AN ADDITION TO THE CITY OF DENTON, TEXAS, AS RECORDED IN VOLUME 1, PAGE 19, PLAT RECORDS OF DENTON COUNTY, TEXAS, AND PART OF A TRACT AS DESCRIBED IN A DEED TO E. W. AND WANDA M. BELCHER AS RECORDED IN VOLUME 782, PACE 209, DEED RECORDS OF DENTON COUNTY, TEXAS, AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS; BEGINNING AT AN IRON PIN FOUND FOR CORNER IN THE WEST RIGHT OF WAY OF COOK STREET (FORMERLY ROSS AVENUE) IN THE EAST BOUNDARY LINE OF RUTH STREET AS CLOSED, SAID POINT BEING SOUTH 30.00 FEET FROM THE NORTHEAST CORNER OF SAID RUTH STREET AS CLOSED; THENCE SOUTH ALONG THE WEST RIGHT OF WAY OF COOK STREET A DISTANCE OF 161.00 FEET TO A POINT FOR COr;ER; THENCE WEST A DISTANCE OF 89.00 FEET TO A POINT FOR CORNER; THENCE SOUTH A DISTANCE OF 9.50 FEET TO A POINT OF CORNER; THENCE WEST A DISTANCE OF 99.00 FEET TO A POINT FOR CORNER; THENCE SOUTH A DISTANCE OF 87.19 FEET TO A POINT FOR CORNER IN THE NORTH RIGHT OF WAY OF DALLAS DRIVE (U.S. HIGHWAY 77); THENCE NORTH 43 DEGREES 30 MINUTES 25 SECONDS WEST ALONG THE NORTH RIGHT OF WAY OF VALLAS DRIVE A DISTANCE OF 23.24 FEET TO A POINT FOR CORNER; THENCE NORTH A DISTANCE OF 270.84 FEET TO A POINT FOR CORNER AT THE SOUTHWEST CORNER OF LOT 1, BLOCK 12, ALEX ROBERTSON ADDITION AND THE NORTHWEST CORNER OF RUTH STREET AS CLOSED; THENCE EAST ALONG THE SOUTH BOUNDARY LINE OF BLOCK 12, ALEX ROBERTSON ADDITION AND THE NORTH BOUNDARY LINE OF RUTH STREET AS CLOSED A DISTANCE OF 174.00 FEET TO AN IRON PIN FOUND FOR CORNER IN THE SOUTH BOUNDARY LINE CF LOT 2, BLOCK 12; THENCE SOUTH 45 DEGREES 00 MINUTE'S 00 SECONDS EAST ACROSS RUTH STREET AS CLOSED A DISTANCE OF 42.43 FEET TO THE POINT OF BEGINNING AND CONTAINING 0.9382 ACRE OF LAND. Agenda No l Agenda Item C,. DESCRIPTION OF 0.0103 ACRE IN THE ALEXANDER HILL )are COUNTY OF DENTON , TEXAS. SURVEY, CITY AND ALL THAT CERTAIN TRACT OR PARCEL OF LAND LYING AND BEING SITUATED IN THE ALEXANDER HILL SURVEY, ABSTRACT NUMBER 623, CITY AND COUNTY OF DENTON, TEXAS, BEING PART OF RUTH STREET ( COURTED IN VOLUME 1356,G MOR PAGE 979, CLOSED), AS REAL PROPERTY RECORDS OF DENTON BEGINNING AT TEXAS, A AND BEINE PARTICULARLY DESCRIBED AS FOLLOWS; I/2" CORNER OF LOT 2, IRON PIN FOUND FOR CORNER BLOCK 12, AT THE SOUTHEAST TO THE CITY OF DENTON, 12, ALEX ROBERTSON ADDITION, AN ADOPTION PLAT RECORDS OF DENTON CO TEXAS, AS , PACE 1 UNTY, TEXAS SAID CORDED IN LOT 2 VOLUME 1 E, W• BELCHER IN VOLUME 791, PAGE 860 AND BEING DEEDED TO DEED RECORDS OF DENTON COUNTY, TEXAS VOLUME 806, PACE 591 NORTHEAST CORNER OF RUTH STREET AS CLOSEDI POINT OF WAY OF COOK STREET (g0M~. BEING AT THE AND THE WEST RIGHT RLY ROSS AVENUE); IN THENCE SOUTH ALONG THE WEST RIGHT OF W BOUNDARY EAST LINE op RU AY OF COOK STREET AND THE CLOS FEET TO AN I ON IN SET FOTH STREET R CORNER ,AWITH CAD A DISTANCE OF 30.00 THENCE NORTH 45 DEGREES 00 MTES 00 P NUMBER 3989; STREET AS CLOSED A DISTANCE OFIN42- 43 FEET TO AN ? CORNER IN '47HE NORTH BOUNDARY LINE OF SECONDS WEST ACROSS RUTH THE SOUTH BOUNDARY RON PIN SET FOR ADDITION; LINE OF SAID LOT 2 RUTH STREET AS CLOSED AND BLOCK 12, ALEX ROBERTSON THENCE EAST ALONG THE SOUTH BOUNDARY LINE OF SAID LOT 2 DISTANCE OF AND THE NORTH BOUNDARY LINE OF SAID RUTH STREET AS CLOSED A 0. 30.00 FEET TO BLOCK 12 0103 ACRE OF LAND. THE POINT OF BEGINNING AND CONTAINING EMI W M c i Agenda ko. -0 $ Ap,nda Item 3$ Date - (p DATE: April 9, CITY COUNCIL REPORT FORMAT TO: Mayor and Members of the City Council FROM: Rick Svehla, Acting City Manager SUBJECT: Hold a public hearing and consider an ordinance rezoning 3.1176 acres from the Agricultural (A) zoning district to the Commercial (C) zoning district. The subject property is located on the north side of University (U.S. 380), 580 feet west of Cooper Creek Road. RECOMMENDATION: The Planning and Zoning Commission recommends approval of the request, seven in favor, none opposed (7-0). SUMMARY: See Planning and Zoning Commission Report. BACKGROUND: See Planning and Zoning Commission Report. PROGRAMS DEPARTMENTS OR GROUPS AFFECTED: Not applicable. FISCAL IMPACT: None. Respectfully submitted: Rick Svehla Acting City Manager J 4 E Y, F' Agenda Na. Agend I em Date Prepared by: Walter E Reeves, Jr. Urban Planner Approved: Frank Robbins, AICP Director Planning and Development Attachment #1: Planning and Zoning Commission Report. Attachment #2: Ordinance. Attachment #3: Minutes of the March 13, 1996, P & Z meeting. I v A A06HJ6 N4.1 DENTON PLANNING AND ZONING COMMISSION To. Denton City Council From: Denton Planning and Zoning Commission Date: April 9, 1996 Subject: Z-96-006 GENERAL INFORMATION Applicant: Bizplex Inc, 2107 Shumard Oak Lane Irving, Texas 75063 Owner: Same as above. Action: Request change in zoning for 3.1176 acres from the Agricultural (A) zoning district to the Commercial (C) zoning district. Location: The subject property is located on the north side of University (US 380), 580 feet west of Cooper Creek Road. (See Attachment 1) Surrounding Zoning and Land Use: North: Commercial use and zoning. South: Commercial use and zoning. East: Residential use, General Retail and Commercial Conditioned zoning. West: Commercial use and zoning. Denton Development Plan: Low Intensity Area #35 (128% allocated). SPECIAL INFORMATION The subject property is already platted. BACKGROUND 1969 Area is placed in the Agricultural (A) zoning district and use classification by Ordinance 69-01 which adopted the Comprehensive Zoning Ordinance and Map for the City of Denton. July 1985 A Final Plat of the property (Denton Business Park) is approved. The property is incorrectly identified on the plat as being in the Commercial (C) zoning district, and the plat incorrectly locates the property in relation to Spring Valley Road (off by @150 ft.). Permits are subsequently issued for building construction (there are currently 5 structures on the site), and Certificates of Occupancy for commercial uses. Page 1 V i i npltf111~ Ha, Agen a em I I% It was discovered that the subject property was not in the ComrQ41 2 Mr~-' district, based on an inquiry by a party interested in leasing space in the complex. As a result of that discovery, the Building Official would no longer be able to issue new Certificates of Occupancy, which means that as tenants leave, or go out of business, no new tenants would be able to use the property commercially. NOTICE Fourteen (14) notices were mailed on March 1, 1996. Three replies were received, two replies are in favor of the request, one reply was received which was in favor, but not signed by the property owner. ANALYSIS The table below will provide a summary of the Plan related analysis for this project. Denton Development Plan Policy Analysis Summary Low Intensity Area Z-96-006 Development Rating VS Potlcy POLICY COMMENTS &9N unlry sane«nsl Cwsislem lrewcstdm x,earn.lslsnl To be consistent with the Plan, a There are 5 buildings totalling approximately development strould not exceed its 50,000 square feet on the site. x allocated intensity. Allocated fntansi;y - 187 intensity trips. Actual Intensity . 3,000 intensity trips Strict site plan control within 1,600 There is residential use within 1,600 fc.1 of feet of existing low density the project, However, the site has operated x residential. commercially since 1985, and no site plan is proposed, Traffic design to ensure that Multi. The property has drect access to University Family or Non-Residential uses have (US 380) , L access to collectors or larger x arterlals with no direct access through residential streets, Sufficient gwen space, recreational This Is an existing facility. Landscaping is facilities and diversity of parks are provided as required by the Landscaping, x provided Screening, and Tree Preservaton Ordinance, as applicable during" permitting process. Input into planning by neighborhood A neighborhood meoll was held on March associations and councils is S. 1996. One neighbor afforded, and is in x encouraged, favor Neighborhood service center The site is 3.1176 acres. Plan allows up to x concentration five acres along an arterial, University (US 380) Is classified as a primary artenaf. Separation The subject property Is within 12 mile of other commeraal concentrations. x Page 2 Agenda Ntlm Arty form of continuous te._ . .trip This are. commercial development is strongly area of a Un associa ssocia dted with swiths the dscouraged in or near low in;ensN t 001nm strip areas. commercial cial development. However, the Property has been thought to be in the x Commercial zoning district, and was allowed to be developed commercially in 1985. Location The property is located along US 380, a ";or arterial, Is already developed commercially, and Is in what Is normally regarded as 'commercial' sites. Topography The subject property is already Platted and developed. Land use in planning area and surrounding uses North is Commercial zoning and . use. South Is Commercial zoning and use. East is General Retail 8 Commercial Conditioned zoning, and residential structures. West Is Commercial zoning and use. To recap, the property was incorrectly identified as being in the Comm zoning district when it was platted in 1985. ercial Since then su building construction, and Certificates of , permits have been issued for Occu an buildings, and the property has operated as a p cy for commercial uses of those rezoning is marginal, buts being recommended ufor approval. However, if the the property were vacant, undeveloped land, there would have been conditions recommended by the staff, to the Planning and Zoning Commission for bufferyards or additional landscaping to offset the strip commercial nature of development along this street. However, in light of the circumstances surrounding this case, staff recommended approval without conditions, and the Commission is making the same recommendation to the Council. RECOMMENDATION The Planning and Zoninn Commission recommends approval of this request. ALTERNATIVES 1. Approve as recommended. 2. Approve with conditions. 3. Deny. 4. Postpone consideration. ATTACHMENTS 1. Zoning exhibit. 2. 1985 plat. Page 3 j " Apeoddaa,lllem O Dare/ (Q ■ g ■ 1 1 r a FT IIII f 3!0 US 3 t+wY ' ` ' y5. y I ~ AytintJ~ Nu. ` '•f Agend tem S 'Oro SURV r, ~ yi f A6 774 + A r ' WIL I IL A -c 1 a ~ R 1 ~ N r , a e ~ 4u~: ~ i w 1~ . ~ ~ ,AD I 7 s S Ifni; w 'm I pt jij=V MI 9s 1 ! e fi rr:! is c~:r:! =i i E°jtEt E' fEE F~ i~ Jim t~~ t $j .}iSS i t sib dial 'ii !l! ! t t Evil t a; c'f 1 ' -i ii'~' ! ►E r tie 1 ' t t ~ 9; e oi~ l '•E ~:j~; = .i'i•'~ Ear-~ is ~ i f;tttie Tali sr top- ;S's it i, it !i = ir'tir;i i Y Agenda Mo. MINUTES Agenda em Q PLANNING AND ZONING COMMISSION Date • March 13, 1996 Regular meeting of the Planning and Zoning Commission of the City of Denton, Texas was held on Wednesday, March 13, 1996, and began at 5:00 p.m. in the City Council Chambers, 215 E. McKinney. Present: Mike Cochran, Katie Flemming, Guy Jones, Rudy Moreno, Bob Powell, Ellen Schertz, and Barbara Russell. Present from Staff: Frank Robbins, Director of Planning and Development; Jerry Drake, Assistant City Attorney; Owen Yost, Urban Planner; Walter Reeves, Urban Planner; David Salmon, Senior Civil Engineer; Kathy DuBose, Executive Director of Finance; Jon Fortune, Chief Finance Officer; and Chris Rodriguez, Secretary. Meeting called to order at 5:03 p.m. 1. Consider approval of the minutes of the February 14, 1996 meeting. Ms. Russell: Are there any corrections to the minutes? Mr. Cochran: 1 move approval of the minutes for February 14, 1996. Ms. Flemming: I'll second. Ms. Russell: Any discussion? All in favor please raise your right hand. Opposed same sign. Approved. (7-0) 11. Receive a report regarding the 1996.2001 Capital Improvement calendar and process. Mr. Jon Fortune presented the schedule for the 1996 through 2001 CIP process. III. Hold a public hearing and consider a request to rezone 3.1176 acres from the Agricultural (A) zoning district to the Commercial (C) zoning district. The subject property is located on the north side of University (U.S. 380), 580 feet west of Cooper Creek Road, and is more commonly known as Denton Business Park. (Z-96-006) Ms. Russell read the rules of procedure for the public hearing. Mr. Reeves: This case is a rezoning on U.S. 380 of 3.1176 acres already platted and known as the Denton Business Park. It was platted in 1935 and at that time the property was misidentified as being in the Commercial zoning district and the distances from Spring Valley and Cooper Creek Road were not correct. The property is actually in the Agricultural zoning district and not the Commercial district. I don't know why no one noticed this in 1985 but it ended up being considered a commercial piece of property. Since 1985 there have been five buildings built on the property and certificates of occupancy have been issued to the leasers of space there. This error was discovered about a month ago and the owner of the property was concerned about this since the building official would not be able to issue any more certificates of occupancy due to the fact that the property is not commercially zoned. That is the reason that we are here tonight. The normal analysis for a zoning case is in your Agenda No w _ P&Z Minutes Agenda )ter March 13, 1996 Date Page 2 backup. If this were a normal zoning case there might be some concern about strip commercial but this is an existing property and has been used for the last ten years as a business park. We did get three responses to our notice and all of them were in favor but one of them we couldn't count because it was not signed by the owner of the property as listed on the tax rolls. We are recommending approval without conditions. Mr. Powell: What is on the property now? Mr. Reeves: There are five buildings on the property. Ms. Russell: Would the petitioner care to speak? Mr. Diamond Jamal: My name is Diamond Jamal and I represent Bizplex Incorporated and my address is 2107 Shumard Oak Lain. I have some pictures of the property. Bizplex acquired the property in 1983 and prior to purchase we visited the zoning department and they identified the property as being Commercial. Denton Business Park was built with full approval from the City of Denton and a final plat was approved in 1985. To the best of my knowledge Denton Business Park has been used commercially for more than ten years. Ms. Russell: Is there anyone to speak in favor of the petition? Is there anyone to speak in opposition to the petition? We will close the public hearing. Any final remarks? Mr. Powell: I move that we recommend approval of this request to rezone 3.1176 acres known as the Denton Business Park Addition, from Agricultural (A) zoning district to the Commercial (C) zoning district. Mr. Cochran: I'll second that. Ms. Russell: Any discussion? All in favor please raise your right hand. Opposed same sign. Approved. (7-0) IV. Hold a public hearing and consider a request to rezone 1.211 acres from the Single Family 7 (SF-7) zoning district to the Office Conditioned (O[c]) zoning district. The subject property is located on the west side of Hinkle, approximately 500 feet south of Haggard Lane. (Z-96-003) Ms. Russell opened the public hearing. Mr. Reeves: This piece of property is located on Hinkle Drive south of Haggard Lane. There is an existing building on the site that in the past has been used as a church and later as a school, Mr. Don Richards, the applicant, would like to use the property for an office building and that is the reason that we are here today. We sent out twenty-two notices. We received four replies in favor and one reply in opposition at the time that the staff report was prepared. One of the replies that we received in favor we couldn't count because again it wasn't signed by the property owner that appears on the tax roll. We did have a neighborhood meeting last Thursday. We had one person attend and it was the person that was opposed. This request is fairly consistent with the Denton Development Policy and the only one it is not consistent with is the separation policy. It is within a half mile of the 2-Y4-DOC Agenda No. Agenda em Date ~ ORDINANCE NO.J AN ORDINANCE OF THE CITY OF DENTON, TEXAS, PROVIDING FOR A CHANGE FROM THE AGRICULTURAL (A) ZONING DISTRICT CLASSIFICATION AND USE DESIGNATION TO THE COMMERCIAL (C) ZONING DISTRICT CLASSIFICATION AND USE DESIGNATION FOR 3.1176 ACRES OF LAND LOCATED ON THE NORTH SIDE OF UNIVERSITY DRIVE (U.S. 380), 580 FEET WEST OF COOPER CREEK ROAD; PROVIDING FOR A PENAL'T'Y IN THE MAXIMUM AMOUNT OF $2,000.00 FOR VIOLATIONS THEREOF; AND PROVIDING FOR A14 EFFECTIVE DATE. WHEREAS, Mr. Diamond Jamal, on behalf of Bizplex, Inc., initiated a change in zoning for 3.1176 acres of land from the Agricultural (A) zoning district classification and use designa- tions to the Commercial (C) zoning district classification and use designation; and WHEREAS, on March 13, 1996, the Planning and Zoning Commission recommended approval of the requested change in zoning; and WHEREAS, the City Council finds that the change in zoning will be in compliance with the Denton Development Pan; NOW, THEREFORE THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION I. That the zoning district classification and use designation of the 3.1176 acres of land platted as Lot 1, Block 1 Denton Business Park, is changed from the Agricultural (A) zoning district classification and use designation to the Commercial (C) zoning district classification and use designation under the comp- rehensive zoning ordinance of the City of Denton, Texas. SECTION II. That the City's official zoning map is amended to show the change in zoning district classification. SECTION III. That any person violating any provision of this ordinance shall, upon conviction, be fined a sum not exceeding $2,000.00. Each day that a provision of this ordinance is violated shall constitute a separate and distinct offense. SECTION IV. That this ordinance shall become effective four- teen (14) days from the date of its passage, and the City Secretary is hereby directed to cause the caption of this ordinance to be published twice in the Denton Record-Chronicle, a daily newspaper published in the City of Denton, Texas, within ten (10) days of the date of its passage. PASSED AND APPROVED this the day of 1996. BOB CASTLEBERRY, MAYOR 4 A Ageoda No. 9 AQend lte Date ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: APPROVED AS TO LEGAL FORM: HERBERT L. PROUTY, CITY ATTORNEY BY: PAGE 2 Agenda No. - 0/ Agendalhm 3C, oats DATE: pri CITY COUNCIL REPORT FORMAT TO: Mayor and Members of the City Council FROM: Rick Svehla, Acting City Manager SUBJECT: Hold a public hearing and consider an ordinance rezoning 1.211 acres from the Single Family 7 (SF-7) zoning district to the Office Conditioned (O(c)) zoning district. The subject property is located on the west side of Hinkle, approximately 500 feet south of Haggard Lane. RECOMMENDATION: The Planning and Zoning Commission recommends approval of the request, seven in favor, none opposed (7-0). SUMMARY: See Planning and Zoning Commission Report. BACKGROUND: See Planning and Zoning Commission Report. PROGRAMS DEPARTMENTS OR GROUPS AFFECTED: Not applicable. FISCAL IMPACT: Norio. Respectfully submitted: Rick Sveh a Acting City M:t Tager z 1 Agenda No. ~e Agenda it m UZW • Prepared by: Walter E. Reeves, Jr. Urban Planner Approved: `~'yll~ Frank Robbins, AICP Director Planning and Development Attachment #1: Planning and Zoning Commission Report. Attachment #2: Ordinance. Attachment #3: Minutas of the March 13, 1996, P & Z meeting. Agenda No. Date DENTON PLANNING AND ZONING COMMISSION RE To: Denton City Council From: Denton Planning and Zoning Commission Date: April 9, 1996 Subject: Z-96-003 GENERAL INFORMATION Applicant: Mr. Don Richards 521 N. Locust Denton, Texas 76201 Owner: Ms. Rhonda Banks 1201 Thomas Denton, TX 76201 Action: Request change in zoning for 1.211 acres from the Single Family 7 (SF-7) zoning district to the Office Conditioned (0[c]) zoning district. Location: The subject property is located on the west side of Hinkle Road, approximately 500 ft. south of Haggard Lane (see Attachment 1). Surrounding Zoning and Land Use: North: Vacant/residentially used, Agricultural, Single Family 10, and Two Family zoning. South: Residential use, Single Family 7 zoning. East: Vacant Good Samaritan Village land, and vacant Single Family 16 zoned land. West: Residential use in Single Family 7 zoning. Denton Development Plan: Low Intensity Area #23 (84% allocated). SPECIAL INFORMATION The subject property has an existing building that has been used as a church and school in the past. The property is not currently platted, and platting is not required to use the property as it currently exists. Any further development will trigger platting requirements. BACKGROUND Mr. Richards is a contractor, and would like to rezone the subject property and use the building for his own office, and any other potential office renters. The major conJition on this rezoning is that the property be used for Offices, Professional and Administrative only. A Contractors Shop and Storage Yard is not a permitted use in Page 1 Agenda No. Agenda lf~e Date • the Office zoning district, thus, even if rezoned to an unconditioned Office (O) zoning district, there would be no storage of equipment or use as a shop. NOTICE Twenty-two (22) notices were mailed on March 1, 1996. Four replies were received in favor, and one reply was received in opposition. ANALYSIS The table below will provide a summary of the Plan related analysis for this project. Denton Development Plan Poifcy Analysis Summary Low Intensity Area Z-96-003 Development Rating VS Policy POLICY COMMENTS &Wvlr n aY Sonm"v 646 CMNrIrM YnconW trot rncmaht-,t To be consistent with the Plan, a Allocated intensity. 73 intensity trips. development should not exceed its Proposed intensity - 75 intensity trips, it allocated Intensity. limited to the 5000 sq. n. office, X Stilct site plan control within 1,600 There is residant of use within 1,600 test of feet of existing low density the project, No site plan Is proposed, A residential. condition of using the existing buildings would X equate to a site plan. Traffic design to ensure that Multi- The property has direct access to Hinkle, Family or Non-Residential uses have which Is classified as a collector level street, access to oillectors or larger arterials whh no direct access X through residential streets. Sutficienl greon space, recreational Landscaping is provided as required by the facilities and diversity of parks are Landscaping, Screening, and Tree provided. Preservation Ordnance, as e X ppficab!e during the permitting process. Input Into planning by neighborhood A neighborhood meebng was held on March associations and councils is 7, 1996. There was no Significant opposition. encouraged. X Neighborhood service center rTh te is 1.211 acr esPlan allows up to two concentration aloe a toll X 9 actor street Hin Je is ied as a collector. Separation The subject property Is within mile of otter commercial concentrations at University and X Hinkle, Page 2 h~anud NJ, My form of continuous stnp The subject property Is physically separated commercial development is strongly from the commerdal uses along University by discouraged in or near low fniersiy s ngle family residential development. There areas. is no other commercial development In the x area along this streal, although there are three retirement homes. No site plan to judge step commercial appearance is required. Location The property is located along Hinkle, a collector !avel street. It has an existing building and parking lot, and has been used previously as a church and a school. Topography The subject property is already developed Any further development will require platting, at which bme, the requirements of the citys subdivision and Land Development Regulations will come into play. Land use In planning area and North is a mixture of vacant and surrounding uses. residentially zoned land, and residential zoning districts. South is residential use and SF-7 zoning, East is vacant land owned by Good Samaritan, and vacant sF•16 zoned land. West Is residential use and SF-7 zoning. New buildings will also trgge. a requirement to build a six foot fence or solid screen adjacent to existing residences, A 55 loot buildings setback Irom existing residences Is proposed, To recap, the property already has an existing building and has been used previously as both a church and school, There is an existing parking lot, and platting is not required unless further development of the property occurs. RECOMMENDATION The Planning and Zoning Commission recommends approval of this request subject to the following four conditions: 1. The use be for Offices, Professional and Administrative only. 2. Maximum building square footage of 5000. 3. 55 foot building and dumpster setback from the southern property line. 4. Lighting not directly illuminate adjoining property. Page 3 'v • 1 Apenda No.- Agenda Item ae Approve as recommended. [2. ERNATIVES Approve with additionaVother conditions. Deny. Postpone consideration. CHMENTS Location Map. Zoning exhibit. Page 4 ATTACHMENT 1 - Agenda No, en? fill i batenj MEADOW RIDGE D0. S HAGGMD . i i GREENBRMA 0 Min - - 51. AgenAm ATTAC,+A MENT Z AgenDate /l71.YlI/ .~Nw1n7~C /d0 .;1 YN/H . M E , 1 I C ~ t r f E' { 1 i r • ii E T I t '~L F P&Z Minutes AgenJN0'a March 13, 1996 AgenCow Page 2 Date backup. If this were a normal zoning case there might be some concern about strip commercial but this is an existing property and has been used for the last ten years as a business park. We did get three responses to our notice and all of them were in favor but one of them we couldn't count because it was not signed by the owner of the property as listed on the tax rolls. We are recommending approval without conditions. Mr. Powell: What is on the property now? Mr. Reeves: There are five buildings on the property. Ms. Russell: Would the petitioner care to speak? Mr. Diamond Jamal: My name is Diamond Jamal and 1 represent Bizplex Incorporated and my address is 2107 Shumard Oak Lame. I have some pictures of the property. Bizplex acquired the property in 1983 and prior to purchase we visited the zoning department and they identified the property as being Commercial. Denton Business Park was built with full approval from the City of Denton and a final plat was approved in 1985. To the best of my knowledge Denton Business Park has been used commercially for more than ten years. Ms. Russell: Is there anyone to speak in favor of the petition? 1s there anyone to speak in opposition to the petition? We will close the public hearing. Any final remarks? Mr. Powell: I move that we recommend approval of this request to rezone 3.1176 acres known as the Denton Business Park Addition, from Agricultural (A) zoning district to the Commercial (C) zoning district. Mr. Cochran: I'll second that. Ms. Russell: Any discussion? All in favor please raise your right hand. Opposed same sign. Approved. (7-0) IV. Hold a public hearing and consider a request to rezone 1.211 acres from the Single Family 7 (SF-7) zoning district to the Office Conditioned (O[c)) zoning district. The subject property is located on the west side of Hinkle, approximately 500 feet south of Haggard Lane. (Z-96-003) Ms. Russell opened the public hearing. Mr. Reeves: This piece of property is located on Hinkle Drive south of Haggard Lane. There is an existing building on the site that in the past has beer used as a church and later as a school. Mr. Don Richards, the applicant, would like to use the property for an office building and that is the reason that we are here today. We sent out twenty-two notices. We received four replies in favor and one reply in opposition at the time that the staff report was prepared. One of the replies that we received in favor we couldn't count because again it wasn't signed by the property owner that appears on the tax roll. We did have a neighborhood meeting last Thursday. We had one person attend and it was the person that was opposed. This request is fairly consistent with the Denton Development Policy and the only one it is not consistent with is the separation policy. It is within a half mile of the P&Z Minutes Agenda No. W March 13, 1996 A.9enda it 4 Page 3 gate Hinkle and University Drive intersection to the south and then there is Good Samaritan Villag Sterling House to the north. Staff is recommending this with some conditions. The uses woue ldandbe for offices, professional and administrative only. The existing building is thirty-three hundred square feet and we are recommending that the maximum building square footage on the property be five thousand square feet. The intensity policies of the Plan would allow up to a five thousand square foot building to be constructed on the site and still be consistent with the plan and that is what we are recommending. We are also recommending a fifty-five foot building and dumpster setback from the southern property line. The existing building, from the wall to the northern property line, is ten feet and with the roof overhang it is probably closer to about three or four feet. It is almost at the northern property line and any additional buildings will be built at least that far away from the residential neighborhood to the south. We are adding a condition that the lighting be kept on the property and not directly illuminate adjoining property„ Ms. Russell: Would the petitioner care to speak? i Ms. Lee Richards: My name is Lee Richards and my address is 507 Headlee. My husband and 1 are looking to buy th[s property to use as an office. This is our neighborhood and we won't do anything but to try to beautify the property. We don't have any problem with the conditions. There was a Montessori school here and I think our company will have a lot less traffic than the school. We are going to use it as an administrative office for our company, DBR Construction. Ms. Russell: Is there anyone to speak in favor of the petition? Mr, Truitt Leake: My name is Truitt Leake and I live at 1210 Greenbriar. I have lived there for twenty years now. I am in favor of the petition for a couple of reasons. I am sure that these folks will be better neighbors than the previous owners. There are street lights on the property so that the whole area is lit. The lot is two hundred and forty feet deep and without the lighting we would have a lot of problems in the parking area. It has approximately a hundred by seventy-five foot asphalt parking lot behind the building. There is a drainage problem. When the church originally built their parking lot it was not designed to drain towards the street it drained down between the lots. The previous owners dug a ditch so that it would drain to the street. Hinkle has a flooding problem and I would like to see this resolved. We do have kids that drink beer in the parking lot and if a gate could be put in to keep kids off of the parking lot at night that would be helpful. I would like to see the lighting kept because the owner of the property does pay for the lighting which protects our property. There is plenty of space for them to put in another building. The only nuisance that we have is kids in the parking lot after hours and the drainage on Hinkle. Ms. Russell: Is 6%ere anyone else to speak in favor of the petition? Is there anyone to speak in opposition to the petition? Would the applicant like to speak in rebuttal? Ms. Richards: We have looked into the drainage problem and it is my understanding that the money has been designated for that project from the last bond election. I think the gate is a good idea. Mr. Moreno: Would you be storing anything on the property? Ms. Richards: No, we would not have a construction yard. If we did store anything we would build enclosed garages. P&Z Minutes µgenda No, March 13, 1996 Agenda it m 'rage 4 Date • ► Mr. Robbins: You couldn't do that because the only use that this ordinance would allow would be the use as an office and storage of construction material would not be considered incidental to that use. Ms. Richards: That's fine, we don't need to do that. Ms. Russell: We will close the public hearing. Any further comments? Mr. Powell: Why was this zoned Single Family? Mr. Reeves: A church is a permitted use in every zoning district and as far as the school goes I dor:'t know. I don't know the details about the Montessori school. Ms. Schertz: I move we recommend approval of this request to rezone the 1.211 acres from Single Family-7 zoning district to the Office Conditioned zoning district subject to the following conditions. (1) The use be for offices, professional and administrative only, (2) the maximum building square footage of five thousand, (3) a fifty-five foot building and dumpster setback from the southern property line, (4) lighting that would not directly illuminate the adjoining property. Mr. Jones: Second. Ms. Russell: Any discussion? All in favor please raise your right hand. Opposed same sign. Approved. (7-0) V. Hold a public hearing and consider a Specific Use Permit for a parking lot for the Sullivan-Keller Early Development Center. The subject property is in the Single Family 7 (SF-7) zoning district, and consists of Lots 1, 2, 3, & 4, Block 4 of the College View Addition, and is located on the northwest corner of Davis and Wood Streets. (Z-96-004) Ms. Russell opened the public hearing. Mr. Reeves: This is a Specific Use Permit for a parking lot across the street from the Sullivan- Keller Early Development Center. We mailed out twenty-seven notices. We received two replies before the staff report went out and boui of those were in favor, unfortunately one of those we couldn't count because it was not signed by the property owner listed on the tax roll. Since that time we did receive a response that was opposed to this. The map in the backlnp was incorrect but the big map that was included with the packet was the correct one. As you can see there is going to be a lot of landscaping on this parking lot. The analysis in the staff report finds that this is consistent with all of the requirements of our zoning ordinance regarding Specific Use Permits. A neighborhood meeting was held on March 6th and one neighbor attended and was in favor of the request. We are recommending approval. Mr. Moreno: is a hackberry a protected tree? Mr. Reeves: The ordinance does not distinguish by type of tree but by size. If it is ten inches in caliper then it is a protected tree. Z-96-077 Agenda No, Agenda tte calf. e ORDINANCE NO. AN ORDINANCE OF THE CITY OF DENTON, TEXAS, PROVIDING FOR A CHANGE FROM THE SINGLE FAMILY 7 (SF-7) ZONING DISTRICT CLASSIFICATION AND USE DESIGNATION TO THE OFFICE CONDITIONED (O(c)) ZONING DISTRICT CLASSIFICATION AND USE DESIGNATION FOR 1.211 ACRES OF LAND LOCATED ON THE WEST SIDE OF HINKLE DRIVE, APPROXIMATELY 500 FEET SOUTH OF HAGGARD LANE; PROVIDING FOR A PENALTY IN THE MAXIMUM AMOUNT OF $2,000.00 FOR VIOLATIONS THEREOF; AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, Mr. Don Richards, on behalf of Ms. Rhonda Banks, initiated a change in zoning for 1.211 acres of land from the Single Family 7 (SF-7) zoning district classification and use designation to the Office Conditioned (O[c]) zoning district classification and use designation; and WHEREAS, on March 13, 1996, the Planning and Zoning Commission recommended approval of the requested change in zoning; and WHEREAS, the City Council finds that the change in zoning will be in compliance with the Denton Development Plan; NOW, THEREFORE THE. COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION I. That the zoning district classification and use designation of the 1.211 acres of land described in Exhibit 1, is changed from the Single Family 7 (SF-7) zoning district classifi- cation and use designation to the office Conditioned (0[c]) zoning district classification and use designation under the comprehensive zoning ordinance of the City of Denton, Texas, subject to the following conditions: 1. The shall use be for Offices, Professional and Adminis- trative only. 2. Maximum square footage of all buildings constructed on the subject property shall not exceed 5,000 square feet. 3. "here shall be a fifty-five (55) foot building and tumpster setback from the southern property line. 9. Lighting shall not directly illuminate adjoining proper- ty. SECTION II. That the City's official zoning map is hereby amended to show the change in zoning district classification. SECTION III. That any person violating any provision of this ordinance shall, upon conviction, be fined a sum not exceeding $2,000.00. Each day that a provision of this ordinance is violated shall constitute a separate and distinct offense. 7 Agenda No. Agenda I em Daia v %W SECTION IV. That this ordinance shall become effective four- teen (14) days from the date of its passage, and the City Secretary is hereby directed to cause the caption of this ordinance to be published twice in the Denton Record-Chronicle, a daily newspaper published in the City of Denton, Texas, within ten (10) days of the date of its passage. PASSED AND APPROVED this the day of 1996. BOB CASTLE BERRY, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: APPROVED AS TO LEGAL FORM: HERBERT L. PROUTY, CITY ATTORNEY BY: PAGE 2 u i Agenda FIELD NOTES ADW Iem 1.211 ACRES Data ~ %P ~''1n? )11 that certuin lot, tract, or parcel of land situated in the Robert Beaumont Survey, Abstract Number he ill the City and County of Denton, Texas, being a part of that certain tract of land conveyed by deed from Leroy H. Howe to The Church in Denton, recorded in Volume 914, Page 518, Deed Records of Denton County, Texas, and being moco3 particularly described as follows: BEGINNING at a 60d nail set for corner in Hinkle Drive, a public roadway, said point being the southeast corner of said Church in Denton Tract; TIIENCE N 88'30100" N, pass at 21.09 feet an iron rod found [or west line of -;aid Road, a total distance of 435.61 feet to an iron rod found for curner; THENCE N 01'26139" E, 121.50 feet with the remnants of an oil) fence line to an iron rod set for corner; THENCE S 88029140" E, with the remnants of an old fence line, pass at 411.46 feet an iron rod set for west line of said Road, a total distance of 432.55 feet to a 60d nail set for corner in said Road; THENCE South, 121.50 feet with said Road to the ?LACE OF BEGINNING and containing 1.211 acres of land, of which 4.059 acres lie within public roadway. (Commonly known as 2301 Hinkle Drive) N +~rr t v L Agenda No. Agenda Item pnApril 9, 1996. CITY COUNCIL AGENDA ITEM I'O: MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Rick Svehla, Acting City Manager SUBJECT: CONSIDER ADOPTION OF AN ORDINANCE AUTHORIZING THE CITY MANAGER MANAGER TO EXECUTE A CONTRACT BETWEEN THE CITY OF DENTON AND THE CALLAHAN ESTATE FOR THE PURCKLASE OF REAL PROPERTY FOR WATER RECLAMATION PLANT PURPOSES RECOMMENDATION: The Planning and Zoning Commission at their special called meeting of April 1, 1996, recommended approval. SUMMARY: The City was able to reach an agreement Frith Bob Callahan for the purchase of the tract of land containing approximately 151.2 acres of floodplain land And some non- floodplain land situated in Denton County, Texas, in the vicinity of Denton's wastewater treatment plant for additional buffer space and future expansion of the wastewater treatment plant. Respectfully submitted, I Zo~ Al fanager Prepared by, R. E. N-flson, Executive Director Utilities Exhibits: 1. Ordinance il. Real Estate Contract j:\hone\Denny_D\counci l\agitem\ tc c on t ra c t. a 0 9 i C:\HPDOC S\OR D\CALLAN AN. ORD AgenAmjA AgenDate ORDINANCE NO. AN ORDINANCE OF THE CITY OF DENTON, TEXAS AUTHORIZING THE CITY MANAGER TO EXECUTE A REAL ESTATE CONTRACT BETWEEN THE CITY OF DENTON AND ROBERT W. CALLAHAN, JAMES E. CALLAHAN AND ANN C. STARK; AUTHORIZING THE EXPENDITURE OF FUNDS; AND PROVIDING AN EFFECTIVE DATE. i THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION Z That the City Manager is hereby authorized to execute a real estate contract between the City of Denton and Robert W. Callahan, James E. Callahan and Ann C. Stark for property being more particularly described in Exhibit "A" attached hereto and incorporated herein by reference. SECTION LI. That the City Manager hereby authorizes the expenditure of funds in the manner and amount as specified in the agreement. SECTION III. That this ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the day of 1996. BOB CASTLEBERRY, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: APPROVED AS TO LEGAL FORM: HERBERT L. PROUTY, CITY ATTORNEY BY: Agenda Not Dale p~ Apenid Date REAL ESTATE CONTRACT STATE OF TEXAS § COUNTY OF DENTON § THIS CONTRACT OF SALE is made by and between ROBERT W. CALLAHAN, JAMES E. CALLAHAN and ANN C. STARK (hereinafter referred to as "Seller") and CITY OF DENTON, TEXAS, a home rule municipali- ty, of Denton, Denton County, Texas, (hereinafter referred to as "Purchaser" or "City"), upon the terms and conditions set forth herein. PURCHASE AND SALE 1. Seller hereby sells and agrees to convey, and Purchaser hereby purchases and agrees to pay for, the tract of land containing approximately 151.2 acres of floodplain land and 90.6 acres of non-floodplain land situated in Denton County, Texas, in the vicinity of Denton's wastewater treatment plant, being more particularly described in Exhibit A attached hereto and incorporated herein by reference for all purposes together with all and singular the rights and appurtenances pertaining to the prop- erty, including but not limited to any right, title and interest of Seller in and to adjacent streets, alleys or rights-of-way, royalties and mineral rights (all of such real property, rights, water rights or rights to water, and appurtenances being hereinafter referred to as the "Property"), together with any improvements, fixtures, and personal property situated on and attached to the Property, for the consideration and upon and subject to the terms, provisions, and conditions hereinafter set forth. 2. Seller, for clarification purposes, agrees this contract assigns, conveys and/or transfers to Purchaser all leases or other legal rights Seller has including, without limitation, leases or legal rights to wells presently being utilized by Lone Star Gas Company on the subject property. 3. Seller, for clarification purposes, agrees this contract assigns, conveys and/or transfers to Purchaser all water, irrigation and flowage rights Seller has in the subject property and in particular any rights conveyed to Seller by the Texas Natural Resource Conservation Commission. PURCHASE PRICE 1. Amount of Purchase Price. The purchase price for the Property shall be the sum of FIVE HUNDRED SEVENTY-FIVE THOUSAND DOLLARS ($575,000). 2. Pavment of Purchase Price. The full amount of the I Agenda NoA"- AgenR Date _ Purchase Price shall be payable in cash at the closing. MISCELLANEOUS OBLIGATIONS OF THE PARTIES 1. Seller may continue to occupy such portion of the subject property for the sole purpose of moving cattle from one cati property remaining in the ownership of Seller adjacenlot toontheon ownership a Sel subject tract Seller adjaanother lcent to ocation the on subject trapropertyct. remaining The ning in method to the be utilized in the effectuation of the transfer of Seller's cattle and the portion of the subject tract to be used to acconplish the transfer of cattle must be approved by Purchaser's Director of Utilities. This right to occupy the subject property may be terminated upon twelve months written notice from the Director of Utilities or his/her designee, if the continuation of such right is detrimental, in the Purchaser's sole opinion, to the "quiet enjoyment, of the property by Purchaser. 2. Seller shall be responsible for any damage or claim based on injury or death to person and damage to property arising by reason of Seller's occupancy and use of the subject tract and Seller agrees to indemnify and hold Purchaser harmless from any claims or damages filed against Purchaser by reason of Seller's negligence. PRELIMINARY OBLIGATIONS OF THE PARTIES The obligations of Purchaser hereunder to consummate the transactions contemplated hereby are subject to the satisfaction of each of the following conditions any of which may be waived in whole or in part by Purchaser at or prior to the closing. 1• Preliminar Title Re ort. Within twenty after the date hereof, Seller, at SELLER'S SOLE COST AND (EXPENSES shall have caused the Title Company (hereinafter defined) to issue a pre- liminary title report (the "Title Report") accompanied by copies of all recorded documents relating to easements, rights-of-way, etc., affecting the Property. Purchaser shall. give Seller written notice on or before the expiration of ten (10) days after Purchaser re- ceives the Title Report that the condition of title as set forth in the title binder is or is not satisfactory, and in the event Pur- chaser states the condition is not satisfactory, Seller shall, at Seller's option, promptly undertake to eliminate or modify all unacceptable matters to the reasonable satisfaction of Purchaser. In the event Seller is unable to do so within ten (10) days after receipt of written notice, this Agreement shall thereupon be null and void for all purposes and the Escrow Deposit, if any, shall be forthwith returned by the Title Company to Purchaser; otherwise, this condition shall be deemed to be acceptable and any objection thereto shall be deemed to have been waived for all purposes. PAGE 2 Agenda No.. % Agenda It hate _4146 2. Sum, Contemporaneously with Purchaser's delivery of an executed original of this Agreement, Seller shall within twenty (20) days from the date hereof, at PURCHASER'S sole cost and expense, deliver to Purchaser a current survey of the Property, prepared by a duly licensed Texas land surveyor. acceptable to Purchaser and Seller. The survey shall be staked on the ground, and shall show the location of all improvements, highways, streets, roads, railroads, rivers, creeks, or other water courses, fences, easements, and rights-of-way on or adjacent to the Property, if any, and shall contain the surveyor's certification that there are no encroachments on the Property and shall set forth the number of total acres comprising the Property, together with a metes and bounds description thereof. Purchaser will have ten (10) days after receipt of the survey to review and approve the survey. In the event the survey is unacceptable, then Purchaser shall within the ten (10) day period, give Seller written notice of this fact. Seller shall, at Seller's option, promptly undertake to eliminate or modify the unacceptable portions of the survey to the reasonable satisfaction of Purchaser. In the event Seller is unable to do so within ten (10) days after receipt of written notice, Purchaser may terminate this Agreement, and the Agreement shall thereupon be null and void for all purposes and the Escrow Deposit, if any, shall be returned by the Title Company to Purchaser. Purchaser's failure to give Seller this written notice shall be deemed to be Purchaser's acceptance of the survey. 3. Seller's Compliance, seller shall have performed, ob- served, and complied with all of the covenants, agreements, and conditions required by this Agreement to be performed, observed, and complied with by Seller prior to or as of the closing. REPRESENTATIONS AND WARRANTIES seller hereby represents and warrants to Purchaser as follows, which representations and warranties shall be deemed made by Seller to Purchaser also as of the closing date: 1. There are no parties in possession of any portion of the Property as lessees, tenants at sufferance, or trespassers. 2. Except for the prior actions of Purchaser, there is no pending or threatened condemnation, litigation or similar proceeding or assessment affecting the Property, or any part thereof, nor to the best knowledge and belief of Seller is any such proceeding or assessment contemplated by any governmental authority or other party. PAGE 3 I I Agenda No. da It a - Agen Date-+~- f 7 3. Seller has complied with all applicable laws, ordinances, regulations, statutes, rules and restrictions relating to the Property, or any part thereof. 4. (a) There are no toxic or hazardous wastes or materials on or within the Property. Such toxic or hazardous wastes or materials include, but are not limited to, hazardous materials or wastes as same are defined by the Resource Conservation and Recovery Act (RCRA), as amended, and the Comprehensive Environmen- tal Response Compensation and Liability hct (CERCLA), as amended. (b) To the extent allowed by law, the City of Denton assumes the risk of and agrees to indemnify and hold Seller harmless, and to defend Seller against and from all claims, costs, liabilities, expenses (including without limitation court costs and attorney's fees), or demands of whatsoever nature or source for any defects or Environmental Problems, latent or obvious, discovered or undiscovered, in the real and chattel property to be conveyed hereunder, causing personal injury to or death of persons whomsoever (including without limitation employees, agents or contractors of the City of Denton, Seller or any third party), or causing property damage or destruction of whatsoever nature or contamination to the environment (including without limitation property of the City of Denton or Seller, or property in its or their care, custody, or control, and third party property), Lrising out of acts, omissions or events occurring after closing. (c) Seller assumes the risk of and agrees to indemnify and hold the City of Denton harmless, and to defend the City of Denton against and from all claims, costs, liabilities, expenses (including without limitation court costs and attorney fees), or demands of whatsoever nature or source for any defects or Environ- mental Problems, latent or obvious, discovered or undiscovered, in the real and chattel property to be conveyed hereunder, causing personal injury to or death of persons whomsoever (including without limitation employees, agents or contractors of Seller, the City of Denton or any third party), or causing property damage or destruction of whatsoever nature or contamination to the environ- ment (including without limitation property of Seller or the City of Denton, or property in its or their care, custody, or control, and third party property), arising out of acts, omissions or events occurring before Closing. (d) Seller's and Purchaser's indemnification responsibilities in g (c) above are limited to a sum not to exceed the Purchase Price under this contract. (e) Purchaser shall have 30 days from the execution of this contract by Purchaser to inspect, excavate, and/or bore test holes on the subject property to determine if environmental PAGE 4 Apenda No. Apend e Dale problems may exist on such property. If during such 30 day period, Purchaser's inspection uncovers physical features or soil samples that raise any concerns to Purchaser that an environmental problem may exist on the subject tract, Purchaser may cancel this contract on 24 hours written notice. Termination of this contract on the basis set forth herein will not result in any liability to Purchaser for any expenses Seller has expended prior to such termination. (f) "Environmental Problems" means any cause or action under the federal Comprehensive Environmental Response Compensation and Liability Act of 1980 (as amended) and any cause or action arising from similar federal, state or local legislation, regulation or other rules of law, and private causes of action of whatever nature which arise from environmental damage, toxic wastes or other similar causes. CLOSING The closing shall be held at the office of FIRST AMERICAN TITLE, 222 E. McKinney, Denton, Texas, on or before May 15, 1996, or at such title company, time, date, and place as Seller and Purchaser may mutually agree upon (which date is herein referred to as the "closing date"). CLOSING REQUIREMENTS 1. Seller's Requirements. At the closing Seller shall: A. Deliver to Purchaser a duly executed and acknowledged General Warranty Deed conveying good and marketable title in fee simple to all of the Property, free and clear of any and all liens, encumbrances, conditions, easements, assessments, and restrictions, except for the following: 1. General real estate taxes for the year of closing and subsequent years not yet due and payable; and 2. Any exceptions approved by Purchaser pursuant to Purchaser's Obligations hereof; and 3. Any exceptions approved by Purchaser in writing. H. Deliver to Purchaser at Seller's sole cost and expense a TEXAS OWNER'S TITLE POLICY at SELLER'S SOLE EXPENSE, issued by First American Title Company, 222 E. PAGE 5 h ,3Qenda No."d S AQenda Ite Date McKinney, Denton, Texas, (the "Title Company'O), or such title company as Seller and Purchaser may mutually agree upon, in Purchaser's favor in the full amount of the purchase price, insuring Purchaser's fee simple title to the Property subject only to those title exceptions listed in Closing Requirements hereof, such other exceptions as may be approved in writing by Purchaser, and the standard printed exceptions contained in the usual form of Texas Owner's Title Policy, provided, however: 1. The boundary and survey exceptions shall be deleted if required by Purchaser and if so required, the costs associated with same shall be borne by Seller; and 2. The exception as to restrictive covenants shall be endorsed "None of Record"; and 3. The exception for taxes shall be limited to the year of closing and shall be endorsed "Not Yet Due and Payable"; and 4. The exception as to liens encumbering the Property shall be endorsed "None of Record". C. Deliver to Purchaser possession of the Property on the day of closing. D. Seller shall pay any rollback taxes attributable to the property and indemnifies and holds Purchaser harmless against the payment of such rollback taxes, if any. 2. Purchaser's Requirements. Purchaser shall pay the full cash purchase price to Seller at Closing in immediately available funds. 3. Closing Costs. Through the date of Closing, Seller shall pay all taxes assessed by any tax jurisdiction through the date of Closing. Any taxes imposed, assessed or arising because of a change of use of the Property after closing shall be paid by Seller. All other costs and expenses of closing in consummating the sale and purchase of the Property not specifically allocated herein shall be equally shared by Purchaser and Seller. PAGE 6 Agenda No. Agenda Item Date REAL ESTATE COMMISSION Any real estate commissions occasioned by the consummation of this Agreement shall be the sole responsibility of Seller, and Seller agrees to indemnify and hold harmless Purchaser from any and all claims for these commissions. BREACH BY SELLER In the event Seller shall fail to fully and timely perform any of its obligations hereunder or shall fail to consummate the sale of the Property except Purchaser's default, Purchaser may either enforce specific performance of this Agreement or terminate this Agreement. BREACH BY PURCHASER In the event Purchaser should fail to consummate the purchase of the Property, the conditions to Purchaser's obligations set forth in PURCHASER'S OBLIGATIONS having been satisfied and Purchaser being in default Seller may either enforce specific performance of this Agreement, or terminate this Agreement. MISCELLANEOUS 1. Assignment of Agreement. This Agreement ray not be assigned by Purchaser without the express written consent of Seller. 2. Survival of Covenants. Any of the representations, war- re+ities, covenants, and agreements of the parties, as well as any rights and benefits of the parties, pertaining to a period of time following the closing of the transactions contemplated hereby shall survive the closing and shall not be merged therein. 3. Notice. Any notice required or permitted to be delivered hereunder shall be deemed received when sent by United States mail, postage prepaid, certified mail, return receipt requested, addres- sed to Seller or Purchaser, as the case may be, at the address set forth beneath the signature of the party. 4. Texas Law to _pnly. This Agreement shall be construed under and in accordance with the laws of the State of Texas, and all obligations of the parties created hereunder are performable in Denton County, Texas. 5. Parties Bound. This Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, executors, administrators, legal representatives, successors and assigns where permitted by this Agreement. PAGE 7 ~z qua Mo. J.~trtd~ Ii m 6. Legal Construction. In case any one or more of the pro- visicns contained in this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, said in validity, illegality, or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if the invalid, illegal, or unenforceable provision had never been contained herein. 7. Prior Agreements Superseded. This Agreement constitutes the scle and only agreement of the parties and supersedes any prior understandings or written or oral agreements between the parties respecting the within subject matter. 8. Time of Essence. Time is of the essence in this Agreement. 9. Gender. Words of any gender used in this Agreement shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, and vice versa, unless the context requires otherwise. 10. Memorandum of Contract. Upon request of either party, both parties shall promptly execute a memorandum of this Agreement suitable for filing of record. 11. Compliance. In accordance with the requirements of the Texas Real Estate License Act, Purchaser is hereby advised that it should be furnished with or obtain a policy of title insurance or Purchaser should have the abstract covering the Property examined by an attorney of Purchaser's own selection. 12. Time Limit. In the event a fully executed copy of this Agreement has not been returned to Seller within thirty (30) days after Seller executes this Agreement and delivers same to Purchaser, Seller shall have the right to terminate this Agreement upon written notice to Purchaser. DATED this day of 1996. SELLERS PURCHASER Robert W. Callahan THE CITY OF DENTON, TEXAS James E. Callahan Ann C. Stark By: Robert W. Callahan By. Rick Svhela Acting City Manager 215 E. McKinney Denton, Texas 76201 PAGE 8 Agenda No. Agenda Item Dale APPROVED AS TO LEGAL FORM: HERBERT L. PROUTY, CITY ATTORNEY BY: C~~/t~!/~ l~ STATE OF TEXAS $ COUNTY OF DENTON S This instrument was acknowledged before me on this day of _ , 1996 by Robert W. Callahan in behalf of himself and James E. Callahan and Ann C. Stark. Notary Public in and for State of Texas STATE OF TEXAS $ COUNTY OF DENTON S This instrument is acknowledged before me, on this day of , 1996 by RICK SVHELA, Acting City Manager, of the City of Denton, a municipal corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument and acknowledged to me that the same was the act of the said City of Denton, Texas, a municipal corporation, that he was duly authorized to perform the same by appropriate ordinance of the City Council of the City of Denton and that he executed the same as the act of the said City for purposes and consideration therein expressed, and in the capacity therein stated. Notary Public in and for State of 'T'exas J:\NPDOCS\K\CALLANAX.K PAGE 9 E:\WPD0C5\0P.D\FRA4K0RD Agenda Ho. - U /S Agenda Item Due ORDINANCE NO. AN ORDINANCE OF THE CITY OF DENTON, TEXAS RETAINING WAYNE PAUL FRANK TO PROVIDE PART-TIME MUNICIPAL COURT PROSECUTORIAL SERVICES ON CERTAIN DATES BETWEEN APRIL 15, 1996 AND MAY 30, 1996; AUTHORIZING THE EXPENDITURE OF FUNDS THEREFOR; AND PROVIDING AN EFFECTIVE DATE. THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION I. That Wayne Paul Frank is hereby retained to perform Municipal Court prosecutorial services in the afternoon and evenings on certain dates as assigned by the City Attorney between April 15, 1996 and May 30, 1996. SECTION II. That the hourly charge for the services to be rendered by Wayne Paul Frank as set forth in the letter of April 1, 1996 from Wayne Paul Frank at $25.00 per hour with a minimum daily fee of two hours, a copy of which is attached hereto and made a part hereof for all purposes, are hereby authorized. SECTION III. That this ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this day of 1996. BOB CASTLEBERRY, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: APPROVED AS TO LEGAL FORM: HERBERT L. PROOUTYY, CITY ATTORNEY BY : yr~'LSNt^ ~r ~'ev"ice A Wayne Paul Frank Agenda Agenda Item~~/ ! Attorney at Laa Date- 4• 1400 W. Nonhmest H")., Suite 260 + Grapevine, Teas 76051 (817) 949-2161 I April 1, 1996 Mr. Herb Prouty City Attorney 215 E. Mckinney Denton, Texas 76201 RE: Municipal Court Prosecutor Dear herb: Pursuant to our previous conversations, the City of Denton ("City") will not be able to fill the position that I previously held with the City for at least a month or two. In order to help alleviate this situation, I am willing to work as a contract attorney with the City Attorney's Office. I will be available in the evening from 5:30 to 8:30 beginning April 9, 1996, as needed. My fee for such services is $25,00 an hour, with a minimum daily fee for two hours. If you have any questions or need any, additional information, feel free to contact me. Sincerely, 63 any, r~ f a.~ Q ~it a .,9z Wayne Paul Frank V9 rA""T P" APR CITY U ,LNTOK LEGAL DEPT. E:~WFDOCE~CRL~,CHAMBER.? AP4M0. Agel4l hem Ile- ORDINANCE NO. AN ORDINANCE OF THE CITY OF DENTON AUTHORIZING THE MAYOR TO EXECUTE AMENDMENT NO. 3 TO AN AGREEMENT BETWEEN THE CITY OF DENTON, THE DENTON CHAMBER OF COMMERCE, AND THE ECONOMIC DEVELOPMENT CORPORATION OF DENTON, INC. FOR THE PURPOSE OF PROVIDING A PROGRAM TO PROMOTE ECONOMIC DEVELOPMENT; AND PROVIDING AN EFFECTIVE DATE. THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION I. That the Mayor, or in his absence, the Mayor Pro- Tem, is hereby authorized to execute Amendment No. 3 to an Agreement bet,veen the City of Denton, the Denton Chamber of Commerce, and the Economic Development Corporation of Denton, Inc., as amended, for the purpose of providing for a program to promote economic development ("Agreement"), and transferring curtain municipal funds for the purpose of economic development from the Denton Chamber of Commerce to the Economic Development Corporation of Denton, Inc., under the terms and restrictions contained in the attached agreement, a true and correct copy of which is attached hereto and incorporated by reference herein. SECTION II. That the City manager is hereby authorized to make any expenditures of funds, take action to assure the accounting of said funds, and that the transfer of said funds is made in accordance with the attached Agreement. SECTION III. That this ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the day of 1996. BOB CASTLEBERRY, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: APPROVED AS TO LEGAL FORM: HERBERT L. PROUTY, CITY ATTORNEY /GL BY: me~g ~I Agenda No. 9l~ - aL~ Agenda 11em5C.__y_L_ STATE OF TEXAS § § KNOW ALL MEN BY THESE PRESENCE COUNTY OF DENTON § AMENDMENT NO. 3 TO THE AGREEMENT BETWEEN THE CITY OF DENTON AND DENTON CHAMBER OF COMMERCE This third amendment to that certain agreement for a program to promote economic development entered into the 15th day of August, 1989 by and between the City of Denton, Texas, a Texas municipal corporation ("City"), the Denton Chamber of Commerce, a Texas non-profit corporation ("Chamber"), and the Economic Development Corporation of Denton, Inc. ("EDC") as amended, WHEREAS, on August 15, 1989, the City and the Chamber entered into an agreement for an economic development program ("Agree- ment"), a copy of which is attached hereto as Exhibit "A"; and WHEREAS, on August 2, 1994, the City and the Chamber entered into that first amendment to the Agreement, a copy of which is attached hereto as Exhibit "B"; and WHEREAS, on August 15, 1995, the City and the Chamber entered into that second amendment to the Agreement, a copy of which is attached hereto as Exhibit "C"; and WHEREAS, on April 2, 1996, the City passed a resolution authorizing the creation of the EDC, approving Articles of Incorporation and Bylaws for said EDC, consistent with the Development Corporation Act of 1979 (art. 5190.6 Vernons Ann. Tex. Civ. Stat.); and WHEREAS, the City, the Chamber. and the Board of Directors of the EDC wish to amend the Agreement to set out the relationships between the parties; NOW, THEREFORE, IN CONSIDERATION OF THE COVENANTS AND CONDITIONS HEREIN SET FORTH: ARTICLE I That the City and the Chamber hereby amend Article I "Office of Economic Development" of the Agreement, as amended, to read as follows: 1. Office of Economic Development Created. During the term of this Agreement, the EDC shall maintain an Office of Economic Development ("Office"), and shall perform all economic development functions, with the exception of cer- tain promotional and marketing functions, which (shall) (may) remain with the Chamber, as determined between a contract between the Chamber and the EDC. The EDC may contract with the City for financial, administrative, legal, and other municipal services as needed by the EDC in a contract which will executed by the parties. Agenda Na-~ Agenda item ALC. ARTICLE II Date W That the City and the Chamber hereby amend Article II "Economic Development Committee Created" of the Agreement, as amended, by adding a new paragraph to the end of Article II, which shall read as follows: Immediately upon the creation of the EDC, the EDC shall perform all those tasks and charges set forth in Article II, as amended by the second amendment to the Agreement between the City of. Denton and the Denton Chamber of Commerce, which have not already been performed by the Chamber. The EDC may contract -vith both the Chamber and the City, as well as with outside consultants or any other entity to perform all or a portion r_ said tasks and charges. ARTICLE III That the City and the Chamber hereby amend Article IV "Support Services and Finding" of the Agreement, as amended, to read as follows: IV. Support Services and Funding The EDC shall provide the office space, equipment, and support staff necessary to the operations of the office, provided, the EDC, as indicated above, may contract with the City, Chamber, or other parties to provide these services and facilities. Immediately upon the formation of the EDC, the Chamber will transfer to the EDC all funds previously approved in the City's budget for economic development, with the exception of $ , which may remain in the Chamber in a separate segregated account for the purpose of marketing and promoting economic development. Provided, however, that neither the EDC or the Chamber may utilize any of such funds for political advertising, contrary to §255.003 to promote either the proposed August , 1996 sales and use tax election for economic development, or any subsequent sales and use tax election, except to provide communications that factually describe the purpose of the measure, if the communi- cation does not advocate passage or defeat of the measure. The City may provide additional funding, as approved in the City's budget, which shall be adopted on or before the 20th of September of each year. Of the amount appropriated for each year, the City may pay the EDC one-half on October let, and the remaining half shall be paid on the following April let. Thereafter, the City may provide annual funding in the amount appropriated for that purpose by the City Council. Any funds provided by the City, pursuant to this Agreement, shall be retained in an account separate and segregated from the EDC's general operating fund, including any sales tax revenues which may be received, and shall only be used for the purposes provided for in this Agreement and in the EDC's Arti- Page 2 Ape,ida No. _ Apenda 1 Date_ arn Iles of Incorporation and Bylaws, or in any subsequent agree- ment between the ED C and the City. The EDC shall keep current and accurate retards of all funds received and expended, in accordance with article of its Bylaws, which records shall be subject to inspection by the City at all reasonable ' times. The EDC shall provide monthly status reports to the City on the progress of the economic development program, which shall include a description of expenditures made with funds appropriated by the City. Annually, during the budget process, the EDC shall submit a program budget request to the City Manager. The City shall then evaluate the progress of the EDC economic development program and, at that time, determine whether to make appropriations to support the EDC's economic development efforts the following fiscal year. Special studies, research, travel expenditures, and operation- al expenses, including City administrative expenses relating to support of the EDC, may be funded as a line item in the 1996-97 EDC budget. The Chamber will remain accountable and liable under the conditions of the Agreement, as amended, up to the time that the EDC is formally established and legally in operation, and, through the direction of the Chamber president, shall be responsible for fiscal management, disbursement of funds, and the supervision of economic development Chamber staff fulfill- ment of all program goals. At such time as the EDC is formally established and in operation, the EDC shall. be responsible and remain accountable and liable for all obliga- tions of the economic development program. ARTICLE IV That this Agreement shal'. be effective when it is excr,_ted and ratified by the EDC, through the dually authorized signature of its president of its board of directors. ARTICLE V That save and except as amended hereby, all of the terms, conditions, sections, sentences, paragraphs, and phrases of the Agreement, as amended, shall remain in full force and effect. IN WITNESS HEREOF, the City of Denton, Texas has caused this Agreement to be executed by its duly authorized Mayor, the Denton Chamber of Commerce has caused this Agreement to be executed by its duly authorized Chairman of its Board of Directors, and the Economic Development Corporation of Denton, Inc has caused this Agreement to be executed and ratified by its duly authorized President on this the day of 1996. CITY OF DENTON, TEXAS BY: 803 CASTLEBERRY, MAYOR Page 3 . AgenAem AgenATTEST: Date JENNIFER WALTERS, CITY SECRETARY BY: APPROVED AS TO LEGAL FORM: HERBERT L. PROUTY, CITY ATTORNEY BY: 2Z,, 1 CHAMBER OF COMMERCE BY: PRESIDENT ECONOMIC DEVELOPMENT CORPORATION OF DENTON, INC. BY: _ PRESIDENT e;\vPOOCS\K\CHAMZR.a Page 4 16I6L EXHIBIT "A" Agenda No._ Agenda Item Dale - THE STATE OF TEXAS S ECONOMIC DEVELOPMENT PROGRAM COUNTY OF DENTON J AGREEMENT BETWEEN THE CITY OF DENTON AND THE DENTON CHAMBER OF COMMERCE This Agreement is made between the City of Denton, Texas, ("City"), and the Denton Chamber of Commerce ("Chamber") for the purpose of providing for a program to promote economic develop- ment through the joint effort of the parties hereto, who, in consideration of their mutual promise;,, agree as follows: 1. Office of Econtomic Devel ment Created. During the term of this Agreement, oC am eros at Office of Economic Development, A Direc for aofe Economici Develop- ment (rDi ector"), shall be hired as a full-time employee of the Chambe to perform the duties of the Office, 2. Economic Develo went Committee Created, In order to promote a program or economic eve o ment that an Economic Development Committee the parties agree (ommttee" will be established, The members of the Committee ,'Cwhoishall)r present the diverse interests of the community, shall be appointed by the Chamber's Board of Directors, but shall include one member of the Council and y'two empoyees of s ub lic Util theBoard' two members of the City y, as designated by the City. The Chamber President shall have the authority to hire the Director of Economic Development with the approval of the Committee. The Chamber President shall supervise the daily activities of the Director and may terminate the Director. The Committee shall approve the appointment of the person to serve as Director of Economic Development, and act in an advisory role to the Director appointed. 3. Duties of Office. The duties of the Office of Economic Development s a inc u e the following: a) Preparation, in consultation with the Committee, of a written comprehensive Economic Development Plan ("Plan") to be approved by the Chamber's Board of Directors and City council. b) Annual review and amendment, as necessary, in consultation with the Committee, of the Plan. To become effective, any amendments to the Plan shall be approved by the Chamber's Board of Directors and the City Council, I 1P Agenda No. Agenda IfPm Dales c) Maintenance of a liaison with the Texas Industrial Commission and other public and private agencies and organizations that would promote the purpose of the Plan. d) Preparation and maintenance of a comprehensive fact book and other publications that would provide information to interested persons as to the City's population, employment base, private and public institutions and facilities, and other significant characteristics and resources of the City. e) To initiate and maintain contact with, and, make presentations to, desirable industrial prospects so as to promote their interest in locating within the area. f) To advise the City of the progress of the Plan at such times as requested by the City. To this end, the Office will provide monthly program reports to the City through the minutes of the Chamber's Board Meetings. Quarterly reports that include the sources of expenditure of funds, major pro- jects, number of industrial prospects who visited Denton and industries locating in Denton will be presented to the Denton City Council, Public Utility Board and such other groups as the parties may determine. 4. Support Services and Funding. The Chamber shall provide the office space, equipment an support staff necessary to the operations of the Office of Economic Development. The City shall, during the first year of this Agreement, provide funding in the amount of Thirty-three Thousand Four Hundred Thirty-nine Dollars ($33,439), when, and if, matching funds from other public or private sources in the amount of Sixty-six Thousand Eight Hundred Seventy-six Dollars ($669876) or more, are provided to the Office of Economic Development. Thereafter, the City shall provide annual funding in the amount appropriated for that purpose by the City Council. Any funds provided by the City pursuant to this Agreement shall be retained in an account separate from the Chamber's general operating fund and shall only be used for the purposes PAGE 2 Agenda No. Agenda Iferr, D?fie A provided for in this Agreement, The Office of Economic Deve- lopment shall keep current and accurate records of all funds received and expended, which shall be subject to inspection by the City at all reasonable times. A monthly financial statement showing all current revenues and expenditures of the Office shall be provided to the City in the Chamber's monthly Board Packet, 5. Status of Office, The Office of Economic Development created un er t rs Agreement shall be under the direct super- vision and control of the Chamber and all personnel of the Office shall be considered employees or agents of the Chamber. The Chamber shall he responsible for the payment of all benefits or liabilities of such employees or agents, including the ,rithholding or payment of personal income or social security taxes, as provided by applicable law, and the payment of worker's compensation premiums, The Chamber shall maintaii: policies of insurance in the ;ninimum amounts required by law to 1 vehicles used by employees ofr1thegOfffrom ice ands the Chamber o agrees to defend against, and indemnify and hold the City harmless from any claim arising from any negligent act of such employees, 6. Term- Termination. This Agreement shall be effective for a term o one year from the execution hereof, and shall be automatically renewable for successive period of one year with- out the necessity of any action on the part of the parties hereto, unless during any successive term, the City shall, after the initial funding provided for herein, fail to appropriate funding for any successive year, in which case this Agreement shall terminate. In any case, however, either party may terminate this Agreement by giving written notice to the other thirty (30) days advance notice, in which rase any unexpended funds provided by the City shall be~retuurned to the City. Executed this J° day of jj2eja 1986. RAY ST/ ENS, MAYOR CITY 0 DENTON, TEXAS PAGE 3 r I i Agenda Na. S' Agenda Item Date - ATTEST: ffARLOTT AL EN, IT SECRETARY CITY OF DENTON, TEXAS APPROVED AS TO LEGAL FORM: DEBRA ADAMI DRAYOVITCH, CITY ATTORNEY CITY OF DENTON, TEXAS BY: DENTON CHAMBER OF COMMERCE BY: PAGE 4 i Apmda Na EXHIBIT "B" Apend tem~~L Dale " ! S MENDKENT N0. I TO AOREEXENT BETAEEN THE CITY OF DENTON AND THE DENTON CHAMBER OF COKkERCB WHEREAS, on August 15, 1989, the City of Denton, Texas ("City") and the Denton Chamber of Commerce ("Chamber") entered into an Agreement for an economic development program ("Agreement"), a copy of which is attached hereto as Exhibit "A"; and conductiing af the Chamber has n analysis of Denton 's requested marketing purpose and the City wishes to amend the Agreement to provide for such analyses; NOW, THEREFORE: W I T N E S E T H: ARTICLE I. That the City and the Chamber hereby amend Article 3 of the Agree- ment to read as follows: 3• Ih~ties of o fine The duties of the office of Economic Development shall include the following: (a) Preparation, in consultation with the Committee, of a written comprehensive Economic Development Plan ("Plan") to be approved by the Chamber's Board of Directors and City Council. (b) Performance of an annual review and amendment, as neces- sary, in consultation with the Committee, of the Plan. (To become effective, any amendments to the Plan shall be approved by the Chamber's Board of Directors and the City Council.) (c) Maintenance of a liaison with the Texas Department of Com- merce and other public and private agencies and organiza- tions that would promote the purpose of the Plan. (d) Preparation and maintenance of a comprehensive fact book and other publications that would provide information to interested persons as to the City's population, employment base, private and public institutions and facilities, and other significant characteristics and resources of the city. (e) Initiation and maintenance of contact with, which shall include making presentations to, desirable industrial prospects so as to promote their interest in locating within the area. Agenda No Agenda Item Date "?~_(r. (f) Render advice to the City of the progress of the Plan at such times as requested by the City. To this end, the Office will provide monthly program reports to the City through the minutes of the Chamber's Board meetings. The Office will also present quarterly reports that include the sources of expenditure of funds, major projects, number of industrial prospects who visited Denton and industries locating in Denton to the Denton City Council, Public Utilities Board and such other groups as the parties may determine. (g) The conduct or commission of studies for the purpose of special analysis or research to enhance the City's market- ing capabilities, as identified and mutually agreed upon by City and Chamber. ARTICLE II. That Article 4 be amended by the addition of a new paragraph, which shall be and read as follows: With respect to the services described in Article 3 (g), the City shall reimburse the Chamber for one-half of the cost of conducting an economic analysis for the purpose of enhancing the City's marketing capabilities; provided, however, that the reimbursement shall not exceed the sum of $25,000. ARTICLE III. In all other respects, the terms and conditions of the Agree- ment, as executed by the parties on the 15th day of August, 1989 shall remain in full force and effect. EXECUTED this c~~f9hd day of Z, 1994. CITY OF DENTON, TEXAS BY: 04y BOB CASTLEBERRY, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: PAGE 2 Agenda A~en7i Item A Date y • 'i 4 APPROVED AS TO LEGAL FORM: DEBRA A. DRAYOVITCI1, CITY ATTORNEY BY: F DENTON CHAMBER OF COMMERCE BY: CHARLES N. CARP LATER, PRESIDENT E : \I~DOClU(~C IWRiER, MD PAGE 3 EXHIBIT "C" AWtDds NO. ~ ~ Apenda Item Date • AMnDMENT NO. 2 TO THE AGREEMENT BETWEEN 4 THE CITY OF DENTON AND THE DENTON CHAMBER OF CONMERCE I THE STATE OF TEXAS § COUNTY OF DENTON § r This Second Amendment to that certain agreement for a program to promote economic development entered into the 15th day of August, 1989 by and between the City of Denton, Texas, a Texas municipal corporation ("City") and the Denton Chamber of Commerce, a Texas non-profit corporation ("Chamber"), as amended. WHEREAS, on August 15, 1989, the City and the Chamber entered into an Agreement for an economic development program ("Agree- ment"), a copy of which is attached hereto as Exhibit "A"; and WHEREAS, on August 2, 1994, the City and the Chamber entered into that First Amendment to the Agreement, a copy of which is attached hereto as Exhibit "B"; and WHEREAS, the City and the Chamber will mutually cooperate to create an Economic Development Transition Committee ("EDTC") for the purpose of researching and recommending the best structure for an Economic Development Corporation ("EDC") and to develop the charge to the EDC. ARTICLE I. That the City and Chamber hereby amend Article 1 "Office of Economic Development" of the Agreement as amended, to read as follows: 1. Offi of R onomic DP,~P1~pm n rnwrwri During the term of this Agreement, the Chamber shall maintain an office of Economic Development ("Office"). ARTICLE II. That the City and chamber hereby amend Article 2 "Economic Development Committee Created" of the Agreement, as amended, to read as follows: $,COnomi~ DevAlonme~r Tra-nitinn Committee Created. In order to promo'Ce a program for economic development, the parties Agenda No Agenda Item Y e..., Date agree that an Economic Development Transition Committee ("EDTC") will be established and seated no later than October 1, 1995, unless this date is extended by mutual agreement of the parties. The members of the EDTC, who shall represent the diverse interests of the community, shall be composed of seven persons, four of whom will be appointed by the City Council and three of whom will be appointed by the Board of Directors of the Chamber. No employee of the City or the Chamber and no elected official shall be appointed to the EDTC. The members of the EDTC shall select one of their members as chair and shall adopt their own rules of procedure. The EDTC will replace the current Economic Development Advisory Board ("Board") and assume all responsibilities, duties and author- ity previously assigned to the Board. In addition, the EDTC is charged with accomplishing the following tasks: a) Develop Economic Development Corporation ("EDC") mis- sion/operating principles. b) Study other economic development charters and make choices of positive aspects of each that would lend to success of EDC. c) Tour the most successful EDC's in country and document recommendation of best structure and outline results- oriented goals. d) Determine long-range financing of economic development program and EDC operation. Assess potential success and funding opportunities under both Sections 4A as well as 4B of Article 5190.6 Vernons Tex. Civil Statutes to ensure all opportunities under the law are reviewed. If positive, develop strategy and campaign, and make recommendation to City Council to call election. e) Define roles with regard to financial responsibility and authority of economic development financial contributors (i.e., investors, City Council, Public Utility Board). f) obtain counsel for promulgation of charter for EDC. Page 2 Agenda No. 96 Agenda Item Oate1 g) Present justification for corporation charter at joint meeting of City Council and Chamber of Commerce. h) Present justification for long-range financing of EDC programs at joint meeting of City Council and Chamber of Commerce. i) Draft internal operating policies for final adoption by the EDC. j) Recommend detailed line item operations budget for first year activities related to establishment of EDC. k Hire experts/consultants for expediticus and professional implementation of short term objectives, i.e., financial analyses, team building, and economic development consultants econometric models. 