MINUTES OF THE MEETING
THE GOVERNANCE COMMITTEE
March 14, 2011
A meeting of the Governance Committee was held via videoconference at the Authority’s offices at 501 Seventh Avenue, New York, New York, 123 Main Street, White Plains, New York and 95 Perry Street, Buffalo, New York at approximately 3:00 p.m.
The following Members of the Governance Committee were present:
Trustee Eugene L. Nicandri, Chairperson
Trustee D. Patrick Curley
Trustee Jonathan Foster
Trustee Mark O’Luck
Also in attendance were:
Michael Townsend Chairman, New York Power Authority
Gil Quiniones Chief Operating Officer
Judith McCarthy Acting General Counsel
Joan Tursi Senior Vice President – Corporate Support Services
Joseph Gryzlo Vice President – Labor Relations and Chief Ethics and
Patricia Leto Vice President – Procurement
Lesly Pardo Vice President – Internal Audit
Karen Pasquale Vice President Enterprise Shared Services
Brian McElroy Treasurer
Karen Delince Corporate Secretary
Dennis Eccleston Chief Information Officer
Rod Mullin Director – Fuel Planning and Operations
Mark O’Connor Director – Real Estate
Shannon Sramek Senior Treasury Analyst
Lorna Johnson Assistant Corporate Secretary
Louise Nestler Assistant Ethics Officer
Sheila Baughman Senior Secretary, Corporate Secretary’s Office
Chairman Nicandri welcomed Ms. Judith McCarthy, Acting General Counsel, and other staff members to meeting.
The minutes of the Committee’s October 26, 2010 meeting were adopted.
Ms. Karen Pasquale presented an overview of the Authority’s Procurement activities, with
Ms. Patricia Leto, Mr. Mark O’Connor, Mr. Rod Mullin, Ms. Shannon Sramek and Mr. Joseph Gryzlo reporting on procurement contracts and disposal of personal property; acquisition and disposal of real property; fossil fuel; corporate finance and ethics and compliance.
Ms. Pasquale said that four sets of Guidelines and Procedures were being presented to the Committee for approval: Guidelines for Procurement Contracts; Guidelines and Procedures for the Disposal of Personal Property; Guidelines and Procedures for the Disposal of Real Property and Guidelines and Procedures for the Acquisition of Real Property. The following highlights as it relates to each Guideline were presented:
2.1 Guidelines for Procurement Contracts
The Guidelines for Procurement Contracts describe the Authority’s process for soliciting proposals and awarding contracts. As a result of recently enacted state laws, chapters 174 and 175 of the Laws of 2010, that made substantial amendments to the Public Authorities Law, with several changes governing procurements, Authority staff is proposing several changes to its guidelines for procurement contract as follows:.
Additional non-substantive and stylistic changes have also been made throughout the Guidelines.
In response to a question from Trustee O’Luck, Ms. Pasquale said that the proposal for the approval of contracts in the amount of $1million or more does not relate specifically to M/WBEs but to all sole source or single source contracts within that limit.
2.2 Guidelines and Procedures for the Disposal of Personal Property
The Guidelines for the Disposal of Personal Property include, but is not limited to, the use, award, monitoring and reporting of contracts for the disposal of personal property, materials, tools, equipment and vehicles owned by the Authority, with a value in excess of $5,000. The proposed changes are to make the Guidelines consistent with the law, clarify or improve the Authority’s disposal process and to reflect particular or organizational changes in the Authority. In summary, the proposed changes to the Guidelines:
Additional non-substantive and editorial or stylistic changes were also made throughout the Guidelines.
In response to a question from Trustee O’Luck, Ms. Joan Tursi said that the Authority conducted a re-sale of the 2008 –2009 vehicles because of issues with the cars. She added that the Authority generally dispose of vehicles within a certain timeframe or mileage, 5 yrs or 75,000 miles; however, with the referenced vehicles there was a cost benefit in replacing them at that time.
In response to further question from Trustee O’Luck, Ms. Tursi said that commission rates are based on the type of equipment being purchased; transportation fees are also included in the commission. She added that all Authority vehicle sales are done by an auctioneer, JJ Kane of Rome, New York.
The guidelines and procedures for the disposal and guidelines and procedures for the acquisition of real property allows for Authority acquisitions and dispositions to ensure that these transactions are transparent to the public while preserving the Authority’s ability to assist in economic development. The only substantive change in the 2011 guidelines from 2010 is a title change, which reflects operational changes made within the past year. The Vice President – Enterprise Shared Services is named as the Authority’s Contracting Officer in the place of the Senior Vice President – Enterprise Shared Services.
