City Council

Minutes of the Special Meeting of the Gallup City Council, City of Gallup, New Mexico, held in the Council Chambers at City Hall, 110 West Aztec Avenue, at 4:30 p.m. on Tuesday, January 12, 2016. The meeting was called to order by Mayor Jackie McKinney. Upon roll call, the following were present: Mayor: Jackie McKinney Councilors: Linda Garcia Allan Landavazo Yogash Kumar Fran Palochak Also present: Maryann Ustick, City Manager George Kozeliski, City Attorney The Mayor and Councilors conducted a work session pertaining to the following item: 1. Electric Ten-Year Financial Plan — Richard Matzke, Director, Gallup Electric Department Mr. Matzke presented an overview of the financial landmarks that the Electric Department has faced during the past two years: • July 1, 2013— the City began a 364-day contract extension with Public Service Company of New Mexico (PNM) which included a substantial wholesale rate increase to the City. • September 2013 the City enacted a 12% retail rate increase to all its — customers. • June 30, 2014 the City began its first year of a contract with Continental Divide — Electric Cooperative (CDEC), which resulted in approximately $5 million decrease in its wholesale power costs during the first year of the contract. • August 2014 the City enacted a 3.5% retail rate decrease to its customers. — • January 2015— the City enacted an 8% retail rate decrease to its customers. • July 1, 2015 the City began its second year of a contract with CDEC which — included a 26% wholesale rate increase which is an approximate $1.8 million impact to the City’s wholesale power cost. Mr. Matzke said the City consulted with RBC Capital Markets to prepare a ten-year financial plan for the Electric Department, which includes a review of long-range capital improvements, expense projections, a minimum fund balance recommendation, annual fund balance projections and an annual revenue requirement which will be used in future rate decisions. MINUTES Special City Council Meeting — 1/12/2016 Page 2 Paul Cassidy of RBC Capital Markets provided a power point presentation on the Electric Department’s Financial Plan. A copy of the power point is attached hereto and made part of these official Minutes. Mr. Cassidy said the financial plan should not be considered a rate analysis; however, the plan will help develop a revenue requirement model which will used in making future rate decisions. The costs of providing services are typically determined based on a rate study or a cost of service study in which the costs are allocated among the various classes of users in the electric system. In explaining the projected net revenue available for debt service and coverage, Mr. Cassidy said an 8.75% rate increase is needed every year through 2026 to prevent rate spikes, to absorb Capital Improvement Project (CIP) costs and to end with the operating fund balance of a recommended minimum of 150 days cash on hand. If there is a delay in implementing the 8.75% increase by July 1, 2016, the rates will need to be increased by 9.8% on an annual basis. Based on conservative assumptions, the rate requited for the annual increase could be reduced from 8.75% to 7.8% if the City financed $2.015 million in 2018 and $2.565 in 2020, through a loan agreement with the New Mexico Finance Authority or the public market. In concluding the presentation, Mr. Cassidy recommended that the City proceed with a cost of service study as soon as possible, implement a 1 year rate increase by adopting a rate ordinance (rates may be adjusted in the future based on the results of the cost of service study), and to analyze the financial plan every 12 months. Discussion followed concerning the work being done to separate the financial data for each of the City’s utilities and the need to review the financial model for the Navajo Gallup Water Supply Project and the City’s waste water system. There being no further business, the Work Session adjourned until the Regular Meeting at 6:00 P.M. ATTEST: Alfr Abeita II, Cit Approved 1/26/2016 City of Gallup Electric Utility Overview and Finances January 12, 2016 STRICTLY PRIVATE AND CONFIDENTIAL Table of Contents I. Overview of Gallup Utilities II. Overview of Gallup Electric Utility Ill. Electric Utility Financial Overview IV. Economic and Demographics of Local Economy 1 RBC Capital Markets Overview of Utilities RBC CapitaL Markets City Governance The City of Gallup (the “City”) is a charter municipality under New Mexico (the “State”) law. The City was incorporated under Chapter 32, Session Act of 1891 in the Territory of New Mexico. Located in the northwestern portion of the State, Gallup is approximately 20 miles from the Arizona border. The City has a land area of 13.35 square miles and a population of approximately 20,289. The City’s economy is based on government activity, retail trade, tourism and coal mining. • The City operates under a Council-Manager form of government • Four councilors are elected from districts for four-year staggered terms • Non-partisan elections are held biannually • The Mayor is presiding officer of the Council and is elected at large for a four-year term • A City Manager is appointed by the Council to act as Chief Administrative Officer of the City Name Office Term Expires Occupation Jackie McKinney Mayor Match 2019 Retired Linda Garcia Councilor March 2017 Retired Allan Landavazo Councilor March 2019 Businessman Yogash Kumar Councilor March 2017 Businessman Fran Palochak Councilor March 2019 Retired 3 RBC Capital Markets Organizational Chart CITY OF ‘k GALLUP ANT TO THE CITY 1ANAGI Risk Management Customer Service Emergency Mgmt. Organizational Development Training Strategic Planning/Capital Project Monitoring/Reporting Maint. Svcs. Custody Facilities Animal Control Course El Morro ELECTED OFFICIALS APPOINTED OFFICIALS DEPARTMENT HEADS Division Heads 4 RBC Capital Markets Strategic Goals — Utility Proposed Strategic Goals (2015 — 2019) Fiscal Responsibility — Operate at a level that will qualify for a high ‘A’ category bond rating — Maintain stable and competitive electric rates Service Delivery Excellence — Maintain high level of service availability, minimize interruptions, reduce outage restoration time — Build in capacity for growth — Timely response to customer requests Infrastructure Development — Update and modernize electric system — Design and build in operational flexibility — Predictive/preventative maintenance program Quality of LifelCommunity Identity — Project quality in appearance of facilities and equipment — Establish reputation as a quality employer in the region — Provide support to City Departments and the community 5 RBC Capital Markets Summary Overview • The City currently owns and operates four public utilities: solid waste, water, wastewater, and electricity. • The day-to-day management of the System is under the direction of two Director of Utilities; Director of Electric Utility and Director of Water/Wastewater/Solid Waste Utilities. • The Utility division employs 67 FTEs • Electric employs 25.6 • Water employs 13.4 • Wastewater employs 12.3 • Solid Waste employs 15.7 • Recommended minimum 150 days cash on hand operating fund balance target for electric utility. • Overall rates are set by council to provide sufficient operating funds as well as funds for infrastructure and service expansion. 