Minutes January 10, 1995 CITY OF DENTON CITY COUNCIL MINUTES
January 10, 1995
The Council convened into a Closed Meeting on Tuesday, January 10,
1995 at 5:15 p.m. in the civil Defense Room.
PRESENT: Mayor Castleberry; Mayor Pro Tem Brock; council Members
Chew, Cott, Perry, Miller and Smith.
325
ABSENT: None
1. The following items were discussed in Closed Meeting:
A. Legal Matters -- Under TEX. GOV'T CODE Sec. 551.071
B. Real Estate -- Under TEX. GOV'T 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. GOV'T 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 Council 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
326
City of Denton City Council Minutes
January 10, 1995
Page 2
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 staff ~eviewed the
staffing and operating cost levels of agencies similar 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
reduction in power costs which was keyed in with the timing issue
of change of fuel supply and disposal of the draglines.
Flexibility dealt with removing the restrictions placed on the
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
utility system and could not make efficiency changes which would
help keep Denton's own costs down. A second point dealing 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
attempt to do this three years ago but it was not successful. The
third goal was an acknowledgement that the four city managers
needed to spend more time dealing with Agency concerns. The four
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
327
issue of the Agency being a generation plant was more of a
philosophical issue. There was a general acknowledgement that if
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 each 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..
3 2 ~ity of Denton City Council Minutes
January 10, 1995
Page 4
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 resDonsible 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 Minutes
January 10, 1995
Page 5
329
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 lB, 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 price. The second concern
dealt with some of the other options the study looked at such as
closing the facility and purchasing external or repowering or
putting 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.
Nelson replied that it was not known yet. The focus was on having
the flexibility to be able to look at those issues. The City's
3 3 0City of Denton City Council Minutes
January 10, 1995
Page 6
first generators were installed in 1954 and the last one in 1972.
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
January 10, 1995
Page 7
331
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 further business, the meeting was adjourned at 7:10 p.m.
TERS
CC~I T Y SECRETARY
CITY OF DENTON, TEXAS
ACC00243