MINUTES OF THE MEETING
THE GOVERNANCE COMMITTEE
A meeting of the Governance Committee was held via videoconference at the Authority’s offices at the Clarence D. Rappleyea Building, 123 Main Street, White Plains, New York, and King Reporting Service, 14 Sun Tree Place, Suite 101, Melbourne, Florida, at approximately 8:38 a.m.
The following Members of the Governance Committee were present:
Gil Quiniones Chief Operating Officer
Joseph Del Sindaco Executive Vice President and Chief Financial Officer
Joan Tursi Senior
Vice President –
Joseph Gryzlo Vice President – Ethics and Employee Resources
Agnes Harris Vice President – Human Resources
Patricia Leto Acting Vice President - Procurement
Lesly Pardo Vice President – Internal Audit
Anne Cahill Corporate Secretary
Angela Graves Deputy Corporate Secretary
Albert Swansen First Deputy Inspector General
Brian McElroy Treasurer
Dennis Eccleston Chief Information Officer
Jacqueline Carmody Attorney I
Mark O’Connor Director – Real Estate
Michael Saltzman Director – Media Relations
James Ondishin Manager – Fuel Operations
Mary Jean Frank Associate Corporate Secretary
Lorna Johnson Assistant Corporate Secretary
Louise Nestler Assistant Ethics Officer
1. Minutes of the Regular Meeting of November 12, 2008
and the Special Meetings of December 23 and 30, 2008
The minutes of the Committee’s meetings of November 12, December 23 and December 30, 2008 were adopted.
2. Procurement, Fleet, Fuels, Corporate Finance
and Real Estate Divisions’ 2008 Annual Reports
Ms. Joan Tursi presented an overview of the Authority’s Procurement activities, with Mr. James Ondishin, Mr. Brian McElroy and Mr. Mark O’Connor reporting on fossil fuel purchases, corporate finance activity and acquisition and disposal of real property, respectively.
· During 2008, 2,136 contracts (excluding fossil fuel) greater than $5,000 in value were active.
· The overall value of these contracts is more than $1.1 billion, with $291 million in contract expenditures for 2008.
· More than 47% of the contracts are for the purchase of equipment and commodities.
· Services such as technician work and contracted personnel accounted for 32% of the contracts.
· More than 13% of the contracts are for consulting services (e.g., engineering, design, and specialized analysis).
· Approximately 8% of the contracts are for construction work.
· Based on the total value of the contracts included in the summary, approximately 92% of the total dollars expended (excluding fuels and corporate finances) were for contracts that were competitively bid
· In terms of the number of contracts processed, approximately 69% of the contracts were competitively bid, while 31% were sole-awards, including the purchase of highly specialized spare parts and services from original equipment manufacturers and procurement of services on an emergency basis and from proprietary sources.
· While approximately 53% of the total number of non-fuel contracts in 2008 exceeded $25,000 in value, the total value of those contracts was approximately 99% of the total non-fuel expenditures.
Supplier Diversity Program
· In 2008, the Authority awarded more than $18.7 million (or 9.2% of its reportable expenditures) on contracts with certified M/WBEs, representing both direct contracts and subcontracts and including construction and energy efficiency-related work.
· The Authority’s annual goal for the use of New York State Certified Minority/Women-Owned Businesses (“M/WBEs”) is 6% of its non-specialty procurements. The Authority does not include specialty procurements such as turbine runners, transformers, circuit breakers, other large electrical equipment, natural gas and other specialized goods and services since there are no M/WBEs available to provide these goods and services.
· The Authority continues an active outreach program with various M/WBE organizations and trade associations. The Authority will host its 19th Annual Purchasing Exchange on June 18th in the White Plains Office. More than 250 representatives of M/WBEs attended and met with representatives of more than 30 New York State, federal, New York City and local government entities, as well as private companies.
· The Authority continues to work with the Governor’s Office to reenergize the State’s women and minority business programs.
In response to a question from Governance Committee
Chairman Eugene Nicandri, Ms. Tursi said that the M/WBE contractors are located
all across the State, particularly the ones involved in the Authority’s energy
efficiency construction programs.
Disposal of Personal Property
In 2008, the Authority received more than $1.1 million
for all reportable personal property disposed of that had a value of more than
$5,000. There was only one
non-fleet-related reportable personal property disposal in 2008. The Authority participated in six
fleet-related auctions in 2008, four of which were conducted by the
The Authority received $251,666 (from the high bidder, TCI of NY, LLC, for disposal of the third Generator Step-Up (“GSU”) transformers at the Blenheim-Gilboa Project, since the reclamation/salvage value of the scrap copper and steel exceeded the cost of disposal and recycling. The fourth GSU transformer will be changed out and disposed of in 2009.