6 RBC Capital Markets Electric Utility Overview RBC Capital Markets Electric System Overview The City of Gallup does not own any electric generating capacity at present. The City’s Electric System owned and operated for the purpose of receiving electric energy at transmission voltage levels and distributing to its ultimate customers. The substations, transformers and distribution lines are owned by the City. The City-owned transmission lines interconnect with lines owned by Public Service Company of New Mexico and Tn-State Generation and Transmission Association. The current total capacity of the five substations utilized by the City is approximately 89 megawatts. The City currently requires approximately 41 megawatts of power. Electric power is purchased from the Continental Divide Electric Cooperation “CDEC” pursuant to a contract effective June 30, 2014 and continuing through June 30, 2022. In addition to power purchased from CDEC the City also has access to provided federal power from the Western Area Power Administration The Electric Department facilities are generally less than 40 years old. The City considers the facilities to be in fair condition, and the Electric Department has approved and is working toward implementation of a preventive maintenance program to improve and maintain the facilities. The Top 10 customers of the Electric Utility has consistently accounted for —17% of the annual consumption and approximately 16% of the annual electric system revenue. The overall demand has decreased by 17,589,218 kWh or 7.89% since 2010 a The residential demand has decreased by 7.12% since 2010 • The commercial demand has decreased by 11.05% since 2010 • The industrial demand has increased by 64.09% since 2010 The overall revenue has increased $1,670,009 or 8.02% since 2010 The residential revenue has increased by $514,240 or 10.30% since 2010 The commercial revenue has increased by $785,640 or 5.09% since 2010 The industrial revenue has increased by $370,129 or 95.37% since 2010 Source: City of Gallup 8 RBC Capital Markets  Electric System Overview: Rate Schedule — Current Fiscal Year and 5 Years Historical The city calculated the monthly bill based on 2 components (1) Energy Charge (kWh) and Demand (kW) for large commercial customers. The City bills customers monthly for the electric system, based on a set schedule. The rates are approved by the City Council. Current Year FY16 FY15 FY14 FY13 FY12 FY11 FY10 Residential Service Rate: Energy Charge: First50 kWh Included in Minimum Service Charge of $6.41 $ 6.41 $ 7.22 $ 6.45 $ 6.45 $ 6.31 $ 6.17 Over5O kWh $01068 perkWh $ 0.1068 $ 0.1203 $ 0.1074 $ 0.1074 $ 0.1003 $ 0.0933 General Service-Small (Non-Residential Rate: Consumption 40,000 kwH per month (demand < 100kW) Energy Charge: First 100 kWh Included in Minimum Service Charge of $12.83 $ 12.83 $ 14.48 $ 12.90 $ 12.90 $ 12.63 $ 12.36 0vr100kWh $01141 perkWh $ 0.1141 $ 0.1285 $ 0.1147 $ 0.1147 $ 0.1075 $ 0.1003 General Service-Medium (Non-Residential Rate: Consumption ‘=40,000 kwH per month (demand >= 100kW) Demand Charge First 100 kW Included in Minimum Service Charge of $1400.00 $ 1,400.00 $ 1,534.43 $ 1,370.03 $ 1,370.03 $ 1341.74 $ 1313.13 Additional Demand $11.96 perkW $ 11.96 $ 15.90 $ 14.20 $ 14.20 $ 13.66 $ 13.13 Energy Charge: Au kWh $00727 per kWh $ 0.0727 $ 0.0791 $ 0.0706 $ 0.0706 $ 0.0643 $ 0.0580 Municipal Service General Rate: Energy Charge: Au kwh $00528 per kWh $ 0.0528 $ 0.0595 $ 0.0531 $ 0.0531 $ 0.0942 $ 0.0873 Municipal Service Joint Utilities Rate: Energy Charge: AJI kWh $00738 per kNh $ 0.0738 $ 0.0803 $ 0.0742 $ 0.0742 $ 0.0946 $ 0.0877 Outdoor Area Lighting: Energy Charge: 150 Watt $6.38/Month $ 6.38 $ 6.34 $ 5.66 $ 5.66 $ 5.54 $ 5.42 250 Wail $14.62/Month $ 14.62 $ 14.50 $ 12.95 $ 12.95 $ 12.68 12.41 $ 400 Waft $18.28/Month $ 18.28 $ 18.14 $ 16.20 $ 16.20 $ 15.87 15.53 $ Metered Street and Highway Lighting Rate: Energy Charge: AJIkWh $0.lOlOperkWh $ 0.1010 $ 0.1138 $ 0.1016 $ 0.1016 $ 0.0946 $ 0.0877 9 RBC Capital Markets Electric System Power Supply Resources • Delivery Points Designated Network Resources The delivery points for CDEC to sell and deliver, and the City to receive and purchase are: Under the City’s NITSA with PNM and Tn-State’s Under the City’s NITSA with PNM: transmission function, the designated Network Resource A. Ambrosia 230 kV switchyard (“DNR”) shall be within the agreement between CDEC B. San Juan 345 kV switchyard and the City. C. Blue Water 115 kV switchyard The generation resources to be used by CDEC to provide Firm Power to the City include, but shall not be limited to: A Prewitt Escalante Generation Station B. Springerville Unit #3 C. San Juan Unit #3 • City Metering Points The following is a list of the City Owned Metering Points: Under Under Tn-State Measurement Delivery CityIPNM Point to Point Substation Voltage Voltage NITSA Contract JIison 13.8kV 13.8kV X Noe 13.8kV 13.8kV x Sunshine 13.8kV 13.8kV x Ft. Wngate 13.8kV 13.8kV X X Mendoza 13.2kV 13.2 kV x x 10 RBC Capital Markets Gallup Electric Service Area Map .•I • * F j t, • ii * . : 1* —i ANTAHEY / >-. ROcWPRINGS 1. T&R - - \\. •UNIPR HuLl GAMSRCQ CAON — COAL N% TRANSFER JI’..(4,1*PARN./ ‘:*** STATION fi y/;,t* / p. a-, 7 “ .1 CHURCHROCW ‘ REHOSOTH A z r.I FTW*NGATE ENTRE ARMYOEPOT AIRPORT I NM I -‘ - WI Legend:1 N 1 I - City of Gallup City Limits City of Gallup Service Electric Boundary 11 RBC Capital Markets  ______________ Gallup Electric Service Area Map — Substation Locations irf ;-:1 - JL ‘f -‘ 1Lq -, 4 I PARK • r • I H Fhh’.j til I .‘.. L°’ LAIRPORT_1.? , J] ill ;il, - r1 s2j ;m :—- ..-. ••-, • j. - • • L - — ‘: c : _f jeqend : 1’ : [MNGATE - • •. ‘v.- i.’ç CITY. OP GALLUP - • ..f -p- ,‘ . ._SUBST I .• çIT’TRANSMISSON,. 