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March 28, 2016REGULAR MEETING OF THE CITY COUNCIL OF THE CITY OF NEDERLAND 4:30 p. m. March 28, 2016 1. MEETING The meeting was called to order at 4:30 p.m. by Mayor Nugent at the Nederland City Office Building, 207 N_ 121' Street, Nederland, Texas_ See attached for quorum. The following statement was read by Mayor Nugent: -F-URSUANT TO SECTION 30.07, PENAL CODE (TRESPASS BY LICENSE HOLDER WITH AN OPENLY CARRIED HAIVDGUN3, A PERSON LICENSED UNDER SUBCHAPTER H, CHAPTER 411, GOVERNMENT CODE (HANDGUN LICENSING LAWS, MAY NOT ENTER THIS PROPERTY WITH A HANDGUN THAT IS CARRIED OPENLY_" 2_ INVOCATION AND PLEDGE OF ALLEGIANCE, The invocation and pledge of allegiance were led by Gay Ferguson, City CIerK_ 3. CONSENT AGENDA - All consent agenda items listed are considered to be routine by the City Council and will be enacted by one motion. There will be no separate discussion of these items unless a councilor l`3er so requests, in which event the item will be removed from the Consent Agenda and considered separately. A motion was made by Mayor Pro Tem Albanese and seconded by Cou ncilmember Belaire to approve the Consent Agenda Items a -e as presented. MOTION CARRIED_ Ayes: Mayor Nugent, Cou ncilmembers Neal, Albanese, and Belaire_ Noes: None. Abse"t: Cou ncilmember Austin. a. Minutes — March Y4, 2016 regular meeting b. February 2016 C)epartmental Reports c. Tax Assessor Collector Report - February 2016 Cl. Consider a request from All Starts Little Clribblers to utilize the Nederland Recreation Center gymnasium for all stars bas Ketball team practices_ e. Payments: Basco Construction, Inc. - $46,672.02, Bob Henson Building Repairs/Improvements project Schaumburg 8, Polk, Inc. - $3,200.00, South S`^ Street Water Tower Rehabilitation project Minutes Continued, March 28, 2016 4. REGULAR AGENDA a. Allen Nation, Vice -President of Adaptive Sports for Kids, Inc. thanked council for their continued support and invited everyone to Opening Day scheduled for 1:00 p.m. on April 2, 2016 at Uarnar\sVincent Beck Stadium. Athletes presented t -shirts to counci|rnennbers. g. James Edwards, J.R. Edwards Ok Associates, LLP presented the Comprehensive Annual Financial Report ending September 3O,2O15toCity Council. He highlighted the management's letter and analysis and said these were very important to read. He reported there were no deficiencies and brought to Council's attention the Certificate of Achievement for Excellence in Financial Report which is given to those with the highest possible standards |ngovernment accounting. Mr. Edwards explained the single audit which was required due tothe amount of federal funding expenditures. Hesaid they tested the program with the greatest expenditures for the year, which was the General Land Office Community Development Block Grant Program. Headvised there were nofindings. A motion was made by Counc||memberBelaire and seconded by Mayor Pro Tern Albanese boaccept the Fiscal Year 2014-2015 audit as prepared b*].R. Edwards 8k Associates, LLC. MOTION CARRIED. Ayes: Mayor Nugent, Cound|rnennbersNeal, Albanese and Be|aine. Noes: None. Absent: Cound|nnernberAus1in. b. A motion was made by Mayor Pro Tern Albanese and seconded by Coumj|member Neal to approve Change Order No. 3 (adding $278'00 to the contract price) to replace galvanized gutters and downspouts with stainless steel gutters and downspouts onthe Bob Henson Building Repairs/Improvements project. MOTION CARRIED. Ayes: Mayor Nugent, Counci|rnenmbers Neal, Albanese and Be|aire. Noes: None. Absent: Counci|rnernberAusdn. c.Amotion was made by Mayor Pro Tern Albanese and seconded bvCound|member Neal to approve an Assignment of Agreement with Carroll 8k Blackman, Inc' to UA Engineering, Inc. regarding the Phase II y4S4 Permit Implementation Services. MOTION CARRIED. Ayes: Mayor Nugent, Cound|nnennbarS Neal, Albanese and Be|aire. Noes: Mone. Absent: Counci|rnennberAuatin. d.Amotion was made byOmnci|memberNeal and seconded by Mayor