September 2, 2014

Council members discuss public-private partnership agreement

Danedri Thompson
dthompson@gardnernews.com
At least one council member doesn’t think the city should spend more time considering a private-public partnership for Gardner’s utility management.
Council member Chris Morrow said maintaining management of Gardner’s electric, wastewater and water utilities is in the public’s best interest.
“I’m not sold that this is something we need to spend more time studying,” Morrow told council members and a group of officials from Alinda, Infrastructure Management Group and Black & Veatch.
Phillip Dyk, a partner at investment firm
Jointly, the three companies answered Gardner’s Request For Information about the idea of a possible partnership that would involve a company essentially leasing Gardner’s utilities.
Under terms of a yet determined agreement, the companies would give an upfront payment of between $65 million and $75 million to the city of Gardner. In return, they would takeover management of the city’s three utilities.
Phillip Dyk, a partner with Alinda, an infrastructure investment firm, explained that the agreement would allow private investors a steady rate of return over the course of 30 years.
The benefit to Gardner, he explained, is that Alinda would provide capital up front for and the long-term leasing agreement would allow the city to better plan changes in utility rates.
“We are in the business of making sure pensions get a benefit over a long period of time,” he explained. “…Our role is to make sure the investment is creating a good return.”
The company has similar agreements with public entities in Rhode Island and in California as well as internationally in Great Britain.
The agreement would require the transfer of the city’s utility employees to a newly-formed private corporation whose board would oversee management of the company.
The new company would offer a 401k-type retirement plan to employees rather than the defined pension benefits of KPERS, Kansas’ public pension program.
The mayor and council would retain oversight of the utilities, and existing employees would continue to handle day-to-day operations.
The city would continue to own all assets and continue to manage utility billing. In exchange, the city would transfer all of the risk related to running a utility to the private corporation.
“We would be like the tenant in a landlord-tenant contract,” Dyk explained. “The city’s relationship with customers would not change.”
Council member Kristina Harrision wondered how the agreement could be profitable for the companies involved.
“How do you make that happen?” she asked.
Dyk said the company wouldn’t enter into any agreements that would add costs to the utilities.
Contractors typically find a way to do work for less when they’re working with private corporations rather than the public bureaucracy.
“We think we can find ways to make improvements with no negatives to your community,” he said.
A portion of the profits would come from growth of the utility – or more users in the form of new Gardner residents and businesses.
Officials from all three companies shared the table with council members during a work session on Jan. 9, and Dyk said they’d like to leave with a consensus to continue towards an agreement.
“What we’re here to request is the ability to do more due diligence,” Dyk said.
It’s unclear whether they received it.
“I’m not sure I was sold on (the idea) to begin with,” Council member Larry Fotovich said. “How much are we being charged compared to doing it ourselves? If this is a marriage, then with the due diligence, we’re not ready for a trip down the aisle.”
He compared the agreement to a reverse mortgage.
Mayor Dave Drovetta said the agreement is a way to get ahead of future challenges. Specifically, the city has several utility upgrade and maintenance needs and limited funding to make them.
“I think we do need to get in front of the issue that’s facing us in the not-so-distant future,” Drovetta said. “We’ll address it now or we’ll address it when it’s an emergency.”
The city can use municipal bonds to fund infrastructure improvements. The bonds currently require a 4 percent interest rate.
Council member Brian Broxterman said city officials need more information.
“We’re trying to make a decision without all the facts,” he said. “We’re trying to get all the information we can.”

Comments

  1. As Nancy said, “Just say No.” If the city isn’t managing the utiltiies right, then fire the managers and get some in that can. But to be honest, I know many of the people that have worked at the city over the years, and they are good, hardworking people who care about this town. They live here and sent their kids to my schools. The problem isn’t the workers it’s the city management. Send them back to where they came from. They’ve spent us into the grave and are now borrowing against my grandkids future. And, again Mr. Mayor, stand up for those of us who voted for you. Please.

  2. More info from the Council Meeting says:

    One thing not mentioned in this article is the fact that the city will pay back that upfront money, along with a 10 to 11% return on that loaned money for the Black and vetch investors. They aren’t in this business to be nice; they have to make their money somewhere and it will be on the backs of the residents of Gardner. It will add another layer of debt for a minimum of 30 years to a city that already has shown that they can’t manage their money.

    The smarter, no cost way for the city to go is to form a board of public utilities and put all of the utilities under a board to run. The electric board has done a great job of not raising rates and servicing the city. I believe that water and waste water could be successful under that kind of management. In talking to city management, if the city would have quit taking money from the utility funds and putting into the general fund as they’ve done for many, many years, water and waste water would not be in the shape it is in today.

