99 Walnut Street, Unit 200 Chattanooga, TN 37403 ait Group December 20, 2019 Board of Directors Hannibal 8oard of Public Works PO Box 1589 Hannibal, MO 63401 RE: Organizational Review Final Report Dear Board Members: This final report is complete after reviewing the preliminary report with the Board of The Hannibal Board of Public Works (HBPW) on December 16, 2019, Itis an honor to have the chance to work with HBPW and its staff. The staff was open and welcoming during my time on site. The work that was done by the staff in preparation was also helpful. | was able to review many docurnents that gave a very good overview of the HBPW organization. Jam available for any questions via email at jay stowe@stoweutilitygrauip.cam or by phone at 256-625-6966. Very Truly Yours, yea Jay C. Stowe Founder and CEO Stowe Utility Group CC: Matt Munzlinger, Interim GMOrganizational Review of the Hannibal Board of Public Works December 20, 2019 Jay C. Stowe, Founder and CEO Stowe Utility Group, LLC Chattanooga, TN ‘The job of a utility, particularly a municipal mult service utility is to focus on three issues: ‘© Improve Public Health and the Environment. + Provide for Public Safety + Support Economic Development HBPW has a unique ability to impact the quality of life of the people it serves, The community ‘must trust that the organization is protecting their health and safety. Both indirectly through managing rates and directly with involvement with regional economic development, HBPW can improve the lives of the people it serves. Ultimately, the last point in this report notes something critically important; the report is less important than the process. There are not any recommendations in this report that are one-time fixes. To get maximum value from the report a continued focus on the process is critical. During my time on site, Iwas able to meet with most of the employees, representatives from the board, city council members, the mayor, and the city manager. | also spent time driving around the community on tours of some of the facilities and | have made some observations based on the document review and my time in Hannibal Before | get into the main body of the report, | would like to make a couple of points critical to my LX) sTolia Was not: discussions with staff. | was not asked to perform e any sort of disciplinary overview of any staff. was Diallo not hired to move HBPW towards privatization or a Effort to Privatize merger with the City. | mention this because during, my first few meetings, these topics came up for discussion, and | want to be clear of my role. Plan to Merge with City My general impression is that HBPW is in a good position to make some important improverents in process and procedure, Many good and thoughtful employees care for the community and the organization work at HBPW. They care about each other and the wellbeing of Hannibal. HPBW has a strong history and is positioned to continue to support the community.The structure of HBPW, owned by the city, but a separate organization, is a strong position and the best option to allow ongoing success. While the City of Hannibal is the owner and has influence, the appointment of a separate board allows key decisions to be made by a group of leaders whose sole focus is the utility. HBPW has an operating budget of just over 435 million and, as such, needs a set of experts managing and leading the utility. The following history is simplified but keeps the salient point. The tone of the issues facing HBPW over the past several years is a good starting point for the recommendations moving forward. ‘The past few years have proven to be difficult Recent Issues Impacting ‘ones for HBPW for several reasons. The Prairie State project, the public push to change the water treatment process, the development of deOGeG the stormwater utility (including the subsequent lost ballot measure) and finally the issues relative to lack of control over [ety-lel[aee= 1c MO -9 financial policies have undermined public Stormwater Utility trust and increased costs. UEC ee rea Water Treatment Any one ofthe issues would have been a short- lived problem that could have been easily addressed, but the combination of all of these items have put stress on the relationship between the HBPW the City as an organization and the public itis called to serve. It also has ‘caused stress within the organization, which has had an impact on the employees. Despite this stress, many positive things have been done. My first impressions of the organization came from a detailed review of the material sent ahead of my visit. |have attached a list of the documnent request to this report. The requested material was submitted in a timely fashion and was presented in a very professional manner, It took input from several groups to gather this information, The effort to gather and send this indicates there is good teamwork within HBPW. ‘Once on-site, | toured the area including the water plant, the wastewater treatment plant and several other facilities, including the main bullding, substations and the technology park. My impression continued to be positive as the equipment and grounds were well maintained. 