1) Develop economic development program operational perfor- mance indices. m) Continually work at strengthening coalition with inves- tors of economic development program. n) Develop and provide written bi-monthly status reports reporting on the progress of the above-mentioned tasks, and on expenditures to the date of the report. Provide the Chamber, Board, and the City Council with a written report, no later than January 31, 1996, unless that date is extended by mutual written agreement of the parties. That report must have the EDTC's recommendations and findings concerning the formation of an EDC, thereby completing charges (b), (c), and (g) on page two of this agreement. o) If the EDTC concludes that the formation of the r.DC is justified and in the best interest of the entire communi- ty, it shall provide the Chamber Board and City Council with a written f'.nal report, no later than March 31, 1996, unless that date is extended by mutual written agreement of the parties, with recommendations and findings regarding the remainder of the charges. The Page 3 Agenda Na % DI TW Agenda lfern, Dale • final report will include, without limitation, recommen- dations for the proposed organizational structure, a proposed budget for the EDC, a final charter, draft of the and an analysis of the one-,-,Alf cent sales tax as a funding option, as well as an analysis of other funding options. The EDTC will also be responsible for the development of the charge to the formal EDC including, without limitation, the following: a) Conduct oral interviews with City Council members and Chamber Executive Board members for purposes of annual EDC effectiveness assessment. b) Determine appropriate physical location for EDC headquar- ters. c) Conduct recruitment and make selection of CEO. d) Hire experts/consultants for expeditious and professional implementation of short term objectives, i.e., financial analyses, econometric models, land planning, development specialists, engineering, public relations, team build- ing, and economic development consultants. e) Develop and implement five-year strategic plan. f) Set measurable first year goals and establish priorities for tasks. g) Prepare pay structure, organizational design, job descriptions, performance measures and incentives. h) Monitor performance results and conduct performance reviews of CEO. i) Develop annual operating business plan and maintain performance indices. Review quarterly and make adjust- ments. Page 4 fA~,'I(86'ttein Date ' _AG j) Continually work at strengthening coalition with inves- tors of economic development program. k) Adopt internal operating policies. 1) Publish annual performance report. m) Analyze and publish cost/benefit of efforts. n) Develop periodic comparative analyses, i.e., land purchases, infrastructure expenditures, etc. o) Establish business retention and account management activities. p) Develop and market industrial parks. q) Meet with major land owners/developers, to determine desire, interest and plans for development. r) Obtain firm market prices on parcels of land available for industrial development. s) Send requests for proposals to national brokers for development of industrial parka. t) Purchase, if appropriate, land and develop specific buildings to meet goals. U) Establish linkages with higher education institutions and implement strategies to better leverage university research and educational assets. V) Interview corporate CEO's and invite input to process and survey as to need for customized training programs. w) Establish technical training center. x) Establish brand image and develop marketing campaign. y) Establish and strengthen strong ties and relationships with Dallas and Fort Worth chambers and the North Texas Page 5 Agenda No, • & w o Agenda It m Date w ` Commission. Z) Participate actively in metroplex MIDAS group. aa) Develop first-class marketing video. bb) Conduct high profile events (i.e, golf/tennis tourna- ments, symphony/theater events) for stockholders and development contacts and periodic special events/tours for metroplex and national brokers and relocation consultants. cc) conduct at east one international marketing tour each year. ARTICLE IV. That the City and Chamber hereby amend Article 4 "Support Services and Funding" of the Agreement, as amended to read as follows: 4. Support Services and Funding. The Chamber shall provide the office apace, equipment and support staff necessary to the operations of the Office. The City shall provide funding as approved in the City's budget which shall be adopted on or before the 20th day of September of each year. Of the amount appropriated for each year, the City shall pay the Chamber one-half on October let and the remaining half shall be paid on the following April lot. Thereafter, the City shall provide annual funding in the amount appropriated for that purpose by the City Council. Any funds provided by the City pursuant to this Agreement shall be retained in an account separate from the Chamber's general operating fund, and shall only be used for the purposes provided for in this Agreement. The office shall keep current and accurate records of all funds received and expended, which shall be subject to inspection by the City at all reasonable times. The Chamber Economic Development Office shall provide monthly status reports to the City on the progress of the Page 6 Apends Agen4a Item Date Economic Development Program, which shall include a descrip- tion of expenditures of the office made with funds appropriat- ed by the City. Annually, during the budget process, the Chamber shall submit a program budget request to the City Manager. The City shall then evaluate the progress of the Chamber Economic Development Program and, at that time, determine whether to continue appropriations to support the Office the following fiscal year. Special studies, research, travel expenditures and operational expenses, including City administrative expenses relating to support of the Economic Development Transition Committee, will be funded as a line item in the 1995/96 Chamber Office of Economic Development budget. Until such time as the Economic Development Corporation is formally established and in operation, the Chamber will remain accountable and liable, through the direction of the President, for fiscal management, disbursement of funds, and supervision of Economic Development Chamber staff and fulfill- ment of the original program goals. ARTICLE V. That save and except as amended hereby, that all the terms and conditions, sections, sentences, paragraphs, and phrases of the Agreement, as amended, shall remain in full force and effect. IN WITNESS HEREOF, the City of Denton, Texas has caused this Agreement to be executed by its duly authorized mayor, and the Denton Chamber of Commerce has caused this Agreement to be executed by its duly authorized Chairman of its Board of Directors on this day of 1995. BOB CASTLEBERRY, MAYOR Page 7 I AgenAND. AgenDate ` - ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: APPROVED AS TO LEGAL FORM: HERBERT L. PROUTY, CITY AT ORNEY BY:~ - DENTON CHAMBER OF COMMERCE BY: ATTEST: BY: SECRETARY 8: \Mt'pOCS\R\OW~EA.ED] Page 8 ',WnDOCr,Frs~enc.a Agenda Na. -O15 Agenda Item Dcte RESOLUTION NO. A RESOLUTION AUTHORIZING THE CREATION OF THE ECONOMIC DEVELOPMENT CORPORATION OF DENTON, INC. AS AN INSTRUMENTALITY OF THE CITY OF DENTON; APPROVING BYLAWS AND ARTICLES OF INCORPORATION; CONTAINING OTHER PROVISIONS RELATING TO THE SUBJECT; AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, the Economic Development Transition Committee of the Denton Chamber of Commerce ("Chamber"), formed under a contract with the City of Denton and the Chamber executed on the 15th day of August, 1989 and last amended on the 15th day of August, 1995 ("Chamber Contract"), has recommended the formation of an economic development corporation under 94A of the Development Corporation Act of 1979, article 5190.6, Texas Revised Civil Statutes Annotated, as amended (the "Act"); and WHEREAS, the Economic Development Transition Committee has also recommended to the city that after the formation of the Economic Development Corporation of Denton, Inc. (the "EDC"), that the City Council call an election to approve an additional one-half cent sales and use tax within the City dedicated solely for economic development purposes under §4A of the Act; and WHEREAS, the Act authorizes cities to create industrial development corporations to act on their behalf in the promotion and financing of projects so as to eliminate unemployment and under employment.. and to promote and encourage employment and the public welfare; and WHEREAS, after the formation of the EDC, the City of Denton will call and hold an election to approve the one-half cent sales and use tax and is authorized to create a corporation under the Act that is governed by §4A of the Act; and WHEREAS, the City Council intends hereby to approve the Articles of Incorporation and Bylaws and the creation of the EDC; and WHEREAS, the City Council has determined to authorize and approve the incorporation of the EDC as its constituted authority and instrumentality to act on its behalf in accomplishing the public purposes described in the Act, in the Articles of Incorporation, and article III, §52 a of the Texas Constitution; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY RESOLVES: SECTION I. That the incorporation of the Economic Development Corporation of Denton, Inc. ("EDC") is hereby authorized and approved as an industrial development corporation under the provisions of the Act, with the same to be governed by §4A thereof. Agenda Mo_9 Agenda 11~nlc Date da~ . d O_ SECTION II. That the Articles of Incorporation of the EDC, in the form attached hereto, are hereby approved; the initial directors named therein are hereby appointed as directors of the EDC for the terms therein stated; and the incorporators are hereby ' authorized to file the same with the Secretary of State as provided by the Act. The City Manager and the City Attorney shall assist the EDC in filing these documents with the Secretary of State, in obtaining the Certificate of Jncorporation and the Corporate Charter and in doing all other things necessary to form the EDC. SECTION III. That the Bylaws of the EDC, in the form attached hereto, are hereby approved and same shall be adopted by the BoarI of Directors of the EDC prior to the commencement of its business. SECTION IV. That the EDC is hereby made and established as an integral part of the City's programs for promoting local economic development and to stipulate business and commercial activity in the City and is authorized to make loans and grants of public money and to take other action to promote local economic development in accordance with TEX. LOC. GOVT CODE 5380.001. SECTION V. That upon dissolution of the corporation, the City hereby agrees to and shall accept title to any and all real, personal, or other property owned by the EDC at such time, subject to all rights of third parties that may then exist. SECTION VI. That upon formation of the EDC, the City Manager is hereby authorized to enter into contracts w?.th the EDC to provide legal, financial, administrative and ether municipal services at a compensation to be determined by the Boa;-d of Directors of the EDC and the City Council. All such contracts shall be subject to the approval of the City Council. SECTION VII. That the City Council shall ratify and confirm the retention of bond counsel, special counsel, financial advisors, and/or consultants, which the EDC deems necessary for the development and financing of the projects of the EDC, and the payment of said firms' fees and expenses. SECTION VIII. That until the sales and use tax election passes and the EDC is fully funded the EDC and the Chamber shall continue to perform the tasks and the services to promote economic development set forth in the Chamber Contxact, as amended. SECTION IX. That the City Council has found and determined that the meeting at which this resolution is considered is open to the public and that notice thereof was given in accordance with the provisions of the Texas Open Meetings Law, TEX. GOVT CODE ch. 551, as amended. SECTION X. That this resolution shall become effective immediately upon its passage and approval. Page 2 a An:nda No ' Agend,a /i'-zm Date 3.__ PASSED AND APPROVED this the day of 1996. BOB CASTLEBERRY, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: APPROVED AS TO LEGAL FORM: HERBERT L. PROUTY, CITY ATTORNEY BY: Page 3 I y 1 Agenda No. Agend tem Date ARTICLES OF INCORPORATION ECONOMIC DEVELOPMENT CORPORATION OF DENTON, INC. A NON-PROFIT CORPORATION DENTON, TEXAS 4 Agenda Na. Agenda em Data ~ ~ ARTICLES OF INCORPORATION OF ECONOMIC DEVELOPMENT CORPORATION OF DENTON, INC. A NON-PROFIT CORPORATION DENTON, TEXAS THE STATE OF TEXAS § COUNTY OF DENTON § WE, THE UNDERSIGNED natural persons, not less than three in number, each of whom is at least 18 years of age and each of whom is a qualified elector of the City of Denton, Texas (which is a duly established City under the Texas Constitution), acting as incorporators developmentcorrporation public instrumentality under-chef Development Corporation Act of 1979, Tex. Rev. Civ. Stat. Ann. art 5190.6, with approval of the governing body of the City of Denton, Texas (the "City"), as evidenced by the resolution attached hereto and made a part hereof for all purposes, do hereby adopt the following Articles of Incorporation for the Corporation: ARTICLE I NAME The name of the Corporation is ECONOMIC DEVELOPMENT CORPORA- TION OF DENTON, INC. ARTICLE II NON-PROFIT CORPORATION The Corporation is a non-profit corporation specifically governed by section 4A of the Development Corporation Act of 1979, Tex. Rev. Civ. Stat. Ann. art. 5190.6. ARTICLE III DURATION The period of duration of the Corporation is perpetual. ARTICLE IV PURPOSE The Corporation is organized exclusively for the purposes of benefiting and accomplishing public purposes of the City of Denton, Texas, by promoting, assisting, and enhancing economic development activities for the City as provided by the Development Corporation Act of 1979, Tex. Rev. Civ. Stat. Ann. art. 5190.6, as amended. The Corporation shall have and exercise all of the rights, powers, privileges, authority, and functions given by the general laws of Texas, including, without limitation, those given to non- profit corporations by the Texas Nonprofit Corporation Act, Tex. Rev. Civ. Stat. Ann, Art. 1396-1.01 et. seq., and the additional powers as provided in Art. 5190.6, §23, including the issuance of F Agenda No. Agend~a Item bonds. If any conflict should arise between tahteseL statutes regarding the Corporation's powers, art. 51.90.6 shall control and govern the Corporation. ARTICLE V INITIAL REGISTERED OFFICE AND AGENT The street address of the initial registered office of the Corporation is 215 East McKinney Street, Denton, Texas 7620:, and the name of the initial registered agent at such address is ARTICLE VI DIRECTORS The affairs of the Corporation shall be managed by a Board of Directors. The number of Directors constituting the initial Board of Directors of the Corporation is five (5). The names and addresses of the persons who are to serve as the initial Directors and the dates of expiration of their initial terms as Directors are as follows: Directors and Addresses Term E fires The initial terms of office for the Directors shall be one (1) Director with a three (3) year term, two (2) Directors with two (2) year terms, and two (2) Directors with one (1) year terms, as designated by the Mayor and City Council. No member of the Board shall serve more than two (2) consecutive three (3) year terms. The Denton City Council shall appoint the Directors of the Corporation. The number of Directors shall be five (5). The Directors shall meet the following qualifications: (a) The Directors will be selected based on interest in the work of the Corporation, special expertise and civil service. Special expertise includes, without limitation, business skills in finance, accounting, law, personal credibility, business accomplishments and interpersonal skills. (b) The Directors must reside in the corporate city limits of the City of Denton, Texas. Page 2 ~I I r AgenXltem ApcnDate (c) No employee of the City of Denton or the Denton Chamber of Commerce and no elected official may serve as a voting member of the Board of Directors. The Denton City Council shall serve as non-voting ex-officio members of the Board and may appoint up to five (5) ex-officio non- voting members of the Board who will serve for one (1) year terms. After the initial terms of office, the five voting Directors shall serve for three (3) year terms. Any vacancy occurring shall be filled by appointment by the City Council. Each of the initial Directors shall reside within the City. Each Director, including the initial Directors, shall be eligible for reappointment. Directors are removable by the governing body of the City for cause or at will. The Directors shall serve as such without compensation except that they shall be reimbursed for their actual expenses incurred in the performance of their duties as Directors. ARTICLE VII MEMBERSHIP/STOCK The Corporation has no members and is a non-stock corporation. ARTICLE VIII AMENDMENTS 1,,ese Articles of Incorporation may at any time and from time to time be amended as provided in the Development Corporation Act of 1979 so as to make any changes therein and add any provisions thereto which might have been included in the Articles of Incorpo- ration in the first instance. Any such amendments shall be effected in either of the following manners: (i) the members of the Board of Directors of the Corporation shall file with the City Council a written application requesting approval of the amendments to the Articles of incorporation, specifying in such application the amendments proposed to be made. The City Council shall consider the application and, if it shall by appropriate resolution duly find and determine that it is advisable that the proposed amendments be made it shall approve the form of the proposed amendments and the Board of Directors of the Corporation may ac.:nd the Articles of Incorporation by adopting the amendments at a meeting of the Board of Directors and delivering articles of amendment to the Secretary of State; or (ii) The City Council may, at its sole discretion, and at any time, amend these Articles of Incorporation, and alter or change the structure, organization, programs, or activities of the Corporation, or terminate or dissolve the Corporation (subject to the provisions of the Development Corporation Act of 1979, and subject to any limitation provided by the constitutions and laws of the State of Texas and the United States of America on the impairment of contracts entered into by the Corporation) by written resolution adopting the Page 3 r I r Agenda No. Agenda Item Date ` % _ amendment to the Articles of Incorporation of the Corporation or Articles of Dissolution at a meeting of the governing body of the City and delivering Articles of Amendment or Dissolution to the Secretary of State, as provided in the Development Corporation Act of 1979 or upon election as provided in the Act. Restated Articles of incorporation may be filed with the Secretary of State as provided in the Development Corporation Act of 1979. ARTICLE IX INCORPORATORS The name and street address of each Incorporator is: ARTICLE X AUTHORIZATION The City has specifically authorized the Corporation by resolution to act on its behalf to further the public purposes stated in said resolution and these Articles of Incorporation, and the City has by said resolution approved these Articles of Incorporation. A copy of said resolution is attached to these Articles of Incorporation and made a part hereof for all purposes. ARTICLE XI DIVIDENDS No dividends shall ever be paid by the Corporation and no part of its net earning remaining after payment of its expenses shall be distributed to or inure to the benefit of its Directors or officers or any individual, firm, corporation, or association. No part of the Corporation's activities shall be carrying on otherwise attempting to influence legislaioand itashall,not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of or in opposition to any candidate for public office. ARTICLE XII DISSOLUTION If the Corporation ever should be dissolved when it has, or is entitled to, any interest in any funds or property of any kind, real, personal or mixed, such finds or property or rights thereto shall not be transferred to private ownership, but shall be transferred or delivered to the City after satisfaction or provisions for satisfaction of debts and claims. I Page 4 7 Agejd AgenDate _ ARTICLE XI II LIMITATIONS ON LIABILITY OF DIRECTORS A Director is not liable to the Corporation or members for any monetary damages for an act or omission in the Director's capacity as Director except to the extent otherwise provided by the laws of the State of Texas. ARTICLE XIV ` INDEMNIFICATION The Corporation may indemnify a person who was, is, or is threatened to be a named defendant or respondent in litigation or other proceedings because the person is or was a Director, officer, employee, member, or other person related to the Corporation as provided by the provisions in the Act governing indemnification. As provided in the Bylaws, the Board of Directors shall have the power to define the requirements and limitations for the Corpora- tion to indemnify Directors, officers, members, or others related to the Corporation. ARTICLE XV CONSTRUCTION references All in these Articles regulat regulations, or other source oflegal authority shall refer states, authorities cited, or their successors, as they may be amended from time to time. ARTICLE XVI LIMITATIONS ON EXPENDITURES AND CONTRACTUAL AUTHORITY The Corporation may spend no more than ten percent (10&) of the corporate revenues for promotional purposes and may contract with other existing private corporations to carry out industrial development programs consistent with the purposes and duties set out in the Development Corporation Act of 1979. SIGNED: INCORPORATORS E:\MADOCS\NORE\ARTICLES.INC Page 5 ~f y F L Agenda No. Agenda item Date" % A BY-LAWS ECONOMIC DEVELOPMENT CORPORATION OF DENTON, INC. A NON-PROFIT CORPORATION DENTON, TEXAS Agenda No. C Agenda I em BYLAWS OF ECONOMIC DEVELOPMENT CORPORATION OF DENTON, INC. A NON-PROFIT CORPORATION DENTON, TEXAS SECTION I OFFICES 1.01 Registered Office and Registered Agent The Corporation shall have and continuously maintain in the State of Texas a registered office, and a registered agent whose office is identical with such registered office, as required by the Texas Non-Profit Corporation Act. The Board of Directors may, from time to time, change the registered agent and/or the address of the registered office, provided that such change is appropriately reflected in these Bylaws and in the Articles of Incorporation. The registered office of the Corporation is located at 215 East McKinney, Denton, Texas 76201, and at such address is the Corporation, whose mailing address is also 215 East McKinney, Denton, Texas 76201. 1.02 Principal Office The principal office of the Corporation in the State of Texas shall be located in the City of Denton, County of Denton, and it may be, but need not be, identical with the registered office of the Corporation. The Board of Directors shall be authorized to establish additional offices in the corporate city limits of Denton, Texas. SECTION II PURPOSES 2.01 Purposes and Duties The Corporation is a non-profit corporation specifically governed by the Texas Development Corporation Act of 1979, as amended. The purpose of the Economic Development Corporation of Denton, Inc. ("Corporation") is to promote, assist, and enhance economic development in accordance with the Articles of Incorpora- tion. Without limiting the foregoing, the Corporation shall. develop and implement a competitive industrial (economic) develop- ment program for Denton which will: 1. Expand the economy in order to provide the highest levels of job opportunities and quality of life for all citi- zens; 2. Improve the City and infrastructure to attract and support development and investment; 3. Retain and expand existing businesses; 4. Diversify and broaden the tax base; Y Agenda No. Agend Item 5!7 Date ` 5. Protect the local environment and resources; and 6. With the assistance of the City of Denton ("City") and the Denton Chamber of Commerce ("Chamber"), perform all tasks, charges, and services required of the Corporation under Amendments No. 2 and 3 to the agreement between the City and the Chamber, executed, respectively, August 15, 1995 and , 1996, and amending that contract entered into between the City and the Chamber dated August 15. 1989 ("Chamber Contract"). 7. Be a part of the City of Denton's economic development programs, and may be the recipient of loans and grants of public money and accept contributions, gifts, or other resources to promote economic development and to stimu- late business and commercial activity in the City of Denton, in accordance with TEX. LOC. GOVT CODE 9380.001. SECTION III MEMBERS AND POWERS 3.01 Membership The Corporation shall have no members. 3.02 General Powers The Board shall have all powers granted to it by law, including without limitation, the following powers which shall not be deemed exclusive: 1. Develop policies and operating procedures that do not conflict with City policy. 2. Develop and implement financial/incentive programs to attract and retain business. 3. Provide funding for or to develop infrastructure. 4. Develop long-range economic development goals and programs for the City and the Corporation. 5. Acquire or lease property (land or buildings) within the city limits (or the ETJ) or, with Council approval, outside the city limits. 6. Plan, develop, improve, and sell or lease land. 7. Build or rehabilitate buildings for sale or lease. 8. Sell or lease property by installment payments or otherwise. 9. Make secured or unsecured loans or loan guarantees. Page 2 I Agenda No. Agenda tem. Date f ` W io. May borrow funds and issue bonds with City Council approval. 11. Sue or be sued in the Corporation's name. 12. Appoint standing or ad hoc committees which may include individuals who are not members of the Board. 13. Employ personnel as may be needed to conduct the business of the Corporation. 14. Contract for services necessary to conduct the business of the Corporation. 15. Market and promote the City and its amenities consistent with the purposes and duties set out in these Bylaws. 16. Undertake all cther activities necessary to carry out the purpose of the Corporation. SECTION IV BOARD OF DIRECTORS i,kL_P_oard of Direge:ors The business and affairs of the Corporation and all corporate powers shall be exercised by or under authority of the Board of Directors (the "Board"), appointed by the City Council of the City of Denton, and subject to applicable limitations imposed by the Texas Nois-Profit Corporation Act, the Texas Business Corporation Act, the Articles of incorporation, other applicable laws, or these Bylaws. The Board may, by contract, resolution, or otherwise, give general or limited or special power and authority to the officers and employees of the Corporation to transact the general business or any special business of the Corporation, and may give powers of attorney to agents of the Corporation to transact any special business requiring such authorization. The Board may plan and direct its work through a Director of Economic Development, who will be charged with the responsibility of carrying out the Corporation's program as adopted and planned by the Board. The Board may contract with the City, Chamber, or another entity for the services of a Director of Economic Develop- ment. 4.02 Number and Qualifica i n The authorized number of Directors of this Board shall be five (5). Provided, however, all members of the City Council shall be non-voting ex-officio members of the Board and the City Council may appoint up to five (5) non-voting ex-officio members who shall serve one year terms, and which could include the City Manager and the volunteer head and staff head of the Chamber, The Board may Page 3 Agenda No. J Agenda ! errt Date. ' recommend individuals for service as ex-officio members. Ex- officio members shall be given notices of all. meetings, may participate in discussions at Board meetings, but shall not be entitled to vote. The City Council shall appoint the Directors of the corpora- tion. The number of Directors shall be five (5). Each Director shall meet the following qualifications: 1. Members will be selected based on interest in the work of the Corporation, special expertise and civic service. Special expertise includes, but is not limited to busi- ness skills in finance, accounting, law, personal credi- bility, business accomplishments3, and interpersonal skills. 2. Board members must reside in the corporate city limits of Denton, Texan. 3. No employee of the City or Chamber and no elected official may serve as a voting member of the Board. The City Council shall also consider an individuals experi- ence, accomplishments, and educational background in appointing members to the Board to ensure that the interests and concerns of all segments of the community are considered. 4.03 Bonds The President, Vice President, Treasurer of the Board, and the Director of Economic Development shall each give an official bond in the sum of not less than One Hundred Thousand Dollars ($100,000.00). The bonds referred to in this section shall be considered for the faithful accounting of all monies and things of value coming into the hands of such officers. The bonds shall be procured from some regularly accredited surety company authorized to do business in the state. The premiums therefor shall be paid by the Corporation. A copy of each officer's bond shall be filed with the City Secretary. 4.04 Implied Duties The Corporation is authorized to do that which the Board deems desirable to accomplish any of the purposes or duties set out or alluded to in Section 2.01 or any other applicable sections of these Bylaws and in accordance with state law. 4.05 Tenure The initial terms of office for the Directors shall be two Di- rectors with one year terms, two Directors with two year terms, and one Director with a three year term, as designated by the City Council. No merdber of the Board shall serve more than two con- recutive three year terms. The City Council shall appoint the Di- rectors of the Corporation. The number of Direcrors shall be five. Page 4 Agenda No._ Agenda Vem After the initial term of office, the Directors shall serve for three years. Directors shall be removable at any time by the City Council by vote of four councilmembers. 4.06 Vacancies Any vacancy occurring shall be filled by appointment by the City Council. 4.07 Meetings The Board shall determine the number of regular meetings to be held witin the Denton corporate city limits by resolution, but shall have a minimum of four regular meetings a year. Special meetings may be called by the Board President, secretary, any three voting members of the Board, or by the Mayor or any three members of the City Council. All meetings of the Board shall provide notice thereof as provided and set forth in the Texas Open meetings Act, TEX. GOVT CODE 5551. Any member of the Board may request that an item be placed on the agenda by delivering the same in writing to the secretary of the Board no later than ten days prior to the date of the Board meeting. The President of the Board shall set regular meeting dates and times at the beginning of his/her term. Notice of any meeting shall be given to the public in accor- dance with the requirements of the Texas Open Meetings Act. The notice shall contain information regarding the particular time, date, and location of the meeting and the agenda to be considered. All meetings shall be conducted in accordance with the Texas Open Meetings Act. The Board shall hold an annual meeting during the last quarter of the fiscal year. This meeting may be held as a joint meeting j with the City Council. All meetings shall be conducted in accordance with Robert's Rules of Order, Newly Revised, or under specified rules adopted by the Board similar to the City Council Rules of Procedure. {City Ordinance No. 94-183, as amended.} 4.08 Attendance Regular attendance of the Board meetings is required of all members. The following number of absences may constitute the need for replacement of a member: three consecutive absences, or attendance reflecting absences constituting 50k of the meetings over a 12-month period. The Board and the City Council may grant special conoider:,tion for absences for good cause. In the event replacement is indicated, the member will be counseled by the President and, subsequently, the President shall submit in writing to the City Secretary the need to replace the Board member in question. The City Council may remove any Board member who is absent for three consecutive regular meetings or who is absent from fifty percent or more of the meetings over a twelve month period. Page 5 Agenda No. ~Q Agenda llem _ Date~~_ 4.09 Quorum For the purpose of convening a meeting, a simple majority of the appointed number of appointed voting Directors then serving on the Board shall constitute a quorum. For purposes of transacting ` the business of the Corporation at any meeting, a simple majority of the appointed voting Directors shall constitute a quorum. An affirmative vote of three members of the Board shall be necessary to take any official action. If there is an insufficient number of Directors present to convene the meeting, the presiding officer ' shall adjourn the meeting. 4.10 Compensation The duly appointed members of the Board shall serve without compensation, but shall be reimbursed for actual or commensurate cost of travel, lodging, and incidental expenses while on official business of the Board in accordance with state law. 4.1_ 1 Voti~{ci Action of the Board of Directors Directors must be present in order to vote at any meeting. Directors may not vote by proxy. Unless otherwise provided in these Bylaws or in the Articles of Incorporation or as required by law, the affirmative act of three of the Directors present at any meeting for which a quorum is present shall be the act of the Board of Directors. In the event that a Director is aware of a conflict of interest or potential conflict of interest, with regard to any particular vote, the Director shall bring the same to the attention of the Board and its Secretary at the meeting and shall abstain from the vote, unless the Board determines that no conflict of interest exists in accordance with TEX. LOC. COV'T CODE ch. 171 and §14.04 of the City Charter. The Corporation shall not escrow money from or otherwise transact business with a board member, officer, or committee member without full disclosure of all relevant facts and without approval of the Board. Any Director may bring to the attention of the Board at the meeting any apparent conflict of interest or potential conflict of interest of any other Director, in which case the Board shall determine whether a true conflict of interest exists before any vote shall be taken regarding that particular matter. The Director as to whom a question of interest has been raised shall refrain from voting with regard to the determination as to whether a true conflict exists. 4.12 Board's Relationship with City Council In accordance with state law, the City Council shall require that the Corporation be responsible to it for the proper discharge of its duties assigned in this article. All policies for program administration shall be submitted for Council approval, and the Board shall administer said programs accordingly. The Board shall determine its policies and direction within the limitations of the duties herein imposed by applicable laws, the Articles of Incorpo- ration, these Bylaws, contracts entered into with the City, and budget and fiduciary responsibilities. Page 6 Agenda No Agenda I em 4.13 Board's Relationship with Administrative Departments of the City The Board may contract with the City to provide legal, technical, administerial, financial, and other services for the Corporation upon terms, conditions, and compensation as are mutually agreeable. Any request for services made to the administrative depart- ments of the City shall be made by the Board or its designee in writing to the City Manager. The City Manager may approve such request for assistance from the Board when he finds such requested services are available within the administrative departments of the City and that the Board has agreed to reimburse the administrative department's budget for the costs of such services provided. Any requests for legal assistance shall be made by the Board or its designee to the City Attorney. The City Attorney may pro- vide such assistance when such services are available and the Board has agreed to reimburse the City for cost providing the legal services. SECTION V OFFICERS 5.01 Officers of the Corporation The elected officers of the Corporation shall be a President, Vice President, Secretary, and Treasurer. Such officers shall have the authority and perform the duties of the office as the Board may from time to time prescribe or as the Secretary or Treasurer may from time to time delegate to his or her respective Assistant. Any two or more offices may be held by the same person, except the office of President. 5.02 Selection of Officers The initial President and Vice President shall be elected by the Board and shall serve a term of one year. On the expiration of the term of office of the original President and vice President, the Board shall select from among its members individuals to hold such office. The term of office for President and Vice President shall always be for a period of one year; provided, however, that the President and Vice President continue to serve until the election of their successors. The Secretary and Treasurer shall be selected by the members of the Board and shall hold office for a period of one year; provided, however, that they shall continue to serve until the election of their successors. Elections shall be held dt the annual meeting of the Board. 5.03 Vacancies Vacancies in any office which occur by reason of death, resig- Page 7 Agenda No. 9 Agend Item C. nation, disqualification, removal, or otherwise, may Se be .i We by the Board of Directors for the unexpired portion of the term of that office, in the same manner as other officers are elected to the Board. 5.04 President i The President shall be the presiding officer of the Board with the following authority: 1. Shall preside over all meetings of the Board. 2. Shall have the right to vote on all matters coming before the Board. 3. Shall have the authority, upon notice to the members of the Board, to call a special meeting of the Board when in his judgment such meeting is required. 4. Shall have the authority to appoint standing committees to aid and assist the Board in its business undertakings or other matters incidental to the operation and func- tions of the Board. 5. Shall have the authority to appoint ad hoc committees which may address issues of a temporary nature of concern or which have a temporary affect on the business of the Board. In addition to the above mention duties, the President shall sign with the Secretary of the Board any deed, mortgage, bonds, contracts, or other instruments which the Board has approved and unless the execution of said document has be expressly delegated to some other officer or agent of the Corporation by appropriate Board resolution, by a specific provision of these Bylaws, or by statute. In general, the President shall perform all duties incident to the office, and such other duties as shall be prescribed from time to time by the Board of Directors. 5.05 Vice President In the absence of the President, or in the event of his or her inability to act, the Vice President shall perform the duties of the President. When so acting, the Vice President shall have all power of and be subject to all the same restrictions as upon the President. The Vice President shall also perform other duties as from time to time may be assigned to him or her by the President. 5.06 Secretary The Secretary shall keep, or cause to be kept, at the regi- stered office a record of the minutes of all meetings of the Board and of any committees of the Board. The Secretary shall also file a copy of said minutes with the City and the same to be given, in accordance with the provisions of these Bylaws, or as required by Page 8 Agenda No Agenda item 3A Li the Texas Open Meetings Act or the Texas Open Recordsac `or o er W applicable law. The Secretary shall be the custodian of the cor- porate records and sale of the Corporation, and shall keep a register of the mailing address and street address, if different, of each Director. 5.07 Tre3s1jrer The Treasurer shall be bonded for the faithful discharge of his/her duties with such surety or sureties and in such sum as the Board shall determine by Board resolution, but in no event shall the amount of such bond be less than an amount equal to the average of the sums which the Treasurer has access to and the ability to convert during a twelve month period of time. The Treasurer shall have charge and custody of and be responsible for all funds and securities of the Corporation. The Treasurer shall receive and give receipt for money due and payable to the Corporation from any source whatsoever, and shall deposit all such monies in the name of the Corporation in such bank, trust corporation, and/or other depositories as shall be specified in accordance with Article VII of these Bylaws. The Treasurer shall, in general, perform all the duties incident to that office, and such other duties as from time to time may be assigned to him by the President of the Board. 5.08 Director of Economic Development The Corporation may employ a Director of Economic Development. The Director of Economic Development may serve as the Chief Exec- utive Officer of the Corporation and may oversee all administrative functions of the Corporation. The Director shall develop policies and procedures for the Corporation, including financial, personnel, accounting, and purchasing policies and procedures to be approved by the Board and City Council. 5.09 Other Employees The Corporation may employ such full or part-time employees as needed to carry out the programs of the Corporation. These employ- ees shall perform those duties as are assigned to them by the Di- rector of Economic Development. The Director of Economic Develop- ment shall hire, direct, and control the work of all Corporation employees. 5.10 Contracts for Service The Corporation may, with approval of the city council, con- tract with any qualified and appropriate person, association, cor- poration, or governmental entity to perform and discharge designat- ed tasks which will aid or assist the Board in the performance of its duties. However, no such contract shall ever be approved or entered into which seeks or attempts to divest the Board of its discretion and policy-making functions in discharging the duties herein above set forth in this section. Page 9 Agenda No. Agenda item SECTICN VI Date COMMITTEES 6.01 Oualifications for Committee Membership Members of committees shall be appointed by the President, and approved by the Board. Committee members need not be members of the Economic Development Corporation of Denton, Inc., unless required by these Bylaws or Board resolution. 6.02 Special Committees This President may determine from time to time that other committees are necessary or appropriate to assist the Board, and shall designate, Subject to Board approval, the members of the respective committees. No such committee shall have independent authority to act for or in the stead of the Board with regard to the following matters: amending, altering, or repealing the BylawF; electing, appointing, or removing any member of any such committee or any Director or Of- ficer of the Corporation; amending the Articles of incorporation; adopting a plan of merger or adopting a plan of consolidation with another corporation; authorizing the sale, lease, exchange, or mortgage of all or substantially all of the property and assets of the Corporation; authorizing the voluntary dissolution of the Cor- poration or revoking the proceedings therefor; adopting a plan for the distribution of the assets of the Corporation; or amending, altering, or repealing any resolution of the Board which by its terms provides that it shall not be amended, altered, or repealed by such committee. The d:signation and appointment of any such committee and delegation to that committee of authority shall not operate to relieve the Board, or any individual Director, of any responsibil ity imposed on it or on him/her by law. 6.03 Term of Office of Committee Members Each member of a committee shall continue as such until the next annual appointment of the Board and until his or, her success or on the committee is appointed, unless the committee shall be sooner terminated or unless such member has ceased to serve on the Board of Directors, or unless such member be removed from such committee. Any committee member may be removed from committee membership by the President, with Board approval, whenever in their judgment the best interests of the Corporation would be served by such removal. 6.04 Vacancies on Committees Vacancies in the membership of any committee may be filled in the same manner as provided with regard to the original appoint- Page 10 Agenda No. # Agenda item V Date ments to that committee. SECTION VII FINANCIAL ADMINISTRATION The Corporation may contract with the City for financial and accounting services. The Corporation's financing and accounting records shall be maintained according to the following guidelines: 7.01 Fiscal Year The fiscal year of the Corporation shall begin on October 1 and end on September 30 of the following year. 7.02 Budget A budget for the forthcoming fiscal year shall be submitted to, and approved by, the Board and the City Council of the City of Denton. In submitting the budget to the City Council, the Board shall submit the budget on forms prescribed by the City Manager and in accordance with the annual budget preparation schedule as set forth by the City Manager. Along with the budget, the Board will submit a performance evaluation detailing the Corporation's achievement of its prior goals and objectives along with the next year's program of work for the City Council's review and approval on a mutually agreed date. The Corporation shall also submit quar- terly written activity reports to the City Council on a mutually agreed schedule. The budget shall be submitted to the City Manager for inclusion of it in the annual budget presentation to the City Council. The budget proposed for adoption shall inclLde the pro- jected operating expenses, and such other budgetary information as shall be useful to or appropriate for the Board and the City Council of the City of Denton. 7.03 Contracts As provided in Article V above, the President and Secretary shall execute any contracts or other instruments which the Board has approved and authorized to be executed, provided, however, that the Board may by appropriate resolution, authorize any other of- ficer or officers or any other agent or agents, including the Di- rector of Economic Development, to enter into contracts or execute and deliver any instrument in the name and on behalf of the Cor- poration. Such authority may be confined to specific instances or defined in general terms. When appropriate, the Board may grant a specific or general power of attorney to carry out some action on behalf of the Board, provided, however, that no such power of attorney may be granted unless an appropriate resolution of the Board authorizes the same to be done. 7.04 Checks and Drafts All checks, drafts, or orders for the payment of money, notes, or other evidences of indebtedness issued in the name of the Corporation shall be signed or bear the facsimile of the President Page 11 Agenda No. Agenda Item Date 41" 4 or Treasurer, or such other person as designated by the Board. 7.05 Deposits All funds of the Economic Development Corporation of Denton, Inc. shall be deposited on a regular basis to the credit of the Corporation in a local bank which shall be federally insured and shall be selected following procedures and requirements for selecting a depository as set forth in Chapter 105 of the Local Government Code. All monies of the Corporation shall be deposited and/or invested in accordance with the City's Investment Policy and the Public Funds Investment Act, subchapter A, chapter 2256, Gov- ernment Code and with article 4413(34c) Vernon's Texas Civil Stat- utes and all other applicable laws. The Board shall designate the accounts and depositories to be created and the methods of with- drawal of funds. The investment and reconciliation of corporate funds may be performed by the Finance Department of the City. 7.06 Gifts The Economic Development Corporation of Denton, Inc. may accept on behalf of the Corporation any contribution, gift, bequest, or devise for the general purpose or for any special purposes of the Corporation. 7.07 Purchasing All purchases made and contracts executed by the Corporation shall be made in accordance with the requirements of the Texas Constitution and statutes of the State of Texas. 7.08 Investments i Temporary and idle funds which are not needed for immediate obligations of the Corporation may be invested in any legal manner provided in subchapter A, chapter 2256, Government Code (Public Funds Investment Act) and consistent with Policy. the City's Investment 7.09 Bonds Any bonds issued by the Corporation shall be in accordance with the statute governing this Corporation but in any event, no bonds shall be issued without approval of the Denton City Council after review and comment by the City's bond counsel and financial advisor. 7.10 Uncommitted Funds Any uncommitted funds of the corporation at the end of the fiscal year shall be considered a part of the fund balance. The Undesignated Fund Balance may be committed for any legal purpose provided the Corporation's Board and the City Council both approve such commitment. This may include the establishment of a Page 12 r Agenda No, Agenda item Da!e 4104- permanent reserve fund which shall be accumulated for the ` of using the interest earnings of such fund to financerpthe operation of the Corporation. 7.1_1 Audit The Corporation shall pay and provide for an annual financial audit to be performed by a competent independent auditor or auditing firm at the end of each fiscal year. The audit shall be submitted to the City Council and City Manager. SECTION VIII BOOKS AND RECORDS 8.01 Books and Records The Corporation shall keep correct and complete books and records of all actions of the Corporation, including books and records of account and the minutes of the meetings of the Board and of any committee having any authority of the Board and to the City Council. All books and records of the Corporation may be inspected by Directors of the Corporation or his/her agent or attorney at any reasonable time; and any information which may be designated as public information by law shall be open to public inspection at any reasonable time. The Texas Open Records Act and Open Meetings Act shall apply to disclosure of public information. 8.02 Monthly Resorts The corporation shall provide monthly summaries of proposed dispersal of funds for anticipated projects, and funds that are dispersed over $50,000. any two m ation, the City Manager shall 9 notify request the formal who shalldnot make the dispersal unless the request for formal Council action is withdrawn. Upon request for formal Council consideration, no such payment shall be made unless a formal public vote in open City Council session is made to approve the dispersal. SECTION IX PROGRAM 9.01 Authorization The Corporation shall carry out its program subject to its Articles of Incorporation and these Bylaws, and such resolutions as the Board may from time to time authorize. 9.02 Program The program of the Economic Development Corporation of Eenton, Inc. shall be to assist, stimulate, and enhance economic develop- ment in Denton, Texas, subject to applicable state and federal law, including without limitation, TEX. LOC. GOV'T CODE 5360.001, these Page 13 Agenda No. Agenda_ Ijem Bylaws, and the Articles of Incorporation. Date f~• SECTION X PARLIAMENTARY AUTHORITY 10.01 Amendments to Bylaws These Bylaws may be amended or repealed and new Bylaws may be adopted by an affirmative vote of three of the authorized Directors serving on the Board, at a special meeting of the Directors held for such specific purpose, and the notice requirements stated hereinabove regarding special meetings shall apply. The Directors of the Corporation present at an annual meeting of the Board may, by an affirmative vote of three, in accordance with the require- ments of Article IV hereinabove, amend or repeal and institute new Bylaws, provided that at least ten days prior to the annual meeting, written notice setting forth the proposed action shall have been given to the Directors, and public notice regarding such action shall have been given according to the requirements of the Texas Open Meetings Act and Open Records Act. Notwithstanding the foregoing, no amendment shall become effective unless the City Council approves the amendment. SECTION XI DISSOLUTION 11.01 Dissolution On petition of ten percent or more of the registered voters of the City of Denton requesting an election on the dissolution of the Corporation, the City Council shall order an election on the issue. The election must be conducted according to the applicable provision of the Election Code. The ballot for the election shall be printed to provide for voting for or against the proposition: "Dissolution of the Economic Development Corporation of Denton, Inc." If a majority of voters voting on the issue approve the dissolu- tion, or if the Corporation is otherwise dissolved in accordance with the provisions of the Development Corporation Act of 1979 or any other applicable law, the Corporation shall continue operations only as necessary to pay the principal of and interest on its bonds and to meet obligations incurred before the date of the election and, to the extent practicable, shall dispose of its assets and apply the proceeds to satisfy those obligations. When the last of the obligations is satisfied, any remaining assets of the Corpora- tion shall be transferred to the City, and the Corporation is dissolved. Page 14 Agenda No~p Agenda i em SECTION XII Date_ ` INDEMNITY 12.01 Indemnity The Board shall authorize the Corporation to pay or reimburse any current or former Director or Officer of the Corporation for any costs, expenses, fines, settlements, judgments, and other amounts, actually and reasonably incurred by such person in any action, suit, or proceeding to which he or she is made a party by reason of holding such position as Officer or Director; provided, however, that such Officer or Director shall not receive such indemnification if he/she be finally adjudicated in such instance to be liable for gross negligence or intentional misconduct in office. The indemnification herein provided shall also extend to good faith expenditures incurred in anticipation of, or preparation for, threatened or proposed litigation. The Board may, in proper cases, extend the indemnification to cover the good faith settle- ment of any such action, suit, or proceeding, whether formally instituted or not. To the extent the Board authorizes indemnification to Direc- tors or Officers of the Corporation, the City of Denton shall also provide indemnity to said Directors and Officers. All officers and employees of the Corporation, including without limitation, its Board of Directors, shall be covered under Ordinance No 95-128, the city's indemnity ordinance. However, the City of Denton'j indemnifi- cation shall only apply after the Corporation's ability to indemnify has been exhausted, Nothing in this section creates personal liability on the part of Officers or Directors ro any extent not otherwise provided by statute or case law. Furthermore, the Corporation agrees to indemnify and hold harmless and defend the City of Denton, its officers, agents, and its employees from and against liability for any and all claims, liens, suits, demands, and/or actions for damages, injuries to per- sons (including death), property damage (including loss of use), and expensea, including court costs and attorneys' fees and other reasonable costs arising out of or resulting from the Corporation's activities and from any liability arising out of or resulting from the intentional acts or negligence, including all such causes of action based upon common, constitutional, or statutory law or based in whole or in part upon the negligent or intentional acts or omis- sions of the Corporation, including but not limited to its of- ficers, agents, employees, licensees, invitees, and other persons. The Corporation further agrees that it shall at all times exercise reasonable precautions on behalf of, and be solely responsible for the safety of its officers, agents, employees, licensees, invitees, and other persons, as well as their property, while in the vicinity where activities are being performed. It is expressly understood and agreed that the City of Denton shall not be liable or responsible for the negligence of the Corporation, including but not limited to its officers, agents, employees, j licensees, invitees, and other persons. Page 15 i r Agenda No. r 4 Agenda I em Dale ' It is further agreed with respect to the above indemnity, that the City of Denton and the Corporation will provide the other prompt and timely notice of any event covered which in any way, directly or indirectly, contingently or otherwise, affects or might affect the Corporation of the City of Denton, and the City of Denton shall have the right to compromise and defend the same to the extent of its own interests. It is further agreed this indemnity clause shall be an additional remedy to the City of Denton and not an exclusive remedy. 12.02 Insurance The Board may purchase insurance, including public officials and employees liability insurance and other policies of insurance it deems necessary to fully cover its indemnification responsibil- ities set forth in section 12.01 above. The City shall be a named insured on all such policies of insurance which shall contain a clause that such insurance policies shall not be cancelled or changed without thirty days prior notice to the Corporation and the City. Rather than purchasing separate policies of insurance, the Corporation's Directors, Officers, and employees may seek to be covered under the City's policy of public officials liability insurance. Copies of such insurance policies as well as bond policies will be filed with the City Secretary. SECTION XIII MISCELLANEOUS 13.01 Relation to Articles of Incorporation These Bylaws are subject to, and governed by, the Articles of Incorporation and applicable state statutes under which the Corporation is organized. E:\NPDOCS\BORE\BYLANS Page 16 Y r' .1 r 1A~,entE~ item Crt~ ' CITY OF DENTON, TEXAS MUNICIPAL BUILDING ~ DENTON, TEXAS 76201 ~ TELEPHONE (817) 568-8307 Office of the Ciry Manager MEMORANDUM TO: Mayor and Members of the City Council FROM: Rick Svehla, Acting City Manager DATE: April 4, 1996 SUBJECT: Resolution in Support of U.S. 77 Attached is a resolution of support by the Council. As you know, TxDOT will be holding a public meeting on Thursday, April 11, and it would be helpful to have a resolution in support filed at this meeting. Council is well aware that we have supported this project in concept and agreed to provide the right-of-way and some construction money since 1988. The facility will be a four lane divided facility from 1-35 south to F.M. 2164. From there the project will split and become a one-way couplet on Elm and Locust Streets as indicated on the attached map from TxDOT. We will be happy to discuss any questions the Council might have at your convenience. Rick Svehla Acting City Manager RS:bw AMM007EF Attachment "Dedicated to Quality Service" [iArppp~p~~,AVVS.0.I5 War Agenda No, op Agenda t m Date RESOLUTION NO. RESOLUTION OF THE CITY OF DENTON CITY COUNCIL SUPPORTING THE DESIGN AND DEVELOPMENT OF U.S. HIGHWAY 77 AS PROPOSED BY THE TEXAS DEPART14ENT OF TRANSPORTATION; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the City of Denton approved Minute Order 86816 on March 15, 1988, agreeing to participate in acquiring right-of-way, adjusting utilities, and construction of the highway; and, WHEREAS, construction of this highway will provide for better traffic movement in the northwest section of the City; and WHEREAS, construction of this facility will promote access and economic development opportunities for the City of Denton; THE COUNCIL OF THE CITY OF DENTON HEREBY RESOLVES: SECTION I. That the City Council of the City of Denton supports the design and development of U. S. Highway 77 as proposed by the Texas Department of Transportation. SECTION II. That this resolution shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the day of , 1996. BOB CASTLEBERRY, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: APPROVED AS TO LEGAL FORM: HERBERT L. PROUTY, CITY ATTORNEY BY: O t~ Agenda No. AC:ndi Iferi _ ~ D3t1 April 9, 1996 CITY COUNCIL AGENDA ITEM TO: MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Rick Svehla, Acting City Manager SUBJECT: RECEIVE A REPORT, HOLD A DISCUSSION AND GIVE STAFF DIRECTION REGARDING THE TMPA/DENTON POWER SALES AGREEMENT SUMMARY: On September 1, 1976, the cities of Denton, Bryan, Garland and Greenville entered into a power sales contract with the Texas Municipal Power Agency (TMPA) to furnish power and energy (Exh. 1). One of the provisions of the power sales contract is that the cities are required to purchase all of their power and energy from TMPA except that which they produce from their own plant that was in operation on September 1, 1976. (Exh I Section 3(a)(1)). TMPA has taken the position that this clause prohibits the cities from either building or purchasing additional power generation supplies on their own. To emphasis this position, TMPA in the mid 1980's, denied Denton's installation of two small hydroelectric generating stations on Ray Roberts and Lewisville Lakes until a very narrowly worded amendment was approved by the TMPA Board to permit Denton to build the hydroelectric plants. Although there may be two sections of the contract (Section 3(b) & 3(b)(i)) and Section 3(c) & 3(b)(i) in conjunction with Section 13(d)) that allow exceptions to TMPA's position, it has been the sense of the cities that an amendment is necessary to firmly settle the issue. In addition to settling the issue regarding the cities ability to build or buy power and energy elsewhere, this amendment will also firmly clarify each cities percentage "take or pay" responsibility for the power and energy from TMPA. There has been a lingering debate between the cities (particularly Greenville) over whether each cities' "take or pay" responsibility is as per the contract (Section 3(b) (i), Section 2 (g) or Section 14 (a)) or as per the negotiated percentage set by the TMPA Board in 1994. The negotiated percentage in the present allocation, which was recommended to the TMPA Board by the P & 0 Committee, was an effort to transition from an improperly applied rate methodology (one that had been substantially penalizing Denton) to a percentage allocation that followed the contract terms (Section 3(i)). However, prior to 1994, Greenville had used the rate methodology to their advantage and was able to reduce their percentage of TMPA "take or pay" power and energy to only 9% of TI•IPA's output versus ; l% as would normally apply per Section 3(i) of the contract. Since this represented approximately $2,000,000 per year in higher costs to Greenville due to ::\horte\pmn~ 6\cc unci l\agi [em\trtpapsa.a J9 I t ApeRds No, 96 AOen, a tom TMPA's above market power costs, Greenville resisted any attempt to change the "take D or pay" allocation from the negotiated temporary t I% to the appropriate contract value of 9%. Greenville used their approval of the Power Sales Contract amendment as a negotiating lever to avoid taking their 11% share of TMPA. After substantial negotiation by the City Managers, Greenville agreed to approve the amendment to the Power Sales Contract in exchange for firmly setting the "take or pay" allocation for Greenville at 10%. Denton's allocation will be 21.3% vs the previous 22%. Bryan's allocation will be 21.7% VS the previous 22% and Garland's allocation remains unchanged at 47%. We understand that the Bryan City Council will act on this amendment as it has been drafted by TMPA's bond attorney during the week of April 8. Garland and Greenville City Councils will be reviewing the document during that same week but it is not certain whether they will approve the amendment. Garland and Greenville have both forwarded changes as they desire (Exh 111). Respec submitted, Rick Svehla, Acting City Manager Prepared by, R. E. Nelson, Executive Director Utilities Exhibits: Exh I Power Sales Contract Exh 11 Amendment Exh 111 Greenville & Garland's requested changes I j:\homelpenny b\courci I\agi tem\t mpape&. a a9 O Dale a D te ` CONFORAUD COPY POWER SALES CONTRACT BETWEEN TEXAS MUNICIPAL POWER AGENCY AND CITY Or BRYAN, TEXAS CITY OF DENTON, TEXAS CITY OF GARLAND, TEXAS CITY OF GREENVILLE, TEXAS Dated: Sep;cmbcr 1, 1976 ~u~2C:fs. } i Agenda No. ` Agenda II map' Dale TABLE OF CONTENTS Section 1: Term of Contract... Section 2: Definitions. Section 3: Sale and Purchase of Power and Energy.. . Section 4: Performance of Certain Services, Section S: Delivery of Power and Energy.......... . Section 6: Annual System Budget, Section 7: Rates and Charges. . . Section 8: Meter Readings and Payment of Bills... 6 Section 9: Meter Testing and Billing Adjustment....... ' ' . . . 7 Section 10: Payments to Constitute Operating Expenses of City System.... 7 Section 11: City Rate Covenant. 7 Section 12: Covenants of the Agency. . Section 13.' Project Approval and Rights of Cities when a Project is not Approved. Section 14: Debt Service Guarantee; Operating and Maintenance Expenses. . . to Section 13: Remedies in Event of Default. Section 16: Re-creation of Agency. 12 Section 17: Payment Due Dates and Delinquency. !2 Section 18: Power Sales Contracts. 13 Section 19: Continuation of Services. 13 «tion 20: City Not to Jet] its Electric System. Section 21: Assignment of Rights of a City, 13 Section 22: Dissolution of the Agency... . . 13 Section 23: Force Majeure. 13 Section 24: Insurance. . 14 Section 25: Reports. Section 16: Records and Accounts. [4 Section 27: Access... Section 28• Governmental Rates, Regulations and Laws. 14 Section 29: Easements. 14 ' 15 Section 30: Cancellation of Prior Contract. i. IS Section 31: Notices. Section 32: Severability. 15 15 Section 33: Contracts to be Separate. Exhibit A 1 S ' 17 Schedule H . 19 N r, f Agenda No. Agenda I em POWER SALES CONTRACT Date BETWEEN TEXAS MUNICIPAL POWER AGENCY AND CTIY OF BRYAN, TEXAS CITY OF DENTON, TEXAS CRY OF GARLAND, TEXAS CITY OF GREENVILLE, TEXAS This Contract, made and entered into As of the 1st day of September, 1976, by and between tite Texas Municipal Power Agency, a municipal corporation and political subdivision of the Slate of Texas, and the City of Bryan, the City of Denton, the City of Garland, and the City of Greenville, Texas each of which cities is a municipal corporation of the State of Texas and a home rule city (herein collectively called "Cities" or individually called "City"). WtTNESSETH: WHEREAS, each City has need for an economical, reliable source of Power and Energy to meet the growing demands of its customers and has determined to purchase such Power and Energy from the Agency; and WHEREAS, the Agency proposes to construct or acquire electric generating plants and transmission lines or to acquire ownership interests therein, and to purchase or otherwise obtain Power and Energy for the purpose of supplying Power and Energy to each City and others. and WHEREAS, each City desires to purchase, and the Agency desires to sell Power and Energy on the terms and conditions herein set forth: Now. THEREFORE, in consideration of the mutual undertakings herein contained, the Agency and each City agree as follows: Section it Term of Contract. This Contract shall become effective upon the delivery to the Agency of the proceeds of the initial series of Bonds. Subject to the provisions of Sections 16 and 19 hereof, this Contract shall remain in effect for a period of thirty-five (35) years from the date hereof or until such time as all of the Debts of the Agency shall have been paid (or provision for such payment shall have been made), whichever is later. Section 2% Definitions. As used herein: (a) "Act" shall mean Chapter 166, Acts of the 63rd Legislature. Regular Session. 1973, as amended by Chapter 143, Acts of the 641h Legislature, Regular Session, 1975, and all laws amendatory thereof or supplemental thereto. t (b) "Agency" shall mean the Texas Municipal Power Agency as created and established (pursuant ! to the Act) by concurrent ordinances adopted by the governing bodies of the Cities, or its successor. i (c) "Annual System Costs" shall mean, with respect to a Contract Year, and to the extent not paid or to be paid from the proceeds of Bonds or other funds legally available to the Agency, all costs and expenses of the Agency that are paid or incurred during such Contract Year and are allocable to the System, including, but not limited to the payment of the Operating and Maintenance Expenses of , 1 Agenda No. 96 Agenda I em dk-l the System, all costa, ch Date _ " New, arga, s and expenses of replacements and renewals of the System and all taxes, System Of q or paymentsotheringovelieurnmental charges lawfully imposed on Agency or on the revenues of the Sstem or thereof, and the deposit or payment of any and all amounts which the Agency may now and hereafter become obligated to deposit into any fund or pay from revenues of the System, by law, entnaot, or any Bond Resolution. (d) "Annual System Budget" shall mean, w~lh respect to a Contract year, the budget of the Agency prepared in accordance with Section 6 hereof for such Contract amended Annual System Budget, for the remainder of such Contract Year. Year or, in the case of an (e) "Approved Project" shall mean a Project which has been approved pursuant to Section of this Contract. The term does not include Projects which may be approved after the Agency is recreated pursuant to Section 1 U 6 of this contract. (f ) "Bonds" shall mean all bonds issued by the Agency pursuant to the Bond Resolution. (9) "Bond Resolution" shall Rican the resolution authorizing the issuance of the "Texas Municipal Power Agency Revenue Bonds, Series 1976," and any resolution subsequently adopted by the Agency which authorizes the issuance of Bonds, including refunding Bonds, on a parity with the said Series 1976 Bonds, Subject to the provisions of paragraphs (e) and (f) of Section 14, in either of the events that (i) a City disapproves a Project (pursuant to Section 13 hereof) and elects Option One or till the Agency is recreated pursuant to Section 16 hereof and entities other than all of the Cities of Bryan, Denton, Garland and Greenville contract with the Agency to provide moneys for the payme the Sent es 1976 ' of an Bondatiaorndo theoAgency. s obligations shall erenot af be deemed shall not be on a to the Bond Resolution. d to have been ssueda pursua1nt (h) "Contract Year" .511311 the Agency., provided. howevertheefirst Contract )Year of the Agency ashall beg on Inle to time determined bv the effective d3 a of bthisecomes Contract and shall end on the last day of the fiscal year of she Agency within which this Contract , (1) "Debts" shall mean Bonds and Subordinated Indebtedness, as defined in the Bond Resolution, together wits interest thereon, and redemption premiums, if any, (j) "Debt Service" or "Debt Service Requirements" shall mean, with respect to an net aggregate of the amounts required to be paid during said period on any Debts outstanding as the same shall become due. Y period, the "Des ect" shall of the or modificattionslto annex ting generatingafacilityoow edninrwhole or follnopawinrt by the A en are designed to increase or maintain ng an operating efficiency of the facility of repairs, replacements, cy, developments[ work to determine whether any work should be undertaken as a Project, or engineerit legal, and financial studies in cooertion with the Planning. Y (tt) Preliminary and resources, or (iii) any purpose for which proceeds of Bonds maydhe expended undetrltheaAct~except a, Project The Agency rr„y issue Bonds (in a separate series or combined with Bonds being issued frr other p,irposes) to provide funds for a Development Project upon compliance with the provisions for the issuance of Bonds as set forth in the Bond Resolution but the a Section 13 hereof, shall not be required. pproval of the Cities, pursuant to (1) "Energy" shall mean kilowatt-hours (kwh). For L from (OthersNmi use E ergy eliveredh tot otmean a hers at the Poinret ts BY generation plus Energy received consideralon. of Delivery during the period under (n) "Operating and Maintenance Expenses" shall mean all expenses incurred in the operation and maintenance of the System and the Agency which are property accounted for such purpose under 2 i Agenda No. L2 %.00 __A14111M Agenda It M Date ~ 44 %111 it generally accepted accounting principles. Such term does not include depreciation or obsolescence charges or reserves therefor, interest charges and charges for the payment of principal, or amor&adon, of Bonds or other indebtedness of the Agency. (o) "Points of Delivery" shall mean the points on the System of, or available to the Agency, as set forth in Exhibit A, as amended from time to time by the Agency and the City concerned, at which Power and Energy are made available to a City pursuant to this Contract. (p) "Power"shall mean kilowatts (kw). (q) "Project" shall mean one or more of the following: (i) any power generating facility (or interest therein) to be constructed or acquired by the Agency as well as fuel therefor and any trans- mission facility required to connect or interconnect such generating facility with a City or others, or (ii) any addition or improvement to a power generating facility which is then owned, in whole or in part, by the Agency, or (iii) any contract right to purchase or receive a power supply or transmission capacity (a) by the making of a prepayment of capital costs which are associated with the supply or capacity so purchased, or (b) the execution of a take or pay contract having a duration of more than 10 years, including any renewals thereof, or (c) the execution of a contract to purchase Power of Energy (either or both) on an all requirements basis. The term does not include any facility financed with the proceeds of Special Contract Obligations as permitted under and defined in the Bond Resolution. (r) "Rated Capacity" shall mean the maximum load expressed in net kilowatts (kw) that a generating source (as identified in the definition of Project) is capable of supplying under good operating conditions. (s) "System" shall mean the Agency's interest in all properties (owned or operated by or oa behalf of the Agency) which are financed, in whole or in part, through the issuance of obligations by the Agency for Approved Projects. System Development and Reliability Expenditures, and Development Projects, prior to the time one of the Cities disapproves a Project under the provisions of Section 13 and elects Option One under paragraph (d) of Section 13. The term also includes any contract for providing services or Power and Energy, either or both. The initial System is hereby designated as System A. The term does not include the Agency's interest in any facility financed with the proceeds of (i) Special Contract Obligations issued by the Agency as permitted under and defined in the Bond Resolution or (ii) bonds issued to finance any Project which is not approved by all of the Cities if a City or Cities which disapprove a Project elect Option One under Section 13. (U "System Development and Reliability Expenditures" means those expenditures which the Agency determines, under prudent utility practices. should be expended over a given period of time for 0) transmission and related facilities to increase the reliability of the delivery of Power and Energy by the Agency or (ii) the exploration for. development of or the acquisition of a fuel supply or supplies in order to provide fuel for generating facilities which are not then owned or in the proc'tss of construction for and on behalf of the Agency, or (iii) repairs, replacements, or modifications to an existing generating facility (owned in whole or in part by the Agency or under construction by it) which are designed to increase the Rated Capacity of such generating facility. Such expenditures which are to be aid from the p proceeds of a series of Bonds shall be considered a single Project. (u) "Uniform System of ACCOUn(%- and all other accounting methods and terminology contained or referred to in this Section or elsewhere in this contract means accounting principles. methods and terminology followed and construed, as nearly as practicable, in conformity with the Uniform System of Accounts for Class A and Class 0 Public Utilities and Licensees and accounting rules and regulations thereunder prescribed by the Federal Power Commission for privately owned power companies which are subject to its jurisdiction and engaged in business comparable to the business of the Agency, as amended from time to time, or such other system as may be required by any regulatory agency. Section 3: Sale and Purchase of Power and Energy. (a) Each City during the time this Section is applicable shall: (1) Purchase and receive from the Agency all Power and Energy which it shall require for the operation of its electric system in excess of the amount (i) supplied by any generation and 3 I I Agenda No. 41 Agenda I em Date * - tranurnission facilities owned by it on the effective date of this Contract, including generating and transmission facilities under construction on such date, and improvements or extensions of generating facilities which increase the Rated Capacity of same so long as the increase during any period of two successive Contract Years does not exceed 10% of the same's Rated Capacity at the beginning of such perirxi, provided the Cities and the Agency may, in writing, waive such 1095 limit, and (il) supplied from any generation facility primarily fueled from and the construction ant; operation of which is incidental to the disposal of solid waste that is hereafter constructed and owned by one or more of the Cities, together with any transmission facilities that are necessary for the transmission of Power and Energy therefrom; and (2) Binds itself to pay for all Power and Energy purchased or rherwise acquired by it from the P.oency pursuant to this Section 3, said payment to be made at the rates and charges established pursuant to Section 7 of this Contract. The foregoing provisions of this Subsection (a) shall have no application to the purchase or exchange of Power or Energy (i) on an emergency, maintenance, or stand-by basis or (ii) or, the basis of econoric dispatch between the Cities and Brazos Electric Power Cooperative, Inc. (Brazos), or any one or more of such entities or (iii) under the existing pooling agreement be- tween the Cities and Brazos and future pooling agreements among the foregoing and others, all, or any combination thereof, and the Agency. (b) In the event that the Agency is not able to supply the Power and Energy required or re- quested under its power sales contracts. it shall allocate its available Power and Energy monthly among the (i) Cities pro rata in accordance with their respective Net Energy for Load during the corresponding month of the preceding Contract Year unless a governmental agency requires a different allocation and 00 other power purchasers as may be provided by contract. The Agency shall devote its best efforts to the acquisition, by purchase or otherwise, of the Power and Energy required to meet the requirements of its power sales contracts. During the period the Agency is unable to supply Power and Energy required or requested under its power sales contracts. so that an allocation of Power and Energy is made, the Cities shall be permitted (during such period) to purchase only such amounts of Power and Energy as are not supplied by the Agcncy. (e) The provisions of this Section do not apply to any City front and after the effective dace a City (i) disapproves a Project under the provisions of Section 13 and` (ii) elects Option One; nor shall the provisions of this Section apply to a City which disapproves a Project and elects Option Two. Section 4: Performance of Certain Services. (a) In addition to the delivery of Pnwer and Energy hereunder and the performance of all acts and actions incident thereto, the Agency agrees that, to the extent not performed pursuant to or as a consequence of any other Section of this Contract, it will either perform or cause to be performed, in a prudent and economical manner, the following services concerning the interrelated activities of the Agency, the Cities and others, as well as various combinations of such parties: (I) comprehensive planning for Power and Energy and the transmission thereof to mutually agreed upon load centers; (2) undertake or coordinate and monitor the design, construction and operation of joint facilities; (3) plan for and undertake or coordinate and monitor the economic dispatching of Power and Energy of the System and the %%.tems of the Cities and other entities Ito the extent permitted by contract) to which such s)stcnts are interconnected, pursuant to subsequent agreement(s) be- tween the Cities, the Agency and any other entity; (4) provide accounting and cost allocation services; and 4 Agenda No. Agenda_Item (S) such other services as the Agency and a City, from time fr/ shall determine to be approprire and necessary. o time (b) City hereby binds itself to pay for the cost of the services that are to be provided by the Agency pursuant to Subsection (a) of this Section 4, such payment to be made at the rates and charges established pursuan. to Section 7 of this Contract. Section S: DOI of Power and Energy, (a) The Power and Energy is be famished under this Contract shall be altereating current, s+xty (60) hertz, three-phase, subject to conditions of delivery and measurement as hereinafter provided. (b) The Points of Delivery, delivery voltage and other conditions of service shall be in accordance with the service specifications set fort% in Exhibit A attached to this Contract, as amended by the Agency and the concerned City from time to time, (c) The City shall make and pay for all connections between its facilities and the System owned by or available to the Agency at the Points of Delivery. The City shall install, own and maintain any necessary substation equipment at the Points of Delivery, from the System or or, available to the Agency and shall install, own and maintain switching and protective equipment of adequate design and sufficient capacity beyond such Points of Delivery to enable the City to take and use the Power and Energy supplied under this Contract without hazard to the System. In the event that the Points of Delivery set forth in Exhibit A are not on the City's electric system, the City shall arrange for transmission of Power and Energy sold under this Contract to its system, including the installation and maiotenance of any facilities required for it to receive such Power and Energy into its system. (d) Except as otherwise agreed, metering equipment shall be furnished, installed and maintained by the Agency at each Point of Delivery to the City at the low voltage side of the transforming equipment located there. Loss adjustments for low voltage side or remote metering shall be as specified in said Exhibit A or as otherwise agreed by the parties. Srcuon 6: Annual System Budget (a) The Agency shall prepare or cause to he prepared an Anm.tal System Budget at least ninety (90) days prior to the beginning of cuch Contract Year which shall itemize estimates of Annual System Costs and all revenues. income or other Funds to he applied to ouch Annual System Costs for and applicable to such Contract Year. Such Annual System Buds account forecasts, which shall be furnished b set shall also utilize and rake into twenty (120) days prior to the beginnirg of such Contract Y1ear,tof the m nsthl y at least one hundred requirements estimated to be obtained from the Agency during.such Contract yearower and Energy (b) After consideration of any comments of We Cities, the Agency, not less than thirty (30) days prior to the beginning of such Contract Year, ;hall adopt an Annual System Budget for such Contract Year and the rates and charges for Power and Energy to be furnished and the services to be performed during such Ccitraci Year and shall cause copies of such Annual System Budget and rates and charges to be delivered to the Cities. Provided, however, the Annual System Budget for the first Contract Year shall be prepared, considered. adopted and delivered in the manner which the Agency deems best. (c) If. at any time or from time to time after the adoption of the Annual System Budget III accordance with Subsection (b) of this Section fi, the Agency estimates that the Annual System Costs or revenues for the Contract Year or any part thereof for which such Annual System Budget applies will be greater or less than the Annual System Costs or revenues set forth in the Annual System Budget, or that the amount of Power an_ Energy which the Agency expects to deliver during such Contract Year or any part thereof is greater or less than the amount of Power and Energy which the S ~I Am A genDale Agency estimated at the time of adoption of the Annual System Budget would have been delivered during such Contract Year, then the Agency may prepare an amended Annual System Budget. The amended Annual System Budget shall be timely adopted by the Agency and transmitted to the Cities. (d) In the event a budget for the ensuing Contract Year has not been adopted on or before the first day of the Contract Year, the total amount budgeted for the preceding Contract Year shall be the total amount of the temporary budget for such purposes for the ensuing Contract Year. The temporary budget shall be effective only until such time as a permanent budget has been finally adopted and approved. I The chief administrative officer of the Agency shall be responsible for the allocation for expenditure i of the total amount of the temporary budget until a permanent budget is adopted and approved. Section 71 Rates and Charges: (a) The rates and charges of the Agency to the Cities for Power and Energy and for services supplied shall be: (1) non-discritninatory, and (2) fair and reasonable, and be based upon the cost of providing the Power and Energy or providing the service with respect to which the rate or charge is based, and (3) adequate (after taking into consideration other moneys received or anticipated to be received) in each Contract Year to pay or make provision for paying Annual System Costs. (b) When the Board of Directors proposes to establish a new rate or charge, as determined under Schedule B, it shad give each City written notice that it proposes to establish a new rate or charge for Power and Energ, or for services (setting forth such charge) on a date certain (which shall not be less than 120 days from the mailing of the notice to each City, all such notices to be mailed simultaneously). Except as provided in paragraph ( c ) hereof, no charge or adjustment in any rate or charge made by the Agency shall be effective if any City, by resolution or ordinance of its governing body, enters an objection to such adjustment in a rate and charge by cav.;ig to be filed with the chief administrative officer of the Agency a copy of such resolution or ordinance more than 30 days prior to the suggested effective date of the proposed new rue or charge. In the event a City enters an objection to the charge or adjustment in a rate or charge, the effective date of the charge or adjustment shall be postponed pending the resolution of the dispute in the following manner. (1) The Cities may jointly select r.n independent consultant or consultants to prepare a rate evaluation and schedule of proposed rates and charges, provided it such joint se:ection is not made within 30 calendar days of the filing of an objection (evidenced by the passage of a resolution or ordinance) such independent consultant shall be appointed by the Board of Directors of the Agency; (2) the report of the independent consultant shall be submitted to the Agency and each City for consideration; and (3) It the report of the independent consultant is approved by the governing bodies of the Agency and the Cities the same shall be effective as of the date originally suggested by the Agency in its notice. It the adjustment is not approved or an agreement reached within 15 days after the receipt of the report of the independent consultant, then the Agency and the Cities shall each have all cf the rights and remedies at law and in equity except that in no event shall any City be relieved of its obligation to the holders of Bonds under Section 13 or 14 of this Contract. 