Commissioner Agendas & Minutes
COMMISSIONERS SPECIAL MEETING
Commission Chairman, Steven E. Joy called the meeting of the Hancock County Commissioners will meet at 8:28 a.m. on Tuesday, July 8, 2014 in the conference room at the county courthouse located in Ellsworth Maine with Commissioners Brown and Blasi in attendance.
E. Stumpfel Esq. of Rudman & Winchell stated that last year a financial deal was negotiated with Hancock Wind LL. for their proposed wind project, this basically consisted of a 20 year Credit Enhancement Agreement (CEA) with a 70/30 split of the new tax revenues for the project in return for which the county would receive $5,333 per turbine, per year, for the same 20 year period under the Community Benefit Agreement (CBA). The goal of the commissioners, at that time, in finalizing that arrangement, was that Community Benefit dollars are more flexible, you can spend the county wide, they are not restricted to the Unorganized Territories, there are more things that you can do with them under Maine Law, they can be used for any county public purpose, they are not subject to the restrictions of the TIF statute or use of the funds.
Since then, the parties have been in agreement of the text of all documents, since the middle of March, with the exception of some provisions that Attorney Stumpfel introduced into the CBA and the CEA to provide some security to the county for the CBA payments. Under the Maine Wind Energy Act the developers of wind projects are required to provide a minimum Community Benefit of $4,000 per turbine, not per mega watt, for 20 years. Satisfying that requirement becomes a part of the permanent proceedings before DEP for their project files. First Wind, prior to finalizing with their negotiations with Hancock County, had satisfied that requirement, they had signed CBA's with other entities and had submitted those to the Maine DEP as part of the site location application. That requirement had been met independent of the agreement with Hancock County. The implications of that to Attorney Stumpfel was, if the Community Benefit payments do not show up, under this agreement, Hancock County would not have the ability to initiate action against the DEP permit and will have lost the recourse that the statute would otherwise provide to us if this particular CBA would have been part of their permit. In lieu of that, the language inserted by Attorney Stumpfel allowed Hancock County to set off against the credit enhancement reimbursements, any amount that was due but not paid under the CBA, so that if the $5,333 per turbine did not show up in 2018 then the amount of the CEA would be reduced by that amount. For reasons that Attorney Stumpfel is not sure of, Dave Fowler and First Wind is objecting to that language and deleted it from the last draft agreement last March.
In May, Attorney Stumpfel was contacted by Shana Cook-Mueller Esq. and was informed that after looking at the numbers again the 70/30 split would not work for the company anymore and that new numbers would be forthcoming. As it turns out, they had misread their own financial projections and now they are okay with the original deal. Noreen Norton, a consultant with Rudman & Winchell, is doing a portion of the financial projections that are required to submit the TIF Application, Shana Cook-Mueller has done the revenue projections. There is a piece of the DEC Application Packet consisting of tax shift projections, which basically provides a number for the State to use, for example, what portion of the county tax would be paid by the UT without a TIF that now would be paid by other UT property owners with the TIF because the value in the TIF is sheltered from that particular tax. Commissioner Joy questioned what would happen if the county decided not to do the TIF but instead opted to "pay us the taxes." Attorney Stumpfel stated that he did not think it was a wise strategy for the County because then the State controls what happens as far as the new tax dollars. One option for the County is to say that we are going to do the TIF but we are not going to have a CBA or a CEA, we are simply going to retain 100% or whatever percent the County captures of the new tax dollars from the project as part of the County TIF Development Program. That would restrict where the funds could be used and what they could be used for, they have to be used in the TIF District of the Unorganized Territory. There are defined uses of the funds under the TIF Statute so the funds could not be used, for example for general government or recreation buildings or a number of other things that communities sometimes want to use found money for. Commissioner Joy clarified that for First Wind, they want some of that as their financing package to get some of that money back. Attorney Stumpfel agreed and stated "to put it bluntly, because the CBA dollars are more flexible when these deals are negotiated, typically the county or the town or the host community pays a premium to get them, so the projected reimbursements under the CEA are usually substantially larger than the fixed dollar income stream under the CBA, so if you say without some security for the CBA payments, no-deal, then what that would mean is, based on the financial projections you would actually receive more money over that 20-year period, except that your use of those funds would be restricted by the TIF statute.
