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05/28/1996 (2) 1 ': I,~ I I. ".," .. '~, :~', I, ':""1 ",' ,.' \...., I":."':' ' ~:,. I', ", '~', ~ , , . c I .> I ' , " . ';', ,,' : 1 ." , , ,. .' . . ..... ." '.. . 'I.' . f.', , , . . c c c . ' , . , , . ." .' , ,..'.~'.' .." . 1-; ~ ,.,~.~.~ ."'''';''~.~~:''~:l::'~~~~.'~'I'''>"I:.\r~),1.J).~...!.'v...~..../<' ~,"""';<>',I,'~f'. ':>~'j~:::':'.",': ". ,';";;~' 'H. , . , c . , " FRC c . Fiscal Review Committee Minutes II bo.~ ~~. 'lg~(P ) Date . j '~jL}" f,. -. , , "'.1 , , . , " ,I " . ,. '. . , ~ ' .... \ :. , .. " \ . I'. " " ., \ . .. ~ '-" .' " ':.' ,.'.':. ," ,.' ',' ,.,.'.... .<. .":,: :','~. '..' .:.,.,',:,:,... :'.':: : .... ".....'..,... ...,'."'.. >..~: >';. - , '.' , , .... I . , I" I.. 1-:-- . . u.,., , , ' . ,. . I' ,j '''-~..... + ~ . ~'>. Absent: Daniel Fleck Committee Member , '. " ',. . " ~ FISCAL REVIEW COMMITTEE CITY OF CLEARWATER May 28, 1996 Present: John Rich Janet MacNutt Daniel Moran Carol Warren Tina Wilson Chuck Warrington Jim lewin Bob Bublitz Patricia O. Sullivan Committee Member Committee Member Committee Member Committee Member Budget Director Clearwater Gas System Managing Director Clearwater Gas System Assistant Director Clearwater Gas System Controller Board Reporter Budget Director, Tina Wilson called the meeting to order at 4:00 p.m. I:;> CGS (Clearwater Gas System) Assistant Director Jim Lewin distributed a summary of the 3-year Marketing Plan. He said CGS is developing the plan's main points: 1) increase market awareness; 2) create data base from survey to determine which appliances residential and commercial customers have~ 3) increase customer base by 25 % within 3 years; 4) increase annual appliance sales by 50% within 3 years; 5) develop and implement information/safety outreach program for elementary/middle school students; and 6) develop comprehensive community communications program. Regarding marketing costs to obtain new customers, Mr. lewin said marketing cost centers include: 1) advertising; 2) energy conservation; and 3) marketing and planning. This year's budget for advertising and promotion is $415,000 and CGS projects signing 1,150 new customers at $350 each. Next year's budget of $475,000 projects 1,395 new customers at $341 each. CGS Managing Director Chuck Warrington said most of the $275,000 earmarked for energy conservation allowances covers appliance rebates. Other promotional activities include community events. It was recommended CGS contact existing customers. Mr. lewin reported the current billing system cannot create data bases. CGS is reviewing software and has hired a prlJgrammer to develop programs. The current system does not separate customers who use gas to cook or heat. eGS' sales representatives currently gather that information through one~on-one contact and mailings to targeted neighborhoods. The first quarterly customer newsletter will be distributed in July as a bill insert. CGS' 3 Pinellas County and 2 Pasco County sales representatives are paid 50% base salary and 50% commissions, plus mileage allowance. It was questioned if sales representative costs are included in new customer costs. Mr. Lewin said staff is not included in those costs. It was suggested overhead costs for sales representatives, time, and administration staff provide a truer picture of new customer costs. Mr. Warrington said sales representatives address customer service concerns and sales. He estimated o mfrc05c.96 1 OS/28/96 . <'" "'co .v '.. . c ,,~ / ~ ,~~, ,':' . 'j ',' " ',! ',I,.' ,', ',~'.:.,,:u:,.." '__....:..~.:...'.:.............:.:::~~I,;~.. '. ,', :....;::, '.,: ""~.::"'~: ,,','; ,:";' "", '.:'.': ":.":.' '....'. ' ':; "<"~:~" ,.~' ~/ ";. .',':f'" ',',' '.: ',', , '" >'.'. . I~ ) 50% of sales representative costs are related to obtaining new business. In answer to a question, CGS Controller Bob Bublitz said administration staff costs are not charged to sales. He noted administration costs should not include such items as warehouse personnel and a training officer. Staff is developing a log to charge costs more accurately. According to CGS' goals, it was noted each sales representative must sign up 220 new customers. It was suggested CGS hire additional sales representatives. Mr. Lewin said added representatives would generate a need for more support staff including construction and installation labor for service and repair. Mr. Bublitz said the computer programmer will design a program to track and schedule staff time for improved efficiency. A hand held time assignment and scheduler would benefit field installations, fully account for time, and increase efficiency and billing times. Currently, field communications are handled by radios in the trucks. Mr. \Narrington said projected new customer connections are based on current sales staff levels. He estimated CGS will sign up 1,1 66 new customers in FY (fiscal year) 1995/96 and 1,939 in FY 2001/02. Sales representatives also contact current customers, schedule installations, and troubleshoot. Improvement in work flow management