1 • - , -TRISTATE TRANSMISSION PNM TRANSMISSION 4, 12 RBC Capital Markets Electric Utility Financial Overview RBC CapitaL Markets Historical and Budgeted Net Revenue Available for Debt Service (FY2012-2015) — ACCRUAL BASIS The following depicts the actual, audited financials from FY12 through FY14, actual unaudited financials for FY15. Actual Actual, Unaudited 2012 2013 2014 2015 REVENUES Charges for services 23,288,785 23,301,015 28,876,219 20,698,285 Common items (80,791) (42,736) 199,595 373,520 23,207,995 23,258,279 29,075,814 21,071,805 Miscelleneous income - - - Total Operating Income 23,207,995 23,258,279 29,075,814 21,071,805 Interestlncome 259,427 52,613 6,970 (2,922,044) Transfers In 3,558,599 349,083 134,920 Total Revenue 23,467,421 23,310,893 29,082,784 18,149,761 Interest Income 259,427 52,613 6,970 (2,922,044) Common Items (80,791) (42,736) 199,595 373,520 178,636 9,878 206,565 (2,548,524) EXPENSES Personnel services 1,424,964 1,337,514 1,243,134 1,665,669 Depreciation - 65,500 Professional and technical 77,897 186,202 166,899 573,694 Vehicleexpense 110,640 124,434 83,068 94,991 Utilities 37,562 35,684 391,083 418,305 Bad debt 84,871 (1,885) 6,245 4,712 Rentals 6,158 6,566 7,098 5,890 Insurance 570,041 523,430 441,020 433,730 Maintenance and supplies 249,933 284,680 280,076 589,226 Fuel and purchased power 12,674,056 12,714,521 14,776,509 10,138,965 Franchise taxes 1,164,439 1,050,000 1,192,070 1,151,570 Miscellaneous 57,367 131,423 79,948 98,609 Shared services -GJUMmin 484,443 724,653 910,351 1,261,780 Total Operating Expenses 16,942,371 17,117,222 19,577,501 16,502,641 Total Expenses 16,942,371 17,117,222 19,577,501 16,502,641 Capital Outlay 4,712,290 414,207 (237,966) 78 Principal Repayments 21,654,661 17,531,429 19,339,535 16,502,719 NetlncomeB4Transfers 1,812,761 5,779,464 9,743,249 1,647,042 ;.WTransfers Out 3798,510 L%43,21O 2,916,246: 167O,629 Net Income (1,985,749) 4,536,254 6,827,004 (23,587 öjiigcom6,25,624 6141 ,057 9,4983 4,569,164 14 RBC Capital Markets Historical and Budgeted Net Revenue Available for Debt Service (FY2O1O-2015) — CASH BASIS The following depicts the actual Revenues and Expenses from FY2O1O through FY2014 and the FY2015 Budgeted figures Budgeted FY2O1O FY2O11 FY2012 FY2013 FY2014 FY2015 1 REVENUES 2 Charges for services 3 Residential 4,991,736 5,350,417 5,675,121 5,855,841 6,054,704 6,054,704 4 Commercial 15,437,990 16,369,275 16,736,849 16,789,025 17,895,685 17,895,685 5 Industrial 388,083 397,844 385,685 360,139 395,948 395,948 6 Utility Work Orders 0 0 0 0 68,660 68,660 8 Transfers In Operating Grants 0 0 0 0 0 9 Other Charges for Services (46,300) 0 0 0 4,507 0 10 Total Operating Revenues 20,771,509 22,117,537 22,797,655 23,005,006 24,419,503 24,414,996 11 Interestincome 147,805 (1,269) 0 0 0 0 12 Total_Revenues 20,919,313 22,116,268 22,797,655 23,005,006 24,419,503 24,414,996 17 EXPENSES 28 Personnel Services 1,382,385 1,432,260 1,424,964 1,395,328 1,141,205 1,555,098 60 Operating Expenses 14,188,441 14,947,448 15,371,705 14,333,886 16,233,855 17,206,646 61 62 Total Expenses 15,570,827 16,379,708 16,796,669 15,729,214 17,375,059 18,761,744 65 OperationalExpenses 15,570,827 16,379,708 16,796,669 15,729,214 17,375,059 18,761,744 66 Capital Outlay 303,205 404,399 449,867 362,708 245,181 408,000 68 Total Expenses 15,874,031 16,784,107__17,246,536 16,091,922 17,620,241 19,169,744 69 Net Income Before Transfers 5,348,487 5,736,560 6,000,986 7,275,791 6,799,262 5,245,252 70 General Fund Transferred (8% 2016 forward) (1,393,165) (3,784,513) (1,139.618) (1,353700) (1,317,500) 71 Net Revenue Available for Debt Service 5,348,487 4,343,394 2,216,473 6,136,173 5,445,562 3,927,752 72 Operatinq Income 5.200,682 5,737.829 6,000,986 7.275,791 7.044.443 5.653.252 15 RBC Capital Markets  Projected Net Revenue Available for Debt Service and Coverage (FY2016-2026) The following depicts the Budgeted Revenues and Expenses for FY2016 and projected figures assuming the items below • —_-.. Budgeted .-. Projected FY2016 2 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 REVENUES 2 Charges for services 3 Residential 5367,143 5751,164 5,636,421 5523,981 5,41 3,798 5,305,828 5,200,026 5,096,350 4,994,757 4,695,206 4,797,657 4 Commercial 16,047,567 17,486,425 17,392,164 17,298,856 17,206,490 17,115,053 17,024,536 16,934,929 16,846,221 16,758,404 16,671,468 5 Industrial 725,545 793,287 793,287 793,287 793,287 793,267 793,287 793,287 793,287 793,267 793,287 10 Total Operating Revenues 22,352,755 24,155,876 23,946,872 23,741,124 23,538,574 23,339,168 23,142,849 22,949,566 22,759,265 22,571,896 22,387,411 12 Total Revenues 17 EXPENSES 28 Personnel Services 2,204,454 2,259,565 2,316,054 2,373,956 2,433,305 2,494,137 2,556,491 2,620,403 2,685,913 2,753,061 2,821,887 60 OperatingExpenses 15436484 16005961 16340439 17028016 17272414 17614725 18641473 18633740 18630653 18663460 18638525 61 62 Total Expenses 17,640,938 18,265,527 18,656,493 19,401,972 19,705,719 20,108,862 21,197,964 21,254,143 21,316,566 21,416,521 21,460,413 65 Operational Expenses 17 640 938 18 265 527 18 656 493 19 401 972 19 705 719 20 108 862 21 197 964 21 254 143 21 316 566 21 416 521 21 460 413 66 Total Capital Outlay 1 033 630 1 179 796 2 813 353 992 626 3 296 679 816 596 837 011 857 936 879 384 901 369 923 903 67 Total Expenses 18,674,568 19,445,322 21,469,846 20,394,598 23,002,398 20,925,458 22,034,974 22,112,079 22,195,951 22,317,890 22,384,316 68 Net Income Before Transfers 3,678,187 4,710,554 2,477,025 3,346,526 536,177 2,413,710 1,107,875 837,487 563,314 254,006 3,095 69 GF Transferred (8%) (1.788,220) (1,932,470) (1.915.750) (1,899,290) (1,883,086) (1,867,133) (1,851,428) (1,851,428) (1,851,428) (1,851,428) (1.851,428) 70 Available for Debt Service 1,889,966 2,778,084 561,276 1,447,236 546,576 71 Operating Income 4,711,817 5,890,349 5,290,378 4,339,152 3,832,856 3,230,306 1,944,886 1,695,423 1,442,699 1,155,375 926,998 72 Beginning Fund Balance 9,660,285 11,550,252 14,328,336 14,889,611 16,336,847 14,989,938 15,536,514 14,792,961 13,779,020 12,490,906 10,893,484 73 EndIng Fund Balance 11,550,252 14,328,336 14,889,611 16,336,847 14,989,938 15,536,514 14,792,961 13,779,020 12,490,906 10,893,484 9,045,151 74 Rate Required 0.00% 8.75% 8.75% 8.7 8.75% 8.75% 8.75% 8.75% 8.75% 8.75% 8.75% WY201 Pt201 FY FY2 75 J’IeTh:EIT;— • Assumptions: Cost Per MWh (Contract with CDEC): Year Contract Year Price %Increase 1. Revenues projection based 3. Franchise tax is equal to 5% of Operating 1 - 6/30/14 6/30/15 $ 34.71 a. 2% decline in Residential Demand Revenues 2 - 7/1/15 6/30/16 26 30% b. 3% growth in Solar Demand 4. General Fund Transfer is 8% of Operating $ 43 84 - . . 3 7/1/16 /20/17 42OI0 ‘4’ ‘4666 c. 0% Growth in Industrial Demand Revenues - 7/1/17 6/30/18 $48.48 3.90% d. 0.5% to 3% decline in other Commercial 5. Purchased power grows based on contract with 5 - 7/1/18 6/30/19 5.82% 2. 