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HomeMy WebLinkAboutMinutes City Council - 05/19/1982J1 MINUTES CITY OF CORPUS CHRISTI, TEXAS REGULAR COUNCIL MEETING MAY 19, 1982 11:26 A. M. PRESENT: Mayor Luther Jones Mayor Pro Tem Betty N. Turner Council Members: Jack K. Dumphy Bob Gulley Herbert L. Hawkins, Jr. Dr. Charles W. Kennedy Cliff Zarsky City Manager Edward Martin City Attorney J. Bruce Aycock City Secretary Bill G. Read Mayor Luther Jones called the meeting to order in the Council Chamber of City Hall. City Secretary Bill G. Read called the roll of required Charter Officers and verified that the necessary quorum was present to conduct a legally constituted meeting. A motion was made by Council Member Hawkins that the Minutes of the Regular Council Meeting of May 5, 1982 be approved as presented; seconded by Council Member Dumphy; and passed unanimously. Mayor Jones noted the issuance of the following proclamations: 1. "AMERICAN BUSINESS WOMEN'S ASSOCIATION SCHOLARSHIP MONTH" - May, 1982. 2. "WORLD TRADE WEEK - May 16-22, 1982. Mayor Jones announced the bid opening on the following engineering project: Kentner Street Improvements from Palmetto Street to Claremore. This .Bond project provides for the reconstruction of one half of Kentner Street from University Place to Claremore where right-of-way was recently donated and subdivision development will soon take place. This project also provides for the construction of a 4 -foot wide sidewalk on the east side of Kentner from University Place to Palmetto Street. The scope of the Bond Program also provided for an additional block of Kentner Street from Claremore to Homecrest being reconstructed, but due to unresolved right-of-way problems, it is recommended that the additional work continue to be deferred until satisfactory right-of-way arrangements can be made. MLCROFJLMED SEP 3 91984 Minutes Regular Council Meeting May 19, 1982 Page 2 Mr. James K. Lontos, P.E., Assistant City Manager, opened bids on this project from the following companies: Goldston Corporation; Heldenfels Brothers, Inc.; Isles Construction Company; and King Construction Company. i Mr. Lontos verified that the required bid security bond had been submitted with each bid. Mayor Jones stated that the bids will be tabled for 48 hours, pursuant to the requirements of the City Charter and referred to the Staff for tabulation and recommendation. A motion was made by Council Member Hawkins that Council Member Bob Gulley serve as Acting Mayor Pro Tem in the absence of both Mayor Luther Jones and Mayor Pro Tem Betty Turner; seconded by Council Member Dumphy; and passed unanimously. Mayor Jones called for consideration of actions of the City Council by motion on the following items: 1. Emergency repairs to the electrical power service at the Corpus Christi International Airport totaling $8,334.00 be noted. The work involves the replacement of a cable by a new cable of around 510 feet between manholes. Electrical Construction Company is furnishing the labor and materials for the work. 2. Plans and specifications for the Glenoak Drive Storm Sewer Extension project be approved and bids be received June 23, 1982. This 1977 bond project provides for the installation of 60" diameter storm sewer conduit in the large open ditch which exists at the extension of ,Glenoak Drive at Flour Bluff Drive. The very large drainage ditch was cut in 1968 to relieve flooding in the Glenoak-Flour Bluff Drive-Retta Street area. Subdivision construction is now taking place within this drainage area, and the Glenoak Drive extension project will provide a drainage outfall for the existing subdivision as well as a very sizeable area of this portion of Flour Bluff. 3. An agreement be approved with the State of Texas for the Five Points Storm Sewer Outfall System providing for City/State joint funding of the project. The State will design and administer the project, excavate the offsite drainage channel and pay 40% of the concrete drainage box on U. S. Highway 77. The City will pay 60% of this box and all the cost of a bridge at Emory Drive, the entrance structure at' the Missouri Pacific Railroad channel and smaller drainage structures. All right-of-way for the off-site drainage channel will be acquired by the City. The City's share of construction costs will be appropriated and placed in escrow when plans are complete and an estimate is available. Construction will begin early in 1983. ti `(,4jrrt MEAL L M , gap $ Aidn Meeting May;iij igf� feg9 1. «4,1,4. The Downtown Improvement project be accepted and final payment of $60,491.42 for a total of $631,430.90 be made to Heldenfels Brothers, Inc. This project provided for the installation of storm sewer in the downtown area including landscaping, sidewalks, pedestrian ramps, planters and benches. The project was funded by the 1977 Bond Program and by 6th Year Community Development Block Grant funds. 5. A change order for $6,959 be approved for additional work performed for International Airport Terminal Building Renovation work. The change order provides for a) spray -on acoustical texture in the new restroom ceiling and vestibule, b) ceiling work at the rental car booths, c) installation of carpet in lieu of tile at the new baggage claim entry, d) installation of door scanners in lieu of automatic door mats, and e) additional trim work in the enlarged ticket lobby area. The work included items requested by the Airport Manager and the architect to provide more acceptable finish on several areas of the Terminal Expansion project. Funds for the change order are available in the contingency appropriation, and no separate appropriation is necessary. 