COMMONWEALTH OF KENTUCKY
IN RE: KENTUCKY RIVER AUTHORITY
MEETING NO. 162
September 21,2012
10:00 A.M.
Lock and Dam 4
1021 Kentucky Avenue
Frankfort, Kentucky
APPEARANCES
Ms. Clare Sipple
CHAIR
Mr. Charles Bush
Proxy for Secretary Lori Flanery
Ms. Paulette Akers
Proxy for Secretary Len Peters
Mr. Jerry Wildt
Mr. Keith Cartier
Mr. James Kay
Mr. Herbbie Bannister
Ms. Pat Banks
Mr. Ron Johnson
KENTUCKY RIVER AUTHORITY
Mr. Jerry Graves
EXECUTIVE DIRECTOR
___________________________________________________________
CAPITAL CITY COURT REPORTING
TERRI H. PELOSI, COURT REPORTER
900 CHESTNUT DRIVE
FRANKFORT, KENTUCKY 40601
(502) 223-1118
___________________________________________________________
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APPEARANCES
(Continued)
Ms. Sue Ann Elliston
Ms. Kayla Dempsey
Mr. Don Morse
Mr. David Hamilton
Mr. Greg Henry
Mr. Bobby Webb
Mr. Tom Russell KRA STAFF
Mr. Ed Councill
Mr. Jim McCarty
Ms. Joy Jeffries
Mr. Rodney Simpson
Mr. Scott Althauser
Judge Harold Tomlinson
Mr. Daniel Gilbert
Mr. Craig Avery
Mr. Eddie Hightower
Mr. Alan Banks
Mr. Mike Young
Mayor Gene McMurry
GUESTS
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AGENDA
Motions ...................................... 3 - 5
1. Call to Order ................................ 6
2. Approval of KRA Minutes #161.................. 6 - 7
3. Financial Report - Don Morse ................. 7 - 22
4. Consideration of the Renewal of Lease of
Lock and Dam 13 Property with Lee County -
Sue Ann Elliston..............................22 - 23
5. Consideration of the Renewal of Lease of
Lock and Dam 14 Property with Lee County -
Sue Ann Elliston .............................22 - 23
6. Presentation and Consideration to Adopt
Emergency Management Action Plan -
Tommy Russell ................................23 - 34
7. Engineer’s Report - David Hamilton ...........34 - 51
8. Executive Director’s Report - Jerry Graves ...52 - 56
9. Chairperson’s Report - Clare Sipple...........56 - 71
10. Adjourn ...................................... 72
Court Reporter's Certificate .................
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MOTIONS
MOTION TO APPROVE MINUTES OF
MEETING #161.................PAGE 6, LINE 20
CHAIR SIPPLE: Do I have a motion to accept
the minutes for the last meeting?
MR. WILDT: Motion.
CHAIR SIPPLE: Motion is made by Mr. Wildt.
Do we have a second?
MR. KAY: Second.
CHAIR SIPPLE: Second. We have a motion and
a second. All in favor, signify by saying
aye. Any opposed? The minutes are
approved.
MOTION TO APPROVE MEMORANDUM OF
AGREEMENT WITH AUDITOR OF
PUBLIC ACCOUNTS.............PAGE 20, LINE 18
CHAIR SIPPLE: We need to make a motion to
approve signing the Memorandum of Agreement,
the MOA, with the State Auditor of Public
Accounts.
MR. CARTIER: So moved.
MR. WILDT: Second.
CHAIR SIPPLE: All those in favor, signify
by saying aye. Any opposed? The motion
carries.
MOTION TO ACCEPT FINANCIAL
REPORT......................PAGE 22, LINE 1
CHAIR SIPPLE: Do we have a motion to
approve the Financial Report?
MR. BUSH: I make a motion.
CHAIR SIPPLE: We have a motion. Do we have
a second?
MR. JOHNSON: Second.
CHAIR SIPPLE: We have a second. All those
in favor, say aye. Any opposed?
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MOTION TO APPROVE RENEWAL OF LEASE
OF LOCK AND DAM 13 PROPERTY WITH
LEE COUNTY AND LOCK AND DAM 14
PROPERTY WITH LEE COUNTY.....PAGE 23, LINE 3
CHAIR SIPPLE: Does anybody have any
questions for Sue Ann? Do we have a motion?
MS. BANKS: I make a motion.
MR. WILDT: Is the motion for both 13 and
14?