Although “scrap” is not considered personal property, the Authority received additional revenue of $77,690 for the sale of scrap heat exchangers and $46.142 for stator coils at the Niagara Project.
Trustee Cusack commented that it had been another good year for the Authority in terms of its sales of personal property.
Acquisition and Disposal of Real Property
· The Authority acquired four danger-tree easements off its existing Niagara-Adirondack Tie Line rights-of-way for vegetation management and removed dangerous vegetation on the land owned by two other individuals through negotiated settlements. In 2008, the Authority acquired 135 danger-tree permits to eliminate dangerous vegetation near the Willis-Plattsburgh, Niagara-Adirondack, Moses-Adirondack, Fitzpatrick-Edic and Moses-Willis-Plattsburgh lines. The Authority also issued 37 land-use permits for the Authority’s easement areas. In response to a question from Committee Chairman Nicandri, Mr. O’Connor said that the land-use permits were primarily for roads, driveways and connecting utility distribution lines to houses.
The available space in the Authority’s Clarence D. Rappleyea
headquarters office building in
· The Authority entered into a lease amendment for its Albany office that cut the amount of space it uses on the 10th floor of 30 South Pearl Street by nearly half (from 169,234 rentable square feet (“rsf”) to 8,760 rsf. The amended lease terminates on February 28, 2014.
The Authority’s lease of space at 1633 Broadway,
As part of the St. Lawrence Project relicensing Settlement
Agreement in 2003, the Authority agreed to several changes in the Project
boundary that would remove approximately 1,340 acres from the Project. The Authority intends to transfer
jurisdiction over approximately 741 acres at
As part of the Niagara Relicensing Settlement Agreement, the
Authority was obligated to convey certain properties to various entities. During 2008, the Authority conveyed
approximately 42 acres to the
As of December 31, 2008, overall inventory levels at all of the Authority’s operating facilities totaled $87.87 million, compared to a year-end total in 2007 of $78.97 million. The increase in inventory levels is largely related to equipment received to deal with issues at the 500 MW plant, with $9 million in inventory being stockpiled for the planned 2009 outage at the plant. Inventory at the Authority’s other facilities remained at close to the same levels as in 2007.
The design of the new Niagara Warehouse and Office Space Design will meet the U. S. Green Building Council’s Leadership in Energy and Environmental Design (“LEED”) certification requirements and optimize the volume of the warehouse with a modern racking design to provide the Niagara Project with the best possible storage solutions. The design is 60% complete and it is anticipated that an RFP for construction will be issued in the third quarter of 2009.
In response to questions from Committee Chairman
Nicandri, Ms. Tursi said that the land for the new warehouse had been given to
the Authority in exchange for Authority land adjacent to
· In 2008, a total of $636 million was spent on fuel purchases -- $617 million for natural gas and related costs and $19 million for fuel oil. These fuel purchases were carried out through 47 contracts for natural gas and fuel oil, as well as pipeline transportation and related services.
· The price of natural gas is about $5.50 per dekatherm (the equivalent of 1 million Btus), interstate transportation accounting for $1.25 of that amount.
· Crude oil is currently trading at under $40 a barrel, with the price of #6 residual fuel oil used at Poletti currently at $43 a barrel, the oil used at Flynn at $52 a barrel and the jet/kero used at the 500 MW plant at $59 a barrel.
· The weak economy and increasing inventories mean that fuel prices may continue to soften.
Corporate Finance Activity
The “Corporate Finance Addendum” for the Annual Report of Procurement Contracts identifies non-procurement items paid during the year for unique and specialized services requiring a broad depth of knowledge and expertise that are provided by a limited group of firms. In 2008, the total amount for these items was $2.5 million. The non-procurement items include trustees and paying agent services, commercial paper remarketing services, escrow agent services and fees paid for revolving credit agreements supporting the Authority’s Commercial Paper Programs and Adjustable Rate Tender (“ART”) Notes. The fees associated with the revolving credit agreements for the Commercial Paper Programs and ART Notes accounted for $1.6 million and $200,000, respectively, of the total spent in 2008.
