fyi From: Ext_mail John Hill Sent: Tuesday, January 11, 2011 9:28 AM To: Ron Whitehead; Randy Moravec Cc: Nancy Cline Subject: FW: Oncor-Addison undergrounding estimates Fyi, just received. From: Clarence West [mailto:cawest@cawestlaw.com] Sent: Tuesday, January 11, 2011 9:24 AM To: Hill, John Subject: FW: Oncor-Addison undergrounding estimates John-Just got this from Howard Fisher-seem under the new 2011 tax Law, the “tax adjustment “ may be $0.0 for 2011 only “if the CIAC is paid in 2011 and the project is placed in service in 2011.”! Clarence A. West, Attorney Austin, Texas 512-547-6707 Confidential Attorney Client Communication. If this email was sent to you in error or you are not the intended recipient, please reply by email of the error and delete. From: Howard.Fisher@oncor.com [mailto:Howard.Fisher@oncor.com] Sent: Tuesday, January 11, 2011 9:03 AM To: cawest@cawestlaw.com Cc: rnewsom1@oncor.com Subject: RE: Oncor-Addison undergrounding estimates Clarence, While my earlier response set out the basic concept underlying the CIAC tax adjustment, I would like to clarify that, because of the bonus depreciation allowance of 100% for calendar year 2011 passed by Congress at the end of last year, it is likely that the federal tax adjustment would be $0 if the CIAC is paid in 2011 and the project is placed in service in 2011. Earlier CIAC calculations, done before the change in law at the end of December, would not have taken this change into effect. I would note that the state tax adjustment would not change, as the state gross receipts tax calculation remains unchanged and unaffected by the change to federal tax law. Howard ________________________________ From: Clarence West [mailto:cawest@cawestlaw.com] Sent: Friday, January 07, 2011 8:47 AM To: Fisher, Howard Subject: Oncor-Addison undergrounding estimates Howard, Per our call yesterday, the City has asked for an explanation regarding the $76,069.46 “tax adjustment” (See the below emails on Oncor responses and the Addison undergrounding CIAC estimate components.) If you could please explain the “tax adjustment” added to this overall estimate that is to be paid by Addison for undergrounding Oncor facilities in Addison. Specifically, even if (from Oncor’s perspective) Oncor treats Contributions In Aid of Construction (CIAC) collections as income in the year in which it is collected with the “tax adjustment” representing the tax liability associated with the CIAC collected on each project, i.e., the “tax adjustment” being added in order to make Oncor “whole” for the requested project, this same CIAC “income” from this project is paid out by Oncor to third party contractors as an “expense” and/or amortized/capitalized over time which results in an income tax deduction and lower income taxes over the years, why does the City not get a “credit” back for that reduction in income taxes in subsequent years? Clarence A. West, Attorney Austin, Texas 512-547-6707 Confidential Attorney Client Communication. If this email was sent to you in error or you are not the intended recipient, please reply by email of the error and delete. From: rnewsom1@oncor.com [mailto:rnewsom1@oncor.com] Sent: Monday, January 03, 2011 11:45 AM To: Hill, John; lbaldwin@oncor.com Cc: ncline@addisontx.gov Subject: RE: Oncor Tax Adjustment: The “tax adjustment” refers to the tax gross-up that is added to all Contributions In Aid of Construction (CIAC) collections in order to make Oncor whole for the requested project. Oncor is required to treat CIAC as income in the year in which it is collected. The “tax adjustment” represents the tax liability associated with the CIAC collected on each project. This is tax liability to Oncor and not a tax passed on, nor is it dependent on, the tax exempt status of the entity requesting the service. Franchise Fee: The Franchise fee is a 4% pass through fee that is collected on certain Discretionary Service Charges (DSC) that are paid to City’s once each year. The 4% fee is calculated by taking the CIAC charge, then adding in the tax gross up, and then multiplying by 4%. Let me know if you have additional questions. ________________________________ From: lbaldwin@oncor.com [mailto:lbaldwin@oncor.com] Sent: Wednesday, December 29, 2010 10:26 AM To: Hill, John Cc: ncline@addisontx.gov; rnewsom1@oncor.com Subject: RE: Oncor The negotiated contractor labor unit pricing used in WMIS is labor cost established in a contract with Wilbros T&D (formally known as Infrastrux T&D). This contract provides Oncor special pricing from Wilbros T&D and guarantees Wilbros a minimum amount of work across the Oncor T&D system. On this project the underground work will be performed by Wilbros T&D. The overhead work will be done by Oncor employees. Randy Newsom is out of the office this week. He will be providing the information on the Tax Adjustment and Franchise Fee. ________________________________ From: Hill, John [mailto:jhill@cowlesthompson.com] Sent: Wednesday, December 29, 2010 9:46 AM To: Baldwin, Larry Cc: ncline@addisontx.gov; Newsom, Randy Subject: RE: Oncor Thanks Larry. Since the labor and material costs were estimated amounts, is the undergrounding work done by Oncor employees or is it bid out? If bid out, do (or will) you have the actual amounts that Oncor will be paying for the work? We also asked for an explanation regarding the $76,069.46 “tax adjustment” and