1905.04 Stowe Utility Group, LLC December 20, 2019,I spent the remainder of my time on-site holding a series of meetings, some as one-on-one discussions while others were in groups. The scheduled changed slightly, but is generally depicted in attachment two. Overall Issues Communication [eccrine isliseseles In general, the people | met with were open and Seiraiy willing to share their views of the organization. sear : There were some common themes that | was pele CU CE essterasel able to verify during my conversations. The ale Itwagteleos themes are intertwined in some ways. But one theme came across more than all others: improved communication, both internally and externally, is imperative, Communication The overall theme is a need for more frequent and better communication. There is concern aboutthe timing and methods of communication, While this is not atypical of an organization of any size, there seemed to be a higher level of concern at HBPW. ‘As an example of the communication concern, the stories that my role was to work towards the discipline of employees, merge HBPW with the city or move towards privatization are not rooted in truth, but people believed them. This could have been addressed during the Immediate transition of the last General Manager to an interim GM with better communication from the Board to the staff. Some of the employees at HBPW learned of the transition through the media, The senior staff needs to be on the same page when communicating with staff. | heard examples of topics being delivered by supervisors in arnunietnn different ways, There is a culture survey that asks the questions “How would you like to be communicated Internal with?" There were several options - email, message any} boards, memos, meetings, etc. The reality is that all communication channels must be used, and the GM and senior staff members must send the same Lae) ife messages to their staff. Leeridar lately | recommend that the management get all employees an email address to allow for internal communications to all employees. ‘A subcomponent of communication is the relationship with the City. The relationship is delineated in the charter and policies, but there remains some ambiguity in what iterns need 9005.04 Stowe Utility Group, LLC December 20, 2019council approval. | suggest that management and the board/city attorney work to clarify this issue, Currently, decisions are made differently depending on the people, issue or potential for conflict. Addressing this will make issues easier to deal with in the future. There has been a long history with the relationship with the City. The relationship with the City should be better than it currently is. The ordinance related to water treatment required a regular update to the City Council from the HBPW management. | suggest that this update continues regulerly on all issues, not just the water treatment topic, It will be helpful in the future for the GM of HBPW and the City Manager of Hannibal to have a strong working relationship. The future of the two organizations is intertwined and the services they each provide are critical to the community. A strong partnership between these two organizations will provide a platform for succes: Economic Development. | would recommend a continued and even increased effort with the Economic Development Council. Any significant economic development project will have a positive impact on the operations of HBPW. The issue related to developing a stormwater system is one that has been ongoing for a while, HBPW will ultimately need to develop a rate structure to address the costs associated with the system, but also will need to continue to work closely with the City on the delineation of responsibility, There will be confusion on responsibilities until a clear distinction is made and agreed to formally. Accountability and Controls | believe the culture of HBPW has become lax in holding staff accountable for actions. The clearest example relates to the recent issues with credit card use. There were too many credit cards issued, for the wrong reasons, and then existing policies were not followed. The culture of acceptance has become the norm. | suspect this is not only related (CIC EUS to credit cards, The credit cards are only a symptom - if of an organization an organization from top to bottom is willing to ECaeaceheee overlook the rules associated with credit cards, then it Is likely that other policies have been overlooked as well. A detailed review of all policies is warranted, A team should review the current policies, determine if they are being followed appropriately, if training is adequate and if there are any changes, updates, additions or deletions necessary. The management team should spend a focused amount of time on this policy development and communicate the changes to the organization, This will provide a framework to operate the organization effectively and efficiently, The misuse of credit Encleteccltinctsiisys 13005.04 ‘Stowe Utility Group, LLC esemer 20, 2019The process of reviewing the policy manual may tum up other specific issues, but a confusing one is related to the hiring of relatives. While there Is a policy regarding hiring of relatives, it states that HBPW will not discriminate in favor or opposed to hiring relatives, then outlines ‘@ method for