2.5% Growth on Personnel and Operating CDEC as listed to the right $ 51.30 Expenses 6. No bond issuance required per capital plan 6 7/1/19 -6/30/20 $ 53.12 3.55% 7. Grow Capital Outlay Requirements at 2.5% 7 - 7/1/20 6/30/2 1 $ 58.54 10.20% 8 - 7/1/2 1 6/30/22 8.99% $ 63.80 16 RBC Capital Markets  ___ Projected Net Revenue Available for Debt Service and Coverage (FY2016-2026) [Assumes Bond Issuance for Major Capital Outlay Requirements in 2018 & 2020] The following depicts the Budgeted Revenues and Expenses for FY2016 and projected figures assuming the items below Projected FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FV2024 FY2025 FY2026 REVENUES 2 Charges for senAces 3 Residential 5,367,143 5,700,924 5,587183 5,475,725 5,366,505 5,259,478 5,154,601 5,051,830 4,951,125 4,852,443 4,755,746 4 Commercial 16,047,567 17,333,670 17240,233 17,147,740 17,056,180 16,965,542 16,875,816 16,786,992 16,699,059 16,612,008 16,525,832 5 Industrial 725,545 786,357 786,357 786,357 786,357 786,357 786,357 786,357 786,357 786,357 786,357 10 Total Operating Revenues 22,352,755 23,945,951 23,738,772 23,534,822 23,334,042 23,136,377 22,941,774 22,750,179 22,561,540 22,375,809 22,192,935 12 Total Revenues 22,352,755 23,945,951 23,738,772 23,534,822 23,334,042 23,136,377 22,941,774 22,750,179 22,561,540 22,375,809 22,192,935 17 EXPENSES 28 Personnel Services 2,204,454 2,259,565 2,316,054 2,373,956 2,433,305 2,494,137 2,556,491 2,620,403 2,685,913 2,753,061 2,821,887 60 Operating Expenses 15,436,484 15,995,465 16,330,034 17,017,701 17,262,187 17,604,585 18,631,419 18,623,770 18,620,767 18,653,656 18,628,801 61 62 Total Expenses 17,640,938 18,255,030 18,646,088 19,391,657 19,695,492 20,098,723 21,187,910 21,244,173 21,306,680 21,406,717 21,450,689 63 Amortization (from 2018 Debt) 0 0 0 184,033 182000 182,800 183,400 183800 184,000 179,000 179,000 64 Amortization (from 2020 Debt) O 0 0 0 0 239,663 240,700 239,850 238,775 242,475 240,725 65 Operational Expenses 17,640,938 18,255,030 18,646,088 19,575,690 19,877,492 20,521,185 21,612,010 21,667,823 21,729,455 21,828,192 21,870,414 66 Total Capital Outlay 1,033,630 1,179,796 863,353 992,626 796,679 816,596 637,011 657,936 879,384 901,369 923,903 67 Total Expenses 18,674,568 19,434,826 19,509,441 20,568,316 20,674,171 21,337,781 22,449,021 22,525,759 22,608,839 22,729,561 22,794,317 68 Net Income Before Transfers 3,678,187 4,511,125 4,229,331 2,966,506 2,659,871 1,798,596 492,753 224,419 (47,299) (353,752) (601,382) 69 GF Transferred (8%) (1,788,220) (1,915,676) (1,899,102) (1,882,766) (1,866,723) (1,850,910) (1,835,342) (1,835,342) (1,835,342) (1,835,342) (1,835,342) 70 Available for Debt Service 1,889,966 2,595,449 2,330,229 1,083,720 793,148 71 Operating Income 4,711,817 5,690,921 5,092,684 4,143,165 3,638,550 3,037,655 1,753,864 1,506,005 1,254,860 969,092 742,246 72 Beginning Fund Balance 9,660,285 11,550,252 14,145,701 16,475,930 17,559,650 18,352,798 18,300,484 16,957,895 15,346,973 13,464,332 11,275,237 73 Ending Fund Balance 11,550,252 14,145,701 16,475,930 17,559,650 18,352,798 18,300,484 16,957,895 15,346,973 13,464,332 11,275,237 8,838,513 74 Rate Required 0.00% 780% 7.80% 7.80% 7.80% 7.80% 7.80% 7.80% 7.80% 7.80% 7.80% FY2O1 F7 75 Days Cash on Hand 238.98 p32252 52 W12 13 68230.65 Assumptions: Cost Per MWh (Contract with CDEC): 1. Revenues projection based Year Contract Year Price %Increase 4. General Fund Transfer is 8% of Operating a. 2% decline in Residential Demand Revenues 1 6/30/14-6/30/15 $34.71 b. 3% growth in Solar Demand 5. Purchased power grows based on contract with 2 7/1/15-6/30/16 $43.84 26.30% c. 0% Growth in Industrial Demand CDEC as listed to the right 3 7/1/16 - 6/30/17 6.43% $ 46.66 d. 0.5% to 3% decline in other Commercial 6. No bond issuance required per capital plan 4 7/1/17-6/30/18 $48.48 3.90% 2. 2.5% Growth on Personnel and Operating 7. Grow Capital Outlay Requirements at 2.5% 5 7/1/18-6/30/19 $51.30 5.82% Expenses 8. $2.O15MM Debt Issued in 2018, 4.0%, 15 Year 6 7/1/19-6/30/20 $53.12 3.55% 3. Franchise tax is equal to 5% of Operating Amortization 7 — 7/1/20-6/30/21 $58.54 10.20% Revenues 9. $2.565MM Debt Issued in 2020, 4.5%, 15 Year 8 7/1/21 -6/30/22 $63.80 8.99% Amortization 17 RBC Capital Markets  Total Electric System Demand (kWh) The following depicts the historical total electric system demand by rate class (Residential, Commercial and Industrial) %Change %Change %Change %Change %Change %Change;%Change Rate Class 2010 09 10 2011 10 11 2012 11 12 2013 12 13 2014 13 14 2015 14 15 10 15 Refinery(CO) 6,655,600 (31.0%) 6,598,984 (0.9%) 5,906,908 (10.5%) 6,072,808 2.8% 5,485,620 (9.7%) 2,902,228 (47.l%)L (56.4%) Medium Commercial (GM) 66,499,740 6.4% 66,162,120 (0.5%) 64,507,493 (2.5%) 64,490,703 (0.0%) 63,090,628 (2.2%) 61,334,365 (2.8%) (7.8%) Small Commercial(G5) 76,271,885 (4.3%) 76,725,571 0.6% 76,661,134 (0.1%) 77,117,510 0.6% 75,210,898 (2.5%) 74,300,743 (1.2%) (2.6%) Gallup lndependent(IM) 483,120 (10.2%) 508,702 5.3% 596,467 17.3% 535,961 (10.1%) 512,196 (4.4%) 542,969 6.0% 12.4% JointUtilities (JU) 5123912 184% 3606287 (296%) 3714560 30% 4765478 283% 3746438 (21 4%) 4575601 221% (107%)g Municipal Service (MU) 15,063,949 10.6% 10,056,280 (33.2%) 10,053,665 (0.0%) 9,586,937 (4.6%) 9,175,242 (4.3%) 6,361,118 (8.9%) (44.5%) Residential® 51,843,516 1.5% 52,006,758 0.3% 51,784,439 (0.4%) 51,746,234 (0.1%) 50,174,433 (3.0%) 48,112,676 (%)l (7.2%) Solar Commercial (SC) 0 81,632 177,988 118.0% 102,725 (42.3%) 110,326 7.4% 147,410 33.6% SeernTrentServ.(SE) 0 3,536,175 3,580,788 1.3% 3,152,522 (12.0%) 3,477,876 10.3% 3,443,213 (1.0%) Signal Light (SL) 259,152 (27.1%) 235,334 (9.2%) 234,336 (0.4%) 237,037 1.2% 227,401 (4.1%) 235,909 3.7% (9.0%) General Solar (SO) 0 76,765 78,944 2.8% 728,320 822.6% 716,640 (1.6%) 683,360 (4.6%) Solar Residential (SR) 133 9,810 7,275.9% 13,215 34.7% 11,538 (12.7%) 13,999 21.3% 40,370 188.4% Metered Street Light (ST) 747,847 6.4% 718,775 (3.9%) 736,056 2.4% 731,899 (0.6%) 675,315 (7.7%) 679,674 0.6% (9.1%) TOTAL 222,948,854 0.2% 220,323,192 (1.2%) 218,045,993 (1.0%) 219,279,671 0.6% 212,617,011 (3.0%) 205,359,636 (3.4%) • The overall demand has decreased by 17,589,218 kWh or 7.89% since 2010 %Change %Change %Change %Change %Change %Change %Changej Rate Class 2010 ‘09-’10 2011 ‘10-11 2012 ‘11 -‘12 2013 12-’13 2014 ‘13-14 2015 ‘14-15 ‘10-15 Residential 51,843,649 1.5% 52,016,568 0.3% 51,797,654 (0.4%) 51,757,772 (0.1%) 50,188,432 (3.0%) 48,153,046 (4.1%) (7.1%) Commercial 164,449,605 1.7% 161,707,640 (1.7%) 160,341,431 (0.8%) 161,449,097 0.7% 156,942,959 (2.8%) 146,285,548 f6.8%) (17.0%) Industrial 6,655,600 (31 .0%) 6,598,984 (0.9%) 5,906,908 (10.5%) 6,072,808 2.8% 5,485,620 (9.7%) 10,921,042 99.1% 64.1% Total 222,948,854 0.2% 220,323,192 (1.2%) 216,045,993 (1.0%) 219,279,671 0.6% 212,617,011 (3.0%) 205,359,636 (3.4%) • The residential demand has decreased by 7.12% since 2010 • The commercial demand has decreased by 11.05% since 2010 • The industrial demand has increased by 64.09% since 2010 18 RBC Capital Markets  Electric System Revenue ($) The following depicts the historical total electric system revenue by rate class (Residential, Commercial and Industrial) Note: Demand has decreased but Revenue produced has in creased ¾ change %Change ¾ Change %Change ¾ Change ¾ Change ¾ Change Rate class 2010 ‘09-10 2011 ‘lO-’ll 2012 ‘11 -‘12 2013 ‘12-’13 2014 ‘13-’14 2015 ‘14-15 10-15 Refinery (CO) $ 388,083 (23.8%) $ 397,844 2.5% $ 385,685 (3.1%) $ 360,139 (6.6%) $ 395,948 9.9% $ 141,977 (64.1%) (63.4%)j Medium commercial (GM) 5,824,299 7.1% 6,284,369 7.9% 6,551,011 4.2% 6,317,658 (3.6%) 6,970,357 10.3% 6,578,240 (5.6%) 12.9% Small commercial (GS) 7,720,217 (3.8%) 8,306,740 7.6% 8,844,340 6.5% 9,153,194 3.5% 9,531,031 4.1% 8,930,320 (6.3%) 15.7% Gallup Independent (IM) 41,064 (7.4%) 45,769 11.5% 56,923 24.4% 53,015 (6.9%) 53,421 0.8% 51,226 (4.1%) 24.7% Joint Utilities (JU) 449,262 18.7% 341,950 (23.9%) 275,620 (19.4%) 305,715 10.9% 305,453 (0 1%) 350756 14.8% (21.9%) Municipal Service (MU) 1,314,847 10.9% 948,050 (27.9%) 535,109 (43.6%) 517,654 (3.3%) 536,111 3.6% 462,863 (13.7%) (64.8%) Residential® 4,991,673 1.7% 5,349,134 7.2% 5,673,521 6.1% 5,854,298 3.2% 6,052,818 3.4% 5,501,125 (9.1%). 