would allow sales representatives to be more effective. He estimated 25% to 30% of their time is spent coordinating installations. .t~ i""l:r) In answer to a question, Mr. Lewin said he and a marketing engineer position handle accounts such as Morton Plant Hospital and area malls. eGS recently signed up the Pasco County Morton Plant Trinity Hospital which uses 115,000 gallons of propane gas annually. Natural gas pipes have not yet been installed. CGS is negotiating with Pasco County hospitals: 1) HCA in New Port Richey - 250,000 therms annually and 2) North Bay - 95,000 therms annually. The Pasco School Board also has indicated an interest in converting current systems once pipes are installed. Negotiations with an asphalt plant are difficult as they currently burn low-cost reclaimed oil. CGS has held several seminars for architects and engineers regarding the benefits of natural gas air conditioning. Mr. Warrington said each sales representative is assigned a territory. CGS is considering converting territories for representatives to target specialized markets such as new construction and commercial accounts. The sales staff organization and commission structure wilf be reviewed. Annual sales goals are driven by the strategic plan and tracked monthly. CGS uses a team concept and enco,urages the sales force to share ideas to reach solutions. In answer to a question, Ms. Wilson said CGS always has been an Enterprise Fund. In answer to a question, Mr. Lewin said staff retention is excellent. Only one sales representative has left since the new marketing program was established. In the past several years, Mr. Warrington estimated CGS released 6 employees and 10 employees Quit. He said CGS attracts many applicants from other City departments. o Mr. Warrington noted the City Commission had questioned CGS' ability to accomplish their strategic plan. CGS feels those goals can be obtained ,and will produce mfrc05c.96 2 OS/28/96 ~ ' ," ..' . .~':.' , '. ;, ,'. .. :..' ":. ." :' . ..... :;"" . ~." '. ': .:.!,\: :. . ..:.,.... :.:;" ~ -:.;', .<,: ::,:': .:':. ':'~' ;'.::' ~~ ':-"" ',... . i' .", :..:'" ".: ":.":.'..:' '.: :,...':' :.'!.' ;':',: :'., C.:. ,:::.:..~ ;\' :":"')' {;,"<:.:.:.: <', '. : :, ': "'_1'" ".....'1\'1'..'....\.., .... .....,.., '"..' , ::.' :..: -: .:' '. '. ,::... .'<'.,: ': ',\ '. : '~.~~:',' .,~.<~'::.\>:.-;>.'.::\.' ~"::':,:;"':'~.'<'~.::>~i'" .' ~",,:C: ":>:', .....::.IL.:~:<'.::." '. . ,:'..:.~I"/ ';::<:" .,'.:..'.>\.:.:.. .. ':,:', :.1':'"", ,:.':....'1...'.....: .,1...,'/"'" ..~." .,,:.:I:.:.~~,~,.....:....,,;.'-...:,....:~......~.. ~. .\.,.... I. ..... ". :.';'. .....(~~..~. ..f: :....,:.: .:..: ,~,I.l'.;,'" ....: ,'..... . I'') report cards outlining accomplishments. CGS currently is ahead of their goals. In reference to a management audit recommendation, Mr. Warrington said R. W. Beck had done an assessment of CGS in 1989 to help craft an RFP (request for proposals) for the utility's sale. The study indicated the City was not realizing CGS' potential. In 1991, Grant Thornton's business plan study indicated the City should be more market oriented. Neither study was a management audit. CGS is developing a RFP to analyze strategic plans, review management structure, assess management and goals, and recommend a course of action, including costs. He expected proposals will be returned in mid-June. It was suggested CGS may need closer scrutiny. Concern was expressed CGS has a $40-million "blank check," a near monopoly, a sales force that acts as service representatives and technicians, and no benchmarks established by the City. It was noted eGS is not encouraged to pay back bonds early. It was recommended that measurable benchmarks be established. It was felt most of sales representatives' time should be charged to marketing. It was questioned if CGS plans to purchase a computer system. Mr. Bublitz said a computer system and software are listed in the Strategic Plan to be included in the new bond issue. Software will be customized. CGS has had computer problems for at least two years. The goal is to integrate eGS with City software systems. Ms. Wilson reported utility system software will be purchased in 3 years. ,,,.~ 1"..<\' In answer to a question, Ms. Wilson said staff prepares quarterly budget reports on general fund and enterprise operations although budgets are not specifically correlated to CGS goals. The Budget Department scrutinizes goals twice yearly. In answer to a question, Ms. Wilson said the City Manager reviews and judges department goals. Goals are incorporated in the budget document. eGs' goals are included in their Strategic Plan. The City Manager rates CGS on 16 goals. CGS reviews their 50 to 60 goals monthly. It was noted eGS is a relatively new business and progress takes time. It was stated management must take responsibility for rate study mistakes as the rate study was two years old before rates became effective. It was noted private companies report to a board of directors while CGS reports to the Commission and City Manager. Mr. Warrington