Commissioner Blasi questioned if the language currently being contested is still in the CEA. Attorney Stumpfel stated no, that the commissioners should now have red-lined copies of both documents and referenced the strike-outs on page 3 of the CBA. The strike-out language was intended to give Hancock County the same rights, with respect to this CBA, as the Towns of Eastbrook, Osborne and Waltham have under their separate CBA’s. Those three CBA's were the
agreements that Hancock Wind submitted in connection with this DEP Application and used by Hancock Wind to satisfy its CBA requirement under the Wind Energy Act. For example, if it stops making payments to any of the three agreements to any of the three towns, then they at least potentially could ask DEP to revoke the license for the project because Hancock Wind or its successor will have violated the conditions under which the DEP granted the Site Location Survey. The setoff language is in the CEA on page 10 letter (d), which has been struck out by First Wind. This is language at Attorney Stumpfel had added as part of his red line markup to the document and First Wind (First Wind is a parent of Hancock Wind) accepted all of the other changes that he made to the document. The language was added in the CEA to protect Hancock County; there is set-off language on page 8 that reinforces it.
The CBA, as drafted and as presented, is between the County of Hancock and Hancock Wind only, Hancock Wind is the stand alone (owner) to own and operate this project. As such, if something goes wrong with the project, such as they go out of business, then they're out of business. Hancock Wind is a wholly owned subsidiary of Maine Wind Holdings LLC which is a wholly owned subsidiary of First Wind Holdings LLC, either of those parent entities was listed as a party to the CBA. Attorney Joan Fortin has stated that she thinks it may be acceptable to them to have those parent entities sign on as guarantors of the CBA.
It is remotely possible that the whole structure could go into bankruptcy at some point, but we do not know of any reason why they would. As an example, if Hancock Wind were to go into bankruptcy, a bankruptcy trustee has the power to assume or not assume executorial contracts, which is done by the trustee at his/her discretion for the benefit of the creditors of the bankruptcy. In this case a bankruptcy trustee would like the CEA because it is paying money, but they would not like the CBA because the trustee is paying money. In the bankruptcy context, Hancock County could potentially be put in a position where they are still making the reimbursement payments under the CEA but it is not receiving the payment stream under the CBA, that is the unlikely but worst case scenario that, as the attorney involved, is the goal to protect the County against.
CFO Roy and three questions: 1) He did not see the Recession Clause as strong in the CEA, 2) he did not see the TIF Agreement or TIF Applications and; 3) was not stated.
Commissioner Blasi requested Attorney Stumpfel to define the tax shift. The tax shift is a more significant item when a TIF District is located in a municipality. Under the TIF Statute, any new value that is captured in a TIF District is sheltered from State funding formula impacts and the County tax. Example: If he has a town with a $30 million dollar existing value and someone plunks down a $100 million dollar wind farm project in that town, if they don't do anything then they are going to become a minimum receiver of EPS and State Revenue Sharing because suddenly they have all this new value. If they put the new value in the TIF District, they don't lose those revenues and the $100 million dollars also does not count against them in determining their share of the county tax and so as part of the application process the DECD you have to calculate what the quote tax shifts are. How much EPS revenue would the town lose that it is not now losing. It is a required calculation to follow the application to DECD.
Attorney Stumpfel stated that this is something that is up the commissioners judgment but his advice would be that if the commissioners do this without any additional language to protect the revenue stream, to make sure they are doing it with open eyes. He gave an example of the choices that Oakfield and Lincoln made. This CBA is not part of the permit application, the commissioners may decide and First Wind might agree, that it is sufficient assurance for Hancock County to have the two parent entities to sign on as guarantors, they may decide that it is not enough and they may decide that they are not going to allow a set-off and the commissioners may decide to forgo the CBA and do a larger TIF, it's a question of judgment at this point. His recommendation would be, unless the County has some additional assurance of payment, that the commissioners very carefully consider whether to go forward on this basis. The reason for that is essentially, although it's not a dollar for dollar swap, the CBA payments are fixed, the Credit Enhancement reimbursements are not because you do not know what is going to happen with the mill rate or evaluations. You are, in essence, swapping some tax dollars that are fully secured by a first priority tax lien for an unsecured contractual obligation. As a lawyer, that makes him nervous especially when public funds are involved. Attorney Stumpfel would prefer to have the set-off language included. Having the parent companies sign off as guarantors mitigates his concern somewhat.
