SWANTON VILLAGE BOARD OF TRUSTEES
SWANTON VILLAGE MUNICIPAL COMPLEX
120 FIRST STREET
SWANTON, VT 05488
Monday, March 27, 2017
PRESENT: Neal Speer, Village President; Eugene LaBombard, Trustee; Chris Leach, Trustee; Adam Paxman, Trustee; Reginald Beliveau, Village Manager; Lynn Paradis, Assistant Village Manager; Dianne Day, Village Clerk; Ken Nolan, VPPSA; and Ch. 16.
Unless otherwise noted, all motions carried unanimously.
1. Call to Order:
Neal Speer, Village President, welcomed all to the Regular Board of Trustees meeting and called the meeting to order at 7:00 p.m.
2. Agenda Review:
3. Approve and Accept Minutes from Monday, March 13, 2017:
Chris Leach made the motion to approve and accept Minutes from Monday, March 13, 2017 as presented. Adam Paxman seconded. Discussion: None. Motion carried.
4. Approve and Accept Village Warrants through Friday, March 24, 2017:
Eugene LaBombard made the motion to approve and accept Village Warrants through Friday, March 24, 2017. Adam Paxman seconded. Discussion: Eugene LaBombard stated he wanted it noted that the warrants were only through March 17th. Motion carried.
5. Ken Nolan, VPPSA, Discussion Regarding Sale of the Highgate Converter:
Ken Nolan from VPPSA was present for this discussion. He presented the Board with a summary of the proposed Highgate Converter Sale and the following information was included in the summary:
What is the Highgate Converter
- A 225 MW AC-DC-AC Converter connecting the Quebec and Vermont transmission systems in Highgate, VT
- Built in the 1980’s with the primary purpose of delivering the original Hydro-Quebec, so-called VJO, contract to Vermont utilities
- Because of rules at the time most Vermont utilities ended up owning a share of the facility – in order to document a physical path from Quebec to individual utility loads
- VPPSA owns a 9.36% share on behalf of its members and is referred to as VPPSA’s Project #3
- Financial Benefit – Because of how VPPSA financed the 2011 control system upgrade at the converter VPPSA members are losing about $40,000 per year right now
- A 10-year loan with 20-year depreciation
- Annual loss becomes income in 2024
- TRANSCO acquiring Highgate raises their “Pool Transmission Facility” value under ISO New England rules
- Means more TRANSCO overhead can be assigned to the ISO New England Tariff
- By coupling the sale with an equity purchase it also raises TRANSCO equity percentage
- Roughly $5 million in Vermont costs would become regional costs
- Reduced Regulatory Burden
- A complaint has been filed at FERC alleging transmission owner rates of return are too high
- As a result FERC is seeking more transparency and rigor in calculations
- This brings increased burden/cost for VPPSA to file the Highgate cost of service
- VPPSA will need approvals not sought before (i.e. depreciation studies and approval)
Ken Nolan stated that a complaint was filed with FERC and the rate of return is too high. He said in order to determine costs they factor in depreciation rates, audits, etc.
- Reduced Capital Risk
- Highgate is 30+ years old and major investments are on the horizon
- The present ownership structure requires VPPSA (and VPPSA participants) to raise the necessary capital
- TRANSCO ownership would place this burden on their $1 billion balance sheet instead
Ken said this facility is 30+ years old and will need upgrades soon.
The (Original) Transaction Concept
- All Highgate owners would sell the asset to TRANSCO on May 31st
- At Net Book Value (required to maintain PTF treatment)
- TRANSCO would use their line of credit to pay cash
- TRANSCO would amend its Operating Agreement to allow Highgate owners to acquire TRANSCO equity on September 30th equal to their previous ownership share of Highgate
- Highgate Owners would give TRANSCO back its money in return for Membership Units
- VPPSA would be allowed to buy $800,000 of additional equity to offset costs presently assigned to Highgate
- The net effect would be that the Highgate owners would convert their ownership of Highgate into increased ownership of TRANSCO
- Transmission payments are converted to TRANSCO dividends
He said TRANSCO owns the asset and Velco manages it. He said on May 31st Velco would pay cash at net book value and in September TRANSCO would allow the purchase of equity at a 12.5% dividend.