10.2% Solar commercial (SC) 8,832 20,336 130.3% 11,326 (44.3%) 13,842 22.2% 17,791 28.5% Severn Trent Setv. (SE) 334,522 265,694 (20.6%) 246,423 (7.3%) 284,787 15.6% 265,479 (6.8%)I Signal Light (SL) 22,723 (27.0%) 22,263 (2.0%) 23,809 6.9% 24,650 3.5% 25,422 3.1% 24,939 (1.9%)I 9.8% General Solar (SO) 8,784 89,223 915.8% 85,220 (4.5%) 99,745 17.0% 86,572 (1 3.2%)I Solar Residential fSR) 63 1,283 1,927.8% 1,599 24.6% 1,543 (3.5%) 1,886 22.2% 4,851 157.2% 7,567.1% Metered Street Light (ST) 65,578 6.7% 67,996 3.7% 74,783 10.0% 74,169 (0.8%) 75,517 1.8% 71,679 (5.1%) 9.3% TOTAL $ 20,817,809 1.2% $ 22,117,537 6.2% $ 22,797,655 3.1% $ 23,005,006 0.9% $ 24,346,336 5.8% $ 22,487,817 The overall revenue has increased $1,670,009 or 8.02% since 2010 %Change %Change %change %Change %Change %change%Change Rate Class 2010 ‘09-’10 2011 ‘lO-’ll 2012 ‘11-’12 2013 12-13 2014 ‘13-’14 2015 ‘14-15 ‘10-15 Residential $ 4,991,736 1.7% $ 5,350,417 7.2% $ 5,675,121 6.1% $ 5,855,841 3.2% $ 6,054,704 3.4% $ 5,505,976 (9.1%) 10.3% Commercial 15,437,990 1.8% 16,369,275 6.0% 16,736,849 2.2% 16,789,025 0.3% 17,895,686 6.6% 16,223,630 (9.3%) 5.1% Industrial 388,083 (23.8%) 397,844 2.5% 385,685 (3.1%) 360,139 (6.6%) 395,948 9.9% 758,212 91.5% 95.4% Total $ 20,817,809 1.2% $ 22,117,537 6.2% $ 22,797,655 3.1% $ 23,005,006 0.9% $ 24,346,338 5.8% $ 22,487,818 (7.6% 8.0% • The residential revenue has increased by $514,240 or 10.30% since 2010 • The commercial revenue has increased by $785,640 or 5.09% since 2010 • The industrial revenue has increased by $370,129 or 95.37% since 2010 19 RBC Capital Markets  Electric System Revenue ($/KWH) The following depicts the average historical total electric system revenue per kilowatt hour by rate class (Residential, Commercial and Industrial) %Change %Change %Change %Change %Change %change %change Rate class 2010 09 10 2011 10 11 2012 11 12 2013 12 13 2014 13 14 2015 14 15 10 15 Refinery(CO) $ 0.0583 10.5% $ 0.0603 3.4% $ 0.0653 8.3% $ 0.0593 (9.2%) $ 0.0722 21.7% $ 0.0489 (16.1%) (32.2%)I Medium Commercial (GM) 0.0876 0.7% 0.0950 8.4% 0.1016 6.9% 0.0980 (3.5%) 0.1105 12.8% 0.1073 (2.9%),: 22.5% Small Commercial (GS) 0.1012 0.5% 0.1063 7.0% 0.1154 6.6% 0.1187 2,9% 0.1267 6.8% 0.1202 (5.2%)1 18.7% Gallup Independent (IM) 0.0850 3.0% 0.0900 5.9% 0.0954 6.1% 0.0969 3.6% 0.1043 5.4% 0.0943 (9.5%); 11.0% JointUtilities(JU) 0.0877 0.2% 0.0948 8.1% 0.0742 (21.7%) 0.0642 (13.5%) 0.0815 27.1% 0.0767 (6.0%) (l2.6%) Municipal Service (MU) 0.0873 0.2% 0.0943 8.0% 0.0532 (43.5%) 0.0540 1.4% 0.0584 8.2% 0.0554 (36.6%) (•)1 Residential® 0.0963 0.2% 0.1029 6.8% 0.1096 6.5% 0.1131 3.3% 0.1206 6.6% 0.1143 (5.2%) 18.8% SolarCommercial(SC) 0.1143 0.1103 (3.5%) 0.1255 13.8% 0.1207 (3.8%) SevernTrentServ. (SE) 0.0742 0.0782 5.3% 0.0819 4.8% 0.0771 (5.8%) Signal Light (SL) 0 0877 0 2% 0 0946 7 9% 0 1016 74% 0 1040 24% 0 1118 7 5% 0 1057 (5 4%) 206% GeneralSolar(SO) 1.1302 0.1170 (89.6%) 0.1392 19.0% 0.1267 (9.0%) Solar Residential tSR) 0.4757 0.1308 (72.5%) 0.1210 (7.5%) 0.1338 10.5% 0.1347 0.7% 0.1202 (10.8%) (74.7%) MeteredStreetLight(ST) 0.0877 0.2% 0.0946 7.9% 0.1016 7.4% 0.1013 (0.3%) 0.1118 10.3% 0.1055 (5.7%)l 20.3% TOTAL $ 0.0934 0.9% $ 0.1004 7.5% $ 0.1046 4.2% $ 0.1049 0.3% $ 0.1145 9.1% $ 0.1095 (4.4%). 17.3% %Change %Change %Change %Change %Change %Change %Change Rate Class 2010 09 10 2011 10 11 2012 11 12 2013 12 13 2014 13 14 2015 14 15 10 15 Residential 00963 02% 01029 68% 01096 65% 01131 33/o 01206 66% 01143 (52%) 188% Commercial 0.0939 0.1% 0.1012 7.8% 0.1044 3.1% 0.1040 (0.4%) 0.1140 9.7% 0.1109 (2.7%) 18.1% Industrial 0.0583 10.5% 0.0603 3.4% 0.0653 6.3% 0.0593 (9.2%) 0.0722 21.7% 0.0694 (3.8%) 19.1% Total 0.0934 0.9% 0.1004 7.5% 0.1046 4.2% 0.1049 0.3% 0.1145 9.1% 0.1095 (4.4%) 20 RBC Capital Markets Next Steps • Cost of service study, start in February • 1 year rate increase via the adoption of a rate ordinance • Analyze every 12 months 21 RBC Capital Markets Minutes of the Regular Meeting of the Gallup City Council, City of Gallup, New Mexico, held in the Council Chambers at City Hall, 110 West Aztec Avenue, at 6:00 p.m. on Tuesday, January 12, 2016. The meeting was called to order by Mayor Jackie McKinney. Upon roll call, the following were present: Mayor: Jackie McKinney Councilors: Linda Garcia Allan Landavazo Yogash Kumar Fran Palochak Also present: Maryann Ustick, City Manager George Kozeliski, City Attorney Presented to the Mayor and Councilors were the Minutes of the Special and Regular Meetings of December 8, 2015 and the Special Meeting of December 15, 2015. Councilor Palochak made the motion to approve the aforementioned Minutes. Seconded by Councilor Garcia. Roll call: Councilors Palochak, Garcia, Kumar, Landavazo, and Mayor McKinney all voted yes. The Mayor and Councilors presented a Certificate of Retirement to Peter Becenti, Jr., Park Supervisor at Red Rock Park. Presented to the Mayor and Councilors were the following Discussion/Action Topics: 1. Resolution No. R2016-2; Acceptance of Legislative Appropriation 15-0942 for the Allison Road Bridge Construction Project Stan Henderson, Public — Works Director Mr. Henderson said Governor Susana Martinez authorized $4.5 million in State funding for the project in three separate grants. Resolution No. R2016-2 would authorize the acceptance of $2,250,000 of the State’s appropriation for the project. Councilor Garcia made the motion to approve Resolution No. R2016-2. Seconded by Councilor Palochak. Roll call: Councilors Garcia, Palochak, Landavazo, Kumar, and Mayor McKinney all voted yes. 2. Resolution No. R2016-3; Acceptance of Legislative Appropriation 15-1 034 for the Allison Road Bridge Construction Project Stan Henderson, Public — Works Director MINUTES Regular City Council Meeting — 1/12/2016 Page 2 Mr. Henderson said Resolution No. R2016-3 would authorize the acceptance of $1,600,000 of the State’s appropriation for the