Commissioner Joy voiced his concern with the sale of the project. He wanted to make sure that the new owner could not back out of the agreement should the project be sold. This is another reason for the set-off language. The set-off provision would remain in place whether or not the project was transferred and whether or not the new owner agreed to assume the CBA. Commissioner Joy preferred for the language to travel with it, although it was not in the permit, he wanted it noted that should the project be sold, it is part of the package to be sold.
Commissioner Brown questioned why this agreement has to be different from the previous one, he was concerned with the clean-up of the site should the project close down or be sold. Attorney Stumpfel explained that the decommissioning of the project will remain in the agreement.
Commissioner Blasi asked if the Weigang complaint has been resolved. Attorney Stumpfel stated that he is not familiar of the status and that he has not been tracking it as he is not involved in the permitting of the project.
CFO Roy voiced his concern regarding soft language in the CBA. Attorney Stumpfel read the following from Page 3, Paragraph 3(b): Prior to any sale or transfer of the Project or of a controlling interest in the Project, the Company shall take all necessary steps to assure that its obligations under this Agreement are assumed by, binding upon and enforceable against any successors, assigns, transferees or purchasers of the Company or of the Project. Unless expressly released by the County in writing, the Company shall remain obligated to the County for payment of all amounts to be paid to the County under this Agreement, if not paid in full by such successors, assigns, transferees or purchasers when due. Attorney Stumpfel felt that this was fairly strongly worded that keeps Hancock Wind on the hook even if the project is sold to someone else as far as a contractual obligation; it doesn't address a bankruptcy obligation. If the CBA were tied to the CEA then the trustee has to make the CBA payments in order to be entitled to receive a tax reimbursement.
Commissioner Blasi questioned if there could be a conflict or a discrepancy between the TIF statute and the agreement. Attorney Stumpfel explained that the Maine Revenue Services does not like TIF's in general, and they especially do not like Wind Farm TIF's. They also don't want dollar for dollar swaps that would convert tax dollars into non-tax dollars. That would allow to work around the limitations on use of TIF dollars that are in TIF statute. This agreement is different, it is not a dollar for dollar swap, there is a fixed revenue stream and a defined amount under the CBA, the CEA's are always expressed as a percentage reimbursement of the taxes, we project what we think those numbers will be, we don't know for sure today because we don't know what the project valuation will be when it's completed, we don't know what the mil rate will be.
With regard to the revenue stream, CFO Roy stated that for the first 20 years we are going to receive approximately 2.2 million dollars, the last 10 years would be approximately 3.6 million dollars. Commissioner Brown questioned the effect that changing turbines will have on the TIF's or the CBA. Attorney Stumpfel stated that there shouldn’t be any change, but it could affect the CBA payments. If size was increased, mega watts may increase therefore revenues would increase under the CBA and vice versa. As far as the TIF goes, the tax is based on the product value. Any change in the turbine would affect the tax revenues to the extent that that particular turbine would have a different evaluation. Commissioner Joy stated that our first agreement was attached to mega watts, this agreement is per turbine, we felt like we did the right thing the first time in attaching it to mega watts, as technology gets better, the turbines may get better and we wanted to connect to that. The would affect the County on the CEA side, the TIF side because it would potentially have an impact on project value. Depreciation is built into the first 5-years of the revenue schedule, if they were to re-power in a future date with a new turbine that should bump the valuation back up and restart the depreciation clock. In the CBA it would make no difference this time because it is per turbine, in the TIF it would because of the valuation is going to change and we would still be on the 70/30 split. Attorney Stumpfel stated that the agreement figure is $5,333 per turbine for 18 turbines. (This was corrected later in the meeting to reflect a figure of $11,765 per turbine ($211,770 annually). Dave Fowler was trying to mimic the per mega watt cost per turbine price.) The State minimum requirement per turbine is $4,000 per turbine per year but the agreement was already satisfied between the towns of Eastbrook ($25,000), Osborne ($40,000) and an unknown amount in Waltham. With regard to an agreement with Hancock County, they have met their obligation through agreements with the three towns so at some point First Wind can say that they don’t have to do anything.