Pro Tern Albanese to approve payment to UA Engineering, Inc., Phase II MS4 Permit Implementation Services. MOTION CARRIED. Ayes: Mayor Nugent, CVund|rnennbersNeal, Albanese and Re|aire. Noes: None. Absent: Counci|nmennberAustin. e. Amotion was made by Mayor Pro Tern Albanese and seconded by Coumj|member Neal to approve Ordinance No. 3016-13, approving the rate increase settlement of Minutes Continued, March 28, 2016 Ayes: Mayor Nugent, Counci|membersNeal, Albanese and Belaire' Noes: None. Absent: Councilmember Austin. f. Bids: 1. A motion was made by Mayor Pro Tern Albanese and seconded by Mayor Nugent to award the bid for Water Inventory Items to HD Supply. MOTION CARRIED. Ayes: Mayor Nugent, Counci|rnernhens Neal, Albanese and Be|aire. Noes: None. Absent: Cound|rnennberAust|n. ii. A motion was made by Mayor Pm Tem Albanese and seconded by Counci|nlennber Neal to approve the bid for the Nederland Swimming Pool Fence project. MOTION CARRIED. Ayes: Mayor Nugent, Counci|nnemmbersNeal, Albanese and Be|aine. Noes: None. Absent: Councilmember Austin. S. EXECUTIVE SESSION The regular meeting was recessed at 5:15 p.m. by Mayor Nugent for the purpose of conducting an Executive Session as authorized by Texas Government Code, Chapter 551.071, Consultation with City Attorney. 6. RECONVENE The regular meeting was reconvened at 5:42 p.m. by Mayor Nugent. He announced the Executive Session was held for informational purposes only and no action is 7. COMMUNICATION City Manager's Report: a. Construction Project Update w Service Center- bid opening schedule for May 1Dm * Bob Henson Building - working on roof, granite work and moving phones and computers. ° South 5th Street Elevated Tower - Shroud is in place for environmental work to proceed. Artwork will bean Old English "N"with a black band around the bottom. * Doornbms Park - Dugouts are near completion. * L[}Construction -fina|izing quantities on the street project. b. Art -in -the -Park will beSaturday, April 2nd c' Miscellaneous: * Swimming Pool is being drained in order to begin the resurfacing project ° ASK Opening Ceremonies April 2nd at 1:00 p.m. at Lamar University Minutes Continued, March 28, 2016 There being no further business a motion was made by Mayor Pro Tern Albanese and seconded by Cound|rnernber Be|aineto adjourn the meeting at 5:53 p.m. MOTION CARRIED. Ayes: Mayor Nugent, [ound|nnernbersNeal, Albanese and Be|aire. Noes: None. Absent: Counci|rnernberAugtin. City of Nede nd, Texas 4'r hq 1 'J-�lm City of Nederland, Texas CITY OF NEDERLAND COUNCIL MEETING ATTENDANCE SHEET NAME TITLE PRES NT ABSENT R. A. Nugent Mayor Talmadge Austin Council Member - Ward I " Billy Neal Council Member- Ward 11 Don Albanese Council Member - Ward III V Craig Belaire Council Member -Ward IV V Chris Duque City Manager Gay Ferguson City Clerk Jesse Branick City Attorney Cheryl Dowden Director of Finance V Darrell Bush Police Chief Gary Collins Fire Chief Steve Hamilton Director of Public Works George Wheeler Building Official V Victoria Klehn Librarian Holly Guidry Human Resources Director Joni Underwood Executive Secretary V to/ An ela Fanette Parks Director R'A. Nuidgent, MVoVr �.. 11 a 1 tM , 1.. _ r March 28, 2016 Date ALLISON NATHAN GETZ TAX ASSESSOR -COLLECTOR STATE OF TEXAS COUNTY OF JEFFERSON TERRY WUENSCHEL CHIEF DEPUTY 1, Allison Nathan Getz, P.C.C., the Tax Assessor -Collector of Jefferson County, Texas and also, by contract or statute, the Tax Assessor -Collector for CITY OF NEDERLAND, affirm, under oath, that this amount $658,985.88, represents all taxes collected for CITY OF NEDERLAND during the month of February 2016. Allison Nathan Getz, P.C.C. JEFFERSON COUNTY COURTHOUSE - P.O. BOX 2112 • BEAUMONT, TEXAS 77704-2112 PHONE: (409)835-8516 • FAX: (409)835-8589 AN ORDINANCE BY THE CITY OF NEDERLAND, TEXAS (-CITY-) APPROVING THE RATE INCREASE SETTLEMENT OF TEXAS GAS SERVICE COMPANY; SETTING FINAL RATES; APPROVING A RATE CASE EXPENSE COLLECTION SURCHARGE; FINDING THAT THE MEETING COMPLIES WITH THE OPEN