6 Agende Ny, - Agends I 3, V_ Date ' (c) The Agency shall diligently enforce and tike all reasonable steps, action and proceedings necessary for the inforcement of all terms, covenants and provisions of any power sales contracts. The Agency shad not amend this Contract without first having secured the prior written consent of all Cities, but no amendment shall be made in Section 14 or Section 16 of this Contract. (d) The Agency covenants and agrees that it will operate, maintain and manage its System or cause the same to be operated, maintained and managed Io an efficient and economical manner, con- sistent with sound utility practice and in accordance with standards normally used by utilities owning like properties, (e) The Agency covenants that it will not make a change In any Bond Resolution so as to create additional Funds (except those now established by Article V of the resolution authorizing the issuance of the Series 1976 Bonds) without the approval of such thing" by the governing body of each City, nor shall any change be made in the amounts required to be paid into, accumulated in or maintained in the Bond Fund, Reserve Fund or the Contingency Fund, except as provided in the resolution authorizing the Series 1976 Bonds, without such approval. Secdoa 13. Project Approval and Rights of Cities wbee r Project Is not Approved: (a) Except as to Bryan Lignite Number One (hereby approved as a Project) prior to the issuance and sale of Bonds to provide money for each Project, the Agency shall submit a written notice to each City as required by the provisions of paragraph (b) of this Section. If a Project has been approved pursuant to paragraph (c) of this Section, the Agency may thereafter issue, sell and deliver Bonds in order to fully provide funds for such Project, including the design, construction, and the placing of same in commercial operation, or to meet any requirement of law, in- cluding those of a regulatory agency having jurisdiction, or to pay judgments or casualty losses not covered by insurance, or to meet a safety or overriding public necessity. (b) A written notice of the Agency's intention to provide funds (through the issuance of Bonds) for a Project shall contain a general description of the Project, the projected sources and uses of funds for all aspects of the construction and testing of the Project, and a statement to the effect that, in the opinion of the Agency, the Project is necessary for the Agency to meet its commitments under power sales contracts and is economically feasible, together with an explanation of the Agency's basis for this opinion. Within 60 days after receipt of such notice, each City shall give the Agency written notice of its approval or disapproval of the Project. If a City fails to give the Agency such written notice within such 60-day period, then said City shall be deemed to have approved the Project, (c) If all of the Cities (who have approved all previously Approved Projects) approve a Project then the Agency may proceed with the issuance, sale and delivery of Bonds to provide such Project. If one or more of such Cities should disapprove the Project, then the Agency shall give each such City written notice which of the Cities approved the Project and which of the Cities disapproved the Project, Any of the Cities who approved the Project may then give the Agency written notice of its or their desire that the design and construction of the Project be commenced; and, if the Agency de- iermines that the Project is still feasible, it may proceed with the issuance, sale and delivery of such Bonds, but the City which failed to approve such Project shall be required (within 60 days of being notified by the Agency that it will prcxced with the issuance, sale and delivery of Bonds for such Project) to elect to limit its responsibilities under this Contract under Option One or Option Two as set forth in paragraph (d) of this Section. (d) If any City disapproves a Project, then within the time specified in paragraph (c), such City shall, by a resolution or ordinance adopted by its governing body, elect which of the following option shall govern its future responsibilities under this Contract. If the City disapproving a Project hereunder fails to timely communicate to the Agency as to the election of an option under the provisions of this Section, it shall be conclusively presumed that Option Two has been elected. i ,t~tnd~ tin, Apend I em Iw Date ` (1) Option One: (aj Each City shall be entitled to schedule and receive, each month for its own account, the same proportion of the available Power and Energy from the System as its Net Energy for Load relates to the local Net Energy for Load of all the Cities for the corresponding month of the completed Contract Year next preceeding the effective date of the opdon. (b) As consideration for such Power and Energy, and the right to purchase the same, each City shall, each month, pay to the Agency its proportionate share of the Annual System Costs equal to the percentage of it's Net Energy for Load of the Net Energy for Load of all Cities for the Contract Year next proceeding the effective date of the option. (c) Each City's obligation under Section 14 of this Contract shall be equal to the percentage as calculated under the preceeding sentence, (2) Option Two: (a) During the balance of the term of this Contract after the effective date of the option, the amount of Power and Energy required by the City exercising the option to be purchased under Section 3 of this Contract shall be limited. Such City shall, in each cal- endar month, take or pay for an amount of Power and Energy equal to the amount of Power and Energy purchased by such City from the Agency during the corresponding month of the 12 consecutive month's period preceding the calendar month of the effective date of the exercise of the option, or such other amount of Power and Energy as may be from time to time agreed upon by the City, the Agency and the other Cities; and the Agency shall no longer be required to provide any Power and Energy in excess of such amount, and the City shall be relieved of its obligation to purchase all of its requirements from the Agency. The Power and Energy furnished to such City shall be billed by the Agency at rates and charees as from time to time adopted pursuant to Section 7 of this Contract. The calculation of the limiting City's obligation under Section 14 of this Contract shall assume such City's Net Energy for Load for the purposes of said calculations is equal to such City's Net Energy for Load in the completed Contract Year next preceding the effective date of the option. (e) In the case of each option: ( l ) The effective date of the option shall be the first day of the Contract Year which is more than 90 days after the date a City disapproves a Project, as permitted in paragraph (c) of this Section. (2) The right to schedule Power and Energy is subject to outages for maintenance and operating emergencies. (3) The amount due from a City (which disapproves a Project) (under paragraph (d)(1) or paragraph (d)(2)] shall be due and payable irrespective of whether any Power and Energy is delivered or made available for delivery to such City. (This also applies to all Cities after the effective date of the exercise of Option One by any City.) (4) The City which excrcjvcs an option, pursuant to paragraph (d) shall not ihereaftcr be entitled to approve or disapprove any subsequent Projects. (S) Amounts due from entities other than the Cities shall be taken into account in cal- culating the amount due from the CLticl, I (f) After a City has disapproved a Project under paragraph (c) of this Section, it may thereafter revoke such action and approve the Project provided: (1) the Agency and each of the Cities approve the revocation, and 9 I r Agenda Nu, %6 _ Agenda Ham Date 9-40 (2) in order to pay a pro rata part of expenses incurred (including Debt Service) since the Project was'disapproved, the City agrees to Assume or pay such amount as may be determined by the Agency and the Cities, Sect3oa 14. Debt SYr*e Gooreatee; 0pendg# aajd Maisteaaasee Eapetaaes. (a) In any instance where the amount of money on deposit in the Bond Fund (created by the Bond Resolution) is not the full amount then required to be on deposit there;n, without giving consideration to transfers made from other than the Revenue Fund or from Bond proceeds (provided that transfers may be made from the Reserve Fund to the Bond Fund for not more than two (2) consecutive calendar Months) each City shall be obligated to make a payment the aggregate amount of which shall be the amounts that are necessary to establish or reestablish the amount then required, under the terms of the Bond Resolution, to be on deposit in the Bond Fund, the Reserve Fund. and the Contingency Fund. The percentage share of the payment to be made by each City shall ini Wly be as follows: City of Bryan, Texas; City of Denton, Texas: 22.73 ,75 City of Garland, Texas: 20.34505 rt*--- City of Greenville, Texas: 47.66175 9.27% Except as set forth in Section 13(d) such percentage share of the payment to be made by each City shall be adjusted at the beginning of each Contract Year. Such adjustment shall be made by calculating the percentage relationship that each City's Nei Energy for Load for the Contract Year immediately preceding the Contract Year in which the adjustment is being made bears to the total aggregate Net Energy for Load of ail Cities for such Contract Year, and the sum of the adjusted percentages shall equal 100%. The payments required to he made to said Bond Fund, Reserve Fund cr Contingency Fund (any one or all of such Funds) shall be paid by the Cities in the percentage shares determined above and such payments shall be made direct to the custodian of the respective Funds as established in the Bond Resolution. Each City unconditionally covenants the payment will be made, if required, in the amount and in the manner prescnbed. The provisions of this covenant are for the benefit and protection of the Agency, the Cities and the owners and holders of Bonds, it being recocnized that the Holders D( such Bonds shall be third-party beneficiaries of [his covenant, and it is understood by the conUacting parties that the purchaser of Bonds has and will agree to the purchase of Bonds conditioned upon [his carnant, (b) In any instance, except that occasioned by the failure of a City or other power purchaser to pay the amount it is required to pay for the purchase of Power and Energy, in which the funds of the Agency are insufficient to pay Operating and Maintenance expenses or other expenses (except those for which provision is made in paragraph (a) hereof) payments shall be paid to the Agency by the Cities in the percentage share determined under paragraph (a) of this Section 14. (c) A new power purchaser (with the approval of the Agency and the Cities) may assume primary liability for the obliration to make payments under this Section with respect to Debts of the Agency incurred prior to its becoming a power purchaser, but the same shall not discharge the liability of those who were obligated when such Debts were incurred (who shalt remain secondarily liable). (d) In the event Iht Agency is held to be in default under the provisions of the Bond Resolution (ty reason of the in.uequacy of payments required to be made by the Cities under the provisions of this Contracts, the Cities shall cure the default by making payments in the same proportion as provic'ed in paragraph (a) of this Section. (e) In the event a City disapproves a Project under Section 13, or if a City elects to with. draw from the Agency under Section 16, then each City shall continue to be obligated under part- graph (a) of this Section with respect to Bonds theretofore issued and Bonds thereafter issued to fully provide funds for each Project (as contemplated by the second sentence of Section 13(a)l and In 10 I , Agenda No. Agenda M Date addition, if a City elect Option One, then all of such Cities shall be obligated under paragraph (a) of this Section with respect to Bonds thereafter issued for Development Projects described in clause (i) of the definition of that term. If a City elects Option Two, then all of such Cities shall also be obligated under paragraph (a) of this Section with respect to Bonds thereafter issued for Development Projects and for Sysrem Development and Reliability Expenditures and Bonds issued for Projects thereafter approved, For and in consideration of the payments to be made by the Cities under this Contract (including those under this Section) the Agency agrees to use its best efforts to deliver Power and Energy from Projects, to such Cities, under the terms of this Contract, and such payments by the Cities shall be in consideration for the Agency's agreement to deliver such Power and Energy; but the failure of the Agency to comply with such agreement shall not relieve any City of its obligations under paragraph (a) or (d) of this Section, which obligations shall be unconditional and absolute. In the event the Agency is recreated under Section 16 so the new entity assumes primary liability for a pro-rata share of the Debts of the Agency then outstanding fas distinguished from the creation of a new system (not financed under the Bond Resolution) with respect to projects thereafter approved) then the new entity shall thereafter be included in the calculation of the percentage share of the payment to be made under paragraph (a) of this Section, for the purpose of determining such primary liability; but in no event shall the Cities of Bryan, Denton, Greenville and Garland be relieved of the obligation each has assumed (by the execution hereof) to coli,ctively pay the entire amount (based upon the percentage of Net Energy for Load) required to be }lid under paragraph (a) of this Section with respect to all Bonds theretofore or thereafter issued withor, regard to such new ;ntity. Section IS: Remedies in Event of Default, (a) (t ) If any City fails or defaults in meeting the terms, conditions and covenants of this contract (other than a default in payment for which provision is made in subsection (b) of this Section) and such default continues for a period of IS days, the Agency shall give notice (in the manner con- templated by Section 31 of this Contract) to the Cities, The defaulting City shall from the date of the mailing of such notice, have a period of 30 days to cure the default, (2) If any City fails to make any payment (hereinafter called a default in pylment) to the Agency that is required to be made under the provisions of this Contract, and such default in payment con- tinues for a period of fifteen (IS) days, the Agcncy shall give notice (in the manner contemplated by Section 31 of this Contract) to Cities. The defaulting City shall, from the date of the mailing of such notice, have a period of thirty (30) days to pay the full amount then due to the Agency, together with interest thereon, as hereinafter provided. (3) If the City does not cure its default within such period of thirty (30) days, then, so Ion as sue ' ~~r• ~Ir a d to ~a' to aav otil4r rights which the Agency has under this Contract and at law and in equity, the Agency may terminate all service--to, such Cty. Additionally, in the event of default in payment, the Agency m`ay-c aiie to an co ect rom such City each calendar month the amount which the Agency determines to be i,ae Iifference between what the Agency would have received from such City under this Contract. for Power and Energy and services furnished and delivered to such City. had such City not been in default, and the amount, if any, which the Agency receives from sales of such Power and Energy and services to the other Cities. or others, either or both. Termination of service hereunder shall not reduce or change the obligation of the defaulting City under the other provisions of this Contract. (b) If the Agency fails or defaults in meeting the terms, conditions and covenants of this Contract, except its covenant to use reasonabit diligence to provide a constant and uninterrupted supply of Power and Energy contained in Section 12(b), and such default continues for a period of IS days after a City has given the Agcncy notic: of such default in the manner contemplated in Section 31 of this Contract, then such City shall have all of the rights and remedies provided at law and in equity, except that in no event shall any of the Cities be relieved of its obligation speciFed in Section 14. The delivery of available Power and Energy as provided in this Contract shall be a ministerial duly of the Agency. 11 Agenda No... Agenda tern Date S"dora 16: Raeresdose oft Agency. Each City and the Agency recognize that pursuant to the Act the concurrent ordinances by which the Cities created the Agency reserved the right to the governing body of each of the Cities to join with the other Cities to provide for the re-creation of the Agency by the addition and deletion, either or both, of a public entity, as defined in said Act, so long as there is no impairment of obligation of any existing obligations of the Agency. Each City covenants and agrees that it will not join with any of the other entities to recreate the Agency so as to delete one or more entities unless (1) the then outstanding Debts of the Agency have been paid or provision mode for their payment under Article XI of the Bond Resolution or (2) the Holders or at least 60% of the principal amount of the Bonds then outstanding approve the concurrent ordinance proposed for adoption by the Cities, of (3) the withdrawing entity contracts and agrees to continue to pay a fixed percentage (as determined by the Board) of the Annual System Costs (including the Debt Service Requirements on the then outstanding Debts of the Agency) during the time such Debts remain outstanding. Such percentage shall be fixed by calculating the percentage relationship of the withdrawing entity's Net Energy for Load (during the Contract Year in which such percentage was the highest) bears to the total aggregate Net Energy for Load of all Cities (during such Contract Year). The obligation contained in Section 14, as to the entity seeking to withdraw, shalt r~mrin unaffected until the Bonds permitted to be issued by Section 14(c) have been paid and retired. So withd;awat shall be effective until such indebtedness has been paid; and at such time this Contract, ar to i~ch withdrawing entity, shall terminate. From and after notice is given to the Acer cy of the intent of an entity to withdraw from the Agency, nc additional Bonds of the Agency shaft be issued for a new Project which involves any additional payments by or guarantee of the Debt Service Requirements by such withdrawing entity. Each City covenants and agrees that it will not join with any of the other entities to recreate the Agency so as to add one or more entities unless (I l the then outstanding Debts of the Agency have been paid or provision made for their payment under Article XI of the Bond Resolution or (2) the Holders of at feast 600/cof the principal amount of the Debts of the Agency then outstanding approve the concurrent ordinance proposed for adoption by the Cities, or (3) entity being added expressly either (as approved by the Agency and set forth in the concurrent ordinances) (1) assumes the primary liability for the payment of for a pro-rata share of the Debts of the Agency (which shall not discharge the liability of those obligated when such Debts were or are incurred, who remain secondiarily liable) as well as the obligation provided in Section 14(c) and assume thereafter to pay its share of the remainder of the Annual System Costs, or (ill agrees it will be obligated only with respect to the payment of annual system costs for projects which are approved after the re-creation of the Agency. Section 17r Pavmenl Due Dales and Delinquency. (a) In the event that a City fails to make any payment at the time herein specified, interest on such delinquent amount shall accrue at the rate of ten percent (10Sr ) per annum from the date such payment becomes due until paid in full, and the Agency may institute a proceeding for a mandatory injunction requiring the payment of the amount due and interest thereon, such action to be instituted in a court of competent jurisdiction. (b) All payments required to be made by the Cities under the terms of this Contract shall be due and payable within tairty (30) days following the date the Agency renders the bill, and the Cities shall have no right of setoff, recoupment or counterclaim against any payment under Section 14(a) or that part of the Annual System Costs which are attributable to payments to be made into the Bond F+rnd, the Reserve Fund or the Contingency Fund by any Bond Resolution or similar Funds established for the payment and security of Subordinated Indebtedness (as defined in the Bond Resolution), which ate unconditional, (c) Should a dispute as between any City and the Agency arise as to whether the Agency is in compliance with its covenants as contained herein, each City shall nevertheless be obligated 12 Agenda No Agenda Item Date.! ` (1) to make the payments provided by paragraph (a) or Section 14 hereof and (2) to pay such amount of the Annual System Costs as may not be in dispute pending the resolution of such dispute, provided a City may elect to pay all such Annual System Costs, including any disputed amount. in the event a disputed amount of Annual System Costs is paid by a City the same shall be placed in escrow in an interest bearing account by the Agency pending resolution of the dispute, but only the principal amount thereof shall be returned to the City. If the City elects not to pay the amount in dispute and the dispute is resolved against such City, the amount ultimately found to be due plus interest at 1091o per annum (calculated from the date the same was originally due) shall be paid by the City within 15 days of the resolution of the controversy. Attorneys' fed shall be assessed as court costs, Section 18. Power Sales Contracts. The Agency may provide Power and Energy and services pursuant to a power sales contract, upon such terms as may be approved by the governing body of the Agency and, except as provided by Section 12(a), the Cities. Section 19: Continaadon of Services. A City, unless it elects an option under Section 13 or withdraws under Section 16, shall have the right to the continued performance of services pro- vided under the provisions of this Contract for the useful life of the System by giving written notice to the Agency at least 5 years prior to the scheduled termination of this Contract (as speci- fied in Section 1) provided that if such termination is occasioned by making provision for the payment of the Debts of the Agency, the notice may be given within 90 days of such provision being made. Such City shall be obligated to continue paying its proportionate share of the Annual System Costs. Section 20: City Not to Sell its Electric S)slem. Each City covenants that during the term of this Contract (or the extensions thereof) it will not sell or otherwise dispose of its electric utility distribution system in whole or substantially as a whole to any entity other than an assignee under Section 21 of this Contract and, in the case of such an assignee, only with the written consent of the Agency and all Cities. Section 21: Assignment of Rights of a City. A City may assign any of its rights +joder this Contract to another entity, if permitted by applicable law, but no sale or other disposition shall reliese such City of its obligations under this Contract (including the obligations under Secti )ns 10, 11 and 141 so long as any Bonds are outstanding. Section 22: Dissolution of the Agency. At such time as the Debts of the Agency have been paid or provisions made therefor pursuant to Article XT of the Bond Resolution, and the Agency is dissolved.. each City who has not made an election under Section 13 or withdrawn under Section 16 shall ce entitled to an undivided interest in the properties of the Agency in proportion to the amount paid to the Agency under this Contract, Section 23: Force Malcnre. (a) If for any reason of "force majeure" any of the parties hereto shall be rendered unable, wholly or in part, to carrry out iu. obligations under this Contract, other than the obligation of the Cities to make the payments required under the terms of this Contract, then if such party shall give notice and the full particulars of such reasons in writing to the other party within a reasonable time after the occurrence of the event or cause relicd en; the obligation of the party giving such notice, so far as it is affected by such "force majcurc," shall be suspended during the continuance of the inability then claimed, but for no longer period, and such party shall endeavor to remnve or overcome such inability with all reasonable dispatch. The term "force majeure" as employed herein shall mean acts of God, strikes, lockouts, or other industrial disturbances, acts of the public enemy, orders or actions of any kind of the Government of the United States or of the State of Texas or any civil or military authority, insurrections, riots. epidemics, landslides, lightning, earthquakes, fires, hurricanes. storms. Moods, washouts, droughts, arrests, restraints of government and people, civil disturbances, explosions, breakage or accident to dams, machinery, pipelines, or canals or other structures or machinery, on account of any other cause not reasonably within ttie control of the party claiming such inability. It is understood and agreed that the settlement of strikes and lockouts shall be entirely within the discretion of the party having the difficulty, and that the above requirement that any "force majeure" shall be l3 i Apentf ! am r remedied with all reasonable dispatch shall not require th Date eced to the demand of the o the settlement of strikes and lockouts by judgment of the party having the difhcultyRg parties when such settlement is unfavorable to it in the (b) No damage shall be rv.overable from the Agency or the Cities by reason of the causes above mentioned. Section 24: fnsursoce. (a) The Agency shall maintain, or cause to be maintained in force for the benefit of the Agency, such insurance with respect to the System as shall be reasonably available and as is usually carried by municipal electric utilities constructing and operating generating and transmission facilities but, in the case of nuclear generating facilities, not less than will satisfy the requirements of federal Lnd state law and the Nuclear Regulatory Commission regulations and such other insurance as is usually carried by municipal electric utilities owning like properties. Provided, however, in any event, the Agency shall maintain, or cause to be maintained, in force, insurance in such amounts and against such risks as required by the Bond Resolution. (b) The Agency will secure and maintain adequate fidelity insurance or bonds on all officers and employees handling or responsible for funds of the Agency. (c) The obligation hereunder to procure and maintain insurance with respect to a Joint Project, as defined in the Bond Resolution, shall be met if the entity acting as the manager of the Joint Project obtains and maintains the insurance required for the benefit of all owners of the Joint Project, as their interest may appear. (d) The Agency may establish and create a special fund for the purpose of providing a self insurance fund. Amounts to be deposited in or credited to such fund in any Contract Year shall be accounted for as Operating Maintenance Expenses. To the extent that monies are deposited in such fund, if created, such monies may he infested in Investment Securities, as defined in the Bond Resolu- tion. To the extent of the amounts held in such fund, the face amount of appropriate insurance policies may be reduced. Section 25: Reports, The Agency will prepare and issue to each City the follow'g each fiscal year: (i) financial and to re perating statement relating to the System: (ii) status ofreports f construction for each facility constituting the System during construction; and (iii) analysis of operations relating to the System. Section 16: Records and kccounts. The Agency will keep accurate records and accounts of the System and of the transactions relating to each facility constituting the System as well al of the operations of the Agency in accordance with the Uniforrn System of Accounts, which shall include depreciation. Within one hundred twenty ( 220) days after close of each Contract Year, the Agency shall cause such records and accounts and atf transactions of the Agency relating to the System with respect to such Contract Year to be subject to an annual audit by an independent certified public accountant. A copy of each such annual audit shall be sent by dta Agency to each City. Section 27: Access, Each City shall at all times have reasonable access to examine any and all books and records of the Agency and to examine any facility of the System. The Agency and each City will give the other the right to enter the premises of the other at all reasonable times for the purpose of repairing or removing facilities, reading meters and performing work incidental to delivery and receipt of Power and Energy furnished hereunder. Section 28: Governmental Rates, Regolatlons and Lawx, sh be to all valid rules, regulations and laws applicable thereto, as promulgateThe d by~heaUnited115 atesuofeAmerri a, the Slate of Texas, or any other governmental body or agency having lawful jurisdiction or any authorized representative or agency of any of them. 14 I • AgenJem Agen Date Section 29: Easements: Each City agrees that the Agency or its agent shall (when permitted by existing easement) have full access to such easements or over any easements, right-of-way or property held by such City if, and to the extent, required by the Agency for any and all purposes required for the System or any Project thereof. Section 30: Cancellation of Prior Contract. In connection with the issuance of $10,625,000 TEXAS MUNICIPAL POWER AGENCY REVENUE BONDS, SERIES 1975, the Cities and the Agency have heretofore entered into a contract which is incorporated in an instrument entitled, "Contract for Develop- ment of Fuel Resources, Fianning Electric Generation Facilities and Performing Certain Duties," which contract was dated September 15, 1975, that such contract provided certain payments would be made by each City to the Agency for the payment of debt service on the aforesaid Series 1973 bonds and maintenance and operating expenses of the Agency. The parties agree that upon the effective date of this Contract and the cancellation of said bonds, the prior contract shall be cancelled in its entirety and no payments shall continue to be made thereunder for any purpose and this Contract shall supercede such prior contract in every respect. Section 31t Notices. Any notice, request, demand, statement or bill provided for in this Con- tract shall be in writing and shill be considered to have been duly delivered when sent by registered or certified mail, addressed as follows, unless another address has been designated, in writing, by the party entitled to receive same: Agency: Texas Municipal Power Agency City of Bryan 7t11 Bosque Boulevard P. O. Box 1000 Waco, Texas 76710 Bryan, Texas 77801 Attention: Executive Director Attention: City Manager City of Greenville P. O. Box 1049 Greenville, Texas Attention: City Mtnager City of Denton ` Civic Building f Denton. Texas 76201 Attenton: City Manager City cf Garland P. O. Box 401889 Garlatd, Texas 75040 Attention: City Manager $"don 32: Sevembility. The parties hereto agree that if any of the provisions of this Contract should contravene or be held invalid under the laws of the State of Texas, such contravention or invalidity shall not invalidate the whole Contract but it shall be construed as though not containing that particular provision, and the rights and obligations of the parties shall be construed and in force accordingly. Section 33: Contracts to be Separate. This instrument embodies four separate contracts between Eha Agency and each City. Terniination of one Contract shall not affect the others. 15 i Agenda No, Agenda l em ` Date • ~ ~ IN WITNESS WHEREOP, the ponies hereto have caused this Contract to poste names and their corporate seals aJlxed, all by the proper tract as of the day and year tint hereinabove written. dulbee executed in their cor. thereunto, TEXAS MUNICIPAL POWER AGENCY BY /s/. C.. E. DucxWOATH . (SEAL) . ATTEST: BY /s/ JIM WHITE Secretary City of Bryan, Texas (SEAL) ATTEST: BY:...... /s/ LLOYD JOYCE Mayor BY' /S/ JOE E. EVANS City Secretary " " City of Denton, Texas (SEAL) ATTEST: By•......... /S/ RINOR HUGHES Mayor By:...... ,,.!s/ BROOKS HOLT City Secretary City of Garland, Texas (SEAL) ATTEST: BY:. /S/ CHARLES G. CLACK Mayor BY:......... /s/.ALETA WATSON . City Secretary City of Greenville (SEAL) ATTEST: BY: JOHN T. GRIFFIN 'wa)'or By: /.s/.IRENE WILSON City clerk . 26 i Apends Mo. Aflenda !em WiIL- EXWsrr A Date POINT'S OF DELIVERY Bryan: L Bryan Plant: Facilities included are as follows: (a) 138 KV lines (b) 200 MVA, 138169 KV autotransformer (c) associated breakers, bus work, switches, etc. 2. Nall Substation: Facilities included are: (a) 138 KV lines (b) 200 MVA 138/69 autotransformer (c) 450 MVA, 3431138 KV autotransformer (d) 343 KV lines (e) associated breakers, bus work, switches, etc, 3. South East Bryan Substation: Facilities included are as follows: (a) 138 KV lines (b) 200 MVA, 138/69 KV autotransformer (c) associated breakers, bus work, switches, etc. Denton: 1, Denton Plant: Facilities included are as fellows: (a) 138 KV lines (b) associated breakers, bus work, switches, etc. 2. North Denton Substation: Facilities included are as follows: (at 138 KV lines (b) 450 MVA, 345/138 KV autotransformer (c) associated breakers, bus work, switches, etc. Carlaod: 1. Apollo Substation: Facilities included are as follows: (a) 138 KV interconnection with TP&L (b) associated breakers, bus work, switches, etc. +}t 2. Oates Substation: Facilities Included are as follows: ;t (a) 138 KV interconnections with TP&L (b) 450 MVA ?45/138 KV autotransformer (c) 345 KV lines (d) associated breakers, bus works, switches, etc. 17 s i .00 A AgenAem Ago3. Ben Davis Substation Qate Facilities included are as follows: (a) 430 MVA, 343/138 KV autotransformer (b) 345 KV lines (c) associated breakers, bus work, switches, etc. 4. McCrce Substation Facilities included are as follows: (a) 450 MVA, 343/138 KV autotransformer (b) 345 KV fines (c) associated breakers, bus work, switches, etc. Greenville: I. Steam Plant Facilities included are as follows: (a) 138 KV line (b) 75 MVA, 138/69 KV autotransformer (c) associated breakers, bus work, switches, etc. 2. Diesel Plant Facilities Included are as follows: (a) 138 KV line (b) 75 MVA, 138/69 KV autotransformer (c) associated breakers, bus work, switches, etc. 1a A~6nJa No, A9end I em SCFMDULE B Date RATES AND CIfARGES (1) RATES FOR POWER AND ENERGY The rates to be charged by the Agency for Power and Energy furnished to the Cities shall consist of a demand charge and energy charge. These charges shall be baud on cost of service to the degree that is practical. The costs used in developing cost of service rates shall be based on accounting entries as outlined in the Federal Power Commission's Uniform System of Accounts. The rates for demand charges shall be established to recover costs that are related to Debt Service, (including coverage ratios), other ordincrily predictable stable Operating auto Maintenance Expenses and such other {easoaable fixed costs as these costs relate to plant and transmission capactitlay utilized. The demand charges shall be based on the above listed costs In proportion to total KW that the Agency has available. Proper consideration shall be given in the demand charges for such factor or coincident peak demands, diversity factors, load factors, etc, of the Cities. Energy charges shall be based on fuel costs, operating personnel costs, variable Operating and Maintenance Expenses, postage stamp type transmission losses, station service energy, and other such reasonable variable costs as these costs relate to energy provided to Cities. The rate making methods used to develop these demand and energy charges shall be consistent with standard utility wholesale rate making procedures. These methods shall be applied as appropriate to the system. It Is recognised that these rates shall be developed in a reasonably equivalent manner as similar wholesale power suppliers, State Utility Commission guidelines, and FPC rate regulations as applied to like power systems. (2) RATES FOR SERVICES PROVIDED TO ALL CITIES Various services shall be provided to all Cities as directed by the Hoard of Directors and will be paid for by the Cities at a rate per kilowatt-hour which shall be established from time to time by the Board of Directors. Each City's share of such charges shall be that portion of the total represented by the ratio of his share of the net energy for toad to the total net energy for load of all of the Cities. Billings will be made in advance on estimates of loads and paid evenly throughout the year, (3) RATES FOR SPECIAL SERVICES PROVIDED TO A SPECIFIC CITY Special services may be provided to a member from time to time at the request of a City. Reimbursement for these services will be made at cost by the City receiving the services- . t r •r ' 19 U.r,, i 02 19 90 1703 IM214 855 8200 F & J L.L.P. Z004"00,1 Agenda No. Agenda l m _ Date_ 4- DESCUSSION DRAFT OF 2120196 AMENDMENT TO POWER SALES CONTRACT BETWEEN TEXAS MUNICIPAL POWER AGENCY AND CITY OF BRYAN, TEXAS CITY OF DENTON, TEXAS CITY OF GARLAND, TEXAS CITY OF GREENVILLE, TEXAS This Amendment to Power Sales Contract (the "Amendment'), made and entered into as of the day of 1996, by and between the Texas Municipal Power Agency, a municip corporation and political subdivision of the State of Texas end herein referred to as the "Agency" and the City of Bryan, Texas, the City of Deuton, Texas, the City of Garland, Texas and the City of Greenville, Texas, each of which cities is a municipal corporation of the State of Texas and a home rule city, and herein collectively called the "Cities" and individually called "City." WITNESSETH: WHEREAS, the Agency and the Cities entered into that certain Power Sales Contract (the "Power Sales Contract"), made and entered into as of the 1st day of September, 1976, which Power Sales Contract was amended by and between the Agency and the Cities as of the 18t day of September, 1976 (such amendment together with the Power Sales Contract being herein called the "Contract'7; WHEREAS, the Cities desire to amend the Contract to provide each of them with the ability to purchase or to generate Power and Energy from sources other than the Agency and other than as contained in the Contract; WHEREAS, the Cities have agreed to alter the terms and conditions upon which they each agree to purchase Power r nd Energy from the generating facilities of the Agency to provide that the Cities will be unconditionally obligated to take or pay for Power or Energy, or both, from the Agency in accordance with the provisions set forth below in this Amendment; WHEREAS, the Agency concurs with the desire of the Cities to purchase Power and Energy as provided in this Amendment; WHEREAS, the Agency has obtained the consents and given the notices required to be obtained or given prior to entering into the Amendment; 117104'007540 004 02,19 98 17:06 $214 833 8200 F & J L.L.i. J09 AgendAgenWHER EAS, the Cities hereby reaffirm their commitment to the Agency and the holders of the outstanding Debts to provide the payments required under the Contract to assure that the obligations of the Agency are timely paid in accordance with the provisions of the Contract; NOW, THEREFORE, in consideration of the mutual undertakings herein contained, the Agency and each of the Cities hereby agree as follows: SECTION I. Section 3(a) of the Contract is hereby amended to read as follows: Section 3: Sale and Purchase of Power and Energy (a) Each City and the Agency agree as follows: (1) Each City shall be entitled to purchase and receive a percentage of the available output of Power and Energy from the generating facilities owned by the Agency. The percentage of available output to which each City is entitled is as set forth in Section 3(a)(2) hereof. (2) For the right to receive Power and Energy from the Agency, each City shall be unconditionally obligated to pay to the Agency, without offset or counterclaim and without regard to whether Power and/or Energy is delivered by the Agency to the respective City or Cities or whether or not any City or Cities actually use Power and/or Energy from such generating facilities, whether due to "force majeurs" or otherwise, the percentage of the Annual System Costa, including the payment of the Debt Service Requirements and Operating and Maintenance Expenses which may from time to time exist, set forth below: City of Bryan, Texas: 21.7% City of Denton, Texas: 21.3% City of Garland, Texas: 47.0% City of Greenville, Texas: 10.0% (3) The percentage of the payment obligation of each City shall be subject to amendment by the mutual agreement of the Cities, provided, however, that the percentages shall never total less than one hundred percent (100%) of the Annual System Costs. hneaflovsa,oa .2- 02 1B 99 17:08 22214 855 8200 F & J L.L.P. ~ OU8i000 AgeJ11ce % AgenM Date (4) Each City bind: itself to take or pay for its entitlement to Power and Energy in accordance with the rates and charges established pursuant to Section 7 of this Contract. SECTION II. Section 3(b) of the Contract is hereby amended to read as follows: Section 3: Sales and Purchase of Power and Energy (b) The Agency shall devote its beat efforts to the generation and delivery of Power and Energy from the generation facilities of the Agency. SECTION III, its entirety. Section 3(c) of the Contract Is hereby amended by deleting Section 3(c) in SECTION IV. Section 7(a)(3) of the Contract is hereby amended to read as follows; Section 7; Rates and Charges: (3) not greater that the amount required to (i) pay the costs and expenses of the Agency, including but not limited to the payment of the Operating and Maintenance Expenses of the System, for the applicable Contract Year as such costs and expenses are set forth in the applicable Annual System Budget, (ii) fund the requirements of the Bond Fund for the applicable Contract Year, (iii) fund the requirements of the Reserve Fund for the applicable Contract Year, (iv) fund the Contingency Fund in an amount equal to $2,000,600 for the applicable Contract Year and (v) fund a construction and replacement reserve fund in an amount equal to $3,000,000 for the applicable Contract Year, Any funds held by the Agency over and above the amounts required by (1), (H), (iii), (iv) and (v) in the immediately preceding sentence shall be returned to the Cities within 120 days of the end of the applicable Contract year in the same percentage as the percentage specified in Section 3(a)(2) of this Contract, SECTION V, uaoa9o~aa~o,a ,3. 02,19/98 17:07 0214 $55 8200 F & J L.L.P. 007,009 Agenda No, agenda t m Data ` ~ Section 13(d)(1)(a) of the Contract is hereby amended to read as follows: Approved: Section 13. Project Approval and Rights of Cities when a Project is not (a) Each City shall he entitled to schedule and receive, each month for its own account, the proportion of the available Power and Energy from the System equal to the percentage established under Section 3(a) of this Contract, as such percentage may be from time to time adjusted in accordance with the provisions of Section 3(a) hereof. SECTION VI. Section 13(d)(1)(b) of the Contract is hereby amended to read as follows: Section 13. Project Approval and Rights of Cities when a Project is not Approved: (b) As consideration for such Power and Energy, and the right to purchase the same, each City shall, each month, pay to the Agency its proportionate share of the Annual System Costs equal to the percentage established under Section 3(a) of this Contract, as such percentage may be from time to time adjusted in accordance with the provisions of Section 3(a) hereof. SECTION VII. Section 13(d)(1)(c) of the Contract is hereby amended to read as follows: Section 13. Project Approval and Rights of Cities when a Pr Approved: eject is not (c) Each City's obligation under Section 14 of this Contract shall be equal to the greater of the percentage established under Section 3(a) of this Contract or the percentage established under Section 14 hereof. SECTION VIII. Section 13(d)(2) of the Contract is hereby amended to read as follows: Section 13. Project Approval and Rights of Cities when a Project is not Approved: ~inovoo~ie~o.a ,4- 02?19%98 17:07 0214 853 8200 F & J L.L.P. 009 Agenda No. 1%74 !R - Agenda It m Date - (0-- (2) During the balance of the term of this Contract after the effective date of the option, the amount of Power and Energy required by the City exercising the option to be purchased under Section 3 of this Contract shall be limited. Such City shall, in each calendar month, take or pay for an amount of Power and Energy equal to the amount of Power and Energy such City is entitled to receive from the Agency during the corresponding month or such other amount of Power and Energy as may be from time to time agreed upon by the City, the Agency and other Cities, but in no event shall such take or pay requirement be less than the amount required to be paid pursuant Section 3(a) or Section 14 hereof, whichever amount shall be greater; and the Agency shall no longer be required to provide any Power and Energy in excess of the amount to which such City is entitled pursuant to Section $(a) hereof. The Power and Energy furnished to such City shall be billed by the Agency at rates and charges as from time to time adopted pursuant to Section 7 of this Contract. The calculation of the limiting City's obligation under Section 14 of this Contract shall assume such City Net Energy for Load for the purposes of said calculations is equal to such City's Net Energy for Load in the completed Contract Year next preceding the effective data of the option or the amount required to be paid pursuant Section 3(a) hereof, whichever Is greater. All other terms, provisions, conditions and obligations of the Power Sales Contract between the Cities and the Agency, dated September 1, 1976, as the same has been amended prior to the effective date of this Amendment, shall remain in full force and effect, and said Power Sales Contract, as amended, shall be construed together as a single contractual agreement. SECTION IX, This Amendment shall become effective upon the execution by the Agency and the Cities, all by the proper officer duly authorized by the Agency and the Cities to execute this Amendment for and on behalf of said executing party, TEXAS MUNICIPAL POWER AGENCY BY: ATTEST: By: u,~w,vo~aaaa -5- i 02418408 1706 '12214 855 $200 F & J L.L.P. 40012 Agenda No. 04' Agenda m Scam 0210- ` CITY OF BRYAN, TEXAS ATTEST: By; CITY OF DENTON, TEXAS BY: ATTEST: By: CITY OF GARLAND, TEXAS BY: ATTEST: By: CITY OF GREENVI LLE, TEXAS BY.. ATTEST; By: 1►~ixrDOe~roro a City Council Item SummaryraSb Work Sesaionftem Agenda rem Agenda ftMt TMPA Power Sales Agwement Amendment After gwny fttonths of disoyssion between re"sentatWs of the four Texas MunkgW Power Agmq (TM PA) agre"hl has finallybeen reached on fbfMg each city's share of TMPA anorgy and also Messing eadh Cltf datermine what future generation projects they might need, M toy. This draft amondrnsnt to our T1MPA Power Bases Agreement Is attached with a comparison to our currant agroemont. R~ At their Me" ¢1, Mating, the Wftry Advisory Oosrd WAS) voted unanimously to forward this d+rtt agreemaM to CounoR for oomklerstlon with he following suggested changes: 1) sale of TMPA assets ortly to be used to aefsaas TMPA debt. a) No now dabs ttxnn IOgq term and short term! *VW TMPA Bard approve(. 3) Section IV, Bubeeotton 7:3, Rates and Charges • UAS does not agree with placing any Ilmlta on TMPA oontingenoy funda; therefore, all WY& should be removed from this saolton• TM TtNPA 1110erol has sohedulod their April 11 board mesting as a work session to dsouss the TMPA Pow dates M Amendment We would like 1o fof"fd a Arland the to the TMPA Board a11tNM flefser lal BtJntMA Ootlee Impost of ftaeMlw+1erxJalkm/Actton this FYI &in ❑ One-Time ❑ Reeurring t sud0eted; Yes ❑ No t E Poatdl' brand fax I/MISMlaal Marie "Ji r or pp.. ~►+'00V NYV Agenda Item No,l 5 - • / MW4 41 7 r--- NQ/10.7/7b 1 f: GY bKttNV 1LLt tLt1- 1 Ki - U 1 1L 1 1 T '7G1 ltibbbG~b Nu. b]'y VU-- apcnda GREEWLLE ELECTRIC UTILITY Sys e ~ R 6000 Joe Ramsey Boulevard bate " JfTa lHighway 69 South) J. Ean Morse. Sea1Wr/41Uswer Greenville, TX 75402.9805 Canaa w. McBrae. Mard Meaner (903145 7-2800 Dwain c. vnmpt UPC Wear April 3, 1996 0 po Mr. Mike Conduff, City Manager Mr. Jeff Muzzy, City Manager City of Bryan City of Garland P. O. Box 1000 P. O. Box 469002 Bryan, TX 77805 Garland, TX 75046.9002 Mr, Rick Svehle Mr. Ed Thatcher, City Manager Assistant and Acting City Manager City of Greenville City of Denton P. O. Box 1049 215 E. McKriney Greenville, TX 75403-1049 Denton, TX 76201 Subject: Proposed TMPA Amendment Gentlemen: I wish to offer further comments on the proposed Amendment to the Power Sales Contract. I wish to add the following change to Section 3 of the Contract to replace the previously proposed language: Adva iced payment of debt (other than debt due and payable In the current year) shall not be cons) lered an 0 & M expense of the Agency, Rate revenues collected from the member cities cannot be used for the advanced payment of debt except by unanimous approval of all the cities. However, Agency revenues from the sale of assets no longer considered used or useful can be used for the advanced payment of debt, as determined by majority vote of the Board. Sincerely, Tom Darte General Manager cc: Electric Utility Board City Council Greenville TMPA Board Members Gary W. Smith, City Attorney D1►TiLLOiIOnSfYT~YVRan'M?e/V 1 Over 100 Years or Service, Est. 1891 first Municipally Owned Electric System in Texas b4~~1„-yb 1r: Gb UNttiV 'LLt tLtt- IKit ICI ILI 0T + 7b117DbbGJb Nu. b7y 1/tJJ Agenda No. ~Iwto GREENVILLE ELECTRIC UTILITY SYST N11 1 F 6000 Joe Ramsey Boulevard Date V a lHighway 69 South) ~ Farr mole. Uverary/T,usurer Greenville, TX 75402.9805 Do^a3d W McBrice, Boaro KtmOer 1903) 457-2800 0-am k, Fmmgs Board Mer Cer March 26, 1998 Mr. Mike Conduff, City Manager Mr. Jeff Muzzy, City Manager City of Bryan City of Garland P. O. Box 1000 P. O. Box A69002 Bryan, TX 77805 Garland, TX 75046-9002 Mr, Rick Svehla Mr. Ed Thatcher, City Manager Assistant and Acting City Manager City of Greenville City of Denton P. 0. Box 1049 215 E. McKinney Greenville, TX 75403-1049 Denton, TX 76201 Subject: Proposed TMPA Amendment (gentlemen: I wish to offer suggested changes to the amendment as proposed by Fulbright & Jaworski in their cover letter dated February 19, 1996, These proposed changes have not yet received legal review by our City Attorney or by Fulbright 3 Jaworski. These suggested changes are my own, but I do plan to discuss them with our Electric Utility Board at our April 4 Board meeting. The suggested changes are meant to more clearly define when and under what conditions debt can be reduced by the Agency. The change to Section 13 is intended to greatly simplify and eliminate the cumbersome language involving Options One and Two. It was my understanding at the last city managers' meeting that the language Involving Options One and Two would be eliminated from the Agreement, These changes are submitted for your review and future discussion. If the city managers and utility directors can reach substantial agreement on the language then I would suggest at that point we attempt to work with our respective boards, councils, and TMPA Board members. I plan to Invite our TMPA Board members to our Utility Board April 4 to discuss these changes. Members of the City Council and out TMPA Board members are also invited to attend these discussions. Sincerely, 'r Tom Darte General Manager a +/ru6.rTf0A714PDIIrVr!{rt1'MGAIf Cvl ~ over wo Years or Service, Est, 1891 First Munlctpally owned Electric System In Texas i data}~7e I: 'e; bRttNVILLE ELECTRIC UTILITY RF17566C236 N0.659 Agenda No-9-1 ~ Agenda Item Date SUGGESTED CHANGES TO THE PROPOSED AMENDME NT V O THE TMPA POWER AS DRAFTED BY ROBERT D. DRANSFIE D, F O BR GHT d JAWORSKI FEBRUARY 19, 1996 Proposed changes are summarized below: SECTION Section 7: Rates and Charges --Add "3" 4viiin P y off debt on behalf of all the cities only through the safe of assets no longer used or useful. SECTION V Section 13: Project Approval and Rights of Cities when a Project is not Approved (a) Additional projects of the Agency will be allocated among those cities that participate based on a fixed take-or-pay percentage share of such project for each city that participates totaling 100%. (b) Joint Facilities (if any) utilized by multiple projects wili be allocated between projects based on standard FERC accounting procedures, or (c) Existing project percentages can be modified to a single percentage for multiple projects by mutual agreement of all of the cities that will or have participated in any project of the Agency. (d) Cities will have 180 days to approve an additional project once submitted to all the cities by the Agency. Lack of approval within 180 days will exciude that city from participation in that specific project unless approved later by the mutual agreement of the participants. (a) Additional participants may be permitted in any project of the Agency if permitted by mutual agreement of all the participants. (f) Mutual agreement of the participants shall mean unanimous approval of the participants. (g) Each city's obligation under Section 14 of this contract shall be equal to the greater of the percentage established under Section 3(a), (b), or (c) of this contract or the percentage established under Section 14 hereof. The purpose of the above change is to eliminate reference to Options One and Two in the contract and other references considered redundant and unnecessary at this time. If the inclusion of additional' projects based on a nomination of a single percentage or the inclusion of that project with prior projects into a single percentage is not feasible then it is suggested that TMPA become a single unit agency and any future projects be done separately by the cities, either as a separate agreement under TMPA if legally feasible or done separately by the cities as a joint ownersh'p in tenancy agreement if tegally feasible. SECTION Move the fast paragraph of Section Viii to S ection IX IX D 1WP-FILESMMPATWO p~gPUTEW N CHO 1/7 Agenda Na - N Agends ltnm 09,A ril0, IQQK CITY COUNCIL AGENDA ITEM TO: MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Rick Svehla, Acting City Manager SUBJECT: CONSIDER APPROVAL OF A RESOLUTION REQUESTING TMPA TO REDUCE ELECTRIC RATES TO REFLECT ACTUAL COST OF TbIPA OPERATIONS RECOMMENDATION: The Public Utility Board at their meeting of March 18, 1996, recommended that Denton request TNIPA to lower their rates to cover actual costs. SUMMARY: At the urging of the four TMPA cities in early 1994, TMPA investigated several alternatives to lower the cost of the power and energy provided to the four cities. In early 1995, the Mayors, City Managers and Utility Directors met and recommended cost reduction goals and the City Councils approved a position paper requesting TMPA to meet those goals. TMPA has met those goals by discontinuing use of Grimes County lignite, converting to Wyoming Coal and taking other cost savings actions such as reducing personnel from 340 to approximately 150. On February 29, 1996, TMPA closed down the Grimes County mine. On March 15, 1996 TMPA shut down the Gibbons Creek power plant and proceeded to convert the plant to burn Wyoming Coal. On April 1, 1996, TMPA began running the Gibbons Creek plant successfully on Wyoming Coal. At the February 26, 1996, TMPA Plamling and Operating Committee meeting, the Committee received a recommendation from the TMPA staff stating that an adequate rate to meet TMPA operating costs, debt service and fixed costs would be an energy charge of Sl 4.07/mwh and a demand charge of $21.92/kw/mo. The present rate is $13.61/mwh and $26.i6/kw/mo. The staff recommended an implementation date of April 1, 1996, to coincide with the start up of Gibbons Creek plant on Wyoming Coal. 'rhe Planning and Operating Committee therefore recommended this subject rate to the TMPA Board. The P & 0 Committee also recommended that the respective share of the TMPA Power and energy be established at Denton 21,3% (vs. 22%), Bryan 21.7% (vs. 22 Garland 47% and Greenville 10% (vs. 9%). At the March 14, 1996, TMPA Beard meeting, a motion by TMPA boardmember Mike Conduff, (City Manager, Bryan) to adopt these rates and change the percentage shares effective April 1, 1996, per the recommendation of the P & O Committee, failed for lack tc\he me\Penn y_0',councl 1\ agi tem`,tRp a rate, a C9 I Aponde No, CITY COUNCIL AGENDA ITEM Agenda IT 0 APRIL 9, 1996 Dale ° N PAGE 2 of a second. The Board subsequently adopted the recommended rates with the changed percentages but instead of being effective April 1, 1996, the Board set them to be effective August 1, 1996. This action allows TMPA to retain $3.2 million of the four member cities money that is over and above that recommended by the TMPA staff. Denton's share of this amount is $696,924. Some TMPA Boardmembers explained their reason for charging the cities more than cost was a concern that the rate recommended by the TMPA staff provided very limited working capital during the initial months of operation on Wyoming Coal. However, this concern maybe marginally justifiable. The $21.92/kw/mo. demand charge paid by wire transfer each month is sufficient to cover all of TMPA's fixed costs including bond debt, salaries and plant maintenance. Also if the plant has operational problems, it will be in each of the customer cities best interest to restore a higher rate on an emergency, basis if additional cash is required. An issue that probably has clouded the TMPA rate issue has been the ongoing deliberation between the cities regarding whether the savings from the fuel conversion should be kept by TMPA to pay off future bonds or be returned to the cities, - via lower rates, for each cities future use to pay the higher TMPA costs as their debt service increases. Originally, Denton and Garland preferred setting up a "secure" rate stabilization fund at TMPA. However, Bryan and Greenville insist that the savings be returned to the cities. Bryan's attorneys have pointed out that the TMPA Cities power sales contract probably doesn't give TMPA the authority to retain such a fund. As negotiations on the power sales amendment has proceeded the City Managers and Utility Directors have generally, concluded that the only safe way to handle the savings is to lower the rates and let the cities make provisions for future stabilization of their own electric rates. i I Respect submitted, Rick Sveh a, Acting City Manager Prepared by, R. E. Nelson, Executive Director Utilities Exhibits: L January 10, 1995 City Council Minutes ll. January 10, 1995 Worksession Agenda Item Nl Ill. Resolution No. R95-076 J:\home\penny_b\tcuncil\e jisem\[mpa rete.a09 CITY OF DENTON CITY COUNCIL MINUTES January 10, 1995 AdYnQp Pi O, • _ The Council convened into a Closed Meeting on TuesAivdaI 1995 at 5:15 p.m. in the Civil Defense Room. We ~ ~ ' PRESENT: Mayor Castleberry; Mayor Pro Tem Brock; Council Members Chew, Cott, Perry, Miller and Smith. ABSENT: None 1. The following items were discussed in Closed Meeting: A. Legal Matters Under TEX. GOVT CODE Sec. 551.071 B. Real Estate Under TEX. GOVT CODE Sec. 551.072 1. Discussion regarding lease of property for additional parking for the DMC from Union Pacific Railroad. C. Personnel/Board Appointments Under TEX. GOVT CODE Sec. 551.074 1. Considered working conditions of part-time and assistant judges and gave Municipal Judge direction. The Council convened into a Special Called Session on Tuesday, January 10, 1995 at 6:00 p.m. PRESENT: Mayor Castleberry; Mayor Pro Tem Brock; Council Members Chew, Cott, Perry, Miller and Smith. ABSENT: None 1. The Council received a briefing, held a discussion and considered a motion regarding various requests to TMPA. Mayor Castleberry stated that last week the Mayor of Garland invited the mayors of the four cities in TMPA, their city managers, the chairmen of their utility boards and their executive directors to meet regarding TMPA. It was felt that Council needed to meet as quickly as possible to discuss that meeting. The Garland City Council met last night and unanimously approved the motion to be heard later. The Bryan City Cruncil would be meeting this evening and a poll of their council members indicated that they would also approve the motion. City Manager Harrell stated that a memo from Garland Power and Light, which was included in the agenda back-up materials, represented a summary of the meeting. The first page of that memorandum enumerated the concerns expressed by the four cities regarding the TMPA operation. The representatives at the meeting all expressed similar concerns regarding TMPA. The, following statements represented the consensus of the concerns for the members present. (1) Reduce the cost of power from the TMPA J V City of Denton city c incil Minutes January lo, 1995 Page 2 ►D/ Ag~ndr No. Agenda Item Date_,. ° _4 resources to the lowest achievable level. Retail wheeling would soon be present and in order to survive as a electric utility in that kind of environment, it was extremely important to be competitive regarding power rates. The major driving force in that was TMPA and all four cities concurred that an overriding goal was to expect TMPA to reduce power costs to the lowest feasible level. (2) Obtain flexibility for member cities to modify or change their own power resources according to their individual desires. That flexibility went back to the power sales contract, (3) Obtain more direct control over TMPA operations. It was his impression that there was general consensus from some of the cities that in the past TMPA had operated independently and the cities did not have oversight regarding the operations. (4) Return TMPA's role in relationship to member cities to one of a large power plant which provided power to the cities as opposed to a full fledged utility operation. After reaching a consensus of concerns, there was a discussion regarding possible goals which the cities felt were achievable by TMPA which would speak to the concerns listed. The four utility directors along with technical staf, reviewed the staffing and operating cost levels of agencies sir,; 1:,; to TMPA. From that information, they developed reductions in power costs which were determined to be achievable if TMPA were committed to do so. It was felt that the cities should enumerate the goals and let TMPA and the TMPA Board decide how to meet those goals. Reductions in the cost of TMPA power included a reduction in staff, a r of change of eduction in power costs which was keyed in with the timing issue { Flexibility dealt u with supply and dthe disposal t placed drag on nthe member cities by the power sales contract. That restriction bound the cities to TMPA until a project was offered to the cities which could be declined. Currently Denton could not upgrade its own utilikty D nton sd own costs down. A isecond epoint changes 9 with the flexibility dealt with having the city managers, city attorneys and TMPA Board attorneys meet in two weeks to develop a plan for submittal to respective boards and councils to remove that restriction. That could involve an amendment to the power sales contract and could be concluded within 60 days. There were three basic goals dealing with control of TMPA. One stated that the individual city councils would inform TMPA, through their respective board members, of future actions which were expected of TMPA. The second item was that the Planning and Operating Committee would be more involved in the oversight of TMPA's operating budget. Currently the electric directors were involved in the oversight and made recommendations regarding the capital budget of TMPA but not the yearly operating budget. There was an a third goal was an ttempt to do this three years ago but it was not successful. The acknowledgement y needed to spend more time dealing with Agency concerns. Tmaners heafour city managers would meet on a regular basis with the TMPA General Manager as an oversight committee to the operations of TMPA. The City of Denton City Council Minutes January 10, 1995 Page 3 Agenda No. + Agenda I em Sewsw Date issue of the Agency being a generation plant was more of a philosophical issue. There was a general acknowledgement that if i the cities expected TMPA to become a power plant, some of the functions now performed by TMPA would have to be done by the member cities such as maintaining power lines or serving as a purchasing function for the Agency. The cities were willing to do such provided the TMPA role was limited. A short term calendar was then developed for implementation of the recommended actions. (1) A report was to be given to e.ch City Council within two weeks. (2) Following the report to the various councils, it was hoped that each city council would endorse the goals as articulated by the representatives from the Garland meeting. (3) TMPA would be asked to call a special meeting within 30 days to be held in Greenville to discuss the proposed directives. (4) After the special meeting, the city managers would be ready to meet with the General Manager to start the oversight responsibilities. (5) The city managers and TMPA bond counsel with TMPA management would meet on the flexibility issue as soon as possible. (6) Within 30 days after the Greenville meeting, there would be a follow up meeting in Denton at which time the General Manager and the TMPA Board would report back on how TMPA expected to follow through the goals indicated by the cities. Council Member Cott stated that he approached the issue as money and electricity. If production were going to be reduced, the sale of that production had always been the principle way to pay off the bonds. He felt it was important to be careful on the projection so that the reduced production did not come back as higher rates. Bob Nelson, Executive Director for Utilities, stated that the production would actually go up rather than down. The present price was $.052 per KW hour and the cities asked that that cost be lowered to $,04. one way to do that was to follow a study just completed which converted the power plant to western fuel. One of side lights of converting to a western fuel was to increase the Kw of the plant. Council Member Cott asked if the four customers were obligated to take that. Nelson replied yes but not immediately. For a majority of the time, they would be able to do so. Any excess could be sold when necessary. The western fuel was a low sulphur fuel as opposed to the current fuel. With this fuel, it would be possible to eliminate the use of the scrubber as well as the drag lines and conveyor belts. Western fuel had twice the heat value as opposed to the current fuel. Council Member Cott asked if there would be projection of a debt reduction.. i "City of Denton city council Mi7iutes January lo, 1995 I_ Page 4 AptinE1 No. u Agenda Ilem Date Nelson replied that there would not be a reduction in debt. The debt would stay the same. The conversion to the western fuel would cost approximately $33 million. The Agency had in reserve some resources to handle the conversion. City Manager Harrell stated that all the cities represented were unanimous in acknowledging that the cities were responsible for the outstanding debt and were obligated to pay that debt. The cities were focusing on the operating costs to get them as low as possible. Council Member Cott stated that the current amount of debt would remain the same. Nelson replied yes that the debt structure would not change. Council Member Cott asked for a scenario which would reduce that debt. Mayor Castleberry stated that the procedures outlined would get the cities closer to be able to get a better handle on the issue. Mayor Pro Tem Brock stated that one of the proposals to reduce the cost of TMPA power was to reduce overhead and demand and would be left to the TMPA Board and management. She questioned if the TMPA Board Members felt this was possible. She assumed that this reduction was related to the philosophical shift of TMPA as a power supply and not as a larger utility. Tom Harpool, TMPA Board of Directors, stated that it was not known at this time if the price could get that low. It had been investigated and felt it was a reasonable goal. If the lower rate impinged on anything else, the Board Members would return to Council with that information. The engineers felt that it was a reasonable request. Mayor Pro Tem. Brock asked if by having the city managers as an oversight committee and with the city councils giving stronger direction to TMPA, would the role of the TMPA Board be reduced. Harpool replied that it would not necessarily be a reduction as the Board would still be responsible for the actions. The city managers would bring items to the General Manager who would bring them to the Board. The Board looked at it as a supplement and a much needed help to the Board because there was a problem in the past trying to get each city have the same goals. This proposal would help the Board carry out the goals of the cities. Mayor Castleberry felt that this would be an instance when the City Council and its two representatives would be working much closer with TMPA than ever before. City of Denton city council minute January lo, 1995 s Page 5 Agenda N0.5 ` G Agenda I ern Date. _ Harpool stated that for years there had been a problem that the four cities could not come to a consensus. Council Member Miller stated that there had been an indication of concerns regarding the results of the Burns and McDonnell supply study. Were those concerns being revisited and how did that tie in with the goals and recommendations. Nelson replied that there were two elements of the results which were of some concern. The first concern, which was addressed in Item 1B, dealt with the price which Burns and McDonnell expressed for the power. Their price was approximately $.046 to $.047 per Kw per hour. There were also approximately $8.5 million of administrative costs included in that dealt with some of the other options thestudyTlookedoat sucheas 1 putting the facility and purchasing external or repowering or g an efficiency generator with one of the cities power plants. The kind of facilities and the kind of purchase power which were selected as the alternatives did not seem to be the lowest possible opportunity, Council Member Miller asked if Burns and McDonnell were still involved and were they being asked to confirm the results. Nelson replied that the group did not anticipate to have them return for any further information. He was certain that the TMPA staff would ask for their continued advice. Council Member Miller felt there was an assumption that the cities were on record for not wanting any additional long term debt but that it was not indicated so. He felt there was a need to make that very clear. Nelson replied that Item 3B would be addressing that issue but that it might be a good idea to include that very specifically. Council Member Miller felt that it would be much better if that were specifically stated. Harpool stated that Burns and McDonnell did not include further reductions as they were not directed to do so. In regards to the debt, the Board was well aware that the cities did not want to incur any further long term debt. Council Member Perry stated that the second objective dealt with flexibility regarding native generation. He asked Nelson what he envisioned that would do to local plants and what impact it would have on Denton. thesflexibilityttot be ablento lown attthoseeisfocus sues was The Cities Y J J VCity of Denton City Council Minutes January 10, 1995 Page 6 AgeAllemw AgenDate first generators were installed in 1954 and the last one in 1972.8 The technical efficiency of the machines were not as good as some of the later models and not as good as the technology today. The flexibility would give the cities the opportunity to redesign the plants to produce better efficiency. Right now the cities could only do what TMPA wanted to do and did not have any flexibility. Council Member Chew did not want to add anything additional to the proposal at this point in time as all four cities had agreed to what was presented. He felt that perhaps the suggestion by Council Member Miller could be added later. Council Member Cott felt that a five year reduction goal in capital needed to be developed. Mayor Pro Tem Brock asked for a clarification on changing TMPA from a power agency to a generation plant. Nelson presented an example of the cities taking on more of TMPA's responsibilities. TMPA had three substations in Denton. The City had a service crew which visited the City's substations each day and also checked on TMPA's substations. If TMPA had a failure of one of their three substations, they would send someone from Bryan to repair it. Denton had individuals capable to do that and could provide that service. That was one way to reduce TMPA staff. Mayor Pro Tem Brock asked for the difference between a power agency versus a generation agency. Nelson stated that there were two basic ways to create an agency. One way was to have several cities come together to build a power plant or a series of power plants. Each participant bought a percentage of the power plant and the power from the plant. Another way was to create an agency which became the umbrella agency for the group. The cities were not involved in the production and generation business. When the cities went into this 20 years ago, Garland was interested in a full requirements entity. Greenville and Bryan, at the time, wanted individual participating agencies. Greenville and Bryan put in a clause which allowed the cities to back out when the next project was selected. The cities have never gotten to that point and thus never had the opportunity to come out. Mayor Pro Tem Brock stated that it was implied from the minutes of the meeting to return TMPA's role to that of a power plant. Was that the original role of TMPA which had been lost over the years. City Manager Harrell stated that on that point there was less specifics articulated than on the other three points. That was more of a philosophical statement and a willingness to determine if there were items which could be deleted at the Agency level and . City of Denton City Council Minutes 31 0. V January 10, 1995 Agenda No, Page 7 Agenda It m Date picked up at the member city level. Smith motioned, Chew seconded approve the plans which the representative had detailed and endorse their propositions. Council Member Cott asked what happened as a result of the vote. City Manager Harrell stated that after the votes of all of the cities, there would be a special Board meeting as soon as possible in Greenville to present the goals to the TMPA Board. At that point in time, TMPA would have 30 days to report back at a special meeting in Denton on how it would respond to the goals and how to achieve them. Council Member Miller stated that he would still like to have a discussion with the other cities regarding long term debt so that it was not implied that the cities were not willing to have any further long term debt. If that were not in writing, it might be too late. Council Member Cott felt that it was necessary to have an objective of debt reduction. On roll vote, Brock "aye", Cott "aye", Miller "aye", Smith "aye", Chew "aye", Perry "aye", and Mayor Castleberry "aye". Motion carried unanimously. With no °urther business, the meeting was adjourned at 7:10 p.m. 41 - BOB CASTLEBERRY, MAYO CITY OF DENTON, TEXAS J4'IMER//VALTERS Y SECRETARY CITY OF DENTON, TEXAS ACC00243 Acvta No 1X5 Ayeodiiifem 605 A/ DATE: January 10, 1995 CITY COUNCIL AGENDA ITEM TO: Mayor and Membe;s of the City Council FROM: Lloyd V. Harrell, City Manager DATE: January 10, 1995 SUBJECT: MEETING OF TMPA MEMBER CITIES ON JANUARY 4, 1995 REGARDING TMPA ISSUES AND FUTURE COURSE OF TMPA SUMMARY: The City of Garland requested a meeting of representatives from the four member cities over immediate concerns regarding the future course of TMPA, its power supply, its relationship to the four member cities, and its escalating cost of power to its member cities. The representatives requested to attend the joint meeting included the Mayor, City Manager, Utility Board Chairman, and Utility Manager from each city. From this representation from each city, it was hoped that a consensus of planning and understanding could be developed in order that these concerns could be forwarded to the cities governing bodies. The City of Garland, in addition to other member cities including Denton, had recently expressed concerns on the rtsults of the Bums & McDonnell Power Supply Study done for TMPA as it related to determining future TMPA power supply . The cities also did not feel they had been allowed sufficient input and that all possible alternatives had not been considered. In addition to these concerns on TMPA power supply, the City of Denton had continued to express its concern to TMPA management on the restrictions contained within the TMPA contract with the Cries. This rontract prohibits the City of Denton from controlling or reducing costs on its own native Spencer generation by upgrading or replacing its existing generation. From the discussion of the member cities present at the meeting the following statements represented the consensus of the concerns for the members present: 1. Reduce the cost of power from the TMPA resources to the lowest achievable level. 