MINUTES OF THE SPECIAL MEETING

OF THE

POWER AUTHORITY OF THE STATE OF NEW YORK

 

July 22, 2010

 

 

Table of Contents

 

            Subject                                                                                                                                             

 

1.       Consent Agenda:

a.       Proposed Expansion Power Contract with Yahoo! Inc. –  Notice of Public Hearing, Exhibit - “1a-A”; “1a-A-1” & “1a-A-2”
Resolution

                                                                                                                

 

b.       Economic Development Plan – Kolmar Laboratories, Inc. –  Industrial Incentive Award, Exhibit - “1b-A”
Resolution

     

 

 

Discussion Agenda:

 

2.       Hudson Transmission Partners, LLC - Authorization to Post Security.
Resolution                                                          

  

3.       Motion to Conduct an Executive Session                                                                                 

4.       Motion to Resume Meeting in Open Session                                                                            

5.       New York State and Local Employees’ Retirement System – Retirement Incentive
Resolution                        

     

6.       Next Meeting                                                                                                                                 

Closing                                                                                                                                             

                                                                                                     


 

Minutes of the Special Meeting of the Power Authority of the State of New York held via videoconference at the following participating locations at approximately 11:00 a.m.:

1)       New York Power Authority, 123 Main Street, White Plains, NY

2)       New York Power Authority, 501 7th Avenue, New York, NY

3)       St. Lawrence/FDR Power Project, 830 Barnhart Island Rd., Massena, NY

4)       Harris Beach, PLLC, 99 Garnsey Road, Pittsford, NY

 

Members of the Board were present at the following locations:

                                Michael J. Townsend, Chairman – Pittsford, NY

                                Jonathan F. Foster, Vice Chairman – New York, NY

                                Eugene L. Nicandri, Trustee – Massena, NY

                                Mark O’Luck, Trustee – New York, NY

 

                                D. Patrick Curley, Trustee – Alexandria Bay, NY, via teleconference

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Richard M. Kessel                               President and Chief Executive Officer

Gil C. Quiniones                                   Chief Operating Officer

Terryl Brown                                        Executive Vice President and General Counsel

Francine Evans                                    Executive Vice President, Chief Administrative Officer

                                                                    and Chief of Staff

Elizabeth McCarthy                           Executive Vice President and Chief Financial Officer

Jordan Brandeis                                   Senior Vice President – Power Resource Planning and Acquisition

Angelo Esposito                                   Senior Vice President – Energy Services and Technology

Paul Finnegan                                      Senior Vice President – Public, Governmental and Regulatory Affairs

James F. Pasquale                               Senior Vice President – Marketing and Economic Development

Joan Tursi                                             Senior Vice President – Corporate Support Services

Rocco Iannarelli                                  Vice President – Human Resources

John Kahabka                                     Vice President – Environment, Health and Safety

Dennis Eccleston                                 Chief Information Officer

Karen Delince                                      Corporate Secretary

Michael Saltzman                               Director – Media Relations

Sarah Barish-Straus                            Special Assistant – Project Development, President's Office

Mary Jean Frank                                 Associate Corporate Secretary

 

 


 

Chairman Townsend presided over the meeting.  Corporate Secretary Delince kept the Minutes.


 

1.                     Consent Agenda

 

a.                   Proposed Expansion Power Contract with Yahoo! Inc. – Notice of Public Hearing 

               

 

                The President and Chief Executive Officer submitted the following report:           

 

SUMMARY

 

                “The Trustees are requested to authorize a public hearing pursuant to §1009 of the Public Authorities Law (‘PAL’) on a proposed contract (‘Contract’) for an allocation of Expansion Power (‘EP’) to Yahoo! Inc. (‘Yahoo!’).  The proposed Contract is attached as Exhibit ‘1a-A.’

 

BACKGROUND

 

Under §1005(13) of the Power Authority Act, as amended by Chapter 313 of the Laws of 2005, the Authority may contract to allocate 250 megawatts (‘MW’) of firm hydroelectric power as EP.  Each application for an allocation of EP must be evaluated under criteria that include, but need not be limited to, those set forth in PAL Section 1005(13)(a), which details general eligibility requirements.  Among the factors used for evaluating a request for an allocation of hydropower are the number of jobs created, the capital investment in the business’ facilities, the number and types of jobs created and the associated wages and benefits. 