6. The following actions be taken on revisions to the Wooldridge -Staples Drainage Channel. a. A public hearing be held June 2, 1982 on the proposed amendment to the Master Drainage Plan. It is proposed that the drainage plan be amended to widen the channel by 4 feet and deepen it by approximately 18 inches. The change would permit draining all of a 163 -acre tract to the Wooldridge -Staples, channel in lieu of draining only two-thirds of the tract as`is currently indicated on the plan. b. An agreement be approved conditioned on the Master Plan revision whereby the developers of the 163 -acre tract at Saratoga Boulevard and Cimmaron Boulevard would pay the cIty $40,000 in increased costs to widen, deepen and enlarge the structures in the outfall channel. Mr. Tim Clower and Mr. R. C. Allen, developers of the tract outside the City limits, have requested City services and an annexation agreement is now being prepared. 7. An additional elbow -boom aerial bucket, furnished and installed on a City vehicle, be purchased from Sky -Dart, Inc. of Mansfield, Texas on the basis of low bid of $9,973 for the Traffic and Transit Department. The bucket is included in the 1981-82 Budget and is part of a preventive maintenance program for the replacement of traffic signal bulbs to reduce the unscheduled call out of crews to perform replacement. 8. one replacement 10,000 gross vehicle weight van with utility body and aerial lift be purchased from UEC Equipment Company, Houston, Texas, on the basis of low bid meeting specifications of $29,028. The apparent low bid of $28,314 by Commercial Body Corporation of San Antonio does not contain insulation to protest against electrical shock should the unit come in contact with power lines. The unit is included in the 1981-82 Budget and will be used by Traffic and Transit for maintenance of traffic signals. 9. Bids be received June 8, 1982 for a twelve months supply agreement for pipe repair clamps, saddles, coupling and adapters including approximately 1864 full circle clamps, 30 steel pipe repair clamps, 600 saddles, 1300 steel couplings, 30 PVC repair clamps, 30 bell joint clamps, 600 brass adapters and gaskets for the Gas and Water Divisions. Minutes Regular CoUhcil Meeting May 19, 1982 Page 4 10. An automated film booking system be purchased for the South Texas Library System from Research Technology International Company, Lincolnwood, Illinois, for $28,205 on the basis of low bid. The equipment is included in the grant from the State Library for the system and includes a computer and related hardware and software to reserve films for library patrons and to quickly determine what films are available for checkout. No local money is involved. Tao bids were received. 11. A contract for removing of an ambulance module from a present cab and chassis and refurbishing and installing it on a new cab and chasis provided by the seller be awarded to Superior Southwest, Inc. of Dallas on the basis of low bid of $23,078. The project is included in the 1981-82 Budget. Refurbishing of the module will extend its service life. The cab and chassis to be replaced is a 1978 model. Purchase of a completely new ambulance would cost at least twice as much. The refurbishing and remounting of this unit, the two replacement ambulances purchased earlier this year and the four purchased last year will complete the updating of the ambulance fleet. Several of the Council Members indicated that they had a question about items 2, 3, 4 and 6. A motion was made by Council Member Gulley that items 1, 5, 7, 8, 9, 10 and 11 be approved; seconded by Council Member Hawkins; and passed unanimously. * Council Member Kennedy arrived at the meeting at 11:02 a. m. Council Member Zarsky referred to item 2 and requested that a transparency be displayed indicating the location. Mr. James K. Lontos, P.E., Assistant City Manager, pointed out the area on the transparency and explained where the various subdivisions are located in the area. He stated that this project is to remedy the drainage problem near the portion at Flour Bluff Road, stating that the drainage will be routed to Oso Creek. He informed the Council that this extension will take care of all of the area from Retta Place to the Oso, one-fourth of a mile on the south and one-half mile to the north. City Manager Martin referred to item 3 and explained that this was a project that began with the understanding that the City would pay 100%. He stated that the State has now agreed to pay 40% of the drainage box with the City paying 60% which will result in a savings of $500,000 which will be available for other projects. Council Member Gulley referred to item 4 and inquired if this downtown project did not include the sidewalks on Shoreline. Mr. Lontos explained that there are two downtown projects and the one under contract at this time includes the sidewalks on Shoreline, but this is another downtown project. • Middle® Reg%11Rk CoUridi1 Meeting 'May 19, 1982 Page 5 Mr. Lontos then referred to item 1 and stated that there are some problems with the cable at the airport. He explained the events associated with a power -out that occurred the preceding night and stated that they are of the opinion that this cable should be replaced. Mayor Jones referred to item 4 and mentioned the memorandum in regard to the statement to the effect that the contractor may enter into litigation because of the requirement to maintain two-way traffic in the intersection. Mayor Jones inquired if it was possible to reach a compromise to avoid litigation. Assistant City Manager Lontos explained that the contract was awarded at a reduced scope than that originally planned. He explained further that the question of litigation is a result of an interpretation of the