Discussions need to be reopened to add the fire truck to the CBA. The fire truck was going to be considered just like the tower, they would give us XXX amount of dollars to purchase the truck, or they will purchase the truck and donate it above and beyond the CBA and the TIF. The CBA would be the best place to put it than the TIF, that way, you would not be clouding DECD's application. Mr. Fowler has agreed to do this. Attorney Stumpfel stated that, based on if this goes through, you are essentially paying an estimated premium of 50% for the CBA dollars, less than that actually because the TIF reimbursement declines over time with the depreciation schedule. Over 20 years it's $5.177 million dollars of reimbursements to the company vs. about 5.8 million over 30 years to the County since it keeps all the revenues for the last 10 years for the project. The CBA payments to the County will be about will be about 4 million over that same 20 year period. It is virtually the same as the Bull Hill project. The CBA would work out to a premium of approximately $4,470,700. for 20 years plus the fire truck.
Commissioner Joy stated that at this point it became more obvious that Dave Fowler's presence was needed. Attorney Stumpfel knows that the County is trying to protect funds in bankruptcy and sale, but Mr. Fowler is needed for the rest of the discussion. Commissioner Joy stated that we are not in as strong of a position as last time. Commissioners Brown and Blasi agreed. Commissioner Brown stated that one of the things that he is always concerned about on a project like this is that probably none of us will be around when the last dollar is paid on this but if between now and 30 years from today, we don’t change our energy policies we probably will still have windmills. If energy priorities change, windmills may become a thing of the past. We want to make sure that we want to be able to clean this site up and put it back to nature. Upon visiting the sites on a few occasions, environmentally, they did a real good job with the site, but the commissioners need to make sure that it's in black and white that any cleanup need or decommission of the site is included in the agreement and it has to be "iron clad." Commissioner Joy stated that it was included in the DEP Permit, CFO Roy added that it also has to be bonded and the bond has to be up to date throughout the project.
The clerk was instructed to contact Mr. Fowler to meet within the next few weeks. Attorney Stumpfel was thanked for his efforts. The timeframe for the TIF application was unknown at this time.
Airport Manager Madeira recommended a funding solution for the Hoyle Tanner & Associates (HTA) contract amendment through an e-mail prior to the meeting. In refreshing the Commissioners memory regarding the full amount being requested, the eligible amount and the county share of the request if the board agrees to pay the full amount. The entire amount of the proposal presently is $77,850. What is eligible according to the FAA based on the proration that could change is currently $64,922.58. Luke Garrison, the Civil Engineer with the FAA New England Region Office, has verbally confirmed that this amount is eligible so long that the proration does not change. The FAA will not pay for removing items as a part of the value engineering (VE), and then add them back later as they see that as paying for it twice. Manager Madeira stated that as of today, the proration is set at 91.44% of Article I, for VE, and 100% of Article II, for project administration. The FAA would support both Article I and Article II at $64,922.58. This would be the part that would be covered by the Airport's entitlement dollars. The total eligible amount is actually $72,136 but the FAA pays 90% of that total which brings it down to $64,922.58. Article I is VE, Article II is Project Administration (PA). Article II is 100% eligible and totals $11,100. If 100% is eligible and the FAA pays their 90% then they pay $9,990 of that. Article I is a little more complicated because it is not 100% eligible. Presently it is at 91.44%. That proration could change if throughout the rest of the project, items are added that were previously VE's out. That will reduce the proration. The county share would be the difference between the $64,922 and the $77,850, which is $12,927.42 if the board agrees to the full amount being requested by HTA.
Commissioner Joy stated that what was still not clear to him was why a 4 million dollar building was designed when a commissioner never said that it was okay. He also did not understand why when it went out to bid that it turned into a 3.2 million dollar building when it was supposed to be a 2.5 million dollar building. Not only do you pay for design work to make a 4 million dollar building or a 3.2 million dollar building that is too much. We VE'd it out and items were removed, but yet still it turned into 400 hours. He did not understand how it got to this point.