The members of the Governance Committee agreed to forward the proposed changes to the Guidelines for Procurement Contracts; Guidelines and Procedures for the Disposal of Personal Property; Guidelines and Procedures for the Disposal of Real Property and Guidelines and Procedures for the Acquisition of Real Property to the Authority’s Board of Trustees for review and approval.
3. Procurement and Real Estate Reports
3.1 Procurement Contract Activity
Ms. Leto highlighted the following procurement contract activities:
In response to a question from Trustee Mark O’Luck, Ms. Leto said that the Authority plans to raise its goals as it pertains to M/WBEs and will also be posting construction contracts of $100,000 or more in value and contracts to M/WBEs on its Web Site. Also, the Diversity division will monitor the Authority’s activities to ensure that it is in compliance with the new laws.
3.2 Disposal of Personal Property
Ms. Leto provided the following report:
2010 Annual Report of Disposal of Personal Property
The Public Authorities Accountability Act (“PAAA”) requires the preparation of a report listing all personal property over $5,000 in value disposed of during the year. This information will be included in the Annual Report of Personal Property Disposal to be submitted to the ABO by March 31, 2011 and posted on its Public Authorities Reporting Information System (“PARIS”).
WPO and Facilities
The Authority received $1,374,386.66 for Personal Property Disposal transactions in 2010. This included the sale of scrap metals conducted at the St. Lawrence/FDR Project ($65,186.66) and the sale of certain plant equipment/ materials in connection with the decommissioning and dismantling of the Charles Poletti Power Project ($1,309,200).
Ms. Joan Tursi provided the following report:
The Authority participated in three Fleet-related auctions conducted by JJ Kane Auctioneers. This auction resulted in the sale of 160 units of property comprising light duty vehicles, heavy duty trucks and special equipment; 64 units were sold for more than $5,000. The Authority received $647,750 for the 64 units. The net amount received, after commission and transportation costs were deducted, was $613,935.75.
The Authority also participated in an online auction on December 22, 2009 conducted by Auctions International. This auction resulted in the sale of three additional units, one of which was sold for more than $5,000. The net proceeds of this auction were $6,991. Since payment was not received by the Authority until 2010, this transaction is included in the 2010 Report. In addition to the aforementioned auctions, Fleet Operations staff also solicited bids for the sale of three crew cabs which resulted in additional net proceeds of $44,985.
In summary, the Authority’s Fleet Operations disposed of 68 units of property with a sale price of more than $5,000, the net proceeds of which were $699,749. The net value of Fleet-related auctions during 2010 was $665,911.75.
An additional $104,389.60 was received for the sale of 98 units with a value less than or equal to $5,000.
In 2010, the Authority received $2,040,298.41, after commission and transportation costs were deducted, for all personal property disposed of that had a value of more than $5,000.
3.3. Acquisition and Disposal of Real Property
Mr. Mark O’Connor reported on the acquisition and disposal of real property as well as leasing and permitting activities during the period January 1, to December 31, 2010.
The Authority acquired three easements during this period: 1) an easement for underwater cable to support the St. Lawrence transmission; 2) a water and sewer utility easement to support the Authority’s construction at Niagara Project and 3) an easement for the construction of an electrical grounding grid to alleviate a safety concern near the Authority’s Flynn Plant in Holtsville, Long Island.
In addition, in order to support the Niagara Project’s ice boom operations, the Authority had one major acquisition, the First Buffalo Marina, to secure permanent mooring rights for winter storage of the its tugboat, ice breaker and barge.
With regard to danger tree permits, the Real Estate division continues to support the Transmission division with the acquisition of danger tree permits which gives the Authority the right to remove trees and other tall growing vegetation which pose a threat to the safe operation of its transmission system. During the period, the Real Estate division obtained 82 danger tree permits at a cost of $43,000.
Land Use Permits
The Authority controls the use of its lands and rights-of-way by others by issuing land use permits. During 2010, the Real Estate division issued 13 permits for the use of Authority fee-owned property or for activities within its rights-of-way.