contract that was included in the contract, noting that the contract specified that one lane of traffic must be open at all times. He stated that, however, the contractor had closed one of the streets at one time and informed him that a member of the Engineering Staff had stated that this would be satisfactory. Mr. Lontos assured the Council that he had checked with every member of the Staff, and was confident that none of them had given the contractor verbal permission to do so. Mayor Jones expressed the opinion that the contractor should have complied with the written specifications. City Manager Martin assured the Council that the Staff is still working on this dispute and will try to resolve it, but they feel that the contractor should receive his final payment at this time. There were no questions from the audience on these items. A motion was made by Council Member Zarsky that items 2, 3, 4 and 6 be approved; seconded by Council Member Dumphy; and passed unanimously. Mayor Jones called for actions of the City Council by ordinance and referred to number 1 item, the new ordinances. There were no questions on these ordinances. A motion was made by Council Member Gulley that the new ordinances be brought forward for consideration at the appropriate time; seconded by Council Member Hawkins; and passed unanimously. Minutes Regular Council Meeting May 19} 1982 Page 6 A motion was made by Council Member Gulley that the second and third reading ordinances be brought forward; seconded by Council Member Hawkins; and passed unanimously. Thee were no comments from the audience on the ordinances; City Secretary Read polled the Council for their votes; and the following were passed: FIRST READING: AUTHORIZING EXECUTION OF AMENDMENT TO IN LOT 13, SECTION 56, FLOUR BLUFF AND CORPORATION AND SUN OIL COMPANY. The foregoing ordinance was read for reading by the following vote: Jones, and Zarsky voting, "Aye". ORDINANCE NO. 17042: SURFACE LEASE FOR A 2.07 ACRE DRILL SITE ENCINAL FARM AND GARDEN TRACTS WITH EXXON the first time and passed to its second Turner, Dumphy, Gulley, Hawkins, Kennedy AUTHORIZING THE CITY MANAGER TO EXECUTE A CONTRACT WITH DELTA UTILITIES FOR CONSTRUCTION OF, THE BROOKHAVEN--FIVE POINTS AREA SANITARY SEWER AND APPROPRIATING $150,000 FOR THE PROJECT; AND DECLARING AN EMERGENCY. The Charter Rule was suspended and the foregoing ordinance passed by the following vote: Jones, Turner, Dumphy, Gulley, Hawkins, Kennedy and Zaraky voting, "Aye". ORDINANCE NO. 17043: AUTHORIZING THE CITY MANAGER TO EXECUTE AN AGREEMENT WITH E. H. MOORE HOMES, INC., AND J -R BUILDERS, INC., PROVIDING FOR THE CITY TO REIMBURSE THE DEVELOPER FOR ONE-HALF OF THE COST OF STREET CONSTRUCTION; APPROPRIATING $7,746; AND DECLARING AN EMERGENCY. The Charter Rule was suspended and the foregoing ordinance pased by the following vote: Jones, Turner, Dunphy, Gulley, Hawkins, Kennedy and Zarsky voting, "Aye". ORDINANCE NO. 17044: AUTHORIZING THE CITY MANAGER TO EXECUTE AN AGREEMENT WITH E. H. MOORE HOMES, INC., AND J -R BUILDERS, INC., PROVIDING FOR THE CITY TO REIMBURSE THE DEVELOPER FOR ADDITIONAL HOT -MIX ASPHALT AND CALICHE BASE ON EVERHART ROAD; APPROPRIATING $33,134; AND DECLARING AN EMERGENCY. The Charter Rule was suspended and the foregoing ordinance passed by the following vote: Jones, Turner, Dunphy, Gulley, Hawkins, Kennedy and Zaraky voting, "Aye". ORDINANCE NO. 17045: ANNEXING 1.3 ACRES OUT OF THE NUECES RIVER IRRIGATION PARK ANNEX NO. 1 WEST OF THE CALALLEN HIGH SCHOOL TRACT; AND DECLARING AN EMERGENCY. The Charter Rule was suspended and the foregoing ordinance passed by the following vote: Jones, Turner, Dunphy, Gulley, Hawkins, Kennedy and Zarsky voting, "Aye". Minutes Regular Council Meeting May 19, 1982 Page 7 SECOND READING: CLOSING AND ABANDONING A 10 -FOOT UTILITY EASEMENT, A 5 -FOOT PORTION OF WHICH IS OUT OF MT. VERNON SUBDIVISION NO. 3 AND A PORTION IS OUT OF PADRE -STAPLES MALL; CLOSING AND ABANDONING TWO 10 -FOOT UTILITY EASEMENTS PREVIOUSLY RETAINED THROUGH THE CLOSING OF MT. VERNON DRIVE; CLOSING AND ABANDONING ALL OF JANET DRIVE FROM THE NORTH RIGHT OF WAY LINE OF MT. VERNON DRIVE TO THE SOUTH ;RIGHT OF WAY LINE OF McARDLE ROAD AND MT. VERNON DRIVE FROM LENORA DRIVE TO JANET DRIVE, SUBJECT TO CONDITIONS SET FORTH HEREINAFTER. The foregoing ordinance was read for the second time and passed to its third reading by the following vote: Jones, Turner, Dunphy, Gulley, Hawkins, Kennedy and Zarsky voting, "Aye". THIRD READING - ORDINANCE NO. 17046: REPEALING ORDINANCE NO. 16337 WHICH AUTHORIZED AN INDUSTRIAL DISTRICT AGREEMENT WITH SUNTIDE REFINING COMPANY; AIUTHORIZING EXECUTION OF A NEW AGREEMENT WITH KOCH REFINING COMPANY, PURCHASER OF SUNTIDE REFINING COMPANY'S INDUSTRIAL PROPERTY. The foregoing ordinance was rehd for the third time and passed by the following vote: Jones, Turner, Dumphy, Gulley, Hawkins, Kennedy and Zarsky voting, "Aye". THIRD READING - ORDINANCE NO. 17047: AMENDING CHAPTER 17, FINANCE AND TAXATION, OF THE CITY CODE BY ADDING A NEW SECTION TO EXEMPT THE SALE OF SURPLUS LIBRARY BOOKS AND MATERIALS FROM THE REQUIREMENT OF DETERMINING IF SUCH MATERIALS MAY BE UTILIZED BY OTHER DEPARTMENTS BEFORE BEING OFFERED FOR SALE TO THE PUBLIC. The foregoing ordinance was read for the third time and passed by the following vote: Jones, Turner, Dunphy, Gulley, Hawkins, Kennedy and Zarsky voting, "Aye". THIRD READING - ORDINANCE NO. 17048: AUTHORIZING THE CITY MANAGER TO EXECUTE A CONTRACT FOR ANNEXATION OF 1.3 ACRES OUT OF THE NUECES RIVER IRRIGATION PARK ANNEX NO. 1, WEST OF THE CALALLEN HIGH SCHOOL TRACT. The foregoing ordinance was read for the third time and passed by the following vote: Jones, Turner, Dunphy, Gulley, Hawkins, Kennedy