 

At their meeting of May 19, 2009, the Trustees approved an allocation of 15 MW of EP to Yahoo! for a term of 15 years.  Approval of the allocation was based on an evaluation of Yahoo!’s application for hydropower in which the company proposed to build a new regional datacenter to serve its East Coast customers.  The allocation is contingent on Yahoo!’s investment of $150 million to build the datacenter and a commitment to create 125 jobs.

 

DISCUSSION

 

                “On March 15, 2010, the Authority and Yahoo! signed an ‘Interim Agreement for the Sale of Expansion Power and Energy’ (‘Agreement’).  The purpose of the Agreement was to enable Yahoo! to accept delivery of its EP allocation at the startup of its datacenter operation on April 1, 2010.  Also included in the Agreement was an Appendix cosigned by the Authority, Yahoo! and the delivering utility, New York State Electric and Gas Corporation (‘NYSEG’), to effectuate an April 1, 2010 delivery arrangement.

 

                “The Agreement, in part, cites PAL §1005(11): ‘The Authority is authorized ‘to exercise all the power necessary or convenient to carry out and effectuate the purposes and provisions...to sell…electric power, and generally to do anything and everything necessary or convenient to carry out the purposes of...title [1 of article 5 of PAL].’’  Furthermore, the Agreement cites the May 19, 2009 Trustees’ authorization ‘to…take any and all actions and execute and deliver any and all agreements and other documents necessary to effectuate…approval of the Allocation.’

 

                “The Agreement expires the earlier of December 31, 2010, or until a long-term contract becomes effective.  It is anticipated that the Contract that is the subject of this Trustee item will become effective prior to December 31, 2010, after the anticipated completion of the approval process  required by PAL §1009. 

 

“The proposed Contract follows the format of the Western New York proposed contract extensions submitted to the Trustees at their May 26, 2010 meeting.  As with the Western New York contracts, the Authority will provide firm electric service from the Niagara plant, consisting of firm power (capacity) and energy service, subject to pro-rata curtailment when there is insufficient generation at the Niagara and St. Lawrence/FDR facilities.  The power and energy will be sold on a direct-sale basis.  Delivery will be provided by the local utility, NYSEG, and billed directly to Yahoo!.

 

“As per the Trustees authorization, the 15 MW allocation is contingent on Yahoo!’s investment of $150 million, completion of the new datacenter facility and creation of a total of 125 new jobs.  The allocation amount will be subject to an enforceable employment commitment of 125 jobs, and includes an annual job reporting requirement and a job compliance threshold of 90%.  Should Yahoo!’s actual jobs reported fall below the compliance threshold, the Authority has the right to reduce the allocation on a pro-rata basis.  The rates, terms and conditions for the sale are contained in the relevant service tariffs, which are the same tariffs applicable to all EP allocations.  Specifically, Service Tariff No. EP-1 (Exhibit ‘1a-A-1’) is effective through June 30, 2013 and Service Tariff No. WNY-1 (Exhibit ‘1a-A-2’) becomes effective from July 1, 2013 until the expiration of Yahoo!’s allocation on March 31, 2025.  The Contract also requires that an energy efficiency audit be performed not less than once every five years during the term of electric service.

               

RECOMMENDATION

 

“The Manager – Business Power Allocations and Compliance recommends that the Trustees authorize a public hearing on the terms of the proposed contract with Yahoo! Inc. to be held on a date to be determined at the Niagara Power Project’s Power Vista Visitors’ Center.  It is further recommended that, pursuant to §1009 of the Public Authorities Law, the Corporate Secretary be authorized to transmit copies of the proposed contract to the Governor and legislative leaders, and to arrange for the publication of a notice of public hearing in six newspapers throughout the State in accordance with the Public Authorities Law.

 

“The Executive Vice President and General Counsel, the Senior Vice President – Marketing and Economic Development, the Vice President – Marketing and I concur in the recommendation.”

 

The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted.