a detailed breakdown of any taxes included in that number, as well as an explanation of the $15,064.82 franchise fee (please see below). I look forward to hearing from you. John From: lbaldwin@oncor.com [mailto:lbaldwin@oncor.com] Sent: Wednesday, December 29, 2010 9:18 AM To: Hill, John Cc: ncline@addisontx.gov; rnewsom1@oncor.com Subject: RE: Oncor I am sorry for the delay in providing you the additional information that you requested. We utilize a Distribution Information System (DIS) to maintain facility records and aid in the operation of our electric distribution system. We also use components of DIS to estimate cost for our construction projects. The DIS system includes a model of our actual distribution facilities. When we prepare a Work Request (WR), the DIS model is adjusted graphically and non-graphic with the Construction Units (CU’s) that are necessary in the design for the proposed work to be performed. The graphic features and construction units are associated with material and labor units. A Work Management Information System (WMIS) compiles the designed material and labor units in the WR and produces reports including the Design Estimate for the WR. The material costs for our Design Estimates are determined by average material pricing which is updated daily. The labor cost for our Design Estimates are determined by negotiated contractor labor unit pricing for specific work activities to be performed. On this project I estimated to relocate the facilities in “like kind” to determine the non-reimbursable relocation credit. Then I revised the design to reflect the work that is to be done in relocating the facilities underground. ________________________________ From: Hill, John Sent: Monday, November 22, 2010 1:34 PM To: 'lbaldwin@oncor.com' Cc: ncline@addisontx.gov Subject: RE: Oncor Larry, what we’d like to see is how the numbers were arrived at. For example, with respect to the underground labor costs of $82,098, how was that number determined (e.g., a certain number of anticipated hours of labor times an hourly wage for each category of worker?). With respect to materials, what are the materials to be used and what is the cost for them, and how was that cost arrived at (e.g., by solicitation of bids?). With respect to the overhead relocation costs, how was that number arrived at? I hope that helps. Please let me know if you have any additional questions. Thanks. John From: Hill, John [mailto:jhill@cowlesthompson.com] Sent: Friday, November 12, 2010 5:09 PM To: Baldwin, Larry Cc: 'Nancy Cline' Subject: RE: Oncor Larry, I serve the Town of Addison as City Attorney. Regarding the cost breakdown included below that was provided on undergrounding the electric utilities in connection with the Spring Valley construction in Addison, that was appreciated, but we would like to have some additional information. Concerning the labor and material costs, we would appreciate it if Oncor would provide additional underlying detail for the undergrounding and the overhead credit. Additionally, please provide an explanation of the $76,069.46 “tax adjustment” and a detailed breakdown of any taxes included in that number. Finally, please explain the $15,064.82 franchise fee. I understand that there is a PUC rate case that is on appeal, in which any franchise fee above the kWh fee was disallowed. Please explain why the franchise fee is being collected in light of the rate case. I look forward to hearing from you. John Hill COWLES & THOMPSON 901 Main St., Suite 3900, Dallas, TX 75202 214.672.2170 (t) | jhill@cowlesthompson.com 214.672.2370 (f) | www.cowlesthompson.com From: Ext_mail John Hill Sent: Friday, November 12, 2010 4:50 PM To: Nancy Cline Subject: Oncor Nancy, regarding the undergrounding costs for electric utilities on Spring Valley, you had previously asked Oncor (I think it was you) for a breakdown of their costs. I understand this is what they sent you: Cost Breakdown: Labor $ 82,098 Materials $277,691 Const. Cost $359,789 Const. Cost $359,789 OH Relocation* ($ 59,238) *OH Relocation is a credited cost if the overhead electric distribution facilities were relocated in like kind. Difference in Cost $300,551 Difference in Cost $300,551.00 Tax Adjustment $ 76,069.46 Franchise Fee $ 15,064.82 Total Cost $391,685.28 Ron asked me this morning to follow up with Oncor and try to obtain further details regarding these costs. Do you have the name of a contact person at Oncor that I could send a note to requesting those details? Thanks. John ****************************************************************************************************************** This e-mail and any files or attachments transmitted with it contains Information that is confidential and privileged. This document may contain Protected Health Information (PHI) or other information that is intended only for the use of the individual(s) and entity(ies) to whom it is addressed. If you are the intended recipient, further disclosures are prohibited without proper authorization. If you are not the intended recipient, any disclosure, copying, printing, or use of this information is strictly prohibited and possibly a violation of federal or state law and regulations. If you have received this information in error, please delete it and notify Hamid Khaleghipour at 972-450-2868 immediately. 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