project. Councilor Palochak made the motion to approve Resolution No. R2016-3. Seconded by Councilor Landavazo. Roll call: Councilors Palochak, Landavazo, Kumar, Garcia, and Mayor McKinney all voted aye. 3. Resolution No. R2016-4; Acceptance of Legislative Appropriation 15-1029 for the Allison Road Bridge Construction Project Stan Henderson, Public — Works Director Mr. Henderson said Resolution No. R2016-4 would authorize the acceptance of $650,000 of the State’s appropriation for the project. Councilor Kumar made the motion to approve Resolution No. R2016-4. Seconded by Councilor Palochak. Roll call: Councilors Kumar, Palochak, Landavazo, Garcia, and Mayor McKinney all voted yes. 4. Construction Contract Award for Downtown NM 118 Pedestrian Safety Improvements Stan Henderson Public Works Director — Mr. Henderson presented the bid results for the work to be done at the intersections on NM Highway 118 from Strong Drive to Third Street. The project provides for traffic calming, pedestrian safety and Americans with Disabilities Act (ADA) improvements. As currently budgeted, Mr. Henderson said the project is underfunded by about $100,000. He said there is a project savings of about $130,000 from the recently completed College and Hospital Drive Reconstruction Project and recommended transferring the $130,000 to the Downtown NM 118 Pedestrian Safety Project. Based on the bids submitted, Mr. Henderson recommended award of the construction contract to H.O. Construction in the amount of $563,684.25. Councilor Palochak made the motion to award the construction contract for the Downtown NM 118 Pedestrian Safety Improvements to H.O. Construction in the amount of $563,684.25 and to approve the budget transfer of $130,000 from the College and Hospital Drive Reconstruction Project to the Downtown NM 118 Pedestrian Safety Project. Seconded by Councilor Garcia. Roll call: Councilors Palochak, Garcia, Kumar, Landavazo, and Mayor McKinney all voted yes. 5. Resolution No. R2016-5; A Resolution Adopting a City Residential Anti Displacement and Relocation Assistance Plan for Calendar Year 2016 — Stan Henderson, Public Works Director MINUTES Regular City Council Meeting — 1/12/2016 Page 3 Mr. Henderson said when federal funds, such as Community Development Block Grant (CDBG) funds are used in a project involving the acquisition, rehabilitation, or demolition of real property, the Uniform Relocation Assistance and Real Properties Acquisition Policies Act (URA) may apply. The purpose of the URA is to provide fair and equitable treatment for persons whose real property is acquired or for persons displaced as a result of a CDBG funded project or activity. The proposed Resolution and Residential Anti-Displacement and Relocation Assistance Plan must be adopted on an annual basis regardless of whether the City is undertaking relocation activities. Discussion followed concerning the City’s utilization of its Residential Anti-Displacement and Relocation Assistance Plan when the City utilized CDBG funds to renovate homes over 20 years ago. Councilor Garcia made the motion to approve Resolution No. R2016-5. Seconded by Councilor Landavazo. Roll call: Councilors Garcia, Landavazo, Palochak, Kumar, and Mayor McKinney all voted yes. 6. Resolution No. R2016-6; A Resolution Adopting a HUD Section 3 Plan for Calendar Year 2016 Stan Henderson, Public Works Director — Mr. Henderson said Section 3 is a provision of the Housing and Urban Development (HUD) Act of 1968 that helps foster local economic development, neighborhood economic improvement and individual self-sufficiency. The program requires recipients of certain HUD financial assistance such as CDBG funds, to provide job training, employment and contracting opportunities for low or very low income residents in connection with projects and activities in their community to the greatest extent feasible. The proposed Resolution and HUD Section 3 Plan must be adopted on an annual basis for CDBG projects. Councilor Landavazo made the motion to approve Resolution No. R2016-6. Seconded by Councilor Palochak. Roll call: Councilors Landavazo, Palochak, Garcia, Kumar, and Mayor McKinney all voted yes. 7. Resolution No. R2016-7; 2016 CDBG Citizens Participation Plan — Stan Henderson, Public Works Director Mr. Henderson said a Citizen Participation Plan is a federal requirement for grantees receiving CDBG funds. The Citizen Participation Plan states that citizens will be provided with reasonable notice and timely access to local meetings to solicit their input and project ideas for the CDBG program. The proposed Resolution and Citizen Participation Plan must be adopted on an annual basis for CDBG projects. MINUTES Regular City Council Meeting — 1/1 2/2016 Page 4 Discussion followed concerning the level of attendance and participation by citizens at public meetings to solicit their input and project ideas for the CDBG program. City staffs efforts to hold such meetings at Councilors’ Neighborhood District Meetings were also discussed. Councilor Palochak made the motion to approve Resolution No. R2016-7. Seconded by Councilor Kumar. Roll call: Councilor Palochak, Kumar, Garcia, Landavazo, and Mayor McKinney all voted yes. 8. Resolution No. R2016-8; 2016 CDBG Procurement Policy Adoption — Stan Henderson, Public Works Director Mr. Henderson said the New Mexico Department of Finance and Administration requires the City to annually adopt a procurement policy for CDBG projects. The proposed resolution would certify the City’s compliance with the Federal and New Mexico Procurement Codes. Councilor Kumar made the motion to approve Resolution No. R2016-8. Seconded by Councilor Garcia. Roll call: Councilors Kumar, Garcia, Landavazo, Palochak, and Mayor McKinney all voted yes. 9. 2016 CDBG Fair Housing Proclamation — Stan Henderson, Public Works Director Mr. Henderson said as a requirement for CDBG funding, each local government must annually certify that it will affirmatively further fair housing. He presented the proposed Fair Housing Proclamation which publicizes the City’s commitment to fair housing and proclaims Tuesday, February 16, 2016 as Fair Housing Day in Gallup. Councilor Landavazo made the motion to approve the 2016 CDBG Fair Housing Proclamation. Seconded by Councilor Palochak. Roll call: Councilors Landavazo, Palochak, Garcia, Kumar, and Mayor McKinney all voted yes. 10. Appointment of Terry Proffift to the Labor Management Relations Board — Mayor Jackie McKinney Mayor McKinney said the current makeup of the Board consists of Mr. Proffitt representing management, Brenda Duran representing labor, and John Beeman serving as the impartial member of the Board. Although Mr. Proffift has expressed interest in serving another term, Ms. Duran is unable to serve another term and Mr. Beeman has moved out of town. City