 

                RESOLVED, That the Trustees hereby authorize a public hearing on the terms of the proposed contract for the sale of Expansion Power to Yahoo! Inc. to be held at the Niagara Power Project’s Power Vista Visitors’ Center on a date to be determined; and be it further

 

                RESOLVED, That the Corporate Secretary be, and hereby is, authorized to transmit copies of the proposed contract to the Governor, the Speaker of the Assembly, the Minority Leader of the Assembly, the Chairman of the Assembly Ways and Means Committee, the Temporary President of the Senate, the Minority Leader of the Senate and the Chairman of the Senate Finance Committee pursuant to §1009 of the Public Authorities Law; and be it further

 

                RESOLVED, That the Corporate Secretary  be, and hereby is, authorized to arrange for the publication of a notice of public hearing in six newspapers throughout the State, all done in accordance with the provisions of §1009 of the Public Authorities Law; and be it further

 

                RESOLVED, That the Senior Vice President – Marketing and Economic Development or his designee be, and hereby is, authorized, subject to the approval of the form thereof by the Executive Vice President and General Counsel, to enter into such agreements, and to do such other things, as may be necessary or desirable to implement the Contract with Yahoo! Inc. as set forth in the foregoing report of the President and Chief Executive Officer; and be it further

 

                RESOLVED, That the Chairman, the Vice Chairman, the President and Chief Executive Officer, the Chief Operating Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things, take any and all actions and execute and deliver any and all agreements, certificates and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

 


 

b.                   Economic Development Plan – Kolmar Laboratories, Inc. – Industrial Incentive Award

               

                                                                                                                                                                                                               

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to approve an Industrial Incentive Award (‘Award’) to Kolmar Laboratories, Inc. (‘Kolmar’) in accordance with the previously approved Economic Development Plan (‘Plan’).

 

BACKGROUND

 

                Chapter 32 of the Laws of 1987 added the eighth unnumbered paragraph of Section 1005 of the Public Authorities Law (‘PAL’), which directs the Authority to identify net revenues produced by the sale of Expansion Power (‘EP’) and, further, to identify an amount of such net revenues to be used solely for Awards.  These awards are to be made in conformance with a Plan covering all such net revenues that is submitted by the Authority to the Economic Development Power Allocation Board (‘EDPAB’) and is approved by EDPAB pursuant to Section 188 of the Economic Development Law (‘EDL’).  

 

                “Net revenues are defined by Section 1005 as any excess of revenues properly allocated to the sales of EP over costs and expenses properly allocated to such sales.  The Authority is directed in Section 1005 to identify net revenues no less often than annually.  Section 188 of the EDL provides that EDPAB is to review each Plan applying the same economic development criteria as those used to evaluate applications for power.  The statute does not define Industrial Incentive Awards.

 

                “At their meeting of September 29, 2009, the Trustees approved a Plan that allows the use of net revenues from the sale of EP for calendar years 2008 through 2016 to provide electric bill discounts to New York State manufacturing companies that are at identifiable risk of closing or relocating to another state.

               

DISCUSSION

 

                “Economic conditions are placing added strain on many New York State manufacturing companies.  Among these companies is Kolmar, which has been manufacturing pharmaceutical, cosmetics and personal care products in Port Jervis for nearly 70 years, employing hundreds of people and generations of families.  Due to rising business costs in 2008, Kolmar began looking at the possibility of relocating its plant to Texas, Louisiana or a sister facility in New Jersey.  In 2009, Kolmar began to seriously consider a move to Texas.

 

“The Empire State Development Corporation, along with other local and regional economic development agencies, began to bring together resources to enable the company to stay and invest in the Port Jervis facility.  Based on Kolmar’s business case, the Authority has been asked to consider authorizing an Award as part of a broader package of incentives to keep the facility in New York State.  Kolmar has been asked to commit a $23 million investment to support the operations in Port Jervis and retain 400 jobs in return for a package of State and local incentives worth up to $6.4 million.

 

“It is recommended that the Authority’s Trustees authorize an Award to Kolmar.  This recommendation comes after careful consideration of Kolmar’s business case.  The form of the award will be a 3˘/kWh price discount applied to annual electric consumption up to a maximum annual award of $300,000, as described in Exhibit ‘1b-A.’  The Award is predicated on the availability of net revenue funding for such an award and will be issued at the Authority’s sole discretion.

 

                “Kolmar’s Award will remain in effect for a one-year period.  The Award may be extended for up to two additional one-year terms based on the availability of funds and provided that Kolmar meets the agreed-upon job commitment as specified in Exhibit ‘1b-A.’  In the event that Kolmar qualifies for and participates in a future, yet-to-be-determined, statewide power program that offers similar value, the Award would ultimately be terminated.   

 

                “Staff will report to the Trustees annually on the actual disbursement of these funds.