2. Obtain flexibility for member cities to modify or change their own power resources according to their individual desires. Gs-rua~~ f Agenda item 3. Obtain more direct control of TMPA policies and actions by the m0eml r l yes.• 4. Return TMPA's role to its members' cities to that of a power plant versus its ` present structure of a utility. After discussion, the following course of action was recommended for each of the main points of concern: 1. Cost of TMPA Power a. By May 1, 1995, TMPA will reduce its demand charge by S1.25/KW month. How TMPA was to reduce overhead and maintenance cost within the demand structure would be left to the TMPA Board and Managemeat. b. By January I, 1996, TMPA will reduce its total cost of power and energy sold to the cities to 4.00/KWII. (Present cost is 5.20/kwh). This issue represents TMPA future power supply. The figure reached by a separate sub-meeting of the Utility Directors, represents what the cost of power should be from a western fuel, coal-fired power plant operating within a lower range of O & M expenses as referenced from current operating lignite fired plant. C. By January I, 1998, TMPA will reduce power and energy cost by an additional .23¢/KWH. This represents a consensus that TMPA should be able to properly dispose of its draglines by such date and eliminate a $7.8 million annual lease cost. 2. Flexibility for Member Cities Regarding Native Generation a. A contract amendment finalizing changes allowing flexibility to cities will be completed within 60 days. b. City Ma.1agers', City Attorneys', and TMPA Board Attorneys' to meet within two weeks to develop plan for submittal to respective Boards and Councils. 3. Control a. Short term • For app. oximately one year, tiua City Managers' would act as an oversight committee to monitor agency perf ffnance with respect to the goals. ✓ t:w..~.~ ~u~a~io - I I I i ~a~ndn Nu. _ Agenda item Date b. Long term Planning and Operating Committee would have oversight over the Operating Budget in addition to their existing responsibilities. The final action recommended was a short-term calendar for implementation of recommended actions: 1. A report was to be given to each City Council within two weeks. 2. Each City Council is asked to give, specific directions to its TMPA Board Members. 3. TMPA Board members would hold a special meeting in 30 days to discuss proposed directives. 4. Oversight meeting will be scheduled by City Managers' with Ed Wagoner at an appropriate time after the TMPA Board meeting. 5. Meeting with Bond Council, City Managers' and City Attorneys' regarding contract changes (See Action #2). 6. Original convened group to meet in Denton to receive a report from Ed Wagoner on his plan to meet the desired action proposals. A copy of the minutes from the above meeting is attached. t y submitt I V. Harrell, City Mana r Prepared by: ( 1 r►'c~i Harder, Director of Electric Appr ed by: R. E. Nelson, Executive Director Utilities 0105-9~ IS: 32 12214 205 2939 C01G EIECMR . 2002 037 4P ~bt~1e[ Uam ' Agenda Nu. w MEMORANDUM Date Ca item ` TO: Attendees FROM: Jeff Muzzy DATE: January 5, 1995 SUBJECT: MINUTES OF TMPA MEMBER CITIES MEETING JANUARY 4, 1995; GARLAND, TEXAS Fallowing welcoming and Introductory remarks by Garland's Mayor Jamie Ratliff, each member city in turn expressed their TMPA related issues, concerns and their thoughts as to areas in which positive action should be taken. From this discussion there were consensus that all the members primary concerns could be represented by the following four toplcs. 1. Reduce cost of Power from TMPA resources to the lowest achievable level. 2. Obtain flexibility for member cities to obtain their future power resources according to their individual desires. 3. Obtain more direct control of TMPA policies and actions by the member cities. 4. Return TMPA's role to its members' cities to that of a power plant (as opposed to that of quasi-utility supplying wholesale energy services). a Apt:nda No.• Lowest Cost Agents Item Date Discussion of point 01 brought consensus on the following goals that were to be communicated via the TMPA board to the TMPA Management, • Request the TMPA Management, within 30 days, to provide to the TMPA Board and the customer cities a plan that would: a) Reduce the current demand charge by $1.25/kw. This must be accomplished without deferral of expenses or reducing operating roserves. b) Reduce agency power costs to $40.00 MWH by January 1, 19%. This must be accomplished without deferral of expenses or reducing operating reserves. c) Mitigate the lease payments on the mine draglines by January 1, 9998, and make a corresponding reduction to the demand charge. ' Flexibility With regard to point #2 there were consensus that the Agency board, management and legal counsel would develop a plan that would remove the restrictions placed on the member cities by Section 3 of the Power Sales Agreement. There was further consensus that this process should begin within 2 weeks with a meeting between the TMPA city managers, their city attorneys and the agencies bond counsel and that an action plan should be concluded within 60 days, i TMPA Control With regard to point #3 there were consensus that: • The indlvidual city councils would inform TMPA via their respective board members of whet future actions were expected. • That the TMPA P&O Committee would have oversight of the agency operating budget. (in addition to their present responsibilities) • That for a short period of time (approximately one year) the TMPA city managers would act as an oversight committee to monitor aency respect io the four goals identified. g Performance with • Jeff Muxty will serve as chairman of this committee, AgeA Agency vs. Generation Plant Agen Date With respect to the 4th point there were consensus that it was the desire of the member cities that TMPA's role in the future be only that of a generating plant (staifad only to fulfill that function) and that the member cities would decide among themselves as how to best accomplish the other functions currently encompassed within the agency. Action Plan . TO start the process of fulfiling the four identified objectives the group identified the following sequential actions for the immediate future. 1. Within 2 weeks each city would report to its respective council on the meeting and the action plan agreed on. 2. Each council would give specific directions to its respective TMPA Board Members regarding the common goals. 3. Each council would request that a Special meeting of the TMPA Board be scheduled In February, In Greenville, for the purpose of meeting with the designated ',y representatives regarding the goals set by the member cities. 4. The City Manager's oversight committee would meet with the general manager of the Agency. 5. The agency Management and its bond counsel would meet with the City Managers and their city attorneys. The designated city representatives would meet again, In Denton, to review the plan prepared by the Agency management to accomplish the identified goals. E:\N?D0CS\AESI7MPA.SE7 Agenda No. Agenda Item Date RESOLUTION NO. 610 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DENTON, TEXAS SUPPORTING SETTLEMENT OF ISSUES AFFECTING TMPA CITIES AND THE AMENDMENT OF THE POWER SALES CONTRACT; DIRECTING THE MAYOR, CITY MANAGER, AND DENTON'S TMPA BOARD MEMBERS TO WORK DILIGENTLY Oil BEHALF OF THIS COMPROMISE; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the member cities of Texas Municipal Power Agency ("TMPA"), Bryan, Denton, Garland, and Greenville, have been long- time public power allies; and WHEREAS, the Cities of Bryan, Denton, Garland, and Greenville have jointly entered into a Power Sales Agreement governing the jointly owned TMPA; and WHEREAS, certain disagreements have risen about the methodolo- gies of application of the Power Sales Agreement; and WHEREAS, the four allied cities wish to amicably resolve all of these disagreements; and WHEREAS, the City Council of the City of Denton believes that a fair and equitable resolution of each of the issues can be reached and that it is in the best interest of the citizens of the City of Denton to reach an agreement with the other cities and to provide for the amendment of the Power Sales Contract to effect the agreement; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY RESOLVES: SECTION I. That the City Council of the City of Denton conceptually endorses the following compromise of the issues of percentages for the member cities, rate/debt reduction and flexibility as follows: The percentages for t.e member cities shall be fixed as follows: Greenville - Ten percent (10%) Garland - Forty-seven percent (47t) Denton - Twenty-one and three-tenths percent (21.3k) Bryan - Twenty-one and seven-tenths percent (21.7%) The TMPA Board shall adopt the lowest possible rate for power and energy on an annual basis (utilizing the mechanisms outlined by Fulbright & Jaworski and First Southwest, provid- ing each city with the opportunity to establish a debt reduction account with TMPA thereby mitigating the impact of increasing debt on the city). Agenda No, Agenda Item Date Each member city will have the option to acquire power and energy for its future needs through any means it deems reasonable. Each member city will support default provisions. The Power Sales Contract shall be amended to incorporate the resolutions of these issues. SECTION I, That the City Council of the City of Denton hereby authorizes its Mayor, City Manager, and TMPA Board members to work diligently in furtherance of this compromise detailed in Section I of this resolution, and to take all actions necessary to facilitate the implementation of the compromise. SECTION III. That this resolution shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the 0?IJFI' day of - 1995. BO CASTLEBERRY, MAY ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: APPROVED AS TO LEGAL FORM: HERBERT L. PROUTY, CITY ATTORNEY BY: J PAGE 2 C: \MPC'0C5\PE5\r` PA. RES JIQmQa No. - S 4enda ft fm (vA RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DENTON, TEXAS, REQUESTING THE BOARD OF DIRECTORS OF THE TEXAS MUNICIPAL POWER AGENCY TO REDUCE ELECTRIC RATES TO REFLECT ACTUAL COST OF OPERATIONS; EFFECTIVE ON APRIL 1, 1996. WHEREAS, Texas Municipal Power Agency, TMPA on April 1, 1996, has completed the conversion of the Gibbons Creek Power Plant from Grimes county lignite to higher quality, lower cost Wyoming Coals; and WHEREAS, on January 10, 1995 the Denton City Council passed a motion directing TMPA to meet certain cost reduction goals; and WHEREAS, on February 7, 1996 the City Managers and Utility Directors met and confirmed that those goals were being met; and WHEREAS, the TMPA staff has determined that the appropriate rates to recover costs for TMPA operation is $14.07/mwh and $21.92/kw/mo. and WHEREAS, the TMPA Planning and Operating Committee (Utility Directors of Bryan, Denton, Garland and Greenville) on February 26, 1996, after careful consideration recommended to the TMPA Board to adopt said rates effective April 1, 1996, with the following respective percentage shares; Denton 21.34 (vs. 224), Bryan 21.74 (vs 224), Garland 474, Greenville 104 (vs 94); and 4 WHEREAS, the City Councils of Denton, Bryan, Garland and ions mentionedepercenttageeshares; NOW THEREFORE supporting the respective above BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF DENTON: SECTION 1 I That the City Council of the City of Denton requests that TMPA Board of Directors adopt rates, effective April 1, 1996, of $14.07/mwh and $21.92/kw/mo. with Denton's percentage share of TMPA power energy costs of 21.34. SECTI_ 0N _II That this resolution shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the day of 1996. BOB CASTLEBERRY, MAYOR ATTEST: APends No, 96 - D AgendA ne+n C! ¢ 7 i Date CITY COUNCIL AGENDA ITEM TO: MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Nick Svehla, Acting City Manager SUBJECT: RECEIVE A REPORT REGARDING THE DEREGULATION OF THE ELECTRIC INDUSTRY AND ITS AFFECT ON DENTON SUMMARY: As a result of major technology advances in electrical power generation and natural gas exploration, coupled with the deregulation of the natural gas industry, the electric industry is facing significant deregulation, Mr. Rick Covington from the consulting firm of Resource Management International (RMI) will present a review of these industry changes and their likely impact on Denton at the April 9 council meeting. The technological advances in the electrical power industry are primarily a result of combining a jet engine with a conventional steam boiler-turbine power plant to increase the efficiency of converting natural gas fuel into electrical energy from 33% efficient to 60% efficient. Those advances in conversion efficiencies coupled with technological advances in the use of 3-D computer seismology used in natural gas exploration, horizontal boring technology used in the production of natural gas, and deregulation of the natural gas market, has brought the price of natural gas down from a high of approximately $4.50 per 1000 cubic feet in the mid 1980s to a stable $1.80 per 1000 cubic feet Ioday. Natural gas fuel at $4.50 used in a 33% efficient plant produces electricity at 4.5 cents per kwh for the variable cost of fuel plus approximately, 1 cent per kwh for fixed costs for a total of 5.5 cents per kwh. Therefore, when natural gas fuel prices were escalating in the mid to late 1970s and early 1980s most electric utilities built coal fueled plants to take advantage of the much lower cost of coal fuel. Another factor in electric utilities decision to switch to coal, and some to nuclear fuel, was the state and federal regulations limiting the future use of natural gas as a fuel for power plants. Power from most coal fired plants are in the range of 1.3 cents per kwh for the fuel and 2.0 to 2.5 cents per kwh for the fixed costs for a total of 3.3 to 3.8 cents per kwh. TMPA's total costs are in the 4.0 to 4.5 cents per kwh range. The fuel costs for the new combined cycle power plants using $1.80 gas is 1.1 cents per kwh with another 1.4 to 1.7 cents per kwh for fixed costs and profit for a total of 2.5 to 2.8 cents per kwh. Considering that in a city of 100,000 people the normal power usage is in the range of 1,35 billion kwhs, a one cent per kwh difference in the price of electricity represents $13.5 million. Financial differences such as these have brought substantial pressures to Congress and state governments to deregulate the traditional vertically integrated electric utility and allow new emerging power producers to enter the market and undercut the existing power suppliers. Unfortunately, the existing power producers built and financed their power production plants with the assumption that they' would have a firm market in which to sell their power and thus receive the revenues necessary to pay off the long t home'penny b' ccuncirar;itcm' deregu If 209 Agenda tJo~~ Agenda I em _ CITY COUNCIL AGENDA ITEM 031e APRIL 9, 1996 PAGE 2 term debt. In 1992 the Federal government deregulated the high voltage transmission system in the United States, requiring the owners of those lines to carry any generator's power who was willing to pay essentially the average cost of tansmitting that power. The high voltage transmissions lines are now considered "common carriers," similar to the natural gas pipelines and the local telephone systems. The Federal government left to the states the task of deregulating the distribution systems. Those distribution systems have historically protected each utility's right to essentially exclusively serve the customers in those territories. For example, Denton has the "Certificate of Convenience and Necessity" (CCN) from the Texas Public Utility Commission (PUC) to serve the City of Denton. In addition, the 1995 Texas Legislature gave the PUC the responsibility to develop a report on the structure of the electric power industry and emerging competitive markets in Texas. (See "Order Initiating Investigation," attached.) The PUC has been holding workshops for several months and will be filing their report with the legislature later this summer. On February 20, 1996, amendments to Section 23.67 of the Public Utility Regulatory Act, 1995, were adopted. This section requires utilities to provide wholesale transmission service no later than February 28, 1996. One issue the PUC is addressing concerns the pricing for transporting power over the high voltage transmission system that is owned by approximately 15 to 20 utilities, including Denton and TMPA. The PUC has decided that the pricing will be based 70% on a "postage stamp" rate - everyone pays the same price per kw of connected load on the transmission System, regardless of how far the power must be transmitted from the power plant. The other 30% of the transmission rate will be based on a "vector absolute mile" (VANI). VAM is dependent on how far the load is from the power plant. The concept for the "postage stamp" rate is that every utility with transmission costs will send a bill that represents that utilities transmission costs to a central clearing fund and the utility will then be billed by the clearing fund for their respective load on the transmission system. Denton's transmission costs are currently in the range on $5/kw. TMPA's costs are in the range of $35 to $40,1w and the statewide average is believed to be in the $20/kw range. Denton's connected load is approximately 220,000 kw of which 97,000 kw will come from TMPA and the remainder from Denton's own system. Although the pricing mechanism will not be finalized until April 15, 1996, the general concept of calculating the cost of transmission based on a "postage stamp" rate yields a transmission bill for Denton in the range of $4.4 million (220,000kw x $20/1-w). (Local Denton transmission cost ((220,000kw-97,000kw)x$5/kw) plus the $3,880,000 TMPA transmission cost ((97,000kNv x $40/kw) for a total of $4,495,000.) Denton's current total cost is $615,000. Considering that the pricing mechanism does include a 301.10 component for distance, Denton's bill should be less than the $4.4 million. The other major issue is how to transition from a fully regulated industry, one in which the utilities have j bomt pemry_ b eouecir agiim deregull.a09 AgenJda AgenDate not only had th e right to serve but the obligation to serve. In meeting that obligation, most utilities did as Denton and built or contracted for a power supply that they thought would be the best and lowest cost when the decision was made. However, due to technological and regulatory changes, that is no longer the situation. The PUC is struggling with the concept of how to compensate the utilities who built those plants, many because of the regulations and/or approval of the PUC or the State, for their investment that will be a "stranded" cost to the bondholders or shareholders if the PUC deregulates the service territories and lets other power suppliers pick off the customers. A major concern is that only the large customers will be "picked off" leaving the small business and residential customers to pay the remaining debt on the stranded investment. t As a historical review of why these changes are occurring one must go back to the early years of the electrical power industry to understand how and why regulation exists. In the early decades of this century, as the electric industry was developing, there was substantial consolidation of electric power comipanies so that a large customer base could be secured so that economies of scale in power generation could be realised. As a result of these consolidations, electric utilities became virtual monopolies. As customers complained about high prices resulting from the monopolies, states were asked to step in and regulate. The power companies traded regulation with guaranteed profits in exchange for the right to operate their vertically integrated monopolies. As power generation technology advar--' `arger and larger power plants, economics of scale kept power costs going down from the 1920' • 1960's. The fuel of choice for the power plants was predominately coal but substantial grin : ,atural gas fueled plants developed after World War 11, primarily as a result of the natural gas four.,i along with the oil during the major exploration efforts just prior and during the war. Power plants were a good market for the natural gas industry due to its summer peak usage as a contrast to domestic usages winter peak. By the mid 1950's substantial pipelines had been built from the southwest to serve the domestic and industrial natural gas demands of the Midwest and the northeast. In 1954, in a Supreme Court Case involving Phillips 66 and the U. S. Government, the U. S. Government determined that it was appropriate to "regulate" the price of natural gas if such gas is sold across state boundaries. The subsequent regulation of the price of natural gas kept its price low in comparison to alternative fuels such as oil or coal. Demand for natural gas in power plants continued to rise, particularly through the rapid growth of the 1960's. However, exploration for natural gas dwindled due to the low prices being regulated by the federal government. With the OPEC embargo of the early 1970's and oil and coal fired power plants being converted to clean natural gas fuel due to crtvironmental laws of the early 1970's, the result was a shortage of natural gas. As a solution to the shortage of natural gas supplies in the mid 1970's, the Federal and State governments put a limit on the future use of natural ga.; for electrical power generation. As a result, Denton and the three other TNIPA cities joined together in 1975 and formed TMPA to build the lignite fueled plan near Bryan, Texas. Then, in the early 1980's the Federal Government deregulated the natural gas industry. Natural gas prices had risen from 2511 per 1000 cubic feet to $4.50 per cubic feet form 1974 to 1984. With Denton's plants being approximately 2801% efficient, the cost of the fuel component of electricity soared from .30 per kw to 5.6¢ per kwh from 1974 to 1984. Denton's fixed cost of the j. hotne'penny_b cnuncif agitem'dmpaIt a09 L Agenda No. CITY COUNCIL AGENDA ITEM Agenda I m APRIL 9, 1996 Date " • PAGE 4 power plant was in the range of .50 to .90/kwh in 1974 for total production costs in the 6.1 to 6.4 cents per kwh. The visions of lignite power at 5 cents per kwh was welcomed. At the recent bond rating meeting is New York, Standard and Poor's provided the City with several articles they have published this past year on the effects of deregulation on the effects deregulating the municipal power industry. (See attached packet.) Of particular interest is the June 19, 1995, article, "Preview of Municipal Electric Business Positions," and the June 26, 1995, article, "Outlook Dim for Some Municipal Electrics." Rick Svehla, Acting City Manager Prepared by, R. E. Nelson, F;xecutive Director Utilities j.,home'Mny_Vouncifapl m'deregult a09 a0ends N0. Q Agenda It M ORDER iNn'IATING INVEST[GAT1ON Date ` Purmutt to Sections 1.101, 1.201, 2.001, 2.0030 2,057(e), 2.151, 2.201, 2.20% 2.2030 2.204, 2.203, 2.206, and 2,207 of the Public Utility Regulatory Act of 1985, Tex. Rev. Civ. Stat. Ann. art. 1146x0 (Vernon Supp. 1996) C`PLTRA95"), the Public Udlity Commission of Texas ("Commission") institutes this proceeding to determine t4 magnitude o£generation excess costs over market BCOM") and potential lost revonues resulting from various oompetiave scenarios and the appropriate allocation and rK4wy Of ECOM of investor-owned, mu,ticipally-owned, and cooperatively-owned electric power utilides in Texts. TF 1✓E'R~4~TM~~Tt~aN ~ . Legislative direction, the need to examine the Kmcturo of the electric power indu3oy in Texas, and emerging competition for generation in the eleciric power industry all I oont ibute to a need ror tho Commission to investigate the problem of potential generation stranded investment or ECOM at this time. In Pi1RA §2.057(e) the Legislature gives specific guidance to the Commission to investigate issues concerning stranded investment. 21W commisVOR .Volt submit a report to the Mh Legislature ofi methods or Proeediarn.r fS7r qumrtlfylrrg the nrabrnltade of stranded dnrstment, pmm io is jar allaealIV Gaffs, and the aamptable methods ojiyooswrlnaq siancur4rdcosta The legislature also understands that the electric power industry In Texas is In a period of tragfsition. its statement of legislative policy reads: ?Ire /egtslature finds that The wholesale electric Industry through federal t' legi rlattw, Adteial, mud ad ninirtrative actions Is becominX a more competitive industry which does not lend usepo fraditional electric utility regulatory rules, policies, and principles and That, therefore, the public Interest requires that new rules, policies, and principles be formulated and applied to protect the public interest in a more competlti~v marketplace. r Furthermore, the Legislature specifically asks the Commission for recommendations regarding rules, policies, and principles appropriate to the more competitive marketplace in the Commission's Scope of Competition report; J2,pp1, PURA. 3 Agenda No. ~a 10 %.dhow The report.rhall also include recommendatlrunr to the !e!{!sl Apenda ! leglrlatinn that the 011xrrri"1011frndr approprlale taPromule the Public interest hr the context of a flartlally competitive electric rXar~eL r However, the Cammissiott, the Legislature, utilitia% the financial communi s ty, interested parties esvtot begin to seriously contemplate indu and l the the issue of potential stranded investment is resolved. In order to not promote or inhibit any pai;ialar industry restructvro proposal, the issue ofECOM must be dealt with on e system-wide basis in a manner that does not depend on the eventual industry sfiic The importance of stranded utvestment issues in an examination of emerging compe(ition and possible industry restructuring is clear. In its NOPR on and Stranded Investment, the FERC recognized that Open to 1 address ransrnded costs in order for electric is essential to stranded power markets to become competitive. We believe it it ecemtial to addrkcr the towrnr! Lrnttitiorr lswar aseoclaKd with iJie A~W rymrt¢aetitionregrgrnri/riy, ?lrenrxstsigrifrcrnrlufrhe~¢Issvxrirrtratsrtdoam meos sry of ArXirimate aim ►erjllabte v"kjad casts is er/trcal to the "KWssfit1 brtftif on of * elec7r; c utility r►adlustryfiom a dghtly reg'WwO4 ciast-of oerwce M davy to an qvn bansm r w•ion=esq carrperiJiuclypric+ad 710 CMMiWn exatMrrod Orricled investment issues to some degree its Nlanaklrrp Projad on 71rwrMSdon Access and Pricin in the op in le n ArA . xss In ^il~ng Project, the Commission determined that to have a tra~ No,namiaao14045) the place by the statutory deadline of February 28, 1996, and to give st ft I rule the degree of dd'har*ion required, the issues relating 0d Lsuee the a future protect to atnnded l:tvr!stnne,it rliuukl be duel to In the Commission's judgment, the time has come for the Commission to address these t ethical issues in the proceeding instituted today, WHORITY The following sections of PURA grant the authority to the Commission to order and umduct this investigation' See. 1,101. GENERAI, POWt:.R; i ULES; HEARINGS. (a) The commission hac the Kengral power to regORte kind supervise the budnoou of every public utility within its Jurisdiction and to do all things, whether spocifically r§zrat, PURR,-- w Neiioc orPteivsod ftutcmking, at 13? 4 AdenQa Nt,_ `V designated in this Act or implied herein, meccas aflenda t em of this power and jurisdiction a[y and oonveni( 0 t ~0 See. 1.201. Rr-CORDS OF PUBLIC UTILITY, (a) Every public utility shall keep and render to the regulatory authority in the manner transandacttornedprescribed by the commission uniform accounts of all business , (b) The commission may alto preacribc ixma of book memoranda to be kept by such public utilities, inctudinsthe t oo4acc, and records, and meranda of the rendition of and cepaci y for aCd ee gdS "I bass the recelpta and expendimotures of money, and any other fornts, records, and memoranda which in the judgment of the comuafevion may be necessary to ' out any of the provisions of this Act. Sec. 2.001. LEGISLATIVF. POLICY CONCERNING REGULATION OF THE ELECTRIC UTILITY INDUSTRY, + (a) This title is enacted to protect the public interest inherent in the rates and services ofpublic utilities. The legislature finds that public utilities are by definition monopolies in many of tho services They provide and in many of the areas they serve, and that therefore the normal forces of competition that operate to regulate prices in a free enterprise socl except as other~se society do not always operate, and that therefore, aro regulated AS r provided for in this Act, utility rates, operations, and ae Mces by public agencies, The purpose of this title is to establish A comprehensive regulatory system that Is adequate to the task of Wild" as defined In this title, to assure rates, operations, and se 0o regulating am 00 just and reasonable to consumers and to the utilities. The legislature finds that tho wholesale electric industry through federal legislative, judicial, and administrative f actions is becoming a more competitive industry which dges not lend itself to traditional electric utility regulatory rules, policies, and principles and that, therefore, the pubE j interest requires that new rules, policies, and principle, be formulated and applied to protect the public interest in a more competitive marketplace. The development ofA competitive wholesale electric market that allows for increased participation by both utilities and certain nonutifities is in the public int"t. Sec' 2.003, SCOpq OF COMPF,TITION. Before January 15 ofeach odd-numbered year, the commission shall report to the legislature on the scope of competition in electric markets and the impact of competition and industry restructuring on customers In both competitive end nuncom[wlitive markets. 'The report shall include an assessment of the Impact of competition on ilia rates and availability of electric services for residentlel and email commercial customers And a sulumary of commission actions over the preceding two years that reflect ch,inges in the .cope of competition in reguiatcd electric markets. S Agenda No&nr The nPoK sh all also include recommendations to the legislature for erlte that the camrrussion finds appropriate to promote the public interest m t e conMildly rnmttirivr electric market. Set. 2.057. WIIOIXSAL13 COMPETITION. (e) The commission shall submit a report lathe 75th Legislatureon ' Procedures tut quantifying the magnitude of stranded inves*neentfie~~ r allocaen , pmceduroa for 8 oosts, and the acccptable methods of recovering stranded costa. a' See. 2.207. SEPARA710NI AND ALI,OCATInNS f ntts ofh6litiet, revenues, a e pettscs, taxes, and reservea shall be separated or allocated as prescnW by the gulatury aulbority. lSec. 41(b)] The following aecti j On of the Commissions substarttive rules relates to requirements4 utilities to file special reports: §23-11 (k)Special and additional report. Each utility, including municipally owned es, report on lbrms prescribed by the commission special and additional information as requested which relates to the operation of the business of the utility. tTANDARD & P00R7' Sq, • 1 CREDITWEEn ■ MUNICIPAL THE AUTHORITY ON CREDIT QUALITY A NUARY 30,1498 TWO NOTABLE EVENTS MARK 1994 FOR MMWEC The last quarter of 1994 was rnarked by two un- mont in 1989. The Vermont parhdpants had chal- portant events affecting the Massachusetts Mu- lengedthe vabdityoftheparticipants'ProlectNo, nicipal Wholesale Electric Co. (MMWEC): the 6 contracm SuMquent litigationchaUerigingthe utility carried out the largest tender of municipal vabdity of power sales agreements have been bonds ever by a tax-exempt entity, and it was settled in M.MWEC's favor. MMWEC's Project l requi red to payout S3 4 million to four Vermont No. 6 prov1des ownership shares in the Seabrook utilities u part of a judgment. Glut 1 nuclear plant. The $112.8 million tender-part of a refunding MMWWEC is passing through the costs of the program that has been going on since 1992-is judgment to the remaining Project No. 6 parti i- expected to reduce debt service by about $3 rrul- pants through monthly billing, However, the 7 = Lon annuaUv, with life-of-debt savings of more largest Project No. 6 participant, the Hudson 13 than $44 rrullion for the 28 municipals ies that Light&Power Department, has withheldushare a °i participate in MVINEC's power supply proOs of the additional December billing, contesting s ¢ o It also is expected to provide a hedge agamt M.NM'EC's abiLry to biU other Project No. 6 par- fluctuahng interest rates. ticipants for thetudgmerit and requesting arbitra- Recent declines in the bond market enabled hon. Another participant, the PeabodyMurucipal MMWEC to buy back its bonds at substantial Lighting Plant, has paid its billing, but also is discounts. To repurchase the bonds, M\IVAEC requesting arbitration. issued S97,6 rruUion of vanable-rate deft in No- All other participants have paid the full vember 1994 The variable interest rate always monthly December biUing, and MMWEC man- wiU be less than the interest income on an equiva- agement does not expect the other participants to lent amount of required float ting.rate assets, contest. Thu controversy is not expected to un- Prior refundtngs already have reduced pact MMWEC's credit rating ('BBB+' revenue MMWEC's debt service by 536 million, with a bonds; stable outlook), as MMWEC management Lfe-of-debt savings of $875 million. The savings is exploring legal means to coUM the approxi- result in lower power costs and enhanced nexi- mately 565,000 being withheld by Hudson. In bitty for the participants addition, MMWEC has ample reserves to cover MMWEC's S3.4 milLon payout to the Vermont amounts withheld by Hudson, uhhties resulted from an October 1994 judgment Hounrd Spumberg (21:) 208-8096 p rov id ing restitution of a portion of the payments Bill Cox (212) 208-1866 made under contracts that were voided in Ver• Copyright O 1995 by The McGraw-KII Comoaroes Inc Reproduc0an in whore at part prorvbeed except by pe mssw M rphb reservtad CREDIT COMMENT ad vantage isenjovedmore bvresidential custom- option has some promise, but it is politically ers (33°r less than private uhhrv rates) than by problematic In addition, where rates are already Industrial customers (2°r less than private utility too far out of line w th the region, the window of rates). Many councils and boards will have to opportunity already hai closed, Ntrertheless, choose between winning the battle of resstance S&P expects a wave of debt restructuring and Q to gradual movement toward cost-cf-senlce ad- r"mortrahon pro"Ls that will be aimed at lustments, or winning the war of survival, pay:ngdown debt sooner, ratharthan later- par-ticularly in the Southeast and in California, If THE QUEST FOR EQUITY properly structured and timed, these proposals Many of the utilities with negative outlooks have both credit and competitive benefits. simply have too much debt, either because of The other option, new equity, is radical but z E' 1 excess capacity, excessive use of capitalized inter- realistic. S&P would respond favorably if uhhties est, or too highly leveraged off-balance-sheet ob- found new sources of capital that alleviated the cc (V* v c ligation. This conclusion is derived from the fact burden of level or rising debt service, for utilities W 'A O1 that the total debt-to-peak-demand ratios of these that are too highly leveraged, an Maim of new u Zi, c utilities is higher than trudustryormgkxullnorri capital from local or sute-owned pension funds, a a This indicates a need to spread higher feed colts or deeply subordinated investor, or even rem- over a sm~Uer demand base. Adding to the prib- vestment of 'transfers' would alleviate some of Iem for some of these issuers are level or rising the principal amortization problem The cost of debt service obligation over 30 years-irudicat• this capital would be the sarne or higher than ing tic pending relief of the fixed cost burden. existing debt, but it presumably would not need Unfortunately, this is all being realued at a time to be amortized in the traditiorul manner of mu- when investor-owned uhbties (IOUs)-particu- nicipal revenue bonds, Iarly in California-are exploring option to di- For example, a large dty's pension fund could vest themselves of burdensome assets and, in invest in its own utilitysystem under negotiated some cases, accelerating depreciation of those as- terms to provide a far investment return to meet sets, the fund's needs. The terms could include a non- Public power utilities have at least two options. traditional approach to principal retirement to They can begin ppaying down their debt more reduce the utility's annual obligations. This rapidly now, while there is some window of op- would create windows of relief for ratepayers porturuty', before full reran wheeling arrives; or and decrease risk tocreditqualitv for the remain- they can seek sources of new capital. The prior ing traditional debt obligation. talllw 01M ~1 OlrtwwA maim [Mc" Sys CaW 6201 015 A.A. MM SPA- Eugene EwC a Wtr . Sys Mow Nader Aq I. On. tilt 600 AA Neg WA. Lewis Canty PUD (Co.Nt fahlWuh $161.900 M ill" IPA- Noft Waco Peo*I W Dd.. Ore mom AA Ne'1 IPA. Wat rviw AA Pwr. Sraim (Prot. 0122)• Waft $1.257 000 AA w0 11144~41 1 and Nwwaw Erwgy Symm. On 630.1.10 AA Mel. IPA-Tuana PO W. Lt Dn Case ko0_ Dn. _ 572216 AA we CeWba1 Lrsln Pao" LW. On $12.106 At Neg. inlermoawan M Apr PW &APA Utah & 43O .S73 All 1110 mwrvm~ Pw Aey Pwr S4pfy. Utah $171.095 AA- Np LA"W4 fill $311706 W INC Loa AMw Daps o1 Wtr a Pm. Caal 52.721.000 M Ne0 Matoo Cory PW Waen 616175 A- Neg MEAG-C*orW" Pn I Spr. Gnwm Ga. 61.001600 A. Mp MEAGGewga Mre AI, 1 Sr Ga 52.329.712 A• Nep MEAD GcaOM Wn P1 I Sub. Ga 5731205 A Meg MEAG-GmW Mum Pi 24 IN Ga 6517.000 A, Act A1E044m" Maw Toaiw Ser I, W 521.000 A Neg MEA.134mtpa Vim var RaM Sub Ga S97350 AA-1 Mao N1tAoU Pub Pw Dist rwa 51 441.106 Ar Neg Nw Yon ►am AvOr N Y $3.195216 Ale Neg "C96" Faisal law NW Aqy NC $7.180.000 A- Neg N" Canirw " Pw. Aey f 1. N C $2770 us A Meg Pwrnar Min. Pw. Apr, MC 350 070 A- Neg P w Alm EMax M• PA St. W6064 A- Meg Soudem CAMIIrma PA Pw Adlt 1"o"I. Lad 577200 Ak Will SauOwm CaMonQ Pub P r Au* IA•r 111,oRC11 Card 1177,tis AA Np SDAMM CYAOnwa Py0 Pw AuM IPw Pi DWI Su0 Cad SNAW AA. Neg SM%m Carbmu PA Pw. Audi (TRANS Aoledl Cad 5655000 AA Meg So~ CjWWM Pub NO Aim. (TRANS F4W) Sub Cold 5793175 AA tleq Sm"M Mom Mum tin Aef. Moan $860 701 AUr Ne9 PG&E G"AW NeraM 1rr. Ast rYt" kaI Cad IM213 A Neg Oeorlk 'WfrMou wr NO Cam SW SW A Neq SyW In oat cam 927000 A 10" YCrary Wtr D'A Calif _jKa A 011119 t0111 !73244 191 W%_40 cril"atlr we "9*4 rNkA WIS 2 RWOAM O ROM STAMM* A POMIS MOf11MpX AVJNS*P" AMbL 10, ItlHf f COVERSIONT Less radical-and probably much more will include stranded investment components. likely-are proposals that would These costs may reduce the economic benefit., .Increase uhhties''short-term andyanable•rate initial] yattnbuted.o"municipalization". exposultor Cities contemplating similrr actions should • Increase the number of bullet maturities and avoid three pdfalls to maximize both their credit term bonds, and ratings and business positions. The primary rea- • Increase the use of derivatives son for "municipalization" should not be to pro- Each of these options would have to be vide the general fund with an alternate revenue weighed carefully to measure the sluff of rsks stream from surplus electric revenues in the face from ratepayers to bondholders Some of these of voter opposition to new taxes, options, in certain cues, may result in better credit Secondly, the traditional use of long-term reve- gwlitythan analtemativekssofcustomers. nue bonds with straight-line amortization to fi- nance the purchase of the distribution system CONSOLIDATION without an equity contribution from the city Forrrwnysmaller systems, paricvlarlythose par- places what can be an undue heed cost on the bapating in lughly leveraged pint action agents system before it ever begins to deliver power of the Southeast and West, S kP believes compeb- under its new organ ization. Lion wig forte consolidation. The central question Finally,autility shwidattempttobalance itsnew for some of these utilities with competitive risk is: power supply resources Rallies than locking in Can they continue to have multiple financial teams, participation in long-term single-project or single- multiple maintenance crews, multiple mew read- utility-system capacity purchases or, altenutively, ers, and multiple wrviee vehicles? after.5 rig to rely on currently low rates in the S&P believes that, in some mstams, credit surplus power markets, a newly 'miiudpahzed" quality would be better served by consolidation. utility would be best served from a reliability, cast, Some smaller joint action participants in North and credit perspective by balancing its power rw Caroiira have seen their 15% rate advantages sources between short and long-term cornmut- converted to 15% rate disadvantages in less than ments, and among several providers and fuel types. 10 years. Even when only a few inseams of the rate-disadvantaged communities occur, they RESERVES AND MARGINS pose political problems for the larger agency that Some would argue that the retention of cash by could lead to credit detenioration.Retentionofthe a large public power utility with access to capital concept and practice of public power, and all of is an inefficient use of resources. Some also would its benefits, may require cities to sacrifice com- argue that a utility exposed to competition may plete control to a larger, more efficient organza- be better off with slirtuner, rather than greater, lion. However, in cases where individual artid- margins. These are reasonable business argu• pants' needs are widely divergent, further ments and reasonable competitive arguments, separation may be best for individual parses, but they are not necessarily in the best interest of although not necessarily the collective whole. bondholders. S&P stands firm in its belief that the The concept of some form of aorsoiidabon of most highly rated uhhhes will be the ones with publicly owned systems already has been proposed not just the highest margins but with the competi- n California. aria the corsolidabon of some rnarr hve muscle to retain those margins. Clearly, some agement And firundal services is being explored by utilities will be able to retain credit quality even Electricitses of North Carolina. Not only does this with reductions in margins or reserves, and an ctxxept have merit, it may be necessuy become tven better long-term credits because of Assumi g that organizational and techrucal Ls- these actions; however, by and large, investors sues are surmountable, the mainobstadestocon- should not confuse the fact that financial polices sohdation will be pobticaI. S&P believes the abd- and competitive strategies often will be at adds icy to overcome some of these political obstacles in a more competitive environment. S&P is re- isgoing to partly define wuuwrs and losers on the sponding to many proposed changes in reserve competitive landscape. and margin polices, always with a bias toward balance and consistency. MUNICIPALIZATION S&P will continue to weigh bods qualitative The4larrh29release bytheFederal ErergyRegu- and quantitative features in its analysis of the latory Commesm of its wholesale bwamismon utility sector evolves further in the throes of com- notict of proposed rukmakirng (NOM) appears to petition. Industry changes will requiredanges in generate additional opportunities for cities with the emphasis-rot the content-of Sadys araly- highpower caststo"munidpalite"their systms - sits. The business position assessment will be a that is, purchase their distribution assets from an tool for investors to recognize which utilities will IOU, circumvent their traditional power provider, be at competitive risk and, therefore, whkh may AM purchase more economical wholesaleponver pursuechangain their organizabomland finan- trom other providers While aaves to wholesale cial profiles that areouduud above. power markets seems to facilitate "muirucipahza- 8411 Cox (212) 108.1866 lion", the NOPR indicates transmission prices MaryColby (212)208-1157 CopyrVA 01995 by That McGraw+Hil Conpanles, Inc. Reproouclon in of o (W prolmliv d wicapt by penmiasion. Alf tlglnts MwYed. t q/INlI1M !lO/A STr111CAM ill 1tOOlrti CIM,YrIpL ASYN OM APIA I*, I"M 3 STANDARD POOR'a 1 . CREDITTWWVE MUNICIPAL THE AUTHORITY ON CREW OUAUTY APRIL. 10, 1995 PUBLICLY RATED G&TS WELL POSITIONED FOR COMPETITION As competition increases in the electric utility factored into its ratings for nearly a decade. The industry,p=1yratedgenerationandtransrnis- business position assessment has been estab sion rural electric cooperatives (G&Ts) are well fished toprovide investors with enhanced ability positioned to remain viable power suppliers in to differentiate between uhhty systems across all the Future. These G& Ts have demonstrated their sectors. ability to compete in a changing environment S&P recognises that G&W characteristics dd- through proactive management, low power pro- fer from those of municipal and investor owned duction costs, access to wholesale markets, and utilities (ICIUs),however, they share one common minimal capital expenditures for regulatory corn- trait :-the envirortmentin whnchthey must com- > = pliance. S&P believes that the challenge to the pete. S&P believes that every electric utility G&Ts will be to work with their member systems whether municipal, FOL', or rural electric coop- v a incontinu.ingtoreducetheendusers'retadrates erahve (REC) must fuily embraceand preparefor o ac ° through load management, economic develop- competition The following discussion is focused 4 ors ment rates, and system efficiency improvements. on the primary areas S&P is exploring to deter- S&P is in the process of assessing the business mine the business positions of all electric utilities, positions of the G&Ts. G&T's purchase and/or wluch are management, operations, competitive generate electric power for sale on a wholesale position, and markets. basis to they member distribution cooperatives. Mowgemenh. S&P has always considered a In turn, these cooperatives distribute the power G&T's management team to be an important ral. to retail customers. About 27 million people in 46 ing factor. In the context of the business position, states and U5. temtones are served through the the management team plays a similar role in that 829 distributors and 64 G&Ts in existence today, it is one of the stronger predictors of a G&T's S&P rates seven G&Ts which repreyent over S2.4 long-term viability and strength. It is S&P's view billion of rated debt. These G&Ts are among the that management should fully embrace and pre- strongest in the cooperative industry, as evo- pare forcotnpetition. A management team must dented by ther'A' and 'AA' category ratings (see be proactive and far sighted in their management table f Y. approach. This far-sighted approach begins with establishing a long-term strategic plan that iden- t aaM 1 hhes competifive threats as well a s opportune ties. coarattw a Tranarl" AM Toot Management must be aware of competitors' rate ON WM and cost structures and develop plans to match issuer A+or+O ~ ► rleeaotil6ooti them if necessary. Management should identify 64tH PoPer N D A 541110 36 t00 Pow ONO Sabo olt 76300 and know both their distributors' and their retail Chv . MgarA EMCOx Ana Atas A A same 716646 customers' in terms of current and future energy Daryw Pow" Wa AA stable 26.270 needs, service requvenxnts, load factors, and Noouer Energy Ina A slam 24.662 cost of service, Also, a good management seam DOWW" Old Domexo Po* v ya Ate. ~ 1200 6610040 will continually cultivate a good working rela- Tad 24"611 tionship with their distributors and the distribu- tors' customers. S&P's business position assessment measures S&P recognizes that a G&T's management an electric utility's ability to compete effectively team operates in a different envisonment from in the UAustrv's increasingly competitive envi- that of a municipally owned system. Primarily, a ronrrent. The business position is a subset of the G&T's management team must manage a diverse general rating factors re%iewedin the as,ignment group of distributors Basin Electric and of S&P'sestablishedcredit ratingsand formalizes Oglethorpe Power Corp. (OPC) highlight this the analysis ofcompetitovepositions that S&Phas characteristic. Basin Electric sells power to 108 SPECIAL REPORT i SPECIAL 1900 distribution cooperatives located infivestates,- Electric's management team has been faced with InOpC'scale, manage men I must offset the diver- over 1,000 MW of excess capacity, since 1986. gent resource needs of distnbutors experiencing However, management has been able to success- rapid growth in the suburbs around Atlanta with fully market this surplus under short-term con- , those of the slower growing rural distributor. tracts and on the spot rsarket. The short-term One aid to management is that sometimes, a contracts have worked to their benefit, providing G&T's management team is somewhat removed opportunities to recover increasingly higher rates from local public policy interests which some- as the market tightens, inessence, a more forward times negatively impact a municipal system's looking approach than entennginto longer-term, competitive interests. An example of this would fixed price contracts which in some other cases, be a municipal utility governed by a city council would be preferable. that transfers a portion of the system's revenues Operations. G&W primary power supplies are to the city's general fwd. The transfer may sup- coal-fired generating plants. G&Ts, in general, port a public poucygoal such as keeping property have very little exposure to nuclear power plants, tares low or capturing revenue due to a property unltke municipals and IOUs. Of the seven G&Ts tax base dominated by tax exempt property. reviewed, all have a concentration in coal assets However, excessive transfers that artificially in- andhrl.Theexceptions tothis amChugach Electric (late rates may limit the municipal utility's con- Association which is looted in Alaska, and reliant petitive position. This difference may provide a upon nmuzlgas,andOldDominion Electric, whxh G&T's management team with a larger degree of currently relies on purchased power, aldw* it is competitive flexibility than the municipally building two 390 MW coal fired units, owned system. The tugher rates often associated with RECs is Another critical difference between G&Ts and generally ocxrr at the retail level as a result of the municipals is the enomrlous investment required higher apppa) investment per customer. Gem- to serve Huai areas. This large invatrnent has ally the MT's power production costs are low necessitated G&T's management otium to keep and compare favorably with competing municf- ooppeerations and maintenance costs as low as po6- pats and IOUs. Lower wholesale rates are att ib- sible. A REC's investment per customer is 30%'> utabk to G&T's lower cost of ca pital, due to their 35% higher than urban utilities' investments. low cost loans from the Rural Utilities Service RECs serve, on average, five customer per line (RUS) and the National Rural Utilities Coopera- mule compared to municipal and IOUs that serve tive ponce Corp. (CFC) and very little capital- 31 and 32 customer per line mile, respectively. ized interest duringcorutrudion periods. For n- This inherently inefficient system has fostered a ample, Basin's ability to market surplus power is cost conscious muragement approach that many dirextiy tied to its low production cosh, ranging municipals are now beginning to examine as from f0.0098/kwhto Sa.014/kwh competition increases. Nevertheless, challenges However, without an extensive transmission remain. Management must continue to identify network that allows it to move power to Arizona, and work with members that areinevitablygoing Washington. and Canada, Basin's low produc- to be tempted by )over wholesale costs in a rap. tion costs would be to no avail. Traromiaion idly clanging market. ownership is a characteristic that is cocrunon to A good management team also plays an impor• the G&Ts. By owning transrnwom G&T% are tant roll in offsetting operational weaknesses. A often able to circumvent some o(dwiroperabonal number of the G&Ts reviewed have 1 «xYS capac- d isadvantages, such as few economies of scale for ity as a result of over building during the 1980s. theusales tomembers, andtocompete invarious However, these concerns have generally been wholesale markets not easily accessible to mu- offset by management's ability to successfully nkipal utilities, which traditionally lack trans- market the surplus power. For example, Basin mission. low t awesai a Nomura mete 19" 6 0MM *Awn ams.rlwes Old ban tlucteh CNOO oerylwa 1IMM t Doo mw Teel nwraa cum 4%901 701.767 170 612 166 177 2MYS 1.016177 3412M 1101 m. areaelm r 41m wNn i1000f 17617 W so 563W 47.117 94JO 459231 70361 CONAir44 &M er11o woerap4 01 1 24 116 1 U 153 1 41 too 2 01 TOM 0161 MM 1, 2,700 334136 756401 716704 5561116 4.491.626 710.070 141110110 M Z34 130 250 117 222 49 14.6 TM 1161 m Oak (thw7 1 635 307 627 130 404 1,125 473 raw do m nW'M iM* 665 777 606 324 416 916 $42 Ilan! (OMft *K1 AvWW airier p0e rate 712 714 61 7 M 414 Sts 4.01 A map a0mg ram 10 W110 b 415 3 M 44 406 4 U 5 72 4 M avarap4 1hr9eglxt iMmbad ram 741 700 1120 672 ?S0 141 163 Stn preM Maier" ra 440 747 1020 710 6 70 771 7 s0 avmape Prbnpanl W41111 M ram 510 311 7.10 430 $ 30 414 910 Stn 4arw w0wred nu 420 420 T M 420 410 4 74 1.10 MA-4rR an4am. 2 SWOMM /1.001 STANDARD A POOR'S CtlOfTWU MuwarAL APUL I*, I "Ill, SPECIAL REPORT rue 3 GOMareaee a Wm ahriw NEW 1996 OMNI 940160 CONOWWw aas,n 9"keve Chvgxn Panyund ibas~n Ogklta~0e Oamma: +IOerxy MWn sales 13 %5 000 5.661.! 17 2 115155 6 502 962 6 3112% 29 193 0vf 6 900 0W To alr6ooann I\1 417 96 5 907 70D 554 715 1000 10 omen 1%I 563 IS 93 300 u6 '9s 00 dj% Aotfo Dan (MW) 1.060 1,M 389 736 1 206 3 us 1 676 Agero aawartr MIN) 2166 1227 501 976 1 336 6153 1 666 Apenyreser,r MWOrt 1%1 163 130 359 ISO tos 130 1126) t A01rxy 10.0 Wor I\ I 697 575 651 58 0 60 0 472 V AV" badCis" (tWAS) II 090 29 111 112 207 NA V ms~ (am) 14J 252 26 286 2.13 311 NA ~ of tow E 1 y 16.2 51.0 729 315 p0 I10 161 tyget pre a a % or MW 2 =I" 233 % 653 332 766 t36 250 °c c y S& as 0t11 xyy 49 690 221 573 A 711 631 < 4 0 W%Sa a%%co AQMVV N1 190 210 33 Na 93 332 Tao 10 orlk W" at % it Ayrey MWA saw 22.7 100 51.7 570 392 $35 NA Teo 10 read UAft" a W % of A"VY MWN no 391 15.5 97 MA. MA 17 MA N A __W ay31111611 Although the G&Ts have low power produc. bens. The advantage of G&Ts' earlier investment tion costs and good access to transmission, their in CAA coatplaancr will become more apparent melba system' bad factors are generally poor, in the future as competitors have yet to put the This is attributable to the nature of the distribution cost of compliance in their rate bases. Hoosier cooperatives' customa base. Residential customers Energy is already experiencing this advantage of represent, on average, 9M. of cooperatives' cur- making substantial investments in CAA complt- tomer base and 6M* of kwh sales. Consequently, ance during the 198N. Hoosier's competitors, even though a G&T may provide competitive which are nowbeginning to addresscomphance. wholesale rates to its member, the members' inef- have rate increase requests pending before the fictent mtemsovewhelm the low rates and inflate Indiana Utlllry Regulatory Commission while the ultimate retail rates (me dart 1). Hoosier is the only utility requesting a rate de- The G&Ts are well posihonedrorneettheClean crease. Air Act Amendments (CAA), even though most Competiroe position. There are two levels on are concentrated in coal fired generation. This is which G&T3 must be competitive: the distnbu- a result of the relatively newer irnstalled baseload tors' retail rates and the wholesale rates. A G&T's capacity and early efforts to address emission distributors rates are an important factor both requirements. Dairyland Power-Cooperative, from a credit and business position standpoint, Hoosier Energy REC, and Oglethorpe Pcwtr Historically, member distribution cooperatives' Corp., which are concentrated m cool generation, retail rates have been higher than competing mu- are expected to meet the CAA tnrough coal rucipAs and IOUs. This is directly linked to the switching programs and the watallation of scrub- higher cost of serving a small number of custom- C3 Ce-ao C3 State kdrip r• y WPWWW WOM fi1AMAM A Pows a&DMVM mina tL YM 1f11e 1Mfi 3 SPECIAL REPORT t * 1lflf~,2' I A llEt1AR 1~ 1 " f"" ~~eL~ •~l►. i att. .r.•' C"p f . :1s+'~ •Sutrawrapr 4 n tins per lice mile and a dominant residential nus pwos~nt. The busst mess ~s ition assessrnm Swill ig Comer base that results in a poor load factor. As a nttact and arrangements with whole, the rated G&Ts' rates to members have rare existing contracts been trending downward since 1987. For exarrr, members and focus on the ability of the G&T to pie, Hoosier Energy has reduced its rates to mem- serve and compete within an open retail wheeling bets by ZS% suite 1987, thus narrowing their en nons S&F's posiho that a ould pat memt,ersreMdentialrate disparity with competi high wholesale to 8% from 34% Other G&Ts that have re- tenhally be at risk of losing a member system or d uced rates in 1593 to become more competitive a portion of its load to a low-cost power provider include: Buckeye Power-8.5x, decrease, This situation ~n~en~ of trnember hree ofineC's Chugach Electric--l 4%decrease, and Da0land members, RP g Power-2.0% decrease. On the industrial side, sales, which are studying options that would al- G&Ts' member systems' rates are alsc+ generally low For a ppoorrtt~tan of their future load growth to be higher than IOUs and mwucipals tsa chart 21, suppbedbyaltemahvepower suppliers.This isa This disparity is primarily mitigated because result of OPC's rnembers continued u~ many distnbubon cooperatives have very few d spanty relative to Georg~versitY of the needs industrial custornas within their service area. In pliers, and by the growing While dIert is addition, the lsck of Industrial customers also fO~emrmbe g utilities w umt~k to competin eneration their llirrutsihethreatof in an open pen wheeling errvyonmmt, the serve these distnbu ton at a low c' ht S&P is tak- retail cog rated G&T's that have excess power to sell are poor load factors, thus highbgh y positioned to compete with municipals and IOUs ing a narrow view of a G&T's market base in light Hoosier Electric. Cur- wh :inatased comtiol-L S&P will determine tee wholesale mar~et- This , G&Ts are at~risk by dentifying member both Basin l7lectri rently, Basin Electric is making wholesale power systems teat have high load factors~s from cpxentratiotts and diHerirn82 Y temscould sales at an extremely amadrve firm pnce of 37 s nt Sys mills per kWh and economy sales of l8 mills per caber members,todeterrw- lw ower cost providers. kwh in the baseload rich Mid-Continent Area be p~tial candidates s for igtner cost-of power Pool. Hoosier Energy provides rT with a goad factors, Electric Power Co. with 300 MW of capacity at a service profile and poor firrn competitive puce of 38 nulls per kWh and dbe the least IOUs for future ioa dition from also nukes economy sales at 19 mills. municipals And f~ork future io 1212? 208 1352 Markets, For the purposes of the business pcai- W Glotfilty (2121208-I83I lion, which assumes a full retail wheeling envy cky Faallon lon (21 21 208-1863 Wrt Fox rorur nent, S&P s vew of a G&T's market is some New NOW York hom L 10020. Ed rMM 1* M1111 o :1 try S ematj* if New York NY p1p0003 ISSN G731 t~ S"nbe~ wfy as: (212)20611146 tCcpyn" 1995 t r TTa Mcyim- C epic fhGn 25 M* Dr in y. rm AN rVits rasened. OHitx is d The McG raw-M Cornotri es . Je ,epee l e. Ct omWnas Ae Exec ten in weak a pan Dro rrw except id nt and Chef and Socrwff. KerMM M. Yates. Eu aar 4 Yu Prudatt and Gentral Coansd. F rank 0, Per0m, Sala Wo F rifaidara, Tnnsury Op AOM ktlorrnabon era been Otorr Ctrtirmart and Ctiitf f~ieartne prticer, ltarold W. McGrew M. Resident eM and Lixel Operatirq plicar, Robert N L1rdeS. Sena l:xetutM V101 obaaerad by Cra0 mek Akin crpaf hom sotrrtxa b*VW to be reWbit woweMR b"JW of ft! Dos Aft Of hurnin or mKhncw "try our sitirices. Cr W*Oek fitvi Kow or WWII. of~ 40=0 ~ U34 01 SLO efft ation accuracy, matiluacy, or complewou of any iMamoon tend is rid RSDa6ida to any errors or orrissioru or tar ft WAM otilairtad 4 MOWN" ROHM "An"M ! 0100111'! COSDM1>MX MYNIVAL APVA I*, 1N5 • • CUDITW MMUNICIPAL~~~ THE AUTWAITY ON CREDIT ODUITY MAY 22,1445 NORTHWEST COMPETITION: GOOD FOR MOST, BAD FOR BPA? Utilities in the Pacific Northwest have long bene- fication of resources to lessen dependence on V/ fted from an abundance of low-cost hydroelec- SPA a long-term goal for many utilities in the O trio power that has enabled them to provide elec- region. tricity at some of the lowest rates in the nation. The need to develop alternatives to SPA has Hvdroelectnc resources are available either di- taken on increasing importance in the past sev- e redly-throughwholeorjointownership-orin. eralyears for anumber of reasons, including: 4 directly, through wholesale power contracts, at:oncem about SPA's future rote increases, most often with the Bonneville Power Admin,- specifically as A result of the increasing cost of stra tion (SPA). protecting threatened and endangered fish Low-cost hydro power has been one of the species; primary reasons for the strong ratings ofpubluly • Increasing attractiveness of gas-fired re- 10 v owned electric utilities in the region (see table and sources, caused by low gas prices and oppor- v d related updates andanalvsesr, Other factors include ruruhes for cogeneration, and Co a o service-area growth and diversification, stable fi. • Amachve pricing of purchased power as a nances, and strong management result of surplus capacity to the Northwest region and the Southwest. Nar•taew Pdk PMW Raw" er meer These factors have created great opporturuties Wks"ton (Siva Of W"IV are aeon Rab"7 ovnoot for utilities to the region-at least in the short run. Cnetal Counq Purak U" Dmm 14o I U SLOk Becat.se SPA currently projects a ca pacity short - CuArm County Pubic UNah Detaa No t 888 Subic age relative to projected demand, it has ;flowed Co* ft Court' Rick U" Detect No I R- Sub" DcWx County PuW Utlaty Orsw No t A. sole several of its customers to pursue resource op- Gram County Pt" uEaty ofwa No I A. Stank hoes independent of their long-term contracts wron County tronr Dean No I A NN with BPA. Suit 1. ekwncctrc+orl system Seaae u diversification strategy can work in the and Power AA AA $oak Th SUN 1 Snonomen C"Fy Pubk U" DOW No I A. Sink short and intermediate term as the wholesale SovlR Co umw sa'm ir+gmon Dana AA Suge market becomes morecompetitive, assuming gas raccona tbrtK sySbm t• stable pricesdonot increase sharplyand thepur6ased• O,vm power market does not hghten significantly. Cereal tmo* Pro*% Way oan>a A. Stage Also, the alternative resource options under con- t4w Wow am Eiectrc 8caa AA sunk stderatlonordevelo eni represent only a shall SVVVW r ioWy Poooki U%tv CinW A St" portion of the utilihL'trncapaary, providng com- waa fort in light of some of the potential risks. There- 8otw9uru Imo non Datra' AA sum fore, although an individual uhhVs risk might r,f Riser AwW Ekcrx Coooeran,e Bob- Stable not increase much ;s a result of this dlversifica- Iaano raft Ns°c system A su°'e lion stratel;y, the potential loss of load in aggre- Raaq one; on con rat „tn Seatoe tonrwls Power gate is certainly a risk for BPA. The compehhye situation at the retail level Most uhhhes u, the area rely on SPA for most holds the same threat for BPA. Although some or all of their energy needs. Even with the large utilities aught lose Industrial customers in the rate tncreasesoftheearlvandrrud-14805,-related event of"reta %Win&" most have the option to SPA's involvement in the %%ashtngton Public to reduce purchases from SPA as their pnmary Power Supply System 'snuclear projects 1,2,and supplier. Therefore, the impact on theirsdividual 3-the cost of power from SPA remained attrac- utilities will not be as significant as the potential tive. However, the increases have made diverst. impact on SPA. CREDIT COMMENT d BPA is undertakings number of dramatic steps event, public utilities in the region should benefit that it hopes will improve its competitive posi• as the increasinglycompetitiveenvironment pre- tion. This includes dramatic cost reductions, av sents new opportunities and forces BPA to keep eraging $250 rplllion per year over the next five rate increases to a minimum. years; more flexible rates and contract terms: and Malachy Fallon f 2121208.1841 more service options for its customers. In any Hounrd Spumberg (212) 208.8096 I Reprinbdtrom erednwtlr iauraooer try Standard A Pools Ramp Grow a &vsw of nK McGraw-t+n Comes. DOM mas:1221 Amu alru kv t U. New Yoh, KY. 10000, FdM- I Okm 25 Braeft", New Yak N Y 100D1. ISSN 0131.1911. Subscriber servOL 52121 2061116. CepyrVil 1106 by Pie McGraw-Nil Cpnparws. Reproduction in Vx* or n pan Vd died except by permeworl AK ni" rtsened. Wan of The McGrmMie Camperws.: JoWh L. Do", Chernsn and Chid fxecutrve Ofter, Nttdd'M. WGraw.111. Presided and Cho( Operating Meer, Robed N. LmdM Sonia ftK*A We Pre&& l W Sec%W.. Karvstll M. VW. few *A YO Pendent aM General Counsel. Fran D. Perom. Serra Vice Pnaiduk Treasury Operations, tnla, aft has been oeuerd by CnAwfea Mtrncpl tram sources beUv~d b be Rliae. Mo■ever, oeorse d the passDiry of NOW or merJrrllal error by our wwos, CndkN'wrt or cwow"a of aM Worm" aril 's not rownso lot my u+ms for Of tWwL Cm~ p IN IpMta anwW an rim hill ft sae q 01 w w tre ut j 2 ON40RO FIRM WAND a POOWI CM§D111MMK Mr1tACMK MAY M 1MR • CREDITWVEEn ■ MUNICIPAL THE AUTHORITY ON CREOfT OUALI rY JUNE 19. 1995 PREVIEW OF MUNICIPAL ELECTRIC BUSINESS POSITIONS Standard & Poor's Public Finance Department entitys credit standing. With the business posi- h. s completed thereviewof58 municipal electric tion assessments, Standard & Pools his taken a ant rural electric cooperative utilities, which col- more specific view of rate commppeehhveness, cost ledivelyhave over $720million o(debtoutstand- comparisons, and customer vvlmabi ity as the I ng Included in this review were the nation's 20 industry's direction will be increasingly dictated 8 largest municipal systems, as measured by kd. by these forces. lowatt-hour sales. This brings to ISI the number Each utility evaluated was scored on a five- of business positions assigned to rated utilities point scale ranging from "Above Average" to o E ! (Standard & Poor's already has assigned business Below Average" and assessed in four main areas z positions to 123 irivestorowned uWams). otanalysm c v The business positions of the municipal and • tilanagement cooperative utilities will be announced in the .Operations, m Qcm on June 26 edition of Standard & Poor's CreditWeek . Competitive position, and Municipal. These business positions were formu• • Markets sated to measure the competitive stance of uhh- The business positions of mvestorowned utili- ties un their vicreasuigly complex and competitive ties, N hatch have been evaluated by Standard & operating environment and will provide inves- Poor's since October 1993, are ranked on a more tors with another tool to differentiate amongudb- detailed seven-point scale The busirwss position ties ofaUtypes. assessments of investor-owned utilities are Business position results uvdicate'thatsome rat. linked explicitly to their financial perfomance. ing and/or outlook changes on rated municipal For instance, a ublity with a "Below Average" and cooperative debt will be forthoxr ing. For the business position will need stronger financial rat- most part, these will be negative. Hygh cast save- bos to maintain a given rating than a utility with tures, dependence on industru I si les with rates an "Above Average"busuiessposihomAsofyet, to this sector higher than regional competitors, there are no such parallels between a murucipal reactive management, and fnc.iontetweenagen- system's financial performance and its business cies and then members Nall be the pnme reasons position. for such rating and outlook adjustments.Thegen- Future municipal and cooperativemwlvseswill eral inability of these systems to competitively include, m addition to the traditional sections of position themsek es as the industry restructures commentary, sections on the business position bke(vwill hinder their ability to retaincustomers and eachofitscomponents,such asmariagement, and, thus, current credit ratings. operations, competitive position, and markets. As Standard & Poor's described in its Nov. 7, Over the coning months, Standard & Poor's 1994 CreditWerk Municipal commentary on the will publish a series of articles on the business business posm,)ns, its cntena for evaluating positions, including regional reports, compari- credit have not changed. Hon ever, it would be sons between suruhrlyrated utilities,andvanous Wth to ignore the many changes ukuug place in other topical issues. Additionally, a teleconfer- the electric oulity industry and not factor these ence will be scheduled to provide a forum to into current ratings. For instance, thepressuresof discuss some of the conclusions drawn from the high fixed costs and regionally uncompetitive business position assignment process. retail rates, which likely would be captured to a Marla Fos (112) 208-1863 poor business position, also would nnlluence an William Cox (212) 208.1866 Copyrigttt O 19% by The McGraw-Hi Carpures, Inc Reproduclion in stole or pan prolWed excoa by permssim. M nots, reserved. CREDIT COMMENT • W ` MUNICIPAL ~~El TH[ AUTHORITY OM CAEDR OUAUTY JUME X Im BUSINESS POSITIONS IMPACT MUNICIPAL ELECTRIC RATINGS As a result of its new business position assess- signed weights based on the specific utility char- ments5tandard de Pooeshasplaced t1 municipal acteristia. Endividual weightings weretalLed for electric utilities on CreditWatch with negative a total score and categorized according to the unpliabons. The specter of increased competi- following five-point sale, ranging from strong- tion in the eleRnc utility industry makes these 1 l est tow eakest: utilrlies' cost and rate structures incompatible a'Above average', with their existing ratings. Any associated rating • 'Somewhat above average', changes on tf.ese uhlities will occur in the next • "Average", several weeks (see CreditWatch and table). • "Somewhat below average', and In addition. Standard & Poor's has assigned a "Below average'. negativeoutkooksto six eletncsystems,bringing Utilities' fituncialprofiles, service area demo- to 13 the number of muncipal utaihes now as- graphics, and legal provisions surrounding spe- signed negative outlooks, The sum of debt issued cihc bond sales are excluded intentionally. How- bv utilities listed on CreditWatch or assigned ever, they remain important components of / negative outlooks is $39.7 billion. CREDfT POSM In addition, Standard do Poor's also has l~g~termcedit changed the outlook on two utilities tbt, stIni0uLd mosl cuts. a urs Wse withitsbudnais rA~ from stable, affecting $2.5 billion of rate e deebt. doaefy oa Business position assessments were assigned to bm assea meat I%* * a utilky rata In the ~ 62 utilities with $77 billion of outstanding debt. 9"'pego[y ahouldhavrabasirrait~otsNion Included in the assessment process were eight ameadutn that scow at or above ' generation and transmission cooperatives, IS age'aasesemeett,since mokofWHfidoeethat wholesale municipal utilities, anda6 retail mu- (nSue:iar!MaifidtheAw. liar nicipal systems, Standard & Pours already has or weak finarates, kgaf Pr°w assigned business position asses. nents to 123 demographics may bit7 kdhwrAL#w rat- urvestor-owned electric utilities, bringing the Zile n sti>itlea number of business position assessments as- tea„ signed to 185, neft COMPONEM7S AND SCORES Standard & Poor's believes that the raprdrty with which regulators ovea . and legislators are embracing the concept of that Its ra' M91 be a , grater customer choice ice dictates an intensified ~6 focus on four key factors. These factors already `tkPaponaterit.Tahs are incorporated in utrli es' raring- but now will tr'k Mad in Ya be more heavily weighted m determuu tg ratings ~Be Fa and business position assessments . They include: • hlana rnent, narwes, Mildt lov. am 5 times (x) debt foc at . Operhoru. • Competitive positron. and {eye the Iasi eight Yr°s' s a Markets strong atiz* t4± The business position assessments were de%el- How em, the greater m*rt W~ IoAkiaft oped to intensity Standard & Poor's analytical btnrms Poattron attention to the issues that are rntxal to utilities e atibny dta w led the ability to compete in the new environment. These ~me some W tin rqM Y by Critc (boors were scored individually and then as- COVER STORY utilities' credit ratings and are the main reasons 2011Uf" DI1110)1ECMM An examination of for specific discrepancies between utilities' busi- the business position assessments and ratings of ness position assessments and their ratings. the rution's 20 largest municipal electric s'stenu. Results of the assignment process indicates a whose $496 billion in debt outstanding repre- normal distribution of business position assess- sentsthemapntyof outstanding, illustrates5ome ^ ments. More specifically, 26 of the 62 reviewed, interesting points. For example, the ratings on fir) or 42%, received 'average' assignments, another half of these likely will change in the next three 16 (26x1 scored better than average, and 20 (32%) years. The rating trend on nine of these is nega- J worse lur accompanying labial. tive; only one has a positive outlook. / Tab)r 1 lists the bu-sirless position assessment More specifically, while 11 of the 20 have rat- results by type of system. Listings in each ca te- ings in the 'AA' category, seven had 'somewhat z y g gory indicate relative quality. For instance, on the below average' business position assessments, retail table, while Tacoma Electric and Sno- and six have been placed on CreditWatch with v horrish County Public Utility District both have negative implications. Austin Combined Utili- d 'average' business Ix ition assessments, Ta- tics, one of the seven with a 'somewhat t below a a° v coma's assessment is stmriger than Snohomish's, average' assessment, is rated'A' and is thembre which saxes in the low 'average' range. South not in imminent danger of being downgraded, Carolina Public Service Authority's (Santee Coo- contrary to the'AA' credits. per) business position aswsment, at the low end It is dear from looking at this scull but elite of the'above average' category, might not be too group of utilities flat the largest are rot necessar- different Fran San Mtorvo s, which scored at the dy the strongest. Certainly, their size, sophistica- high end of "somewhat above average'. Lion, and operational clout have supported gen- Rdw ■ dl" Uvft ania a PO"=- TOW soft 61lbr4 saw Mora PA9310 p laser P911a41a LW Riq d10ooA a6 (60004) A6"aa-no- AdbOVwt El" kororty 1 AA stabil 2142,VA tikaal flood Srirobm I M StAft W 2" Sall Arm hood AVOAanal arVWW4M A Paver Oaw I M St" 3 653 301 Soto Carotw K*k sws &A rv 1 A. Pau" 2 740 000 sda"rt civet , - opt San AFAM beft a Gas 2 M Stable 2.465 No Gran Cower Ptak WWI 060c1 No 2 2 A. sww 116.425 Cfrnn C4wgt ►iOrc UW1V DoW No 1 2 A. Swig 712,525 OmaN h*k Sawn Dear! 2 M srdb 171.100 Ok W tans C.w114sd1 2 AA 506 1471.573 CMNrM AMC Pow 2 wit. posim 244.100 Mo41abIPg9W D," 2 A• sob 236300 SON Off tqe 2 M sb011 Sams *WW Tacoma 3 A Staab 419,913 anaMb t119en 904141 3 M SWA $1.175 SMm9Nt UOK Gas 6 War Dmw 7 M ShOb 232.455 kmltft 4 E1ecYc $*IV" 3 M Stat hl 111.903 Eu041r Wow a E07i c board 3 M slab" 71,960 Ganosr~r RWDM Ublber 3 M *91104 111.900 S41a41frrb Mwrepal Uwtr Dow 3 A- SUN 1.961.000 Out Ask Lad 3 M Swig 71,344 P$arb Aka EkOc Pow Aue" 3 A• 409414 2X1 %a AF&%M Old 3 AA, N09001 361,950 NbaW Ask Pew DOW 3 A. boom 1542.560 P11140 M EYcirk 3 M- b49ib'A 71.300 & km In oft Dbsd 3 M NgaON 167.493 Sank lira Bsmc 3 A, Stable 237.566 &Ww"raNEtn NlbkTakty Oentr,d No 1No 1 3 A. shm US 000 Soon" boom m - W Au10n r., - O Ue114111 4 A NeOeWe 2.699 376 Los ANpb DtwnN414 of Win 6 Paver 4 M IN-11 2750.266 laea0n Paw a Lot A A. M P 36.100 13~ C411110M Ue66e 4 A. slaw 56 311 tarts PAk S4nce DW&Vrvn ENC4c 6 Wow 4 M- CW41 4105 AMUL• Bowe *am A M• CW_I $90275 g1a9M44 D" Sralanl 4 AA_ /4gwe4 1143" mulialala Eilcre 4 A 1111pe4 172.047 UMW+1 no a WSW milbe3 4 AA N40e1 407.301 'UNIYI n ..41140 W" 4141 CILIM tttn" b VIM 611ra1'- ETW 00 "4111130 x111 Web. 141111 A M OM N7r1 to MOW m/ rA 1 'AAA 2 21rRN1M /ROM WANONS • POOWS Ctt+/OfT%Mlt NVJHKIPM MN 241, 1 MIll erall-v high ratings in the past. However, the Finally, two uhbties remain remarkably stable stresses of competition, which apparently have throughout this otherwise tumultuous pencid. affected manyofthesesystemsto agreate:degree Jacksonville Electric Authority and Salt River than the&Suller counterparts, are taking their Project Tl esesystems, with Lincoln Electric Sys- toll. Un1*ss5 otherwise addressed by council or lem, shared the highest business position assess- r board action, their cost and rate structures will be ments assigned. Their regionally competitive the leading contributors to their decline inaedit rates, lack of customer vulnerability, varied re- quality. sources, and strong management teams keep There are at least twonotable exceptions to the their'AA'ratirtgs stable and secure. expected rating deterioration: the Lower Colo- rado RiverAuthorityinTexasand5anteeCooper. RESULTS BY SYSTEM Lower Colorado's rating bucked the trend last Wlalmlemunuryalrkrtrics.The businessposihon year, when its rating was upgraded to'AA-' from assessments of the evaluated wholesale systems A`' for many of the same reasons cited in its generally are worse than both the generationmW "sornewhat above average" assessment. These trammksion cooperatives and the municipal re- included very low and stable whoiesak power tail systems. In fad, their scores were heavily costs and proactive management team. These fac• skewed from the 'avenge' to 'below average' tors, among others, led Standard & Pools to rank ategories. Lower Colorado was the only whole- Lower Colorado's business position assessment sale system to score 'somewhat above average". the highest of all evalw led wholesale systeems. There are a number of reasoro for this outcome. San tee Cooper is one of only two utilities whose First and most promi.