The Authority continues to perform leasing activities to support its operational needs. Its headquarters at123 Main Street, White Plains, generates approximately $3.2M of gross rental. During 2010, staff renewed a lease with a long-standing tenant, Hodagaya Chemical. The renewal was for 5 years at an annual rate of $70,000. In addition, staff renewed the office and hanger lease for the storage of the Authority’s plane at Landmark Aviation, Westchester County Airport. This renewal was for three years at an annual rate of $82,000. Staff also modified and extended the lease term for the Authority’s Albany Office for a 5-year term. Approximately 3,860 rentable square feet was added, bringing the total to 12,720 rentable square feet with an annual rental of $253,000; the expiration date was also extended one year to July 31 2015. Staff entered into an agreement with 501 7th Avenue Associates for a modification and surrender agreement because the Authority no longer subleases to the Office of Alcohol and Substance Abuse Services. The effect of this agreement was to surrender approximately 40,000 square feet which the Authority had been subleasing to New York State Office of General Services. The effect of this early surrender was to save the Authority approximately $477,000 of direct rental payments. The Authority currently occupy approximately 7,185 rentable square feet on the 9th floor of 501 7th Avenue at an annual rental of $276K and a current termination date of August 31, 2011.
St. Lawrence Relicensing
As part of the Authority’s license compliance efforts at its St. Lawrence/FDR Power Plant, 599 acres of Authority-owned lands was committed to municipalities or landowners who own lands adjoining the Authority’s land. All the municipal parcels committed to in the relicensing of the Plant have been conveyed. Also, 360 of the 520 private parcels have been conveyed and 64 deeds have been finalized, closed and recorded in the St. Lawrence County Clerk’s office. In addition, 57 deeds are awaiting final payment and closing. Funds collected, to date, for these transactions total more than $765,000. These funds will be returned to the local communities to fund local public projects.
In response to a question from Chairman Nicandri, Mr. O’Connor said that the Authority has not placed a time limit for the transfers. A 2-year time frame was anticipated for the transactions, however staff is having difficulty in getting some landowners to close; there are approximately 70 deeds awaiting final signature.
3.4 Supplier Diversity Program
Ms. Leto said in 2010, the Authority had awarded, $35.7 million ((11.7% of the Authority’s reportable expenditures) to New York State Certified Minority and Women-Owned Business Enterprises (M/WBEs). The Authority’s goal for 2010 is 6% of “Reportable Expenditures.” Also, seven different NYS certified MBE financial dealers transacted over $421 million or 27.6% in principal sales and purchases for the Authority.
The Empire State Development Corporation provided a template for submittal of agencies’ 2011-2012 goal plans, due April 21, 2011. The template incorporates new requirements set forth in the recent M/WBE legislation and the new Article 15-A regulations adopted on December 22, 2010. A major component of the plan is to increase the M/WBE annual goal to help meet the Governor’s goal for minority and women-owned firms to account for 20 percent of the state’s business.
The Empire State Development Corporation also amended the M/WBE Guidelines which were used to update the Authority’s M/WBE and EEO contract language respectively, as well as the Authority’s procurement policies and procedures. The Guidelines also increased monitoring and reporting requirements to facilitate transparency in state procurement.
An inquiry was submitted to all agencies and authorities by the new Chief Diversity Office for New York State requesting specific information on the their Supplier Diversity Program and practices. This information was prepared and submitted on February 9, 2011.
3.5 Inventory Statistics
Ms. Leto reported that as of December 31, 2010, the total stock value of the Authority’s inventory was $87,021,409. This figure includes $1.3 for B-G LEM spare materials purchases and transfers into inventory and $1.3 for blades, rings and control valves for the Flynn Plant.
The Construction of the new Niagara Warehouse continues. Construction completion of the new Niagara Warehouse and Office Facility is scheduled for July, 2011.
3.6 Fossil Fuel Activity
Mr. Mullin said that in 2010, the total fuel expenditures and related costs was $213 million. Of this total, $212.3 million was spent on natural gas and associated costs and $631,000 on oil storage and inspection. There were 27 natural gas and oil contracts in total, all of which were competitively bid.
The fuel prices for products that impact the Authority’s cost of doing business are as follows:
Natural gas prices have been comparatively low due to weak demand, high storage levels and increased supply availability to the Northeast.
3.7. Corporate Finance Activity
Ms. Sramek reported that the “Corporate Finance Addendum” to the Annual Report of Procurement Contracts identifies certain non-procurement items paid throughout the year. Through December 31, 2010, the total is approximately $2.2 million. The firms listed in the addendum provide unique and specialized services in that performance of such services requires a broad depth of knowledge and experience and are therefore provided by a limited group of firms. These non-procurement items include trustee and paying agent services, commercial paper remarketing services, escrow agent services and fees paid for revolving credit agreements supporting the Authority’s Variable Rate Debt Program. Of the $2.2 million spent to date, approximately $1.4 million is associated with the Authority’s revolving credit agreements.