 

RECOMMENDATION

 

“The Senior Vice President – Marketing and Economic Development recommends that the Trustees approve an Industrial Incentive Award to Kolmar Laboratories, Inc.  The terms of the Industrial Incentive Award and the maximum annual payments are specified in Exhibit ‘1b-A.’

 

“The Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer and I concur in the recommendation.”

 

The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted.

 

RESOLVED, That the Authority hereby approves an Industrial Incentive Award to Kolmar Laboratories, Inc. as per the terms set forth in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the Chairman, the Vice Chairman, the President and Chief Executive Officer, the Chief Operating Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things, take any and all actions and execute and deliver any and all agreements, certificates and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

 

 


 

 

Industrial Incentive Award (IIA)

 

 

 

Kolmar Laboratories, Inc.

 

·         Port Jervis (Orange County) – 400 jobs

·         Orange & Rockland service area

·         Discount (˘/kWh) against O&R / ESCO rate

·         IIA of 3 ˘/kWh, with max award of $300,000 / year

·         1 year initial term with potential to extend up to 2 additional 1 year terms

·         Flexibility to allow Kolmar Laboratories, Inc. to participate in any new NYPA power program

 

Total recommended Industrial Incentive Award maximum = $300,000

 

 


 

Discussion Agenda

2.                   Hudson Transmission Partners, LLC -- Authorization to Post Security  

               

 

The President and Chief Executive Officer submitted the following report:

SUMMARY

“At a later date it is anticipated that the Trustees will be requested to authorize the execution of a twenty-year agreement between the Authority and Hudson Transmission Partners, LLC (‘HTP’) (the ‘Firm Transmission Capacity Purchase Agreement’ or ‘FTCPA’), for the purchase by the Authority of firm transmission capacity through a to-be-constructed undersea/underground high voltage direct current transmission cable from Bergen County, New Jersey to Manhattan (the ‘Line’ or ‘Project’).  The Project is targeted to commence operations in late 2012/early 2013.

 

                “Pending finalization of negotiations with HTP, the Trustees are requested to authorize the Authority to post corporate guaranties with PJM Interconnection, LLC (‘PJM’) by August 15, 2010 and to post an additional guaranty as a substitute for collateral posted by HTP on June 30, 2010 in the amounts described below.  These postings would guarantee the payment by HTP of interconnection and upgrades which are necessary to accommodate the HTP Project.  In order to protect the guaranties the Authority will post, HTP has filed notice, pursuant to its rights under the PJM tariff, to suspend all interconnection and upgrade work in New Jersey to be done by Public Service Electric and Gas (‘PSEG’) and Jersey Central Power and Light (‘JCPL’).  The suspension will not be lifted without the Authority’s written consent, which will not be given until the FTCPA is executed, all requisite approvals for the Project are received, and the HTP Project’s financial closing has occurred, or the Authority’s guaranties have been replaced by alternate security posted by HTP.

 

BACKGROUND

 

“At their November 2006 meeting, the Trustees authorized Authority staff to begin negotiations with HTP, the winning transmission line bidder in response to the Authority’s March 11, 2005 Request for Proposals (‘RFP’) for Long-Term Supply of In-City Unforced Capacity and Optional Energy.[1]  This RFP was a competitive solicitation for the benefit of the NYC Governmental Customers, with whom Authority staff collaborated during the RFP process. 

 

The Line would be a long-term asset, having a useful life of 40 to 60 years.  With the Line in service, the Authority would acquire certain non-equity rights in the project that would enable it to, among other things, import energy from the PJM market into the NYISO market.  Under the proposed FTCPA, the Authority would acquire the right to 495 MW, or 75% of the Line’s 660 MW capacity.  HTP would retain a 25% share, a portion of which it may transfer to a third party.

 

“Operation of the Project would contribute to a reduction in the energy prices for the NYC Governmental Customers and other electricity consumers in New York City and New York State and enhance both the fuel and geographic diversity of electric supply for the New York City region.

 

DISCUSSION

 

“The Authority has virtually completed negotiations with HTP on the terms of the FTCPA and has commenced talks with its NYC Governmental Customers about the terms of an agreement under which the Customers would agree to make monthly payments to the Authority for the duration of the FTCPA.

