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05/28/1996No heading here on 5/20/99 when brought up to convert Gwen has Tues. 5/28/96 in header she had "frc0516.nts" on left side of footer but date on right side of footer was 05/28/96 deleted frc0516.nts from footer It is Fiscal Review Committee Present: John Rich Janet McNutt Daniel Moran Daniel Fleck Carol Warren Tina Wilson Chuck Warrington Jim Lewin Board Member Board Member Board Member Board Member Board Member Budget Director Managing Director, Clearwater Gas System Assistant Director, Clearwater Gas System   Bob Bublitz Gwen Legters Controller, Clearwater Gas System Board Reporter  Absent:     Tina Wilson, Budget Director, opened the meeting, and introduced the gas item. Jim Lewin, Assistant Director, CGS (Clearwater Gas System) distributed a one-page summary on the three-year marketing plan. Marketing activities are implemented and monitored by Mr. Lewis, Mr. Farquar and Mr. Warrington. Mr. Warrington joined CGS in 1992, at which time CGS began reporting to the City Manager’s office rather than the Public Works Department. The marketing department was nonexistent. One sales rep left CGS since the new program began. Approximately six sales staff have been released in the last few years, and ten left the company voluntarily due to promotions or personal reasons. Solid Waste, Public Service and Parks and Recreation department personnel have applied for gas technician positions due to growth opportunities. FRC reviewed marketing objectives, sales and marketing, advertising, promotional events, and budgetary expenditures. Six main objectives of the plan were discussed. Increased awareness of marketing through branding and image-based promotions is a priority. Surveys of residential and commercial customers will be helpful in determining appliance usage. Results will be entered in a database for direct marketing purposes. CGS plans to increase total customer base 25% within the next three years, increase annual appliance sales 50%, and implement an outreach program for elementary and middle school children. Safety procedures for natural gas will be emphasized. A comprehensive community communications program will also be developed. Commercial sales reps’ commission plans will be updated. Annual goals have been established for sales reps and are monitored monthly. Mr. Lewin reviewed the breakdown of marketing dollars for fiscal year 1995/96 and fiscal year 1996/97. Advertising and other promotional funds directly impact three cost centers. The energy conservation cost center is the largest with $85,000 for 1995/96, and $275,000 in other promotional costs. The Marketing and Planning cost center entails $15,000 in advertising and $30,000 in other promotional costs. Pasco sales cost center receives a small advertising and promotional budget. Total budget for 1995/96 is $415,000 for advertising and promotional activities. New customer projections are 1150 at $361.00 in advertising per customer. The advertising budget for 1996//97 is $475,000 and the strategic plan projects 1395 total new customers at $341.00 in marketing costs per customer. Other promotional costs include community events and displays at facilities such as architectural design centers. Chuck Warrington, Managing Director, CGS, added that the rebate money for energy conservation measures taken for appliances is included in “other promotional” costs. A new database must be created for redesign of the current billing system. CGS’ in-house programmer will be involved in the process. In addition to securing new customers, tracking existing customers is imperative. Breakdowns of customers which are heat-only or cooking-only cannot be determined with the current system. Mr. Bublitz, Controller, CGS, indicated hardware and software with upgrade capabilities will be requested. He noted that customized software will obviously be more costly. CGS agrees this is critical. Mr. Warrington announced the first customer newsletter will be mailed in July as a bill insert. Mailouts are scheduled four times per year. CGS has three sales reps in Pinellas County and two in Pasco County, who are paid on salary and commissions, as well as mileage for use of personal vehicles. Sales reps handle customer service inquiries in addition to sales responsibilities. Reps receive 50% in base salary and 50% for service administration functions is paid. Mr. Warrington noted that weekly goals have been implemented for Pasco County sales reps. Sales reps currently spend 25% to 30% of their daily activities on sales, engineering , troubleshooting and coordination of installations. This operation will be refined. Mr. Rich indicated sales reps base salaries are approximately $19,700 annually, plus commission, making approximately $40,000 annually. Commission is acquired through appliance and gas sales, installation, and all product sales. Monthly reports are being done on all operations at CGS. The reports do include goals. Page 25 of the strategic plan does show specific goals. Bob Bublitz, stated a considerable number of costs in the Administration cost center require revisions. Warehouse personnel, training officers, and the operations manager positions will be movedi to the operations cost center. Mr. Warrington, Mr. Nina, Mr. Lewin and Mr. Bublitz are part of Administration. Plans are to implement a time log, allowing personnel to charge time to various cost centers and calculate totals daily. Current schedules are distributed each morning, although some appointments are dispatched via radio. Hand-held time reporting devices for installers and sales personnel would reduce paperwork. Mr. Rich suggested, based on current projections, it may be wise to hire more