when to interview for a position, but finally says HBPW will nat hire immediate family members. Ambiguity like this in policies will cause confusion when they need to be implemented. Safety and Regulatory Compliance When reviewing safety practices, HBPW appears to have a safe environment. It is not clear that the safe environment is by chance or by a focus on safety. While there is a regularly scheduled safety meeting, there are not regularly scheduled pre-job briefings. The culture of safety is stated but may not be actual. Going through the motions of a safety-focused culture will not improve safety and a renewed emphasis on safety is critical At first glance, the layout of the main facility may not seem like a safety issue, but the facility used as a warehouse and parking lot is problematic, The ‘Tetris Game" that must be played to get trucks in and out of the facility each day is not safe or efficient, The housekeeping was impressive, especially considering the layout and type of work. There has been consideration of a new facility and there is, CAVE eve cia a need for this is on several levels. First, the safety related to staff in the back of Rett ea lan el vlc the building; second the safety of Main Building Truck Parkin; customers in the parking lot with the way NERC compliance: trucks have to go through the customer : parking lot; third the safety and security of Stormwater Regulations the front of the bullding considering the work and money that changes hands. Having said this, the board must be thoughtful regarding a new facility. The system already has high rates, and careful planning should be completed to be sure it is not overbuil. There are regulatory issues that have been handled well over the years, The North American Electric Reliability Council (NERC) has requirements related to the bulk power system in the country. Currently, HBPW owns and operates some transmission but is exempt from the regulation. As more transmission is built, it is critical to test the compliance with the NERC rules and regulations. If a compliance section were needed, it will be expensive. Regulatory changes in each of the utilities will cause an impact on the system. HBPW developed a method to comply with stormwater regulations, and now it must execute these policies. The regulatory framework that must be followed for stormwater and the other 19005.04 ‘Stowe Utility Group, LLC December 20, 2019,Utilities is going to be more in flux than it has in the past, and staff will need to continue to stay involved with associations to be prepared for these changes. HBPW has done great work and has participated in the APPA RP3 program. It|s agood model and itis very Impressive that a team focused on making this a priority. Care must be taken to do the things listed in the document, rather than simply going through the motions. The team should periodically get an outside group to help ensure it is going beyond box- checking, Organizational Structure and Staffing The GM has a span of control that is too broad - too many direct reports - and there is a significant value that can be achieved with the addition of a director of operations. This position existed in the past, and I recommend putting that position back in the organizational structure after the permanent GM is in place. The board needs to advertise the GM position and proceed with a search. The search will add transparency to the process, and will provide the board with the confidence they have the best person in the role. ‘Once the GM is in place and there is more stability in the organization, the GM should complete a full review of the structure to ensure the functional areas of the organization are in the right place. The current structure has morphed over time Sse Mele eMC e leat ie to a place where positions and people have been moved based on the personalities and * GM fill Operations Director Role expertise of staff and there may * Complete a functional review be more efficient structures. For example, inventory and purchasing roles do not report through the finance department. All financial type activities should be under one organization. This would include the purchasing and inventory functions reporting through the finance department, Other areas could be moved, but the simple process of completing a review by the senior leaders will help ensure the most efficient outcome, * Post and fill GM role ‘One component of the functional review that crosses several of the Issues discussed in this report Is the role of communications/public relations, This role could provide significant value to the organization to help with internal and external communications. As the functional review of the overall business is completed, the staff should consider reinstating this position. Social media posts, key accounts, internal communications, and external stakeholder relationships could be enhanced with a person focused on these issues. 