and Zarsky voting, "Aye". ORDINANCE NO. 17049: DELETING THE PRESENT PROVISIONS OF SECTION 53-257. SCHEDULE VIII, PARKING METER ZONES ESTABLISHED, AND IN LIEU THEREOF ADOPTING NEW PROVISIONS AS MORE FULLY SET FORTH HEREINAFTER. The Charter Rule was suspended and the foregoing ordinance passed by the following vote: Jones, Turner, Dunphy, Gulley, Hawkins, Kennedy and Zarsky voting, "Aye". *********** Under the City Manager's Report, Mr. Martin referred to the Special Called Meeting of the City Council and of the Corpus Christi Housing Finance Corporation conducted on Sunday morning in order to authorize application to be filed for an allocation from the State for tax-exempt revenue bonds for financing of single-family housing. He informed the Council that the City's application was ruled to be acceptable and the following amount was approved for Corpus Christi: $20,071,200. Mr. Martin also informed the Council that there MihtEes Hegiiiar Council Meeting May 19, 1982 Page 8 was over $100,000,000 in applications submitted on Monday that did not receive allocations. Council Member Zarsky inquired if the allocations were made on a pro -rata basis and City Manager Martin replied that it was on a first-come first-served basis and the City of Corpus Christi received the last allocation. Mayor Jones indicated that he hoped that the news media would make it very clear that this money is still very tentative and it is possible that the City will not be able to sell the bonds. Mayor Jones suggested that it would be unwise for citizens who are in the process of purchasing a house to delay such a purchase. Council Member Gulley stated that he understood that the loans would be limited to first-time home buyers and asked for a list of guidelines associated with the tax-exempt revenue bonds. City Manager Martin confirmed that it would be limited to first-time home buyers; there will be an income limit to be determined at a later date; and there will be a limit on the value of the homes that could be purchased. Assistant City Manager Tom Utter further explained that many of the guidelines for these loans are already established and stated that this will be on a fixed interest rate. He reminded the Council that the bond purchase agreement signed on Sunday has a maximum interest rate not to exceed 13.5%. Hy way of information, Mr. Utter informed the Council that Midland sold bonds that day at an interest rate of 13.25% which means that the lending money would carry an interest rate of 13 7/88. Mr. Utter further informed the Council that all of the details will be worked out and noted that a lenders' meeting is scheduled to be conducted on Friday afternoon. He also stated that no contract will be honored that is dated prior to the date that the bonds are actually sold and Mr. Martin stated that the trustee must approve every loan. Council Member Gulley complimented the Staff on clearing the trash and grass from IH37 at the Old Nueces County Courthouse. There being no further business to come before the Council at this time, a motion was made by Council Member Gulley that the meeting be recessed at 12:10 p.m., seconded by Mayor Pro Tem Turner and passed unanimously. ********* Mitibies ftsgilidr Couneil Meeting MaY 19, 1982 Page 9 Mayor Jones reconvened the Regular Council Meeting in Room 225 of the Bayfront Plaza Convention Center and stated that the purpose of the meeting was to conduct a public hearing on the rate increase request of Central Power and Light Company. City Secretary Read verified that the necessary quorum of the Council and the required Charter Officers present to conduct a legally constituted meeting. Mayor Jones made a opening statement and reviewed the events which necessitated this public hearing. Mayor Jones explained that Central Power & Light Company filed with the City on March 25, 1982 a request for a system wide adjusted annual rate increase of $156,020,642, of which $24,153,543 would cane from rate payers inside the City limits. He explained that the increase request was filed in accordance with the Public Utility Regulatory Act as well as Article VIII, Section 7 of the City Charter which grants the City Council full power after notice of hearing to regulate by ordinance the rates of Central Power and Light Company. Mayor Jones explained that the statute grants the City original jurisdiction over the rate request but allows the utility the right of appeal to the Texas Public Utility Commission. Mayor Jones explained that the City of Corpus Christi has cooperated with approximately seventy other cities served by CP&L to employ consultants and legal counsel to analyze the company's request and make recommendations concerning the request. He then explained the procedures to be followed during the public hearing, stating that Central Power and Light Company will be provided an opportunity to speak first. Mr. S. E. Kelley, Jr., District Manager of CP&L, made opening remarks and expressed appreciation to the Council and the City Staff, pointing out that CP&L has served this area for 66 years. Mr. Kelley reminded the Council that CP&L had decreased rates on several occasions and that it had been thirty months since they asked for an increase. Mr. Kelley informed the Council that the company's ability to borrow money had been affected by their existing rates and there is a need to determine what is fair if the company intends to remain as the supplier of electricity. He stated that they are present today to justify their request and to be in a position to furnish power for their customers. * Council Member Herbert Hawkins arrived at the public hearing at 2:17 p.m. driyI1 Council Meeting May 19, 1982 Page id ,z The next speaker was