January 24, 2013GROSSE POINTE SHORES — Leave it to skinflints on the city council to figure ways of saving money by spending it.
"We're squeezing to find money anywhere we can," said Mayor Ted Kedzierski.
The council is considering an upgrade of electrical, environmental control and public works infrastructure that more than pays for itself in energy and operational savings.
Depending on the range of improvements, savings yields a positive net cash flow of between $753,080 and $1,662,671 over 16 years, according to representatives of Honeywell, the proposed project manager.
That doesn't mean the city would have that much extra cash on hand.
Savings, guaranteed by Honeywell in a performance contract, would be used to pay notes on a construction loan.
Full-out upgrades also require the city to enter into a separate contract with DTE Energy to upgrade all underground wiring for streetlights, some of which is 65 years old, according to Shores officials. The cost is anticipated to be an additional $1 million.
"It's a fool-proof way to do this," said Councilman Bruce Bisballe, chairman of the finance committee and, like Kedzierski, a CPA. "If the savings don't occur, based on (Honeywell's) recommendations and implementation, we're not on the hook. "
"It's financially the best way to go for the city," added Councilman Robert Gessell. "With the savings and replacement of the infrastructure, you can't beat it."
"It's a fiscally responsible way for the village to fund replacements that in a lot of cases are going to be replaced anyway," Dick Williams, Honeywell's government market leader for Michigan, told the council Jan. 15.
He added, "You do it through savings, rather than waiting for a catastrophe and having to come up with money at that time."
The council unanimously authorized signing a letter of intent with Honeywell to nail down costs and benefits.
"We're going to work with (Honeywell) to finalize these details so we have a firm commitment as to what's going to be done, what it's going to cost and financing," said Gessell, a business and corporation lawyer.
Options and costs
At the Jan. 15 council meeting, Williams outlined two project options that differ in one respect.
Option 1 consists of:
replacing boilers at city hall and the pool house,
modifying environmental systems in those two facilities,
upgrading temperature controls at city hall, the public works complex and pool house,
retrofitting lighting systems and controls in all three buildings,
replacing two sewage pumps, which date to 1954 and lack replacement parts,
installing a back-up generator for city hall and public works,
a liquid coating to retain heat in the swimming pool,
reworking decorative streetlights and park lights to accommodate energy-saving light emitting diodes and
retrofitting street light poles that already have been converted to accommodate LEDs.
Option 2 includes everything in Option 1, plus extending work to all streets, which would shave to be converted to accommodate LEDs. There would be a separate cost for the system-wide streetlight conversion.
"You'd need to work with Detroit Edison," Williams told the council. "They own the transformers to service that."
Option 1 is forecast to cost $1,650,000.
Guaranteed annual energy and operational savings of $23,348 and $110,487, respectively, total $753,080 after 16 years, adjusted for 4 percent inflation, according to Williams.
Option 2 is forecast to cost $1,820,000, less separate costs to upgrade all streetlights.
Guaranteed annual energy and operations savings of $38,859 and $145,458, respectively, total $1,662,671 after 16 years, adjusted for 4 percent inflation, according to Williams.
"It would take us about one year to get all this installed," Williams said. "After it's installed and accepted, the village would start paying back on the installment loan."
"I support the full package," said Councilman Robert Barrette Jr., a retired DTE Energy manager. "It's a way to get significant infrastructure done."
Worn out equipment
"Much of our equipment is old and beyond its useful life," said Mark Wollenweber, city manager.
He added, "This is a way to fund badly needed improvements of equipment that we can't afford to pay for except through a unique program, like this, that we pay for out of energy savings."
"I'm very much in favor of this," said Councilwoman Kay Felt.
City Attorney Brian Renaud has negotiated some terms with Honeywell.
"We reached agreement on making indemnities between parties mutual (and) extending product warranties beyond repair to Grosse Pointe Shores," Renaud said. "If something's in need of repair and there's a product warranty attached to it, that warranty will pass to the city in excess of Honeywell's basic warranty."
Analysis so far hasn't cost the Shores anything.
Honeywell representatives evaluated the city's infrastructure and designed improvements free of charge.
The Shores owes Honeywell up to $25,000 in administrative fees if the city backs out after signing the letter of intent.