MEETINGS ACT; MAKING OTHER FINDINGS AND PROVISIONS RELATED TO THE SUBJECT; AND DECLARING AN EFFECTIVE DATE WHEREAS, on or about December 30, 2015, Texas Gas Service Company filed a Statement of Intent with the City to consolidate the existing South Jefferson County Service Area and the Galveston Service Area Into a newly created Gulf Coast Service Area and to increase natural gas rates by $3.171 million per year, and WHEREAS, Texas Gas Service Company updated and revised its original rate request for the Gulf Coast Service Area to $3.308 million per year; and WHEREAS, the City of Nederland suspended the effective date of the Texas Gas Service Company's rates within its jurisdictional limits until at least May 3, 2016 and hired the Lawton Law Firm, P.C. to review the Company's rate change request and proposed tariffs; and WHEREAS, the expert utility rate consultants retained to review Texas Gas Service Company's rate increase on behalf of the City have made a range of proposed adjustments and concluded that Texas Gas Service Company has not justified the need for a $3.308 million annual rate increase. The consultants' analyses recommend reducing. the Texas Gas Service Company annual rate request by about $1.208 million resulting In an annual increase of about $2.1 million for the Gulf Coast Service Area; and WHEREAS, Texas Gas Service Company, Railroad Commission Staff, South Jefferson County Service Area Cities, and Galveston Service Area Cities participated in a number of settlement discussions to resolve the rate case Issues without litigation; and WHEREAS, Texas Gas Service Company has agreed to settle the rate request at a rate increase level of $2.3 million per year for the combined Gulf Coast Service Area, setting the residential customer charge at $13.00 per month, allocating costs to customer classes based on Company witness Cummings Option 3 allocation which minimizes residential class impact while no other customer class Is moved further from cost based revenue assignment, and the current separate gas cost clauses for South Jefferson County Service Area Cities and Galveston Service Area Cities will be maintained in the newly combined Gulf Coast Service Area level, and reasonable rate case expenses will be recovered from all customers through a 24 month surcharge; and WHEREAS, the Railroad Commission Staff, the Lawton Law Firm retained to represent the South Jefferson Service Area Cities, and counsel for the Galveston Service Area Cities have recommended approval of the Settlement terms as a reasonable alternative to resolve the rate case issues without litigation; and WHEREAS, the statutory deadline to act on Texas Gas Service Company's rate increase request is May 3, 2016. NOW THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF NEDERLAND, TEXAS, THAT: Section 1. That the statement and findings set out in the preamble to this Ordinance are hereby in all things approved and adopted. Section 2. The City of Nederland hereby approves rates and tariffs consistent with the Texas Gas Service Company proposed Settlement. Section 3. Texas Gas Service Company is hereby ordered to file with the City rates and tariffs consistent with the proposed Settlement. Section 4. The meeting at which this Ordinance was approved was in all things conducted in strict compliance with the Texas Open Meetings Act, Texas Government Code, Chapter 551. Section S. This ordinance shall become effective from and after its passage. PASSED AND APPROVED this 28TH day of MARCH, 2016. R. A. Nugent ayor City of Nederland, Texas ATTEST: l� Gay Ferguson, City Clerk City of Nederland, Texas APPROVED AS TO FORM AND LEGALITY: erland, Jessy City THE LAWTON LAW FIRM, P.C. 136w Hill Country Bh d.. Suite 11-375 • Amain, Texas 78738 . 