The Amended (Actual) Transaction
- Stowe Electric Department (which is a Highgate participant through VPPSA but not a VPPSA member) decided to retain their ownership
- Further, they believe they have a right of first refusal on VPPSA’s entire ownership (this is not clear in the contracts)
- Hyde Park decided it did not want to retain an interest, but wanted its share sold to Stowe
- These positions clouded VPPSA’s ability to undertake the sale without a protracted legal battle
- To avoid litigation the deal was amended such that VPPSA will sell 56% of its Highgate interest to Stowe on May 31st and the remainder to TRANSCO
- TRANSCO agrees to issue equity to VPPSA as though the entire Highgate interest was sold to them plus the additional $800,000 originally included
- Stowe will have 2-years to acquire the remaining 44% of VPPSA’s interest from TRANSCO
- This results in VPPSA’s position being the same as originally thought
- Except Stowe ends up owning VPPSA’s Highgate share instead of TRANSCO
- Preserves about 90% of the anticipated benefits to the state
Ken stated that Stowe was a member of VPPSA but left. He said he’s been in the electric transmission business for 25 years and he can’t figure out what benefit this would have for Stowe.
How the deal Works for VPPSA
- VPPSA will receive cash from both Stowe and TRANSCO on May 31st in return for its Highgate ownership
- VPPSA needs to pay the remainder of its $1.3 million loan outstanding with KeyBank related to the 2011 upgrades
- Which is collateralized by Highgate’s revenues
- In September VPPSA will acquire TRANSCO equity equal to the Highgate value (less Stowe and Hyde Park’s share)
- Plus the allowed $800,000
- A new loan will need to be obtained for some members to cover the equity purchase
- VPPSA will receive dividends from the new equity and pass them through to members
- The dividends received from TRANSCO will be sufficient to pay the debt service on the new loan for those needing it and will result in sending excess revenues to participants
What are the risks?
- Elimination of TRANSCO dividend
- The only significant threat to TRANSCO’s dividends would be a reduction in their allowed rate of return
- TRANSCO’s return is presently 11%
- VPPSA’s analysis assumes a 9.5% allowed return (being discussed in the pending FERC case)
- TRANSCO has indicated they could absorb a 9% return without a dividend change
- Since the TRANSCO dividend and allowed rate of return are linked decreases below 9% return will result in proportional dividend decreases
- However, decreases in allowed transmission return would impact Highgate as well so retaining ownership doesn’t necessarily avoid this risk
- TRANSCO decides to sell Highgate to someone else
- Any sale would need Board of Director’s approval
- Public power holds 5 votes and VLITE holds 3 votes out of 12 total
- TRANSCO will need to demonstrate public benefit from a sale
- It would need to occur at net book value or reimburse New England for its costs coverage
- VPPSA believes these risks are significantly less than the risk of continued ownership
Chris Leach asked if Swanton Village would need to pay anything up front for this and Ken said no there is no out of pocket expense to the Village. He provided a chart showing the impact to Swanton (12.3% ownership - $279,904 and 14.07% of outstanding loan - $184,826). The chart showed by selling the asset and purchasing the equity equal to available cash will provide Swanton Village with a dividend payment of $11,894 beginning in 2017 and going through year 2036. Ken stated VPPSA recommends selling and getting out of this risk.
Chris Leach made the motion to authorize Village Manager Reginald Beliveau Jr. to sign necessary documents to sell the Village of Swanton’s shares in the Highgate Converter Station per VPPSA’s recommendation and also authorizes the funds from the sale to be used to purchase Transco Equity. Adam Paxman seconded both motions. Motions carried.
6. Audit Report Review:
Lynn Paradis, Assistant Village Manager, informed the Board that Kittell, Branagan & Sargent completed their audit of the Village of Swanton for the year 2016. She said all aspects of the audit went well but they did have a couple of recommendations on two issues. She said they are recommending that the “due to” “due from” be kept at under $1 million dollars and they also recommended that journal entries be reviewed by the Village Manager on a quarterly basis. Other than that the audit went very well. They said we have a good system in place. Adam Paxman made the motion to accept the 2016 Auditor’s Report as presented. Eugene LaBombard seconded. Motion carried.
7. Review Banking Relationships for Village of Swanton Business:
Lynn Paradis, Assistant Village Manager, explained to the Board that all daily regular business is done at People’s United Bank with our main operating account. She said that Union Bank would like for the Village to move this operating account to their bank. She said she spoke with a couple of representatives from People’s United Bank today but said her government banking representatives are in Burlington. She said as it stands now the Village goes to the bank everyday and makes a deposit. She said if the Village were to move their operating account to Union Bank we would scan our own checks and do a remote deposit right here from the Village Office. She said between the Police Department and the Office staff, someone could run out there probably twice per week and deposit the cash. She said the online banking with ICloud is going great and the deposits from that have been real good. She said right now their cash flow is better than it has been. Chris Leach said he trusts Lynn’s opinion and said the choice is hers to make. She said they have been contemplating this for a while and feels this will be a step in the right direction. Chris stated as long as the Village’s funds are insured he is fine with leaving the decision up to the Assistant Village Manager.