•xrstis the Wthat many of outlook was adjusted to positive from stable. Its these entities invested heavily in expensive ca- vision iry management, which leads the market parity in the early part of the last decade, which in rate structures and pri4ing issue% low w hole- soon became excess to their needs. Further, the sale costs and generally diverse resources could extended use of capitalized interest, which contribute to a rating in the 'AA' category while boosted project costs further, wid theconsequeni the ratings on others already in that category are exorbitant debt levels, have left many with high fallin& costs that are difficult to restructure. For the ma- le MaMepM41aas/~ a 7n.,.WM. rae0 hires Allow Toll 6laq MOM Srtw ww" ftew4r p issue- pawn tae Naxq Aaoaa It (foaol 34aMW aba" SHOP tow Ca waft Nor Au0"my 2 AA- saw 1,161.776 SO~ CA"M Poaac Paw Au Wee- door: LW" f om 2 AA. AMY 37.116 M90 Electric Asecio" Inc 2 A Paint 307.107 law EYarc C4OOWW4 2 A imb $ 3111.514 amy'e e fted lU_ tnoa 90wer Agency 3 A st" 202110 OW P. , Eieetrc Captl>bA 3 A. Saw 793 070 Tn-Aa1e Goo No a ir""mnsw Aaacubw 3 A- AMY 673.100 Soulrm Claire-: Pak Pow: &*0*. Soutl+em twisine wn hw"d 3 AA Mal Ism 20o igaar Pray Nury Ellwc Comraim kic 3 A AMY 741.174 D"rybn6 Pow Cwotrarve I M Swat 311 014 Inge no~ Pow Agency 3 M CW4e S.W,SU 5"Wn Callan" PuDAC Pow: hetavy. San Juan No 7 hap" 3 A CW-11 217,375 DPW* Pow covarMOn 3 A. SYa11 1,431,126 Saawn Aarm sm mwvc a Paver Agency 3 A. 11e08104 7% MO Sao"" 11 2 op Mxeopa Eraesie Aaew* of G=W 4 A. CW# 5.144,000 Teus Munpg" Poor Agency 4 A. Ma41111111,b 11/2.757 kovie" a Pow A"mei¢trat" 4 AA CW41 ILA mimead em Mvwiea WAaMeit Etctu Urpary 4 t16M sum 1,341215 Yw M Pop Agency 4 AA- (71 111 7161.100 Yrln Croy" Ano/a Pow Agency Na 1 4 A CW44 2.144 000 4* 0n CraYr" LKWi Osmoses P" Agency 4 A CW# 3,463 No P"Will Muhegll POW Agency 4 A- CW M IM 1q SaMn WW"d hat Po.er MRnonti P* vw* NW 1 M CW41 1 1m 440 61AP" snip waln"q W PUW Poor k"Ov 5riem 5 AA MR 7.012 000 Sam IlsyEnxn WANCO Powr Agency 5 K AMY 231.751 •IJLI are re"e6 anti Own caegarv arrarewp q welt *A* ITata NM nndu0tl al No YaY. tense d 6" aw raw W eaaN en6 ream AAA RN~If1M MOM tiTAllOftTtO i rooMef tuoeYwuSe MaAarAL son u, 1"s a I lorih of the wholesale systems, participating Nonetheless, there were no decipherable member cities ha%ehad problemsbeing competi- trends in the distribution of retail svstembu-snness tn•e on a retail level when their wholesale costs position assessments It would be interesting to are high and, in many cases, increasing. As a compare, however, Lincoln Electric 5v stem with result, 12 of the wholesale systems evaluated Lakeland, Flonda's electric system. Lincoln is a Q either are on CreditWatch with negative impl:ca- 'AA'rated Nebraska utility with an "aboyeaver- lions or have negative outlooks. age" business position assessment. Contributing A couple of the wholesale utilities evaluated to this assessment is Lincoln's diverse and io%,- operate as projects rather than systems. There- cost power sources, regionally competitive rates, fore, specific project economic heavily influ- and largely residential customer base. On the errcedthe business position assess me nuforthese other hand, Lake land's react ivemanagementap- o E 1 entities. In fact, Standard & Poor's did not rteces- pmach, uncompetitive rates that have caused z sanly equate a wholesale project's business posi- some of its largest customers to explore supply M v lion assessments with the business position as- alternatives, and the city's general fund depend. sessments of their purchasing utilities. trice on system dividend payments hrrut the uhl- a a o For example, th,e Southern California Public 4'sopemingflexibihry.As aresult. its business Power Authority's Hoover Uprating Project re- position was one of the lowest assigned to the ceived a "somewhat above average" score even reviewed utilities and its negative outlook was thoughrrcutofitsprajectpartidpantsreceived'av- therefore affirmed. Continued inattention to erage'or'somevv It below average" scores, Simi these matters likely will cause this rating to falh Ludy, the Intermountain Power Agertcv s declining the 'A' category. coats and relatively compebtrvdy priced power led to an 'average" business position assessment, de- RATINGS ABOVE 'AA' A number of uhhtin with spite the Las Angeles Department of Water & high business position assessments are also Power "somewhat below average" score. among the highest rated utilities. Included in this Generation and lransmissnon co-ops. The genera- group are Jacksonville Electric Authority, Lin. eon and transmission cooperatives scored fairly colmArid theSaltPiverProject,arerated'AA'and well, consistent with the conclusions drawn by share the highest business position wore While Standard & Poor's in its April 10, 1995 comment Standard & Poor's believes that the ratings on on this sector. Of the eight rated and assigned many of those systems with poor business posi- business position assessments, two earned bons could drop, itnererthelessdoes notbelieve "somewhat above a erage" scores whir the re- that there is upside rating potential for these al- matnder, wereclassdied as "avenge'. Whatontce ready highly rated utilities. Greater competitive may have been perceived as a detraction from pressures and more umertainhes in this rapidly credit strength that is, & more sparse, residential changingenvironmentlikel willbetoomuchfor service area may be a retl strength in a more utilities ci withstand at high credit keels. Thus, competitm eenvironm?M, where Large and dense 'AA+' and 'AAA' electric utility ratings are pre- customer bases are likely first targets. Equally eluded, at least at the point in time. sigruticant is the generally low-mi asset bases of these cooperatives. Large federal inv_eshrients AS3ESSl1l FACTORS A number of insights and more rapid depreciation schedules than were gatheredfromthebusinesspositionassign- man v municipal systems have contributed to ment process. Each will be the subject of a more their relahveiv competitive wholesale costs. As a detailed comment, which will include star focal result, the ratings on these cooperatives seem comparisons, to be published in the coning protected from competitive pressures at lease for months. the time being. Managewnt. An assminenl of management is For instance, P.asin Electric Cooperative, a large clearly one of the more important deternwunts and multitiered cooperative, received a "some- of business position, especially on the mugin what above average" assessment, higher, in fact, where metal and timely changes could improve than most other utilities, regardless of type. Its busuiess positions. However, where fixed costs reaurkably low costs and ample transmission were exorbitantly high or low, the weighing of alleviues any potential concern with Basin's ex- the management factor was often lower. cess capacity situation. Actually, in a market Many systems' business positions were invari- whose average marginal costs are higher than its ably influenced by the eHectiverim of their mart. own, Basin is in a relatively attractive sihnahm. agers to most areas of their business. In many Rood municipal eleclna. The business position cases, however, the strengths of dayy-to-daybusi- assessments of the evaluated retail systems were mess managers were seen to be inhibited by the overwhelmingly better than those of the re- slowness with wfuch some coundb and boards viewed wholesale entities. Only eight of the 36 are able or willing to accept and act on industry retail systems received scores below the "aver- changes. Austin and Los Angeles are two aties age" category wNle 12 scored above it where this issue was most prevalent. Four of these systems voted in the highest Another aspect of the management scoring that category, "above a% erage" while none of the gen- became apparent and equally limiting to tits af- eratton and transmissions or wholesale systems fected wholesale entities are the lavers of man- did ageme nt involved in runuung and thiis ev aluating 4 D P"M STANDARD K 1111,00615 t RSIMMUK MdlMMAl mm !fr 1"s wholesale supph.rrs. Just as ~ holesale agencies' analvices are extending beyond local competitor credit ratings represent, in large pan, the credit to regional a%eogesand market leaders, Further, quality of their pa rticipatingcities, so too doesthe rates are beingeaamined for indn idual custom- management portion of the business posinon as- ers as well as by customer classes, x. hich rr ght sessmeni analysis. For wholesale utilities, then, indicate some+nequitiet, not only does the management assessment take The southern California utilities re interesting intoaccount the evaluation of management at the cases. Their residential rates aregenerallycom- wholesale, origencylevel,butilsooftheindivid- petitive; however, Southern California Fdsoris ualcitymanagement teams Accord ingly,despite average industrial rate is tar lower than most of the usual strength; of agency teams, local city the examined municipal utilities. Further, the council reluctance and/or inability to tackle com- miuuci pals' rates in each custorer sector are also petitive pressures, grasp industry issues and re- much higher this regional averages. spond appropriately ultimately influenced the This indicates a couple of important points. business positions of wholesale agencies, in some First, with generally large commercial and indus- cases, considerably, trial bases and rates to these customers higher Openrwrr_c.Many of the systetroevaluared had than average, these utilities individually must fuel and/or asset concentration in their resource address thefa rate inequities, Large transfers to moo. However, not all scored similarly in the city general fiords, in some cases, and the contin- operations section of the analysis, which implies ued desire by miany boards and city coun lls to that different fuel are viewed more favorably keep residenU rates low might limit the utilities' than others Further, utilities with more plants, ultimate ability to compete. Also, these utilities even if of a single fuel type, with good operations, must control costs and develop strategies to could earn drent rankings. lower overall rates. With some form of customer Overa4 hydroelectric capacity from a variety choice likely to come sooner in California than of kxcabons is viewed most favorably, given its otherstates, its municipal utilities needtobecome generally low costs and rimmed operating risks well-positioned to compete effectively, regard- (absent substantial environmental mitigation ex- less of their current protected franchises. posure) On the other end of the spectrum are Regional competitiveness is also interesting to utilities that depend solely upon nuclear power examine for the northwest utilities, which, on a for their entire supply, especially if the unit(s) national basis, all have extremely low rates. But from which the energy xs derived have sporty distinctions can, and were, made among the ex- operating histories. This is because of their high amined utilities. Grant County Public Ublity Di;- costs and opera ting/d ecomrrtusiorung concerns, trict e2, for instance, with average residential Utilities whose supply is coaldenved but which rates of 2.1 cents per kWh, has the lowest rates in cornesfromanumberofdifferentunitsorslations theregion,andlikely,theentiecouritry,Accord- fit in between these two extremes. ingly, its business position was boosted by its Seattle City tight is an example of a utility with strong competitive position. On the other hand, a single fuel dependence for its entire supply- Snohomish County Public Utility District 01 has hydrMectric-but which received high marks in residential rates among the highest i,u the region the operations section due to the Yknety of actual which detracted from its overall strength generating stations and their extremely low costs. Markets. The assessment of markets fonases on Tallahassee, Fla, on the other hand, his difficulty different areas for the retail andwholesale sys- providing truly competitive rates given, in part, terns. For retail utilities, concentration in the mar• its dependence on "twat gas for a full two-thirds kets section is on eie mix of customers among of its supply (it is precluded from building coal residential, commercial, and industrial bads and capacit)), its exposure to the spot market for the the concentration, if any, of system mks and majority of its gas supply, and the need for addi- revenues by its large custorriets. Farther, the at- nonal capacity before the year M. tractiveness of these customers to alternative A utility's ability to compete will be driven power suppliers, as measured by industrial cur largely by its cost of producinga kilowatt-hour of tomer load factors and rates, also is assessed. energy and the fixed costs associated with it Anexaminabonofwholesale utilities &MSen therefore, these costs, especially the latter, are eration and trarxsmission cooperatives, on the key ingredients in Ihi• section's evaluation. other hand, Ucomprised of areWtype of araly- Omaha Public Power N,tnct, for example, has sufor each ofthe rmembacitiaandttbubm fixed costs of 9 mills p, r kWh, which represents members, respectively. There whoksak entities about 24°'o of its total costs. On the other hand, naturally have concentrated customer bases, Sacramento Municipal Uebty District has a fixed where one municipal retail utility could comprise cost of 32 mulls, representing 42`. of its total costs. 25°. or more of a wholesaler's revenues. The risk This, in part, led to Omaha's "somewhat above of significant customierIm,thettiis greater at the average" business position assessment compared wholesale level by virtue of their structure and with Sacramento's "average", customer type. This inherent risk usually led to Compeeitirr Posifion. The rate competitiveness lower market scores for whoiesakn than for re- of utilities is being more closely scrutinised with tailers. In fact, no wholesaler scored above an the business position assessments. Competitive 'avenge" in this portion of the analysis. The 1 L MSP2W 0 /ROM ITAIISIDANi A POOR'S di0f1WUX gWI MAL JM r'4 1905 i entities legal relationships with their suppliers Finally, the generation and trarerrussron coop- are (adored into their ratings. eratn•es typically fared well in the markets area. Those Most penaluzedin this sechonwere thow Centrally Poe, 6dfactor customersof their dts. utilities with a high industnalclass concentratton tnbution cooperative member, their nredonr%i- with relatively high sector rates. Examples of nantly residential customer bases, and sparse such utilities include Muscatine, Iowa, and service territories limit the real risk of near-term Lakeland. Comparatively high wholesale rates customer loss of these cooperatives. influence wholesalers'scoresaswell,particularly Standard & Poor's plans to pubW numerous for Sam Rayburn Munici al Power Agency and additional articles discussing results of the busi- the New York Power Authority. nemposition assessment process overtheconung The Puerto Rico Electtic Power Auttonty is an months. Also, a lelectxlference to discuss thegen - 4,C interesting example of a physically rernote utility eral comments made in this article is scheduled with a lack of significant competitors, and there- for 2.O0p.m. Wednesday, July 26, 1995. fore, a nunimal risk of cstomer loss to cogenera• Marla for (2I2) 103-1 963 a „ Lion or other power suppliers. Despite some oth- Bill Co: 1212/ 209.1966 o erwise limiting factors, Puerto Rico Electric's overall business position was balanced by its cap- tive and diverse customer base. ReprintedlrtimCmdirlWeaWnalaarbyStallardOoorsRaagsGrouo.adnnentif TheMCGraw-HACtirritiinEaecuMdF=1221Arantteditarm M New Yora, N.Y. 111020. Edtorial ogees. 25 Ekutdway, New YOnk N Y 10004, ISSN 0731-1974. Subscriber wrVM (212) 206-1116. CoW#t 1995 by Ttw inwtxk Orin Pal M Dionne, Cnrmun and ChW Exec Executive Vic tole W McAMM Prnift t and Owl Opeianrq Offar,, Rotten N. Exaa Na ~ LO Secretary; Kw ee M. Vow, Entccu" Yta Presderd and General Counsel, Frank D Ptwglese, Senor Vice PtKiaik Twaury Ogivskm kow stick" has then r h Ma is by CM66*ea hkow W btlm sources t>ehaad to be rehaw How". back" of h pta75Otaly of term or nraclerecal ara by act saaim GOWN* Wrtgaal or often bred 116 A ftmol does not Quararnee pte acwracy. adequacy. CY tbmpittarm at any Normsom Mud a trot neI m milt Mx any anon or ornissa m of Ax pr rewft o0Okrd ham we use d such nlormabon 6 111110 - O PWM NTANDAM a> M",1 11:11110110"N AM MrNplk P*" 24, 1 MLi e 1 e 1 ' • • CREDITW b iki: MUNICIPAL~~~ THE AILIMP1TY ON COM OUAUTY JUNE 21,1!!5 OUTLOOK DIM FOR SOME MUNICIPAL ELECTRICS In coryuriction with )tie assignment of busu+ess Affected utilities generally share someorailofthe positions to the 62 munidpal electric and rural following attributes: electne cooperatives reviewed by Standard & • High liked costs, Poor's over the past several months, l l ratings are • Uncompetitive rates, placed on CreditWatch with negativeimpiications •Viilrterablecustomer bases, and (ste comr story and CreditWatch and Setondory hlar- • A lack of significant managerial efforts to re- kn ante-ups), Furthermore, the outlooks on six verse some or all of the above factors. others are changed to negative from stable (as For the most part, the business positions of dttai4sf in theM",ingpages). Theseare in addition these utilities in the corrext of the new Industry to the seven municipal utilities reviewed that still environment pressure with their individual rat- cam negative outlooks previously assigned Of uip For example, the New York Power Author the 62 utilities reviewed, the rating trend in the iry's "somewhat below average' business post- next three yearson 24 of these, representing $39 7 tion, incorporating the competitive wholesale bilhon of rated debt, is negative flee table) market in which it operates and continued nu- The negative outlooks for these unities were clear operating troubles, is the lowest for simi- determined based on the individual meets of larlyrated muruapalutilities that were evaluated each utility rather than on an outlook for the for part of this analysis inlustfy In general. However, implications of a It is notable that many of those utilities nega- federal government that has actively encouraged lively affected are in the nation's largest mania- greater competition and the momentum of some pal systems. Examining the amount of debt these states to expedite ultimate retail access, clearly utilities have outstanding highlights this point. does not bode well for some evaluated utilities. The reviewed utilities' outstanding debt repre- / Nmw ttwwe pasraon Ramp OiAOOt Toot teat (6000) MKW ee OWNWIM /uarr noix Srvice DoWnem Eroa,c a Waive 4 AA CW-4 49435 N,Nnmavion fc•r AOwry 3 M CW 41 9.D43343 la/ ArWas; ENDaarore m Water i Paver 4 M CW-N 7.)50246 vl^*d ENecbe h1w,it of riwp 4 A. MAI S 144 ,000 New rod lbw agency AA- CW* 3244 900 North Crow Eastern Mnco+i Po+en Agerey 4 A- CNN 7 M7 000 North Crew Mxrr " Po"M Wray 11 c A CW41 2114.000 Pteemom MrWom pri"r Agency 4 A CW 41 1 366 460 Rwnds Fir-) System c M- CWN 190225 So„mern capoma Pubic Pow Ada" (Palo Verde PFW1 4 M tW-N 1,166440 sweven CmNna PUNK Pon" AuitrNty (SalrWni TrwunemonPnowil 3 M cWN $366200 Ilmnerie Power Adrrrwilraw iban d DeMI 4 M CW car NA Conn "M V4 Renh-abN Eneego System. WA N A. M evil ss 63D Eugen OR Wieser 6 Enecvc load (Trope Kaaer POW) NA AA Celt 41 It 600 Leas Co^ PuliK uuer Dairen (M[Nay Dan Fahie"I NA, M CW N 161 ON NoethMn Waco camrv Peppin Uaefy Dow (Wilry Ore Fancy) NA M M4 30075 TACdna WaeMglon (ROac Vdtna i+OM DNsoa con aerie n ?ropect) N A AA CW+1 22245 Wash 31 ita PlAk Paw Supper System iNadn ft w S M CW41 T 012 000 CREDIT COMMENT ti, ~ ^~TIY 1'PI r 11'1 i - Atayeef eaMMNeIsN++ Oetlwb !lams Ooe+t~+ pah+9 OU" Tod ON IS=) An~ Ekctrc NORM 3#1 Sm GGanaAei Ekc ubvan 7 M %"W2 o9 wo /ao0w 8XVc A BeOa 172047 7 M• NpaM we 71)00 Taus akww" Power Apelxy 4 A Na+aR op" 111.79! t1u7s7 61x.9 awe ON"" & low D" 3 A, k"Afm 167493 LAW ~ a WNW UWA a AA 9114" 407.701 talon GorMr Public lA W Dori d 17 NA A. Ngshs 1976 Z = NW OM Ptdk Prlwar Delrct _ 7 A. "1111011"! 1512 7t0 v Soh" A" uls WWWWO atlawceal Pow 7 A' N4etie 47W 10s C e y Awricr 7 A. 11111118114e 7S0000 O Nash! AIIS*ee fiwn OeOar t C Npta 9100rir A"00" Ire. 2 A Posies 700,)07 $mi a iN Adk SNVU Alrelorer I A. Ports 2110 0011 (dot P111Ae OM OK CWN*4 Adel Pw'wr 2 t1aM Poaiw 264.000 NA--W s agie serlts about 75% of total rated sector debt how- was among the highest assigned to any of the ever, the 62 account for only 32% of all rated reviewed utilities. In fact, its extremely competi- municipalandcooperative utilities. tiverates,proactlvemanegementtesm,andaea- One of those whose rating is placed on Credit. five rate-setting very well could contribute to a Watch with negative impiicatoru is the Los An- rating upgrade to the'AA' category from'A+' in gels Department of Water & Power, the nation's the next few years. largest m"ipal electric utility, with $2.75 bit- Ultimate ratings actions for those utilities lion of oatStandung rated debt, Because of its re- placed on CreditWatch are expected in the runt ganally uncompetitive rates at the commercial sat weeks, after Standard & Poor's analysts dis- and industrial level, significant sales to these sec- cuss pertinent issues with the utilities' manage- tors, and ftigh fixed costs that make these prob- ments and nuke final determinations; on the rat- lam difficult to address, the Los Angeles Water ings. Also, Standard & Poor's, will review those & Power S'AA'rating likely will fall to'AA•-' this with negative outlooki on an ongoing Osis. fur- summer, and retain a negative ouliwk. thermore, as Standard & Pcor's revirws the other There remain, a few bright spots among the municipal electric systems for which it has out- systems evalualed.'The outlooks on two utibbes standing ratings, it r,,ill take the necessary and are changed to positive from stable u a result of appropriate actions to fully reflect their business the business position review. Most striking is the positions in their ratings. Suuth Carcillna Public Service Authority, or Slur Marla Fox (212) 208-1UJ tee Cooper, Its 'Above average' busimss position Bill CO: (212) 2td-l 866 Repnrded from Ca*Wwt Afu7 %*W by Standard l Poiis Ratro Grouo. a dreu m d The McGraw-Hill Compares, ExKL*A oRces:1221 Av m of the krietas. Near York N.Y. 10020 EMwW ot/ps: 25 Broadway, New Yok NY. 10004 ISSN 07311974 Subscrber seMUS; (212) 2061116 CopfrigN 1905 by The McGraw-Hill Corn woos, PAvaActon A ahoy or in part prOrubted eauW by pennissron. AA n" reserved. Offers of Tlr "raw-Hill Companies.: JVAPh L Dowse, Chairman and Chef ExecutM Oh1nr, H" W McGraw. III, PresMa and Chef Operating OMar, "m N. Lttda, Senor Er uive Va AeAw. and Secretary. Iterww>n M. Yma, Exec A7se Vice Presides VW Geri ral Cmna, frao D. Penglase. Sena Y+cr President- Tmsury Operaaorn krornsaton ho been oDisw by Cra0t"k APunclpal from so Wcas teaesed to tit reeabw 11owwr, Deralnse of the Wssi IMy of !wares a m111Xwva era by oar NwVK CndtWeee A oupf a ovum CmdTN'ek AAaNto dos not gwranlaa Me am acy, adequky. or compllSwYSS or ary edormatm and el not mown" yr or arms of attlysiors or for 1M feil*a Obllintil Iran"IAa Of Such NItwinitim MMNITM /ROM f7TANDARO S 1a062111 CNOIT1NRtU( MMIIO~AL IIIIS 3f, 1"S 1 'SVANDARD I~ CREDIITTWVWJE -~MUNICIPAL■ TW AUTHORITY ON CREW QUALM AAY 24, It" MUNI ELECTRIC BUSINESS POSITIONS: MANAGEMENT ANALYSIS As the US. electric utility industry's evolution Los Angeles DepartaentofWater &Power regu- into a ksa regulated, mrore competitive envirvn- lady make transfers to thdr associated aty gerr mene gains momentum, system ourugement and teal funds. At a time when keeping rates as low local board initiatives will be critical to utilities' as passible is soda[ to utilities' viability, these success or failure. Cost controls, rate redesigns, transfers utflate rates above the practical cost of individualized customer services, and debt min- service and rabiet competitiveness. WXle some ageme it are fast becoming prerequisites for sus- actions have bum taken to restrict the sae of the tained credit quality. transfers, the oaste m of the transfers and the Surndud & Poor s has arrived at this conclu- councils' reluctance to deal with them in a sub- sion as a result of its business position usigru ent stantive manner continue to cause concern from process, wherein 62 of the largest municipal elec- a credit and competitive perspective. trio and Waal electric cooperative utilities have The Puerto Rico E]eetric Power Authority is a been reviewed over the past several months. prime exampleof how broader political agandas Management is one of the four key areas analyzed and government intervention can influence utrl- as part of the municipal business position deter- ity operations. From system Counting, plant migrations (see bon). sizings, envirorvnenral support, and operabonal Standard & Poor's found that the effectiveness decisions, the strong commonwealth influence of management teams differed greatly among the over the authority's actions ties the hands of util- system examined. For both retail and wholesale ity managers, limits the authority's autonomy, systems, strong and weak mnaagement assess- and restricts its long-term operating potettaL ments were made. Many utilities scored quite Standard & Pooes also found that utilities with well as a result of their instituborWized plavfnng separate utility boards generally were assigned methods, deep understand xngs of custoasers and higher scores than were utilities whoa decisiom competitor, and creative, risk-taking manage- are controlled by city councils. This is due to the went teams. Indira Municipal Power Agency utility boards'typkaLygreater understanding of and Jacksonville Electric Authority are examples industry Issues and the absence of separate agen- of two such utilities, das, which could conflict with the goals of the The Lower Colorado River Authority in Texas utilities. Euzkples of board-controlled utilities exemplifiesa utility with avery forward-thinking include Orlando Utilities Commission, Fla. and and creative staff. It has gone as far as rotating Omaha Public Power District, Neb. scnx,r managers every few years so it has a broad corporate view and to ensure that f esh ideas are CUSTOMER DIOMEOG£ generated. InaddibontheauthonVsswiftreaction Maintainingstrongcustomerrelationshipsand to charges in sate law tlut decentralized its organ- fu12y understanding tlev reeds and desires are iznronal structure and provide for quicker derision being recognized by utilities as necessary ele- making will keep it at the foretfrrnt of the industry. menu of doing busims. This is a departure from the time of protected service territories, when the GOVERNMENT SUPPORT mindset was to 'build, bill, and receive' with Strong management assessments primanly little regard to Planning, rate structures, ardcom- were reserved for utilities that have the support petitiveness. of decision- and poho -makers In at least two Customer knowledge and attention are impor- aues, reticent or inllueotul councils constrained tant components of Standard & Poor's Assess- the ultimatebusiness strength andpotertiallong- rnent of managers d strength. The Salt River termcompetitiveposntionotOwiraffiliated utility Project Agricultural & Improvement District in systems Austin, Ten" Combined Utilities and Aruoru assigned each of its top maagen a CREDIT COMMENT y a 0W 4A6WENT IS ASSS r, F h •Y .1f ".C~4LL b one of fouz fac~tus irctirpo d!i utilities' ass b~atytgspcd6care icy are . • v[ These include the pfarkdev ~ ~ led .~i rs v c, a n ¢ 4 4 group of large customer accounts a number of row view of the electric utility industryand have years ago and gave them the mandate to get to done little to stem high-and, in some cases, in- know them, urelerstand their btainesses, and an- creasung-costs. hapate their needs. The attention to such matters led, in part, to the recent reduction of rates to WILLINGNESS YS. ABILITY these 100or so customers by 4.5°, and the coma- The failure of Orange County, Calif. residents dent 10 yearcontracts signed by most to approve a nominal increase in its sales tax. which would have advanced the county's work- AGENCY-MEMBER RELATIONSHIP out plan and ultimately provided revenues to An associated factor, particularly for wholesale repay noteholders, brings to the forefront the systems, rs the relahonslup between agencies and concept captured in all Standard & Poor's credit their member cities and the effectiveness of rode- ratings, that is, the separation of ability and will- vidual city management. This component com• ingress to meet obbgahores. pixated the analysis and eventual business posi- Standard & Poor's believes most of the evalu- tion assessments of many systems. Despite aced utilities have the abthty to take prudent ac. Standard & Poor's confidence in the maragement bons and ad in the best interests of their custom- uuhahves of many wholesale agencies, some ersandbondholders. Butwhethertheywilladin agencies are bound by the uncreasinglydsvergent such a way is a different issue--one that led to demaruis of their members. The k1wucipal Elec• low management scores for some reviewed sys- mc Authority of Georgia NFAG)ss an example terns. For example, many of the cities Out are part of a system with strong management but with of the North Carolina pint action agencies have practical luruts s, i by varying member demands done tittle to control rising rates, despite knowing and the unabLbty to find a uruhed solution to their for some time that wholesale cods were using. pending issues. Many of `vfEAG's members have Ultimately, strong contracts and other ability excess capacity caused by ovennvestment in issues will not be sufficient to gauge credit and baseload generabon. Costs associated with this compeebbeve strength. Rather, Standard & Poor's have been parball,v absorbed by cities that are not will look beyond what is needed to what is politi- ovennvested, causing them to feel unduly bur- allyfunsble,reascxubkand likely to be supported dered by rurngcc6ts by local councils. Proof of their wiflingress to ad This point extends beyond theexamp!ecited to willbemeasured against actualdecisionsmadedat other wholesale systems. As a result, the manage- are in the utilities' best interests. merit scores of wholesale uel:ees tended to be lower than for the group of retail systems re- T00 LITTLE T00 LATE? viewed An additiorW reason for this is related to Given the vast changes occurring in the indus- Standard & Poor's assessment of member man- try, it will be critical for system managers to lead agementteams as partofthe overall management their utilities into the next phase of lunge as score. Typically, parbapatung cities fuve a nar- oompebhve entities. In so doing, it will be nieces, samm O ROM 11AHOARD IL POd!'B CRUNTWUK AAUNK SAL ART 24, 1 11!1 nary to educate and involve kxal counals and taking acticns won w that three yews from now boudsarlyon.Counalsunonlybeexppecccstedto itcannotbesaid that utaities creditratings,busi- act prudently if they fully understand the issues ruse Positions, and Prospects fOr survival were at hand. shaped oy their inactim today. Many municipal utilities are limited by having Marla Fox l212i 208.1863 done toolittletoolate.Theywouldbewisetostart MaryColby (212)208•I157 ~^1 PAp kom CnddMtifet AAmW*N by SWdard T, Pools Ritor 6 roue, a drvtW of Pa Mollmo 1Y1 CwnwAs Em Mrl d1trC 1121 Awry d 1M Mwtw NM Yok N.Y. 10020. Moral elkm 25 Drodwy, New YoAt kV. 10001. ISSN MI.971. Sobecrrber ufvkK (212) 201'1111. CeppW to by TM IkGn m Compress Pwa&rcbn in aticile or in p91 Pic' abiMO dacW ty prmlasion Al Aptds mrM. OR m d TM M& wrla Cpt*Wa. JmO L Ojmvw, CAMrm and Ctest Er owm ONwer, Itarod W. McGraw, III, Presidrd and CWW Operatrq WIcer, RobV1 N. lartdw, Salvor EVC1*A Mw PtwdK are Secs4rlr KerrttN M Vlbr, faanMre Ytd Prrdert aftd t finery Couroel ffari D. Psnglwe Smbr 1M PmOrl Ttw m Op mOm tlo Won Ina Mm obtm by CnadWwk 1Aralttpet tom sauna brined b a ntsote. Horrav, batsw d th poealrly d Amon a ataolrrdttl array by oaf wteoar, ottalllsat ad 1" Y~ or oompttrru of arty 0 to now a rd Y nA rw0 N MIt br any roan accuracy, A for o or CwMs.C RdtMa ob AAN* hom ftes rd use d rbra dwmaba TANDARD • • • i CREDITW MUNICIPAL THE AUT1f0RfTY ON CREDIT QUALITY JULY 31, RURAL COOPERATIVES ARE WELL POSITIONED FOR THE FUTURE The rural electric cooperatives rated by Standard & dent. These steps irxlude accelerating debt pay- Poces are well positioexd to remain viable power mails, renegotiating fuel contracts, and imply l suppliers in the future, as eviderwed by their gamr- meriting integrated resource ",='s buisilless sr+) ~y ~~u,~ts ArkansasEkctricCooperamuuge- Stardud & Poor 's has assigned business post- meet team implemented a plan in the early 1980s tions to the nine generation and transmission to rapidly paydowndebt incurred forgenerating O cooperatives tG&T) it rata as part of its compre- assets. This strategy has allowed Arkarius Elec- hensive review of the municipal and cooperative tric to lower fixed costs and gain a 10-15% rate electric Industry. All G&Ts reviewed received advantage over Arkansas Power & Light Co, either a "somewhat above average"or "average" Hoosier Energy Rural Electric Cooperative Inc's business position assessment (Me table 1). This management team took steps to lower rates in the confirms Standard & Poor's earlier conclusions late 198N by buying out a coal contract. This has that rated rural electric cooperatives should re- helped Hoosier rower wholesale rates more than o E g main strong participants in the increasingly, com- 28°: since 1' Moreover, all of the G&Ts re- 9 - pebtive electric utility industry , viewed have implemented integrated resource m Asa result of the review', Chugach FJec'r c P s o plans that identify the lowest-cost resource alter- C Ti d i ciabon of Alaska (rated 'A')was asaignedapm: a natives. a W°. ° outlook primarily teflecung its "above average" Furthermore, G&T management teams gener- business position. This compares with the muruci- ally have responded appropriately to the grow- pal electric sector, in which 1l utilities' debt was ing divergence in their member's needs, placed on CreditWatch with negative Implications Oglethorpe Power Corp. highlights Nis cturac- u a consequence of the assessment process (see June tenstic. Oglethorpe s management his had to 26,1995 Craig Werk Municipal). - provide flexibility in managing the divergent re- Standard & Poor's rata nine G&Ts with a com- source needs of distributors "}~enendng rapid bind debt exceeding S9.7 bdlion These G&Ts are growth in the suburbs around AtIMa with that among the strongest in the Coupe-abve industry, as of its slower gro,.vtng rural distributors. In re- evidenced by thein'A'and'AA'otegoyratings(see spun, Oglethorpe is implementing plan table 1) modify the "all-requirements" contractual rela- The common threads among the G&Ts re" tionshipwith itsmembers. Theplanwouldallow viewed uelyghlycompetent andproacriveman- members to engage in power supply transactions agement teams that have a firm grasp of industry on their own to meet load growth. issues, operationally sound generating systems concentrated in coal assets; low-cost wholesale OPERATIONS power, residentially dominant customer bases; Host of the G&Ts reviewed have fuel and asset and the high retail rates of their member systems, concentrations in coal-fired units. The exceptions While the re tail rata ofG&T members typically are Chugach, which relies on natural gas because are higher than those of sur out ling utilities, of its location in Alaska, and Old Dornu*in Elec- cooperabves'rwal and rest dentalserviceternto- trio Corp, which currently relies on purchased nes leave little artractwn for competitors power and has a ownership interest to a ruckar station, However, Old Dominion is building two MANAGEMENT 390mw coal-fired units that will reduce its reli- G&T nuuugement teams scored quite well. The ante on purchased power and further diversify managers, by and large, have good under- its meurcemix. standings of competitive issues In fact, many of Although fuel and asset concentrations are a the tearns already have taken steps to dramati. credit concem, Standard & Poore fazed that it tally lower wholesale casts and become more effi- was not a large dist»ctionfrom the We overall COVER STORY COVER STORY business positions G&Ts that have fuel concen- A major difference in the cost structure is that trahons are not necessarily concentrated in one many wholesale agencies invested in high-cost generation asset and the kav embedded and op- nuclear assets and capitalued interest during 1 erating costs of the units provide great opera- construction, while only two of the nine G&Ts t mal flexibility Such low-cost energycould pro- reviewed-Oglethorpe and Old Dominion- vide the cooperatives with significant market have nuclear assets. Other factors that contnbute opportunities. as much to cooperatives' lower costs are low-cost federal investments in the G&W asset bases, 10" t overwhelming concentration in coal assets, and 6arsew+~ rapid deprecation schedules, compared with rowWg0,r r, those of municipal systems. The higher fixed ?SSW AMq NOW eaa ISM) matte 0"obw costs of the wholesale agencies is one of the lead- Chr " NO An%. "i a A P0$&,U 707 807 Swwtir At'" awapa ing factors that resulted in thetroverall "average" AAane A , r Coop :pep. Arx A. wela 518170 $011't"r gym" "w"it to 'somewhat below average' business post- OW EWM Copp. N D A salt 1.781.561 smiew a saw r4ww sud" poasr Corp. Cho AA sum XV,a as kwa01 dons. Old Dwmw Erotic Copp. V& A. suer »7070 A,vtp1 While aggregate whoiesale rates among the rn-yw CAT Aasoc.. coda A- sort 977 App Mrlid G&Ts are low, aggregate member retail rates are "ftm EFw" AEC. Nw. M A smr 741.174 Averapt high, compared with the system,' state avenge Darytn6 pew Cdo., srr. M srwl 711.914 AWapr OOrewq vow tap. 64 . A. wet 9Sll.iii Awapa rates. This reflects, in large part, cooperatives' Toot 1.770.147 sparser service temtory and the higher costs of total east n 1*6111 AN am tMer rams Of rd M rner IN irraad sod ere 'MA' serving a remote customer base. The G&T mem- ber systems' residential rates generally exceeded About 8099 of Arkansas Electric's 1,916mw of state averages by 8% to 19'8, tr+dustrial rate dis- capacity is in coal-fired assets: however, the larg- Pasties were even largc:, ranging from 2% to est unit is only 16% of opacity and produces 491.. about V'v of total energy output. On the other Not A of the G&T mernben' rates were higher hand, Hoosier Energy/s and Of'C's resource mix than the state averages. Arkansas Electric's and did limit their respective business positions. Hoo- Buckeye's members' rates were, on avenge, 93°A sier relies on one coal unit with 1,073mwof capac- and 94%, of then respective state residential av ity to generate 786. of energy needs. An unsched- erages and 671/9 and 43% of their respective state uled outage at this fadlity for a prolonged period wdustrial averages, would force Hoosier to purchase replacement The rate disparities are mitigated by the fact power at potentially higher rates. that the G&T members' service areas are primar• Oglethorpe'sresourcemix,despite the planned dy residential, with little industrial concentra- addition of a suable pumped storage hydroelec- hons. This characteristic may once have bow per- ceived as a aeviit wtakraesa, however, in the new tric facility, is primarily baseload and 000M. Crated in coal and nuclear assets. This leads to an world of competition, this credit concern may in inefhdent use of its resources, as baselciad units fad help insula te G&T's service arse from out- are being used to meet peak demands, as is ind1• side competition. The presumption is that resf- cated by its low lad factor. _ denlial cudomen Likely will be the last class of Additionally, almost all of the G&Ts reviewed customen vulnerable to loss. An additional Uuu- have excess capacity. Surprisingly, this did not l`~a~tti_n¢¢ factor from cornpetttion Is the special Mai- hurt the overall business positions of nany of the ^dP between the GdeT and its member distri• cooperatives, The reason for this Ls that many of butionsysterro. 5tardad&Poor'sfound that the the plants operated by the G&Ts are efficient and G&T ~ with their members d riot have low production costs, which enables them hurt to sell the excess power at attractive rates Fur- Pared with the detraction from business position . thermore, almost all the G&Ts have entered into strength caused in some situations by strain be- favorably anted long-term contracts that mih- tween municipal wholesale agencies and their gale this operation concern members. A good relationship between the power supplier and the power purchaser is emen- COMPETITION tial to retaining customers in the increasingly Competition at the wh olesa : le el is when competitive Power market G&Ts must be able to compete. The cost of whole- One factor nfleding this relationship is that G&Ts sale power from the G&Ts generally is competi- are somewhat removed from the specter of pul~bc rive with sate averages Standard & Poor's has policy c taskins that can affect a utility/s cornpeti- found that, as a group, the G&Ts have lower fixed till position Also, the families! telationslnip in the costs per kwh than the municipal whoksak aget, cooperative sector contribute to the generally sup- des reviewed, This is evidenced by the overall portive nature of distribution mops tow their average fixed cost per kwh of approximately 1,46 G&Ts. It should be pohneed out however, that the bet sysberris cents for the G&Ts, ranging from a low of 0.73 cents tog tof merri N by can conflict those k fa a high of 2.90 cents f wholesale table 31. This cvmpam In these anw, there could be a poter+tla for favorably with the 0 ceis s agencies' per genda kwh, s ranging as in any other situation, wd cunt be managed fuel cost of about 3220 call calfiict from a low of 1.18 cents to a high of 4.40 cents. accordingly. I~ Kl21101M P& M STANDAW A POW S CmETWUK MUMMAL MT 31, 1 "S MARKETS situation of serving about two-Ourds of the state's The most important factor affecting theG&Tmar- energy requirements, either directly through its ketaralysxswas theususcephbebtvtolcsingload to member systems or indirectly as a wholesa.r. other power producers. StandarA & Poor's found This has allowed Chugach to become the lowest- that the G&Ts' members have relatively low bad cost power provider in the state, with average factors, generally below, 5T,P, as a result of the member wholesale rates of 4 40 cents per k%N'h r)0 overwhelming concentration of the residential Also factored into the assessment is Chugach's l class. Standard & Poor'soften has said this type of strong management team, which has imple- Q aloadprofile would be the least vulnerable to corn- rnentedresource planning strategies focused on _V petition. system reliability, given that Chugach isnotcon• It should be noted that not all of the G&T mem- rlected to the lower 18 states. This constraint has o bers have low load factors. Intact, a few had load led Chugach consistently to obtain over 90% z = factors that exca-ded 60% as a result of large availabdit, factors at its plants. o industrial loads. Customers with such large bads This isolation, however, increases costs, as o are most attractive to competitors. However, Chugach must maintain a high reservernaroof Q C M Standard & Poor's found in these-+ues that the 35% for reliability purposes. In addition, G&Tshavetakensteps to rninimiufnancWnsk Chugach his asset and fuel concentration with should these high-bad-factor customers leave 84% of its total capacity in gas-find units. How- the system. These steps include entering into ever, concern over the fuel concentration is mitt- ' long-term service contracts, providinginterrupt- gated by favorable long-term fuel supply coo- , ible rates, and real-time pricing of power. Addi- tracts from three sites- honally, Standard & Pooe's did not find that the Arkansas Etntric Cooperative Cory. Arkansas G&Ts are unnunently threatened by co-gcnera- Electric's "somewhat above average" business tion. This is primarily attributable to the nature position reflects an experienced management of the members' Toad profiles. team that has fully embraced competition. This is Furthermore,mostofthe G&Tserviceareasare evidenced by wholesale rates that have fallen experiencing slow growth. The majority of the 13% since 1992 and are I0%15% lower than its G&T3 are projecting 192% load growth in their chief competitor, Arkansas Power & Light Co., service territories. However, Old Dominion. and a diverse resource mix of coal, gas, and hy- Ogkthorpe, :nd ArkAmas Electric are anticipat- droelectric. Since the early 19805, management ung higher growth Ieveis in certain of their mem- has been rapidly paying down debt incurred for bers' service areas. Old Dominion, which serves generating assets. This strategy has provided Ar- the area between Washington D.C. and Rich- kansas Electric with extremely low fixed costs of mond, Va. u anticipating load growth of 2%-399 0 73 cents per kWh that provide it with consider- per year. Arkansas Electric has mernbers that able financial fknbtbty in a competitive enviror- serve growing retvemxnt communities that are ment. Also, number load growthhasbeen robust, projecting d%9 bad growth with no sigrn&,Wt corwentration of firth power purchases by a single employer or industry. At- CASE STUDIES laruas Electric his taken steps, well before the The following is a discussiorl of the factors that threat of cornpetitim to limit its hranaal expo- influenced each individual G&T's 6siness posi- sure to large industrial customers. Arkansas Eke tion assessments. The order in which they are trichassigned l0•yearagreementswith itslargest listed corresponds to then husuless position- customers to serve them on an interruptible basis Chugach Etecine Association. Q,ugsch Electric's at rates well below the state's industrial average. "somewhat above average" busu>~spositionas Basin Electric Cooperstivee. Basin Electric's sessment pnmanly reflect Chugach s unique 'somewhat above average' business position as- taew t 46ura1m A tra11/0eW4 r4swa1444 4114 smo wr w440 AAarau bun hat" aw oom DairyYM 74waa OgYNOrpe 04d DOM s1 rrt1101/ facr,c f4a" Wnr Ana P4.v frrm ►a,a bset wr Tay mrotm 110001) 310972 459900 2011315 130.912 166.177 2a0 ,S76 1'MW 341264 177317 NO rr4nrn evail" nor 00 wAm (1004r) u791 173136 63300 sa 347 45.113 14163 459.256 703V 91223 Comwad mot saw co mp4 tit Its 1 24 '46 112 1 S3 1 41 t a 264 112 Tay ma JIM) 545 am t 381 544 3;34.6311 363.107 311,414 741.174 4.431 9A 793 070 673,100 f0a0t1X) 250 234 130 250 147 222 41 till its Tay ma 10 PW 1Vft 1 350 $303 3237 323 424 413 1,125 473 014 Toy ON No capanaf (MMI 200 495 273 606 320 555 9% $42 $72 Rain (wnwN,9U) A,erapa +041tY fow err 360 112 314 070 364 414 SO 4 p 415 Amoy 12W41 raw to paraoturis 396 415 3 54 440 409 443 S72 4 u 4.11 A,erap4 parOCp4M eMdw10a1 rate ?$1 741 700 1120 132 ?so 1.41 113 7.10 Stn awrg4 rn4reul rW 127 644 7 47 1020 ?10 610 714 7.50 MA k,W W Wito M 40etor rw 326 $ 90 311 710 430 $30 4 74 6.10 S b Sow swap nss6+r rn' 465 420 420 760 4 20 410 474 410 X A. MA _4W avaarw 1111 rwrapt raw/ M!/MfIN t3lOttk OlYIOAMf a POMIS adsllrvlftltac MMMOMi XLY S11r 1"M S COVER 13irORY sessment d warranted by a proactive manage- Ofd Dominrort Electnc Cooreratrtc. Old Domin- ment team. efficient plants producing low-cost ion's "average" business position reflects low power, and extensive transmssion ownership purchased power costs, proactive manage- that allows Basin to move power to both the ment. and health' load growth in the larger 1 western andeastemregions ,Since 1986,manage- member territory Old Dominion's cost profile men t has f aced ov e r 1,000m w of s urpl us c a pactty, isev I d to remain low with the addition of as evidenced by the high total debt to plak ratio the foyer coal-fired plant. Clover's Unit No. of SI,303 per mw-, compared with total debt to 1 recently opened, and Unit No 2 is expected capacity of 5395 per mw. However, Basin's low to come on line in the second qquarter of 1996. total costs of about 2.07 cents per kWh and exten• The cost should offset the higher-priced pur- sive transmission access have allowed it to mar- chased power and allow Old Dominion to keep ket the excess power outside of its service tern- rnember rates stable. tory. Management has managed this situation by Record-setting efficient operations attheNorth locking up a long-term firm contract for 385 mw Anna nuclear plant help provide a low- cost of capaci ty at an attractive average cite of 3.7 source to Old Dominions energy mix. Manage- cents per Wh. The rel»iting excess power is ment has pproduced a power requirements study soli under short -term contracts and on the spot with detailed, long-range forecasts. The staff rou- market at average rates of approxirrutely 238 tinely meets with member distribution coopera- cents per kWh. The short-term contracts have live to advise on oiler:"n.9 and firwwW plan- worked to their advantage, providing opportunl• nin& as well as day to day issues, ties to recover increasingly higher rates as the Old Dominion's staff is exploring ways in tine energy market tightens. which to aid members in offering competi Buclreye Poser Corp. Buckeye's 'average" busi- rates. hforthem Virginia Electric Cooperative and ness position reflects current rates that are below Rappahannock Electric System are the two larg- r o6t of the investot-owned uhllties (IOUs) In the est systems. They cover the rapidly developing state and limited upward rate pressure--the re- suburban area between WashulRtor% D.C. and cult of moderate capital needs. Buckeye's average Richrrlond, Va. Customer and bad growth in this members' residential and industrial rates are ap• area is projected to range between 2Yv3`/9 over proximately 94% of the state averages. Addition- the next five years. This represents a third of Old ally, as a result of strong financial operations, Dominion's sales And revenues and Ls alarge part Buckeye im le men ted a temporary rate discount of the forecast growth for the O&T. of about 8-50/9 through August 1997 Buckeye's Tri-State Genemnon & Transmission Association. resource mix is concentrated in coal-fired units. Tri-State's business position assessment of 'aver- In 1994, 51% of Puckeye's total opacity was in age" reflects strong management plaruung and one unit which accounted for 56% of Mwh mks. adaptation to acquired fadlitm and members This concentration is partially mitigated by a 1 omCobrado•Ute.Simacquirurganaddiborul back-up power arrangement with Ohio Power ',Omembersto the original 24,the integration has withroopaaty costs. The re a re no newcops ci ty proceeded with tninimalinterrupbmThe coop. needs until 2010, as Load growth 'sexpectedtobe erative's efficient, low-cost power production slow. Buckeye's members are d ilpersed and competitive rates also figure prominently in throughout the state serving primarily rural areas the business position amessrrent. While rates to with a significant agribusiness component. The members are com tivr member residential largest member comprised over 23% of energy and commercial industrial rates vary greatly. The sales in 1994, markets for Tri-State, like most other coopera- 0111111111- OwraM 6 9'aaa~bdM rra/anl9aa' q/l kWON" 111111111011:111 wisall ONO ho*Y1 dxgaca Darywd Now 0., A p OWOmraun T+$" f7ar3'11: facet Pow Am% NOW Ewpr PMW tlrAir SAT Apatxr , sws 1.162.913 I3 565 000 1464201 111 2.11 S 135 4 M.U2 6 311 M6 20,193 000 119000W 10.t 'Dom To WOW" 1%) V2 V7 965 907 700 551 79S 1000 61.6 To~j%) 116 543 is 93 300 N6 205 00 314 aQWq park (M) 1.566 1 060 1 009 369 736 12M 7,191 1.676 1,424 t916 2.796 1227 S01 976 1736 1.4m 1.464 2160 A101M7 270 r5 130 359 ISO 105 130 .126 65 aprrrr~bcw mar1%) 540 197 575 654 $60 600 472 NA NA s►1 0 73 1 10 090 290 III 1 12 2 07 NA 1.67 Aprapncrcy MW 6W aWAmh It aoarKt wueir aayN.n true i 255 1 97 252 260 264 213 311 "A 201 urpa IM at a% of low spat" 160 102 510 729 365 900 i10 144 234 ty/aa1 AbI1t a X d by coon. 1111111 212 233 560 85) 333 784 134 2590 410 359 139 690 221 573 NA 716 13.4 1631 91/1691 tltat~ Gila aaXataprler 717 441 i90 210 73 NA 13 332 246 loci 10 rrp6pbbertbtx ■ X A~pMCti n9I1~ 33 22 7 loo SJ T S70 392 635 S 01A. 3140 f/at No 391 IS$ 97 NA NA 17 NA 1570 NA-~Id aailta 1 4 W MIEN ff41 STANDAM A Ifi0"Is Cogofnvm Mw NOIAL 7YLr n.1, 1"s tives in the country, remain in the rural base of l0t:s' retail rates. This disadvantage is rningated the membership by Datnland's sparsely populated service tem- Hoosier Energy Rural Electric CwMattc'r. Hoo tory and the ally load factors of the member stets business position assessment of average svstems. 1 irtually all o[ Dalryland's generating to meet reflects a management team that has fully em- capacity is coal-fved. [)air. and is able to meet braced competition. This is evidenced by a two the Clean Air Act amendments through its coal- phase 13% wholesale rate decrease for calendar switching program. vears 1994 and 1995. Wholesale rates will have One weakness of Dairytand is that 2009 of its decreased 28% by the end of 1995, to about 3,90 capacity is from 44yeuold facilities. This will cents per kWh. Much of the decrease can be ted drive future costs, as new units will be needed in to the buyout of a coal contract in late t980s. 2007. Dairyland has been the able io take ad anMea Hoosier has a fuel and asset concentration in of its membership z _ two coal plants consisting of four units for its Power pool (%WP)topurchaselowermetpeak- energy needs. En 1997, the largest unit accounted ing resources during the winter and sell peaking o for 80% of total capacity and 7896 of Mwh sales. power to MAPP members during their summer Hoosier's Meal capacity is 1,336 versus a member peaks' e" a a o peak of about 825 mw, thus providing about SW Ogtethorpe Pony Corp. Og horpe' s ' average mw of excess capacity. Excess capacity is sold via business position is evidenced by wholesale long-term contracts with Virginia Electric Power power costs and member reud rates w~ Mare Co. and Wabash Valley Power Corp. above those of their main compete o Hoosier's wholesale rata are comparable to nicipal Energy Authority of Georgia and the competing tndiana IOUs, and members' retail Georgia Power Corp. rates disparities have narrowed to 8% from 34%. Excess basetoad generation, combined with Hoosier's service area is primarily runt and rest- low load factors, has historically put pressure on has dental, with no large concentrationofindusb-ial power costs. some concerns current rate disparity mbar customers. The top 20 industrial customers rep caused W to member t member resent less than 8% of members' electric sales. cooperatives, response concerns, Ditiryland Power Cooperairm. Dairyland's "aver- Oglethorpe's board of directors approved a plan age" business position assessment reflects man- to modify the 'all-requirements" contractual re- agement's efforts to stabilize member wholesale lationship with members. A key feature of the rates through 2000, fuel concentration with miru- plan, which was approved option to engage in W X malrepUteryexposure, andextensivetransms- give members power sion. Dairyland's management team strength is supply transacbons ontheirrg own to meet fond exempbfied by its comprehensive and annually gower should hodtivel.yyu geed 's costo of updated strategic planning process. The focus of p the planning process is centered on the stab diza- been fully absorbed in the rate base. Thei~it~ l tiers and lowering of wholesale rates to its miter, of 05 mw of a the hydro se resource n xwhxpower in h historically has ben. coal. Since 1988, wlaksale rates have decreased been concentrated in~?r~ty f21v2* 1352 13%, to a very attractive rate of 409 ants per Mvt Marfa For (2222) 1863 kWh. However, despite the rate decrease, mein bet retail rates are higher than the competing gegtinYd h9m CradtWeeR AhMVt pat by StanOar0 8 Pwe i Ratwgs Group, a dN%w at Tht "rarr•H 11 ComOap"L (xSC64M x.1221 Amu of h kri r Nor York N.Y. 40020, Editorial offices: 25 Brmdwr/• Hew YOc H Y 10001. 15511107 311 9 71. Subscriber senses: (212) 208.1116 C490V "ran-Hip ComWnes fte0ro0ucoort n nlwla a n Wrt DromGled eaceN W txmrss ori. AA riOMS rase veQ. (Marrs of TTe lktiraw•FiiA ComDartias: Joa10h l Ita 1 Kwr~Ihm.YNlor Exec uaw YtcaPM*n t and General Cowtsel, f rank O Pergtese. Sena Yoe RPresdnt Treasury Operation wrtiO0m has been obblew by CreAtWxa AA+nc+WI hem sources bellied to be re4W HOriener, because 01 Vie P%sb" at human of mlttrrd error by o toms, Crtde114e1 1ltsNOW of *03, CrMrtWee! Aluriicper 60" col piorarset aK accuracy. adequacy, Or comoMYnem of any domeoom rid s rat caws" for My emirs or ar"Go" or for cent stills obhkr0 tram ate use d Streit cave iatan saine WWWAWN PlOM ffA16OAM 76 POOWS C Y Wf~IE M111M0 M Amy a1. 1"1 I STANDARD CREDITTWWWVE MMUNICIPAL~~~~ THE AUT110IRM ON CREDIT CUUM AIIOUST A Tl96 COMPETITION ON THE RISE FOR NORTHEAST PUBLIC POWER Competitive forces in the power industry are and 6.93 cents/kwh for all sectors. The Middle clearly at work in the Northeast, where high in- Atlantic average rates are above average at 6S8 dustnial rates and excess capacity are driving the cents/kwh for the industrial sector and 9.50 clanging environment. As a result, it is becoming cents/kwh overall (see table). Higher rata u the increasingly clear that certain ratings are under Northeast have been driven largely by regional pressure, and these will depend, in large part, on overcapacity including significant investment in Use ability of utilities to operate under eomped- Nuclear facilities, exacerbated by the 1990's ex- bon. This is true for public power ratings, as well tended economic recession. The high level of em- u for investor-ci a utility ratings in the North- bedded costs have limited the financial flexuhthty east. of these ubbbes. Moreover, cast pressure has In an environment of customer choice, high been evident from mandated demand side man- -ates will not be tolerated. Rates to industrial agement and support of ronutility generators, ctr'orr,:r: in particular are critical, as the rtU- tively large and steady loads make these custom- ~ neoaaa W Main air (smr). ers the most likely targets for retail competition. wows"tor AR IKW The transformation tin the electric power ind us- tieftw a9 a ae 690 rgy 62a rea6 try gained momentum with the National Ene Policy An of 1992, which mandated transmission access for wholesale transactions. More recently, M" ku" too leis in April 1995, the Federal Energy Regulatory Rhou111" 1,03 164 Commission (FERC) issued two notices of pro- Vv in" IN posed regulation that propose to address several ear iVII n Is to 72 critical issues in providing for greater compeb- p q r 401 9x7 lion. There is little question that over the next 1"] rain form ewrsr Iarornnatlaa tidarkidim'Frctrtc several years, competition will become wide- Sam ass Re,arxxo• spread, The degree of competitive pressure and how STATES REACT wckly it occurs vanes by region. This is primer' In response to pressure to lower electric rates, Jy due to differences in market conditions (capac- several states in the Northeast have begun to Like ity versus demand), rate sensitivity, pobtical en- action. In Rhode Island, the Public Utilities Crxrr vvonment, as well as the ability of state and mission. proposed a ratrtaeeuring blue" backed regional interests (public power, tnvestorowned by a diverse collaborative. The blueprint, with the utilities, industry, regulators, state leplatures,etc.) primary goal of reducing rates, calls fornetadwheel- to work together in restructuring the udnatry. ing through the unbundling of generation and In states and regrons with lugh rates relative to t arisnissiort Generation wad be subject to ootrr national averages, pressure h cam large industrial pebti n and transmission and dist-button would customers has prompted efforts a. state-level re- rem= a monopoly. A simile proposal has been structurung and deregulation. The highest aver- putforthinhlassachusetts,wherethestata'hrgest age revenue per kilowatt-hour (kwh) for the in- employer, Raytheon Co, his a e icibbled dustnalsMOr,with theexception ofAlaskaand ~sutelegislature toallowittosliop~vfor 1dnclp- Hawaii, are the New England States The Middle est power. Despite some diHeresoe of opinion as to Atlantic states are also among the highest. The restru u inginthestate, Maimadtunettsisescpected New England 1993 average of g 26 cents /kwh for to be a leader in bon efforts the industrial senor and 10,01 cents/kwh for all in New Hampshire, deregulation kgislature re- sectors is significantly higher than national aver- quired the suit utilities commlasion to take im- ages of 485 cents/kwh for the industrial sector mediate action to impkeneut a pilot propw to CREDIT COMMENT CREDIT COMMIENT, establish retail wheeling (the program size and to strong financial performance historically. deadline are unspecified). In addition a commit- However, troubled operations at NYPA's two teewasestablished tomake recommend ationson nuclear fadLties have led to increasing mats and industry restructuring by yearend. Similar meas. rate pressure for custorners of the nudear facib- ures have been passed in other states. The Corr ties. necticvt Department of Public UtibtyConttrol has MMWEC, a joint-actim agency, sells power to issued recommendations toallow foreleetricgtn• municipalities that have entered into power sales S eration to be provided on a competitive basis, agreements for fixed shares of MMWECs eight 1 with transmission and distnbuhon remaining on projects. The '888+' rating reflects the urderfying an exclusive frarxhise basis. In addition, the Con- credit quality of the participants, and is closely bed necticvllegislaturecreated a task-force to exam- totheTowno(HudsonPower&fightUepartment. C; E S lne the alternative structures for electric comps- Hudson is the largest participant in MMWECs Z - rues, with a Foal report due by January 1947, project No. 6 that contains most of the fixed cosh $ While broad outlines are being introduced, frum an ownership shoe of the Seabrook nuclear many deu ils shil need to be resolved before com- facility. Of concern is thecaxerin6onprovided by ° co o prehensive changes take place. Moat notably, Hudson's largest customer, Digital Equipment questions as to compensation for stranded invest. Corp, which accounts fa close to half of the H ud- ment, environns mtal concerns including the son Power & light's revenues. In response to the treatment high cost renewable energy projects, .."-dye environment MMWEC management and how to protect small busawses and raiden- has made significant strides in knwering the and of tial ntttomm fram subsidizing industrial rams. power, primarily dvw* a serve of debt refund- mgs. However, at the retail level, some participants, MUNICIPAL WHOLESALE PROVIDERS pantiulartydnoseinMMWECsproject No,6,have Thee are two large municipal wholesale power rams dart are somewhat above those of competing providers in the Na*4ast, tine New Yak Power investor-owned utilities in the all-important Indas- Audmty (NYPA) and the Massachusetts Mums- trial sector. pal Whokaale Bectric Co. (MMWFC). NYPA's Both MMWEC and NYPA have experw mad M•'rahrngcurrently ison CreditWatdnwith nega- pnesumfiomcustwnasfalower ntaNYPAhas five impbatiosv reflecting its "somewhat below responded through unending eust°mer contmcts average' business position (BP) assessment, by hverzng rates. This has lessened NYPA's finarr M)dWEC is rated'886+' with a stable outlook and cal flexibility, which is recognized in NYPA's a BP of 'somewhat below avenge'. The rating din CreditWatch negative listing. Maintaining ns ns- parity can by orplaoned, in pant, by the structural tumeswill be critical forNYPA's raNYPAa1so differences between NYPA and MMWEC. is offering expanded services, prim to gevaTM NYPA saves over 200 astome s including cur- mortal aswmers. This is in conlrad to other ut0i- nidpal, irwesbr4wtad and cooperative electric ties In - 1 on unbundling o(savices. ubleies, ts,ge industrial and corporateconoara, and While the outlook for MMWEC's rating is sta- stamand todgovernvnenaganoes Thecustomers ble, ram-related i ousts and participant mad" purchm power on a wholesale and mftil bests un- will rerr" important in maintaining credit qual- de mnerads related b one or more of NYPA's Ity, as its pareT nb will have to be oomQeNtive generating l arbor with rate that vary widely ac- at the retail leve]. Then are issues to be resolved, c rda0IDc customer typeard project Regional coov and details to be worked out. but the wheels of petitive pressure in doe wholesale market has led to deregulation are in motion. The way that utilities NYPKs CreditWatch bsting with negative imps adapt to change will play a key role in dete nin- tior* indicating the likelihood of a new-term rating trig credit quality. downgrade. NYPA's rating is supported by signify Ho uard Spurnberg (212) 208-80% ant low-cost hydroelectric capacity, which has led Marfa For (212) 208.1863 Rsprarid from Cm6yVAat A obmW by %n *O i Pools Aatwo Group. a dl^m d TM McGinn Hit Compmm Eua M ofAcar.1221 Avwnul d fthvoicm Now York 11Y. 'Mo. F M I ' ' drat 25 Stoadewty, Nos York N.Y. 10001. tm oni-1971. $ubarber arvt w (212) 2*11146, CapyA0lt i995 Oy The hod rarH1 CWnWm s. P4poducbon n rt ob a n put ptotabteG auaN Ira pttmisLtn Ail riphti resarvsd Won d The YcGmt-HM Ca Wft: Jm* L Diorxb. tttnnnn arnd Ctwl E"a" Offar, Mmid W. McGirre, III, Pre iderA aro Chid 01 - I OM csr. ROOM N. I &n*n Senior Exw*A Vko ftn&K Saenrwy.. Kervnetln M. VMtor, ExsarM Ya Prisidrnt and Gerard CatnM, frr# 0. PwpMK Swim Noe Pr i s4K Trwury OpanOars. I donrrVon Ms been obomW try Cadn*A Akinimsf hen mums beI lobe net" Howrrw. be=m d h panbft d kr w a nrdfnral wrot by aw samara cndttlMk Aitxair4M or chows. GrAA11i sA AAAMW doe sal porrsu the acaracy, afe0uaq, or comoftnest of cry ift etas And is rid mponw W any morn a omission a for the nr/IS obtairrd from Vr voa d rush sionrnatbn ~ I _ 011PUQM NOM STAMIU M • VOWS CMMN1rVUK MIIItS!!AL A*~ 14t 1"11 STANbARD. • • CREDI Egg ■ MUNICIPAL 11111 x4u3T 14,,943' 1TfE AUT1f011fTY ON CREOfT QiIAIITY BPA PROPOSALS TO HAVE LIMITED IMPACT ON SEATTLE CITY LIGHT The Bonneville Power Administration (SPA; rely on its own resources during peak periods and that BPA purchases will be made during 'AA, ga significant rag ted nificans cant CreditWatch Kn response has proposed rinds. Consequently, Seattle expects rate red unions in (see to 2, 19 5 taupe fx BPA enerw during oH- Cr compeMutitive pressures f BPA 's customers, 199omers, 5 peak pcontinue, a Purchase r kYin and any u,'nam reditWerk ninpaU. One of Seattle City Light ($626 million of debt rated'M' is not expected to exceed I Trull. senior lien)depadsheavily onSPAfortr"mis- BPA'stans>yssattkCitt sUght more dmartuIo lion and to a lesser extent, for energy purchaser. operation . r the bulk Yet, the energy and bVismWion rate proposals, energy. BPA's transinussion lines elivt urtvs if adopted, are not expelled to hurt credit ratings of Seattle's power from remote energy reso, Competition and a regionalsurplusoflowarost including Seattle's own remote resources. of S total energy eattle's power have threatened Hop's includes 11% requirements and 909: of total power purchases its customer bass The proposal l Luies reduction in the priority firm wholesale power are delivered over BPA true Ott travels over rate (charged to municipally owned utibhes) and high percentage of total energy ry trom5eeofBP _ a12.776decreasetntheindustrulpowerrate.~[ rS~PAfire idea to the of the rate decrease will be paid for through Boundary atthe city's tar y stinting efforts and an increase in BPA's rate to hydroelectric facility. is . utilities participating in the residential exchange est owned remit and supplies about 387, of the program, The Pro posel also includes a 35.6% in- dWs energy rae& increase in trans crease in it wit,+ee 6 g transmission costs. If Although the proposed adopted, the proposals will rot be implemented mission rates is submntial, and the migrutude of Seattle's dependence upon SPA for trammission until October 1994, 571496. gnifsunt the potential impact of the pro- ]A 1994, 7. th Seattle City ri edges energy is si=1Z t anssmissiorm rates is to npered needs were met through dry~owne generation b the of trammission costs to total resources, which included hydroelectric facilities y the _ only wheeling The balance costs of about 0 5 cry's reeds per kWh. charges operating of In IM, BPA T % of 5 he balance of the e cry's energy edds were met ct City rges open by several contract nd nfirm energy re- light's tingexperis~x+~ xP~ sources. The single largest provider of off-system iAg that ~II~~~ structure due to energy was BPA which provided 22% of Seattle's to 50% under the proposed to total energy requirements in 1994, up slightly the significant capacity that must be _ the and on off of y from 1993's 2T* Although the 2 cent per kWh SPA lines for peaks coming hour cost for BPA energy u low, it significantly plant A 50% rate increase, however g motes exceeds the cost of self-generation and represents into an increase of only slightly more about 304/6 of the total cost of energy production total opeerua. tl attrib ghi s revenuesare predownan y and purchases. The cost of BP. energy, however. City Jr compnsesonlyl6°6oftheutiWstotaloperating ~utable to se~resis~tW"cc~+~ I customers t for 38% expenses. _ Seattle does not expect an appreciable change dustrul evstoa.cn account for 14% of revenues. in the cost of SPA energy if the adminustraho ' ates by the hhistoririside:ntial larvde been about clanes rate proposals are adopted. Lender the propose utilities that are exclusively or higNy dependent 207• blow the date avaagd for twtottmers in on BPA and that need to purchase energy during those classes. Therefore, the city has sufficient high bad periods will expenena the greatest rate flexibility, to make adjustments to roes to reflect increases . Searle, on the other hand expects to increased transmission tomb. The city s continu CREDIT COMMENT ing ability to maintain rate competitiveness for themselves, impair the credit ratings assigned to these two customer classes and to Lmit any rate City Light's outstanding bonds. Standard & disadvanlagesexperiencedby someoftheindus. Poor 's, however, will continue to review the trial customers is more likely to be affected by the bonds ratings'o ensure tha t strong financial mar. city's sizable capital program than by the 8PA gins are achieved and that tha utility's ability to proposals. compete with alternative pow,•r supply sources Accordingly, because neither the energy nor is not diminished as system debt is increased by thetransmissionrateproposalise ed10have about 30% over the next two years as the capital a significant impact upon City Li is operating program proceeds. expenses, Standard & Poor's expects that imply David B dek f212/ 208.1013 mautadon of the proposals rviy not, in and of HaeardSpamberg(212)208-8096 AgeAF; AgenDaltbr*w hom Cmd~ AbMq#by Standard l Poses Rargs Group, a dewon of The "rarr•NA Cangralea Em1M of loe i ni Mms d w itllnef es, Near Ywk KY, 10020. Edlbrbt An 25 lhw " Nary York N.Y. 10004. ISSN 0771.1971. Su K4w a vitsm 1212) 2061146. Copyrlptt 1994 by The McGmwH 1 Campenties. P4wo&4m n whob or n part prdsbibd brcW by prnnias M Al Aplnla teemed. 0MMm d TM McGm 4M Contpertite.; MaO L Diorw. Cramwt and Chd ExK*A ORW Nereid W. McGraw. III, PrrAW and ChM Opera Yrq OMw,, Robed K L&VK Sector Evoift Yka Pra4K rd SeC vW,, Karer/r bL Vast, Erur*m Va Pre Bert aM General Cowsal, Frrd D. Pernpbae, Sena Va Pseelft Treanay Oparagm a im se n has been obrra by Cadr#ni A#AWryd bom sowsa bdo v b be mh" flowerer, became d tr pD *ft d humm or rddw d am by aw metes Comawni Nafto or a as b evor abM h ua d such irtomsea onY. ade0r a canpMlwa d ry 000 ON rd !1 cad raponaIt I br any erton O FEOM STAIM MOr A POQWO 9>WITM UK AMMOM L AVOW 140 1"s i CREDITWEE MUNICIPAL µrT Ow-1E 0 'r It TMH-MR Y ELECTRIC UTILITY MERGERS: ARE MUNICIPALS NEXT? o an between Union Electric Co. ahng and capital budgets cad saLng back opera- f hemer or secured debt} and CiP Inc. tiorla in antiapation of changes the ve taken the (IM tilities even ha debt) anrounced on Aug. few invatoro wried u move of slashing dividends. " senior secured inov with other utilities, ir+ rir 11.1495 has no near-term audit pa ele tiric for vc1+ mergers bother u l it all, n Standard & Pools rated mturidpkdric sys scues temsi %thearea.Standard&Poor'sratesonly~ +n the rest pradial step the Investor-owned utili- muniopal utilities in Missouri and!)ltno°' ties can take to pare costs, create rtfidericies, and trijes of scale There is h" else they Union and could, oe rear wwin& to do beyond what they combined u~ will serve 1.4 Million. electric will customers and expects to realize SS70 ahead have generally accomplish meredgers that could. mea0mm savings over i10 ayears froin it c the orations on rea ~eld the savings that the The ualsW lb audit considerations In fad, Standard & Poor 's recent~ryuurati Gas & nee' generally b becauseof these utili- ratings on PSI Energy ~ and muniape minimal tive rates, and BBB*' seven months after generally low costs, is. However to 'A•' from p deed u train adequate fvursdal cushions. How, to the %,e they ym merged to forrr+Cinergy fits of ►ower ex- tent that the merged entity is able to encie contributor$ to the upgrade tftt bent synergy that will create long-term effiaenaes, fuel costs, reduced operanng and terunro cost sav% igs and lowee rates, the muniapah will lower production its. be pressured to respond. Alttrr% ve y, their expenses competitive positions--and therefore their credit MBNIS: TO MERGE OR NOT i0 MERGET ratings-••could deteriorate. Standard & Poorsbelieves m uner Furthermore, Standard & Pools does not ex. id most art, resist the t" tof reasons. su ramifuations from the hostile takeover bid complete merger for a variety Gtica- entt- by PECO Energy Co. on Aug. 14, 1995 to acquire Co let by trger Very Nye' a itica They PP&t Resources Lnc, since s does not rate any tsesp that is, separate units of gov ceur+r>h of mutudpaUy owned d electric system in Penns} - typically art goverrnd by kcal city vuua locally appointed boards of diredors. Mup efgin6 withother utilitieswoul m w~ an less At least MERGER INCENTIVES ~amongatkut some control and certainly I~Lso s an less These two merger proposals year seen U.S. po~+'er for decision makem a mof some ots, standard boards, particularly of joint Action investorlow put forth within within tile utilities. e past foretell trend of nuypitdifficulttogair+ consensus . lieves these merger proposals ng ditiously. Often, this is what is needed when erational consolidation pressure to lower examiningcauobdabon alkrrutives.7h ops the dr etolara rove too high a his Po for u" as electric and thus industry However, the al element could prove although it should not rates and thus costs intensifies. to many utilities nit utility mania momentum to merge largely will not restricted municipals, interfere with p slut 8N this diffe rence between those TIN investor-owned utilities and not which are pursuing other means to become Outdo not, however, cwkdbethe renuincompebtiveardAreresistingthepobtial ~Q~ ~~usttyleaders Arid laggards ramifications of consolidation. oQen envircxemet The main incentive for electric utilities of all inamoer, ~ferdlothe low- luitotesanyt types, in the changing inedustry nubis to pal government dal funds from cost provider of service. a investorowrted tive eketrk systerm 1 moo. Maneyrtlopal many of the more progressrv be unvrilling utilities and muniopals Nye been cutting oper• may CREDIT COMMENT utilities support, in some cases significantly, gov for example, is considering combining part of its ernment operations a t the expense of higher elec. nudear operations with Coavnortwealth Edison tric rata. It is telling that municipals in North with the potential for significant saZ' . Carolua, some of the biggest supporters of this The cities of Gk %dale, Pasadena Burbank philosophy, have begun to change their ways in is southern California an loekrg at consolidat- recognitionofutili typre aures and eonsequences ing many of the ser%ices associated with doing of continuing such practices. E oval municipal busUi ss, including maintenance yard work and Q utilities in this sate are expected tobroadlyadopt meter reading.However,separatepoGtialagen- transfer pobdes that restrict the flow of funds to das may ultimately prevent further advance- s cities. rttents [tom occwing, specially where compro- mists will be necessary. ALTERNATIVE STRATEGIES G PARTIAL. a MERGERS MORE CONSOLIDATIONS AHEAD Z " These municipals that have concentrated an There is little doubt that there will be fewer A their future competitive position have focused ekcbric utilities five years from now than today. M their efforts thus far on internal sat controls That means that these merged Goliaths will have a 4 while remaining independent entities. These owncustomvs,moreas.,ets,grateraccasebility utilities have acted early and appropriately by to other power markets, and presumably grater cutting coats, reducing work fowns, renegoating ef5desds than many of their neighboring utility contracts, and paying down high cost debt. brethren Amatg the system that have dome some or all of AD of dus award that municipal entities can not the above include South Caevlum Public Service bury their heads in the sand and wish competi- Departmeni, Sale River Project Agricultural Imr tion away. The industry is moving ahead despite provement k Power District, and Modesto Irriga- what they door do not do-to respond, Many tion District. are euatining alternative solutions to reduce Start of outright mergers or acquisitions mu- costs and ensure tive rates: these munld- nicipalsysla~are hkdytonext considerconsoli- aIshave already idiypositioned themselves daton of many of their procurement, gerrrating for the future, Ultimately, this could be just m and operating functions where there are syner• effective as the investor-0wned utility mergers to gies with neighboring or interconnected munid- date. However, without the political will to stand pal systems. This especially will be prevalent behind the initiatives and bike them one step fur. amon small to medium-sized distribution eyes- tier municipals coWd jeopardise their utilities' terns that ate members of joint action agencies. competitive starts. The point is that no utilityan These in North Carolina, for example, already are afford to do nothing; municipal system are no evaluating the merits of this strategy. exception At fast one municipal utility is even era mu%ineg Maria Fox (2I2) 20&IU3 forming an aWee with an asodaled investor. Bill t:ox (2121208-IM6 owtwd utility. The New York Power Authority, RewwW from CndtMleM A4 dollail by StvWW i Fooes Aameps Group, I derision at The "rewHi'C nplini Eam" aft w 1221 Amm dfy Mnakas. New York N.Y. 10024 EtftsYl dlae 3 bodavy. Nunn York N.Y. t000s. ISSN 073W9T1. SUbK Wr W*K (212) 2061146. Capydpl IM by The McGrow4lN Camparrs Repradtnclo In OW of In pal prdnDAed except by wamism All Va mewl. ORrcm d TM" arI Camprtlss.: Jteaph L Dtorwte, Geirmat anti CNal EveulM 0111W., Mb W W. MCGMW. III, Plu dra ad CAM 0WAV OMW Robert N. laNas. Senior Exam" Yo f'naidK and SscraW , KaratsM AL Vfaa, Erea - Yka Pnsift and 6ensrtd Cow" Fret D. Po glow Sera Via Preskin Tmiury Opnom NWrntdm ftsa Dean obWW try CndN*WN Ailir of from assn Defswd to to rdW*, tldaom, banes of 9y pon"lly of km a rrtaftrtiul arm by w tewoM, GsdMMDef AArrsi w Of WWL Ga/99bA Ahntow door hall pnaranM tiff aeanacy, adeQuacy. or Canllasiar t co WN lndonrteron and Y nA tapaedl for any Wrm Of ontileion or for fie natdb obW W his dy W d urdt ertormstion. l 2 ldgggW tfa PM" $T~• POOWI ~Twlitfi MR9INONIAL "m 121, im L POOR;' • Egg C RE Wj MUNICIPAL AUGUST 211 i"S THE AUT110RITtt OM CREDR OWLITT WHAT WENT tNRONG FOR THE SOUTHEAST JOINT-ACTION AGENCIES? After assigning 'somewhat below avenge" busi- energy Costs, so muoicipabties pined together to nesspoeihonsinjunetotourjoint-acbmagencies purchases shares of generating resources that thw QAAs) in the Southeast, Standard & Poot's re- the eat of not the so rdlxn t agencies, the purc}use Gently lowered the associated ratings. Those ac- In of the merits included arrangements to initial] y tlons affected $1029 billion of debt. Two rasrg of the capacity to North nth Caro Eastern tins MMununisicitphe cipal t arhe Owner /OPeratm Of the lames-the local in- Power agencies-N Agency orth and d Carol Power Agency No. l fseeanafysrsl-►eprrsent the vesrorowned utihtxs--unN the agencies par' majority of the debt, at $5.47 billion. and are bapants grew into it. Integrally the coupled with the responsible for V*/. of all municipal debt issued development of the JAAs selling point in North Carolina. Another, Municipal Electnc that, by owning their own generatlon the P ati has been among therhighest meted historically p could avoid the rofit has investocowned utilitie sand pro de muchlowle been downgraded twice in the last 12 months, retail This seemingly forward-looking arrangement The last, Prednvrit Municipal Power Agency, in South Carolina (see Aug. 7, I"5 Credit Week Mu- has not produced the results that were antid- utloo, has talkn to the lowest rating but the paled o ting cities have not experienced . The participating outlook is stable. the h predicted and now, in many cases, WHAT PRECIPITATED THE DECLINE? are overwhelmed wish substantial excess The siaulanty among these four agencies is the bamload capacity that is dnving p their op- substantial levels of debt under which they oper• eating costs; and ate. The high debt levels, the servicing of which • The price of energy has not autched projec-much rate generally represents at least 5M* of each agency's lions, leading to loot favoorowned operating budget, limit their operating flexibility proms comp the inv and, increasingly, their competitiveness. This utLubes. comes at a tune when the electru utility industry The JAAs are further burdened by the type of to more raNabonalpidlyEnethanrgyitPohu,licylargActeolyf proKcis-~redowinantly nuclear-they joined, their debt structures, and then management, To isinevolrespovingngemuchthe 1992 and the federal Energy Regulatory Corn- keep retail rates as low n possible, the )AA' ~y mission's interpretations of it. Consequently, capitalized ~ all on P~~ ou e payments Standard & Poor's believes that, given the chang' ?01e`i. d N.C. ing environment and a lack of comprehensive u ucipal ~;r Authority of GeorO P u were anAnd N.C. solutions by these IAAs to address the chang atibe that further their pater lratungs evel no longs represented the cep used costs, T Th he yearso capitalized interest propnste level of of aedrt risk for incredibly expensive nuclear projects, as well JOINT-ACTION These four agencie tnirumal principal payments during the yarn CREATION Of enieswre f were formed in AGENCIES response to o as of the sellbacks, have left all four agencies with rwid- the energy a'isis of the late 1970s, when the pntt debt ratios that tower ability t reef otlerrndustry of oil was high and expected to continue to nse. ers, ~(satmite Sui-alarly, the Southeast, in gereral, and the areas changes ultimately served by these agencies in particular, were beginning to experience substantial levels HIGH DEST RA IO$ the of growth. tneexisting contracts with local roves- The highdebt assns lde ldentifed Wied t~~Oe torowned uhlittes offered no relief from high businesapoN CREDIT COMMENT the lack of flexibility these agencies have to im- In an era of continuing cost increases, forward. prove their rates. They all have economic deveI- looking politiaans rosy be expected to accept that opment rates which enable them to offer rela- controlling the local system is less important than tively attractive rates to new and expanding providing competitive levels of service. Some ef- loads, and after recent rate restructurings, Mu- forts in this direction are underway in both agen- i nlcipal Electric Authority of Georgia and Agency cies, but significant reorganization along these No. 1 also have low marginal cost rates that are lines could reduce distribution system operating a available to new loads. Agency No. I's incre- costs many times over. Further realization at the T mental price to serve new load has dropped to local level Out retention of large, industrial loads about 35 cents per kwh from about 5.5 cents ppeer is important, not just to the participant currently kwh.MunicinalElectric Authority ofGeorgiahas serving the load, but to the entire agency, and completed a debt restruchuing which provided mold lead to some very large customers being some rate relief and Agency No. 1 utd astem served directly by an agency without any partici- v *s have both identi&d some refundings to provide pant involvement. This concept is already utd- m a, 15 margi-W relief as well. azed by marry large wholesale agencies such as the Lower Colorado River Authority, and mild cagarbra r Whom *it-"= epdsa also be utilized Sucrosfully by JAM with large Age" No.t arc. Sands ME40 PWdM*n4 industrial !Dads potentially at risk in a retail PA" A- lab A Ile wheeling envkorvnenL 0410aa P One 0.00 seer Sdahr CU@6 "n liMs 204,1114 2M,33t 71,= MANAGEMENT STRUCTURE REDUCES take-ii well (W MOM 3.3rs.sM 3.7M.s7o 1.307M FlE1U1lLITY Nat P" MM 1.140,797 1.1042* LM,U$ 4152" "shale 7 s Iho (ON) 424,470 N,m 1 MMO M.000 A less obvious, but perhaps equally important, 15.013 14 n 1407 71 go 39253 issue is the management structure Inherent in D"MIM ds I(%) 7 rra DOWP at (ee) tee 300 107 313 Joint-action agencies. JAAs typially have opmt• eayy'M 4 (10W tell 5,410 1,7119 4075 ang staffs hired by boards of direction on which t)eOVerrli ttibrt 3.135 2.541 2,950 4,451 each partidpaling city has a representative, al- cooww (q 100 1.10 110 1 M though the Municipal FIectric Authority of Geor- Poee cart (webre) 3.41 357 3.09 3 07 has a srrnall, shire-member board. The artid- 1 rod 997 own at eft n ar t am $4ts 1 1. 