513/392-0019 • Fax: $55/998-7978 Sent via e-mail Mr. D. E. Sosa City Manager -City of Groves 3947 Lincoln Groves, TX 77619 Mr. Chris Duque City Manager -City of Nederland P.O. Box 967 Nederland, TX 77627 Mr. Brian McDougal City Manager — City of Port Arthur P.O. Box 1089 Port Arthur, TX 77641-1089 Mr. Andre Wimer City Manager -City of Port Neches 634 Ave C Port Neches, TX 77651 March 17, 2016 Mr. James Black City Attorney — City of Groves P.O. Box 3286 Port Arthur, TX 77643 Mr. Jesse Branick City Attorney — City of Nederland 3120 Central Mall Drive Port Arthur, TX 77642 Ms. Val Tizeno City Attorney — City of Port Arthur P.O. Box 1089 Port Arthur, TX 77640 Mr. Pete Steele City Attorney — City of Port Neches 3120 Central Mall Dr. Port Arthur, Texas 77642 Re: Texas Gas Service 2015 Base Rate Case Status. Settlement. and Final Rate Ordinance Dear Cities: As discussed in our Marsch 3, 2016 letter regarding the rate case status before the Cities, Texas Gas Service Company ("TGS" or "Company") has agreed to settle the proposed rate increase at levels that are much more favorable to customers relative to the Company's original rate request. As you are aware the Company filed with each City notice of intent to increase rates in the South Jefferson County Service Area ("SJCSA") and Galveston service areas. (As you now know the Company proposes to combine the Cities in the SJCSA with the Galveston service area into a new Gulf Coast Service Area ("GCSA"). The Company's original rate request notice requested an annual revenue requirement increase of approximately $3.171 million in the combined SJCSA and Galveston Service Areas, and the proposed increase to the SJCSA was about $2.954 million annually. The Company has since updated its rate request through CONFIDENTIAL ATTORNEY CLIENT COMMUNICATION December 31, 2015 and the updated combined request for the GCSA is now $3,308,859 and the SJCSA updated increase is $3,057,549.. Given the updates, the South Jefferson service area Cities are looking at a $3 million annual increase request. In addition, the South Jefferson Cities would experience higher gas prices under the proposed combination of the service areas of South Jefferson County and Galveston. Our analysis of the proposed combination of service areas shows that the South Jefferson gas costs have been about 80 cents to $1.00 lower per Mcf than Galveston. When the systems are combined, the combined gas costs for South Jefferson will be higher and Galveston customers will benefit with lower gas costs. Our rate consultant has gone through the TGS case- request in preparation of providing expert testimony in this proceeding. The consultant analysis has calculated various proposed adjustments resulting in an annual increase of about $2.1 million. Basically, the issues identified by the rate consultant would reduce the Company's overall combined rate request of $3.308 million by about $1.208 million. In recent weeks the Company has approached all parties including Railroad Commission Staff ("Commission StafP) and Galveston regarding the possibility of resolving this case by settlement. In these discussions the Company has been fine that TGS must go forward with the service area combination. The Commission Staff has supported the combination based on the view that the Railroad Commission policy is to consolidate service areas. We proposed an alternative way to resolve the consolidation issue's impact on South Jefferson customers, that the fuel (gas adjustment clause) remains separated so that the South Jefferson customers retain the lower fuel cost benefits even in consolidation of the systems. Given that the systems are not .integrated, separate gas and transportation supply contracts must be arranged and keeping gas costs separate makes sense for the SJCSA customers. The negotiating parties agreed that in an overall settlement the gas costs should be separated. In terms of settling revenue requirement issues, the Company would agree to a $2.3 million- annual- rate increase this- compared to our consultant- recommendation of a $2.1 million annual increase. Given the uncertainty of successfully litigating each issue, litigation cost, and the added benefit of retaining separate gas fuel clauses in the