sales reps. Mr. Lewin responded hiring more sales reps would necessitate hiring more support staff, such as construction labor, installation labor, and service and repair personnel. Mr. Warrington projected 1166 customers for 1997 and 1939 by 2002, utilizing a team of five sales reps. Morton Plant Trinity Hospital has recently become a CGS propane customer and projections are 115 gallons per year. Gas installations are ongoing in that area. Negotiations with HCA, New Port Richey, Pasco School Board and North Bay in Pasco County are ongoing. An asphalt plant in the area east of State Road 54 is currently burning low cost, reclaimed oil and is a potential customer. Other potential customers include building contractors and architects. Mr. Warrington stated CGS is ahead of anticipated goals and feels the strategic plan will be accomplished. R. W. Beck performed an assessment of CGS in 1989 and helped the City craft RFP for sales of the system. In 1991 Grant Thornton did a first business plan study. Neither were management audits, however CGS is now working on RFP to analyze strategic plans, management structure and assessment of management and goals. Proposals over $25,000 must have Commission approval, proposals under $25,000 require City Manager approval. Mr. Rich suggested economizing and accomplishing measurable benchmarks rather than asking for money to accomplish goals. Mr. Moran agreed with the suggestion of economizing. He questioned the viability of the proposed computer system to provide pertinent statistics necessary for future efficiency and growth. The purpose of this committee is fiscal review of CGS. Closer monitoring of CGS operations was advised on a continuous basis. Ms. Wilson prepares budget reports three times yearly for the City Manager for presentation to the Commission. Operational status including general fund and enterprise operational goals are scrutinized by CGS two to four times a year. The City Manager reviews goals on a six month or annual basis. Mr. Warrington referenced the “Program Budget & Goals” on pages 19, 22 ,25 and 28 of the CGS Strategic Business Plan Update. The City Manager rates CGS on a total of 16 goals, however CGS has 50 to 60 goals are reviewed monthly by CGS. Ms. Warren recognized CGS is a new business, and although progress takes time, management must take responsibility for mistakes. The new rate change should have been implemented two years ago, upon completion of the study. If CGS were a private company, management would have been required to report to a board of directors. In this case, CGS would report to the Commission and the City Manager. Mr. Rich felt monitoring is critical to CGS’ growth and should be done monthly. Ms. Wilson felt that CGS is monitoring goals monthly, perhaps just not formally. Mr. Rich agreed that if monitoring is done more often, potential errors may be discovered and dealt with quickly, and progress enhanced. Mr. Warrington stated many municipalities have formed authorities within or outside the confines of the Commission. Formal reporting issues are flexible and CGS will be happy to provide reporting as determined by the Commission. It was suggested an advisory board may give CGS valuable insight from other businessmen in the community. Mr. Warrington agreed. Ms. Warren inquired about the year an offer to purchase CGS was considered. Mr. Rich asked what CGS’ current worth was should the business be sold. R. W. Beck ‘s estimate CGS’ worth was $29 , and the Finance Director, through internal assessment, felt CGS’ worth was $24 Million. Mr. Warrington indicated Mr. Bublitz can perform an analysis of CGS’ present value. In 1990, CGS’ estimated worth was $23 million to $24 million. In 1990, the highest bid received, based on the book value that the PSC was willing to allow investor-owned companies earn, was slightly less than $15 million. People’s Gas offered $14.9 million. CGS has grown the past few years. Mr. Warrington estimated CGS’ net worth between $20 million to $30 million, and added bonds would have to be paid. He also indicated CGS has a fund equity value of $10 Million, which is strictly book fund equity. Ms. Warren emphasized CGS’ commitment to Pasco County. Moneys earned in Pasco County will help pay the City’s taxes. Summary discussion ensued. The FRC is comfortable with the strategic plan and willing to move forward with rate increases. The FRC requested closer monitoring of CGS operations, including monthly reports on goals and productivity ratios. The Commission has already asked for a management audit and CGS staff is agreeable. It was suggested the Commission consider an outside advisory committee or board and establish CGS reporting requirements. Mr. Warrington stated bonding for fiscal year 1995/96 is complete. Commissioner Seel had requested a report card prior to passage of the next bond. Annual contracts are done for many activities, such as labor contractors for CGS installations. A report card will be available at the end of each year, subsequent to the completion of yearly contracts. A rolling window exists authorizing moneys against future bond issues. The $9.7 million only covers costs this year. Next year another $8 Million bond will be required. Agenda items will be given to the Commission at the next meeting. Dependence upon the report card items would stunt CGS’ ongoing process. Ms. Wilson summarized four areas the Commission should address before the next meeting . She will copy FRC members. The FRC must elect a formal chairperson for this committee. It was agreed to elect John Rich as FRC Chair and Carol Warren as co-chair. Ms. Wilson will draft a formal letter on scheduled FRC meetings to the Commission . The meeting adjourned at 5:34 p.m.