    When asked by council if Black and Vetch and the others at the table had ever run electric, water and wastewater (all three), their reply was ‘no’. They indicated Gardner would be their first. When council commented that Gardner would be a test case, they then backed away from their earlier comment. I got the idea that Gardner would definitely be a test case and one which they could use to lure other cities to this type of arrangement.

    I hope the city will do what is best; tell Black and Vetch to move on down the road, create a board of public utilities (which will cost the city nothing) and give water and waste water a chance to grow on their own. We don’t need to pawn our utilities and we don’t need a reverse mortgage. We don’t need to borrow (which is what this proposition is) money at 10-11% from Black and Vetch when, if needed, the government can buy bonds to borrow money at 3-4% (these facts were also discussed at the council meeting). Seems like a no brainer to me.

  3. Judith Rogers says:

    Senior, I agree with you, however, you are living in fairy land if you think the Dictator is ever going to work for you. Who in the Sam Hill allowed more of these thieves into our City Hall so they can present this plan and in the end, if they can get this thru, make more money off the citizens who pay all the bills. Just another special interest who the Dictator loves to have around to massauge his ego and more and it will be costing you an arm and a leg in the process. I hope all citizens don’t fall for the baloney about this outfit, or any other, giving you all of this money up front – they will squeeze that from the people and more so they can make their profit – you already have paid for your assets – why would you want some other entity control them and/or manage them??? Get that City Hall cleaned out so you aren’t having to fight rigged processes like this every month or so. Yes, we will be facing costs in the future just like we always have but we should be handling these issues on OUR OWN by having dedicated public servants in office and employed who are going to WORK FOR THE CITIZENS, not some outfit who will come in and just add more costs for us and also while we have less control over what they do and how they do it.

    Every citizen better be getting on the phone, computer, going to City Hall or whatever it takes to let these jokers in office know that you want NO part of this financial rape that so easily could occur if you allow it. You better raise some hell and you better be getting some of these people, both politicians and employees, out of office and employment – if you don’t you will be facing ever increasing higher costs and other adverse affects. THAT IS MY OPINION. I have already sent my e-mail to the Council last week telling them I want no part of this SO-CALLED PARTNERSHIP.

  4. Judith Rogers says:

    Citizens need to be aware of the County employee, John P. O’Neil, who has run that County Wastewater Dept. for years. Wastewater creates enormous costs, you would not believe, unless you watched the County Commissioner Meetings on a regular basis. Mr. O’Neil is before that Board practically every week and he is one of the best, most humble, great public servants I have seen in my life. He is educated and informed on wastewater like you would not believe, he works well with his staff and seems to groom his people for advancement opportunities and to protect the citizens by getting others in line to take over after he leaves, he watches that money, does everything he possibly can do to get competitive bids to keep costs as low as possible, doesn’t involve himself in politics or in the ole manipulation games such as saying the people need to pay higher franchise fees so the County can have more money to utilize as they please like our Electric Board did, There is no middleman in that Wastewater Dept. to drain more money from the people – we have our own employees and Mr. O’Neil manages that department in an excellent manner which saves the taxpayers big bucks. That is what I want but I don’t think the present Mayor, some Council members and city administration could ever bring that to the people of Gardner – they are too damn involved in cronyism government and that is why you need to recognize the PROXIMATE CAUSE of your problems and start doing some house cleaning because if you don’t, you are constantly going to have to spend time fighting all of the conniving, manipution, corruption, etc., etc. and getting more poor by the day.

  5. Charlie K says:

    I can’t understand why we would consider this if the Electric Board has been successful in managing the Electric side of things. Why not do the same for Water/Wastewater if it works? Why now decide to sell everything off? Seems like all the Mayor sees here is the dollar signs from the upfront payment and not the issues the City will have in 15 or 20 years if they go through with this.

  6. More info from the Council Meeting says:

    Everyone should take a look at the gardnerkansas.gov website. Go to the gardner energy page and watch the video. It talks about the benefits of a municipality (city) owing and operating their own utilities. It is on several of the electric pages: here’s one page that has it — http://www.gardnerkansas.gov/electric/ Even the Mayor is on there taking about why Gardner should own and operate their own utilities.

    What is being proposed is a 30 year pawn or as one council member said, a reverse mortgage that has to be paid back at a 10-11% interest rate – that’s what Black and Vetch said in the council meeting.