Rick Malm of Lewis + Malm (L+M) gave a brief history of the design and VE process. L+M have not had a project come in over budget since before 2008, to him, that says something about this project. He had an independent estimator who estimated the project during design development at $2,726,000 an e-mail from Karen Frink of HTA was received stating that the budget was $2,185,000. Lewis + Malm came to a commissioners meeting with plans and proposed VE design development. A building with more finishes and less building proposal was chosen, the building was redesigned at design development to bring it down to what they thought was the budget. This was done with a professional estimating firms help. The low bid was 3 million dollars and each contractor made bidding mistakes, bidding procedures were normal but different from what building contractors were familiar with. Federal wage rates were required, painters were getting $70 per hour, the contractor did most of the painting in his shop, the buy American clause was included but difficult to find. The FAA requirement regarding security and height of equipment were strict, the project was phased in two phases requiring longer construction time and the project is very small at 5,000 ft. The design team worked for months with Nickerson & O'Day to bring the project within budget, construction documents were redrawn to coincide with negotiations. Time for rebilling was billed by L+M, work was drafted by Charles Earley and Rick Malm at $55 per hour and normal billable rates are $80 and $110. They were trying to make payroll by billing at $55 per hour. The total fee for L+M was $27,800. Due to lack of approval of redesign costs L+M have received zero dollars on this project since December 2013. Lack of payment for redesign would be a hardship for L+M as Mr. Malm has been essentially working for seven months for free. Due diligence was given to cost estimating throughout the process but lack of competition and complex project requirements created the necessity for redesign. Lack of payment for redesign would be a hardship to L+M as the money has already been paid out. The way we understood it worked is you pay your bills and when you run out of money you ask the FAA for more, we were at that point on December 31, 2013, we spent seven months dealing with this issue and "I'm working for free."
Commissioner Brown voiced his concern stating that of the $77,000 requested, nowhere does it show the hours that L+M incurred. It was clarified that L+M's fee was included in the $77,000 request. Randy Poulton of Nickerson & O'Day stated that they were going to have a delayed claim as well. Commissioner Joy questioned that if the county does not approve our share, will the FAA approve their share. The answer was no, Manager Madeira it was explained that the sponsor (the County) has to provide the FAA with justification for necessary additional costs. If the County does not pay their Local Share, it is considered a statement by the County Commissioners. Ms. Frink agreed with this statement adding that if the commissioners are not going to support it, the FAA will not support it.
Commissioner Joy stated that L+M was the architect and HTA was the engineer on the ARFF building in 2008, therefore they have worked on federal projects with Davis Bacon wages with a Buy American clause that was not done in two phases. Mr. Malm explained that the ARFF building was a "shovel ready project," in 2008, the economy had just gone bust and it was a different kind of building and different timing. Commissioner Joy understood that the buildings were different but the bidding and design process would be the same with regard to engineering and architecture and dealing with Davis Bacon and Buy American are similar in that project, as well. Ms. Frink stated that they were but the funds received were specifically intended to put America back to work which was why there were so many bidders on that project, this one is different. Commissioner Joy stated that HTA and L+M has had experience with Federal work , Davis Bacon wages and a Buy American clause due to the ARFF building project, therefore it was not like you have not done it before or it snuck up on you. He reiterated that he can never understand how a 5,000 sq ft building can come in at $500 per sq. ft. adding that "it is beyond me how we spend money on things like this and it's on its way to $510 or $520 a sq. ft." He stated that he believed that Nickerson & O'Day stuck with the Davis Bacon wages and the Buy America and the rest of it makes this is a very expensive project. He was not casting blame on the architect or engineer, it just seemed ridiculous to him to spend this kind of money to build these buildings.
The discussion was delayed until later in the morning.
UT/TIF Audit Entrance Interview:
Marcia McInnis, Fiscal Administrator of the Unorganized Territories and Brian Jellison, Principal Auditor for the State of Maine were present to conduct the UT/TIF Audit Entrance Interview.