In response to a question from Chairman Eugene Nicandri, Ms. Sramek said that all of the contracts being reported on are existing contracts. She continued that, at the December 2010 Board meeting, the Authority’s Trustees did authorize staff to enter into a Revolving Credit Agreement to replace the Authority’s Revolving Credit Agreement that expired in January of this year. The new Revolving Credit Agreement went into effect on January 20, 2011 and will be included in the next report to the Committee.
Mr. Gryzlo provided an update of the Authority’s Ethics and Compliance program. He said the ethics case load continues to increase. The Ethics and Compliance Office views this as a positive sign and attributes it to the Authority’s Code of Conduct training program and certification to the NYPA Code of Conduct. The 2010 ethics training focused on conflicts of interest, outside employment, outside activities and gifts. In 2011, ethics training will focus on outside activities and employment. There are a number of employees engaged in various outside activities and employment; the Authority wants to ensure that there are no conflicts of interest with the Authority’s mission, business interests or the individual employee’s job duties. Employees who are interested in seeking outside employment will be asked to contact the Ethics & Compliance Office for an evaluation.
With regards to the annual financial disclosure filing, due at the NYS Commission on Public Integrity (“Commission”) no later than May 16, 2011, Mr. Gryzlo said that Ethics and Compliance Office staff will be communicating with employees required to file and all of the Trustees. The Commission will notify required filers and provide them with user IDs and passwords for electronic filing at their NYPA e-mail address. The Ethics and Compliance Office will work with the Secretary’s Office to ensure proper notification goes out to the Trustees. Approximately one quarter of the Authority’s staff are required to file.
In response to a question from Trustee Foster, Mr. Gryzlo said that Law Department has an Assistant Ethics Officer and a Compliance Specialist. The Power Supply Business Unit Group also has a Technical Compliance group that works in conjunction with the Internal Audit Department, Human Resources and other business units in the Authority on various aspects of the Authority’s compliance activities.
Referrals from New York State Inspector General
Mr. Gryzlo said that during 2010, two referrals of allegations were received from the State Inspector General’s Office, both of which were found to be without merit.
In response to a question from Trustee O’Luck, Mr. Gryzlo said that there were no firings as a result of allegations or cases reported.
In response to further questions from Trustee O’Luck, Chairman Nicandri said that the Authority does not currently have an Inspector General on staff. An internal review determined that the State Inspector General has statutory authority to investigate all issues that arise related to the Authority. In an effort to avoid any conflicts with that statutory authority, NYPA dissolved its internal Inspector General’s Office.
Mr. Quiniones added that the statute does not require the Authority to have an Inspector General on staff, therefore it was determined that staff should refer cases to the New York State Inspector General’s office. He then asked the Acting General Counsel to review the matter and report to the Committee the exact reasoning for the Authority’s decision to eliminate the position.
Mr. Gryzlo added that the Authority conducted training sessions with staff from the Inspector General’s office in 2009, and explained the Authority’s obligation to work with their office on matters under their jurisdiction. He ended by saying that the Authority has a good working relationship with the Inspector General’s Office
NERC Reliability Compliance
Mr. Gryzlo reported that NERC, which has standards and requirements designed to protect the power system and which utilities must adhere to, conducts continuing evaluations as to the appropriate level of resources and staffing for the Authority. The Authority is subject to more than 100 standards and requirements. In June and July 2011, the Authority is scheduled for an audit to be conducted by the regional entity of NERC that enforces its standards.
In response to a question from Chairman Nicandri, Mr. Gryzlo said that the Authority has an ongoing assessment of its staffing levels to be in compliance with NERC standards. Mr. Gil Quiniones added that the Authority increased staff last year in the technical compliance area and will continue to evaluate its needs in order to be in full compliance.
Anti-Retaliation in Policy
Mr. Gryzlo reported that the Authority revised its Anti-retaliation Policy in late 2010, to focus on whistle blowing events, and encourage staff to report concerns of alleged wrongdoing, misconduct, fraud, and policy and procedure violations, without fear of retaliation. Employees were encouraged to cooperate during investigations and inquiries. The Authority maintains a vendor operated anti-retaliation “hotline” which employees can use to report such incidents. Employees are protected if they participate in an investigation related to a whistle blowing event.
The next regular meeting of the Governance Committee will be held on a date to be determined. On motion made and seconded the meeting adjourned at approximately 5:30 p.m.