CHAIR SIPPLE: Yes. Can we do both?
MR. WILDT: With one motion?
CHAIR SIPPLE: Yes, with one motion. So, we
have a motion from Pat Banks. Do we have a second?
MR. CARTIER: Second.
CHAIR SIPPLE: We have a second from Keith
Cartier. All those in favor, say aye. Any
opposed? Motion passes.
MOTION TO APPROVE STRUCTURAL FAILURE
CONTINGENCY PLAN ..........PAGE 33, LINE 18
CHAIR SIPPLE: So, Mr. Cartier, would you
like to make a motion?
MR. CARTIER: I would certainly like to make
a motion to accept and approve the Failure
Contingency Plan or Emergency Action Plan as
presented by Tom.
CHAIR SIPPLE: We have a motion. Do we have
a second?
MR. BUSH: Second.
CHAIR SIPPLE: All those in favor, say aye.
All opposed. It’s unanimous.
MOTION TO ADJOURN...........PAGE 71, LINE 19
CHAIR SIPPLE: If there are no further
issues, do we have a motion to adjourn?
MR. WILDT: I move we adjourn.
MR. BUSH: Second
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CHAIR SIPPLE: Welcome to Lock and Dam No. 4. I want to bring this meeting to order. This is Meeting No. 162 of the Kentucky River Authority. We have a fairly short agenda today. We’ve got a lot of fun things to do after the meeting, so, we’ll make this as quick as possible but we want to recognize everybody that’s here today.
We have some special guests here. So, the first thing we’ll do is go around the table and have Kayla call the membership to see who all is here and then we’ll introduce our guests.
(ROLL CALL)
CHAIR SIPPLE: I believe we have a quorum. So, if we could start with our distinguished guests.
(INTRODUCTIONS)
CHAIR SIPPLE: Welcome, everyone. So, have you all had a chance to look at the minutes from the last meeting? Are there any additions or corrections? Do I have a motion to accept the minutes for the last meeting?
MR. WILDT: Motion.
CHAIR SIPPLE: Motion is made by Mr. Wildt. Do we have a second?
MR. KAY: Second.
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CHAIR SIPPLE: Second. We have a motion and a second. All in favor, signify by saying aye. Any opposed? The minutes are approved.
Don Morse, can we have your Financial Report, please.
MR. MORSE: You’ve got five different monthly statements in your package. They cover the last three months of our fiscal year ending June 30 of this year and the first two months of the current year.
Since we’ve got so much of that and we’re pressed on time, the only thing I will do is mention a few highlight transactions that took place during these time periods.
One of the main things we did is got the lock renovation work going during that time frame. You can see the work going down here at 4 and also down at 3.
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We funded the construction contract for that work at $4,060,000, and we provided the funding from three sources. When we built Dam 3, we had about a $1,109,000 left in contingency funding that wasn’t used or accounting for that. We had unused monies from construction at Dam 9 plus all the investment income that we earned on that project in the four years it was outstanding, and that was $2,700,000, and then we had to take a little bit of our agency cash, $268,000, to fund this construction contract.
Since the project started, we’ve had one change order of $46,000 that we moved into the project account from our agency cash, and we still have a little bit of contingency funding in the project of about $32,000.
In May, we had our first disbursement on the Bluegrass Water Supply Commission grant that you all approved back at the end of last year. That was used to fund the repayment of two loans that the Commission had with the KACO group and the League of Cities, and the total payout on that was $354,000.
We’ve not disbursed any other funds on that, and we’ve not gotten any more information from the Commission in regard to new project funding. So, they’ve still got $545,000 of approved funding for that grant.
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The grant is funded from sources outside our control really. It’s a bond-funded project supported with tobacco funds like a lot of these water projects that are funded around the state, and it’s up to the Finance Cabinet as to when they issue the bonds to provide the cash for that. So, the project is in the red. It’s treated like a capital project.
I’m not recognizing that deficit balance in the statements because, again, the project is not under our control and we have nothing to do with the timing of it. So, it’s just showing the grant by itself and not in the totals.
We had another case. At the end of the fiscal year, the State Budget Director pulled about $84,000 in cash from our agency fees to give to the General Fund balancing mechanisms that they had in the budget. That was related to some cost-cutting measures as well as the deferral of the last payroll of the year.