Mr. Jellison stated that the purpose of audit was to review internal controls, accounting procedures and communication protocol for UT and UT TIF Fund from July 1, 2011 to the current year, the last external audit was as of June 30, 2011. Commissioner Joy informed the auditors that the accounting records first contact is the CFO Roy, adding that people who can help find information are the Deputy Treasurer and Treasurer and if problems are found, the auditors were instructed to contact the CFO and carbon copy the commissioners. If a face to face is needed with the commissioners, the chairman is 200 feet from the courthouse and other commissioners are available. Authority to conduct the audit comes from MRSA Title 5, §244-c, there is no confidential or privileged information in the UT files. Needed items are the accounting & financial procedures manual, the organizational chart and chart of accounts. Auditor Jellison stated that the external auditors findings from 2011 showed two weaknesses, 1) deficiencies in preparation of financial statement and, 2) reconciliation of inter-fund transfers. They will be looking into what action has been taken in regards to those findings. CFO Roy stated that 1) is no longer appearing on audit and we are taking care of those issues, 2) regarding the second finding dealing with the due-to due-froms, approximately seven months ago the commissioners agreed to a contractual agreement with TRIO to correct the due-to due-froms, they have conducted two testing's, which failed on both occasions. TRIO is set up with a primary account because under one fund accounting you typically have one checkbook. In our module we actually have three checkbooks, the payroll, jail and UT checkbooks. The UT checkbook handles the TIF funds and the UT Accounts. The system automatically does the due-to due-froms from Fund 11 thinking it is the primary account. Hancock County has been arguing with TRIO for 2-years that they should be correcting the issue because under one-fund accounting you still have multi-checkbooks, they do not believe that is the case. TRIO has agreed to pay for the upgrades six or seven months ago and as of last week they are still working on it. Currently manual journal entries are currently being done between Funds, everything is documented and trackable. When asked if there have been any other audits performed by outside agencies or federal auditors in the last two years, CFO Roy replied that an FAA audit was conducted approximately 2.5 years ago which concluded with no findings. The FAA audits airports typically every 4-5 years and considers this a routine audit schedule.
Auditor Jellison stated that as an auditor he has to comply with the Statement on Auditing Standards (SAS) 99 requirement, as part of that he asked the commissioners if they were aware of any known wrong doings or any illegal activity. Commissioners Joy and Brown responded no verbally and Commissioner Blasi shook his head no. When asked if they any areas of concern that they wanted to discuss, Commissioner Blasi asked if all requested documents have been received from Hancock County, the auditors response was, we have received some of the documents.
Commissioner Blasi asked the following questions, responses were given by Auditor Jellison.
1) What are the purposes of Fund Accounting? We following Governmental Accounting, GASB procedures which require Fund Accounting.
2) If HC used accrual accounting would fund accounting be required. Yes.
Commissioner Blasi read the following statement:
The CFO’s AP Control Policy has not been approved by the commissioners. It is being used in lieu of the Reserve Account Management policy and the Overdraft Policy, which have been approved. I requested a full accounting of reimbursements from First Wind for legal fees associated with TIF agreement work on October 28, 2013. Account G1-2005-00, and other 2000 Liability Accounts are not established by commissioner action, yet are posted on warrants. 4000 Control Accounts are not reported to the commissioners, unless a commissioner has requested a Ledger Summary for review. I suppose that a commissioner exerts an indirect influence on a 4000 Control Account through the decision making process. Before signing a warrant I check account balances on my Expense Report. If I don't see an account listed, I check my General Ledger Summary. If I don't see an account there either, I ask for an Account Status Report. Last month I decided not to sign warrants with expenses drawn from an over drafted Expense account. The same for TIF Funds until the results of this audit are reported.
Commissioner Blasi asked the following questions, responses were given by CFO Roy and Auditor Jellison.
1) Do unused TIF funds automatically roll into Undesignated Funds? No.
2) Should the amounts shown in Special Fund Reserve Account Reports exceed the bank balance? I would have to answer that at a later date.