staff is in the process of obtaining recommendations from the MINUTES Regular City Council Meeting — 1/1 2/2016 Page 5 City’s unions concerning the appointment of labor’s representative on the Board. Once the members representing management and labor are in place, the two Board members will need to submit their nomination for the third member of the Board. In the meantime, Mayor McKinney recommended the re-appointment of Mr. Proffift to serve as management’s representative on the Board. Councilor Palochak made the motion to approve the re-appointment of Terry Proffitt to the Labor Management Relations Board. Seconded by Councilor Kumar. Roll call: Councilors Palochak, Kumar, Garcia, Landavazo, and Mayor McKinney all voted yes. 11. Appointment of Roger Morris to the Gallup Housing Authority Board of Commissioners Mayor Jackie McKinney — Mayor McKinney said the City suffered a great loss with the passing of Commissioner James Seay last October. Mayor McKinney recognized Commissioner Seay’s dedication and service to the community. In order for the Gallup Housing Authority to move forward, Mayor McKinney recommended the appointment of Roger Morris to the Board of Commissioners. Councilor Landavazo made the motion to approve the appointment of Roger Morris to the Gallup Housing Authority Board of Commissioners. Seconded by Councilor Kumar. Roll call: Councilors Landavazo, Kumar, Garcia, Palochak, and Mayor McKinney all voted yes. 12. Authority to Proceed with Legal Action to Foreclose the Lien on the Property Owned by B.E.l., Inc. (Doug Bishop) at 405 West Hill George — Kozeliski, City Attorney Mr. Kozeliski said the City filed a lien on the property in the amount of $43,130.18 for the cost for demolishing the property pursuant to condemnation action authorized by the Mayor and Councilors. Since Mr. Bishop has not responded to the City’s demand for payment of the outstanding amount owed to the City, Mr. Kozeliski asked the Mayor and Councilors for authorization to proceed with legal action to foreclose the lien and to sell the property. Mr. Kozeliski also said the costs for demolition are significantly higher due to new federal laws requiring asbestos abatement on residential properties. Councilor Landavazo asked about the current fair market value of the property to be sold. Mr. Kozeliski said the fair market value of the property is unknown at this time and the property taxes have not been paid for two years. Regarding the sale of the property, Mr. Kozeliski said the City may receive bids higher than the minimum bid since there are other structures that are being rented on the property. Mr. Kozeliski said the MINUTES Regular City Council Meeting — 1/12/2016 Page 6 City may recover some of the cost of the demolition; however, it will not recover all of the costs due to delinquent taxes being owed on the property. Councilor Garcia made the motion to proceed with legal action to foreclose the lien on the property owned by B.E.I., Inc. (Doug Bishop) at 405 West Hill. Seconded by Councilor Kumar. Roll call: Councilors Garcia, Kumar, Landavazo, Palochak, and Mayor McKinney all voted yes. 13. Ordinance No. C2016-1; An Ordinance Amending the Makeup of the Board Members on the Sustainable Gallup Board George Kozeliski, City — Afforney Mr. Kozeliski said a recommendation has been made for all board members to be at- large members, residents of Gallup and for the City’s Conservation Coordinator to be an ex-officio, non-voting member. The proposed ordinance would include the recommended changes and it would increase the at-large members on the board from six to seven. Councilor Kumar made the motion to approve Ordinance No. C2016-1. Seconded by Councilor Palochak. Roll call: Councilors Kumar, Palochak, Landavazo, Garcia, and Mayor McKinney all voted yes. 14. Award of Contract for Golf Course Irrigation Improvements — Vince Tovar, Gallup Water and Sanitation Director Mr. Tovar presented the results of the re-bid for the work to be done at the Fox Run Golf Course. He also recommended the approval a 10% contingency for the project. Howard Kaplan, Wilson and Company, spoke in favor of Mr. Tovar’s recommendation for a 10% contingency for the project. He also provided an overview of the bid process and recommended award of the contract to Mid-America Golf & Landscape, Inc. in the amount of $2,980,381.24. George Radnovich, Sites Southwest, was also present to answer questions regarding the project. Discussion followed concerning the allocation of the proposed 10% contingency for the project; the work to be done under the project including drainage improvements, pump station improvements, renovations of the pond areas; the time frame for the commencement and completion of the project; the length of time for the grass to germinate, thicken and grow in order for the course to become playable; and the amount of the bid compared to the engineer’s estimate for the improvements. MINUTES Regular City Council Meeting — 1/12/2016 Page 7 Councilor Kumar made the motion to award the contract for golf course irrigation improvements to Mid-America Golf & Landscape, Inc. in the amount of $2,980,381.24 with the recommended contingency. Seconded by Councilor Landavazo. Roll call: Councilors Kumar, Landavazo, Palochak, Garcia, and Mayor McKinney all voted yes. 15. Resolution No. R2016-1; Annual Determination of Notice Under the Open Meetings Act Alfred Abeita, City Clerk — Mr. Abeita said the New Mexico Open Meetings Act requires all public bodies to determine at least on an annual basis, what constitutes reasonable notice to the public of its meetings. The proposed resolution provides recommended notice procedures for the Council to conduct its regular, special, and emergency meetings. The proposed resolution is also considered sufficient and reasonable notice of the regular meetings of the City Council to be held at 6:00 p.m. on the second and fourth Tuesdays of each month. Councilor Palochak made the motion to approve Resolution No. R2016-1. Seconded by Councilor Garcia. Roll call: Councilors Palochak, Garcia, Kumar, Landavazo, and Mayor McKinney all voted yes. 16. Public Hearing: Proposed Issuance of a Restaurant (Beer and Wine) License to G & W Industries, Inc. d/b/a Smokey’s, 505 North Highway 491 — George Kozeliski, City Attorney Mr. Kozeliski presented the information relative to conducting the public hearing on the proposed issuance of the restaurant license. He said the proposed location for the license does not violate the distance requirements under the State Liquor Control Act with regards to the location of nearby churches and schools and the proposed location is in compliance with the City’s zoning regulations. The only criteria the Mayor and Councilors could disapprove the issuance of the license is if the issuance of the license