If you were a General Fund-funded agency, you got that back with the new budget. In our case, it’s just cash gone and there is no makeup. So, that hurt us a little bit. It’s only the second time that they’ve done that to us in our history. In the current budget, we don’t have anything on the horizon of a similar nature. So, I don’t look for that to reoccur this next two years. So, that’s a good thing.
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Fee collections last year, our Tier I fees from the whole basin, $893,000. The Tier II fees on the river users were $1,451,000. That was on the Tier I fees about 5% below the last ten-year average. And our Tier II fees, the current rates on that have only been enacted for the last four years. So, on a four-year average on that, we’re about 9% below is what that four years has averaged out.
So, it wasn’t a good year on revenue, but we were able to curtail our expenses last year. Operating expenses were held down and the debt service wasn’t increased at all because we didn’t issue
additional debt as we had budgeted.
So, we carried forward about the same cash balances in the new year as we brought forth from the past year. We basically lived on what we made, even though it was reduced.
Lock operations, we spent every dime of General Funds that we get for that and really had some payables at the end of the year that we weren’t able to cover. So, it’s going to be a little tight this year. We did carry forward $50,000 of agency funds for that program. They were derived from about $24,000, $25,000 of asset sales last year - scrap metal and whatever we could round up - and then we had monies. About half of that came forward from the prior year from some services that we had done for the Corps and being reimbursed for and some insurance payments, insurance claims. So, we’re going to be using that in the next budget period.
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The first two months of the new year, July and August, in your statements show the new budget numbers for all the different accounts. We have three operating accounts - the Tier I that operates our office, Tier II that pays for debt service and capital project funding, and then the lock operations that’s primarily General Funds.
All those operating budget numbers are based on just this current year. The capital projects still carry forward a total budget of revenues and expenses for the life of the projects because it doesn’t tell you much. It just shows you what’s happening this year.
In those, we have returned our expected revenues on Tier I and II back to the annual averages that we had. So, to meet that number, we’re
going to have to generate about a 5% increase in our Tier I fees and about an 8% increase in Tier II. We’ll evaluate that as time goes along. We have made one fee billing during this period and it was up about 4-1/2% from last year. So, we’ve got to bump that up a little bit. And when we get the billings up for the fall quarter, we will have a little better feel for if we’re going to meet that or not.
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There’s a couple of things that have affected that, particularly with the electric plants that are on the river. The old plant down at Tyrone that KU owns, it doesn’t appear as if it will ever come back online again. There are some new EPA regulations on air emissions that are soon to take effect. And given the age of that plant, KU said it’s highly unlikely that they will make the changes necessary to meet the new rules for Tyrone.
It wasn’t operational last year, but when it was fully operational, it generated about $28,000 a year for us in fees. So, it looks like that won’t be coming back.
The East Kentucky Power Plant over at Dale was also down a bit this past quarter. That’s not a function of the new EPA rules but it’s more a function of the low price of natural gas. And right now that’s less expensive than the generation of coal. So, they have kind of sidelined that plant and use the gas turbine units up at the Smith plant for a lot of this spring.
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That’s knocked their fees down a bit up there, but they have said that they will commit to upgrade that plant for the new air emission rules. They have to have it to meet the electric demand. So, it’s likely to continue and come back up as the prices level out between coal and natural gas, and that will eventually happen.
On our General Funds this year, we received $6,000 less than what we had last year to work with for lock operations. That’s not a big cut, but we’re going to incur a lot more personnel costs this year. Last year we had one of the four employees that’s supported by that program out on unpaid leave for a good part of the year. We’re fully staffed this year. And, two, the employer’s share of retirement costs and health insurance costs are going to be much greater this year than it was last.
So, by the time we fund our personnel costs, we’re going to have about 40% less in operating expenses for utilities and maintenance and those sort of things than what we had last year.
The only way we’re going to make that up is using these agency funds I talked about that we’ve carried forward, and I think that will carry us fine for this year and next year both. After that, there’s going to be a funding problem for that program unless we get a big jump in our General Fund receipts the next budget. So, I need to make you aware of that.
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You have an explanation in those two of the new budget for capital projects. We’re budgeted to do $23 million of capital projects this budget cycle. That was based on estimates for three projects - the new construction at Dam 8, the lock renovations at 1 and 2 and design of our reconstruction at Dam 10.
The cost estimates that we had for those which were done a year and a half ago are probably not correct now. We look for Dam 8 to be somewhere in the neighborhood of $3 million less than what we estimated it to be at that time.