3. Review and Recommendation of Guidelines and Procedures
Ms. Tursi said that the changes to various guidelines and procedures would be presented to the Trustees for their approval at the Annual Meeting in March. She said that the guidelines and procedures were being changed to update definitions, to reflect organizational changes that affected roles and responsibilities and to better comply with applicable laws.
Procurement, Acquisition and Disposal Guidelines
- Pursuant to the Authority’s implementation of the Public Authorities Accountability Act of 2005 (“PAAA”), the Authority’s Governance Committee reviews the Guidelines for Procurement Contracts, the Guidelines and Procedures for Disposal of Personal Property, the Guidelines and Procedures for Disposal of Real Property and the Guidelines and Procedures for Acquisition of Real Property annually and approves any changes to such Guidelines. In addition, annual reports of Procurement Contracts with a value of $5,000 or greater, Disposal of Personal Property with a value of $5,000 or greater and Disposal of Real Property with a value of $15,000 or greater must be reviewed by the Authority’s Trustees.
- The Authority Budget Office and the Office of the State Comptroller have jointly developed an online electronic data entry, collection and reporting system, known as the Public Authorities Reporting Information System (“PARIS”). The Authority’s PARIS reports for 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 were completed and submitted by the March 31, 2008 deadline and have been certified by the Authority’s Chief Financial Officer.
Guidelines for Procurement Contracts
In compliance with the applicable provisions of Section 2879 of the Public Authorities Law, as amended, the Authority has established comprehensive guidelines detailing its operative policy and instructions concerning the use, awarding, monitoring and reporting of procurement contracts.
These Guidelines, approved by the Authority’s Trustees, were implemented on January 1, 1990 and have been reviewed annually and amended as necessary since then. The newly revised Guidelines will become effective on March 31, 2009 upon the Trustees’ approval.
Guidelines and Procedures for the Disposal of Personal Property
In compliance with the Public Authorities Accountability Act (“PAAA”), the Authority established and is required to annually review and approve these Guidelines. Personal property is defined to include, but is not limited to, material, tools, equipment or vehicles that are not expected to be of any future use and have become surplus to the Authority. The Guidelines were initially approved by the Trustees in March 2006. The revisions proposed would add “public auction” as an additional method of determining “Fair Market Value” of personal property to be disposed of and as a means of centralized disposal. The threshold for bidding procedures and disposal methods for personal property would be changed to “in excess of $5,000” (from “in excess of $15,000”).
Guidelines and Procedures for the Disposal of Real Property
In compliance with the PAAA, the Authority established and is required to annually review and approve these guidelines. Real property includes “land owned by the Authority and any other interest in such real property, as such interest may be conveyed to another person or entity for any reason, excluding an interest in security a loan or other financial obligation of another party.” The Guidelines were initially approved by the Trustees in March 2006. The revisions would change some of the definitions contained in the guidelines and revise the duties of the Director of Real Estate to include “independent appraisal as appropriate and consistent with the intent of the PAAA” to provide for the appraisal of real property when a formal outside appraisal would not be cost effective or consistent with the intent of the PAAA given the nature of the real property. In addition, the revisions would clarify some of the language in the sections of the guidelines dealing with real property reports.
Guidelines and Procedures for the Acquisition of Real Property
In compliance with the PAAA the Authority established Guidelines for the Acquisition of Real Property that was initially approved at the Trustees’ Annual Meeting in March 2008. The guidelines set forth the methodology the Authority will use in:
§ Maintaining inventory of real property interests owned or under the jurisdiction of the Authority to determine the need to acquire real property.
§ Making reports of such transactions.
§ Designating an Authority representative (“Contracting Officer”) responsible for compliance with an enforcement of such guidelines.
§ Setting forth ethical prohibitions regarding the acquisition of real property.
The 2009 revisions to the guidelines would update and clarify two of the definitions in the guidelines, modify the section on acquisition reports by the Authority be more consistent with the PAAA, include reports provided to entities as the Authority Budget Office and to the Public Authorities Reporting System and enable staff from Enterprise Shared Services – Real Estate to present and/or submit reports regarding the acquisition of real property at Authority Governance Committee meetings.
Expenditure Authorization Procedures
The Authority’s By-laws require the Trustees to adopt Expenditure Authorization Procedures (“EAPs”) that, among other things, govern contract approval authorization and executions, delegation of approval for claims settlements and payment for real estate. At their meeting of December 19, 1991, the Trustees approved modifications to the EAPs that delegated to the Chairman the authority to modify existing authorization and execution limits for contracts that do not require approval by the Trustees. Since 1991 the full Board of Trustees has not adopted revised EAPs since that time, good governance dictates that revised EAPs are presented to them for their approval.