 

“Discussions are underway to obtain acceptance of Customer Term Sheets from the major NYC Governmental Customers.  These Term Sheets, which are non-binding, will differ only in the relative shares of the Customers’ obligations to the Authority with respect to the HTP Line.  The Authority’s obligations to HTP under the FTCPA will be contingent on the execution and effectiveness of formal Customer agreements consistent with the Term Sheets.

 

“Staff will come back to the Trustees with the full terms of the transaction and its benefits for the NYC Customers and other consumers.  At that time, staff will seek Trustee approval for the execution of all agreements relevant to the Project.

 

                “In the meantime, for HTP to maintain its interconnection priority positions in PJM and the NYISO, certain financial security postings are required under the respective rules of both transmission system operators.  The security is to ensure transmission owners are paid for the work they do on interconnection and transmission system upgrades, which are necessary to accommodate the HTP Project.

 

                “Thus far, the Authority has posted a guaranty for $16.471 million on January 11, 2010 as security for interconnection and upgrade work to be performed by Con Edison in New York City.  That guaranty is required under NYISO rules so that the HTP Line will maintain its priority for interconnection to Con Edison’s West 49th Street Substation.  The guaranty was given on the condition that Con Edison will spend no money on and expend no resources toward the system upgrade facilities needed to accommodate the HTP Line unless authorized by the Authority.  Thus, if HTP does not proceed with the Project, Con Edison will not spend money on these upgrades and there will be no call on the Authority’s guaranty. 

               

                “The Authority has also posted a guaranty for $1.68 million, which, together with a $1.68 million matching letter of credit security from HTP, satisfied the June 30, 2010 PJM security requirement of  $3.36 million to assure payment of the interconnection and upgrade work of PSEG and JCPL.  The Authority agreed that, with Trustee approval, it would increase its guaranty from $1.68 million to $3 million, with HTP retaining the obligation to supply a letter of credit for the remaining balance of $360,000. 

 

                “The June 30th guaranty was posted with PJM only after HTP issued a directive to suspend all work by PSEG and JCPL associated with the construction and installation of interconnection facilities and network upgrades for the HTP Project.  The estimated duration of this suspension directive is until the Project’s financial closing in early 2011.  Further, HTP agreed not to release, rescind, withdraw or modify the suspension directive without the Authority’s express written consent.  Because all work in PJM has been suspended and will not be resumed without the Authority’s consent, the Authority has reasonable protection against liability for interconnection and upgrade costs which would otherwise be ongoing.  These costs would be owed in the first instance by HTP, but would be backstopped by the Authority’s guaranty. 

 

                “Additional security will be required to be posted with PJM in August 2010.  Accordingly, to facilitate the HTP Project and to help HTP to meet the PJM security requirements, the Trustees are requested to authorize the posting of an additional corporate guaranty to provide this security, subject to the same suspension directive given by HTP as to the prior postings.  This additional guaranty would be in the amount of $2.75 million and is required by August 15, 2010. 

 

                “An additional and final posting of $172 million (less any previously posted amounts) is due by October 31, 2010.  This posting is not covered by this authorization request, but will be included in the subsequent request for authority to execute agreements with HTP and the NYC Customers.  Upon Seller’s financial close, all guaranties posted by the Authority to secure HTP's obligations under the PJM requirements will be terminated and replaced by one or more letters of credit or other forms of acceptable security posted by or on behalf of HTP.  Under the proposed FTCPA, the Authority would be responsible to reimburse HTP for all interconnection and upgrade costs once the Project commences operations.

 


 

FISCAL INFORMATION

 

                “As explained above, it is expected that no call will be made on the Authority’s guaranties prior to the start of the interconnection work which is currently suspended and will not commence unless the Trustees at a later meeting approve the requisite agreements and all conditions precedent are met.  Consequently, there is expected to be no cost to the Authority in providing these guaranties.

 

RECOMMENDATION

 

                “It is recommended that the Trustees authorize the President and Chief Executive Officer or the Executive Vice President and Chief Financial Officer to post security in furtherance of the HTP Project’s obligations with respect to upgrades or interconnecting to the PJM system, as outlined above.  Such authorizations are subject to the conditions set forth above.  

 

“The Chief Operating Officer, the Executive Vice President and General Counsel, the Senior Vice President and Chief Engineer – Power Generation, the Senior Vice President – Marketing and Economic Development, the Senior Vice President – Corporate Planning and Finance, the Senior Vice President – Power Resource Planning and Acquisition, the Vice President – Energy Risk Assessment and Control and I concur in the recommendation.”

