Staff CLC- CVEC Cape Cod

Mr. Ronald Bergstrom
Speaker

All Delegates
Barnstable County Assembly of Delegates
Barnstable, MA

May 9, 2014

Re: Determination of Current Allocation of Barnstable County Financial Resources to Support the Operations of the Cape Light Compact and the Cape & Vineyard Electric Cooperative

Dear Speaker Bergstrom and Assembly Delegates,

Although I was unable to attend in person, I watched the video recording of the recent meeting on May 7, 2014 of the Barnstable County Assembly of Delegates with great interest.

As all know by now, Barnstable County has provided, and continues to provide, the Cape Light Compact and the Cape & Vineyard Electric Cooperative with very substantial resources to subsidize the cost of their operations.
Pursuant to the terms of Administrative Services Agreements with CLC and CVEC, respectively, and in accordance with the terms of the CLC Intergovernmental Agreement and the CLC Municipal Aggregation Plan, Barnstable County is the Administrative and Fiscal Agent to both CLC and CVEC. 

In this capacity, in addition to keeping the books and records for both entities, and, ostensibly, providing some degree of financial oversight and supervision over their activities (which the County Commissioners have manifestly neglected to do, in practice), Barnstable County provides the office space, phones, information technology and personnel to administer many of the administrative and financial functions of these quasi-public organizations.

As has become apparent in recent years, the financial cost to the County of all of these subsidies is substantial. 

Notwithstanding the growing awareness of the significant financial burden that these subsidies have imposed upon the County, the County Treasurer does not provide -- and has never provided -- the County Commissioners, the Assembly of Delegates or the General Public with any detailed cost accounting of these costs.  

In fact, to my knowledge, the County Treasurer has never even attempted to track these expenses, notwithstanding his responsibilities  as County Treasurer, as Fiscal Agent to both CLC and CVEC, as the Treasurer of CVEC to keep and maintain accurate accounts and to provide all of these constituents with coherent reports on the costs of their operations.

Over time, the County Treasurer and County Commissioners have fallen into the practice of drawing up an Annual Budget that completely ignores these substantial costs to the Barnstable County taxpayers.  The Assembly of Delegates, for its part, has approved these Budgets, in the form in which they are provided -- which is to say without having the slightest understanding of the size of the financial subsidies to the Cape Light Compact, CVEC, or other agencies, that are embedded within the Budget.

In my opinion, the Assembly is to be commended on its recent refusal on May 7th to approve the County Budget that was forwarded by the County Commissioners.  To do otherwise would be to approve the Budget in the face of the Delegates' growing collective awareness that they really have no idea how the money will actually be spent!

As Delegate McCutcheon eloquently asked -- and numerous other Delegates agreed -- how can the Assembly approve a 2 1/2% tax increase on residents and approve an overall budget when it essentially has no idea how much of the money will be used to subsidize the operations of two "public bodies" that insist that they are entirely independent of the County and over which the Assembly has no jurisdiction and can claim no legitimate interest?

As another Delegate noted, such blind approval of these unquantified and unknown subsidies is all the more inappropriate in the face of the repeated refusals of the Cape Light Compact and the Cape & Vineyard Electric Cooperative to provide the sort of routine financial transparency and public accountability that the Assembly and many members of the public sought for over three years, or to address the concerns of the Assembly and the public about myriad conflicts of interest.

As some Delegates already know, the County Treasurer made some alarming admissions to the County Commissioners in his discussion of the County's finances at the Commissioners' meeting on January 8, 2014 (see video record of the meeting here:  mailto:http://www.barnstablecounty.org/county-commissioner-videos/ ). 

Here are some excerpted comments that Mr. Zielinski offered to the Commissioners to explain the County's expenses:

Zielinski:  "The volume, especially on AP [accounts payable], is up because we’re paying more bills especially for two things.  Our two biggest, sort of, “customers,” in terms of invoices are the Cape Light Compact and the Energy Efficiency Program – by far, those are the two biggest."

* * *

Flynn:  So when you include…..Somewhere in here are the……Where are the costs to actually provide the administrative services for the Compact?  And, say, for CVEC?  The financial costs?

Zielinski: We’re doing that with existing staff.  So they’re all covered with existing staff.  

Doherty: No

Zielinski: Yes.

Flynn: We’re talking about the personnel….they’re all blended into the personnel costs.

Zielinski: Yes.   Like Nancy Cushing, who is our payroll person, she does payroll for the Cape Light Compact, because those people are county employees.  And Kara Mahoney, who does our accounts payable, she cuts the check that I mentioned for all of the [CLC] Energy Efficiency vendors that we have.  So it’s built right in.

* * *

Doherty: Asks about time management systems to measure the time devoted to CLC

Zielinski:  As I say, one of the things that we have not done is do any sort of cost recovery.  So for example, say, like I said, the two biggest pieces of Accounts Payable, really by far, are the Energy Efficiency bills that we pay and the Septic Betterment.  Both of those are funded outside of the County’s coffers, basically. 