19005.04 Stowe Utility Group, LLC December 20, 2019Responsibility for projects is clear in most areas. For example, the responsible department is clear when the project is the installation of new electric lines or replacing sewer lines. Itis less clear when projects cross organizations, specifically support organizations. SCADA, for example, has a department that operates it, but it supports each department ~ when it is time for an upgrade it is largely an IT project. The communication between each of the impacted departments is critical. The GM will need to be sure to have a single responsible party for these projects. Rates The rates for Water, Sewer, and Electric are high. | suggest a detailed review of the rates with a consultant, updating the rate studies that were completed recently (2015 for Electric and Sewer, 2018 for Water). There will continue to be pressure on rates as people are more aware of their usage and efficiency options increase. Due to the high rates, itis even more critical that the management gain tight controls on expenditures and ensure proper maintenance of the systern but doing it with the least cost options, Rate increases do not need to be a foregone conclusion, and the responsibility for managing the budget should lle with each member of the management team, but a more complete focus by the GM and finance director will be required to truly tighten up the spending, The single largest expense in the budget ties back to the power supply. HBPW has a consultant that is well versed in this business assisting with this part of the budget. The GM and finance director should dive deeper into the power supply process to ensure the best decisions are made relative to the assets. Even small percentages of savings in that large of aline item will prove helpful. It also will become more critical to understand the power supply portion of the budget as more customers are requesting local solar or battery solutions. New technologies like solar and battery will have an impact on the operations at some point. The distributed energy technology landscape is changing fast, and will change the way utilities operate. Discussions have already around handling electric vehicles. The board should prepare for other parts of distributed resources to impact the system, Miscellaneous Observations Economic Development is critical ta the success of the community HPBW serves. As new businesses look at locating in the area, HEPW will need to be prepared to support others in this area, The Regional Economic Development Council will require strong support from HBPW, The staff and board should be proactive in recruiting new businesses to town. Most new loads will help manage costs, Specifically, if a new data center has an interest in Hannibal, you should consider aggressive options to serve the load. 19005.04 Stowe Utility Group, LLC December 20, 2019 | | | i | | | | | jNew technologies will continue to impact much of the way HBPW does business. The organization has done a good job of providing opportunities for online payment for customers, has a strong GIS platform and has a SCADA system to operate the system well New technologies in solar, electric vehicles, battery, and other customer-side resources will impact the operations and continuing to plan for these changes is necessary to succeed in the future, These new technologies will put further strain on rates, The trajectory of rate increases will make some customers make decisions to install alternative solutions and that will shift costs to other customers. The process will be more gradual than losing wholesale water sales, but the impact willbe similar over the coming years, While there have been good steps taken to provide payment options for customers, the customer surveys still indicate low customer satisfaction. When staff discussed this, the low scores were justified because of the external issues occurring during the survey. The use of excuses for low customer satisfaction scores will not allow for improvements, and the customer service staff should work aggressively to determine ways to improve the relationship with customers. The policy changes Implemented over the past few years, and even the past few months, have been positive. Disposal of unneeded property should not go to employees. Credit cards are a tool to make jobs easier and should be used wisely. Employees should not use equipment for personal purposes. Each of these changes was critical in maintaining trust from the community. HBPW provides a valuable service to the City of Hannibal. As stated earlier, the relationship between the two organizations needs to Improve, The City management and Council should also recognize the value that HBPW is providing - beyond good, safe, reliable utility service. The City also benefits from the value of services provided that they do not pay for. City accounts do not pay for the utility services - this isa transfer in costs from property owners to customers of the city. The amount of services provided are nearly $350,000 plus the transfer fee. The number will climb when the stormwater system is in place. AS communication efforts are completed, | encourage the board and staff to find ways to gently remind the city of this value. Conclusion HBPW has strong teams that provide a valuable service for the Hannibal region every day. Each of the items discussed in this report can be summarized under the communication heading, Relationships with the community have been stretched with several public issues over the past few years. That has created