 

                Ms. Elizabeth McCarthy presented the highlights of staff’s recommendations to the Trustees.  President Richard Kessel said that the limited scope of this item minimized the risk of financial exposure for the Authority.  In response to a question from Trustee Eugene Nicandri, Ms. McCarthy said that staff would be coming back to the Trustees with additional information once it has been compiled within a week or so.  Chairman Townsend said that a number of Trustees had spoken recently about the fact that the Authority’s revenues are down and their sense that they need to be more informed about the Authority’s capital project planning process.  He said that while the Authority needs to be cognizant of the needs of New York State, the Trustees share an ongoing concern that they need a better sense of where the Authority is going and how it is going to get there.  Ms. McCarthy said that part of the additional information staff would be providing to the Trustees was the long-term perspective for this project.  President Kessel said that he wanted to make three points:  (1) he had made the decision not to ask the Trustees for approval of the whole project at this juncture because of the information that still needed to be presented to the Trustees; (2) he agrees with Chairman Townsend and Vice Chairman Foster that the Authority needs a roadmap for its future direction in terms of capital planning and (3) the recent heat wave has convinced him even more than the Authority needs to be proactive in terms of helping the State meet its electricity needs in order to avoid a repeat of the events of 2000-02.  Trustee Mark O’Luck said that he felt comfortable with how staff is currently approaching the HTP project.  Vice Chairman Foster said that while the Authority’s projects need to be forward looking they also need to be economically feasible and that in the case of this project, the economics need to be more equitably shared among the stakeholders.

The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted.

 

RESOLVED, That the President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer are hereby authorized on behalf of the Authority to post security in the form of a corporate guaranty in the amount of $2.75 million on or before August 15, 2010 and increase the amount of the Authority’s guaranty posted on June 30, 2010 to $3 million; and be it further

RESOLVED, That the Chairman, the President and Chief Executive Officer, the Chief Operating Officer, the Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer are, and each of them hereby is, authorized on behalf of the Authority to do any and all things, take any and all actions and execute and deliver any and all certificates, agreements and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.


 

 

3.                   Motion to Conduct an Executive Session

 

                “Mr. Chairman, I move that the Authority conduct an Executive Session pursuant to Section 105(1)(f) of the Public Officers Law of the State of New York to discuss matters leading to the appointment, employment, promotion, discipline, suspension, dismissal or removal of a particular person or corporation.”  On motion made and seconded, an Executive Session was held.

 

  


 

4.                   Motion to Resume Meeting in Open Session

                “Mr. Chairman, I move to resume the meeting in Open Session.”  On motion made and seconded, the meeting resumed in Open Session.


 

5.                   New York State and Local Employees’ Retirement System – Retirement Incentive 

               

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to authorize the Authority’s participation in the recently enacted two-part New York State retirement incentive for the benefit of certain eligible employees as set forth below.

 

BACKGROUND

 

“On June 2, 2010, the Governor approved Chapter 105 of the Laws of 2010 establishing a two-part retirement incentive.  While reducing the State’s workforce to stimulate budgetary savings and avoid layoffs prompted the Governor to provide a program bill to the legislature for this incentive, the Authority, as a participating employer in the New York State and Local Employees’ Retirement System (‘Retirement System’), can elect to participate as well.  The Authority has the option to offer the targeted incentive feature of this retirement legislation, known as Part A, to its employees, and/or may opt into a temporary ‘55/25 – No Penalty’ retirement program, known as Part B.  The Authority may also choose to not participate in either part of this retirement incentive program.

 

“Part A is a Targeted Incentive Program which, if adopted, may be open to all employees who are at least 50 years old with 10 years of service, or may have a targeted availability only to certain titles within that group of employees.  As explained at the Board of Trustees June 29, 2010 meeting, under the ‘targeting’ method, the Authority’s President and Chief Executive Officer would determine the job titles and number of positions in such titles, identified by department or work location, for which the Part A incentive would be offered.  The Part A program provides one additional month (1/12 of a year) of service credit for each year of pension service credited at the time of retirement, up to a maximum of 36 months.  However, it does not eliminate benefit reductions for members who have not reached the regular retirement age and service milestones (55 years of age with 30 years of service, or 62 years of age). 