67 5 so19 02t s s Ds 35 PP ant representatives typically amYr%, city' ~ IM%tobarlaeml(cwft& 1 444 745 SD9 43 managers, or city council members. Convc f m ram err "lu 84 rib (Ovai+oi 82 1161 171, 7.M quently, not only ate policy decisions often wde natal OOAVVW ag -rib (oraev k0I hors e 9 $ 31 5 0D9 by large, unwieldy groups, but those decision- s rtrta aatteed eq reb in 141 113 125 makers are usually Individuals whose primary casaty pail 034 640 Is st eta COnCerts are rust cahtered around electric utility 194 p mwa l e» 1.352 1.429 292 issues. Particularly when theist boards most only IM sea (Wart 742 11.211 3.431 242 once a month it may require two or three meet- Aba w % wan en err INS MM etr"b qba ings or 60 to 90 days to make a derision. Conse- quently, cony JAAs operate well behind the As is the ass with all JAM. these agencies have curve of change in the andultry little equity aside from accumulated cash re- In response, the two North Carolina power serves, usually in rate stabilization furda acv- have recently passed a joint resolution mulaled during the sell-back periods for future that wiU allow them to elect a 'super board' rate relief when the sell-backs terminate. How- which will be comprised of 12 members who will ever, most of the participants have very high be on call as necessary and who have the power equity levels, either due to accumulated cask or to nuke all decisions other than setting the annual Erm having funded retail system improvernents budget and amending the contracts. This group with cash. Further rate relief at the retail Level could, include anyone from the current board could be real zed from lowering equity IeveLs memberstolocalratepayers, butbanticipatedto through the designation of cash balances for rate include more individuals with industry exper- stabilization or the issuanco of long-term debt to ties. The smaller size of this board should provide fund long•lerm assets rather than from annual substantially more fkxibd4 mcvaorhppared to the margins, previous arrangements of two boards with a total Another potential source of substantial saw of 51 members. However, major structural ings-consolidation--nay be expected to have changes to the agencies still will require approval large, but not insurmountable, political ramifrca- by all the Parbci ts, arc, as has been demon- b". For example, within the two North CarO- strafed in Municipal Electric Authority of Geoc- ling agencies, all 51 participants have electric util- gar's use, disseisiott amorlg the members can ity directors, the associated number of meter still result in a deadlock readers, and purchasing/ inventory managers, The enanagement problem is further scare- not to mention 51 different rate schedules. An bated by divisbets among the c embes due to aggregation of these services among a few of the divergent needs. This l sue is particularly Prot larger, geographically-diverse cities would re- lematic for the Municipal Elector Audwdty of duce kcal operating, maintenance and adminI& Georgia and Agency No. 1 erembers, some of trative costs arithmetically. which are am" rural towns, soohe of which have 2 h POl FROM SfAiMAM a rooers' CWMW hoc MWNWM AWMf 24, li"N CREDIT COMMENT signifxrnt industrial loads and some of which Carolina focal Goverruoent Commission, which have pressures from very rapid suburban oversees local financial and debt managom-nt, grow th, has recently issued a transfer policy to be ad opted In Municipal Eiectnc Andhority of Georgia's by those cities current,y without one and has case, the problem with excess baseload capacity publicly ind eted tat no JAA participant city • is exacerttyed by the contractual amngem_nts will be allowed to issue debt until ithas adopted which assign & specific amount of capacity to each a transfer policy. Vauk this action is expected to participant, rather than assigning costs to partid- result ir. more rapid response than that to date, pants based on their proportionate share of peak Standard & Poor's believes that after years of demand. This has led to dissension between the delay in addressing this issue, a change in the participants with too much apcdty and those cities'transferpolicies nobngerhasthepotential with the appropriate amount. As wholesale rate- to substantially impact the JAA ratings. nuking an be strictly energy based or more di- rectly related to the proportion of coincident COST PROFILE MD RESTRUCTURING peak, the impact on retail rates an van; widely Standard & Pooes believes that the soudwaist- depernding on the bad being served. 41 the em JAAs are gradually coning to terns with the members'kxadsdiverge, asthey have inthese two changes in the industry and, at differentspeed$, uses, the result is an inability to change without are attempting to modify themselves to address consensus . Thus las particularly limited Murdd- them The four agencies are at ddfermt points on pal Electric Atithority of Georgia, which has pre- the path to change, led by Munleip Electric serrted and implemented several contractual and Authority of Georgia and trailed by Piedmont. rate restructurings to its members. However, no The two North Carolina agenda air in the proc- plan has succeeded in comprehensively meeting ess of develop~'nye Plans for aggs~ive flanges, that divergffit nreds and one of the members, which, if sU[C!S%YLy impkmplw, could mturl Caitoun,issuingtheagency over theformula for the ratings outlooks to stable. As the negative supplenental power casts. outlooks indicate, if the changes are not impit A related management issue with Agency No. resented, the ratings could be lowered further. The 1, Municipal Electric Authority of Georgia, and ratings among the four are differentiated based Piedmont concerns local governments cral mg on each agency's current level of rate competi- luge transfers to the participants' general Funds tiveness; their potential to complete rate modifi- fromtheir electric funds.Thetransferscarngreatly adorn, and atta in great er competitiveness based inflate the retail rates and often have no bearing on their resource mix and cost profile; their ic- on the cost of services the general funds deliver lions, to date, toward substantive change; and to the electric funds but help maintain low prop- their projected plans for changes, as well as their erty tax rates. For ex ample, even after many JAA partidpants' level of involvement in reducing participants in North Caro Ira have begun to distribution-level costs. address this Issue, their average tax rate is Ire Mary Colby (212) 208.1 h57 below twee of ron•JAA participants. The North Howard Spum" (212) W"096 Reprinted from CmAYWMa A&4Vapaf by Standard i Pooes RaunOs croup. a d6wori of The 1fcGraw N4 Conpanes Enc*a olka 1221 jl oem of h Mirka, Nor York N.Y. 10M Ed W **a 25 9raadrsay, New York N.Y. 1004. ISSN 0731.1971. SWArLer writ m (212) 2061116 Copyr" 1995 by TN MoGmsrN M Compeers. WoUtion in **vk or in pail prohabted except by permission All dots rammed. Of ors ciTM "rw+ 11 Corvardes.: Jotdoh l_ Diciest, 0 *mw and Cfret EwAvt OMW,, Harold W. McGraw. III, Prtsidea and Chkl Opera v War, kW N. trades. Sprier Eox0m Ws Press nl and SjvtW.. Karnelh M. Vkw. Frewaa Yet RrsCera rd Gene raj Cowart, Fmk O. Perglase, Soria Yes Naidert Trat" Woraas ntomatin fns !Mtn obtabad by CrWW*k Wreioah from Sant Deuced lobe I t 1 p. do ever, Deane d the 4 17 d tames a nnt6nerrul error by our .ostsa GedaWYek ,Hw *4* or oCnas. CiodifWast Wai pN does not guarantee 0r ameacY, adsoAcy, or cornpMMnm of cry Narration nd is not mWe" M Mr city anors or ww,4m or to 9a m uRS obtaksd from pw use of such Normation. ae~a e11fNlIfYM FROM rrltptsAao a room mofrwSul ftw999wK ,tww9r sae t safe 3 STANDARD : Pft 1 C i1VlVNICIPAI. THE AUTHORfTY ON CREW OOALM SEPTEMBER 1,1995 QUANTITATIVE AND QUALITATIVE FACTORS IN BUSINESS POSITIONS t Standard & Pools evaluation of retail municipal Although the scores assigned to the operations electx systems' business positions involves both area were marginally more successful in predict- a quantitative and qualitative assessment of four ing the score for the overall business poston, the areas: management, operations, competitive po- competitive position area snore frequently re- a sition, and markets. Quantitative ratios are most coved weightings that exceeded the 25% aver- relevant to the evaluation of the operations, com- age. However, a link exists between these areas, petitive position, and markets sections of the which is evident when comparing a utility's cost business position analyss,management involves M' ile as measured, for example, by debt per a more qualitative analytical approach. and total cost per kwh, and the ultimate z E Such fad-based measures are useful, as they impact of the cost profile on the retail rate struc- provide a basis for comparing utilities of similar tune. However, these ratios were not used in ab- v a types. Data were derived from a variety of solute teens todenve scores without analysis of sources, including information provided by lssu- how the utilities molded their situations to incor- ' n p ers, as well as state and federal gove-nment porate the realities these rahas represent. sources-for example, the Energy Information Consequently, of the 36 utilities reviewed in the Administrahon. business position assessment, 10 that had high Differences in reporting methodologies could cost profiles received better scores for their com- distort some ratios, especially where state and petitive position than for their operations after regional comparisons are made. For this reason, demonstrating that they are able to maintain a Standard & Poors always evaluates utilities indi- kcallycompetitiveratestructure,partic%darlyfor vidually and considers particular nuances in its their larger customers. analysis. No direct correlation exists between any indi- RETAIL RATES AND COST PROFILES vidual number or ratio and a uhLW% business The competitive position area compared retail position assessment. All four factors typically rates derived from a utibty/s revenues received worked together to indicate an ultimate assess- from a articular customer class divided by en- ment,although,inmany nstances,certainfactors ergy sales to that customer class. The compan- were weighed more than others in the overall sons were nude with 1993 data published by the score . Also, certain ratios played a bigger role in Energy Lnfotmation Administration. FoLiowing a utility's business position than others. For in- historical trends, 29 of the 36 utilities reviewed stance, energy costs per kwh-especially fixed reported residential rates below the state average. costs, rates by customer dassdication,anddegree Municipalutilities' industrial rates, also follow- of large-customer exposure--were important in- ing tustoncal trends, were reported at levels dicators in almost aU circumstances. above statewide averages. However, given the dorrunance of the investor-owned utilities in AREAS INITIALLY WEIGHTED EQUALLY serving large mdmtrialloads and the associated Each of the four areas considered in the busi- economies of scale, municipal rates may be ex- nessposition analysis of 36retadsystems uutiaLly pected to be higher on average. In genet a 1, the was regarded as having equal importance and lower average toad factor of municipal utilities received a weighting of 251/1 In establishing the industrial customers, as well as their smaller size, business position for a given utility, the weight proved to substantially increase the rates they for each area only deviated from 25% for a com- received in comparison with the invesiorowned yelling reason: either the utility had little control utibbes average iMustrW rates. However, the over this area or this area was driving the utility's municipal uhlities' rile structures often ineorpo- overall profile rated demand-side management program,time- CRE®IT COMMENT of. use or interruptible rates, which enabled them 'somewhat below average; pointing out the iar- to overcome higher cost profiles and their cus- ppoorlanceplaced oncustomerconcentrahon.Simi- tomers' load prof es to provide them with rates laxly, three of the f-) ur uhf ities with above aver- similar to or knver than those the local compete- age" or "somewhat above average' business tion offered customers of a similar size. Positions that restive more than 20% of their The operations area measured the impact of revenues from their top 10 customers have long- debt burden on overall costs and also captured term contracts with these customers. This sub- asset concentration. Debt burden among the 36 stantially reduces the utilities' exposure to the utilities, as measured by fixed cost ppeerr kwh, var- loss of these customers in the event of a more led from 0.D6 cents to 55 cents, reflecting, in the open market mvirotvrtatt. first case, Grant County Public Utility District No. The averaV level of revenue from the indus- 2, a purely hydroelectric powersystemcompared triaauk this group of3tilisassa y with Riverside, Calif., a utility burdened with perhaps a rat competed for industrial load. Typically, ownership Les m expensive nuclear plant. Simi• ha lady, cent ,rel per h ran from 1.1 cent te utilities in with La industrial loads werv not the bbuusintess position assessment it 10.12 cents, roosts rtg the same utilities. Delp the very low mW of the bust utility, however, had Ion-lerm cone acts wiro thththevcustomers. received a a o somevhat above average" business B position as a result of its concentration in hydro- Utilities with uneconona' rates and large indus- power and the potential for weather-related trial loads were negatively impacted, as demon problem By comparism despite its high cost striated by reviewing those m the 'somewhat be- profile, Riverside received a 'somewhat below low average' category. average' business position, which incorporated its diverse resource attic through participation in NOT A IENCHMARK a number of projects. Standard & Pools has king maintained the in- Another keyratio, debl to peak(kw),indicating appropriates of establishing bmchaurks for the cost burden for each kw of peak deeccvunndd munidpal utilities, and the interplay between the d isplayed a substantial range, from $29 per kw to qualitative and quantity i ve a as3 c n ducted or%-oper kw. The lower ratio reflects a et deb, d- ~n~ththe business is tenet. These data have pr,vided excel- $ the higher system with no off-balanct with sheet debt. utihitks; the higher rata reflects s a a system with excess a• lent lent measures for comparison among pacity and off-balance sheet debt associated with however, thereasons ebehurd override the ratioswereoften the raw data. ownership a number of very expensive pro- cameb ad comppaarisons can be made, specific jests. However, when comparing these utilities' not be estab ' as cost prof0es with their ultirnate aute retail ate com• operating Medvnarks an petitiveness, each was average for its invnediate a result of significant differences between regions, and both were ultimately assigned aver- utilities. For example, those that are purely distri- agi business posibors. These points hlghli$ht butionsy msnnndbedavcUycomp the importam of analysis into the situations lthh aaI cost basis with utilities that own their own gen- produee these ratios, rather than allowing the eration In addition, utilities that are not faced ratios to Inflexibly drive the assessment. with direct competition from investoeowned utilities in their state, like in Nebraska, cannot be CONTRACTS OVERRIDE CONCENTRATION compared withuthbeswhere competitanuant- The markets area displayed the least deviance ticipated imminnetly, like in calif,rnia. from the 25116 average weight. In this area, revt- While Standard && Pbe s and e u+try at nut concentration from large customers and largeuxreasingY will revenue from the industrial customer class were as utilities costs and rate structures become among the areas measured. As a rule of thumb, greater indiaton of their strestglhes sotne furlhser less than 2096 of a systems revenue from its 10 refinement of these ra is may anbe necessary d eliminate largest customers is considered average. One include other npostant criteria an ot~ te third, or 11 of the 36 utilities, receive more than the di ferentes reporting 20%. of their revenues from these c stomers, and (212120&1151 five of those li received business positions of RWV*d from CraddN'rek ►Nrrticipsl ty Standard i Pools FtV&P G muo, o divmsion d Ttw tAo6rn Nr CWVMes. E►anNte a%ft 142t Awns d th Ankrlnt, New Ysrtt. Xv. 10040. E64WW dAOes 6 New Yak N.Y. boot. ISSN oni-io7e. s*Adw Oldars(d 1z)Lk*1146. Cmpsrit I Jost' nil L McGrv*lw Compares. Reproductiat in W" of in pan wofiDAed wo At perm Dorm Ctwmun Y4 OP W Eaecu M DMW,, Herold W. AkGraw, M. Prestlert"Ctirl Opsramtp Officer, 1114W N. Ludes, Senior ExKW4 via Preslden6 sairM and W tPyK. WMM ht i VMlor, Exiscutiol MOM WkMSOM Wd soM oe doD e. N i, Mmm d I* pdsM cit UM of R1ect o y°u" G Wo„rWi~nWpf or AI r sd cows. C Grs AAtrrt nal the accuracy, adeaw y, or completeness d ary dwristion +nd it not mpasa w my e~ QeWaek i5frerrctp+f does not p a rrreksidta a for this rtnsr/ls obgter0 tram Qre use d seret+ idemutbn. 1 UrMMM ROM ITAMeAM & ►oma'r C* M WUK MUMCf&AL SUMMM! Ie 1 Mr STANDARD& POOR MUNICIPAL~fPTEMEfiRTT,T99fi THE AUTHORITY ON CREDIT QUALITY MUNI ELECTRIC BUSINESS POSITIONS: OPERATIONS ANALYSIS ~I !Municipal ms' ability to compete opportunities by virtue of their high cost stnx• largely will tfnerr oral Profile' tures. Stallard Sc Pools evaluation of these systems, Pasadena, Calif. provides an in;erecting exam. Nerefone, focuses on their cost of service, operating pie. Its total cost pet kwh is high at 65 cents; the s effick it, resoune mix, and capital needs as impo[- Feud portion of this is 4.6 cents, or 54% of the total font det nninants of opera ting strength or weak. Its fixed cost of optntions, that need to be paid ne s- These factors proved to play important roles regudkw of its level 1 sales, is higher than the in Standard & Pools business positions assigned total costs of many other evaluated utilities in- I E thus far and am expected to be leading indicator of eluding Seattle, Wash.; Lubbock Texas and Lire z p 1 utilities' future competitive positions coin Neb. However, regional rate avenges are Standard & Poor's found that there is no direct important to this analysis. While Pasadena's rates correlation between any individual ratio and a are high they are not out of Lune with arts inves- utility's credit strength or business Position as- tor-owned utilities, particularly Southern Cab- c a bessment. All four components of Standard & forma Edison, with which it competes. Poor'sbusutess positions tvpicallywork together Invariably, most utilities with regionally com- to utdtcate an ultunate assessment, although in petitive costs received higher business poeitiors manvinstances certain components prove to play than those with relatively high costs. Notable a bigger role thanothers, Examplesof some of the exceptions to this include Muscatine, Iowa, more important indicators include utilities' en- whose fixed and total costs are quite competitive ergy costs per kwh, rates by customer clwifica• at 13 a 33 cents per kwh, respectively, yet bon, and degree of customer vulnerability. which received a 'somewhat below average' The accompanying tables detail a portion of the business position Despite its favorable coat struc- data and ratios used in Standud &-pones opera- tune, the indusconcentration Y in uaatine's bonal evaluation of municipal retail electric sys• revenue base, b one large customer, tems. These tables do not represent the full gamut limits its competitive potential. This is because of such quantitive indicators but rather some of the loss of this customer to competition, which the more important ratios itanAard & Poor's re- could be possible without a service contract, ex- views. Readers should be cautioned that some poses the utility to a potential loss of revenues comparisons may not be meaningful without and economies of scale, which could ina'ease its com3dering other important qualitative informs- overall system rate. tion about utilities that were reviewed as part of Some of the wholesale entities reviewed have the analysm utilities are not evaluated according particularly high cost structures due to their to predetermined bendvnarks as this would not heavy investment in expensive assets, extensive allow Standard & Poor's w capture the specific use of debt, particularly capitalized interest, and nuances behind each utility. Accordingly, aver. in many instances, surpluscapacity. In most tir- aging and generalizing the numbersm the accom- cumstarx'es, these weighed heavily in Meu poor ponying abler should be none with care, the ~s posQ~gfadm Sments am Raultimately md COST STRUCTURE pal Power Agency (111,; stable outlook) and Inmanycases,utilitws'costsdrive their opera- North Carolina EastemMunicipalPower Agency ampler of lions assessment Thcost y mpo rent representsr a such high coos negative agencies ciaily if the sinble portion of total costs, have less operating genbtlity than those with low overall and fixed OPERATING EFFICIENCY costs. This is espedaUy true for ubbtnes with sur- Utihtis' debt profiks as other measures of plus capacity, which are Urr tedinpotentialsales rating a aboare important Indatytons CREDIT COMMENT i i! r CIUDIT COMMENT of operational flexibility. Two of the ratios used power proiects, man)' of which are financed Off- by Standard&Poor'sin its evaluation of utilities' balance-sheet and are relatively high Lost, con- debt burden are debt•to-peak demand per kw tnbuta in large part to its high debt burden. and debt to net plant. These are designed to indi• The degree to which utilities debt finance their cate a utility's efficiency, debt profile and system capital projects is Captured in the debt-to-plant leverage. Other indices not included in this dis- rata. From a credit and competitive standpoint, cession but evaluated by Standard & Pool's in- all elsebeingequa6 a utilitywithgreaterleverage c)ude kwh sales per employee, customers per is weaker than one with a more manageable lev- employee, and capital investment per customer. erage ratio. Intuitively, greater leverage ratios These ratios inaeas.mggly will be used in any corn- imply NOW debt burdens and associated per petitiveanalysis ofutilities InthecwWVgindus- unit fixed costs. Many of the Caldorrdautilities try, where quality of service and operating efti• stand out As was which have high debt burdens. cmncy are becoming as important as system rates These include Pasadena, Modesto Irrigation Da- in utility differentia don. WA and Riverside. Such highly leveraged utili- Some utilities, outer flan ppuredistribution sys. tia may find it difficult to manage their costs and tams like =1 his and hlashville, Tenn., also ultimately their rate o0mpetitivertas. have relatively bur debt burdens. These include Piedmont Municipal Power Agency/s 'A-' rat- Tallahassee, Fla, and Lincoln. Neb., which have ing was recently .ded to 'BOB', ~+►$~ly deW-to-peak values of $265 and $513, respec• due to its debt burden, whist is tivefy. On the other end of the spectrum is Ana- captured ie the~n6 ratios: debt to peak of heie. Calif., whose large debt burden is evident $4,451 and debt-to-plant ratio of 240%. Akerita- in its extremely high debt-"ak demand ratio lively, the Lower Colorado River AuthoriVs of $3,190. Anaheim's involvement with various 'M•' rating And somewhat above average bwl- MAIN tlw+r 0311On "WWWA 4ra11111 eta/w t1tM1 Poe6 TOW Drw Daev 3ruNn tam ei1 tort t'I.rx• i7W4Y 1111 Me. Will mtl 9411 PON wild a % d • 1 a CIPIW r*V 01.000 01111W 1=100a6) tWW"111 ("W) lac (si) V" caw* (x) A kWfty 4 DKWC AllM, Ra AA salty 1 174 1.74 1177 126 55 11 19 20 lnwln DKW symm. %a. M slaw 1 1 69 4 02 513 is 71 40 20 H SN Mw he" Ar11. AA spew 1 161 563 1,057 64 85 N 16 rA sa1M C411114 W* 541vrce M Will 1 1.31 7.70 900 117 S7 25 11 N - hen- Set Mom t31tf1c A ga4 Ieot M slaw 2 Ill 1.10 No 64 51 24 12 1A M stabw 2 1.54 AM 770 31 64 0 32 35 ✓ grant faarr h11{c tMq' Dwt No. L *UK M S 2 006 Ill 46 t9 to 0 0 a2 01110 OmVy Alit Uft DK Nt. 1. ft*. A. $law 2 0.60 1 10 790 NA M 12 61 IIA onMa Mk Powr DM1d. M SOW 2 1,01 5 .a1 on 76 M H 73 61 orO1101 WMN C4m;i ll ft M- SOW 2 1 49 510 1,741 111 71 52 22 31 ClnOlayd P14k Pow. OOO 666. Pwaw 2 1.77 6.43 an 71 49 27 25 NA 1AOe4m l"a Daly C40 A. Spa 2 1.10 ?01 1,590 2D2 37 7 It M Soft CM lVK WMA. M sp0w 2 065 2]4 411 As St 3D M 7S 1amm Ify1 a ►0w. WMA. Al, sum 2 096 354 307 67 62 12 21 53 N1w4N11 LKVM la" Tenn, AA slaw 3 012 505 A 22 N NA NA 91 wip WK (IN %1w t 6 YbYI Di.11Ia14 Te M slaw 3 024 $40 19 44 S2 NA NA 42 111111110111 Burk se4bA T4an. M SO111 3 021 slt n u $3 0 6 Se Wdff sobw rwwwa As F -1e1d ta1111i14. ~ AMA WPM 7 138 4 309 n m 93 5577 41 A Il Si°rwft Wo"dUtM 047II(A Cllr. A. slaw 1 306 494 Lois 47 / 21 11 Chet P1Ak WNW, Itak A. SOW 3 107 396 as 45 47 D 0 63 Pleb PAO 80Alc Penn Aul. A- Npatw 3 161 104 l im 111 64 57 36 WA Aaldeh IIIra'k tbebk cam AA- 1ir11811111 3 430 7.19 7.190 154 72 N 51 35 11*1111a Palk POW DWM 0 3OlI4 J 1 D9 271 642 111 44 41 11 22 Ptnlew Btcrk C11111. W 10400ae 3 451 I S3 1211 247 N is 11 21 N40eM 3 340 640 IBS 21 71 30 29 10 tnyrlua Kl O MW No. 1. rsm A. $pur 3 041 2 67 Ut 11 00 17 14 N Arta Ca111MW VAWAL Tura A Bops" 4 1 76 145 1,016 103 S1 46 23 33 Los A1g1b wow a law M• N19/w 4 307 Ala 1.101 131 41 4 0 35 U"l Pow a LINK Tama M N409M 4 0 AS 336 110 32 M U 72 NA D~COniMrbUain,Teat A. sum 4 340 7.40 11,75 1911 47 NA 33 133 , 1. Win; A wow. car. A. MOM 4 341 9 M I'M NA 44 S2 N 50 plow" as" WAN. ON A. N10M7A 4 $50 10.12 I'M 151 42 52 NA s0 TWWw w Burk Itph 4 k M• Mop" 4 127 440 263 43 S7 52 56 54 M NON 13 sr" IM A N"*A 4 129 3.73 1260 101 05 26 30 17 tallbll BKtk a WSW. Ra M. 1 jl 4 139 111 153 47 SJ 71 53 20 NA--Nd NAAlat 2 =1I1111MM !heal AANDMO a POWN Qie11TWUN MVNKW" t>VIBMiiiiiiiiii 11 * 1 "S i Hess position are supported by its relatively low upon a single fuel r debt burden (1541 debt to peak and 118% debt to dependinupon tJhe actual fuel uses t Furt~er. plant}, more, dependence on single fuel suppliers and System load factoralone,likemany oftheother either wholly long-term or short-term fuel pro- indwators, does not capture theessenceof a util- cuzement perspectives were limiting factors in ity's efficiency nor dictate overall business posi- the business position assessment process j Hons. However, it provides a good initial assess- From a quantitative perspective, the propor- ment of system load shape and usage, Clearly, tionofcapacity andactual energy utiLties''largest many of the retail systems with high industrial units comprise was reviewed. While many of the customer concentration, like Tacoma and Mus- municipal utilities evaluated have single units ' E ca tine, also are the ones with higher system load that are a reasonable portion of total available a factors. These, too, are the utilities with lower- a adro than-avenge o ~ these units dominate actual with en- Se colts per kwh because of the ef5- ergy production. Ms s was typically the case with aendes of serving a large industrial bam. How- baaiefoad coaf-find units. In instances where the 'a' 2 ever, the trade-offs of greater efficiencies with dominance of single units was noted, further ex- Q o greater customer exposure in this en ofoompeti. amirutfons into plant reliability and perform- bon. particularly if rates to the industrial class are ance, fuel supply contracts and other power sup- co uncompetitive, may not always prove worth- ply arrangements was conducted. laclsanville, Fla.'s diverse resource mix, with AESDIiRCE M1X its largest unit representing only 18% and 19% of A u URC Es resource mix open is a 'is energy and oPeaty, respectively, can be Corn til ity' - of its tilet s good indicator pared with Lakefa d, Fla 'a oxtomtrated supply, trurhues. For Instance . the hydroelec- with its largest unit cumprisi'g 53% and 76% of trkapacitydependence auh6;sintherwrd-- erergyardcap".Itisrotabletfutlacksonville west contributes to their low overall costs. All is among the systems with the highest business northwest utilities evaluated had costs at or be- =while Lakeland is among the lowest, in low 3.0 colts per kwh, some even considerably put, because of this- Additionai'y, Calnesville, below. The total cost avenge for the remaining Fla.'s operations score was limited because of its utilities evaluated was about double this, at 6.0 largest unit concentration, at 81% and 48% of cents. Alternatively, some of the southern Cali- energy andapaaty,respectively,and"tations forma systems, which have considerable off-bal- on a certain type of future generation ance-sheet debt for nuclear projects, are bur- However, even with concentrated asset bases dened with high costs, some utilities were able to earn high snores diversitywasdetermined by evaluat- cause of other o tic ing the various assets and fuel types from which Power Distrii is a ease in point Omaha denies utilities' capacity and energy are derived. Stand- 59% of itsenegy from pre pant. Yet, b&2iw of Pooes utiard to ea found that is more difficult for the unit's solid operating history, lack of fuel top scores lo the operations sec- exposure, and low unit costs Omaha's operat;ng lion flan the other portions of the business posi- score was not unduly limited. lion analysis, in part because of concentrated w set bases, single fuel dependence, and generally CAPITAL NEEDS unreliable plant operations. While most utilities Utilities' future apical needs arc measured love assets of various types, !,)me are dependent against past investment, ash now, and aristmg MAslsab Bask from esepws/w "We" Oman 119") Food Toot 0■OV o4w i r"Sr _"M ka cm WS1 "a V ouaoet po■A>on (0w%1kvA) (anbAwh) ttr ° ) tt w 80%04 or wow CON" M ta■w Calwses Asw hat %30 AA- Sank 2 1.11 ] 96 511 111 52 Stows h■w WF. A 23 is 10 Sarll ] I./1 7b 501 ly 57 b 11 IO 'OM W q A• !!1ld'e 7 2 6/ 424 1.751 112 S! Yuernlal Ekct~c Auw Of Fnwpa A Seek / 19 n 6 76 566 If 6 WAK*d Power tkr■IS - POW Abnn~WaA. M NOW" 1 26 .61 6M 1011 10 11 aa~ee khao" sees 1'a6 1 101 7 00 1.015 107 !2 NA 22 100 12 . N %A 26 El m Co.' M. so" 1 167 ) 21 1332 176 40 26 24 2 Its. M Pow A0. AA- %sow" / 100 270 1.270 06 NA 36 20 13 Ns.0p0r1uc4y" Wuk}r hw A Ns CaslrkNoEar.s Wllupe Aa 1 711 0.79 3,135 117 72 u / "PWAW la 14 04, hw 164' Nsann A 357 119 2.561 300 St f) 11 Apm. S.C. /M Salk / 707 S54 1,151 712 61 a Sara WAM 1latge Po■w Q 1 MA~41061" '1M0 Yes M sow S 1,10 1.10 3,112 21D S? 160 100 NA P/OM BTYINNI/O A V~111 Mt NKMAL ~ l~81q 11, 111!1/ 3 III ' tables include one of have little need for Wit, which therefore linuts plant. The accompanying their capital spending PI+r`s thhe ratios utilized by Stand: rd & Poor 's in makizhg this deterttsi+cation-utilities five-year capital OTHER 1559ES /"N programs relative to existing net PLA't Higher Ckherareasofmruiderationnotincludedintlx ratios stay indicate faster growing areas accom an utntltative tables and the pre- ant greater ca ad needs but also may reflect long- p >uhg 4 but which position +Iso are sttrrh im'P°rt are ry drterminanis of business ignored apical carets that are finaLy being ad- vi ~bilityandmviroruwtalmn- d ed. gth Srea & Seattle and Sacramento Municipal Utility Dis and Poo ls boks at the extent , siderai ors.Staid ion art g as ements provide trill are utilities, whose large capital programs transmiss mpetitive which represent 75% and f16% of their net plants to with ester operating and over their respectively, were limiting factors in their buss- flembibwhichesty, Thom thhat have control from Wei trsmr will 1~MOM _ than those has position assessments. In f derived Seattle's its over ft r destiny likely do na Er~ at tiorul strength wise low,ow hyd~roekctric Capacity was limited by over ~.s nswhile not the issues they rononestal over its considerable once were given react congressional regulatory the cal reedmod overwhelming these Are utiIIties in trusihon have the potential to Sig- capital s that relaxation rronencece auk s capita! needs, unit A ,~y, Standard ec Pools positions nifianty influen For those rcs- dheu operstiars scores and business s and dispatdt, and thus, cost strhactvue• rove 1,Nrderprogressindeanin8 le lation and compliance records are could cortip" their ca ppital plans is made. a doeelY 6ur~ized. Northwest utilities arc par. The Puerto Rico P}ectr c Power Authority has ticularty, familiar with this cancers a$ they have modest capital improvenenn program to Plod spent millions addressing Fish mitigation ratio of 57%. However, this alone does not cap- ture all of the it faces trot b by its PII FRIS fT"USIMGIT NPORTNIT op dal needs, and hi ghts the titaoWe" s utilities' operating profiles-including their toage System. Puerto Rico erkerV costs, resource m ,debt levels, and rtapnt relevant fadoe, not " e ures , in evaluating tal swill become inaeuinky in" n tn m the rlec• ~.rily needs arc consderable givenits healthy gi and limited capital additions over c uh>trsyfin`dustry continues deregulate. toed growth an the pa;tdecade. However, the 57% ratio does r>a Standard k Poor's will evaluate these and other compporomts to gauge utility responsiveness include itssubstu+tialinvestrnentinindependent power projects-financed otf of tee•3ha~ gang pressures in us ~~~tovn and the fad that a good portion of itss r(snoring abili to prwi beyond the fifth y! of its prohettions' era l4owrver, Standard & oors will oontinix to then fags could lead to a misinterpretation of facto" orn comp these key ream all s Puerto Rico Ekdries apical needs and opera' snalyu o~1 structure will or I;Wima lrosiGan deta• tiorul chalkn8'wholesak entities have lowr+ alone to make alee rating The relative capital improvement Program to plant mimhorn, Mare Fox (21 z) 20D-1663 ratios than the retain systecs. Clearly, utilities WrY Copy (212) 20M IS7 WO suffident, and in some wa, excess caPaahr Eiacis►++sllkta t 221 Arararr d 1916~lit Tm ~ L nom Cndlr►Mi+t Novo* by Sts t Pri0rs Ratrrips Grosso., a d;rTMW 01 Tte Mc5ni'"il , (112) 206.1146. CW*d IpAm, Novo* y~ N.Y. ONO. EMWW dins 25 &*do"• Mw vort~ N.V. 10001. ISSN 0731-1974. Surge ~n Of TI`* Mr6rwr+t! coowilw vim ReVO&Kw imto* of in Onto, "amid mm 1A ~~III Pm4oml ~l SM ft N W. rerun oo~IL ~ =MCCnettM~ McGmw4W Camow+a Otarw, 06 mm cad Ctrat fsacutt++ prssidard rd Gdural Coamet. f rants D, Pen9lase, at Aarhln or rthnCtm> cat emir b! OiK ssistst iced SsaMrY y mtrMnd t~eiMica . OW tomo d u7 *f0n^'~" is not rMO sA0n ftm Ljoico M of oarmsk, fr vss d sudnformaa+ row" wed "'I" missimis of br to 11a 1996 MMGf7~0! RoM tRititNtMf~ • ro"OO K MIr111arM 1 CND1TWEEa,A,.) ~~El MUNICIPAL ■ 119 AUTHORITY Off CREDIT DUALITY SEPTE111IER 25.1995 r I LESSONS FROM THE FRONT LINES OF COMPETITION B It While moat murudpal and investor-owned utdi- credit concerns are related to Lubbock's increas- 11V11~11 ties are, on1Y beginnm8 I. focus on operating in a ing dependence on its competitor, Southwestem. Q competitive environment, Cleveland (Oho) Pub- for a substantial portion of its energy needs and tic Power ('BBB.') and I ,ibbock (rexas) Power & Southwestern's recent overtures to purchase the a Light {'AAA'-insured), present interesting case Lubbock system. I studies because they both opera te in competitive Lubbock's energy purchases from Southwest- I markets in which each competes with one other em increased 82% between 1991.1994 aid repre- - 1 utility. Both utilities compete for customers on a sented 46% of 1994's totil energy requirements. E door-to-door basis. The heightened relia'xe on Southwestern is at- z = In correction whin state regulators' and kgis- tributable to high operating costs associated with o lators'increasedexploration ofplanstoinhoduce Lubbock'solder AM inefficieniowned units. Yet, d retail competition to the electric utility industry, due to the age of the bulk of Lubbock'sgenerating z Q o Standard & Poor's has developed and uvorpo- units, debt and fixed cost per kwh are low. Debt rated its business position assessment into its to capacity is only $134 per kw, and fixed costs ratings. The business position assessment is a per kwh are low at 0.68 cents. measure of an electric utility's ability to preserve Southwestern, which this past spring made an both its customers and its credit quality in an unsolicited offer to purchase the Lubbock system increasingly competitive enviimirant.With the mayterminatefirm energysales toLubbock upon exceptions of Lubbock and Cleveland, Standard five years' nobce. In addition, Southwesterns & Poor's assessed the implications of potential economy energy mks to Lubbock are docretion- competitive threats. In the cast of Lubbock and my. These contract provisiorss are troublesome in Cleveland, the actual effects of operating in a light of Southwestemb unilateral desire to pur- competitive environment were examined. While dose the Lubbock system and the risk that South- Cleveland was awtgned a 'sornewhatabove av- western might leverage Lubbock's dependence I` enge' bustness portion, Lubbock was assigned a to advance its objective to provide service to all somewhat below avenge' business position. of Lubbock Southwestern s firm and economy The very different business position assess- energy represented 31% and 15% of Lubbock's ments assigned to these two utilities reflects an 1994 energy demand, respectively. tnterestingconclusion.merely operating andsur- The Lubbock city coundlhas exclusive author- viving in a competitive environment does not, in ity to set rates for both Lubbock Power and South- ard of itself, mean that he utility u well post- western customers within the city's limits. The bored to continue to thrive in a competitive mar- city council rebel on the outcome of state pubik ket. Rather, it is the uhlity's ultimate ability to utility commission rate proceedings for South- ensure that it is strategically situated for the western's outside city rates as a benchmark for fuhrre that is determinative. adjusting rates for the two utilities In the city. Consequendy, Southwestem and the utility come LUIBOCKPOWERBLIGHTOVERVEW mission effectively control the level of raits in the Lubbock Power & Lght competes with South- city, which, with Limited exceptioro, are identical. western Public Service within the City of Lub- Any operating efficiencies achieved by South- bock, Texas. Lubbock serves 49,000 customers western, or Southwestem's ability under the that represent 58% of the potential totalnutomer power contracts to foie Lubbock to generate base. While customers may switch between the electricity while shouldering trtcreased msb as- twoutilities,fvuncialvulnmbibtyis bufferedby sociatedwith the inefficiennciesof its owned gen- the absence of revenue concentratiom armg a erstingresour es, could have anegative effect art single group of customers. Rather, the greatest the utility s currently strong margins. CREDIT COMMENT i i CREDIT Co lmmul~~ CLEVELAND MIMIC POWER OVERAEW ditional generating resources. Nevertheless, it rt- Cleveland Public Power provides retail electric mauu in a particularly vulnerable position until service to an area covering 50% of the city. Cleve- such a plan is im lemented. Conmquently, Lub- land is continuously working to expand its serv• bock'sstategyofLmitingitsfixedcostsbyavoid-r ice area as part of an aggressive capital program, ing the construction of owned generation units, and it sold $220 million of debt in 1994 to finance came at a considerable price. expansion projects. Its market penetration in ar. Cleveland's management, on the other hand, eas served for at least one and one-half years is secured a diverse mix of energy resources with- comparable to Lubbock's, at 55%, in spite of a out exposing itself to conflicts of interest as Lub- significant rate advantage attributable to rates bock did. In addition, Cleveland has procured a that are 209-3096 below its competitor for all FMC tariff that ensures that CE1 m+ut deliver customer classes. Concerns associated with the energy into the Cleveland service area. Surplus ability of customers to freely switch between opacity in the report provides favorable oppor- Cleveland and its competitor, Cleveland Qeatric !unities for Cleveland to pure►. ,e "MV at fa- Muminating Co. (CET), are tempered by the sig- vorable wholesale rates. These ve. tunities are nificant rate advantages and the pmmirence of expected to be available for severe: years. several city departments among the systems As competition a introduced into the market ages customers place, utilities must seek to avoid high fixed costs Cleveland principally relies on wholesale pun that may have to be shouldered by a darkished clusmfrom sixregionalutilitk5toprovide itwith customer base that has been whittled down by low cost energy that satisfies its power require cherry picking. Inseeking toadueve this goal. how- ments and that enable it to maintain its competi- ever, an electric utility come not sacrifice its Ooobil- tive rate advantage. Firm power purchases are ity and independence. Lubbock, for cuunpk ands made under staggered short- and long-tenet core- itself in a position wiere its strategic deosiom and tract. Contractual purchases are supplemented rates are, to a large esdett, dictated by S:uthwest- with spot-motet purchases of ecororny energy, erns actions. Cleveand is much km vulnerable, as we m purchases made for service provr'ded to beca use any dunge in one energy supphWs busi- specifis industrial customers. Purchases made for Tess strategy is tempered by the presence of multi- specific industrial customers present limited plealternative energy sources. Yet, to pteseve its risks, because power contracts mirror the term of business position, Cleveland will need to demons contracts between Cleveland and its customers strate, over time, that affordable energy resources and CleveLvhd acts u a middleman in these trans remain available to it actions. Cleveland also owns generating re- Another example of note is Seattle City light, sources, but these units account for a nominal which has struck a very favorable baluxe be amount of system rrecqquirements. Yet, these re- tween owned resources and offsystem power source help Ceveland meet peeks by enabling it purchases. Although Settle CityLight presently to acquire nonfirm energy at favorable prices. does not operate in a competitive entvircr ones-4 it whik system expansion is contingent upon was assigned a sorewlutaboveaverage,busines Cleveland's ability to segue additi nail energy pcmtion aseaneni based upon its capacity to op- resources and addibunal market penetration, a erate do such an environment About 65%o(Seattie FERC tariff the t obligates C E to de 'v6 er energy to City Light's energy demand is met through owned Cleveland ensures the certainty of receiving con. resowas The balance is met thrV* oHeystem tracted energy. purchases, which ass pdruipally made from the Bonneville Power Admin ist abon, Seattle's operat- RMY FLE1l)BILITY A KEY STRENGTH ing phdosophy is to work to preserve its cunbome' Both Cleveland and Lubbock have achieved base. However, if a customer is lost. Seattle is In a market pene'.rahon of about 55%, and both are potion to reduce purd%m of off-syserat pawns highly dependent on off-system purchases to anStoreduce some dtheOperating oxpensamo- meet energy demand Yet, they have each been dated with the custuem. CaroequaWy, Seattle has assigned very different business position assess- limited the extent to which tb ability to engage in ments. The rationale for the assignment of a del nden strategic planning b subjugated to 'somewhat above fverage' asses: ment to Cleve while avoiding the debt burden of land and a'somewhatbeloN average' assessment buikiuhg Seneration capacity for a customer base to Lubbock is instructive for other t litres as they whose size may decline as a rauh of markiet bras p are themselves for the advent of competition Standard & Poore recognizes that it may be a within the market for retail electricity. challenge for utiltia to model themselves after Standard & Poor's concluded that Lubbock's Cleveland a Seattle. Yet, given the poterdal foe a business position was impaired by the magnitude radial restructur. of the ma iiet p{aae, Standard of its dependence on its competitor for energy. & Pools ratings attd twines portion aseesarnenb Moreover, management entered into contracts will carefully evaluate the extent to which a utility that permit its competitor and the supplier of has achieved a balance between eotthdhin6 fired critical energy to withhold energy. Lubbock re- caab and preserving strak* i cently has begun to develop a plan for greater David Bo" (212) 208-1113 independence, including the consuvejon of ad- Sete Lehman (212) 208.M C490g t a M5 by The MoOmw+M Coveries, too. Repvducufon In sMds or vat prartilad eaocapt by permission. Al"naeerved. 2 WON 10 PROM iTAND&M A MOWN CR@DCT UX AKWOCWM "VnMM 30, 1"s STANDARD • CREDITWE MMUNICIPAL~~~ THE AUTWORM ON CREDR ffUALlTY OCTMR t 1IM MARKET ANALYSIS LINKED TO CREDIT STRENGTH Ong competition within the electric utility factors, low costs of service, and concentrated indhstiry is likely ro expose the customer bases of lads. Standard & Poor's market analysis in- many municipal electric utilities to losses. In par- chides an evaluation of the utility's ZO largest ticular, those with considerable ind usbW sales erect cuuomen and an assessment of these customers high sector rates will lose out to mote diversified, lad trends.projections,st dityo(theindustries / / compet five utilities in the fight for clueotnem they serve, and supply altenative$ to signal po- Fure ertrnore, as power sales ombwts unwind- tentiai exposure (sae table). or sooner, in many it unces--some wholesale This area of Standard & Poet's analysis has d EE 9 agenoes could we their sales threatened by cos- proved to be of critical importance for those uU- z _ comer depaRures for more economic options. Mu- ties with sizable industrial bads, but it was not e nidpal utilities with vulnerable customer bases are one of the more influential factors in determining °c c likely to have poorer business positions and might utlLties' business positi ons. For"ance,thhemar- o, have weaker ratings than others with more bal- ket analysis pointed to the vulnerability of Mus- a a o anted customers and competitive rates. cahne, Iowa FJectric, whose 10 largest customers to fact, the markets section of Standard & Poor 's represent about S0°/. of system revenues and the business position assessment of 65 municipal industrial class in its entirety over 63%. lo fact, electric systerns evaluated thus far has proven to Muscatine's Lrrgest customer contributes 28% of be a reliable indicator of competitive and rating system revenues. Despite its generally low costs strength inaqumbero(cases.Typically,themarkets and good financial profile, the outlook on Mxu- of retail electric systems evaluated sexed better catine's'A' rating was changed to negative from that those of their wholesale counterparts bemuse stable to reflect the large customer dominance of ofbroader, more stable customer bases In ahandful is customer base. of ciises-axticularly wholesale pwpect>-rawW brewers, most retail electric systems have the or outlooks were lowered to reflect the credit dete- stability found in residential c»Oocrars, wh+dn corn- norabon of underlying parbaparts trub with most invesborowrxd utilities, which have sizeable Ind ustrial sales. This oontnbula both CUSTOMER COMPOSITION to lower overall system load factors, an i diatom In an increasingly competitive electric utility of lower system utilization ud efficiency, but also industry, in which customers will be presented to greater customer stability. Municipal ekictifim with supply options, maintenance of a utility's with such diversified. Largely residential customer customer base is of pnme concern. For that ma- bases induce Orrutha Pubhic Power Diabict, Pte son, diversified customer bases should lend braska, Memphis Light Gas & Water, Tennessee credit strength. Utilities with a broad base of and Gabv vilkRegionalLXkbo,Fla. residential customers generally are more pro- Each component of Standard& Pooes business tented from predatory threats than those with a position assessment is viewed re!ative to the few large customers which rq rese -it a sizable other sections of analysis. For instance, a utility's share of system revenues While residential cus- markets and operations sections often interact. A tomers do not provide the same economies of utility with a large customer exposure and a sale and cost advantages as industrial custom- heavy debt burden will be messidembly more en, they do provide a grater degree of stability stressed in spreading these costs over fewer cus- and security. It would take the lose of many rest- comers if one large rndustnal customer kA the denti it customers to equal the lad of a single system than a utility with lower embedded costs. industrial customer Also, U a utility derives a significant portion of its Selected inc! ustnal customers are the likely first revenues from the industrial sector u6 t has rates targets of competi bon beca use of their high bad for each of these customers that are below the CREDIT COMMENT CREDIT .OMMXNT the utility's business position likely trial customers are all but captive. While these will be positively influenced Henct, industrial factors lead to operatioruf difficulties, the author- mncentrabondoes not in and of itselfcausecredit oyes mukets are deemed to be generally secvne. concern, but only when combined with other troubling indicators. LARGEST CUSTOMER EVALUATION While industrial customers will be the ones Standard & Poor's tikes its overall market most likely to be cherry picked by intruding sup- analysis and extends it into an evaluation of a pliers, sizeable commerical sales also could ex- utility's largest customers. It reviews the Saks, pose utilities. Take, for instance, the Los Angeles revenues, margin contribution. load factors, sales eD partment of Water & Power, whose industrial trends, and business health of each utility's 20 customers comprise only 11% of salts. Y.owever, largest customers. The analysis takes on particu- itscommercial customers account forasignificant larspecificityifAutility's sirn lugafcustomer ' SS%. These geographically concentrated custom accounts for more than S%ojrystem revenues. ers create a degree of credit concern since the An increasingly important comparative analy- totalizabon of the loads, a other cc+mbinabons, sis Standard & Pools has undertakem compares could expose the departrnent to significant rove- the rates of individual customers with the ra to of nue foal, Further, the fact that rates for these alternative power suppliers at the same bad and commercial customers are, on avenge, 22% load factor levels, TT re much masdirected and higher Nun the average region W rates cakes the meaningful than averagge~ system comparisow be- department particularly vulnerable to eventual cause it providesa uniform basis of comparison. loan. This contributed to thedepartmeut'sgener- Rabe dHftrtntiabanwwvdiatelybehigldighted ally law markets section sorxe. through this evaluation. In addition to the quantitative measures used Mars 08l6lt slims 1ar6A waesms r6wl to detennim nutome upaure ud satisfaction am TO 0aanb Statdard & Poore also 1ook~ so Nm degree to Sc4e1 Maras 100% a% which utility muugeamemt is in touch with there reel Oraeaa palAlon of rm, Arne important customers. Some of the leading mu- imoswNo Dian &M.. AL AA Seer I 1I 37 LM* raidPal ekctrica have been coraentra m'+g on their t'balc srsMC we. AA subb 1 10 1 A so Rico fee al. arts AA so" t 11 12 largest customers--maintaining contact, rsstTac- SouM Carob mac Seaton Auer, AA- swan 1 e7 3s tur ng rates, providing additional desired sere San Arsano 6KrK A Ga. Texas AA saw 2 S it lees,- order to keep them satisfied with their c0ioraao $01AP wsra AA sww 2 11 31 current supplier. This is a logical, and increAs- 6rant Gay Pa. U1r. Dot Mok feet A, s"Is 2 24 21 ingly important, effort utilities are using to secure 0 s~ims haPA UK M Poo. wm lastt, NO. 1. Wak AAA ~ 2 ai 1i their revenues from the effects of competition OFINNAD rsras M b ar CavvNimilk AL how ONO iii. P 2 17 26 ft "bas a WHOLESALE SYSTEMS Wallis tnr'ISn Ont. Par. M 306110 2 22 26 The mukeb of wholesale suppliers are more raise W uric waA. AA sow 2 is t I vulnerable thus the customer basis of most retail Izim" metre A Po.w, Wink A. 31160 3 u 57 enti ties. Wholesalesuppliers serve far fewer c%w Corm~a usm N. Ter. AA sorb 3 14 _ a tourers that represent lugersharts of total system Go & Wiser. sob 3 Sri L~ t Da krAAck T ~ AMA subb s 9 u revenue mutant broader, care diversified eetail I uqm wrw a ewk se On. AA stew 3 20 13 systems. Henoe, the toes of a A%Ie customer of & OMwsrde ft, tAtssu. tt AA 409*4 s 1 7 wholesale entity, in most instsnoes, could be fu SaMON Ma. w. Dist, Car. A- sub s 7 30 more devastating than the bas of a single retail .1A !liar uewa. walk At slier 3 11 11 custom". Ansrom Boat *sulk CW AA- i 15 u As an example, we an look at the Piedmont N6raas Mac Paver Dist A$ 0"11114 3 M 1 Municipal Power Agersey, In. South Carotins, Paaaaw A I I W M, aspasw 3 13 ss which Wordy 10 retail mu rddpal customers. Its srorr L 4" District. Car. A, "open 3 14 a lugest participating city, Rock Hill, contributes Sas6e O Cab. PA. lilt Dot No 1. wage M 3010 3 14 13 28% of the agencys revenues. Compare this with Am& Canr.w UWAK. Tom A *404 A 7 1 the Orlando Utilities Commission of Florida, to Mpso Dept at craw A Po.w AA_ 010 1 7 11 whose total indu striai mks account for only 7% ueeen Pave a u1st sou A. hops A 21 11 Dawn C4060W UMe1a ;00 A. Serb 1 n 32 of revenues and whose Vrgesl cuastoaher bob" BMW a WNW Cif. A. Mlpew 1 77 47 accounts for less 2%. etc t!x contracts PAW" so" ferret Co. M %Is" A 11 $3 that bbad the members of the t agency, Will"" 6Kfh 3N00n. N. Ale OspM A 24 St Moo" satyr, I&" A k$04 A so p the high and increasing nab of utility service to LawurrA 8mr61r a wow, eta W I I" A 10 12 participating members could prove more power- ful. Furthermore, the inevitability of g ster Pup- One oN1ereunpkanbehighliglilted ply option oocuir at the wfwieeale level in the Puerto Rico Power Authority. Its sooner than at the cif level666 to wholesalers' markets were deemrmined to be generally welt pmts Aexposure to a strull number of s a ra Wtof such grater customer ccustomem aloerttra- tected, despite the industrial sectals 22% revenue tion and therefore vvLxr6bility, the molests sec- oontributia. As as island and a commonwaw tmofwholeulesystems invariably smsedlower with no interconnections to other utilities and vv- dun for rew systems. Nat control over alterative supply options, VW%w 2 111110 RO FROM STANDMIQ A POWE ttlO1TWUK MYI KWU OHOMtt 3, t"S • One last comparison can be made-that be- This led, in p&M to the ratings downgrades of two tweenwholesaleprojects andwholesale systerts. Southern California Pubbc Power Authortys The markets section evaluation of the former projects following the downgrades of some par- takes into account the specific business positions ticipating vtilities, most prominently the Los An- of contnctually obligated entities, and reflects geles Department of WitIcr& Power. more of a "pawthrough" of their credit quality Marta Fox than of wholesale system customers, whose (212) 209.1863 members are often obligated on a system basis. Agenda No 9(0, 0/60* Agenda I em Date Rap Wsd ham Crei Wnk AMrraoWq Stwtdard Pouts Ratings Grow. a &mm otTlr "rr*40I Co T*v* E x~Mn aAtcea .221 Anew d9r Ametrn Maw York N.Y. 10020: UPI* l Aras 25 broaMy. New York FLY. 10064. ISSN 07314911. Svbt:rW set*u (212) 2061146. Cegr" 1996 by Tho McGnwAIII Coven" Reproduction in wh* or in pat protabrled vzW by wrrasiat AN d$ft murt9 .Mm of The McGrew-tits Catganlea: )w O L Diorm, OWman and WO faaeutlh Oft c Itarotd W. McGraw. III, Preaidwd and CAid Operebrq OIAwr, Roan N. L&Ww Swim EreerMn Via ftes dai, and Secntarf. Kameth At Yaw, Wm" Yes Pnsidem and Gene ral Carmel. Fmk O. PWOW, SpiwVln Pmwvt Tmewy Oplrom 4 iamwon hw Doan oMaired by Cr@*~ Mrrcgd hom smxas believed tote miatit. lionw, Donee d 9x p - -0 of cum or aredrrdul ww by arr wuM1. CredlN4et AincW or others. CnadaNYet AAr *4 W does not gum" tM = w". adepuacY, or ca ortaress of any idormaw" and is not rwpatADN for any arrars or onieabn or Aar 9re Mullis obtained ham ri use CO Inch nformatim tlMM1N /wOM STANDAN & POW6 COSD"W fi90 MUN HIM OCWM Si, 1 "1 3 C` STANDARD 10 a CREDI MUHICIPAL~~~~ ~TO Ti* Avrr*P TY ON CAM OUAUn CAN CALIFORNIA PUBLIC POWER UTILITIES COMPETE? California public-power utilities, in response to carves a negative outlook, reflecting the dd&tul- the growing threat of competition, have slowly ties pored by the pace of regulatory events shat • begun to identify opportunities to position them- ing the state's electric industry and the utilities selves for this new environment, including con- ability to compete. As a result of tthheep downgrade tracting with their larger customers and reducing on debt issu Water & d rdA & P s lowesYd the operating budgets. As a more competitive marketplace em ~rga, so ratings on debt issued by two joint power agen- do risks and opportunities for public-power uti o ees--Intermountain Power Ageruy, Uhl, and ties. Caldomia s investor-owned and public ubb• Southern California Public Power Authority, ties currently charge among the highest elevtric Standard & Poor's also revised the outlook on rates in the country and the western region. This Pasadena Water & Electric Department and the competitive environment will continue to have city of Anaheim Electric revenue bonds to nega- an adverse impact on the ratings of some pubbc five from stable (see runty-up on page 74) after power utilities whose rates and costs are higher assigning an 'avenge" business position assess- than theirpotenbalcompebtors';wbosefvuncial meni.lrlcontrast,Modesto Irrigation Districtfsee margins are narrowing; and whose ability to runtyuponpa8e8d1and the Palo Alto ubLty(Oct. adapt to market pressures is constrained. 2 CmlaWerk Municipal) were assigned "some- what above average' business positions because of (heir very competitive rates in ail customer bwala man M simm are 1M 3 (Ono Mr~~ as grans clssetfiotions and low total costs. dovw 9 es 170 Sao 171 Despite these recent credit actions, Standard & Alawtil C400m 11 x 1046 733 Its Poor's is optimistic that, given their proposed Los hviois ow i16 i% `44 _ 1" structural and cost-cutting plans, most utilities sNOVIIA oM0 should maintain thestrongaeditProfiles thatare lbenn 709 get goo 711 reflected in their ratings. Whik the timing and ~ 2031 it" 114 1127 9 a9 956 902 9.72 degree of restructuring remains uncertain, it is ao0a"a 9 u 1076 165 922 Standard & Poor's position that utilities must 't"om" 710 ,066 764 774 position themselves tooperateinamoremmpeti- S" VAI hoAn' 546 esa 394 all !94 9.21 five environment. P"t u 12 930 936 25 1 1060 Two examples highlight the ability of munid- PCE $130 10 070 7 20 ~ 40 127 1050 pal electric utilities to compete. The city of River- hirou 651 651 $w $et side and Modesto Irrigation District recently u.. Muro VII 137 4 b 7 p were able to attract new customers by offering 4 43 walbo 480 4 ssoo 2 w 385 lower rata than their local competitors'. In both w°" 712 562 452 605 cases, management identified opportunities c°b`aa° ar5 Map 172 774 4 as a sl within the customers' dernands and service re- . gnsirea+cslb and was able to m1e4:i these lvith a Over the past two months, after assigning combination of low rates and quality service and 'soinewhat below average' business positions provide a secure load for the utility. assessments, Standard & Poor s lowered the rat• ings on the Las Angeles Department of Water & PREPARING FOR UPHEAVAL Power (Aug. 21, 1995 CreditWerk Municipal), Riv- As California looks for opportunities tomital- erside Electric I Sept, l 1 CrditWeek Municipal), and ize its economy, lower utility cost are essential to Burbank Public Service Department Electric reve- keep business in the state, A study completed by nue bonds f Saps, I I Credit Week Municipal). Each a broad coalition of consumer groups, estimated -CREDIT COMMENT, that Califomians p a v S6 4 biUion annuallyin eIec. Icly o%Ted uCLhes also would have to adjust. Inc service beyond what they No'ild pav if the The utilities with the most exposure to compe- utdines were operated as efnnently as one of the tition exhibit the following charactensttcs nation's top 30 ytdtties-many of wNrh are lo- @ Above-average retail rates, particularly sated tat the western region among the major customers. Because of its high electric rates and an exodus • High feed costs,and, in c'mbination%ith the e j of employers, Caltforrua has begun to overhaul above, V its utility regulatory system. The Califomia Pub- • A customer base dominated by either several Qom, 1 lic Utilities Cornmission (CPUC) has proposed a major customers or by high load factor nu- 0 market-based approach to energy supply that tourers. n nukes competition central and gives customers Under restr•.tunrtg, no utility will be able to the ability to choose then own ele city suppL- operate in +.t isolated or monopolistic fashion, erz (see bor) CaLto"'s utility industry consists since custo.ners an take much tf not aU, of their U of three large investor-owned and 24 publicly btuinrss a iewhere. U major customers move to owned utilities, including the nation's largest alternative generation and transmission provid- munaJpalelectric utility, the LosAngeks Depot- env, utilities will have to spread their fixed costs meat of Water drPower.PJdioughonlytheroves- over an ever s"Uercustom" base laboring tur tot-owned utilities-E0% of the state's custom- der ever higher rates, ers--are regulated by the CPUC, if restnutvring California ubbbes ate surrounded by states- Ls imposed on irtvestorowned utilities, the pub- Washington. Oregon. Arizona, New Mexico, Ne- 0 1 ~O! ORON! f, 1M~ 2 !ElbN1fO FROM fTi111O0Rd ; MOR'f glDR~ MMlwC~AL vada,,and Colorado-with the nation lowest and federal regulation, most of the state's pubbc average and ind ustn": rates. As a result, the de- power utilities had to invest in expensive genera- gree of com lion and pressure to lower rates is lion and transmission projects for some portion re- exacerbat as these generators seek additional of their !e capacity mad ~drf ullat r not revenue sources and loads, qmRcab i, if Though the structure throughwhich transonic impossible, to develop chap generating re sion cast recovery will occur remains uncertain, sources instate. As a result, uthe b c hutetr its had to there may be opportunities for the state's public participate to projects tinter hoist the utilities to reduce the impact o! competition Power Project and other projects those resources- the through access charges. southwest. Also, to utilities had to participate in expensive transmit, THE STATE OF PUBLIC POWER $ion projects, such as the South+em Transmission Although all the state's utilities face many of the Syst►.m to Utah ardth ~C a s moult of same pressures, public utilities in southern Call- truss Project most es that forma are under greater pressure to lower rata their Participation in these project and costs. This is because of greater revenue con- utilities have large offbaharnce•sheet debt Obkam- centration in the corrtrnercial and Industrial cut lima that u « rvice w iresdo .W w Comer claps, because they serve the prunary $a in p o b dy rata ra th their eir e service the not}, A> am ~ economic centers of the regy~n and because of v higher fixed comb. participating resource Mixes Most of Califo r+ia's utilitirs. have firm sup- lees Causehia uliave debt. stave Sower AM~ tothenorthwest orsouthwest rate and oats because they have debt. r Most oFt- fvidinthem with ftemuhty and re lability in nnour The+ea and northern oH•bahancrslheet g rnont}+errh California utilities have an average of trsourts Plann,s utilities art taking steps 307-50% of their resource Infix provided by hy- In addition, And rates through operational ocat Ara Power r capacity, primarily from the a their reductions imervieed effinenciies. I in- Ara Power Administration. Also, under all La Angeles Depart One purchased power conrrads with wesaan Arta dude stall ,eduction a power Administration, northwm CaUker" utili- of water & Power and openp mid the Glendale- have the flexibility to lay off a portion of their in such cities as Burbank allocated sham it a cheaper alternative is avail- able or if they lose it large cwtoaur. However, MARKETS: PROTECTING AN INVESTMENT giventhereeentdiscussions ofthesale ofWestem Utilities must act aggressively now to protect Area Power Administration, many of these saeu relationships with their large commeraal and irr utflitiescould face higher rates on the termination. dustrial customers. Snsvxv and relationship qua]- of tl.cir current contracts. Standard & Pools will ity, which utilities tend to see as 'soft' issues, can the sale cauu ur~arably hard when their absence continue to monitor the event affecting and the awes then lop of kry acco;ts. Mary utilities of paat Area Power Admirusbation already have some competition-'inn the form of impact o on n need utilities. alternative fiscWties, such as crige errs WON COST RAT10S eon-and, ie, urderstud the ~P°R"'ce The high cosh and rata identified during the of relaticrow ! eonss huderscore Nearlyp aU CAUfama public•power utilities the us lad position assasaten p have been suonsshal in develop" key mom" the lack of fl ofity, me procure, ud policy tatheirlatgtc maunemal decisions many y of the C a public utilities rant cust Howirm future fin' must address. Generally, Califorrnis public atilt- and and hid kdustniali l outomnun~ contact with d,* larger, ties' cope strvdum are higher than regional aver- petitas am already mal m in age. Sperifically, the Southern Caltfartua public mare desir+blea+ploshers papiti°ntod+esry mptotal costs range from 6A cents per kwh paccounts ~ of a~ ~ (The exyme (Imperial hale, tiara District) to T02 cents per kwh (Riverside ple, his started to mat with its top 300 amounts and lic u ttlit. of rates, services, And The public utilities in the riortln half of this now is triducts that an the pr ~to its customers. state typically had avenge (Palo Costs, ratty) to P s utilities understand that between 5.46 cents per kwh (Paso Alto Utility) to most of is with cuskmedt- 7.03 cents per kwh (Sammento Mu7%o Utility providing their key in Pstrlct), primarily due to low-cost hydroelectric fined products and service quality is rho resource and this ability to make more economic allocation of costs lot investment avm for Slum hr- Thesecosbcompare favorably tune. As evidence, Y purchases, all among mnmddPal utilities in kmenting long' with the states cost sin excess and utilities as in Of five to teVen three have total costs orison of th cents per s to roteRd>cu des' le beds. just re- kwh However, in comparison b the htksl ce ac P lrri lion District succeeded art tu average of 6.16 cents per lcwh public utilities ar we ondtract negotiations, with its largest customer- into, competitive. m Though du rcasoro fa the high comb are nu- Cabo Wane k Bottlir" securing a th'en`year meedut, a primly reason is that, because of state contrad foe w. Ice. Santa Cara and 111• PlOM 9fA1MAW ' CREDIT COMMENT Riverside have entered into long-term contracts modify their costs, polities, and rues to meet this with three of their largest customers, mitigating competition, particularly those in the southern operational and financial exposure to their loss. half of the state. 1f this effort succeeds, utility Standard & Poor's believes the state's public outlooks could return to stable. If it does not, utilities are movir gg in the right direction to ad- ratings could be lowered further. dress the CPUC's proposed aggressive restruc- Brad Dnwr, tuning proposals and competition, from inside or San Francisco (415) 765.5014 outside the state. Public utilities are attempting to ACrellda NO. Agenda 1 Date ReprinWd from CndsRwlr Ak600 by Standard i Pooes RawVs Group, a division of TTre MoGrow Hdi C&rlv*s. ExaaM ditK 1221 hwwed ft Anwtras Nw YwK N.Y. 10020. E41orW d%m 25 &oadwttr, New YA N.Y. 10004. ISSN 0731.1974. SutsscrUr wroors: (212) 2061146. Copyrlpht 1995 by The Wilaw4011 Cenrprrars. Repaduetion it whole or n part W0401al except by permasron AA rlphta msrved. W ors of TTw McGrew Hg Corrvi4e : Jaeph L Dtsrrrr, ChWffw and Chid ExewtM Offksr, ttuold W. MrGrw. Ill, Presdol W Cnef 0WWV War. Robert N. Landes, Sena EraovlM Vb PMWIL hard SecroW.. KsnrtA W Vow. Examr M Vtce PmderM and General Cmnsei, front D. Pvglm. Sono Vb Pntidsm TmoM Oporabis. hlfomw on hat been N., , 0 by Ci#~ AAnrlr4W hen swm t 1 1 to be rdnb+e, lloaever, beavse d fr paeaAS4 d ou w or medwYol error by ar wurm C+tAw"t AhW*N or cows. CgA1MYM Aft *W des nd Owrv ae N ameab. ade0uaey, of rbrrt merrss of a y i4ol ne on rd is not neporMb fa any anon ee ornletkrtt a for Ire reteb obYlrled horn 1N taN d rrdl ifor•.tution 4 s1PAMfM 11111OM s1A BAV a POWs CRIPff"11 tU1Mam ftcfoMe 1"a I r 1 CREDIiiielk ■ MUNICIPAL OCTUM NIAGARA MOHAWK PROPOSAL MAY AFFECT NYPA NEGATIVELY the o plant'bligsa+atitponsutbackto p ~k A recent proposal by Niagara Mohawk Power wouplantandld issue tstu ax-exempt Corp.PreniorseevnddebtonCreditWatch lhetoNug• with negative implications), if enacted, could ars Mohawk. Such a structure would make lnerab much less to a cred have negative it 's consequences for the New York NYPA y tree This could expose NYPA and State Power thor tceindityrs (NYPA) stings. raStand- ting on its e «ntorrters to si~Cxant additiorul ard & Pools recently affirmed its'M' sting on Niagara Mohawk says NYPA's a067 million gerund revenue bonds, its fixed costs. Furtlwa+ore, Sua a restructuring 'A+/A•i' rating on the authod 1t~r10 5200 million it cannot nile out the possibility code. At adjustable-rate tender rotes, and its'A•1' rating under Chapter 11 cif the US.bankruptcy on NYPA's S50 million commetdal paper. this time it is rot certain if NYPA could issue Niagara Mohawk proposes to move the exist. tar-exempt obligations to finance such a pure mg structure of the electric industry in the come chase, NYPA does not believe that Niagara Mohawk's nuclear facilities panyrs service territory at an accelerated pace refinanang i mov toward an open competitive rnarket, including is feasible orb HnabL of this proposes direct access to the generation market by retail Although tomuna~ aov- customers, as soon as feasible. Part of the fare ing forward, as well asp Co, remains _ py reaching plan includes a proposal to have the the Long Island Lighting NYPA purchase or reFawce Niagara Mohawk's certain Standard & Pools will continue to moru- Nine Mile Point nuclear station. Although the tofevents intheNewYork State ekctricindustry proposal is in a very preliminary stage, Standard that could have an impact on NYPA's ratings. ALiladyFallon (212) 2*1$4 & Pools believes that any impact NYPA Mark Glotfe ty ' p=Aw by would have a negative impact on on the e auut thoritys 1 ratings. Under one possible scenario, NYPA n rAtota or Witt owW W pv isWmN Vin m vod. CcOOOO 1"S by The M013ravr46 GanOar+b• Mx. Rapro4ucaon 1CRElD1T comet T ; L STANDARD& POOR' CIED11W MMUNICIPAL~~~~ THE IWWRW 0w CREDIT W NM OCTOBER 23, IM TEXAS MEASURE GOOD FOR MOST ELECTRIC UTILITIES In its most recent session, the Tow legislature OPPORTUNITIES FOR SOME considered drarrutic deregulation for the electric The Lower Colorado River Authority is under Q utility industry, and the foul bill-while falling much less pressure than many other wholesale short of moving forward on 'retail wheeling"-it systems be-ause of its low and stable power costs opened up the electric market at the wholesale and proac,.ve management. Its management is level. However, many observers believe retail taking advantage of the new environment. This wheeling remains just around the comer. is evident from the recent agreemtent with Destec Under the new legislation-S.B. 373--power Emrgy and Fnron Corp. The authority will pur• generators selling electricity at wholesale are not chase up to 330 megawatts of electricity from c E / subject to Public Utility Commission (PUC) regu- existing generating facilities on the Gulf Coast. As z _ lation. Generators include independent 'exemppI a result, it will not need to build a new power v a wholesale generators" (EWGs), generation off . Plant, u aces of investor-owned utilities, and power mar- a p keters. Under the legislation, utilities are required ran 8rM4p vd t8owasin alowis raMa Ualow to allow wholesale transactionsaavssffiartrars- udity A RaWV mission lines at nondisrnminatory terms and +~an ca"aaxb uaab *Vllm Al" conditions. This-in addition the 'unburden- as,trYan a, yy Acrd ~ y EWVC ~ Sysan A A. stab soft ing^ of the wholesale market-is; expected to re t>~ tmaq $cram A. sash sult in greater choice anA lower power costs. G&WW say Srom tnd t►atonol tar A# soft Many observes believe this is the first step to. Gmw y~ E yM WC. A. saw COW ward full deregulation of the Teams electric indur Law C*rw &W "Wily AA- Staab try. However, as is the use across the nation, the tanaob tasty Syarn ow Sam issue of 'stranded invesmnent' must be resolved 'mot Rr*n tanc oil AOw Apavy M stash ~ before any revolutionary changes are made. The San P4"* 91c ft L fir AA sdxaraus fyr~ wary Sysra saw legislation explicitly states that greater competi- rave Maadaar taw ApsxY a• Nos. bon and lower rates aaoss the state and across customer classes is the ultimate goal. While this Other systems such as Brownsville, College I he case, the to move cacti usly. ThThe al wilgnizesthe reed Station, Austin, and the member cities of Texas re move cautiously. ePUC will be ally on the Municipal Power Agency~:adand, Denton, report back to the legislature bra vy on Greenville, and Bryan-will find greater choice industry s progress towards a to ly competitive and presumably, lower prices as they seek to add env otunent in Texas, new resources or replace existing arrangements. Mosst retail muruopal electric utilities and dis tnbuhon cooperatives expect to have greater DIFFICULTIES FOR OTHERS choice for purchasing power at moreeompehhve c~~wholeufesystems tiutarestrapped with ck of prices. Sa addition, l more com etitiv nsho es le high feed casts associated with debt and pur- less a ba e wholesale chased power contracts will have little room to poweer as a resuli of m the new ew le lecovore gislation. Retail maneuver. This is the case for the Sam Rayburn electricn,Colegneed toaddressyurces,soda Municipal Power Agency, whose wholesale rates as Austitin, College Station, and Brownsville, are expected to rise to 10 cents per kwh by M. should t toa much better position. Some whnk- This is a result of the agency's high fixed costs sale entities such as Sam Rayburn Municipal related to its excess capacity. Power Agency and Texas Municipal increasing While the agency has been able to restructure Agency will find then-selves costs under its debt to provide some rate relief to its members, pressure to cut cossts and lower rates as their it still will have to reduce costs further, Manage- lto s with and members fad them mend is exploring the passibility of contracting xlves with greater access to rhea per power. CREDIT COMMENT i I CREDIT COMAMINIT with non members for sale of excess capacity. In the interim, however, Austin must improve its However, the high cost of the power and avail- own competitive positia*-particularly for large ability of more competitive alternatives in the convrercal and industrial customers. The diffi. evolving wholesale market will constrain nun- culty for Austin is to become more competitive agement's ability to do so. without jeopardizing the transfer ;cues to the Tew Municipal Power Agency has been pres- city's gawral fund. The issue is complex, and, as sured to reduce and shnbibbe is costs through debt a result, the city is looting at all options, it larding restructunng, budget cuthn& and fuel switching. the sale of the utility. The a s ram Cities; am pursuing contract As the industry evolves, Standard k pooes will r rb that would give the cities tttae Held- continue to follow legislative changes that could bitty to acquire resources independent of the affect the creditworthineaa of municipal and co- agency. This could benefit the cities while prctett- operative electric utili ties. The analysis of electric ing difficulties for the agel utilities will evolve to ' to legislative and industry developmenub~ CM will occur as the FOR OTHERS. A DOUSLE•EDOED SWORD 4adidMWCrdithctasforutilities--drversrtyof in a more competitive environment, absent the rksources, f oar vial and rate flexibility, and man- threat of true retail wheeling most retail electric sgement-continue to be empi>a ~ f system and cooperative distribution systems f27112Oefim will benadt Systemssuch a Austin Taas',whldn will need to add resources, will have more choice. RW W tram cffl l AUll by Sts,I hal i Pools Ratlrgs Group. a division of Ttn Md ill Compndas FxanrMs cfkm 12Z All d IN Al tier York N.Y. 10020. Edit daces: 25 Sivads". New York N.Y. 10001. ISSN 07311971. StiHacrDar fllvtneC (212) 2*111l. Csprtgbt 19RS by The IMoBrserttdl Canpaia Rap ulAs m in shots or in W v*& W axupt by permbslon AN dpfas reserved ORlars d Ths "rtarHl COT01il ss: Joseph L Olaar Robal N. lartdaa. SWa 6ractrwe Yia Pnsdenl 06M CNairtrlarl and Chet Eamrdve VMW.... Kvold W. Ml III. Vresident and Cl Opel I* yOpaftlostsen otesk d fit R I RohlVfu Pstaidsnt and 6wnd Cour i K 0 IN Pe.aearDlb al ft of f P tenon a al ar e,itrolJrr va area aral by or~ ov aoscasae. t;far1R1 scarce s. l sonatN OefavW t be rs6Dk. rtoen" , lroirse ct d IN iul 1WR R for mOf IV N MA har s ~IRn~' 1 d at rw . sdo*sl or wnpMSness of aiy im Ics don and Is nit *a IM for ry anon IMM 2 . MW=KM PR M 111AIMAM • lOOR'1 CM MMM K IR POCOAL OC'f0m $ri, 1"a STANDARD ' • • ' 4 • CREDITW THE AIRHOR0 ON CREW OUA1fTT' NOVEMBER 27. 