Mr. R. L. Range, Executive Vice -President and Chief Financial Officer of CP&L. Mr. Range stated that he was speaking for more than 2,400 employees of CP&L and stated that seeking a rate increase is not an enjoyable process because they are adverse to increasing rates, especially since times are difficult and companies are failing= but that they were of the opinion that they would be in error if they did not ask for an increase to properly serve their customers. Mr. Range explained that their cost increases included the cost of generating plants, the electrical power demand on the system and the cost of additional generating plants to provide this City's power. ** Mayor Pro Tem Betty Turner arrived at the meeting at 2:21 p.m. Mr. Range continued by stating that they are attempting to examine other methods rather than gas of providing energy. Mr. Range then displayed slides containing charts showing the various costs involved. He referred to the cost of service and stated that there is a need to have revenues to maintain the level of service. He noted that at this time the company has a revenue deficiency. He explained the expenses of operating the company that they have and stated that they can be audited and verified. He explained that an ample return on rate base must be realized in order to build facilities and the rate base is comprised of the company's physical facilities and items such as working capital, fuel, stocks, etc. Mr. Range then explained Construction Work in Progress (CWIP). He stated that the company must have revenue to continue such construction and even though many people are opposed to paying for any costs of the facilities until they are in service, it would be impossible for the company to carry out large construction over a long period of time unless Construction Work in Progress is included in the rate base. He pointed out that the rate base will ultimately be much less after the facilities are in use and the cost of construction is not included. Mr. Range stated that 95% of the company's CWIP is associated with the South Texas nuclear power plant of which Central Power and Light owns 25.2%. He admitted that the project has encountered many difficulties, but that they now have a new builder and a new architect on the project who are very experienced and work should progress at a steady pace. He stated that it is still an economically sound, vital project which will be very important in the next few years. He explained that when nuclear power is used, the cost is .s ;14 i: Midifef; . a 8egUlsr Council Meeting May 19, 1982 Page 11 projected to be 96C per million BTU's; the cost of coal projected to be $4.73 per million BTU's; and the cost of natural gas is projected to be $9.88 per million BTU's. Mr. Range noted that the estimate for the cost of natural gas could be very conservative. Mr. Range pointed out the difference in the cost of fuel if the company uses nuclear power, noting that the savings will be approximately $7.00 per million BTU's if compared to the cost of natural gas of $8.00, which would amount to $800,000,000 with this savings expected to increase over several years. He emphasized the fact that this fuel cost savings was the reason the decision was made to construct the nuclear plant. Mr. Range referred to the litigation between CP&L and Brown & Root, the former constructor of the nuclear plant, and the concern expressed that rate payers receive their rightful share of whatever benefits are received by CP&L in their pursuit of litigation. Mr. Range stated that the position of CP&L is now; and has alwasy been, that any amount the company is awarded, less related costs of litigation, will be credited back to the cost of the project. He staed that any reduction in project cost would accrue to the benefit of the rate payer. Mr. Range reminded the Council that the question of cost control and efficiency was raised during their last rate increase request hearing. He explained that during the last ten years, the number of customers served has increased 46%; kilowatt hours increased 75%; but the number of employees increased only 4% in that ten year period. He stated that they were required to add 100 new employees to the Staff at the Coleto Creek Plant in 1980. He assured the Council that the company stresses training, efficiency of management and operations and the use 'of equipment and systems to achieve increased productivity. He noted that wages represent 12% of the base rates which is down from 15% ten years ago; taxes increased 29%; and return is now 33% of the base rate. He stated that they are making every effort to maintain their efficiency of operation and stated that CP&L's base rate are among the lowest in the State but their fuel costs are among the highest, noting that the cost of fuel continues to increase but they are providing ways to implement load management measures. He stated that they are also encouraging efficient use by all customers. He also pointed out that investors have actually realized a loss on their investment. Mayor Jones then called for the presentation from the City's consulting firm, Touche, Ross and Company. Itdt�lilar Council Meeting May 15; 1982 Page 12 Mr. Greg Tarasar, a partner in the firm of Touche, Ross and Company, addressed the Council and referred first to the South Texas Nuclear Plant and Efficiency of Operation. He stated that the progress of the construction of the South Texas Plant is of major concern to the cities served by Central Power and Light, noting that the scope of the project includes 1) the necessity of the construction to meet load growth; 2) the cost of STP relative to alternative generation; 3) the cost of overruns resulting from