City energy use, infrastructure to be reviewed by outside firm

Commission split on issue

Sara Cambensy

MARQUETTE — The Marquette City Commission earlier this week approved in a split vote the next step towards developing an energy savings performance contract with HVAC corporation Johnson Controls Inc.

Commissioners voted 5-2 Monday at their regular meeting to approve a project development agreement with JCI and allow them to move ahead with an energy and engineering study to ascertain the cost of the project. Commissioners Sara Cambensy and Sarah Reynolds cast the nay votes, citing the need for more time and information to review the agreement.

The goal of the project, estimated to cost about $18 million, is to identify and fund infrastructure upgrades to city facilities and utilities with an emphasis on energy reduction.

Should the city move ahead with JCI after the initial energy study, a loan would pay for upgrades. The loan wouldn’t register as debt due to 2016 state legislation. JCI guarantees that the upgrades would then be self-financed through the generated energy savings over the life of the contract.

Johnson Controls is an American multinational conglomerate headquartered in Milwaukee that produces automotive parts as well as heating, ventilation and air conditioning equipment for buildings.

Cambensy said the agreement doesn’t offer enough detail, and the decision is too rushed.

“What I would like to see … is a little more time spent on our part making sure that we go into this really feeling like we have done our work as a commission to set our expectations,” Cambensy said. “Right now, I don’t know if we’ve done that. All I keep hearing is that we’re (going to) save money, it’s guaranteed, there’s no loss, the debt doesn’t go on our books. Um, I’m looking for a different level of detail even at this level, so I can know and assess what that risk is for the taxpayers.”

The city will not be responsible for the cost of the study if the project cannot be self-funded, according to commission materials. If the city chooses to pursue the project, all engineering costs are rolled into the final project and are funded through the energy savings. If the city chooses not to pursue the project, the city will pay for the engineering analysis at a cost not to exceed $1.17 million.

Mayor Pro Tem Tom Baldini said city staff have spent a lot of time assessing the issue and talking to JCI and JCI’s clients. He said there are too many big projects the city has been putting off for too long, like the boilers in city hall, chillers at Lakeview Arena, lights, new switches and more. Under this agreement, JCI is responsible for any mistakes, the city carries no debt on its books and doesn’t have to hire any extra staff, while the savings are guaranteed and the improvements are made in today’s dollars, as opposed to being more expensive down the road, Baldini said.

He quoted Voltaire, “The perfect is the enemy of the good,” and Mark Zuckberg, “Done is better than perfect.”

“We could delay going forward and wait for the perfect solution with the perfect funding and the perfect answer,” Baldini said. “We’d like to see perfect. … But we are going to save money, and if we don’t, Johnson Controls is (going to) pay for it.”

Michigan enacted a collection of bills in June 2016 on energy conservation financing for local governments to allow tax-exempt lease purchase agreements. TELP agreements allow governments to void accruing debt and are paid through annual appropriations that can be suspended if there is dissatisfaction with the purchase, according to the House Fiscal Agency’s legislative analysis. TELP agreements can span up to 20 years, cannot exceed the useful life of the item purchased and are renewed annually during budget deliberations.

Marquette resident Matt Luttenberger spoke during public comment, bringing old computer equipment up to the podium with him that he said was 20 years old to illustrate his concern about aging technology.

“Twenty years is a long time,” Luttenberger said.

Ronald Stimac, senior account executive at JCI, said the useful life of the equipment is built into the life cycle model, so the energy savings pay for that as well. Plus they are dealing in today’s dollars, he added.

“So we plan for the useful life of all equipment that may end during that 20-year period,” Stimac said. “It’s fiscally responsible and budget neutral.”

Commissioner Mike Conley, who seconded Baldini’s motion to approve, was responsible for adding to the motion language requiring JCI to incorporate prevailing wages into work costs and to contract with Upper Peninsula vendors whenever possible.

“I want this done right,” Conley said.

The commission on Jan. 30 approved JCI as the vendor for the project and since then, the initial agreement was developed. It was reviewed at a public work session Feb. 9.

Under the approved agreement, JCI will perform an engineering and energy study to develop a scope of work that includes the guaranteed total project cost and savings. The study is expected to be presented to the city commission in June, according to commission materials.

Once the engineered solution is presented, the next step in the process is to negotiate a final performance contract expected to be brought before the commission in July.

Cambensy said she’s not convinced the city couldn’t do the improvements for less on its own.

“If someone in the community asked … ‘How much are you paying them to manage your energy savings, how much is their cut versus ours?’ I can’t answer that, and I don’t think any of us can. I think we need to be more sure of what we’re geting into before we sign this first project development agreement,” Cambensy said.