1119A NORTH AMERICAN ELECTRIC UTILITIES FACE RESTRUCTURING US. electric utilities are trrnde increasing corn employ some or all of these hchni ues an retain to stem ==ants because to reak down cnrropa high and rising costs, could see their ebusinss k-,Oc lies that Iuve traditionally protected there ]n positions and credit quality deteriorate over the Caruda, although substantially gracoming yarn lion in electric power markets has the same underlying trend is evident. U.S. INVESTOR•OWNED UTILITIES Mounting competi tion in the US. undoubtedly The essence of the risk faced by investor-owned wdI translate into lower rates for most investor- electric utilities u that competition is likely to owned and publicly owned electric utilities. mean lower prices. Craver the next several years, Thus, financial rnargins and earnings likely will Standard & Poor's believes that electricity prices d be impaired, As a result, ratings on electric utili- will be under pressure because of several factors, iv ties with potentially volatile profits, coverage including: el a ° protection, and customer bases are at risk • Excess generating capacity, Nonetheless, not all US, utilities will rare simi- a Improving generating technology, larly in the changing and increasingly competi- . ~ emukpricing, and five market. Standard & Poor 's believes 0%at the country's investor-owned utilities (IOUs), which There areclear signs that regulators are moving represent about 76% of total US. utility energy to provide the atnwsphere conducive to grater mks, will be impacted to a greater extent and competition. Following Congress' intent in the more unrrediately than publicly owned systems, National Energy Policy Act of 1992, the Federal IOUs' nuclear plant investment, industrial cus- Energy Regulatory Commission (EERC) in April tourer concentration, and dividend payout pros- 1995 issued two consoliciated Notices of Pro- sures will lead to grater relative audit deteriora- posed Rulemaking. As proposed, the notices ad- hon for this sector. This has already been bome dressing wholesale electricity transmi+sion are out in the downgrades of over 40 IOUs, repre- supportive of electric utility credit quality, ab- senting in excess of are-thin('of those rated, since though they may be modified before actual cr,- October 1993, when Standard & Poor's adjusted plementation. The notices dal with several arms its fuanpal guidelines for electric utillhes. How- of interest to bondholders. Most signifiani to ever, some public power systems, particulady bondholders u FERC's insistexe that u LUesre- those with high fixed costs, large debt burdens, cover stranded costs incurred because of whole- and uncompetitive rates will be negatively rm- sale customers leaving a utility's system to pur- pacted by the movement toward deregulation. chase power elsewhere. Stranded costs refer to Credit risk will begin intensifying over the next utibry investirents in relatively expensive gener- fewyean, asvanousleveLsof retadwheeling take ating facilities, above market purchased power hold. This creates a window during which utili- obligations, and various other costs incurred and ties likely will move to po-ntion themselves for investments made under the historical cost-plus future competitive battles `.orrr IOUsandpubbc regulatory regime. power systems alike already are using this time While FERC rnay well modify the notices after to restructure rates, reduce otherwise high costs, receiving comments, the general approach seems and negotiate agreements with high load-factor dear. Now the action moves to the states, which customers. More than public power systems, in- regulate roughly 85%40% of electric utility reve- vestorowred utilities are also looking at comb- nues, and that is much more important for bond- dating operations and paying off high-cost debt holders. to enhance their operating postures. Utilities that CREDIT COMMENT CREDIT COMMENT At the state level, the regulatory transformation to a competitive marketplace. This will be an is no less monumental. However, ongoing efforts evolutionaryprocess. are fragmented given the near 50jurisdicdons.At The fundamental truth is that investors must be y• the core, there is a shift from cost-based to mar- able to differentiate risks. There will be winners ket-based regulation. as well as losers, Proactive managements wLU f'"1 Under the evolving regulatory framework, aggressively cut costs; tumble utilities will gain utilities are being deregulated and market ores market shaneattheexperiseoftheir more slothful are being substituted for regulation. Certain sec- brethren credit-cortscious managements will re- tors may be deregulated completely over time. duce debt and accelera it the deprecia bon of high The ultimate transfomution in state regulation coot assets; and creative managements will devise is the trove to retail wheeling or direct access, new revenue- producing services and busineiises Under this concept some, or all, utility customers, while saying mire ful of the greater risks these would be able to choose their supplier. In theory, may pose. powNew erfromPerfor uuyiaria, U.S. PUKIC POWEII would fbeabItob y in for example, and pay a fee to the local New Jersey The credit outlook for the almost 200 munici. utility to transport the electidty ppally owned electric utilitic rated by Standard & The biggest obstacle to this happening is the Pact's is generally sable. Most of that are retail transition coats--the investment that utiiitie tryu6ear that serve ultimate cuuomen directly, made under the old cog-plus regulatory framer and that will likely retain theircredit strength due work with the expecubon of recovery. In a corri- to the traditional batefits of public power, bsdud- pehtiveenvirorunenP,themuketmaynotbewill- ing ing to pay as much Most state regulators are • Lack of regulatory oversight. Public power keenly interested in the concept ofregil wheeling, sYSEeo are, for the cost part, free of exterrive and a large number of sate are studying the third party regulation This freedom gives issues involved. The good news for bondholders them the potential to be agile and responsive is Out they appear sympathetic to allowing utili- to industry flanges. ties a reasonable opportunity to recover their past • Resource advantages, Rated public power en- invatments. In this regard, FERCs recent pro. tities typically have newer plants, leas nuclear posal will help set precedent. risk and smaller capital needs than their IOU Still, sate regulators are under pressure to re- counterparts. duce rates soon so customers eryoy the fruits of • Secure customer base. Their high density and competition now. Given that this conflicts with residentialdominartl customer bases protect 100% recovery of hw%sition casts, Standard & public power systems fairly well from rmrne- Poor's antidpates that regulators nay end up dfate threats of loss of large bads adopting a 'share the pain' approach. That is, Because of such advantages, rating upgrades most costs will be recovered from departing or far exceeded downgrades for the past five years. renaming customers but some will be absorbed But, emerging competitive and finuhdal ptes- by the utility/s shareholders. To the degree utilf- surss make it unlikely that this trend will core ties cannot cut their operating costs, profits will tinue. A number of recent visible downgrades suffer. Moreover, even if regulators authorize re- foretells a trend of it+aeasingaedit prewure, par covery of stranded costs, custornets may not be ticularty on the ration's larger public utilities. willing to pay them. The market will uldautely For instarice,theratingtonnine systems,which determine to what extent, mnd over what time represent a si+nificanl $23 billion of total out- frame, utilities will recover their past invest- standing debt,'tave been downgraded since lure meets. 1995, when Standard & Pooes announced the Can the arrival of retail wheeling be predicted? business positions on 62 public power utilities. Based on efforts under way, Standard & Pooes 71he outlook on all but one of these remains nega- believes that widespread retail wheeling, or its Live. 71ne downgraded utilities am among the na- marketplace equivalent, will be in place for the lion's largest publics owned utilities, indicating industrial market within two to four years, for the stress on a greater dolls volume of utility debt commercial market within three to six years, and thin on the number of utilities which may be, or for the residential market within our to seven already have been, affected. Further,theoutlooks years. Reasons for this estimate am not simple. on 20 municipal utilities are negative, while only Since market pressures are bxulding for grater two have near-term positive n potential. competition in retail markets, certain segments of However, the stt~gt~s wtlined above make it industrid retail markets are already very com- highly unlikely that ulnae will be a large enough petitive. However, utilities will do what lhcy an number of rating changes to move the average to put off the further advance of comnpeti tiorr der rating of public power systems fmm its cu cot lay is in their bet intersst. As time passes, utilities 'A'. Additionally, the diversity arno ng these sys- an recover their sunk costs through depreciation two makes it difficult to generalize about the and can prepare for a competitive future by cut- effects of competition on this segme d of the in- ting operating costs. However, the force of eco dustry. rnomkii driven by teclwtop will in time over. Some municipals have several characteristic whelm the current legal and regulatory obstacle weaknesses that will nuke it ddficult fox them to `J 4 YMMfRO ROM fTANW" & POOWI CMDM UK NOtiAttiiiiiiiiiI 170 1 Mat nN the content-of Standard & compete in a free merge market Thewhicch have Pools analyse. The bwui v ss position ash these systems are wholesale entities, ` lic sector to feel the heat will a tool for investors to wrecoFue ill adj which ust been the first in the pub '1 competition and the resultant negative im p1i- ties will be at risk and n their credit quality new 1 7 ca bons on credit, in fact, seven of the 10In ON mvitortmsent and retain electric systems downgraded by Standard & CANADIAN UTILITIES Pools sirsce June 1995 are wholesale systems Although substantially greater competition in These weaknesses include: power markets has trot yet come north of • Excess capacity. Many systems have excess electric base-load capacity, the result of aggressive driv rag dtruduaa] changes at the Large i provin- irgy growth Pro)ectiors and castnxton 0.111y owned electric utilities: E S during the late IM and early 1 . M-45 in Us. power markets and regulation, tiCal and i z . Pohtial am economic p ressures• Poli sys . Comp five threats from Urge electr+atycon- n a environment within which public power o tans operate troy rat always be compatible fiophrug yo, i with a more competitive utility in ustr . Eveu~ts at Ontario Hydro 1993 have been seu MAnd f devoid of direct regulation lice and de• most visible. Fortner chairrruan Maurice Strong tam facie the Political s Of de mand~ h.dLnLmte1992toshaMupthela Vf3"WIW transfers to government general funds, for geruaatin8 ca ty, tW in Was) t t toreduce casts costs instIMM ate structure. Many municipal "e , rs te- , t~ erred as 1993}1992 trued of me Strong sea well . t to R making fletubdiry is Limited by Ouse utilities above the inflation rate. Mr. Strong so reducer ~thxa sW apadtyp app traditional preference for low residential rates, or by 'cost-plus . rati g m rte Methodologies, targeted rtt he yuti~li for the opWty of lncessed from incorporating more flexible, inOntariopowermarkebwithinthe system •as the procedures. be A municipal amble arid d coneKt five mpeti . s _ system has the s ra " they are generally Hydro to ell surplus power at at ttractiv ra creative with its ratestM , as t rates can .as also a proponent of Privatiza- tree of outside regulation. Many, however, a rt Strong ;as Ms. face pobtical obstacles from local boards or whose necessary approval'' tionandsawadvantagestothenkQatl Part city coursdls, of the power giant's generating capacity. per- prove daunting has transmission as well. The nceudy elected . Slow debt amortization. Public systems typi• P ive Conservative govemmeut is arr.eua- cally structure their debt to mature in level progressive of rivati"bM unlike its increments over 20-30, years. However, the bit it the ocatic Party t• reducedcashlowrrqurements ofthistypeof Mpwee,q "'A Bill structure gave public systems advantages However, uadcM Precluded under by the 41atia of Failinger relative to some IOUs that were also financing the jeriPle mentation of such a sale, such a settilmg large plant additions in the 19BOs. However, of Ontario Hydrobetween many IOUs are exploring options to divest theprovince Wj r its p found Best the themselves of burdesome assets and, in some the and its regulatory ~ cases, accelerating their depredation, This constnsctwo ofuld likely be be appropriate a trans may put public power systemo in a difficult for whit would to treat Onnro position in a more competitive Operating HYdr~snuclear m~(Wy,khaccounted for64% and. the areru public power systems have to deal of power generation in 1994). Ontario Hydro's like IOUs, p . For 'M-' rating am stable outlook eontinuetonelled with the rea tities auny reasons they are unnu bent etter re conV~ potuposition the guarantee of the prrr" of liy Ontario in a to deal with competition's ramifications. How- Another provrae deCtM ufilstyI Newfoun(&. eve, many of these utilities will need to gain land and Labrador Hydro tMJl),wasconsidered candidate for privatization in 1994 by political support for their policies and initiatives. a the New' political & poor s does not exiled that dw pub fourdland government However, erK, the boar eh lic power sector will experience w desnread nor ment decided to focus instead on generating a ly by resurru to the public pure from the utd to he immediate credit deterioration. While many sys- a terns, particularly wholesale entities, have weak- laving the utdttY pay an anm~ to the nessm which could lead to credit deterioration. province. The dividend uvouruce'd in the Pro'r' - most of the country's retail electric systems are cial budget in spring 1995 for the heal year April protected from the immediate effects ofcompeti• 1995toMardu1996wssbelitly~ar ti9rr lion. Municipals' sets tivety small, residentia l cus• inpt the utility grner eed ~ utility e cost s1994 totrua bases and rate intact, will help these results. or to dchues, orea~ would be eeTwred s keep they credit it intact. over time. Changes s udard & Pools will continue to irxrorporate to sustain similar dlvideds be r+eceaaarY if box . and quantitative Eeatuues in its to the utilitl/s regulation y ts tive analysis of electric utilities in the throes of comp ~ on flue province's eltrltgyu~athe 9°e`y nation. Industry revisions " require changes ✓ p 111"M rS1A1MAr a Doers aDO11,11, 111tx NOYgMAM 3fe 1"1 3 i CREDIT COMMENT British Columbia Hydro and Power Authority the city of Edmonton, which is rated 'AA), are (BC Hydro) has indirectly felt the impact of in- undo mg a gradua l shift to more open compe- txeasingly abundant, cheap electric pov a south tition, beginning in 1996. Current generation and of the Canada-US. border. In a still unresolved transmission costs will continue to be cost-aver- dispute with the Bonneville Power Authority agedthroughapprovinaalpool, though newgen- (BPA), BC Hydro stands to lose a substantial eration will not be cost-averaged. All power from stream of payments from BPA, as a memoran- both old and new generation projects will be sold duet of understanding signed in tember 1994. to a revised provincial pool on a competitive ba- The basis of the Payments stems the 1964 sis, with all plants in the system guaranteed a Columbia River reaty, which gives BC Hydro minimum of allowed fixed cast coverage, to pre- the rights to halt of the incremental power gerer- vent odsting asseb from being stranded. The ated by BPA from water flowing from dams con- sharing of generation costs will be phased out as strutted in BC in the 1960s, According to the exlstin plants retire from service, according to memorandum of understanding BPA would schedules set for each existing plant- The retire- putrdm w BC Hydro's allotment of power at 1994 melt scMiules, and determisution of allowed priers, beginning in 19%. Since the signing of the fixed costs, will be set following hearings in the memorandum of understanding, BPA has deter- cooing monft mined it omdd miniaJu its oasts ud $till fulfill For ArWkd Pubfic Uiihties Commentary and Ro- ies treaty obliggaation by building a transmission tiorrb, pkrse ser Stemkrd b Poor's Globe! Sector line to dump 4ie power at the BC border, rather Review, November 19%. than putchwing BC Hydro's allotment at what Bill Cox, Public Finance Ratings, New Yost since Lte 19% has become an uneconomic price. (212) 208.1866 It BPA proceeds with its phn. BC Hydro would Stephen Daft, lnlernafioral Ratings Toronto face an even greater surplus of capacity than it (416)364-8580 now has in place. However, the 'AA+' rating of MaAa For, Public Finance Adfin8s, New York BC Hydro is unlikely to be unaffected, as it is (212) 208-1863 based on the guarantee of its provindal owner. Curtis Moulton, Corporate Ratings, New York The three major Albertan electric utilities, {212) 208-1651 though not rated by Standard dr Poor's (Edmon- ton Power is owned by and receives funding from astr.a No owa M saws a PWL 1 dram if no warn N terfWat r[ rs ew.~aon tr:l s,ww 104, r. aa+w het car. WK ecru rem is ewer ON his car. seer ma an t•isna u s rr.aserr nr Q.ea r rr rl.re ws r err w sow awe wa sn.aa. was a+n assnu aemrn tssa k raw aese"e ea"rr wt FAVWMMN r caw of r rat Penes 000 to rwnwtrn w per wwma ORM It h rtrrn+6 CORWAL UL JWW L DOLL orrew ON arm reef" Carr, Nor nr.leywr, f hero err ar ftm" ~ aferal hail left 6wrr Mot Pwl ertarmt town r oar. sir itMsrw rr OeruOrwa MA PN R bft%W hNMK M1rer►ONVAM wewrlwrsdn wlaell M eraratf~ ear w Item w Y w►aa Merv. MJ~r w rre4 awwr raeewr rim M W rasa rxiadfK r w o.wteefw arsrttar 4aarq, NOW, r a rr~r.4 r...sr scar rrae.a Warwfvir.fwa OWN No% terwrt►wa Wrsomb ohm • f111M11f11O PROM /TAMARD A POOWS CMWr IRK NOV1M110M !7r 11"I L Apend~ No. g Agenda no.. . our - - CITY 01 DENTON, TEXAS MUNICIPAL BUILDING 215 E. MCKINNEY # DENTON, TEXAS 76201 (817) 566-8200 v DFW METRO 434.2529 MEMORANDUM TO: Mayor and Members of the City Council FROM: Rick Svehla, Acting City Manager DATE: April 2, 1996 SUBJECT: EXPANSION OF THE OCCUPATIONAL HEALTH NURSE SERVICES CONTRACT (RFSP 111810) RECOMMENDATION: We recommend that the contract previously awarded to Denton Community Hospital for OHN Services be expanded from twenty (20) hours per week to forty (40) hours per week beginning on April 17, 1996. DISCUSSION: During the fiscal year 1995-1996 budget deliberations by the City staff, the decision was made to ask the City Council for approval to award a professional services contract for a part-time Occupational Health Nurse (OHN). Funding for the twenty-hour per week contract would be provided from the Risk Retention Fund. Council approved the contract award to Denton Community Hospital in December, 1995. In the first three months of 1996, the Occupational Health Nurse (0HN) has worked twenty hours per week for the City, primarily on Monday, Wednesday, and one-half day on Thursday. She is now administering the City's Drug and Alcohol Testing program, coordinating Employee Wellness Program activities, and screening new employees for job suitability. She has also been able to devote some hours to Workers' Compensation case management and ergonomics training. Even under the present time constraints, she has: identified a potential new hire who was physically unsuited for a vacant position; evaluated a repetitive stress injury and determined it was not work-related; provided guidance to four other employees in early stages of cumulative trauma; and provided input on medical claims in a lawsuit against the City. Cost avoidance of these few examples far exceed the total yearly cost of the contract. Unfortunately, further use of her abilities has been severely limited because of the lack of available hours. "Dedicated to Quality Seri-ice" L L Page 2 AgenANolft is AgenDate % It is our goal to establish an Occupational Health Clinic where the OHN can screen work-related injuries, provide first aid treatment, refer employees to appropriate medical providers, and give tetanus, hepatitis, rabies, and flu shots. All of these functions are currently provided at a doctor's office at substantially higher costs than at a City operated clinic. We further anticipate that expanded training, early intervention in back and upper extremity injuries and expanded case management will significantly reduce workers' compensation costs. SUMMARY: It is the City staff's conclusion that an expansion of OHN hours, establishment of an Occupational Health Clinic and an increase in training and injury management will more than offset the cost of the expanded contract. FISCAL IMPACT: The current OHN contract is on a calendar year basis, thereby spanning two fiscal years. If approved, additional expense for budget year 1995-96 would be $13,920. Cost for the last three months of 1996 would be $7,560. Total cost to expand the current contract, as recommended, is $21,480. All costs associated with the contract change order and the establishment of the Occupational Health Clinic will be paid from the Risk Retention Fund. Respectfully /s uubmitted. A Rick Svehfa Acting City Manager Prepared by: Max Blackburn Risk Manager Approved by: mss' L Kathy e Executive Director of Finance AFF01148 a;:•c; item ~f,+7 Date CITY COUNCIL REPORT TO: Mayor and Members of the City Council FROM: Rick Svehla, Acting City Manager SUBJECT: JUVENILE CRIME INTERAGENCY COALITION'S ANNUAL REPORT RECOMMENDATION: Execute an agreement with the "Contracts and Bonuses" grantor now that the grant has been awarded. Funding should be forthcoming in April of 1996. Continue to search for grant sources and program development ideas. Consider reconfiguring juvenile boards of similar purpose to avoid duplication of effort and to promote a well defined community effort of juvenile diversion and support. Delay appointment of new JCIC members until groups are reconfigured. SUMMARY: Contract and Bonuses would take the form of referring at-risk children to counseling. Counselors would use "contracts", or agreements, for behavioral modification and "bonuses" in the form of small cash rewards for honoring the agreements. The counselors would assess the child's situation, using clinical tools and determine the most appropriate "contracts" to preempt more serious behavioral problems. The Council authorized creation of a teen court and appointed the teen court board of directors in 1995. The first task of the board was to adopt by-laws and hire a teen court coordinator. This was accomplished by June 1995 and the new Teen Court Coordinator began recruiting students to serve as teen attorneys in September of 1995. Kristi Sandel, Teen Court Coordinator, made presentations to local junior and senior high schools to discuss the benefits of teen Court and to solicit volunteers. The Teen Court has been well received and supported by the schools involved. In October, interested teens were invited to attend a training session conducted by Judge Deborah Flollifietd, and Attorneys James Coleson, Mark Burroughs, and Joanne Shipley-Simmons. During this training, students were informed about proper courtroom procedures and the basics of arguing cases before the court. Twenty-five teen attorneys and two bailiffs were selected to staff the Denton Teen Court. At the end of October, mock trials were held to allow the teens to practice their skills and ask questions of the judge and attorneys. On November 9, 1995, the Teen Court held its first session with Judge Barbara Gailey presiding. To date, twenty cases have been heard by the Denton Teen Court with referrals coming from the Justice of the Peace Court Precinct 5, and the Municipal Court in Denton. Detective Keith Smith of the Denton Police Department is currently working to establish a policy that will allow officers to directly refer to Teen Court. Teen Court defendants are serving their constructive sentences as volunteers in local nonprofit and city agencies. A total of 277 in community service hours have been sentenced by the Denton Teen Court. At rninimum wage, these volunteers are providing $1,246 in services to the Denton community. Continued funding support for Teen Court and a new program has been awarded through a Title V Juvenile Crime Prevention Grant. The name of the grant is "Denton Delinquency Prevention/Intervention Program." The new program, in addition to teen court, is to contract Council Report Format Agenda No, JCfC Annual Report Agenda6 ?M _ March 29, 1996 Date ` Page 2 with the Boys and Girls Club of Denton County, Inc., to develop and operate an after school, weekend and summer recreation, and education program. This program has been projected to serve up to 50 at-risk juveniles at the Fred Moore Learning Center. In addition, this grant incorporates the services of Texas Womans University personnel to assist with program evaluation and provide an avenue for the university student assistance in the form of individual tutoring. PROGRAMS DEPARTMENTS OR GROUPS AFFECTED: Virtually all groups volved in juvenile issues Y it in the community could be affected. The Police Department will cases to teen be dent to divert court that might otherwise not be acted upon. At-risk, students having difficulty in school will be able to have tutoring help through the Title V program. Schools and Court will have a new avenue of diversion for at-risk juveniles. FISCAL IMPACT: The "Contracts and Bonuses" program will replace our current counseling effort and save taxpayers $ 19,000 annually. It will also bring $156,600 over 6 years to the community through program expenditures. The Title V Juvenile Prevention grant will bring approximately $81,000 in early program expenditures to the community. These two programs should provide around $399,600 in external funds. The programs internal component, while not costing additional tax dollars, will have a value to the program of around $300,000 over three years. This internal, or in-kind contribution consists of facilities and personnel time used to operate these two programs. Contributors are: The City of Denton, Denton Schools, Denton County and Texas Womans University. Respec ly submitted: Rick Svehla, Acting City Manager F,epamd byr Tom Joeoy Municipal Cart Adminearefor Approved by: Haden L Jefferson Directs of Focal 0 r nn s. AFF01 OW L Agenda No.~ Vi Agenda Item T CITY COUNCIL REPORT Gate _ TO: Mayor and Members of the City Council FROM: Rick Svehla, Acting City Manager DATE: April 9, 1996 SUBJECT: Zoning Ordinance Rewrite RECOMM_E.NDATION. See the attached reports. The purpose of the joint meeting with P&Z and Council is to receive direction concerning a number of issues raised by the consultant. SiJS AND BACK Anrnvn• The zoning ordinance consultant, Terry Morgan, has delivered his report on the draft ordinance. A new zoning ordinance would replace in its entirety the current ordinance. Mr. Morgan's comments can be categorized into two categories. 1. Wordsmithing, format and orgaaizadon improvements, and consistency. This category is now being worked on or corrected by staff. These changes to the draft ordinance do not change standards or process, and are not discussed here. 2. Substantive issues. These issues do deal with standards and process changes. These issues should be addressed by P&Z and the Council before ordinance drafting is completed. These issues are addressed in the attachments. Each issue is described, has a summary discussion, alternatives are suggested, short analysis is provided, and a recommendation is given. P&Z met on April 3rd to consider their recommendations to Council. Many of these issues were explored by the ZOTF. The overview of the ZOTF's recommendation is attachment 1. PROGRAMS DEPARTME NT OR GROUPS AFFECTED Zoning, Planning and Development, all of Denton. i AgenANo, - Agen FISCAL EWPACT: Date There is no fiscal impact associated with the review. RESP LY SUBMITTED: Prepared by: Rick Svehla, Acting City Manager AOAg ~A Frank H. Robbins AI Director of PlanniogAnd, Development Attachments: 1. ZOTF recommendations. 2. Issues Report. 3. Consultant Report. AUMA47 Ativndi No: , O Ago t m late ` ` Attachment 1 ZOTF PROPOSED NEW ZONING ORDINANCE PROVISIONS a. Mixed Use District (MXD) with bufferyards and policy sensitive site plan triggers. Allows a mix of uses if standards and policy are followed. (APA award) b. Old non-residential districts stay on the zoning map, but no rezoning to them. C. 3 new residential districts. • Single Family Estate. (SF-E) 1 acre minimum. Most A district's "SUP-able" uses deleted. • Single Family 3.5. (SF-3.5) Mixed residential use, medium density. Small lots, townhouses, and zero lot lines development allowed by right, as permitted uses. • Manufactured Housing District. (MHD) Allows a mix of manufactured and SF detached housing. Standards for RV parks and mobile home/manufactured housing subdivisions. d. Heavy Environmental Impact District. (HEI) e. Design Guidelines for all site plans. f. Special districts for special places. g. Updated parking standards. h. Antennae standards. i. User friendly format. More tables, charts, and illustrations. j. Allow minor amendments by staff of PD detailed plans. (Separate amendment approved.) k. Reorganized Board of Adjustment article with non-conforming amortization section, (Separate amendment approved.) 3. u altyds No ~ lob WHAT THE Agenda ZONWG ORDINANCE TASK FORCE DID rn7i' • More x0111119 districts, with longer 'menu" of standards, and office districts narrower list of uses; eg. 3 . • Temporary use standards. (Adopted in 1996 in response to need.) • Public site plan review in zoning process for public parks and facilities. • Landscaping on the low intensity side of bufferyard Maintenance problem. • Requiring AU low intensity area intensity policy violations to site plan. y i r Agenda No, `VI Agenda t m Attachment 2 Dafe ` lie 1LSSUF,S REPORT TABLE OF CONTENTS Issue ........................................Page I a. MXD and DDP . lb, Alternatives to MXD as the replacement for current non-residential districts 9 2. 'Grandfathering' the current non-residential zoning . 3. Bufferyatds , A summary of recommendations associated with issues la, lb, 2. and 3 22 4. Planned Development 23 5. Design Guidelines . 6. Historic Landmark Ordinance 28 7. Farms and Ranches in Residential Districts . 8. Cumulative residential zoning. Single family homes in Multi-fam"y and Manufactured Housing Districts 36 9. Cumulative non-residential zoning. Heavy Environmental Impact (HEI) District Permitted Uses 10. HEI adjacent to Residential . 11- Central Business (CB) district SF permitted use . 12. Special Use Permit (SUP) Procedure . , , 13. Number of members on the Board of Adjustment , , , . 14. Changes to non-conforming uses . , , , , , 15. Non-confornung abandonment , , , , 16. Zoning change petition to P&Z , . , , 51 17. Denied rezoning waiting period conditions , . is Ad, No, ` A.pendo Ito ' Issue #la. MXD, the Mixed Use District and DDP Date policy. BgckMWW: I • The consWtM bas raised several significant legal and practical issues in questioning the current draft. One concern relates to the MXD's use or failure to use some DDP policy in the MXD standards or site plan triggering. A summary of the MXD's provisions is enclosure la-l. 2. The MXD takes many policies directly from the Denton Development Plan (DDP). 3. The DDP will soon be under review by the Development Policy Committee. 4. The MXD was the central component of the Zoning Ordinance Task Force's recommendations. What to do about the MXD? to tiv 1. Drop the MXD. 2. Amend the MXD according to the consultant's suggestions, now, and write into our ordinance that would be considered by P&Z on May 22nd. 3. Consider the MXD, and any amendments to it, wi the DDP update, by the Development Policy Committee (and potentially by a subcommittee), w addressed. That is, address the DDP Vgllcv and MXD when relevant DDP policies are reQU anon at the same time. 4. Approve the MXD as written. ANALYSIS: Not every policy of the DDP is put into the MXD's standards, Some of the DDP's policies may be interpreted differently in terms of the strictness of application. EXAMPLE: V. Diversity/Neighborhood Protection. Low density residential, small scattered sites of apartments, and nonresidential uses are encouraged in all areas of the City subject to the following limitations: 1) Strict site plan control within 1, 600 feet of existing low density residential areas. Developments must maintain the character of the area with architectural design and landscaping. " le. if Y l r Agenda No.46 O r S? Agenda I m Date ` This policy applied to the MXD could result in a "site plan trigger' for many non-single family uses within a 1,600 foot radius of existing single family areas. The ZOTF developed its standards in an attempt to decrease the number and type of development proposals that require P&Z and/or Council approval of inflexible site plans. DDP site plan policy is a major issue to be explored by the Development Policy Committee. As Mr. Morgan has suggested, policy and ordinance should be consistent - either amend the policy or the MXD; therefore Rcj=endati 11: P&Z recommends that the DDP policy as it relates to the MXD be evaluated as part of the DDP update program. If this were followed, the rewrite, except the T,DCD, would continue to be considered now. 7• i ENCLOSURE la-1 A A&00* • 7LD ApcnCa No. MAJOR ELEMENTS OF9endate l e`m ) ` MXD FIXED I~SE n!~..TRI~T 1. A diversity of uses allowed in the district according to standards. 2. Site plan required or Specific Use Permit required for uses that violate Denton Development Policy, are nuisance prone, or have a potential negative environmental impact. 3. Bufferyards required between different uses. The landscape features get wider, the trees more dense, and the fences or walls higher as the difference between the uses increase. 4. Building height and setback; lot depth width, and size for non-residential and residential uses about the same as current standards except: setback of non-residential use from residential use is 15 foot minimum or 1 foot of setback for each foot of non-residential building height. 5. Performance standards for fighting. Apoda, N0,' Agenda Ilsm Issue 11b. Ahmwdves to the MXD as the replacement for non-res. D to c BVjQZWW: 1. It has been recognized for many years and was a specifically recognized ordinance shortcoming of the current ordinance that the current non-residential zoning districts were difficult to approve because 1) their standards were weak - eg. no height limit, and 2) uses allowed in a district could be incompatible with each other - eg. antique shops in the tight industrial district. 2. Since the 70's, the rasponse has been instead of rezoning to a "straight" non-residential district, to rezone to PD or a conditioned district. 3. The Zoning Ordinance Task Force (ZOTF) recommended no further rezoning to the existing non-residential districts, and rezoning using the current residential districts, 3 new residential districts, a heavy environmental impact (HE[) district, PD, and mostly to MXD. 4. The consultant has raised many practical and legal issues about the MXD. Th.y include: a. Consistency with the Denton Development Plan (DDP), noted in Issue (a; b. Uniformity of regulations and related zoning amendment procedures; c. Use of conditional zoning procedures, site plan review procedures, and specific use permit procedures in MXD; d. Site plan approval standards and procedures; e. Relationship of MXD to other zoning districts, including superseded non-residential districts, PD districts and HE districts; f. Format and organization. 5. Some of the suggestions made for remedying these problems may entail creating a district much different from the one suggested by the ZOTF. For instance, (1) rather than site plans approved by P&Z, SUP's would be approved by Council, and (2) a requirement for conceptual land plans when the original MXD is approved. 6. A central element of the MXD is the bufferyard, which (1) addresses DDP buffering policy (2) mitigates the visual, noise, and light of different uses and, (3) adds aesthetic value. They have been adopted in PD's and conditioned rezonings for 5 years. Issue: Should other alternatives to the MXD in its present form as the replacement for current non- residential districts be explored? 9. i yam; Agenda No. Agenda to 1. Create better, ne,v, non-residential and multi-family districts wi ate • more compatible list of uses in addition to those now on the books low shorter, to existing non-residential districts, except W, with new residential adjacency standards. 2. Adopt MXD-like b ifferyards and lighting-no glare residential protection standards in the landscape ordinanc: and zoning ordinance. 3. Consider adding new performance standards like building volume ratios. 4. Amend the MXD according to the consultant's suggestions and consider now. 5. Amend the MXD with minor or no changes. 6. Develop an improved MXD taking into account the consultant's suggestions concurrently with the Development Policy Committee's DDP policy analysis. Atss]on: Staff did considerable work in 1989 and 1990 concerning option 1. Development of drafts of these new districts, bufferyard standards, and no-glare residential adjacency standards could be presented in two weeks. The new MXD may not be used except where there is a large amount of land in a proposed district. P&71Reco meed&=: 1. Options 1, 2, 3 and 6. 2. P&Z considers a new MXD whenever the Development Policy Committee makes its recommendations. 3. Immediately after the first phase of the re-write ordinance is recommended to Council. New multi-family and non-residential districts and standards and bufferyards in the landscaN ordinance are considered. Agenda tJo. Q S P.gend tea -T Issue N2. Tmodfathering" current non-residential zoning. oate ` _ . th~~.!_ Lim: What new, better, but more strict standards should be developed so site plan review is less necessary? What should be grandfathered and/or for bow long? i~ ck r : 1. The ZOTP recommended the MXD and no rezoning to current non-residential districts, but these old districts as shown on the zoning map would be grandfathered. There would be no zoning district rezoning. Implied in this recommendation is that the standards for these districts would not be changed. 2. The consultant's proposal follows: E. Nonresidential Districts (part 1) Notice and ra. ft &r h•= 1. Although the zoning ordinance rewrite prohibits the rezoning of property to the 'old " non-residential zoning districts, these 'old' zoning district categories may remain on the zoning map indefinitely. While this system has some admWages, such as eliminating non-conformities that otherwise might be caused by remapping, it also raises legal concerns. By not amending the zoning map, the City might subject itself to spot zoning challenges, as individual lots over time are forced to rezone to the Mired Use District, while surrounding lots remain zoned under the former nonresidential zoning districts. Moreover, maintaining the 'old' non-residential districts indefinitely raises the concern of whether the zoning ordinance is 'in accordance with a comprehensive plan. ' Therefore, as an alternative to the proposed scheme, development under the mold o non-residential zoning districts should be "grandfathered" only for a period of years, after which rezoning to a "new" zoning district category is required. Consequently, the Notice provision which prefaces the Nonresidential Districts chapter should become section S.1 and should read as follows: Uses which were authorized under the City's nonresidential district regulations in effect immediately prior to adoption of these zoning regulations (insert a date) (Districts P, OAR, 0, NS, GR, C, CB, LI and NI), for which no rezoning is requested, may be established on land zoned for such districts on the existing zoning map in accordance with the prior district regulations contained in Part V under the following circumstances. A. All development shall be subject to the supplemental regulations found in Pan VII. Agenda No. Agenda Item Date- on B. For development on lots or parcels which do no require subdivision resubdivision, building permits must be obtained and construction commenced pursuant thereto within S years of the effective date of these zoning regulations. C. For development requiring subdivision or resubdivision, a preliminary plat shall be approved within 3 years of the effective date of these zoning regulations, a final plat shall be approved within 4 years of the effective date of these zoning regulations and building permits for each use to be established under this section shall be obtained and construction commenced pursuant thereto within S years of the effective date of these zoning regulations. All other development applications which are filed after the effective date of these revised zoning regulations shall be processed, reviewed and evaluated in accordance with the revised district regulations contained in Parts 11,111, and !Y. An application for approval must be accompanied by an application for amendment of the existing zoning map, in order to change the zoning district designation to one which is provided for under the revised district regulations (A, SF-E, SF-16, SF-13, SF-10, SF- 7, SF-3.5, 2F, MF-R, MF-1, MF-2, MN, MAC, NEI, and PD.) 3. This is an issue discussed at some length and depth by the ZOTF. 4. There are several difficulties in malting distinctions about zoning using the criteria as to whether the property requires platting or not. Simply, it will be impossible to tell if platting will be required or not before subdivision, resubdivision, or development is proposed by a landowner whose land is in a certain configuration, platted or not, and the availability of certain infrastructure relative to the need for infrastructure of a proposed use. 5. This issue puts us essentially in the 1990-91 time frame when the fundamental structure of zoning was discussed by the ZOTF, P&Z, and Council. Alternatives: 1. Allow no rezoning to current non-residential districts; and only rezoning to MXD. 2. Allow rezoning to current non-residential districts, except the HI, which will be replaced by the HEI, and rezone as city initiated cases all HI districts to HEI. Many of the performance standards in the existing ordinance associated with HI uses are out of date and/or unmeasurable. 3. Add new standards to the old districts, such as residential adjacency standards, eg. lighting standards as in the MXD, and bufferyards to the landscape ordinance or zoning ordinance. 4. Add new kinds of standards such as impervious surface ratios and building volume ratios. Agenda No. Aponda It m Data P&Z 1. Add no glue residential adjacency standards to all Don-residential and MF districts, and allow rezoning to the current districts. 2. Add bufferyard standards into the city's landscape ordinance, effective in 2001, so by 2001 all new non-residential or MF development would follow bufferyard standards, regardless of its current zoning district; and grandfather existing development (not existing zoning), including an expansion of existing development. 3. City initiated rezoning from M to HEL 4. Develop the MXD with the DDP process, and add it to the zoning ordinance. 5. Develop several new non-residential districts with narrower lists of uses and better standards. Agenda No. Agenda tem Issue N3. Bufferyard standards. Date 1. Low density protection with 'landscaping,' 'buffering," and "screening' are found throughout DDP policy. 2. The MXD proposes bufferyard standards. That is they would be followed by all development in the MXD. Excerpts from the MXD bufferyard standards are in enclosure 3-1. 3. The Design Guidelines proposed the same bufferyards as "guidelines," but not mandatory standa ~.Is. 4. The consultant has noted equity and spot zoning issues concerning development not in MXD's and for those that would be required to rezone to MXD, and those that would not. 5. The ZOTF MXD bufferyards are required between residential and non-residential uses, and between some non-residential uses where the difference between uses are very great; for instance, between outdoor commercial amusement and a retail use 30,000 square feet in size or less. 6. It has been recommended earlier here, that the MXD bufferyard standards be adopted as residential adjacent standards and applied to all new development, regardless of zoning district. 7. Staff has completed a comprehensive review of the landscape ordinance, given about seven years of experience without amendment. Staff believes a landscape ordinance update is warranted. 8. If #6 were followed, more building would be impacted by the increased cost of the bufferyard, than if only those rezoning were required to have a bufferyard. 9. The ZUTF recommended that bufferyards be required between all fire stations and other public buildings, schools, and churches and residential use whether it is in the MXD or not. Staff research has indicated school, church, and public building operator opposition. Issues: 1. Should bufferyards be adopted as standards? 2. Should bufferyards be required between non-residential uses? 3. Should bufferyards be required between schools, parks, fire stations, or churches. L Zoning Chrdinaeco ENCLOSURE 3-1 Sec. 3.13. BUFFERYARD MATRIX (Bono o _ Low Intensity Area Agenda I =m Oale - The following matrix shall be used to determine buffetyard requirements if adjacent to an existing land use. The top row indicates proposed land use, The left column represents existing land use as defined in Land Use Classification. 1 ' B D D F G ~ ' A A H H H H H 8 C D III g F G G H H A A 8 C C D E F G rv D A A • A B B H C D D It, D B B A A 8 C C 0 H V1 F C C a • : - H , e H %if G D C B A ,*]II H F D C e . • A G Lx H 0 E D C • . , , F X H G F D C • . • E xl H H G F D 8 D X H H H H I{ • C H F E D • ' None Required Permitted only widi in SUP, Burrer)ard requirements may be incrtwil is pen or the SVP The following matrix shall be used to determine buff'eryard requirements if adjacent to vacant zoned land. The top row represents the proposed land use class as defined in Land Use Classification. The left column represents the adjacent ,acant zoning district. A or SF•E • A B C D E F G H H F•16SF•13, SF-10 & SF-7 • • • A B C D i 2F, SF•J_S i NF•R • • E F F H H H A B NF•1 • . . „ • C E F G Ii I A B C E F G H XF-2 O • • • , A 8 C E F G H ! • ' ' , • • , , A B C OAR • • • , , , • • ' B VS . ; B GR • • , • C ce • , , ' C LI ' 'D • , ' A B C E F G H I I ' Vora Required " Pem; zed only with an SCP BuRem srd requirements may be increurd u put or the sL P 17 /6. i Mixed Use District - Zoning Ordinance LAND USE CLASSIFICATION anrfa M0. _ Agenda Item _ 1W Sec. 3.8. PURPOSE Date The purpose of this section is to place uses into classes based on common factors between the level of intensity and the externalities associated with the use. Each use class has a preamble which identifies the nuisance factor(s) with that particular use category. Additional factors may influence new or unlisted cues. Sec. 3.9. AREA CALCULATIONS For those nonresidential uses identified herein and classed according to their size, the calculation shall include the footprint of all areas of the lot or parcel which include but are not limited to buildings, storage yards o. service areas whether under-roof or unroofed. The calculation area does not include parking spaces or aisles, required landscape areas and any open unpaved and unused areas which may be located on the same lot or parcel. A. CLASS I USES • Residential uses with density less than l dwelling units per acre • Vacant land zoned, or land use equivalent to SF-E CLAS II USES • Residential uses with density between 1 and 5.99 dwelling units per acre • Vacant land zoned, or land use equivalent to SF-16. SF-13, SF-10 or SF-7 • Neighborhood parks excluding stadiums, lighted ball fields and other organized sport or recreation facilities. • Farm and ranch operations. g /7 Mixed Use District Zoning Ordinance uses) less than 5,000 square feet of area in all buildings on a lot or parcel and no more than four vehicular fuel stations or pumps • Food Services Apendo No Agend Ilerr ? • Private or Public Primary or Secondary Schools Date_ Day Care, Kindergarten or Day Camp Churches, Synagogues, Mosques, Temples and other structures used for religious gatherings with primary structure more than 20,000 square feet but less than 30,000 square feet of area in all buildings on a lot or parcel i G. CLASS VI► USES • Universities and Colleges • Private Business/Technical Schools • Commercial, retail sales, whole sale and self storage warehouses (or combination of these uses) between 5,000 and 30,000 square feet of area in all buildings on a lot or parcel. • Office, warehouse, light assembly, sales, light manufacturing and organized sport faeility (or combination of) between 5,000 and 30,000 square feet of area in all buildings on a lot or parcel • New and Used Automobile and Marine Sales and Service Medical and Scientific Research and Development (all operations enclosed) Vehicular Repair and Service enterprises and vehicular washes of less than 5,000 square feet of area In all buildings on a lot or parcel, and/or with less than four vehicular fuel stations or pumps • Churches, Synagogues. Mosques, Temples and other structures used for religious gatherings with primary structure more than 30,000 square feet but less than 100.000 square feet of area in all buildings on a lot or parcel Commercial parking lot. Fraternities or So orities H. CLASS Vill USES 10 Bu(rsryatd Oraphia AAWI* E Aconda No, ate Item Agenda BUFFERYARD D D Date loop. 2w % PLAN ELEVA'L70N W WOOD FENCE, 6 CANOPY, 10 UNDERSTORY EACH 1' WIDTH EXPANSION = 2,S41v FEWER PUNTS /9. Mixed Use District nin ce sec. 3.16. BUFFERVARD RE .i LAT[&° NU q Item - Date Vii! M A. A use proposing to locate adjacent to an existing land use, or adjacent to vacant zoned land shall install a bufferyard according to the Bufferyard Matrix for the intensity area the existing use or vacant zoned land is located within, and according to the provisions provided herein. Density of adjacent residential land uses shall be calculated using only the residential lots immediately adjacent to and abutting the proposed use. B. A use proposing to locate adjacent to an existing land use of equal or greater intensity, as defined under Land Use Classification, shall not be required to install a bufferyard. Density of adjacent residential land uses shall be calculated using only the residential lots immediately adjacent to and abutting the proposed use, C. If a use is proposing to locate within a Moderate Activity Center or Major Activity Center, and is adjacent to a vacant Agriculture (A) district or any vacant nonresidential district or vacant Mixed Use District (M)(D) also located within a Moderate Activity Center or Major Activity Center, no bufferyard shall be required. D. If a use is proposing to locate within a Moderate Activity Center or Major Activity Center, and is adjacent to a vacant Agriculture (A) district or any vacant nonresidential district or vacant Mixed Use District (MXD) also located within a Moderate Activity Center or Major Activity Center, no parking lot screening shall be required. E. If a nonresidential land use is proposing to locate adjacent to an existing residential land use within the Central Urban Center, as defined in the Denton Development Plan, the nonresidential use will install a bufferyard according to the bufferyard matrix for the Low Intensity Area. F. If a use is proposing to locate adjacent to vacant unzoned land. or in circumstances not included herein, the Director or his designee shall determine the required bufferyard. Bufferyard requirements shall be evaluated based on policies contained in the Denton Development Plan. Appeal of the Director's decision shall be made to the Planning and Zoning Commission. Density of adjacent residential land uses shall be calculated using only the residential land use immediately adjacent to the proposed use and should not consider the entire adjacent subdivision. G. No bufferyard is required between uses located on the same lot of record. 11. No bufferyard is required between single-family detached dwellings or lots. I. For different use classes proposed in separate buildings on the same lot, the required bufferyard shall be determined by the most intense use proposed on the lot. J. For different use classes proposed within the same building. the required buffer)ard shall be determined by the most intense use proposed within that building. '0 b2 0. Zoning Ordinance Age. K. Bufferyards may be increased for any use requiring a site pl~nndaa Itom t)ate L. Trees, fences or walls shall not be installed within utility easements. roes or walls shall be permitted within easements designated for storm water drainage under the following conditions: 1. The drainage easement shall be open, as opposed to enclosed. 2. The proposed trees or walls shall not conflict with the purpose or function of the drainage easement. r M. At least fifty (50) percent of all canopy trees, fifty, (50) percent of all understory trees, and fifty (50) percent of all shrubs used must be "evergreen". N. All bufferyard plantings must be automatically irrigated, or have another readily-available water source, as determined by the Building Official. 0. When the width of buffer-yards A through F is increased by seventy-five (75) percent, the fence/wall requirement is eliminated, and the number of plants reverts to the minimum requirement. P. When a bufferyard width is increased the number of required plants is reduced. However. the required plants in each category can never be reduced below 50% of the minimum requirement. Q. Vehicle parking is allowed in bufferyards except within ten (I0) feet of the property line. When parking spaces are included in a bufferyard that has no fence or wall, all parking spaces must be totally, screened to a height of four (4) feet at time of planting, by evergreen plantings or berms. R. All parking lots and driveways shall be designed and constructed to protect adjacent residential uses or districts from the direct light or glare of headlights from vehicles using the parking area. Where it is physically possible to do so and accomplish the above stated purpose, all off-street parking lots and driveways shall be effectively screened by a solid wall or fence where adjacent to land use Classes 1. 11, Ill, IV and V. Except where such wall or fence would create an unsafe view obstruction to motorist as determined by the City Engineer, such wall or fence shall not be less than four (4) feet in height. In lieu of such wall or fence, a strip of land not less than ten (10) feet in width and planted and maintained with an evergreen hedge, or dense planting of evergreen shrubs. not less than four (4) feet in height at time of planting, may be substituted. S. At time of installation, the minimum size canopy tree is two (2) inch caliper. The minimum size understory tree is one and one-half (I',) inch caliper. The minimum size shrub is five (5) gallon. All plants must have sufficient permeable area available for root growth. T. All ground areas are to be planted with an appropriate grass or ground cover, or 21 oZ~. Apgnds Np.,..,,.~. P.geod to i A summary of P&Z recommendations about the MXD, grandfathered A, a ~ - phasing. ' phase I. Continue review of re-write except MXD. Incorporate no-glare standards into the current supplementary regulation section of the draft. The MXD is referred to the Development Policy Committee. Phase II. After P&Z makes its Phase I ordinance recommendations, P&Z begins review of (1) the revised landscape ordinance including bufferyard standards, requiring bufferyards for all new development in 5 years and (2) new non-residential districts using new standards. Phase Ili. The Development Policy Committee makes its MXD and DDP policy recommendations to P&Z and Council. Allow rezonhig to existing non-residential districts. Arle0d No. 7 Issue #4. Planned Developments (PD), Daend lam - te_ Bacl&ound: 1. The PD section of the ordinance was substantially amended in February, 1991 to enable a three phase PD process. See Enclosure 4-1 for a summary of the earlier and current PD system. 2. A minor amendment section allowing the planning director to make minor amendments was modified in 1993. 3. The Cinemark zoning case in court in Dallas now has illuminated a number of points which should be taken into account. 4, The PD section of the zoning ordinance was amended in 1986 and 1991 to require undeveloped PD's that LA not have an approved detailed plan with all the elements of a detailed plan to submit for approval a detailed plan that had all the elements, Issues: 4A. (1) Who should decide, (2) what elements of a PD, (3) with how much discretion, given how much (or what phase) of a PD has been approved earlier, and (4) using what criteria? 4B. Should the required elements of a concept, development, or detailed plan that would be decided upon by P&Z or Council be made clearer? 4C. How long and/or under what conditions should a PD plan be applicable before it expires or is no longer valid? Recommerrdatio c; The consultant has made the following recommendations which should (1) provide additional protection from suits, (2) clarify, (3) add more predictability for all parties and (4) enable easier decision making. The recommendations include: I. Describe what minimum elements or standards, eg. 25 foot setback, that are required elements of the PD plan ordinance or detailed plan for each of the three types of PD plans. 023 Agenda Na%± Agenda 1 mi'&0 03f ' 2. Separate minimum elements of a plan that is being approved fro m the other required information, eg. existing topography, relationship to the DDP. 3. Clearly define discretion. Specify that P&Z or Council may not make more strict a standard, cg. setback, that has been previously approved, but that additional or different standards may be added at a later PD phase, eg. adding buffering standards. Example. Council has approved a PD development plan for apartments with a density of 16 units per acre, with a 50 foot setback from existing SF homes. Later, P&Z is reviewing the detailed plan. P&Z may not deny (although a denied detailed plan is appealable to Council) a detailed plan simply because apartments are proposed, or require a less dense development, or increase the setback. However, P&Z could deny if buffering were inadequate, or building arrangement created adjacency or internal circulation problems, etc. It is important to note that if P&Z and/or Council discovered at a later date that a PD plan (or any other zoning) as approved was inappropriate, it could initiate a rezoning or downzoning. If during this dowttzoning, 20% of the land within the downzoned area were protested by its owners, 6 votes of the Council would be required to approve it. 4. Make it clearer that DDP policy will be used to evaluate all PA's. 5. Add criteria to the approval of detailed plans. Planning staff recommendation: Take this criteria from the ZOTF recommended Design Guidelines. (See issue 5.) 6. Combine errors and omission and minor amendment by staff sections. I j 7. Decrease the time concept and development plans expire before a detailed plan is presented. The existing standard is 10 years. 8. Expire detailed plans if any part is not built on. The current standard is that a detailed plan expires within 24 months if oo development occurs. After g_,yn development, the detailed plan does not expire. Problems may arise in large or complicated detailed plans. P&Z may extend detailed plans for 1 year at a time. Planning staff notes: 1. Related to the expiration issue, is the existing provision about undeveloped PD's. Undeveloped PD's which have plans that do not meet the requirements about elements of the current detailed plan, must submit a detailed plan with all the current required elements on it. The initiation of this provision, first added to the zoning ordinance in 1986 and again in 1991, was to address old PD's which had very little detail shown on approved plans. ~ y. Agenda No. ` d S Agenda item Date 2. Expiring other zoning districts than PD's may be appropriate if more strict standards are applied to PD's. A central issue then has to do with any speculative zoning, or zoning for which development details are unknown or not imminent. A "user" is not prepared to build soon. Denton has thousands of acres of speculatively PD, C, and I l zoned land. Sooner and more strict expiration standards will make it easier to appropriately zone land if development does not occur in several years. However, the real estate market uses speculative zoning. It could be said that "good zoning in 1996 should be good in 2006" - this provides stability. 3. The difference between the incomplete plan and the expired plan is that with the incomplete plan they "have" what was approved, and new elements would be evaluated. With the expired plan, the plan "goes away" and an applicant would start anew. Alternatives: 1. Expiration dates for any zoning could be added to the specific PD, and/or any other zoning or rezoning ordinance. 2. Automatic reconsideration. After a stated period of time, the undeveloped PD would be considered for rezoning. ds L ENCLOSURE 4-1 PLANNED DEVELOPUNT A""'a No. SUMMARY p.genda Item Date EXISTING SYSTEM PROPOSED SYSTEM . Conce t Plan 1 1. General Conceot Plan or tracts greater than 10 acres in size) a. Existing conditions of a- Statement of Intent 1 site b. Relation to Comprehensive r b. Proposed land uses Plan + c. Development Standards c. Acreage Q.ee. height, setback, d, Land uses *ConsiFAR . dered . by Planning and e. Off site information Zoning Commission and City f. Traffic and Transportation f g. Buildings (location, ` Council. height, setback) Two Public hearings, one h, Residential Subdivision 200 foot notice. (location of lots, minimum 2, size, width and depth, yard' Dev- op_ment Plan requirement) 1 aK y coo ne with a i. Mater and Drainage General Concept Plan. j; Utilities kk Trees a. Specific land use I. Open Space locations on a ma,, Screening ' b. Detailed table of n. Development Schedule + Permitted uses. 'Heard by Planning and Zonin "Considered by Pla ping and Commission and City Councilg Zoning Commissiou and City Public Hearings, 200 foot I Council, notice, Two public hearings, one 200 foot noti^r. 1. Detailed Plan 3. Detailed Plan a, All information required for Concept Plan xcept a• LSame regula. ion as current at pre. exacts, not approximations, s, except that pre- b, Detailed Landscaped Plan llminary plat would be c. Signs - location, type, Processed separately, and size visible from any j b. Criteria for approval. public street. Approval expires in 14 d. Sidewalks or other months. pedestrian paths I *May be approved by Planning e. All information required for preliminary plats. f. Development Schedule ifddeZoning veloQaentmplan°!s°nly orapproved. foot No public hearing notice. A pe May be heard by Planning and ~ b Appeal and Zon;ng Commission only if J by applicant of PAZ denial. concept plan is approved. I Notes: There would be no Tracts less than 10 acres detailed site plan witn "foot- must submit detailed plan, p 2. No rints approved in steps 1 and development No limit onsize, Any schedule, 1542x may be combined. i Aginda Na, Q Agends Item Date' y Issue #S. Design Guidelines. Should the Design Guidelines be substantially revised and made criteria for approval of all site plans for PD's, SUP, and MXD (if MXD is adopted)? Back round: 1. The consultant has made a number of suggestions about improving the Design Guidelines, if they were adopted by ordinance. For instance, separating approval criteria from design standards, and distinguishing between mandatory and vcluntary standards. 2. The ZOTF anticipated using the Design Guidelines as an administrative document, not as a set of mandatory standards or procedures. The task force recognized that for practical purposes, the line between guidelines and standards could be blurred. 3. The interpretation of DDP site plan policy that many types of development in many situations (eg. within 1600 feet of SF) is a major DDP issue. Staff R_eco me atiomo 1. Delete the Design Guidelines as written from the zoning ordinance rewrite. That is, they would not be adopted by ordinance, at this time. 2. Add some of the Design Guideline criteria into the PD section as detailed plan criteria as recommended by the consultant. ~ 7 II S p0a4QS I Em Issue U6. Historic Landmark Ordinance, Onto Backsround 1. Staff and the consultant made several proposals concerning organization, procedural systems, and consolidation. 2. These were presented to the Historic Landmark Commission (HLQ on March 13. 1996. RecoReco-o HLC recommends that no changes be made. HLC may make ordinance recommendations at a later date. °Z8 i Agenjrn AgenIssue M7. Farms in SF, 2F and MF districts. Date Should farm s be allowed in SF16, 13, 10, 7, 3.5, 2F, MFl, and MF2 and/or only in the Agricultural (A) district? ck und: 1. Fauns and ranches are allowed by right in all but three districts, central business (CB), Outdoor Amusement and Recreation (OAR), and Parking (p) 2. Farms and ranches are der°u>ed in the ordinance as "area of three acres or more which is used for growing of usual farm products and for the raising thereon of the usual farm poultry and farm animals. 3. Animals including the raising of "usual" farm animals and poultry, are regulated under chapter 6, Denton Animal Control Ordinance. See enclosure 7-1. ABILY& CON I. Provides more protection to SF and I. Requires zoning back to A if MF neighborhoods, development does not occur and ag exemption or ag use is sought. 2. A disincentive to speculative zoning 2. A disincentive to s and taking "ag exemption" after zoning, speculative zoning, • There are few, if any, complaints that can not be regulated with the animal control ordinance, rather than with use per se zoning regulation. That is, "if it ain't broke, don't fix it" rule; therefore; Staff Reconirn niatinn• Regulate directly the impacts of animals. Allow farms and ranches, including grazing, in most zoning districts as is done now. Make no change to the current standards. ~9 . ts- ENCLOSURE 7-1 Agenda No. 06 C>j ANIMA 14 Agenda Item Sec. 6-11. Breeding of certain Date animals prohibited It shall be unlawful for any poses or employ for person to inteotionally or knowingly keep for breeding Puy. breeding purposes any jack, bull, stallion, ram, be-goat O r o ther livestock within the corporate limits of the city, except in 35 of the Code, areas zoned for agrin•itural use under Chapter . Sec. 6.12. Herding Prohibited. It shall be unlawful for any person to intentionally or knowingly move herds of animals along or upon any public place within the corporate limits of the city without the permission of the city council, except that this section shall not be applicable to any officer, agent or employee of the federal, state or local government if such herding is done in the performance of his official duties. Code 1966, § 4-9; Ord. No. 89.115, § 11, 9.5-89) Sec. 6.13. Keeping of certain livestock. ~a) Hogs. It shall be unlawful for any person to intentionally or knowingly feed or keep any species of swine in any lot, pen, building, stable or other enclosure in the city, any part of which lot, pen, building, stable or other enclosure is nearer than one thousand (1,000) feet to any building. tb) Other animals, It shall be unlawful for any person to intentionally or knowingly feed, stable, pasture or keep any cow, goat, horse, mule, donkey, sheep or other livestock, except swine covered in subsection (a) of this section, in any lot, pen, building, stable or other enclo• sure in the city, any part of which lot, pen, building, stable or other enclosure is within two hundred 1200) feet of any building. Code 1966, § 4.10; Ord. No. 89.115, 111, 9.5.89) Sec. 6.14. Enclosure requirements for keeping certain animals. a, Size of lots, It shall be unlawful for any person to intentionally or knowingly stable, pasture, feed or keep any hog, pig, cow, goat, horse, mule, donkey or sheep in any lot, pen, building, stable or other enclosure in the city, smaller in sire and dimensions than is required by the following specifications: 1 i For one 11) cow, sheep, goat, horse, mule, donkey, hog or pig, a lot, pen, building or other enclosure of not less than four hundred (400) square feet shall be required. 2, For each additional cow, sheep, goat, mule, donkey, hog or pig in any such let, pen, building or other enclosure, an additional four hundred t400) square feet shall be required, b Manure boxes. Each and evi-ry lot, pen, building, stable or other enclosure in the city in A hich any of the animals named in subsection ta) of this section or other related species are kept, W. bred, stabled, pastured or housed shall have a manure box not less than four (4) feet square and not less than three 131 feet deep in which all manure and droppings shall be placed each day. Each such box shall be secvrely screened or otherwise protected from flies, vermin and rodents and shall be thoroughly cleaned out and disinfected at least once each week, It shall be unlawful to pile or stack manure In open stacks in the city. Code 1966, 14-11; Ord. No. 89.115, § It, 9.5.89) 395 Agenda No. § 6.15 DENTON CODE Agenda !tern Date" Sec. 6.15. Disposal of manure. '%lanure from cow lots, horse atables, poultry yards, fowl coops, pigeon lofts, other animals and similar matter shall be disposed of by the owner or person controlling same under the direction of the director of community services. !Code 1966, § 12.1TV Cross reference-Solid waste generally, Ch. 24. Sec. 6.16. Killing of birds. It shall be unlawful for any person to intentionally kill, injure or administer poison to any bird whatsoever within the city limits without the permission of the city o.:.ncil. (Code 1966, 14-12; Ord. No. 89.115, § 11, 9.5-89) Sec. 8.17. Injuring, capturing or killlag animals on pub8c property. Except as may be otherwise provided in this chapter, it shall be unlawful to intentionally or knowingly interfere with, injure, capture or kill any animal within any public park, driveway, street or other public property of the city except by permission of the city council; provided that this section shall not apply to harmful rodents, reptiles or insects. (Code 1966, § 4.13; Ord. No. 89.115, 111, 9.5.89) Sec. 6.18, Keeping of fowl. It shall be unlawful for any person to intentionally or knowingly keep any chicken, turkey, guinea, goose, duck, quail, pheasant or other game fowl in any fenced yard or enclo- sure, any part of which is within two hundred (200) feet of any building in the city, (Code 1966, § 4.14; Ord. No. 89.115, f II, 9.5.89) Sec. 6.19. Pigeons. (a) It shall be unlawful for any person who owns a pigeon to intentionally allow the pigeon to stray in the city. ib) It is a defense to prosecution under subsection (a) of this section that the bird was an Antwerp Messenger, homing or carrier pigeon and was identified or marked as the owner's property. ic) It shall be unlawful for any person to knowingly be in possession of more than twenty. five +M pigeons on any premises within the city. It shall be unlawful for any person to knowingly keep the enclosure in which such pigeons are confined in such a manner so as to give off odors offensive to persons of ordinary sensibilities residing in the vicinity or to breed or attract flies, mosquitoes or other noxious insects or allow such pigeons to cause considerable noise to the annoyance and discomfort of surrounding neighbors so that the reasonable use and enjoyment of their property is disturbed 396 Agenda No. AN144AlS Agenda I V-' _ Date S.Q_ or, in any manner, to endanger the public health or safety or otherwise create a public nuisance. (Code 1966, § 4.15; Ord. No. 89.115, § II, 9.5.89) See. 6.20. Sale or coloring of certain animals. +ai It shall be unlawful for any person to knowingly sell, offer for sale, exchange or give away any chicken, ducklingor other fowl, rabbit or aquatic turtle younger than eight (8) weeks of age as a toy, premium, novelty or pet unless the manner or method of display is first approved by the animal control officer. (b) It shall be unlawful for any person to knowingly color, dye, stain or otherwise change the natural color of any chicken, duckling other fowl, rabbit or aquatic turtle or to possess for the purpose of sale, exchange or gift any of the abovementioned animals which have been so colored. iCode 1966, § 4-16; Ord. No. 89.115, 10, 9.5.89) Sec. 6.21. Performing animal exhibitions. (a) No performing animal exhibition or circus shall be permitted in which an animal is induced or encouraged to perform through the use of a chemical, mechanical, electrical or manual device in a manner which causes or is likely to cause physical injury or suffering. It is a defense to prosecution under this section that, at the time of the conduct charged, the actor was engaged in bona fide experimentation for scientific research. b) All equipment used on a performing animal shall fit properly and be in good working order. (Code 1966, § 4.17; Ord. No. 89.115, 111, 9.5.89) Sec. 8.22. Abandonment and confinement of animals. ,a( It shall be unlawful for any person to intentionally or knowingly abandon any animal within the corporate limits of the city. Any person violating this section shall bear the full costs and expenses incurred by the city in the can of the abandoned animal and the person shall reimburse to the city all costa therefor as determined by the animal control officer. (b) It shall be unlawful for any person to intentionally or knowingly confine or allow to be confined any animal in a motor vehicle or trailer under such conditions or for such periods of time as may endanger the health or well-being of the animal due to heat, lack of food or water or any other circumstances which might cause suffering, disability or death. If the animal control officer or any police officer of the city has reasonable grounds to believe that an animal is in a motor vehicle or trailer under such circumstances, he is authorized to immediately impound the motor vehicle or trailer and enter it if necessary to remove the animal. Removed animals will be taken to the animal control center and impounded. Code 1966, § 4.18; Ord. No. 89.115, § 11, 9.5.89) Cross reference-Abandoned property generally, § 20.31 et seq. 397 Agenda No. 06-23 DENTON CODE Agenda Item 0ale_ Sec. 6.23. Prohibited animal permit-Required, fee. (a) It is unlawful for a person to harbor, own or exhibit a prohibited animal within the city, ~b? It is an exception to the application of subsection (a) of this section if the owner or exhibitor holds a prohibited animal permit or is a governmental entity, (c) A permit for the possession of a prohibited animal may be issued only to a too, research institution, individual researcher, public or private primary or secondary school, performing animal exhibition, rodeo or circus of which the animal is an integral part, if the animal is restrained from inflicting injury upon persons, property or other animals and adequate pro• vision is made for the care and protection of the animal. A permit may be issued to an individual researcher only upon the recommendation of a medical institution or the director of a research institution. (d) The fee for a permit shall be established by the city council and is on file in the office of the city secretary, and the permit Is valid for a designated period of time not to exceed twelve (12) months. A permit may be renewed for the same fee. (e) A permit is issued for one (1) or more animals of an owner or exhibitor at a single location. (Code 1966, 14.19; Ord. No. 89.116, lI 2, 9.5-89) Cross reference-Licenses, permits and business regulations generally, Ch. 16. Sec. 0.24. Same-Revocation. The animal control officer shall revoke a permit to harbor, own or exhibit a prohibited animal within the city if i 1 The permit holder fails to properly restrain the animal; or Z The permit holder fails to adequately care for or protect the animal. (Code 1966, 14.19.1; Ord. No. 89.115, 111, 9.5-89) Sec. 8-25. Same-Appeal from denial or revocation. (al If the animal control officer refuses to issue or renew a prohibited animal permit or revokes a permit, he shall send to the applicant or permit holder by certified mail, return receipt requested, written notice of his action and a statement of the right to an appeal. The applicant or permit holder may appeal the decision of the animal control officer to the city manager by filing with the city manager a written request for a hearing, setting forth the reasons for the appeal, within ten (10) days after receipt of the notice from the animal control officer. The tiling of a request for an appeal hearing with the city manager stays any action by the animal control officer to revoke a permit until the city manager makes a final decision. If a request for an appeal hearing is not made within the ten-day period, the action of the animal control officer is final. 398 -3 ~ ANIMALS Agenda Iter, Ag 6r, Date` ,b, The city manager shall serve as hearing officer at an appeal hearing and shall consider evidence offered by any interested person. The formal rules of evidence do not apply at an appeal hearing. The hearing officer shall make his decision on the basis of a preponderance of the evidence presented at the hearing. The hearing officer must render a decision within thirty 130) days after the request for an appeal hearing is filed. The hearing officer shall affirm, reverse or modify the action of the animal control officer, and his decision is final unless the applicant or permit holder files a written request with the city secretary for a hearing before the permit appeal board within ten (10) days after receipt of notice of the action of the hearing officer. A written request for a hearing before the permit appeal board stays the action of the hearing officer in revoking a permit until the appeal board renders a final decision. (c1 If a request for an appeal hearing before the permit appeal board Is filei within the ten-day period, the city council shall appoint three (3) city oouncilmembers to serve as a permit appeal board and hear and consider evidence offered by any interested person The formal rules of evidence do not apply to an appeal hearing before the permit appeal board. The board shall decide the appeal on the basis of a preponderance of the evidence presented at the hearing. The board shall affirm, reverse, or modify the action of the hearing officer by a majority vote. The result of an appeal hearing before the appeal board is final. (Code 1966, 3 4.19,2; Ord. No. 89.115, 4 11, 9 6.89) Sec. 6.26. Animal noise, waste; keeping of bees. It shall be unlawful for any person to knowingly. ili Keep any animal that unreasonably barks, howls, wbines, crows or makes other unreasonable noise common to its species near a private residence so that the rea- sonable use and enjoyment of such property is disturbed; 2, Keep any animal in such a manner as to endanger the public health by the accumu• ` lation of organic body wastes; -3~ Keep any animal which habitually deposits body wastes upon or destroys by chewing, scratching, diggingor otherwise propertyother than that of the owner of such animal; (4) Keep bees in such a manner as to deny the reasonable use and enjoyment of adjacent property or endanger the personal health and welfare of the inhabitants of the city. (Code 1966, 14.20; Ord. No. 89.116, J II, 9.5.89) Cross reference-Noise generally, 6 20.1. See. 6-27. Procedure for complaints of animals making noise. A report alleging a violation of section 6.26(1) must be written and signed by a person who has personal knowledge of such violation and who can identify the owner of the animal or the premises where the aninial is located. The animal control officer shall investigate the report to determine whether probable cause exists for the issuance of a citation. However, informal 399 3 y~ Aydhdd Nu„ , D § 6.27 DENTON CODE Awd(itin Dale ` resolution of the complaint may be attempted by the animal control officer according to the following procedure: (1) Written notice of the report shall be personally served or sent by certified mail to the alleged violator with a request to correct the problem. 