Commissioner Blasi gave his written statement and questions to Auditor Jellison and thanked him for his time. Commissioner Brown stated that some of the things that were asked were not just in the UT's they were outside of that in our General Accounting procedures, he asked if that was something that they are also auditing, outside of the TIF area, our general policies. Auditor Jellison stated that the way he thinks about it is the general accounting procedures would also include in the UT TIF Fund, therefore they would need to look at those. Commissioner Brown clarified the calendar and fiscal years of the general and UT funds and asked if Mr. Jellison had a copy of the last external audit. Auditor Jellison stated that they had the last external audit to June 30, 2013 for the UT. Administrator McInnis stated that they are here to look at the UT and UT TIF Fund. CFO Roy stated that he wanted the commissioners to understand that Under Title 5, the auditors have free reign, and we had to comply with their requests. He also questioned if they were looking at Fund 1, the General Fund as he was not prepared to present information from that fund as Commissioner Blasi referred back to Fund 1 which has nothing to do with the TIF or the UT. He was concerned that he was not prepared. At this point, Auditor Jellison could not answer the question.
The auditors anticipate coming back for another day of field work. When asked if this audit is something that they do periodically for each county, or upon request, Auditor Jellison stated that when analyzing the external auditors financial statement, in this case there was a fund deficit in the TIF Fund and because the TIF is a relatively new accounting process for Hancock County, they wanted to learn more information about that fund deficit. It indicated that there were expenditures before there was revenue coming in.
CFO Roy stated that the county sent the State, under a FOAA request, all of the documents that document all of that information. When asked if they had that information, Auditor Jellison responded "we have that information that you sent to us, we need to look at contracts as well and we did not receive contracts." They also need to look at internal controls for the UT and UT TIF area. UT Supervisor Millard Billings and Treasurer Janice Eldridge were introduced to the auditors.. When asked if she had any comments, Treasurer Eldridge stated that she had no comments other than she is allotted such a small amount of time and money that he she didn’t have any questions.
Commissioner Blasi stated that he thought the airport managers recommendation of payment/funding options were good. Commissioner Brown did not like eliminating capital accounts to pay for the project. Commissioner Joy was concerned with the possibility of upcoming delays; the cost of possible interruptions was questioned. Mr. Poulton of Nickerson & O’Day stated that it is difficult to provide a definitive price in terms of where the project stands on the construction side is because a good part of it is structured as a unit price contract. It appears that there will be substantial under runs on the unit cost of the project and credits would also be applied later.
Delays started immediately after the bids, the former Airport Manager left thus creating a knowledge gap, the FAA was shut down for 6-weeks so over 4 months lapsed between when they bid the project and when they received a Notice to Proceed contract. This changed the schedule from working in the summer to working in the winter; the project was shut down due to a brutal winter. This is not uncommon, but in aggregate it delayed work on the project. The door delay was a “kick in the chops.” Commissioner Blasi asked Mr. Poulton to restate his statement with regard to Unit Cost. The contract is structured in Unit costs, like a highway contract in an assumed quantity, in general those quantities are under running, therefore there will be savings. Savings and delay costs are accounted for on a “best guess.” The VE process included known costs to remove and re-add and a substantial cost to design changes due to the roof change, mechanical system change and redesign, the ventilation system side was completely redesigned. This all costs money.
After much discussion, the following numbers were discussed:
Local Share at beginning of the project: $238,484
Change order #2 Local Share: $9,726
Change Order #3 Local Share: $3,366 and incorporates a $5,459 credit for lights
After Change Orders Local Share: $251,576
Millwork Local Share: $1,200.80
Ending Balance as of today: $252,776
Short as of today: $3,512
This is before an agreement to pay the HTA contract amendment. That would push the number $265,703 or $16,439 short of what is presently in the G account that is being used to pay the local share of this project.
When asked his opinion, Manager Madeira stated that there is ownership of how we got here to be placed on everybody involved, he recommended that the county commissioners make the parties whole but cut out the 12% profits. With this in mind the following numbers were provided:
Article #1: $57,735.22 New contract amendment, after 12% profit removed and prorated.
Article #2: $10,043.36 After 12% profit removed.