alleged mismanagement; and 4) the ncessity to maintain the company's financial integrity. Mr. Tarasar stated that after study and comparison of figures, they had concluded that the South Texas Nuclear Project was necessary. He referred to the cost overruns associated with the project and stated that his company had concluded that the 1 imposing of a penalty should be on a factual basis and the development of such a basis has been limited by: (1) the statutory time -frame for disposing of a rate application; (2) the reluctance of the Public Utility Commission to hold a separate hearing pertaining to STP; (3) the cost to the cities of holding their separate STP hearing; (4) the probability of the Commission upholding the regulatory action of a City, if the company appeals the action; (5) the pending review by Bechtel Power Corporation and Ebasco Services, Inc.; and (6) the pending litigation against Brown & Root. Mr. Tarasar stated that it had previously been recommended to the cities several years ago that the consultants perform a separate study On the cost of the project, but that this would require from $200,000 to $350,000 and that there is not enough time to perform this task in the 180 days of a rate case. Mr. Tarasar referred to the financial integrity of the company and stated that this is very important because the company does need to continue the construction of the plant. He stated that Touche-Ross has two recommendations in regard to the South Texas. (1) if the litigation against Brown & Root is successful and the ruling is in favor of CP&L, all benefits should be passed back to the consumer; however, if damages have to be paid, they do not feel that this should be passed on to the consumer; (2) Touche-Ross does not believe that the litigation, itself, relieves the Commission from the responsibility of examining that project. He stated that the consultants have recommended a separate hearing on the South Texas project and even though this may cost the City some money, they feel that the Public Utility Commission should make this examination. �.4 Wf ite�dlgr Council Meeting May 19, 1982 Page 13 Mr. Tarasar stated that Touche-Ross had made a comparison of the selected operational ratio to ten Texas utilities. He explained the results of the comparison by stating that CP&L ranked favorably on all items with the exception of the following: Transmission, 0 & M expense per MWH sales, Fuel expense per kilowatt hour, revenue per kilowatt hour. He stated that as a result of this, the consultants do not recommend a management audit of the company. Mr. Tarasar then reviewed a number of reports prepared as a part of their study of the rate increase request and referred, in particular, to the key comparison of various items included in the company's request. He stated that the company proposed revenue requirements included in their request was $156,021,000 whereas after their study, Touch -Ross recommended revenue requirements of $72,862,000. Mr. Tarasar also referred to the estimated residential increase per month based on 1,000 KWH usage and noted that the company proposes an increase of $80.69 but the consultant proposes $71.62. Mr. Tarasar reviewed the breakdown of their study of CP&L's rate base and the items included in it. Mr. Tarasar then referred to the pretax interest coverage per the identure sand explained the way this deduction is made. He summarized by stating that CP&L's estimate for 1983 was 3.50 x whereas'the consultant's estimate was 3.39 x. He stated that the lower figure that they had recommended does not mean that the company is not maintaining their plants properly, because they are doing that, but the consultants feel that this is adequate in order for them to issue bonds. In regard to the company's operating income, CP&L's proposal is for $103,505,000 whereas the consultants, recommended figure is $105,504,000. Mr. Tarasar then briefly reviewed the figures submitted by the company and the consultant's analysis of the figures on the rate of return, rate of return major issues, cost allocations for production plant, return differentials, and other issues. He summarized this portion by stating that the company indicated that they have lost over $4,000,000 and the consultants feel that this should be disallowed. Mr. Tarasar then indicated that he would answei any Council questions. Mayor Pro Tem Turner asked about the current bond rating of the company and Mr. Tarasar stated that it is Aa. Mika4s Regular Council Meeting MaY 19; 1982 Page 14 Council Member Hawkins commented that the consultants had disagreed with the company's figures in several areas. He then inquired about the date any rate increase that is granted would go into effect and suggested that the rate increase be spread over thirty months. Mr. Hawkins also inquired that if a lesser increase is approved 'by the Public Utility Commission than CP&L has requested, when their next request will be forthcoming. Mr. Range replied that the pattern has been about every thirty months. Mr. Hawkins suggested that the rate increase be on a gradual basis rather than all at one time, noting that the impact of the entire increase at one time would be very detrimental, particularly to people on fixed incomes. Mr. Hawkins then inquired if the company is willing to compromise on some of the other areas in which the consultants disagreed with CP&L. Mr. Range explained that they had only received the report of the consultants within the last few days and have not had time to analyze it, but they hoped to arrive at some points of compromise. Council Member Zarsky asked Mr. Tarasar about the definitions and, in particular, the rate of return. Mr. Tarasar referred to their