Section 2879 of the Public Authorities Law defines procurement contracts as contracts for the acquisition of goods or services in the actual or estimated amount of $5,000 or more. Section 2879 also requires the Trustees’ approval for procurement contracts involving services (including personal and non-personal services and construction contracts) to be rendered for a period in excess of one year. Trustees’ approval is required: (i) for the award of non-personal services, construction, equipment or non-procurement contracts with an initial value of $3 million or more; (ii) for the award of personal services contracts exceeding $1 million, if awarded to the low bidder, or exceeding $500,000, if awarded to the non-low bidder or sole source and (iii) when the cumulative change order value of a personal services contract exceeds $500,000, or when the cumulative change order value of a non-personal services, equipment purchase or construction contract exceeds $3 million.
The EAP revisions proposed by staff address issues raised by Deloitte’s assessment of the Authority’s equipment procurement process incorporate approval limits for additional titles and/or title changes for signing commitments and revise the limits for real estate transactions. The revisions would subject the aforementioned change order limits to what is referred to as the “25% Rule,” which requires rebidding of contracts (or approval of the President and Chief Executive Officer or Chief Operating Officer, where rebidding is not feasible) when the total value of such contracts, including change orders, exceeds the original amount approved by senior management or the Trustees by more than 25%, with a maximum cumulative cap of $1 million for non-personal services, equipment, construction and non-procurement contracts and $500,000 for personal services contracts. Any funding in excess of 25% of the amount initially approved requires the approval of either the President and Chief Executive Officer or the Chief Operating Officer pending the Trustees’ approval or the contract being rebid. The real estate revisions to the EAPs increase the settlement amount for claims, annual rental for leases, options to purchase real property and permits for the use of real property, since these amounts have not been revised since 1987.
Responding to a question from Trustee Cusack, Ms. Leto
said that Deloitte had recommended that the 25% Rule apply to personal services
contracts, but that construction contracts required more flexibility. She said that Deloitte’s recommendations were
designed to make the EAPs less confusing.
Review and Recommendation of Guidelines for Executive Search, Recruitment and Hiring
Ms. Tursi provided the Committee with an overview of the Board of Trustees/Committee Guidelines for Executive Search, Recruitment and hiring that staff developed in response to a directive given by the Authority’s Governance Committee at their Special Meeting of December 30, 2008.
The Guidelines lay out the practices to be used when the Board of Trustees or Audit or Governance Committees are involved in hiring and/or review of the compensation or benefits of Authority statutory and non-statutory officers, the Inspector General, the head of the Office of Internal Audit, and Executive Band-level employees. The aim of the Guidelines is to ensure a consistent and fair recruitment process.
a) Prior to initiating a search to fill such positions, a statement of justification or need for the position is to be prepared and signed by the Vice President of Human Resources, Executive Vice President and Chief Administrative Officer, Chief Operating Officer and President and Chief Executive Officer.
b) The position description will be provided to the Board/Committee.
c) Recruitment will be done through a combination of internal and external postings, and contacts with professional associations and organizations, educational institutions and recruitment organizations, as necessary.
d) All prospective candidates will be requested to complete an application form and submit a résumé.
e) The Authority’s Recruitment and Job Posting policy (EP 1.2) will be followed to the extent it is applicable.
f) To the extent practicable, the applications and résumés of at least three applicants will be provided to the Board/Committee.
g) At least two of the three applicants will be interviewed by the applicable Committee, Chief Operating Officer and President and Chief Executive Officer before any recommendation for selection is made.
h) At the conclusion of the interview process, the applicable Committee may recommend a candidate to be selected or decline to do so if they are not satisfied with the candidates.
i) Any such recommendations must be presented to the appointing authority at least 10 days prior to any regular or special meeting.
j) All successful candidates must comply with the Authority’s regular background check and other processes prior to approval.
Mr. Quiniones said that these guidelines had been developed by staff in response to a resolution passed by the Governance Committee at its Special Meeting on December 30, 2008 calling for the executive search, recruitment and hiring process to be standardized and documented. Responding to a question from Chairman Nicandri, Mr. Quiniones said that staff was asking the Governance Committee to recommend to the full Board of Trustees that the guidelines be adopted. In response to a question from Trustee Cusack, Mr. Quiniones said that while the Authority does have a recruitment policy, the Governance Committee had indicated that a separate policy for executive-level employees was needed. Responding to another question from Chairman Nicandri, Mr. Quiniones said that former Trustee James Besha had not provided input to the proposed guidelines. Trustee Cusack said that she thought the draft was a great start.
