Siemens Proposal Questions: Is the city required to competively bid this contract? Is it deemed professional services? Has the city explored any other options or potential contractors? What is the interest rate? The Gazette reported the rate at about 4.7% what is it specifically? Is the rate fixed or adjustable? What is the actual A.P.R.? Is it a discounted loan, is it an interest added loan, or is the interest calculated on a declining balance? Has this been discussed? How does this (loan) impact the cities constitutional debt limit? If, according to the Gazette, the project is to be completed over the next year, when is the first full budget year (2006 or 2007) that the city could realize the anticipated “savings”? How much, if any, of the anticipated “savings” under the proposed contract have been included or factored into the 2006 budget? How – Where?
As a result of these anticipated “savings” does the 2006 budget include an increase in the transfers from the water/sewer fund to the general fund? If so – How much?
Other Concerns and or questions: According to the Gazettes story, the scope of this contract spans the general fund and the water fund. The anticipated savings would be realized by reducing energy consumption and the cost thereon- hence reducing corresponding energy expenses to a point that these “savings” will more than offset the annual cost of the contract. While at first this may appear to be true in the general fund, the Gazette news article states that the greatest “savings” could be realized in the water fund. This is to be accomplished by replacing and upgrading commercial water meters. The assumption here is that as the existing water meters have aged, they may have slowed, and under recorded actual water consumption. This is a subjective area. Further, if these new meters to be installed result in more accurate and hopefully increased water consumption, then the end result will be more water fund revenue – not savings as the Gazette reported. There is a difference! For years it has been a policy of this city to transfer large amounts of monies from the water fund to support the general fund. It has also been long suspected the cities aging water meters may not be recording true water
consumption. This unaddressed situation may have cost the city an undetermined amount of lost water fund revenue. This could have been avoided if the city had a realistic meter replacement policy. If additional water revenues are realized by upgrading and replacing water meters, then an additional positive financial result could appear in the form of increased sewer charges on many of these metered water bills. This sewer charge is calculated as a flat percentage of metered water consumption – i.e. a raise in the water consumption = an increase in sewer fund revenue. This point was not mentioned or covered in the news article. Was this explored and or discussed? Contract Enforcement: The Gazette news article stated that the Siemens contract would guarantee “an annual savings”. Who is responsible for the monitoring of this contract, for the next 15 years to determine if the cities best interest and these “savings” are indeed realized? What method or formula is to be used to determine and chart these “savings”? What is the basis or benchmark on which the next 15 years the cities energy consumption and “savings” are to be calculated? How will this formula be arrived at? MUTUALLY, I hope. Is there a present or future value indexing factor to be used? Is it fixed or variable? Most important, who determines over the next 15 years, if the ultimate “savings” are attained and the amount thereof?
The company - the city- or both? If there is a disagreement between the city and the company, how will it be resolved? Remember, 3.1 million dollars plus interest is a lot of money and 15 years is a long time.
What will be the total amount paid to Siemens over the15 year life of this contract, Principle and interest? How will it be paid- monthly- quarterly- semi-annually or annually, at the beginning or the end of the payment period? DO WE HAVE AN ESCAPE CLAUSE?
Has the city been referred to, or requested a list of other comparable municipalities who have entered into similar Siemens contracts? What was their experience and or their success rate? How long was their agreement and how many years into the contract were or are they? In a contract of this amount and duration, perhaps the most significant questions are those that were never asked and as important, of those posed, were never answered or addressed. In light of the many questions, concerns and lack of definition, I would hope that this legislative body would postpone any action on this matter.
I have no objection to the basic concepts and goals that could be obtained through the implementation of this contract. I believe there are true merits here. My real concern is the apparent lack of the due diligence process by this council and admimistration. I respectfully request a written response to the stated concerns and will be available on a discussion basis. Vince Riggi riggisraiders@wmconnect.com
Copy to: All City Council Members, City Clerk, Mayor, Commissioner of Finance, Press