some level of anxiety internally and externally. A 19005.04 Stowe Utlity Group, LLC December 20, 2018 i |focused and conscious effort to Improve communication will improve trust - and that is the foundation required to make an organization operate well. ‘Communication will require a constant focus from the key leadership - from the Board to the GM to supervisors, Safety should be core to all decisions moving forward, Consistent development and execution of policies will provide a solid base to operate the organization. Several people lamented how the atmosphere at HBPW has changed in the past few years ~ they said, “it used to feel like family.” Increasing communication, holding staff accountable, improving safety, updating the structure and focusing on costs to manage rates is not going to hurt the culture of HBPW, but doing these things will improve it. This Is a process, not a one-time project. If the board and staff are willing to focus on these core issues, the outcome will be improved culture, morale and a better future of Hannibal and the region. 1905.04 ‘Stowe Ulilty Group, LLC December 20, 2019Attachment One: Document Request EPI CR Er + Any studies and agreements for purchasing power + Minutes from last two years of Board Meetings ‘+ Minutes from City Council Meetings in past two years that discuss any HBPW issues + Any Employee Surveys from last «City Ordinances Related to Utility © Organizational Charts «Summary of each Department detailing functional responsibilities, ofeach + Policies and or Manuals © Human Resources Purchasing five years Customer Service Manual . Any Customer Surveys from last Safety ive years + The information submitted for the RP3 designation + Schedule of Fees and Charges for each service +All Rate Structures for each service + Agreements for purchased power + Reports from consultant responsible for purchase power + Three Year of Annual Audited Financials + Three years of Annual Budget and Business Plan Employee Manual Allother policies approved by Board of Directors ‘+ Specification Documents © Design Criteria © Guldelines for Construction © Tree Trimming Guidelines + Monthly Reports - last 12 months © General Manager Reports © Water and Wastewater Compliance or Regulatory Reports © Operational reports from . Any Strategic Plans developed over each department the past five years + Anysstudies related to new areas of business (i. fiber optics/broadband, advanced metering (AMI, etc.) + Any feasibility studies on © Outage reports © Any other regularly prepared reports + Any studies related to water plant and storm water utility i + Pole Attachment Agreements significant capital projects ‘+ List of top 10 customers for each service including usage and revenue + Most recent Official Statement + Most recent rate studies for each service ‘+ Any reports on Sanitary Sewer Overflows 9005.04 Stowe Utility Group, LE December 16,2019Attachment 2- Schedule Hannibal Board of Public Works Organizational Review Draft Proposed Schedule Saturday Night - Arrive Hannibal 11pm Sunday Afternoon 1:00 ill Fischer- Board Member 2:30 Matt Munzlinger provide tour of facilities 5:30__Lisa Peck, City Manager 6:30 Dinner with Stephan Franke MONDAY 7:00 Matt Munzlinger Interim GM ‘Abraham Gray Finance Director Gene Majors. Water Distribution Courtney Harris Admin Assistant Stephan Franke Board Member Beverly Stewart HR Administrator Lisa Peck City Manager Matthew Jones r James lemon City Attorney Electric Jared Stewart Supervisor Mark Hickerson SCADA 8:00 Mark Hickerson, SCADA Supervisor 9:00 Courtney Harris, Administrative Assistant 9:30 Beverly Stewart, Human Resources Administrator 10:00 Go to Water Plant Meet with Staff and More complete tour 32:00 Lunch 1:00 Go to Wastewater Plant Meet with Staff and More complete tour 4:00 Abraham Gray, Finance Director 5:00 Matt Munalinger 530 Alan Bowen 630 Stephan Franke and/or other Board Members ‘TUESDAY 730. Matt Munalinger 8:00. Jeff Willams Pretreatment 9:00 Cindy Price, Billing Services Coordinator 10:00 Emily Dexheimer Customer Services Coordinator 11:00 Lisa Peck, City Manager 12:00 Lunch 1:00 Business Office Staff rotate as available 2:00 James Lemon, City Attorney 3:00 Board Member 19005.04 Stowe Uillty Group, LLC December 16, 2019,4:00 530 WEDNESDAY 730 8:00 9:00 11:00 12:00 12:30 130 330 430 THURSDAY 7:30 8:00 9:00 10:00 11:00 12:00 1:00 2:00 3:00 4:00 5:00 FRIDAY 730 8:00 9:00 11:30 12330 1:30 2:30 19008.04 December 15,2019, Lennie Rosenkrans - Board Member Corey Mehaffey Matt Munalinger Jared Stewart, Electric Department Supervisor Electric Department Overview Individual or Group meetings as possible Probably 2 or 3 Groups Maintenance Electricians Lunch ‘Maintenance Mechanics Sewer Department Steve Smith - Board Member Board Member Matt Munzlinger Lance Kendrick, Facilities Supervisor SCADA Department Overview Individual or Group mestings as possible INVENTORY, James Thewlis Stormwater Coordinator, Andrea Campbell Lunch Matthew Jones, IT Specialist GIS Technician, Joe Darnell pen, Fill as needed during the week Melissa Cogdal - City Council James Hark - Mayor Matt Munalinger Gene Majors, Water Distribution Supervisor Water Department Meter Department Stephan Franke Matt Munalinger Depart for Airport Stowe Utility Group, LLC