would be detrimental to the public health, safety, or morals of the residents of the Local Option District. Disapproval by the Mayor and Councilors on public health, safety or morals must be based on evidence pertaining to the specific applicant and location. Mayor McKinney asked if there was anyone to present testimony against the issuance of the license. There was none. Mayor McKinney asked if there anyone to present testimony for the issuance of the license. Jay Mason, Attorney-at-Law representing G & W Industries, Inc., was duly sworn and MINUTES Regular City Council Meeting — 1/12/2016 Page 8 stated that his clients intend to comply with the rules and regulations pertaining to the sale of beer and wine at their restaurant. Mr. Mason said the location of Smokey’s is the former Furr’s Restaurant and the business premises have been improved by the owners. He said support for the business has been expressed by the members of the City Council, members of the neighborhood and the owners of Rio West Mall. Mr. Mason said he and the owners of Smokey’s are in attendance and are willing to answer any questions regarding the business. Councilor Palochak asked if security was provided at the restaurant. Mr. Mason responded yes. Willie Roy, Jr. of G & W Industries, Inc. and co-owner of Smokey’s, was duly sworn and said his company hired the security business at the mall to provide security services at Smokey’s. Mr. Mason also testified that the security services are included in the lease of the property with Rio West Mall. Councilor Landavazo said he recently visited Smokey’s and was impressed with the investment made by the owners. Councilor Landavazo said the business is a great addition to the restaurant community in Gallup as he always encourages everyone to buy, believe and build Gallup at every City Council meeting. Councilor Garcia said she also recently visited Smokey’s and agrees with Councilor Landavazo’s comments. Councilor Garcia said the business provides a great atmosphere for families and is an improvement to District 1 and Gallup as a whole. Councilor Garcia said she is very proud about local citizens investing their money in Gallup. Mayor McKinney commended the owners on the improvements made to the interior of the restaurant. Mayor McKinney also commended the owners on the quality of food he sampled during a recent visit. Mayor McKinney said Smokey’s will provide Gallup with a variety of food to entice tourists and local residents. Councilor Kumar welcomed the owners and said he was pleased to see the Councilors show support of the issuance of the license. As a hotel owner, Councilor Kumar said customers need additional food choices in the community. Councilor Garcia made the motion to approve the proposed issuance of a Restaurant (Beer and Wine) License to G & W Industries, Inc. d/b/a Smokey’s, 505 North Highway 491. Seconded by Councilor Palochak. Roll call: Councilors Garcia, Palochak, Landavazo, Kumar, and Mayor McKinney all voted yes. Comments by Public on Non-Agenda Items Peter Ippel expressed his concerns with Governor Martinez’s position of not welcoming MINUTES Regular City Council Meeting — 1/12/2016 Page 9 Syrian refugees to New Mexico. He asked the Mayor and Councilors to adopt a resolution to show support of welcoming Syrian refugees to Gallup. Mr. Ippel believes Gallup has a history of accepting people since it stood up against the rest of the country when Japanese-Americans were being sent to internment camps during World War II. He said the Governor’s Office stated that the reason for the Governor’s stance is for the security of all New Mexicans. Mr. Ippel does not believe the Governor’s stance on the issue is in the best interest of security nor does he believe that the Governor has the authority to deny refugees. Although Gallup does not have a resettlement agency, which is requited to have refugees in Gallup, Mr. Ippel said by adopting a resolution, Gallup can make a statement regarding the issue. Mayor McKinney asked Ms. Ustick and Mr. Kozeliski to obtain additional information regarding the issue for the Mayor and Councilors. Once the Council reviews the information, Mayor McKinney said the Council may provide their input on the matter to Ms. Ustick. Comments by Mayor and City Councilors Councilor Palochak commended the Gallup Police Department for all their work, especially with the capture of a fugitive from Taos. Councilor Palochak also commended the Electric Department for their work in restoring power to the Stagecoach area last night around 11:00 p.m. Councilor Palochak said she will hold her Neighborhood Meeting on Thursday, January 14, 2016 at 6:00 p.m. at Stagecoach Elementary School. She encouraged all residents of Gallup to attend. Councilor Landavazo encouraged everyone to “keep building” and to “support Gallup.” Based on the award of the contract for the golf course irrigation improvements, Councilor Kumar said it was the right move to put money into the golf course since it has been neglected for a long time. Councilor Kumar said he hopes everyone will have a healthy and prosperous new year. Councilor Garcia said she hold her Neighborhood Association Meetings on the last Wednesday of every month at the Northside Senior Center at 6:30 p.m. Unfortunately, she will need to cancel her January meeting since she will be out of town. Councilor Garcia’s first meeting of the year will take place on Wednesday, February 24, 2016. In the meantime, Councilor Garcia asked everyone to call her if they need to contact her about any issues. Mayor McKinney assured all residents that City crews are working to repair potholes on City streets. Every winter, Mayor McKinney said he receives phone calls immediately after every storm when the asphalt breaks apart. Mayor McKinney commended Mr. MINUTES Regular City Council Meeting — 1/12/2016 Page 10 Henderson and his staff for their work in repairing the potholes. Mayor McKinney also said the City has to work with the New Mexico Department of Transportation for repairing the potholes on the State roadways in Gallup, which include Highway 66, Highway 491, Second Street and Maloney Avenue. Comments by City Attorney and City Manager Mr. Kozeliski said the City will be hosting the State High School Rodeo Finals and State Junior High School Rodeo Finals later this year. Both rodeos will be combined and the dates of the finals will be determined. Ms. Ustick said there will be a Work Session held on January 26, 2016 at 4:30 p.m. concerning the Growth Management Master Plan Update. There being no further business, Councilor Landavazo made the motion to adjourn the meeting. Seconded by Councilor Palochak. Roll call: Councilors Landavazo, Palochak, Garcia, Kumar, and Mayor McKinney all voted yes. Jackie McKinney, Mayor ATTEST: Approved 1/26/2016