 

“Part B, the Age 55/25-Year Retirement Incentive Program, allows members who are at least 55 years old and have 25 or more years of service credit to retire without benefit reductions.  This program does not provide eligible employees with additional service credit.

 

“Chapter 105 provides that a resolution establishing a retirement incentive program under Part A must be adopted by the Authority, on or before August 31, 2010, and that the resolution must specify the commencement date of the program and the length of the open period for eligible employees to retire.  The open period has to be not more than 90 and not less than 30 days and it must end no later than December 31, 2010.  As for Part B, Chapter 105 provides that a resolution to participate shall be adopted by September 1, 2010, and that the resolution must establish a commencement date for a mandatory 90-day open period for eligible employees to elect to retire.  This open period must also close by the end of this year.  Under both the Part A and Part B programs, employees would have to both file their applications for service retirement and leave the employ of the Authority during the applicable open period(s).

 

“Since 1985, there have been at least 10 other retirement incentive programs enacted into law in New York State.  The Authority opted to offer the retirement incentive to its employees on four of these occasions (1985, 1991, 2000 and 2002).

 

“The Board of Trustees considered the adoption of this Retirement Incentive at its June 29, 2010 meeting.  At that time, the Board directed staff to develop more detailed data on the financial and operational effects of the legislation and to report back at a special meeting at which the adoption of the retirement incentive programs would be considered.

 


 

DISCUSSION

 

“Based on the completed review of the monetary and operational implications that would arise from the adoption of the 2010 Retirement Incentive legislation, it is recommended that the Authority’s Trustees offer the Part A Targeted Incentive Program only to a limited group of employees who work at the Charles Poletti Power Project (‘Poletti’) by adopting a resolution establishing a 90-day open period commencing on October 1, 2010. 

 

“In addition, it is recommended that the Authority’s Trustees adopt a resolution offering the Part B incentive program to all eligible employees and fix August 2, 2010 as the commencement date for the mandatory 90-day open period for the Age 55/25-Years Retirement Incentive.  

 

“The recommendation to only offer Part A of the retirement incentive legislation to this limited group of employees is being made because a larger targeted group that staff initially identified could not satisfy the cost savings requirements of the legislation. The legislation specifically provides that should the Authority seek to fill any position vacated by an individual retiring under the Part A program, it must show cumulative savings over a two-year period of 50% of the retiring individual’s annual salary.  In addition, under Part A the Authority would need to insure that any position vacated as a result of an individual retiring would not:

 

·         directly reduce the service level mandated to protect or care for clients or to assure the public health or safety;

·         endanger remaining employees;

·         clearly cause a loss of revenue; or

·         result in a substantial increase in overtime or contractual costs.

 

“Staff completed a comprehensive evaluation of a proposed targeted Part A and determined that given the current staff levels and the need to comply with the criteria set forth above, it would not be feasible to offer targeted Part A to the Authority. 

 

“The only distinction among otherwise eligible employees that seems appropriate is to recommend that the Poletti employees who might otherwise be subject to layoff due to the cessation of operation of the plant, be targeted for the Part A incentive program. This is a distinct group facing a one- time extraordinary circumstance, justifying the recommendation to offer these employees the retirement incentive seems appropriate. Only Poletti employees would be eligible for the Part A incentive.  This would minimize the impact of retiring Authority employees on operations and work performance that a more extensive targeted plan would have.  The adoption of this limited targeted Part A incentive program provides the opportunity for the Authority to manage both the costs of the retirements as well as the operational costs from the departure of employees.  It also would facilitate the accomplishment of the needed cost savings under Part A.  The resulting estimated annual salary cost savings for this group would be $1 million should all individuals in the targeted positions chose to retire.

 

“The Part B ‘55/25 – No Penalty’ incentive program describes an eligible employee as one who is a member of a retirement system and who is at least 55 years old with at least 25 years of creditable service in a retirement system.  The Authority can disqualify a title from participating in the Part B program if it determines that a particular employee holds a position that is deemed critical to the maintenance of public health or safety.  Currently, 106 employees are eligible to participate in the Part B retirement program.  Of this group, approximately 40% are at headquarters and 60% at the operating sites.  Given that there is no savings requirement under Part B, the business unit leaders believe they could manage the potential reductions in work force, through some level of eliminations and some back filling of positions.