report, in particular, Schedule 21, which gives the return differentials. Council Member Zarsky stated that certain percentage of return is necessary to obtain financing and inquired if that was a standard procedure. Mr. Tarasar stated that if it is not profitable, the company would have to go out of business without a rate increase, and of course, Central Power and Light Company cannot go out of business. Council Member Zarsky mentioned the possibility of operating a municipal power company, and Mr. Tarasar pointed out that this would be a very difficult task. Mr. Zarsky then indicated that he would like to have a comparison of operation costs for a city power company with that of CP&L. Mayor Jones then inquired about the cost of the consultants. Mr. Tarasar stated that the project consists of himself and three other associate members; all of them have accounting backgrounds; they worked approximately 700 hours at'a cost for all of the cities of $95,000. Nqrq chutes [ie`�iilar Council Meeting kiy, 19, 1982 Pae 15 Council Member Hawkins inquired if the rate of return of CP&L dividends will remain the same, and Mr. Tarasar expressed the opinion that the company would increase their dividend payment. Mr. Hawkins made the observation that apparently, CP&L intends to pay the same dividends, yet everybody else is suffering from a recession. He asked Mr. Range why the shareholders are not taking as much of a loss as other people are experiencing. Mr; Range explained that the rate of dividends is considerably below the average of cost of living but the dividends are controlled or directed by the board. He stated that the company expects to pay dividends of about 9% on the common stock. Mr. Hawkins then stated that he was of the opinion that the increases and the dividends or profit should be similar to the economy. Mr. Rangel pointed out that the rate of increase and dividends has been below the rate of price increases for a number of years. Mr. Hawkins then referred to Brown & Root Construction Company and the problems they have encountered in construction of the nuclear plant. He stated that he was of the opinion that citizens do not think they should have to pay for the cost overruns. Mr. Range agreed that the rate payers should not have to pay for the cost overruns but pointed out that CP&L is not the entity in charge of this but noted that they are in the litigation process in regard to this matter. He stated that they did not feel that separate studies of the STP plant would be as comprehensive as that of litigation. He assured the Council that CP&L plans to become as involved as possible to make sure that his company receives full award of any damages that result from the litigation. Mr. Hawkins continued by pointing out that Touche-Ross feels that the rate payer should only have to pay 60% of the cost overruns rather than the 100%. Mr. Range stated that they did not know exactly what the overruns consist of at this time, but it is their intention to credit any recovery made back to the cost of the project which will eventually benefit the rate payer. Discussion followed in the relationship of Central Power and Light Company in connection with the parent company. MigUter iteitinr Council Meeting May, 19?, 1982 Page i6 Council Member Dumphy inquired if CP&L will be able to evaluate the Touche-Ross recommendation prior to the hearing before the Public Utility Commission, and Mr. Range stated that the hearing before the Commission will be on June 1st and they will start working overtime to analyze Touche-Ross' recommendation so that they will have a position prior to that date. Mr. Hawkins then inquired if CP&L is taking any steps to make it easier for rate payers to make their payments, which are already excessive, and Mr. Range stated that CP&L had had programs whereby if customers are undergoing genuine hardship, they can go to the local managers and work out a payment program. ' Mayor Jones inquired if CP&L has a program to expand the number of jobs in the area when they expand their plants. Mr. Range stated that they do not encourage industries to locate here if they use a lot of power and create very few jobs but they do encourage the development of businesses that generate lesser power and employ more people. Mayor Jones inquired about the proportion of power produced by CP&L that is used by the industries as compared to the residential. Mr. Kelley replied to this and stated that 40% is used for residential and 60% for industries. He explained that their policy used to be to build power plants and then go out and attract industry, but they can no longer do that because the days of attracting industry with low cost electricity are in the past. He noted that in the past, they felt that they could take credit for attracting the Dupont Plant to this area. Council Member Hawkins then inquired of the Touche-Ross' representatives what choice the City has if CP&L does not agree to their recommendations. Mr. Tarasar explained that this will be litigated at the Commission level and the decision will be made then, and if the City does not agree with their decision, the matter can be taken to the courts. Mr. Hawkins then inquired if there were any other companies from wham power could be purchased other than from CP&L. Mr. Tarasar stated that the City could petition for a change but Touche-Ross would not recommend that. Mayor Jones called for comments from members of the audience and explained the procedure to be followed. He suggested that the public comments be addressed to the Council only, not to the consultants or CP&L's representatives. Tt• • Mihutes Regular Council Meeting May 19, 1982 Page 17 Mr. Ronald McGee stated that he had obtained