reported some utilities have formed authorities within or outside the confines of their city commissions. These authorities are similar to boards of directors and meet regularly. It was noted CGS cannot keep going back to the City for additional funds. It was felt quarterly or monthly monitoring is critical to the system's growth. Mr. Warrington said a monthly statement is prepared for the City Manager stating key indicators. It was felt an advisory committee would offer business insights, expertise, and input. Monthly monitoring was encouraged to enhance progress, meet or exceed goals, and address potential errors. Mr. Warr!ngton said CGS has created internal pressure for staff to meet goals. It was suggested quarterly reports may be more effective. Mr. Warrington said the utility's business is affected by seasonal weather changes. Mr. Lewin recently established weekly goals for Pasco's sales representatives who earn a base salary of $19,700 plus commjs~ions on installation, appliance, and gas sales. Sales representatives earn an average $40,000 annually. For the past three years, CGS and sales representatives have established goals for appliance saJes and new customers. Mr. Lewin said the current goal <) mfrc05c.96 3 OS/28/96 ~.'(:: ~:':_"" . ',', ': " ,.\:" ',' :. \:'... ....'~:.,..'.~ :,-:'.,' .~.:." .~.',>':<.~>':"."::,\.:: ',~:"~;'.~':,:",::,.:.:.,}~~':~j>:".:(,I/::'~.;."i~"'~~">:',"';':/~':~;.:',:.';:,:.....>":,,,,:,::;.:,,,:"::"," ':'" "., ""~' ':.. ..::.:" . , " '. , 'I . L" , . I "'. .,..l ',\ . .' '. ' I~, '.' J " , . . f ~ .', I '~'. f' . , . . ........ 'J.. . ,.'. :~\~/. 'II' ,0".. ".'. ,", ,.1..,"" ..,: "'{" . ...... .... .,': ...J...., I', '.'~ ;'" ,: ....'.,..:..,4..~.;I.~.. .....'~....i...~'.;.:,:...:,.;.... ..........'~ ...,....:'..: \".:,'.. :.... <':. ..'.... :..,: .,1....... "":" '.1... ....... ...~."'.. " I, :} is to increase the number of Pinellas County customers by at least 6%. Ms. Wilson said CGS's productivity is reported in the budget. In answer to a question, Mr. Warrington said in 1990, the Finance Director had estimated CGS was worth $23.5-million. The highest bid received under PSC (Public Service Commission) rules was less than $15-million. Mr. Warrington estimated the utility's current net worth, after paying off bonds, is between $20-million and $30-million. Fund equity now is $1 O-million. It was felt the Strategic Plan shows vision and intent. It was felt the FRC can operate as a watchdog for the utility. In answer to a question, Mr. Warrington said CGS had difficulty hiring a controller based on the salary level offered. It was felt CGS is heading in the right direction. eGS' commitment to Pasco County was noted as those earnings help pay City'taxes. It was stated CGS' main commitment is to Clearwater citizens. Mr. Warrington noted commercial corridors are more profitable than residential ones. Consensus was to support CGS' Strategic Plan and proposed rate increases. The FRC recommends completing the marketing plan and more closely monitoring CGS' operations, including monthly reports on goals and productivity ratios. FRC also recommended the Commission appoint an outside advisory group, establish CGS reporting requirements, and identify goals. Ms. Wilson indicated staff is moving forward with a management audit. <:) Mr. Warrington stated bonding for FY 1995/96 is complete. A proposed $9.7- million bond will fund this year's construction. Approximately $5-milllon has been committed, but not spent. Commissioner Seel had requested a eGS report card prior to passage of the next bond issue. As many CGS activities are handled by annual contracts, CGS must borrow money from next year's bond issue before a report card is completed at the end of this fiscal year. This rolling window, similar to a line of credit, authorizes spending against future bond issues. The Marketing Plan wlll be distributed this summer and the Management Review should be completed before the end of FY 1995/96. Plans are to sell next year.s bonds in February or March 1997. . Finance Director Margie Simmons had expressed concern regarding selling bonds in increments less than $1 Q-million. Mr. Warrington said every funding request includes a report to the City Manager listing the total of committed funds and the total spent. Consensus was to appoint John Rich as Chair and Carol Warren as Co-Chair. It was questioned if the FRC typically will meet for more than five hours addressing an issue. Ms. Wilson hoped the City Commission will direct the FRC's role. She will forward her recommendations to the City Manager and City Commission. She indicated some issues may require more than one monthly meeting. All City enterprise operations currently are developing business plans. The City Commission may request the FRC review these plans. .::J The meeting adjourned at 5:34 p.m. mfrc05c.96 4 05/28/96 ".1. : . -F' ~'A.jlJ::.IJ. ..' '1.,. '_' ,I :......, :',... '.' , . '.:.,..'..:,.,..,., ',,'.";":"\ """i'': ......... ',.', .....:::.. ;",<.' 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