One issue that took a lengthy amount of time to resolve at Tuesday’s McComb city board meeting was a lease agreement and leasing schedule with Siemens Public to provide 100 percent financing for new automated water meters.
Selectmen approved the $4.5 million project on June 9, 2009. At the same meeting, public works director Ronnie Lindsey said the project would replace up to 6,900 water meters with new digital meters that transmit information on water use and possible leaks to the water billing department.
At the time, Siemens representative Tony Ardillo told selectmen that the company would help the city locate funding, and Lindsey said the project would be done under a performance-based contract.
According to the Mississippi Energy Performance Contracting Manual, performance-based projects shall incur no initial capital costs, achieve significant long-term savings, guarantee savings for energy and operations and maintenance savings, and perform properly.
After a lengthy debate Tuesday, the board unanimously approved the lease agreement and schedule as written to lock in a 4.42 percent interest rate on a 10-year, $4.5 million loan backed by Siemens.
The decision came after Ardillo said interest rates are set to rise to 4.75 percent next week and steadily increase in the future.
The caveat is that an additional, higher bid on the project must be received within five working days from the meeting for the project to go through. At the moment, Siemens is the lone bidder.
The number of required bids was another subject of contention between Mayor Zach Patterson and board attorney Wayne Dowdy.
Dowdy told the board he told Lindsey and Neel-Schaffer Engineering representative Keith Lott that he could not sign off on the lease schedule and agreement unless another bid was received.
“In my opinion, what you did in June was not legally acceptable,” Dowdy said. “They can still go get the two bids. State law will not just allow this board to just get (one) bid.” (He was not the board attorney at that time.)
For more than 20 minutes, the conversation was dominated by Patterson asking Dowdy a variety of questions about what the board’s next action should be, with Dowdy most often responding that two sealed bids must be received before he can sign off on paperwork allowing the project to move forward.
Patterson asked Ardillo what the project would cost if it did not pay for itself. Lindsey estimated that with 6,500 customers, capital improvement rates — which are part of the water bill — could increase by about $6.
When reached by phone this morning, Lindsey pointed out that is a worst-case scenario. The effect the project will have on city employees also is unknown.
“It is too far out to tell what effect the project will have on the employment of meter readers or the cost of water usage,” Lindsey said.
If the project goes through, it should take about six months to complete. That will leave the city another six months to figure out the project’s cost-saving potential.
Payments will be made from accrued savings in the city water/sewage fund, and are scheduled to begin on Jan. 31, 2011. The 10-year repayment scale will include graduating monthly payments in line with the project’s anticipated savings.
Contacted this morning, Selectman Danny Esch said the project’s ability to pay for itself was the reason the board approved it last June, and again on Tuesday.
When city officials initially considered the automated meters, they did so because of the age of existing meters and their problems. The average water meter age in the city is 10 years.
“The information we have received, it shows that it will pay for itself,” Esch said. “McComb cannot afford to have any more indebtedness. The city’s going to have to be doing a lot of cutting back.”
The project still hinges on a second bid coming in by Tuesday. Without that, the city would not be able to lock in the current interest rate, and that could throw a wrench into the plans.any more indebtedness. The city’s going to have to be doing a lot of cutting back.”
The project still hinges on a second bid coming in by Tuesday. Without that, the city would not be able to lock in the current interest rate, and that could throw a wrench into the plans.