a petition containing 13,380 signatures expressing opposition to the rate increase, noting that this petition will be presented to the Public Utility Commission. He stated that the rate request would be too much of a burden on the residential customers because they feel that they not only have to pay for power used but they must also pay for the fuel adjustment for the company's cost of gas, and now CP&L has asked for $100,000,000 for the cost of the nuclear power plant, and they are asking for $65,000,000 to go to the stockholders and to CP&L. He stated that they intend to fight CP&L on the rate increase as far as possible. He also questioned CP&L's statement that the stockholders are not receiving as much of a dividend as they have in the past and quoted from an article in the Wall Street Journal which seemed to dispute this statement. Mrs. Elizabeth Taylor, 1910 Orange Street, expressed opposition t6 the rate increase for CP&L. She stated that there are so many citizens who cannot afford any extra money to pay for the power plant and she objected to the mistakes made by Brown & Root in the construction of the plant. Mrs. Taylor questioned whether the citizens of Corpus Christi would even benefit from the plant the way the stockholders will. She also noted that citizens cannot pay for the rate increase. Mayor Jones inquired about the percentage of the increase. Mr. Rick Mertz, Administrative Assistant for the City Manager, replied that the rate increase is in the amount of $156,000,000 which is about 48% increase on the base bill or about 20% on the total bill. Mrs. Taylor then suggested that the stockholders should pay for the mistakes made by Brown & Root. Mr. J. E. O'Brien, 4130 Pompano, speaking as President of the Taxpayer's Association, referred to all of the testimony which had been given in figures and percentages, stating that he will continue in that method. He noted that CP&L is the largest taxpayer in the City of Corpus Christi; the assessment for 1980 was $154,544,863, yet, they are asking for $156,000,000 increase. He noted that their valuation was increased only about 18. He suggested that the reason for the need for a rate increase was gross mismanagement and greed on the part of the company. He did, however, compliment CP&L on their efforts to restore power to the City after Hurricane Celia. Mr. O'Brien continued by stating that in 1974, the tax rate in Corpus Christi was 920 in 1981 the tax rate was 620 ki tes • Regular Council Meeting May 19, 1982 Page 18 and during the same time period, the valuation in the City of Corpus Christi was doubled, which indicates that CP&L has had a 50% increase in the number of customers. He stated, however, that in 1974, their net income was $2.9 million, but in 1981, it was $93.6 million which is an increase of over 3,000% in their net income. Mr. O'Brien continued by stating that the usual trend is when a company becomes bigger, the product they produce is cheaper, but that is certainly not true of CP&L. He suggested that if CP&L is going to continue to request substantial rate increases, the Public Utility Commission should open up the question of fuel pass through costs. Mr. Clifford Cosgrove, 3302 Olsen, expressed opposition to the rate increase that CP&L has made. He stated that he felt that it was a mistake for the company to become involved in the nuclear power plant in Bay City but, since they own 25% of it, they should have had some input in regard to the construction. He expressed the opinion that the Brown & Root construction was inadequate and demonstrated poor workmanship and he was not in favor for the nuclear plant. Mrs. Pam Bright, 1337 6th Street, expressed opposition to the rate increase,. She stated that ,she felt that it is unfair and the economy is so bad it is going to be very difficult for anyone to pay additional costs to CP&L. Mrs. Alice Blackwell, 3726 Panama, stated that she is a former resident of San Antonio, and the citizens of that City feel the same about the nuclear power plant as the people do here. She referred to the increases passed on by Valero Company for the price of gas and stated that they were told that the use of coal 'would decrease the cost of power, but this never happened, and she anticipated that the same thing would happen when the nuclear power plant is in production. She stated that people on a fixed income would have great difficulty in paying their electric bills. Mr. John Carter, a resident of Flour Bluff, asked about the original cost of the power plant when it first started. He then objected to the cost being passed on to the customers. No one else spoke in regard to the CP&L rate increase request. City Manager Martin informed the Council that from a Staff's standpoint, ,they would recommend that the public hearing be•recessed. He commented that the Council has heard from CP&L and from the City's consultant about their recommendations on the increase. He stated that they would like to study the i • \ Minutes R Regular Council Meeting May 19, 1982 Page 19 matter and he would recommend that the hearing be recessed until the end of June after the hearings before the Public Utility Commission since a rate increase cannot go into effect until this City Council approves it. A motion was made by Council Member Zarsky that this public hearing be recessed until the completion of the hearings before the Public .Utility Commission in late June; seconded by Mayor Pro Tem Turner; and passed unanimously. There being no further business to come before the Council, on motion by Council Member Zarsky, seconded by Mayor Pro Tem Turner, and passed unanimously, the Regular Council Meeting was adjourned at 4:58 p.m., May 19, 1982. *********