Total: $67,778.58 Total Contract Amendment
FAA Share: $61,000.72
County Share: $6,777.86
MOTION: to approve the $61,000.72 to the FAA share and the county share of $6,777.86 as our share. (Joy/Blasi 3-0, motion passed) Discussion: Commissioner Blasi asked if the accounting could be established once the motion has been acted on. CFO Roy stated "it's gonna come out of the county share account." When asked what particular account is used, he responded "it's the same one every time." Commissioner Joy stated that he thought that there may still be some dispute as to whether a G account or another account will be used. Manager Madeira clarified that the G account currently does not have enough funds in it to cover the total local share costs of the project following Change Order #3 therefore it would have to covered by something else. Commissioner Blasi stated "end of discussion." CFO Roy suggested funding it out of the G account until there were no more funds left and then reestablishing the G account by funding it through the fund balance adding that the commissioners have the right to do that at any time. That way the audit trail is kept in one account and they are not "bouncing." Commissioner Blasi agreed. The balance in account G2-3030-20 was $162,414 as of July 1, 2014.
Manager Madeira stated that Fair Point Communications is seeking to upgrade the high speed internet service options available to all of the businesses along Caruso Drive, terminating at the terminal building. There are above ground utility poles which run the entire length of Caruso Drive until reaching pole #10, but presently Fairpoint does not have the cash to run the conduit underneath the road. The estimate to dig the trench, run the conduit, fill the trench, and hot top the ditch to cut across the road is approximately $8,300. Fairpoint is willing to reimburse the airport for the entire cost in the form of a credit against our service. Commissioner Blasi suggested financing the project through the lawnmower account. CFO Roy suggested hooking up to 3-ring binder which is what the courthouse is currently utilizing and stated that the university should be spoken to prior to making a decision. The Fairpoint building lease, which is on the airport property, expired in 2010. The rate for their service is unknown. Included entities include Morris Yachts, the airline and rental companies and possibly Columbia Air Services. Airport Manager Madeira stated that he did not know if he can take on 3-ring binder at this time. Commissioner Joy encouraged him to pursue the service. Fairpoint and 3-ring binder are the only companies who offer this service. The commissioners in general were in favor of the idea but wanted the manager to contact 3-ring binder for comparison. Commissioner Blasi questioned what would happen if Fair Point goes under. Manager Madeira stated that it is still a public utility and someone will come in and buy them out, as there is a need for the service. Commissioner Blasi questioned the RFP requirement for this service. Commissioner Joy stated that we are not there yet.
11:36 a.m.: Commissioner Brown excused himself for a few minutes.
MOTION: to enter into executive session under MRSA Title 1 §405 6a, to discuss a personnel matter. (Joy/Blasi 2-0, motion passed)
Commissioner Joy called the meeting back into regular session at 12:06 p.m. with nothing to report.
CFO Roy stated that we have a cash flow concern, total estimated payroll is approximately $560,000 between now and when we usually begin to receive our funds from the towns, we currently have approximately $750,000 available in the General Fund. CFO Roy requested the commissioners to inform the department heads that essential spending should begin now through the end of August, this means curtailing overtime from now through the end of August. Reminder tax bills have been mailed and we typically run down to $350,000. Commissioner Blasi asked if we have a surplus in the General Fund now and if so, how much is it? CFO Roy stated that we always have surplus. Commissioner Blasi clarified, the question is, do we need to use it. CFO Roy stated that a bill has just been received for FY14, therefore the fund balance in the UT should be approximately $30,000. Commissioner Blasi clarified that he was questioning the balance in the General Fund. CFO Roy stated that we are utilizing undesignated funds and capital reserves right now to run the county, "right, wrong or indifferent, that is how we have operated for decades" by utilizing them, we do not need a TAN, we need to be careful on projects, if we do a $200,000 communal project, and we only have $250,000 to $300,000 through September 1st, you just ate that up. That is why he requests to defer payment a little further out. CFO Roy stated "as long as we do good budgeting and conserve our costs, especially in June, July and August, we've been against that wall and last year I almost came and asked you for airport money."
MOTION: to limit non-essential spending until after September 1, 2014. (Joy/Brown 3-0, motion passed)
MOTION: to adjourn. (Brown/Joy 3-0, motion passed)