21 If the complainant notifies the animal control center that the problem persists, a final notice shall be personally served or sent by certified mail to the alleged violator h informing the person that an investigation will be conducted by the animal control center within seven (7) days of the receipt of the notice and that if the problem is not corrected within this time, the violator will be requested to appear before a hearing officer appointed by the city manager. (3) If the investigation shows that the problem persists, an informal hearing on the complaint shall be held on adequate notice to the parties and shall be conducted by the animal control hearing officer with the alleged violato-, complainant and any witnesses present. (4) The hearing officer shall crake written recommendations concerning what, if any, remedial measures are required. If the violation is not corrected within seven (7) days of the date of the hearing, a citation requiring a court appearance shall be issued. If the animal control officer issuing the citation has no personal knowledge of the violation, the complainant shall be informed that his appearance, along with any witnesses, shall be required at the court hearing on the citation. iCode 1966, § 4.21; Ord. No. 89.115, § 11, 9.5-89) Sec. 6.28. Reporting animal bite; animal under quarantine; rabies suspect. (a) It shall be the duty of any person having knowledge of an animal bite or scratch to a human that the person could reasonably foresee as capable of transmitting rabies or of an animal that the person suspects is rabid to report the incident to the animal control center as soon as possible, but not later than twenty-four (24) hours from the time of the incident. (b) Every veterinarian having an animal quarantined for a bite or scratch incident shall submit a written report to the animal control center describing the condition of the animal on the initial day of observation, the fifth day and the tenth day of observation. (c1 Every veterinarian shall report immediately to the animal control center his diagnosis of any animal observed as a rabies suspect. Code 1966, § 4.22; Ord, No. 89.115, § 11, 9.5-89) Sec. 6.29. Animal quarantine. iai The animal control officer shall have the authority to order the quarantining of ani- mals responsible for bite or scratch incidents or having any roonotic disease considered to be a hazard to the human population or other animals. 400 Agmdj Nd, & Issue #8. Cumulative residential zoning, Agenda Item t)ate Should SF homes be allowed in MF and manufactured housing (MHD) districts? akru 1. SF detached use is allowed in all MF and the proposed MHD (manufactured housing district). Residential zoning is cumulative are the current non-residential districts. That is, the most restricted residential use, single family detached dwelling, is allowed in the least restrictive residential district MHD and MF2, 2, The consultant has suggested making SF detached an SUP in the MF and MHD districts, but not making existing SF dwellings non-conforming, 3. The theory of SUP's is that SUP uses are usually incompatible with the other uses allowed by right in the. district, but may be permitted if they are well designed to mitigate their potential adverse impacts. i u 'o 1. The consultant's suggestion is a variate of the SUP theory stated above, with the difference that the SF detached use might be required to protect itself from the MF or manufactured housing. 2. A minor administrative issue arises if some MF districts have existing SF homes, but new SF homes or vacant lots require SUP's: for instance, in the MF1 area southeast of TWU where there are few vacant lots in this area; in the MF1 area north of UNT; and the MF1 area west and south of Fred Moore School, along Morse/Mill streets, 3. Recent zoning case experience points to incompatibilities between high density apartments and SF detached uses. 4. An SUP follows the same process, but with a detailed site plan, as a rezoning. It would be easier to simply rezone to a SF district. 5. Building a SF detached house in a MF or MFR district can be viewed as a "buyer beware" issue. 6. Maintaining the current cumulative nature of the residential districts is consistent with DDP housing diversity policy. 1 r Agende N~. ~ / Alter: Agenda t m Date 1. Take SF detached out of MFR, MF, MFD, and the Proposed MHD. 2. Not allow SF detached at all in MFl and MF2, but allow them by right in MF-R and MHD. 3. Make no change. 4. Consider as part of phase II. Staff R ~Aju: Make no change. .37 .F Agenda NW"- Agendl IteIssue a9. Cl>mulative non-residential zoning, Date Should low intensity non-residential uses be allowed in the new Heavy Environmental Impact District? Example art galleries allowed with slaughter houses. B c ro 1. The new HEI district is designed to replace the old Heavy Industry District (HI) and its un- l measurable, out of date performance standards for "nasty" uses. 2. HEI is cumulative, allowing all non-residential uses in it in the same manner M is cumulative. Some uses on the list are incompatible. See enclosure 9-1 for a table of HEI permitted uses. Staff Recommendatio c: 1. Delete the uses marked on enclosure 9-1 with an arrow as part of Phase I. 2. Develop new non-residential districts with narrower and shorter lists of less cumulative, more compatible permitted uses as part of Phase II. Zoning Ordinance ENCLOSURE 9-1 any Envirortmcntal Impact District PART IV - HEAVY ENVIRONMENTAL IMPACaRF (HEI) AdanPI AgenSes. J.1. Puryose Date This district is intended to allow for heavy industrial uses, manufacturing activities and other such ' uses whose proximity to residential uses and nonresidential uses ur lesser intensity than those listed herein require special consideration due to nuisance factors associated with these toes. Areas zoned to the "HEI" district are intended to locate close to major transportation sources such as freeways, arterials and collectors and railroads where appropriate, including direct access to arterial or collector sized streets. The uses listed herein are hereby permitted within the city only in compliance with Federal and State regulations. SeLAI Permitted Ues One family dwelling, restricted An gallery or museum Cemetery or mausoleum church or rectory College or university Halfway house " Home care for alcoholic, narcotic or psychiatric patients ""y Hospital ---a! Institutions for religious or philanthropic nature Library +~Occasional sales - Park, Playground or public community center `"t1 School, Public School, business or trade Accessory use (Sec. 7.1.1) '01P Community center Electrical generating plant Electrical substation Electrical transmission line Field or construction office (temporary) Fire station or similar public safety building 1 ,3 9. Heavy Environments) tmpact District Gas transmission line and metering Zoning Ordinance station Agande Mv, Home Occupation Off-street Parking Agenda m Park or open space for Date M _ Private utility shop or storage yardreation Public building, shop or yard, Local, State or Federal Government Radio and television or microwave tower Sewage pumping station Livestock Feedlot Slaughter House Extraction or storage of subsurface resources Food Processing Textile Mill Manufacturing from lumber and wood products Chemical Manufacturing Manufacturing from petroleum products Manufacturing of soaps, detergents, Perfumes and cosmetics Manufacturing, remanufacturing, distillation or refining petroleum related products Recycling collection center for household recyclable materials, household metals and industrial metals. Facilities whose primary use is the disposal of biological or medical waste. Leather tanning or curing !`tanufacturing of stone, clay, glass ~d . 1 1 Zoning Ordinance Heavy Environmental Impact District and concrete products including dry, or slurry products used in highway construction or / building industry Agenda No. Agenda i m Smelting, separating or refining raw Dates • natural materials - Fabricating of metal products Manufacturing of industrial and commercial machinery and equipment, except home and office products Concrete or asphalt batch plants Landfill %'astewater Reclamation Recycling collection center Correctional Facilities Petroleum collecting and storage facility Any industrial use which due to the possible emission of smoke, gas, fumes, dust, odor, vibration or the danger of fire, explosion or radiation as may be determined by the health, fire or building officials to be presently or in the future likely to be a hazard or nuisance to adjacent property or the community at large, but which may be located and operated under specific standards. Sec~et ht and Area Standards Street Yard Building Setbacks Minimum Setback 25' J Aganda No. _ Issue #10, HEI zoning adjacent to residential, P.penda !te Date" - - 1. Much of traditional zoning has to do with taking care of the "edge" between incompatible and/or different uses. 2. The consultant has suggested: If the HEI zoning classification is sought for a tract of land adjacent to a residential use or district, the city shall impose condition and restriction on such pursuant to the provisions contained in (the conditioned zoning section). Staff Reco *+Me ion: Add the above to the HEI district's standards. I e-1 oZ . r r Agenda Nu; O~ A.pe id ern Issue #11 . Major activity center DDP SF policy and the Central Business (CB) district's M permitted uses. Backwound: 1. DDP major activity area policy "discourages" SF development in it, and the consultant has suggested SUP's for SF detached use downtown. 2. The CB district is in a major activity area according to the DDP concept map. 3. The CB district is a unique, single location district designM for a mix of uses in the downtown area. 4. As noted earlier, rezoning to a SF district would be essier than an SUP. Rezoning from CB to a SF district for additional SF protection, if needed would be appropriate, 5. Downtown DDP policy will be analyzed during the DDP update. Staff Recommendation; Retain the CB districts unique mix of uses, avoid non-conformities, and analyze downtown DDP policy concerning SF uses with the DDP update. q3. r Agenda No. Agenda Item Date • Issue N12. Specific Use Permits (SUP). ack : 1. The consultant has suggested that the ordinance be clarified, making it clear that granting an SUP is not a zoning amendment, or a change to the zoning map. 2. The consultant has suggested development of a SUP procedure independent from the rezoning procedure. 3. The current ordinance calls for the same public hearings and notice to landowners within 200 feet before P&Z's, and in the newspaper before Council's public hearings, the same way as for a rezoning amendment. 4. The current practice is for Council to approve SUP's with an ordinance. 5. The current ordinance is silent about the "20% opposition-supermajodty" rule, the P&Z recommendation for denial-superrnajority rule, the 10 days to appeal a P&Z denial recommendation, and the 12 month no reapplication time frame if the SUP is denied that are applicable to zoning reap amendments. to 'v Have P&Z or the Zoning Board of Adjustment consider SUP's. Analysis Staff believes that the nature of SUP warrants notice and ultimate Council consideration using its legislative discretion (by ordinance) to consider SUP's. f Rec mmendations: 1. Clarify the ordinance that SUP's are not zoning map changes, or rezonings. 2. Continue the current decision making process with notice. 3. State that the supermajority rules do not apply. 4. State that a denied SUP may not be considered again for 12 months unless a more restrictive SUP is applied for, or P&Z or Council find conditions changed from those at the time of the earlier application. ~y f r Agenda No 2 60 Agenda t m _ ~ Issue #13. Number of members on the Board of Adjustment. Date_ )aack round: 1. State enabling legislation now allows more than 5 members, and that 75% of the Board hear a case. 2. The current ordinance calls for 5 members and two alternates, with 4 present to consider a case. 3. Under current ordinance and state law, the Mayor or city manager would ask an alternate to serve in the ab.ence of a regular member. In practice, this process is very cumbersome and is not followed. A more viable approach would be for the alternates to serve as ex- officio members and serve as regular members at the request of the Board Chair, when there is an absence. 4. There have been few, if any, quorum problems with 5 members and 2 alternates. Alternatives: I. Make no change. 2. Increase the number of regular members. Staff Recommendations: 1. Continue the existing membership number. 2. Appoint 2 alternates as ex-officio members who would attend all meetings. 3. Delegate by ordinance that alternate members would serve in the absence of a regular member at L~e request of the chair, rather than the Mayor or city manager. ys 4 f Agenda No, Issue N14. Changes to Non-conforming Agenda Item Uses. Date_~"~ I Back¢rous: 1. The current ordinance allows the Building Official 91 the Board of Adjustment to allow a more restrictive but still non-conforming use to Occur in a non-cOnforming building, but with different conditions. (See enclosure 14-1). The Boards conditions are more detailed. 2• The current ordinance allows the Board to consider repair of a more than 50% destroyed non-conforming use, but it is not listed in the special exception section. 1t t' I- Delete the Building Official's authority to allow a more restrictive non-conforming use. 2. Retain the Building Official's authority, but with the more &tailed conditions. Staff R-wnmendations: 1. Option 2, above. 2. Move the 50% damage rebuild Board authority to the Board's special exception section. ii6. ENCLOSURE 14-1 )DENTON CODE AAdDale_ Sec. 35.52. Special exceptions. (a) A special exception may be granted when the board finds that: (1) The exception is in harmony with the ordinance; (2) The public welfare and convenience are substantially served; (3) Neighboring property is not substantially injured; (4) Exceptions will not alter essential character of the district and immediate locatio'3; and (5) The exception will not weaken the general purposes of the regulations. (b) In determining its finding, the board shall take into account the character and use of adjoining buildings and those in the vicinity, the numberofpersons residin or working building or upon such land, traffic conditiooa in the vicinity, and conformance of such area to the Official Zoning Map and comprehensive plan. (c) In granting any special exception under the provisions of this ordinance, the board may designate such conditions in connection therewith which, in its opinion, will secure sub- stantially the purpose and intent of this ordinance. (d) The board may, after public hearing and subject to the conditions and safeguards herein contained, authorise special exceptions to this ordinance, limited to the following: (1) The board may allow a change from one nonconforming use to another nonconforming use when: (a) The change of the use does not prolong the life of the nonconforming use; and (b) The change of the use is to a more restrictive classification. When a nonconform. ing use is changed to a nonconforming use of a more restrictive classification, the building or structure containing such nonconforming use shall not later be re- verted to the former lower or less restricted classification The board may estab- lish a specific period of time for the conversion of the occupancy to a conforming use. (2) A person shall comply with all applicable codes and ordinances when renovating, remodeling or repairing a structure housing a nonconforming use that as been ap- proved by the board, )3) A person shall not expand a nonconforming use beyond the lot on which the use is located except the board may permit the person to provide off-street parking or load- ing spaces on another Int. IOrd. So. 94-076, § 1, 5-3.94) Sec. 35-53. Signs. The provisions of this article shall not apply to the regulation of signs. Appeals, variances and special exceptions involving signs shall be heard by the sign board of appeals. ,Ord So. 94.078, 11, 5.3.941 ;J:p s, s 2,504 4 ~7 4 3512 ~d°n~e ~d. • DENTON CODE Agenda it m Date_ buildingofTicial. and copies shall be furnished, on or tenancy interest in the land or building west to any person having e Proprietary Ord. No 69.1, § I,A affected. Charter referenceBBuildin 41' I•ld•691 B Permits, use and occupancy certificates, § 10.10. Sec. 35.13. Nonconforming uses and struclurea, a A nonconforming status shall exist under the following: 1 istrict a in use worhich such structure which distri does not conform to the regulations prescribed in the use or structure is ]oeated was in existence and lawfully oper- acing prior to the adoption of the ordinance from which this chapter is derived; When, on the effective date of the o rdinan m ce fro which this chapter is derived, the use or structure was in existence and lawfully constructed, accordance with the provisions of the prior located and operating in zoning ordinance or which was a noncon- forming use thereunder and which use or structure does regulations prescribed in this chapter for th not now conform to the islocated; e district in which such use or stricture '3' When a use or structure which does not conform to the regulations prescribed in the district in which such use or structure is located was in existence at the time of annexation to the city and has since been in regular and continuous use. 'bi Any nonconforming nse of land or structures ma time subject to such regulations as the Y be continued for definite t ervation ime u of the such regulations board of adjustment ma periods of gproperty prior to the ultimate removal of the no cofor immed nforming gate The pres. building oiTcial may grant a change oCoecu providing the use is within the pane' from one (1) nonconfortain use. The same or higher or more restricted classification as the original nonconforming use. If a nonconforming use or a building may be th Bed to-another an forming use of more restricted classification, it shall not later be than classification of use, and the prior less restrictive noncon• Bed to a less restrictive been abandoned, classification shall be considered to have c If a structure occupied by a nonconforming use Is destroyed b other cause, it may not be rebuilt exce pt to conform to the provisions of this chapter. In the cause of partial destruction of a nonconformin y fire. the elements or value, reconstruction will be g use Dot exceeding fifty (50) Permitted, but the azseor function ofphte nonconforming use cannot be expanded, d No nonconforming use may be expanded or increased on the lot or tract u nonconforming use is located or on an adjoining lot or tract as of the efi ordinance from which this chapter is derived, except to provide offs goo or o: which two loading =pace upon approval of the board of adjustment. trees Parking r., :trect e Whenever a nonconforming use is abandoned all nonconformin rights and the use of the premises shall henceforth be in conformance to this chapter. Abandonment shall involve the intent of the user or owner to discontinue a nonconforming o shall cease end the 2500 YIP Atlend,l Issue #15. Non-conforming abandonment. Agenda ite Date` DAA&BMW: 1. Since the ZpTF made its recommendations, staff has discovered a problem with the current criteria for determining whether non-conforming use rights are lost. The current criteria is enclosure 15-1. It requirestntent to abandon as a necessary criteria for loss of non- conforming rights. j 2. The intent of an owner can for many reason be impossible to discern or it may change. Reco---won: The consultant has recommended the following: 13. The City has asked whether or not a property owner should lose his nonconforming use tights when the owner claims there is no intent to abandon or discontinue the nonconforming use. To resolve this problem, the City may way to revise subsection E as follows: Whenever a nonconforming use is abandoned, all nonconforming rights shalt cease and the use of the premises shalt henceforth be in conformance to this ordinance. A nonconforming use shalt be considered abandoned if:• L The intent of the user or owner to discontinue the nonconforming use is apparent; 2. The characteristic equipment and furnishings of the nonconforming use have been removed from the premises and have not been replaced by similar equipment within six (6) months. 3. The non-conforming building, structure, or land has remained vacant for a continuous six (6) months. 4. The nonconforming use has been replaced by a conforming use. ~Q . 4 35,12 ENCLOSURE 15-1 Ager(¢s Nv.9• O building oficial, and copies shall be furnished, on request to any tY Agen! tam or tenancy interest in the land or building affected, - Ord. No. 69.1. 1 1,APp. B. Art. 241, 1.1449) Charter reference-Building permits, use and occupancy certificates, 1 10.10. Sec. 35.13. Nonconforming uses and structures a A nonconforming status shall exist under the following. 1' When a use or structure which does not conform to the regulations proscribed in the district in which such use or structure is Inrated was in existence and lawfully oper• ating prior to the adoption of the ordinance from which this chapter is derived; 2 «'hen, on the effective date of the ordinance from which this chapter is derived, the use or structure was in existence and lawfully constructed, located and operating in accordance with the provisions of the prior zoning ordinance or which was a noncon- forming use thereunder and which use or structure does not now conform to the regulations prescribed in this chapter for the district in which such use or structure is located; 31 When a use or structure which does not conform to the regulations prescribed in the district in which such use or structure is located was in existence at the time of annexation to the city and has since been in regular and continuous use, 'b' Any nonconforming use of land or sbuctum may be continued for definite periods of time subject to such regulations as the board of en•ation of the adjoinin adNstment may require for immediate pron- g property prior to the ultimate removal of the nonconforming use. The building official may grant a change of occupancy lfoeo one (1) nonconforming use to another, providing the use is within the same or higher or more restricted classification as the original nonconforming use. If a nonconforming use of a building may be changed teanother noncon• forming use of more restricted classification, it shall not later be changed to a less restrictive classification of use, and the prior less restrictive classification shall be considered to have been abandoned. c' If a structure occupied by a nonconforming use is destroyed by fire, the elements or other cause, it may not be rebuilt except to conform to the provisions of this chapter. In the case of partial destruction of a nonconforming use not esoeeding fifty (50) percent of its reasonable value, reconstruction will be permitted, but the size or function of the nonconforming use cannot be expanded. d No nonconforming use may be expanded or increased on the lot or tract upon which the nonconforming use is located or on an adjoining lot or tract as of the effective date of the ordinance from which this chapter is derived, except to provide off-street parking or off street loading :pace upon approval of the board of adjustment. e Whenever a nonconforming use is abandoned, all nonconforming rights shall cease and the use of the premises shall henceforth be in conformance to this chapter. Abandonment shall involve the intent of the user or owner to discontinue a nonconforming operation and the actual act of discontinuance. Any nonconforming use which is discontinued for or which re- mains vacant for a period of six (6) months shall be considered to have been abandoned. (Ord. No. 69-1, 1 I(APp 9. Art. 22), 1.14.69; Ord. No. 76.30, 6.15-i6) I V L Agenda No. Issue N16: Zoning change petition to P&Z. Agenda f m Date^ BKk&MvW: 1 Tbe current ordinance calls for regulation or district the CityCouncil. boundary changes to be petitioned to 2. This practice has not been followed for many years. It was in 1969 to about 1973. A petitioner would go to Counca, who would then refer the petition to P&Z, who would then send it back to Council, who would hold a public bearing, and if approved, direct an ordinance be considered at a later meeting. 3. This is an issue identified by staff after the ZOTF work was completed. It was not identified by the consultant. Staff Reco menrtatinn• Add P&Z to whom a petitioner may petition to for a zoning district or regulation change. S~ Agenda No. Issue p17. Denied rezoning ' wai Agenda Item waiting period conditions. Date ` ~I 1. Reference the Rector Road and the Colorado ME (c) from 11 rezoning petitions. Staff recently discovered an issue about the conditions for which another rezoning application may not be heard for 12 months after a denial. Those existing conditions are shown in Ir enclosure 17-1. r 2. The existing ordinance does not allow a reapplication to the same or less restrictive district if council denies 21 the petition is withdrawn after "giving of public notice therefor." In the Rector Road situation, a C(c) district was recommended for denial by P&Z, there was no appeal to Council, but the case was not withdrawn, so the 1,2 month wait period was not triggered. 3. It is unclear if the "public notice" is for either the P&Z or Council public hearing. 4. Each rezoning petition's fee is at least $850. 5. The provision is intended to preclude wearing down or wasting the time of decision makers and other interested parties. b. This existing provision does not apply to PD's. 7. Often times applications for PD's and conditions of conditioned zoning may be amended before and after P&Z's consideration. Alternatives: 1. Add to the PD provision that does not require a 12 month wait before another application on property with a denied zoning case, more restrictive conditions of a conditioned zoning petition, 2. Delete the withdrawal provision as a condition triggering a 12 month wait. 3. Specify that (1) withdrawal after the P&Z public hearing and (2) when P&Z recommends denial and there is no appeal to council would trigger the 12 month wait. Staff Recommendations: Option 1 and 3 above. AXXOOA/7 s a. 6 35.7 ENCLOSURE 17_1 Agenda hio._.WI.C.6 2 Betbre taking action on any proposed amendment, supplement or change, the city council shall submit the amendment, supplement or change to the planning and zoning commission for its recommendation and report. 3, The planning and zoning commission shall hold a public hearing on any application for any amendment or change prior to making its recommendation and report to she city council. if the commission recommends denial of the zoning change, such request shall not be referred to the council unless the applicant Kit commission's decision, shall file a request in writing with the de ten ]0 days of the and community development requesting that the council review he commlission's recommendation. Written notice ofall public hearings before the planning and toning commission on a proposed amendment or change shall be sent to all owners of real property lying within two hundred •200+ feet of Property on which the change is requested. Such notice shall be given not less than ten - 101 days before the date set for hearing by posting such notice properly addressed and postage-paid to each taxpayer as the owner on the last approved city tax roll. 4, A public hearing shall be held by the city council before adopting any p amendment, supplement or change. roposed Notice of such hearing shall be given by publi cation in the official newspaper of the city stating the time and place of such hearing, which time shall not be earlier than Glleen i15• days from the date of publication. ,5' In case of a written protest against such change signed by the owners of twenty -201 percent or more of either the area of the Iota or land included in such proposed change or of the lots or land immediately adjoining the proposed change and extending two hundred 2001 feet therefrom, such amendment shall not become effective except by the favorable vote of three-fourths of all members of the city council. Furthermore, a favorable vote of three-fourths of all members of the city council is required to over. rule a recommendation of the planning and zoning commission that a proposed amend. meet, supplement or change be denied. 6' No petition for a change in a zoning district shall be heard for a particular parcel of property if within twelve 112) months prior to the date of such petition, a petition for a change of zoning for the same or a less restrictive zoning district for the same Property was denied by the city council or the prior petition was withdrawn after the giving of public notice therefor; provid(d, however, that the city council, upon finding that there has been a substantial change in conditions in the area in the twelve. month period that would warrant a reconsideration of the prohibited rezoning re- quest, may allow such petition to be heard, For purposes of this subsection, the agricultural zoningdistrict listed first in the heading of the schedule of uses ofsection 3.5-77 shall be considered the most restrictive zoning district. and each zoning district thereafter listed in succession in such schedule shall be considered to be less restric. five than the prior listed zoning district The provisions of this subsection shall not apply to applications for planned development zoning districts, c Filing fees, Any person petitioning for a change or amendment to the provisions of this chapter or amendments to this chapter, pursuant to subsectiona of this section, shall pay to =err N~ 2496 ATTACHMENT 3 Agends No Agend& ltem MEMORANDUM Date (p TO: Frank Robbins, Planning Director Denton, Texas FROM: Terry D. Morgan Freilich, Morgan, Leitner & Carlisle DATE: March 25,1996 RE: Final Report Draft Zoning Ordinance Please find attached our final report on Denton's draft Zoning Ordinance. We anticipate presenting our findings and recommendations in the form of an issue discussion with at a joint session of the Planning and Zoning Commission and the City Council on April 9, 1996. If you have any questions, please do not hesitate to contact me. s~ Agenda No,14-& -11CW T Agenda Ii S Date,. _ i Final Report To the City Planning and Zoning Commission and the Zoning Ordinance Task Force for the CITY OF DENTON, TEXAS PROPOSED REVISIONS TO COMPREHENSIVE ZONING ORDINANCE Prepared by: Freilich, Morgan, Leitner & Carlisle 5001 LBJ Freeway Suite 700 Dallas, Texas 75244-6131 (214) 387-5215 March 25, 1996 SS Agenda ND,% Agenda Item a 7. FINAL REPORT ON Date DRAFT DENTON ZONING ORDINANCE All references to "chapter" should be replaced with "ordinance" unless the City intends to codify the re-write as chapter 35. All references to "article" should be replaced with "part." All references to Ordinance No. 69-1 and subsequent amending ordinances should be eliminated. A. Table of Permitted Uses ~ Intended Effect 1. A statement needs to be added prior to the Table of Permitted Uses that states: The following table summarizes the permitted uses and uses allowed by specific use permit in the City's zoning districts; however such table is for information purposes only and has no regulatory effect. In the event of any conflict between this table and the district regulations, the uses listed in the district regulations shall control. Relationship Between Use Ma riY anrt District Ree la 2. The Table of Permitted Uses and the uses listed in the individual districts are not consistent with each other. For example, in the Table of Permitted Uses, hotel or motel, mobile home park, art gallery or museum, college or university, etc., are all listed as uses allowed in the Agricultural District with a SUP, yet the district regulations list none of these uses. The City needs to compare the Table and the district regulations for all districts to ensure that the two are consistent with each other. 3. All of the use terms which appear in the district regulations also should be included in the Table of Permitted Uses. For example, the Table has eliminated "Community Center (Public)," but the district regulations and definitions section still includes the term. The terms in the Table and district regulations also should be consistent. For example, the Table uses the term "Trailer Camp," but the district regulations and definitions section use the term '*Travel Trailer or Motor Home Park." The City needs to go through and reconcile the Table with the district regulations. 4. The Table of Permitted Uses needs a caption block to identify what "S" and ' :X" mean. We assume "S" stands for uses allowed %kith a specific use permit and "X" means the use is a permitted use. 5. The Table of Permitted Uses lists as a use "Accessory Use." However, this is not a use per se but a classification of uses. Thus, it should be removed from the table. Agenda t m B. Definitions (Part 1) Data ` General Comments 1. The format of the definitions needs to be consistent. Either start all definitions like no. I "Accessory use means a or like no. 3 "adult arcade: any . Specific Definitions 2. The definition of agent in no. 10 needs to be genera iced because "agent" is used throughout the ordinance. A definition similar to the following would accomplish this: "Agent is a person authorized by the owner of property to act in their place, for example, to submit applications under this ordinance, to represent the owner at public hearings, or to otherwise manage the owner's property." 3. Nos. 18, 68 and 133 repeat each other and should be combined into one definition. 4. The reference to article II in definition no. 27 needs to be changed. 5. "Or private school" should be deleted from no. 42. 6. "And not for occupancy of more than four (4) boarders or lodgers" should be deleted from nos. 65 and 69. The definition of family takes care of this issue. 7. No. 106 is unnecessary and should be deleted. 8. No. 108 should be revised as follows: Private club means a private club, licensed by the state, which sells or serves beverages to the membership in accord with state regulation. 9. The reference to sec. 35-387 needs to be changed in no. 117. 10. The last sentence in no. 122 should be deleted. 11. Nos. 204 and 205 are not necessary. Group Homes 12. In order to avoid potential claims of discrimination under the Fair Housing Act or the Community Homes for Disabled Persons Location Act, the following definitions should be revised: 2 Agenda No. ~ Agenda~I)em No. 91 should be rewritten as follows: pbte_ + Group Home - Type I: a family-based or community-based residential facility providing 24 hour care in a protected living arrangement for not more than eight (8) residents, or six (6) residents and two (2) supervisors. This classification includes homes for the handicapped as defined in 42 U.S.C. § 3602(h), congregate living facilities for persons over sixty (60) years of age or older, and maternity homes. This classification also includes foster homes for not more than six (6) children in addition to the foster parents and the foster parents' own children. Pursuant to Tex. Hum. Res. Code § 123.001 el seq., a group home for persons suffering from orthopedic, visual, speech, or hearing impairments, Alzheimer's disease, pre-senile dementia, cerebral palsy, epilepsy, muscular dystrophy, multiple sclerosis, cancer, heart disease, diabetes, mental retardation, autism, or emotional illness, must be authorized as a permitted use in all residential zoning districts. The provisions of the Community Homes for Disabled Persons Location Act apply only to homes with 6 or less residents and no more than 2 supervisors. Nevertheless, group homes for other handicapped persons, such as those with AIDS or recovering alcoholics and drug addicts, should be permitted in all residential zoning districts in order to avoid challenges under the Fair Housing Act. Although, the United States Supreme Court has not yet ruled on what numerical limit on residents of a grc ip home in a single-family residential district would not be discriminatory under the Fair Housing Act, the Court has hinted that perhaps six is a reasonable number. A lower court decision, however, indicated that ninf. residents were required for the group home in question to be viable. There is no requirement that group homes be allowed in nonresidential districts. No. 92 should be rewritten as follows: Group Home - Type II: a community-based residential facility providing 24 hour care in a protected living arrangement for not more than 15 residents plus 1 supervisor per 4 residents. This classification includes homes for the handicapped as defined in 42 U.S.C. § 3602(h), congregate living facilities for persons over sixty (60) years of age or older, maternity homes, and shelters for victims of crime, abuse or neglect. This classification also includes foster homes for not more than fifteen (15) children in addition to the foster parents and the foster parents' own children. Such homes were previously allowed as an SUP in the single-family residential districts. Should they still be? No. 93 should be rewritten as follows: Group Home - Type 111: a community-based residential facility providing 24 hour care in a protected living arrangement for not more than 15 residents plus l supervisor per 4 residents. This classification includes homes for juvenile 3 Agenda t ern delinquents, and halfway houses providing residence in life da em sentencing. 110 C. Residential Districts (Part 11) Format of Dist I • Each of the residential districts should be broken out avoid any appearance that the districts intoseparate sections to aretactually 21 Codeone1.0dist05(rict) xwithFor exnonuniform density § regulations 2.2 would be in SF-E, § 2 violation .3 of Tex. would be Loc. SF-16, § 2.4 would be SF-13, etc. E ample , § m.l would be A, § ach district should begin with a purpose statement, explaining how the district is distinct from the other districts. This statement can be as simple as: "The SF-E district is intended as an area for very low density residential use, with a minimum lot size of one acre." Purpose statements for the other districts could also be based on the maximum density of development allowed if these are the distinguishing characteristics. If the City does not wish to separate the various residential districts out into their own sections, then a statement should be added at the beginning of those sections containing multiple districts which states: "this section contains the district regulations for the following separate zoning districts: SF-E, SF-16, SF-13, SF-10, SF-7 and SF-3.5." The same should be done for the multi- family districts. 2. The format of the residential districts could be improved by adding some introductory language to each of the sections. For example, before actually listing the permitted uses in each district the following language should be inserted: "The following uses of land are authorized as permitted uses within the X District(s):". Similarly, prior to te scific use list the following language should be inserted: "The following uses of land are authorized within the X District(s) upon issuance of a specific use permit under the regulations contained in Part VIII, Section 8.3:". For accessory uses the following language should be inserted: "The following uses of land are authorized as accessory uses within the X District(s):". For temporary uses the following language should be added: "The following uses of land are authorized as temporary uses within the X District(s):", 3. The uses listed as "Permitted Uses with Additional Regulations" in Sec. 2.x{.2, of all of the residential districts do not necessarily have additional regulations that apply to them. For example, there are no additional regulations provided for "community center, public," or for "park or playground for active recreation" in any of the districts. So why are they listed here? Also, "off-street parking" (which needs to be defined) is listed as a "Permitted Use with Additional Regulations," yet the only additional use regulations provided are for off-street parking when it is an incidental accessory use, but off-street parking is not listed as an accessory use. The City needs to clarify what if any additional regulations apply to off-street parking as a permitted use versus off-street parking as an accessory use. Moreover, off-street parking should 4 -09 Awn No. 96P be listed as a I em permitted accessory use. P. Agepend` • 4. The Additional Regulations in Section 2.X.S. and 'he Accesso Regulations in Sec. 2.x(.9 for all of the districts should be folded This wa ry Building regulations contained in part VII. nw►~ the additional use part of the ordinance and the additional regu y, all lations dwhichlare basically thel samce for allthe also provide parenthetical be in one residential districts not need to be repeated in each district. The district regulations should references to part VII for those regulations. For example, satellite dishes have applicable aduses that ha e ditional regulations in Part he City,] PPlrcabI additional insert g VII, but the permitted district uses, SUP regulations uses do , not accesso reference nee, should parentheticals referencing the applicable additionaf egula itonsnsec~one be uses these- T hind all apply (ie. "Satellite Dish (See Part VII, Seel on temporary uses for which additional regulations X• ,"Permitted Uses With Additional Regulations" in all the districts can be eliminated as these uses can with Section 2.X,1., "permitted Uses," with a parenthetical behind the use referring the applicable additional regulations section in Part VII (ie. "Church folded in Part VII, Section 7. the user to X,X,)"). , Monastery or Convent (See Ewk. 5. In the single-family, two-family, and multifamily districts f as a permitted tise. Does the City really want to authorize a f 'arm or ranch is listed arm or ranch, whi defines as "area of three acres or more which is used for growing of usual farmch the ordinance for the raising thereon of the usual farm poultry and farm animals" as a districts? products ...and permitted use in these 6. "Amateur Radio Station" which is listed as an accessory use in all residential districts should be changed to "Antenna and Su Communications" as per § 7.1.3.13. pport Structure for Amateur Radio 7• The City has asked how many unrelated persons are allowed to live together in a two-family dwelling in a 2F district. The zwing ordinance rewrite defines "two-family, dwelling" as "a detached building having sepal,!te accommodations for and occupied b more than two (2) families or by two (2) families and not more than four lodgers." A two-family dwelling is a by not "Farms." is defined in the re -Write as ` permitted use in the 2F (4) boarders and al living tog and as a s districtsingle housekeeping unit, in which not more than four (4} individuals are unated by blood, marriage or adoption." Applying this definition of "family" to the definition of "two-family dwelling," u to eight unrelated persons plus four additional boarders and !odgers would be allowed i a two- p family duelling, for a total of 12 unrelated persons. Perha ; "and not more th four boarders and lodgers" should be deleted from the definition Of "two-family dwelling. (4) S 60 i Agenda Na,U. P Agenda Item !!'"'~r Cumv late Date _ - 8. As presently drafted, single-family detached dwellings are authorized as permitted uses in all multifamily districts and the manufactured housing district. If these districts are intended to encourage multi-family and manufactured housing, the City may want to consider single-family detached dwellings a SUP. However, it should be expressly stated that r existing single-family dwellings are not nonconforming uses. MH igc~l 9. None of the detailed additional regulations applicable to manufactured housing subdivisions, travel trailer or motor home parks, and mobile home parks, which are included in the MH District, are presently applicable to such uses when allowed in the A and MF-2 districts. Therefore, the additional regulations applicable to manufactured housing subdivisions, trailer or motor home parks, and mobile home parks now found in the MR District should be moved to Part VII since such regulations should be applicable to such uses in any district where they are permitted, not just in the MH District. Parentheticals should be added to such uses in all applicable districts including the MH District which refer to the additional regulations contained in Part VII.(ie. "Mobile Home Park (See Part VII, Section 7.XX)"), 10. The MH District allows a dozen other uses other than manufactured housing subdivisions, travel trailer or motor home parks, or mobile home parks. However, as drafted, the district contains no height or area regulations for these other uses. The City needs to draft some setback, height and lot size requirements for these other uses or reference standards in other districts. 11. The City has asked whether state law requires that manufactured housing be allowed in any and all residential districts. On the contrary, the Texas Manufactured Housing Standards Act states "Upon application the installation of HUD-Code manufactured homes shall be permitted as residential dwellings in those areas determined appropriate by the city, including subdivisions, planned units developments, single lots, and rental communities and parks." Thus the City is only required to allow manufactured housing in those districts that the City determines are appropriate. 12. Sections 2.5.10.21. - 24. and 2.5.11.17 - 19. should be moved to the procedures part of the ordinance. D. HEI District (Part IV) Format 1 • Section 4.6 includes regulations for accessory buildings. However, the district does not expressly authorize any accessory uses. The City should insert a list of permitted 6 I r Agen4~ No, ~ Agen Date d 1 m accessory uses in the same format as used in the residential districts. The general accessory building regulations contained in Section 4.6 should be moved to the additional regulations section contained in Part VII in the same manner as suggested for the residential districts. performance tandardc 2. The 11131 District does not contain any of the performance standards that the LI and HI districts contain. Were the performance standards contained in the LI and HI districts ineffective or too difficult to administer? Section 4.S.A should be rewritten to be regulatory, e.g.: "No building permit shall be issued until the applicant has complied with all applicable federal and state regulations." Will compliance with federal and state regulations be the equivalent to complying with the former performance standards? ePC Aitthnr:~ 3. How was the list of permitted uses developed? For example, why are slaughter houses and art galleries and libraries allowed together in the same district? What if any site planning or buffering requirements should apply? Should the less intense uses such as art galleries and libraries be authorized only with a SUP? &WI€ 4. What is the difference between developing such industrial uses under the HEI district and MXD? (Class XII uses) Why have both? sun" 5. In § 4.53, do not tie the rezoning process to an SUP. Instead, refer to conditional zoning; { ' If the HEI zoning classification is sought for a tract of land adjacent to a residential use or district, the City shall impose condition and restrictions on such zoning pursuant to the provisions contained in Section 8.2. 6. As drafted, § 4.5.C, is too vague regarding the triggering criteria. Is it related to the DDP? 7. Similarly, the standards in § 4.5.D. are too sketchy. Is there some other manual we should be referring to? 7 ~1 Agenda No. O S _ E. Nonresidential Districts (Part V) Agenda Ite oate` N ice and rand father Sta us I. Although the zoning ordinance rewrite prohibits the rezoning of property to the "old" non-residential zoning districts, these "old" zoning district categories may remain on the zoning map indefinitely. While this system has some advantages, such as eliminating non- conformities that otherwise might be caused by remapping, it also raises legal concerns. By not amending the zoning map, the City might subject itself to spot zoning challenges, as individual lots over time are forced to rezone to the Mixed Use District, while surrounding lots remain zoned under the former nonresidential zoning districts. Moreover, maintaining the "old" non-residential districts indefinitely raises the concern of whether the zoning ordinance is "in accordance with a comprehensive plan." Therefore, as an alternative to the proposed scheme, development under the "old" non-residential zoning districts should be "grandfathered" only for a period of years, after which rezoning to a "new" zoning district category is required. Consequently, the Notice provision which prefaces the Nonresidential Districts chapter should become § 5.1 and should read as follows: Uses which were authorized under the City's nonresidential district regulations in effect immediately prior to adoption of these zoning regulations (Districts P, OAR, 0, NS, GR, C, CB, LI, and HI), for which no rezoning is requested, may be established on land zoned for such districts on the existing 70ning map in accordance with the prior district regulations contained in Part V under the following circumstances: A. All development shall be subject to the supplemental regulations found in Part VII. B. For development on lots or parcels which do not require subdivision or resubdivision, building permits must be obtained and construction commenced pursuant thereto within 5 years of the effective date of these zoning regulations. C. For development requiring subdivision or resubdivision, a preliminary plat shall be approved within 3 years of the effective date of these zoning regulations, a final plat shall be approved within 4 years of the effective date of these zoning regulations and building permits for each use to be established under this section shall be obtained and construction commenced pursuant thereto within 5 years of the effective date of these zoning regulations. All other development applications w hick are filed after the effective date of these 8 7 Agenda No. Agenda tam - Oate ` revised zoning regulations shall be processed, reviewed and evaluated in accordance with the revised district regulations contained in Parts II, III, and IV. An application for approval must be accompanied by an application for amendment of the existing zoning map, in order to change the zoning district designation to one which is provided for under the revised district regulations (A, SF-E, SF-16, SF-13, SF-10, SF-7, SF-3.5, 2F, MF-R, MF-1, MF-2, MH, HE[, and PD). Format 2. The format of the Nonresidential Use Districts should follow that established for the residential districts. Section 5._(. 1., "Permitted Uses," should list out all the uses permitted in the district rather than merely referring to the Table of Permitted Uses. Similarly, § 5.x(.2., should list all uses requiring a specific use permit. Section 5.X.3., should list any authorized accessory uses. Presently, there are no accessory uses authorized in the nonresidential districts. However, as per § 7.1.3.B., "Antenna and Support Structure for Amateur Radio Communications" is to be allowed as an accessory use in all zoning districts. The City should list other allowed accessory uses. The accessory building regulations presently contained in § 5.x.5. should be moved to the additional use regulations contained in Part VII. 3. Section 5.11, "Classification of New and Unlisted Uses," needs to be applicable to all of the zoning districts and therefore should moved to the General Provisions chapter of the ordinance. The second sentence of § 5. 11.1) needs to be changed to read as follows: The City Council shall by ordinance approve the recommendation of the Planning and Zoning Commission or make such determination concerning the classification of such use as is determined appropriate based on its findings. Section 5.1 LA should be eliminated because the procedure outlined in subsections B, C & D produces the same effect. Section 3.10, "Classification of New and Unlisted Uses," should be eliminated because § 5.11 will be applicable to all zoning districts. 4. The DDP states that new low density housing should be discouraged in Major Activity Centers. The area presently zoned as the CB District appears to be designated on the DDP concept map as a Major Activity Center, but yet the CB District allows single-family detached housing as a permitted use. Should new single-family detached housing in the CB district require a SUP? 5. How does the DDP's trip generation intensity allocation system relate to development in the old nonresidential districts? Is development in these districts subject to the intensity allocation system? If so, the intensity allocation system needs to be referenced in these districts or in the supplemental regulations part of the ordinance. 9 t/ Agenda Agenda I e F. Special Districts (Part VI) Date Policy at m nt I. Section 6.6.1 should be moved to the beginning of part VI. Historic Landmarks and Districts 2. Section 6.2.4. should be revised to clarify that the City treats historic district designations as zoning overlay districts, rather than free-standing districts. Section 6.2.4 should be changed as follows: A. The city council may designate buildings, structures, sites, districts, areas and lands in the city as historic landmarks and define, amend and delineate the boundaries thereof. The suffix "H" shall indicate the zoning designation of those buildings, structures, sites, districts, areas and lands which the city council designates as historic landmarks. Such designation shall be an overlay to and in addition to any other zoning district designation established pursuant to these zoning regulations, and the underlying zoning district regulations shall continue to apply. The zoning map shall reflect the designation of an historic landmark by the letter "H" as a suffix to any other zoning district designation established under these zoning regulations. 3. Section 6.2.3, regarding notices should be eliminated and replaced with a general provision on notices applicable to all rezoning or permit requests in Part IX of the ordinanc° The references in § 6.2.5. to Loc. Gov't Code § 211.007 should be changed to reference th.; hearing procedures to be contained in Part VIII. 4. Section 6.2.7 regarding amendments should be eliminated. Because historic landmark designation is treated as a zoning overlay, the general provisions regarding zoning amendments contained in Part VIII apply. Planned Development Distr 5. Nature and purpose of district. As drafted, planned development districts are intended as free-standing zoning districts in which virtually any use is allowed (see use matrix). In order to assure that PD districts are in accoi dance with the City's comprehensive plan, see Tex. Loc. Gov't Code § 211.003, it is necessary to relate establishment of the district to the policies contained ;n the Denton Development Plan, particularly since a district can be located anywhere in the city with any use or combination of uses allowed in the zoning ordinance. (An altemative procedure not contemplated in the draft regulations is the use of an "overlay" district, in which the uses allowed are limited to those authorized in the "base" zoning district, subject to 10 Agenda No. mod` A.gend tem Date - relaxation of standards in order to achieve flexibility and to provide superior design.) Otherwise, creation of a PD district may be challenged as "spot zoning." The purpose statement in proposed § 6.5.1 does not adequately convey the relationship between the DDP and the PD district to be created. As drafted, a PD district can conceivably be established simply be referring to one of the enumerated purposes (i.e„ A, B or C) without regard to how the district implements the policies of the plan, The last sentence of the section should expressly state that a PD district must be consistent with and implement the policies of the DDP and the DDP land use map. Because at least three intensity levels are reflected in the DDP, the City should consider either enumerating certain policies for each subarea that must be met prior to establishment of a PD district or creating in effect three PD subdistricts, one for each intensity area referenced in the DDP. 6. Types of plans. The ordinance sets forth the three stages of approval for the PD process. Additional clarifications are needed to establish the nature of each development plan to be approved and to frame the level of discretion to be applied by the decision-makers. The first level of approval, the concept plan, must accompany the establishment of the PD district and should be expressly incorporated in the ordinance. Provisions should be added explaining the relationship of the concept plan and the text of the ordinance establishing the district, so that it is clear that certain elements are needed for every PD and that the concept plan is intended to reflect and be consistent with such elements. Appropriately, the concept plan is "approved" by zoning amendment procedures. The second stage of approval, the development plan, also is established in accordance with zoning amendment procedures. The regulations should clarify that this constitutes an amendment to the PD ordinance already established and that the details reflected in the development plan in fact constitute standards for issuing detailed plans and, ultimately, building permits and certificates of occupancy in the district. Where a concept plan already exists, the development plan itself must be consistent with the concept plan. If there are additional plan related standards or adjacency considerations that apply at the development plan stage, then these should be set forth in the ordinance as approval criteria. The third stage of approval, the detailed plan, apparently is not intended as a legislative act, since responsibility is finally delegated to the Planning and Zoning Commission (except in the case where a detailed plan is approved at the time the district is established--but see below). The standards of approval that apply, however, in addition to consistency with the development plan, should be stated. Otherwise, approval of the detailed plan maybe regarded as a ministerial act. See Bartlett v. Onemark USA. In this regard, it is our understanding that the City is considering incorporation of standards for detailed plans on a variety of factors, formerly suggested as "guidelines." 7. Amendment of plans. The ordinance should clarify, that amendment of either the concept plan or the development plan constitutes an amendment to the PD zoning district, to be ii Agenda No. Agend am Date. effected by recommendation of the Commission with final action by the City Council in accordance with zoning amendment procedures in Part VIII. The text makes provision for minor amendments to an approved detailed plan, with some definition of what constitutes a minor amendment. This section should further specify that any "substantial changes" require revision to the development plan and/or the concept plan pursuant to zone change procedures (and enactment of an amendatory ordinance). The City should also give consideration to disallowing approval of a detailed plan by the City Council with the establishment of the district, for the reason that it is not easy to distinguish between those elements of the plan that are legislative in character (and hence which can be amended only by adoption of an amendment to the PD district) and those which parts are administrative in character. If the option to approve the detailed development plan is retained, then perhaps any amendment, however minor, to the detailed plan should be by ordinance of the City Council. 8. Lapse ojplans. Because only the detailed plan is administrative in nature, concept plans and development plans don't expire. The PD regulations should provide for a schedule of development and provisions for lapse of detailed plan approval in the event that development is not pursued in accordance with the schedule. (As drafted, the ordinance only provides that som development must occur within 24 months of detailed plan approval. If the project is large, or consists of multiple uses, detailed plans never expire, a potential problem.) A statement also should be added to the effect that lapse of the detailed plan is occasion for the Commission or the Council to initiate rezoning for the property. 9. Exceptions. The exceptions statement in § 6.5.7 can be simplified by stating that the following generally applicable regulations cannot be varied through planned development procedures. G. Supplemental Regulations (Part VII) General Effect 1. An introductory section needs to be added stating: The following supplemental regulations apply to particular uses authorized in the district regulations, Parts II through VI. The standards set forth in this part apply to the designated uses whether such uses are authorized as permitted or accessory uses or with a specific use permit. Format 2. The matters contained in § 7.1.1. should be separated out into different subsections following the model of § 7.1.2. as follows: I & 2 should be in a separate subsection called "Special Area and Use Regulations". 3 & 4 along with the Accessory Building Regulations formerly contained in 2.X.9 and 5.x.5, should be in a subsection called I 12 Agenda Na.1LiZSl Agenda Ijem[ i)ate_ "Accessory Uses"; 4 should be in a subsection called "Temporary Construction Buildings'; 5 should be in a subsection called "Mixing and Sale of Concrete"; and 6 should be in a separate subsection called "Occasional Sales". For convenience, all of the supplemental use regulations including the parking, alcohol and SOB regulations should be put in alphabetical order beginning with Accessory Uses. Aca essory Use 3. Section 7.1.1.3, "Accessory uses in certain nonresidential districts," does not make sense as drafted. The nonresidential districts, and the PD presently do not authorize any accessory cues, though the PD could, if provided for in the district plans. Moreover, subsection 1 is merely repeating the definition of an accessory use, and subsection 3 is vague and is a given anyway. 4. Section 7.1.1.3.1 "Accessory buildings" is not necessary because it is simply repeating the definition of accessory building contained in Part 1. However, the definition in Pan I requires the accessory building to be detached, while § 7.1.1.3.1 says "attached or detached." Which is it? Misc. Regulations 5. There should be a definition of "occasional sale" added to Part I to accompany the supplemental regulations in § 7.1.1.6. 6. It appears from the regulations contained in § 7.1.2. that a recycling collection center can be both a principal and accessory use. Thus it should be listed as an accessory use in the applicable nonresidential districts. Subsections A, B & E are unnecessary and should be deleted. Antennas. Satellite Dishes & Radio Towers 7. Subsection 4 of § 7.1.3.A is unnecessary and should be deleted. Similarly, the prefatory language in § 7.1.33 is unnecessary and should be deleted. 8. Subsection 3 of § 7.1.3.13 should be revised as follows: The cumulative height of the support structure and antennas shall comply with al; applicable regulations of the Federal Aviation Administration (FAA) and Federal Communications Commission (FCC). 9. It is unclear from 7.1.3. D - H whether these provisions apply only to antenna and support structure for amateur radio communications or to satellite dishes and commercial radio towers as well. If these provisions apply to all three uses, the language should be chariged 13 Agenda ND. Date. ` Agenda 11 rn to clarify this. If these provisions do not apply to all three uses, these provisions should be included in the subsection pertaining to the applicable use rather than in separate subsections. Parking Regulations 10. What is the Denton Development Code which is referenced in § 7.3.1.? Also as, presently, drafted, there is no § 8.4.4. as referenced in subsection 1. 11. The City should consider the use of a matrix format for the parking, regulations contained in § 7.3.2. There also needs to be some introductory language to this sei.tion. 12. Section 7.3.5. should expressly reference the section where the procedure for new or unlisted uses is located. Alco olio Beveragu 13. Most if not all of the supplemental regulations contained in § 7.4 pertaining to alcoholic beverages are preempted by the Texas Alcoholic Beverage Code (TABC) and are invalid unless these regulations were formally enacted before June 11, 1987 or were part of a subsequent amendment which relaxed the prior restrictions or at least did not impose any additional restrictions. For example, unless originally enacted prior to June 11, 1987, the City's provisions which prohibit the sale of liquor and beer within one hundred feet of any residential dwelling district would be preempted by the TABC. S=. €,g., Dallas Merchant' & Concessionaire's Assoc. v. City of Dallas, 852 S.W.2d 489, 493-94 (Tex. 1993). It appears that some of the regulations contained in § 7.4.2. and § 7.4.3. were enacted or amended in 1990 by Ordinance No. 90-124. If this Ordinance imposed additional regulations on businesses selling alcoholic beverages, these regulations would be invalid. The City needs to find out exactly when the regulations contained in § 7.4 were enacted to determine whether they are valid or not. 14. The City has asked whether the City can require a SUP for on-premise sale of beer and/or wine. The City has also asked if a district can be conditioned to allow retail sales or restaurants but not the sale of beer or wine. Pursuant to the TABC, an ordinance may not prohibit the sale of beer of liquor in nonresidential areas of the City, unless such ordinance was originally enacted prior to June 11, 1987. Sgg-TABC 109.31 and 109.32; Dallas Merchant's & Concessionaire's Assoc., 852 S. W,2d at 493. Under the old zoning ordinance and as presently drafted in the zoning rewrite, on-premises sale of beer and/or wine is authorized as a permitted use in all nonresidential districts except for the P, 0 and NS districts, and as a SUP in the MF-2 district. Off-premises sale of beer and/or wine is currently authorized as a permitted use in all nonresidential districts except for the P, OAR, 0 and NS districts. Thus, the City can continue to use these regulations if they were in place prior to June 11, 1987, but may not impose any additional restrictions. 15. All references in § 7.4 to "Alcohol Beverage Code" should be changed to 14 1 Agenda No. 9C• %wdboo Agenda t m,,,l_r I Date_a; "Alcoholic Beverage Code." 16. The purpose statement in § 7.4. t. is not necessary and should be eliminated. 17. The prefatory language in § 7.4.2. should be revised as follows: Except as otherwise provided for restaurants in § 7.4.3, the sale for consumption on the premises where sold of vinous and malt liquors and beer shall be subject to the following conditions: 19. Subsections C and D of § 7.4.2. should be revised as follows: C. The sale of any vinous and malt liquors or beer by any dealer where the place of business is within three-hundred (300) feet of any hospital, public school, or church is prohibited. The separation requirement of this subparagraph shall not apply to the University of North Texas, Texas Woman's University, or between a dealer's place of business and F. hospital, public school, or church, if both are located within the Special Exemption Area depicted in Appendix D of this ordinance. D. The sale of any vinous and malt liquors or beer by any dealer where the place of business is within one-hundred (100) feet of any residential dwelling district is prohibited, unless the dealer's place of business and the residential dwelling are both located within the Special Exemption Area depicted in Appendix D of this ordinance. For the purpose of this condition, "residential dwelling unit" shall mean any single-family, two-family or multifamily dwelling. T be measurement of the distance shall be along the property lines of the street fronts and from front door to front door, and in direct line across intersections. Similar changes to references to the Special Exemption Area should be made to subsections A & B of § 7.4.3. and subsections C and D in § 7.4.4. 19. The last four sentences of § 7.4.3.D. should be moved to a separate subsection E. The City has asked whether 70% should be changed to 75% in defining restaurant. There is no legal reason for changing the percentage. However, if there is a policy reason, the City may change the percentage without facing preemption by the TABC because the City would be merely relaxing its prior restrictions on restaurants. 20. The prefatory language in § 7.4.7. should be revised as follows: The o;xiution of licensed private clubs shall be subject to the following conditions: 15 i i Agenda No. Agenda I em Date"' " 21. Section § 7.4.8. should be renamed "Off-premises sale of beer and/or wine." Furthermore, off-premises sale of beer and/or wine should be listed as a permitted use in the NS district regulations with a parenthetical referring to the supplemental regulation contained in § 7.4.8.A. Section 7.4.8.B. is not necessary and should be deleted. Sexually Oriented Businesses 22. The City should consider moving the majority of the regulations contained in § 7.5. to some other portion of the City's Code. The only regulations contained in § 7.5. which should be part of the City's zoning ordinance are the location restaictions contained in § 7.5.3. 23. Section 7.5.2. could be moved to Part 1 and included in a definition of "sexually oriented business." 24. Section 7.5.3.A. could be interpreted as improperly regulating adult uses outside the City's corporate limits. Tex. Loc. Gov't § 243.003 provides that "a regulation [regarding sexually oriented businesses) adopted by a municipality applies only inside the municipality's corporate limits." Similarly, Tex. Loc. Gov't § 212.003(a) states that "unless otherwise authorized by state law, in its extraterritorial jurisdiction a municipality shall not regulate: (1) the use of any building or property for business, industrial, residential or other purposes." The language in § 7.5.3.A could be interpreted as making it a criminal offense to operate a sexually oriented business located outside the corporate limits of the City if it is within 1,000 feet of certain other uses. Furthermore § 7.5.3, and § 7.5.4, §7.5.5., §7.5.6, §7.5.7., and §7.5.8, should be rewritten as a zoning regulation rather than as a criminal offense. Revise § 7.5.3. as follows: A. A sexually oriented business shall not be located within 1,000 feet of any of the following: 1. a boundary of a residential zoning district; 2. the property line of a lot devoted to a residential use; 3. a church or rectory, as defined in this ordinance; 4. a public or private school, as defined in this ordinance; 5. a day nursery or kindergarten, as defined in this ordinance; or 6. a park or playground, as defined in this ordinance, if any portion of the park or playground, or a street abutting any portion of the park or playground, is within or abuts a residential district. B. For purposes of Subsection A, measurement shall be made in a straight line, 16 -71 Apenol tY0 w A.per,da Item Date without regard to intervening structures or objects, from the nearest portion of the building or structure used as a part of the premises where a sexually oriented business is conducted, to the nearest property line of the premises of a church or rectory, public or private school, day nursery or kindergarten, or to the nearest boundary of an affected public park or playground, residential district, or lot devoted to a residential use. C. No sexually oriented business shall be located within 1,000 feet of another sexually oriented business. The distance between two sexually oriented businesses shall be measured in a straight line, without regard to intervening structures or objects, from the closest exterior walls of the structures in which the businesses are located. D. No more than one sexually oriented business shall be located in any one building or structure. 25. Section 7.5.9.: Any violation of a zoning ordinance is punishable by a fine of up to two thousand dollars per day. The City might consider writing a separate section entitled "Penalty" to advise of the maximum penalty for any zoning infraction. Additional penalties for r-lating adult business regulations are contained in the general statutes, and do not need to be in the zoning ordinance. Section 7.5.10 is similar--the inspection requirements do not need to be in the zoning ordinance. Are both of these in this location to put the public and operators of SOBs on notice? Perhaps they could be more appropriately placed in other parts of the City Code, and cross-referenced here, if that is the goal. 26. Will there be sufficient locations for SOBS to locate, or will this open the City up to a challenge on the constitutionality of this portion of the ordinance? H. Procedures (Part VIII) Design Guidelines I_ The design guidelines contained in § 8.1 should be substantially revised and developed into separate site plan procedures for SUPs. The section should begin by stating that "no building permit shall be issued without the approval of a site plan in the following circumstances:". The second paragraph under § I should be eliminated as it allows unlimited discretion. Section 11 needs to be separated into approval criteria and design standards and those standards that are optional should be clarified. A section on waivers needs to be added as cell. 2. As the ordinance is presently drafted, the only place where a site plan is required is with SUPS. Should a site plan be required in any other instances such as in the I{EI? 17 AgenGe too. Agenda t m Zoning Amendments Date` ` 3. Section 9.6 should be moved to Part Vlll and renamed "Zoning Amendments." The City has asked whether the procedure in subsection B.3 of § 9.6, requiring an applicant to file a request with the P&Z or city council to review the denial of an application by the P&Z, is legal. Althou7% such procedure is not specifically authorized in Tex. Loc. Gov't Code ch 211, pursuant to § 211.006, the governing body of a municipality shall establish the procedures for adopting, enforcing and amending zoning regulations and boundaries, thereby allowing the City to establish the procedure in subsection B.3. 4. The City needs to determine a new hierarchy of zoning district restrictiveness for purposes of subsection B.6, of § 9.6. Where does A fit? CDnd lbrl;i~ 5. All references to "article" in § 8.2 should be changed to "section." Are there any additional matters which should be listed in § 8.2.3.? In subsection "n.", change "poise" to "noise". 6. To which zoning applications should conditional zoning apply, given that the PD and FIE[ regulations should already have adequate standards built-in? 7. If conditional zoning is retained, the regulations should be revised to state that the conditions and restrictions imposed are to implement th! policies of the DDP. S.C1Fit <15S_EC=[l 8. The specific use permit regulations need to be revised to clarify that the granting of a SUP is not a zoning amendment; treating a SUP as a zoning amendment may appear as spot zoning. Consequently, § 8.3.4. should be deleted and the City should develop an approval procedure independent from the rezoning procedure. SUPS also should not be mapped except for administrative convenience. 9. The City has asked whether property which has been granted a SUP can be used for other permitted uses authorized in the zoning district without getting the SUP revoked. As presently drafted, a SUP is treated like a zoning amendment. Unless the ordinance granting a specific SUP says otherwise, the granting ofa SUP should be treated like the passage of an overlay wherein the SUP merely adds an additional use to the property, and the base zoning does not change and remains in full force and effect. Therefore, a property owner may at any time use the property for any of the other uses allowed in the base zoning district without going through the process of revoking the SUP. 10. The City has asked whether a SUP may be made to run with a particular property 18 Agenda No. _ Agenda I m Date owner rather than with the land. A SUP may not be made to nut with a property owner pursuant to the City's zoning powers. Any such attempt would be void ab initio as an invalid delegation of the City's legislative powers to a private individual. Board of Adi =m nt 11. The section numbering for the board of adjustment provisions refers to ch. 35. It should be changed accordingly to Part VIII. 12. The reference to "appointing authority" in § 35-41 should be changed to "City Council" since the council is the appointing authority. Section 35-41 should be broken into two subsections one for membership and one for alternates. The sentence about all cases being heard by 4 members is out of place and should be moved to § 35-43. The 74th Legislature made amendments to the statute on Board of Adjustment, ( LQSa[ Gov't Code §211.008) and now allows more than five members to be appointed, with a minimum of 75 percent of the members required to hear the case. The City may wart to evaluate whether or not to change the membership accordingly. 13. The prefatory language in § 35-42 that states that the board may "act upon certain appeals, as identified below" should be changed to "act upon the following matters" since granting a variance or terminating a nonconforming use are not appeals. 14. Section 35-42 should have a provision added which clarifies that the Board of Adjustment has no jurisdiction to resolve uncertainties over zoning district boundary lines which are governed by the procedures contained in § 9.9, Also, § 5.11 provides procedures for the city council to resolve uncertainties over the authorized districts for new or unlisted uses, and §7.3.5. states that where uncertainties exist as to the applicable off-street parking requirements for a use, the procedure in § 5.11 shall be followed. However, § 35-42 (a)(2) conflicts with these provisions by giving the ZBA the power to decide appeals from an administrative officer's determination of such maters. The City needs to resolve these conflicts. The conflict can be resolved by simply specifying in §35-42(a)(2), "except in the following situations, which shall be governed by the appropriate sections of this ordinance: a. Zoning district boundaries, which shall be governed by the procedures described in §9.9; b. Uncertainties over the authorized distrt^ts for new or unlisted uses, which shall be determined by City Council under the procedures in §5.11; and c. A determination as to applicable off-street parking requirements for a use, which shall be resolved by the procedure in §5.1 L" 15. Section 35-52(d) needs to b,-:-c-structured, so that the result is a list of special exceptions (of which there is presently just one). Subsections (2) and (3) are conditions on the granting of a special exception for a change in nonconforming use, not additional special 19 7V Agenda No. • " 1 Agenda I m r+ Date _ exceptions that may be granted. This section should be restructured to list the type of special exception, subject to certain conditions, which follow in a list. Further subsections maybe reserved for expansion. 1. Administration (Part IX) General Provisions I. This part should be renamed "General Provisions" and should be moved to the front of the ordinance as Part I. 2. Section 9.2 can be simplified as follows: No building, structure or land shall hereafter be used, and no building or structure part thereof shall be erected, reconstructed, converted, enlarged, moved, or structurally altered unless in conformity with the regulations set forth in this ordinance. 3. Section 9.3 references prior SUP and PD ordinances which are to be listed in an appendix. No such appendix is included. Moreover, this section needs to be revised to make it clear that except for all prior planned development ordinances and SUPs, the provisions of this ordinance supersede all prior zoning ordinances and all prior zoning ordinances are expressly repealed. 4. Everything after the first two sentences in § 9.4 should be deleted. 5. Section 9.6 should be moved to Part Vlll, Procedures. 6. Section 9.7 should be revised to include the following: B. In addition to the zoning districts listed in subsection A, the following zoning overlay districts are hereby created: abbreviated Designation oninQ Oreflay District Name II Historic Landmarks and Historic Districts AMID Airport Height Hazard ACLUD Airport Compatibility Land Use The introductory language for the old nonresidential districts should be revised as follows: 20 7 J Agenda No. x Agenda it Date - - C. The following zoning districts have been prospectively repealed and are applicable only in accordance with Section 5.1 of this ordinance: 7. The Table of Permitted Uses should be incorporated as a section of the General Provisions. 8. The references in subsections B.1 and B.2 of § 9.8 to "the 1969 zoning map adopted by ordinance No. 69.1" should be eliminated. 9. Why were the omnibus relief provisions of § 35-10(8) and § 35-15 eliminated? Nonconforming Uses 10. Section 9.12.A. should be rewritten as follows: A. Nonconforming status shall exist under one of the following circums ances: 11. Section 9.12.B. authorizes the building official to grant a change of occupancy from one nonconforming use to another provided certain conditions are met, yet this is also granted under the special exception powers of the Board of Adjustment. This conflict also needs to be resolved, perhaps by clarifying that the Board of Adjustment hears appeals from denials of the building official, but an additional note on this section is that the approval of the building official does not require the compliance with all applicable codes; the City may want to include this provision as well. Similarly, Section 9.12.C. appears to conflict with Section 35.49, on restoring a nonconforming use destroyed by fire. One allows restoration when the damage is more than 50%, another appears to wholly preclude it. 12. The City has asked whether or not a propeity owner should lose his nonconforming use rights when the owner claims there is no intent to abandon or discontinue the nonconforming use. To resolve this problem, the City may want to revise subsection E as follows: Whenever a nonconforming use is abandoned, all nonconforming rights shall cease and the use of the premises shall henceforth be in conformance to this ordinance. A nonconforming use shall be considered abandoned if: I . The intent of the user or owner to discontinue the nonconforming use is apparent; 2. The characteristic equipment and furnishings of the nonconforming use have been removed from the premises and have not been replaced by similar equipment within six (6) months; 21 i Agenda No._ Agenda Item Date 3. The non-conforming building, structure, or land has remained vacant for a continuous six (6) month period; or 4. The nonconforming use has been replaced by a conforming use. 22 77