proposed consolidated service area, a settlement at $2.3 million annual increase is reasonable to SJCSA customers. The Company would also agree to lower the current customer charge for residential customers to $13.00 per -month from the current $18.48 level and the proposed $22.00 level. This lower customer charge benefits the small user and promotes conservation. In terms of the issue of allocating the rate increase to the various customer classes, the Settlement allocates a portion of the increase to all customer classes. The Texas Gas Service Company originally proposed to allocate increase residential rates by about $4 million annually while providing about $900,000 in reductions to the remaining customer classes. As part of the CONFIDENTIAL ATTORNEY CLIENT COMMUNICATION r Settlement, the Company agreed to spread the rate increase to all customer classes consistent with the alternative presented in the Company's own expert's study and analysis. We recommend that such a revenue spread of the rate increase would reflect a more balanced rate design for all customer groups. To evaluate the impact of the proposed Settlement rate levels relative to the original TGS rate request I have prepared the follQwi»g table comparing the impact of the .proposed settlement on residential customers in both the SJCSA and Galveston areas. Resideglial Rate Imnset Coigg dant Customer Current TGS TGS TGS % Settlmnt Settlmnt Settlmnt Class & Avg. Requested Requested Change Avg Bill Increase % Location Bill Avg Bill Increase Change sacsA Res $44.$7 $51.17 $6.30 14.0% $47.97 $3.10 6.9% Gale Res $32.82 $44.67 $11.85 36.1% $48.18 57.28 22.2% The Settlement average monthly percentage rate impact on remaining SJCSA customer classes. is as follows: Class Commercial Public Authority Original FP sed 2.1% 5.4% Commercial Transportation -6.6% Settle 13.4% 10.5% 8.4% Given all of the above, I am recommending that Cities accept a settlement at the $2.3 million annual rate increase level with the agreed rate design, cost allocation, and separate fuel (gas cost) clauses in the new consolidated service area. I have attached a rate ordinance for each city so that the city can accept, reject, or order an alternative increase. Rejecting the settlement or ordering an alternative rate change will likely require continuing the rate case litigation. Again, I am recommending that each City accept the settlement because in my opinion, a settlement on 1 The proposed TGS rates and Settlement rates are the sante in both the SJCSA and Galveston, the reason that the average bill is different is that monthly average usage in the SJCSA is 32 ccf and 25 cef in Galveston. The Settlement increase for the residential customers is 6.9"/o and 22.2% increase in Galveston. CONFIDENTIAL ATTORNEY CLIENT COMMUNICATION the terms I discussed above will provide economic benefits to customers versus continued litigation of this matter. Rate case expenses, both the Company's and municipal, are to be collected through a surcharge over a 24 -month period. In terms of timeline. each City must make a final decision byMAX 3. 2016 bX pssir,�ri a rate ordinance acce&1Wgi mod ifvin& or rejecting the grog osed settlement. Within 30 days of the City's May 3, 2016 action, TGS can appeal the City rate ordinance to the RRC. If Cities agree to the settlement, TGS will not appeal. In the case of modifying or rejecting the settlement then TGS will likely appeal and the RRC will have until about July 2, 2016 to make a final rate decision. Thus, assuming a litigated case (no settlement nor early rate implementation) the final rate increase from this case will not impact consumers until early July 2016. If you have any questions or need any further information, please feel free to call. Please note that my office has had recent technology issues with the telephone system. Should you have trouble reaching me please try my cell (S 12) 940-0773. Sincerely, DA*\�-et, Daniel J. Lawton /AqV CONFIDENTIAL ATTORNEY CLIENT COMMUNICATION