8. Discuss Tree Replacement Schedule in Village Park:
Adam Paxman stated he wanted this on the Agenda in May so asked that this be tabled until a later date. Item tabled.
9. Review Proposed Changes to Coin Drop Rules and Regulations:
Adam Paxman stated he has drafted some changes to the Coin Drop Rules and Regulations and wanted to go over them with the Board. He said he added a line on the bottom of the application where it can be signed when the requesting organization has provided the Village with a copy of their liability insurance. The Board agreed to this change. He showed where he highlighted some of the existing information on the back of the application by making it bold type. He stated on Item #3 relating to liability insurance he wanted to add that the requesting organization had to have a copy to the Village Clerk 3 weeks prior to the approved coin drop. It used to say “one week”. He said he also wanted to add “Copy of insurance certificate must be present at event. Failure to have will result in closing the coin drop.” Chris Leach and Eugene LaBombard didn’t think this was necessary as long as they provided a copy to the Clerk before the coin drop. Adam also stated he wanted to add that “requesting organizations can have no more than one coin drop in a two year period.” Chris and Eugene didn’t agree with this either and suggested that all applications be presented to the Village Clerk by March 15th of each year so that they can be scheduled for the summer. They also suggested that if more than one organization was requesting the same month for a coin drop they would use a lottery system to decide who would have it. They asked the Village Clerk to make these changes and they would go over it again to make sure they all agree on the Rules and Regulations.
10. Missisquoi Valley Rescue Request Coin Drop on Saturday, August 12, 2017:
Eugene LaBombard made the motion to approve Missisquoi Valley Rescue’s request to hold a coin drop on Saturday, August 12, 2017 from 9 a.m. to 12 noon with a rain date of Saturday, August 19, 2017. Chris Leach seconded. Motion carried with two yays and one nay.
11. Star Hose (Swanton Fire Department) Request Coin Drop on Saturday, September 9, 2017:
Eugene LaBombard made the motion to approve Star Hose’s request to hold a coin drop on Saturday, September 9, 2017 from 9 a.m. to 12 noon with a rain date of Saturday, September 16, 2017. Chris Leach seconded. Motion carried with two yays and one nay.
12. St. Albans Police Department Letter of Recognition:
Reg Beliveau stated that he received a letter of recognition from the St. Albans City Police Department regarding the shooting incident last month in St. Albans. He said this letter explains how this incident spilled over into Swanton Village and the City Police Department wanted to specifically thank each individual that responded and helped in some way. He said this letter recognizes Chief Stell, Don Gilbert, Officer Chad Parah, and the Border Patrol agents involved. He mentioned how quickly this incident was solved and how nice it is to have good neighbors and partners. He stated it was a good job done by all assisting agencies.
13. Any Other Necessary Business:
Neal Speer stated there will be a joint meeting on April 4th at the Town Office at 7 p.m. about the Sidewalk Study done by Peter Cross.
Any Other Business: Reg Beliveau stated he has received some complaints regarding vehicles on Brown Avenue and Canada Street and maybe needing a three way stop sign there. He said Chief Stell is going to monitor the area for a while and see if there is an issue.
14. Public Comment:
15. Executive Session (If Necessary):
Adam Paxman made the motion to enter into Executive Session to Discuss Real Estate at 8:47 p.m. Chris Leach seconded. Motion carried.
Chris Leach made the motion to exit Executive Session at 9:34 p.m. and to re-enter Open Session. Adam Paxman seconded. Motion carried.
ACTION TAKEN: Chris Leach made the motion to authorize the Village Manager to claim a 6.4 acre of unclaimed property on landlocked property near the Wastewater Treatment Facility. Motion carried.
Eugene LaBombard made the motion to have the Village pursue selling the Commercial Building on Label Lane. Chris Leach seconded. Motion carried.
Chris Leach made the motion to adjourn the Regular Board of the Trustees meeting at 9:43 p.m. Adam Paxman seconded. There being no further business at hand, Neal Speer, Village President, adjourned the meeting at 9:43 p.m. Motion carried.
Neal Speer, Village President Date
Dianne Day, Village Clerk Date