So say I wanted to charge back part of Kara’s time to the Septic Betterment program, I would look at the total number of invoices she works on over a period of time, pick whatever period you want, and see how many are Septic Betterment.  And let’s say it’s 10% -- 10% of her salary and fringes I would charge back.  That’s what we have to think about.  We’re not doing that now.

* * *

Clearly, County employees whose time and benefits are not reimbursed by the Cape Light Compact are devoting considerable time -- if not the majority of their time -- to the business of the Cape Light Compact and CVEC.

But there is an even bigger, more dangerous, financial burden that has been shifted to the County by the Cape Light Compact as a consequence of the huge growth in the payroll of the Cape Light Compact -- even for those employees the costs of whose salary and benefits are theoretically "reimbursed" to the County by the Cape Light Compact.

The County is already facing a crisis over the size of its unfunded liability for "Other Post Employment Benefits," or OPEB -- i.e. the cost of future retirement benefits for employees.  The County Treasurer and the County Commissioners acknowledge that the County has not set aside enough money to meet these future financial obligations and that the net present value of these future commitments -- the size of the unfunded liability -- is probably on the order of $60 million. 

In other words, that is the amount of money that the County needs to have set aside to pay for this future liability -- but did not. 

Instead, in a short-lived perpetuation of lenient accounting requirements for public bodies, the County continues to set aside "the bare minimum" expense to fund these future obligations.  In other words, the County expenses a minimal amount of money that is required to be set aside but which the Treasurer knows, and the County Commissioners know, to be woefully insufficient.

OPEB – Other Post Employment Benefits
(1 hr 15 minutes into the video record)

Flynn: Now I’d like to talk a bit about “Other Personnel Employee Benefits”.   What are we doing as a County to do with OPEB?

Zielinski: Well we do the bare minimum that we’re supposed to do as a county.

Corrected by Zielinski – “Other Post Employment Benefits”

Summary of remarks on OPEB – future costs of future health insurance benefits for retirees. 

Have to put aside money now to pay future health costs for retirees.  Pensions are accounted for.  These costs for future health benefits are an unfunded liability – no money has been put aside.

The total unfunded liability is about $60 million.  The Annual Retired Contribution (ARC) for the county to meet this future cost is about $4.5 million to $5 million. So if you wanted to fully fund your system for 20 years, you’d have to put aside $4.5 million every year for the next 20 years to fund it, assuming you earn the return of 7 7/8%.

[Bibler NOTE: This is a VERY aggressive return assumption since the U.S. Treasury 10 yr note yields about 2.60% and the US Treasury 30 yr bond yields less than 3.50%. !!!  The assumption of a 7 7/8% return on investment on funds set aside for OPEB has no bearing in reality -- which means that the true size of the unfunded liability, base upon a more reasonable assumption, is much greater than $60 million]

Flynn:  But you have to start somewhere.  In Falmouth, we set aside $10,000, just to get started.  [All laugh.  Ha ha ha].

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Staff

COMPACT ADMINISTRATOR:
Maggie Downey, Compact Administrator
(508) 375-6636
mdowney@barnstablecounty.org

POWER SUPPLY:
Stephan F. Wollenburg, Sr. Power Supply Planner
(508) 375-6623
swollenburg@capelightcompact.org

COMMERCIAL & INDUSTRIAL:
Meredith Miller, Commercial & Industrial Program Manager
(508) 744-1267
mmiller@capelightcompact.org

Vicki Marchant, CEM, Commercial & Industrial Program Analyst
(508) 744-1278
vmarchant@capelightcompact.org

Nicole Price Voudren, CEM, Commercial & Industrial Program Planner
(508) 375-6886
nprice@capelightcompact.org

RESIDENTIAL:
Margaret Song, Residential Program Manager
(508) 375-6843
msong@capelightcompact.org

Briana Kane, Senior Residential Program Coordinator
(508) 744-1277
bkane@capelightcompact.org

Matthew Dudley, Residential Program Coordinator
(508) 375-6829
mdudley@capelightcompact.org

ENERGY EDUCATION:
Debbie Fitton, Energy Education Coordinator
(508) 375-6703
dfitton@capelightcompact.org

EVALUATION, MEASUREMENT & VERIFICATION:
Philip Moffitt, Analyst
(508) 744-1279
pmoffitt@capelightcompact.org

Gail Azulay, EE EM&V Analyst
(508) 744-1266
gazulay@capelightcompact.org

MARKETING COORDINATOR & DATA ANALYST:
Lindsay Henderson
(508) 375-6889
lhenderson@capelightcompact.org

CUSTOMER SERVICE:
Kathy Stoffle, Customer Service Coordinator
(508) 744-1276
kstoffle@capelightcompact.org

Kim Deisher, Customer Service Coordinator
(508) 744-1273
kdeisher@capelightcompact.org

ADMINISTRATIVE ASSISTANT:
Karen Loura
(508) 375-6644
kloura@capelightcompact.org

Contact Us

For more information, please call 508-375-6891.

Mailing Address:

Cape & Vineyard Electric Cooperative, Inc.
3195 Main St.,  P.O. Box 427/SCH
Barnstable, MA 02630

Staff: