City approves $28M energy performance contract
MARQUETTE — In two split votes this week, the Marquette City Commission ushered in a $28 million jumpstart to city infrastructure and energy upgrades, with a contract that promises to save the city $42 million over the course of 20 years.
The commission voted 5-2 at their regular meeting Monday to approve the energy performance contract with Johnson Controls Inc. and 5-2 to authorize the financing of the project, which is being done through a tax-exempt lease purchase agreement.
Commissioners Sara Cambensy and Sarah Reynolds cast the nay votes, citing concerns over the cost and necessity of the project.
The scope of work includes updating 22 traffic intersections; replacing 3,300 water meters with a “smart city” advanced metering infrastructure system; renovations to city hall; LED lights on 2,500 street lights and 125 bike path lights; an electrical co-generation plant at the wastewater treatment plant; numerous building envelope, lighting and HVAC improvements; and completing the Lakeview Arena’s ice system replacement.
A $28 million loan through Bank of America will fund the upgrades over two years. The loan won’t register as debt due to state laws enacted last year that allow local governments to use TELP agreements to finance energy conservation improvements.
The project was estimated at a preliminary $18 million in January, and in June, the city approved borrowing $23.5 million for the project from Bank of America, which won a competitive bid at an interest rate of 2.74 percent.
With the latest cost increase to $27.9 million, the interest rate will go up to 2.84 percent.
Marquette Superintendent of Facilities Eric Stemen said the $42 million in savings over the next 20 years are guaranteed by the contract through energy and operational improvements.
“This project is going to help improve city infrastructure and services, by being a leader in sustainability using dollars that we’re already going to be spending anyways, whether that be on energy or operations,” Stemen said. “And in the end, it’s all financed through this TELP, which is a tax-exempt lease program, … which helps with our bonding capacity.”
TELP agreements allow governments to avoid bonding and aren’t seen by the state as debt.
Cambensy, in voting no, said she has looked hard at this, and she’s not being a perfectionist or trying to push things off.
“But one of the biggest things I saw was that other communities are changing out their streetlights and literally saving 65 percent of what they pay, by changing out a $100-$200 bulb and head,” Cambensy said.
She said the Marquette Board of Light and Power owns the streetlights, and the city pays them about a half-million dollars per year for the electricity and maintenance.
“The (BLP) is a city entity, why are we not working with them?” Cambensy asked. “We both work for the taxpayers, and I think what we need to do is work together to come up with a way to save the taxpayers money. Taking out a contract with Johnson Controls is not saving the taxpayer money.”
Cambensy cited various risks looking at the city’s tax base in the future, including the expected loss of the Presque Isle Power Plant owned by We Energies, the city’s biggest taxpayer. She said a $2 million bond to change out the streetlights could be paid off in six years.
“So I sit here and I congratulate Johnson Controls for being great salesmen, but I’m not buying it,” Cambensy said. “I look at our fire chief, and I know that in two years he needs new fire trucks at the cost of $900,000 each. I would rather buy two firetrucks for the city than pay a third party to tell us we’re (going to) save energy when we already know we can do it.”
Mayor Pro-Tem Tom Baldini said he is quite excited by the contract, the savings and the new technology.
“If the savings is not realized like they suggest it should be, and it’s not our fault, they then pick up the difference, and I like that,” Baldini said. “But they have a very good record of assessing what needs to be done, what can be done and how much we can save.”
Commissioner Mike Conley said this will allow the city to update important infrastructure that has been deferred over the years.
“We could not accomplish this large scope of work on our own,” Conley said.
Conley also said he wanted vehicle detection improvements in every intersection, not just the 22 in the contract.
Marquette resident Matt Luttenberger, who is running for city commission in Tuesday’s primary election, said he wants the improvements, but would like to see them broken down over a longer period than two years.
“I would love to pay Johnsons to do that, if that’s the way we’re going to go. It seems as if we have a whole litany of things that we need,” Luttenberger said.
He also asked if the updates to Lakeview Arena were really needed after the city won Kraft Hockeyville USA last year.
“Do we really need another set of funds going to Lakeview Arena for that reason?” he asked. “And maybe it wasn’t covered, maybe our chillers aren’t good enough, I don’t know, but again, maybe they’re good enough for NHL hockey.”
Reynolds said her “no” vote isn’t because she thinks JCI is a bad company, but she’s not sure all the projects in the contract are needed.
“It’s generally because of the amount of money that we’re talking about spending in one fell swoop. I haven’t been convinced that it’s necessary,” Reynolds said.
Mayor Dave Campana said he likes the contract, because it will accomplish improvements that wouldn’t get done otherwise.
“To me it’s a win for the city,” Campana said. “We’re going to get things done, and … we’ll actually have perhaps more funds available for other projects — streets, sewer, water — that really need attention.”
Mary Wardell can be reached at 906-228-2500, ext. 248. Her email address is mwardell@ miningjournal.net.