 

FISCAL INFORMATION

 

“The eventual cost estimate of participation in these retirement incentive programs will depend on how many positions are targeted under the Part A program and how many eligible employees will actually choose to leave under Part A and Part B.

 


 

The percentage of eligible employees who opted for the prior incentives may provide some perspective.  In 2000, 14% of 918 eligible employees took advantage of the incentive (125 retired – 96 salaried and 29 bargaining union).  Similarly, in 2002, 17% of 682 eligible employees participated (114 retired – 59 salaried and 55 bargaining union). 

 

“It is estimated that the cost of participation in Part A of the program for the targeted Poletti employees would not exceed $ 2 million.  If the Authority adopts Part B of the incentive as proposed, the cost is approximately $1.1 million per million dollars of salary of the retiring employees.  If one estimates that 20% of the eligible employees opted in to Part B, the lump sum cost to the Authority would be approximately $2.1 million. By comparison, if 75% of those eligible retire, the cost will be $8 million.  The resulting payroll savings would depend on how many of those positions could be eliminated or filled at a lower salary.

 

“The pension benefit costs of the incentive are to be paid over a period not to exceed five years commencing in the State’s fiscal year ending March 31, 2012.  Payment will be made from the Authority’s Operating Fund.

 

RECOMMENDATION

 

“I recommend that the Authority participate in the 2010 New York State and Local Employees’ Retirement Incentive Program and opt in to Part B of that plan.  In addition, I recommend that the Authority opt in to Part A as a targeted plan for Poletti personnel only as described above.

 

“The Executive Vice President and Chief Financial Officer and the Vice President – Human Resources concur in this recommendation.”

 

                Ms. Terryl Brown presented the highlights of staff’s recommendations to the Trustees.  She said that since the item had first been presented to the Trustees at their June meeting, staff had compiled more specific information on the savings and costs of the program and that management was confident that, as currently structured, the program would not negatively affect the Authority’s operations.  She said that management was recommending that Part A, the targeted retirement incentive, be offered to certain employees at the Charles Poletti Power Project, while Part B, the 55/25 option,  be offered to all eligible Authority employees.  Part A would be open to eligible Poletti employees for a 90-day period beginning October 1, 2010, while Part B would be open to eligible Authority employees for a 90-day period beginning August 2, 2010.  On motion made and seconded, the Trustees approved the resolution, as amended to specifically refer to Part A being offered only to certain employees at the Charles Poletti Power Project. 

The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted.

 

RESOLVED, That the Trustees of the Power Authority of the State of New York do hereby elect to provide the benefits of Part A of Chapter 105 of the Laws of 2010 commencing on October 1, 2010 as a targeted plan for Poletti employees who might otherwise be subject to layoff due to the cessation of operation of the plant who retire with an effective date of retirement set during the 90-day period beginning with and immediately following the commencement date and who are otherwise targeted as eligible as specified by Part A of Chapter 105 of the Laws of 2010; and be it further

 

RESOLVED, That the Trustees of the Power Authority of the State of New York do hereby elect to provide the benefits of Part B of Chapter 105 of the Laws of 2010, commencing on August 2, 2010, for all eligible employees who retire with an effective date of retirement set during the 90-day period beginning with and immediately following the commencement date and who are otherwise eligible as specified by Part B of Chapter 105 of the Laws of 2010; and be it further

 

RESOLVED, That the Chairman and the President and Chief Executive Officer, or their designees, be, and hereby are, authorized to take all measures necessary or convenient to effectuate and implement the foregoing resolutions.


 

 

6.                   Next Meeting

                Chairman Townsend said that the next meeting of the Trustees would be held at a location to be determined in Syracuse on Tuesday, September 28, 2010. 

 

 

 
 

Closing

                On motion made and seconded, the meeting was adjourned by the Chairman at approximately

12:07 p.m.

 

 

 

Karen Delince

Corporate Secretary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                                                

 

 

 

 

JULY SPECIAL MEETING MINS.10

 


 

[1] A load serving entity, such as the Authority, must demonstrate that it has acquired sufficient generation capacity to serve its load under the rules of the New York Independent System Operator, Inc. (“NYISO”).  Unforced Capacity or “UCAP” is a capacity measure that accounts for required reserves and forced outage rates.  NYISO rules further require that a proportion of the load within the five boroughs of New York City be served by UCAP that is recognized as being located within that locality (“In-City UCAP”).