5. Recent Developments and Status of Authority’s Ethics Programs
Mr. Joseph Gryzlo provided an overview of the Ethics
Office’s key initiatives, saying that the principal substantive issues arising
under the Ethics Law and/or the Authority’s Code of Conduct included various
allegations, questions about outside employment and post-Authority employment,
gifts, conflict of interest/appearance of impropriety and inquiries related to
securities. He said that the outside and
post-employment inquiries from current and former employees are evaluated on a
case-by-case basis and include collaboration with the employees’ supervisors
and other stakeholders. Mr. Gryzlo said
that last October an employee at one of the Authority’s generating facilities
had raised ethics concerns about the employee’s supervisor. The Ethics Office collaborated with the site
Human Resources staff to investigate the matter, conducting interviews with the
employee, the supervisor and others and conducting an extensive review of
documents. It was determined that some
of the allegations were substantive and recommendations for corrective actions
were provided to the Business Unit head.
The Ethics Office also reported back to the employee making the
allegations, although not in great details because of privacy concerns. In response to a question from Trustee Cusack
about the low number of ethics issues raised at the Niagara plant, Mr. Gryzlo
said that the number is most likely low because the overwhelming majority of
The Ethics Office’s annual gifts memo was distributed to all Authority employees in early December 2008 to reaffirm the prohibition relating to employees’ receipt or solicitation of gifts or gratuities from contractors, vendors and other disqualified sources. As in years past, employees have contacted the Ethics Office more frequently to discuss the legal standard and its interpretation.
The Ethics Office submitted the required annual financial disclosure report to the Commission on Public Integrity (“CPI”) listing 168 policy makers and 480 required filers, approximately 25% of the Authority’s staff. All employees holding designated “policy-making” positions and those whose annual salaries exceed $84,863 as of April 1, 2009 are required to file financial disclosure forms with CPI by May 15, 2009. Approximately 230 employees with either personal or title exemptions are not required to do the annual filing. In an effort to minimize the costs associated with running this program, CPI is going to e-mail all correspondence directly to filers. In response to a question from Trustee Cusack, Mr. Gryzlo said that the Authority had provided CPI with the Trustees’ home e-mail addresses. Responding to another question from Trustee Cusack, Mr. Gryzlo said that the Authority follows up with required filers to ensure that they have complied with the May 15th filing requirement and that the Authority has a tracking system that promptly indicated whether someone has filed. Trustee Cusack thanked the Ethics Office staff for the great job they do in providing timely reminder to the Trustees.
Training identifying and interpreting both the two-year and lifetime post-employment restrictions was provided to Authority staff in December 2008. All employees with computer access, including those represented by bargaining units, were required to complete the training online. Bargaining unit employees without assigned computer access were provided with a hard copy of the training. To date, 99% of employees with assigned computer access have completed the training and 95% of employees without assigned computer access received hard copies of the training. In the third quarter of 2009, training introducing the Authority’s revised Code of Conduct will be delivered in the same manner as the 2008 training. Mr. Gryzlo said that the revised Code of Conduct would be drastically different from the most recent version, incorporating not only standards of conduct but also performance consequences and remedies. He said that for the first time the bargaining unit employees would be included in the Code of Conduct.
6. Inspector General Report
Mr. Albert Swansen presented the Office of the Inspector General’s (“OIG”) 2008 year-end report. During 2008, the OIG conducted 29 case investigations, 16 fewer than in 2007. He said that since the White Plains Office has more employees than any other single Authority site, the greatest number of investigations (17 in 2008) take place there. Mr. Swansen said that no additional requests for information had been forthcoming from the New York State Office of the Inspector General about an investigation into a former Authority employee’s alleged misconduct. He said that the OIG had conducted 22 lead investigations, all of them at the White Plains Office, in 2008, compared with the same number in 2007 and 30 in 2006.
7. Motion to Conduct an Executive Session
“Mr. Chairman, I move that the Authority conduct an executive session pursuant to Section 105 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.” Upon motion made and seconded, an Executive Session was held.
8. Motion to Resume Meeting in Open Session
“Mr. Chairman, I move to resume the meeting in Open Session.” Upon motion made and seconded, the meeting resumed in open session.
9. Next Meeting
The next regular meeting of the Governance Committee will be held on Thursday, July 16, 2009 at 10:00 a.m. via videoconference.