  7. More info is needed says:

    Phillip Dyk at the investment firm said, “What we’re here to request is the ability to do more due diligence.” Isn’t the due diligence supposed to be done by the city in this instance? I think Dyk was talking about research. The prospective private partners could have, in my humble opinion, brought forward more info at this meeting, but instead it seems they were intentionally vague.

  8. Judith Rogers says:

    I hope all citizens are looking at the expenditures the city shows with their Council agendas. I especially loved this one:

    11000 20101171 004463 00 00131304436101 0000687 00 VISA CARD CENTER 210111 BILLING 34449
    Harrahe Hotel Lae Vegas HOTEL FOR TRAINING SEMINA 21201211 0000000 000000 – We pay someone to go to Vegas ($349.44 hotel bill)) for “Training Seminar” or was it the local Harrahs and what exactly did they get trained on??????

    We had another trip where someone was staying at the Sheraton, no less. Lodging, misc. expenses time and time again and do they tell you who is going and what it is for??? NO and wouldn’t answer your e-mail inquiry if you tried to get the info.

    Then we have these two payments:

    0003143 00 PRESS MICHAEL B
    102 004665 00 21201271 00111204311115 12111 CONSULTING SERVICES 9010000
    VENDOR TOTAL 009000
    0001876 00 NAL MART STORES INC
    12272011 004664 00 21202711 106 9100 4798199 4Q2011 TIF PMT 0174728

    I just love taking care of Press to the tune of $9,000 and the good ole Walmart TIF for $142,048.77. Then they show purchase after purchase for clothing, boots, gloves, food and on and on – sure wish I could have avoided all of these costs when I was working. Party and good times on your dime!!!!!

  9. Judith Rogers says:

    Citizens also better be getting on Facebook and listen to the Dictator talk about this private/public partnership along with some of the other insiders. And you better be asking yourself WHY he is PUSHING this program so much – sure as hell isn’t for the average citizen in my opinion. This ripoff will put citizens in even greater servitude for years and years to come and the special interests, as usual, will be well take care of at your expense and in many ways. The people better be doing something and paying attention to what is going on in the back rooms, cell phones, e-mails, dinners, meetings, etc., etc. – it will be a done deal before you know it especially since the Dictator will be naming his next YES man this evening. You lost your Fire Dept. the same way and now you could very well be losing control of one of your biggest assets and most of all, the control and management of your utilities. That damn Electric Board is bad enough with the Dictator’s appointments but it will be even worse with this rigged process and you should be getting used to the rigged processes by now and if you haven’t, then all will suffer.

  10. Judith Rogers says:

    While your Dictator here in Gardner is working hard to set up another SPECIAL deal for another special interest that will help put you in the poor house, Brownback has been doing due diligence for his big boys as indicated by the following article. The poor get poorer and the rich get richer and KOMA and KORA laws are violated at will and every day of the week. Your stinking government entities and worthless, corrupt politicians continue to put the knife in your back and Brownback hasn’t even started giving you more sales tax and property tax increases but it will coming your way. I also want to point out I get none of these deductions that Brownback is eliminating and again, I have paid my FULL TAXES my whole life as I should and don’t ask my neighbor to subsidize me like the thieves do and who the lowlife politicians enable and support. Not only does Brownback take care of the thieves, the local politicians and bureaucrats even allow them to get “farm appraisals” (their lovely $10 a year tax bills) on property that should be appraised as commercial vacant land and then you also have the 38 thieves at New Century, who the politicians cover for and enable , and who pay NO taxes or a very minute amount of what they should be paying and then you have the investment group who owns that 80 acres of trailers here in Gardner who gets their property appraised as “residential” and it should be commerical since they rental fees on every one of those trailers parked there. The thieves have infiltered our government so completely that you are a fool if you think you live in a democracy or anything close to it. Super PACs and PACs are the name of the game and your Dictator is part of the whole game – that is my opinion and if you were paying attention just a small amount, you would be able to see what is happening to you. You better be saving every dime you can or you will be in the same place as those poor souls making less than $25,000 per year. The only trickle down affect you are going to be feeling is that trickle down of your bank account.

    ******************************************************************************

    Brownback tax plan hurts poor, figures show
    The Kansas City Star
    2 hours, 4 minutes ago brad cooper
    TOPEKA |New figures out this morning shows that Gov. Sam Brownback’s tax plan will have its biggest impact on anyone earning less than $25,000 a year.
    The numbers developed by the Department of Revenue show that the tax bills for the entire bracket under $25,000 will increase by $88 million.
    In contrast, the bills for the five tax brackets above $25,000 will all decrease under Brownback’s plan.
    The average tax bill for someone earning under $25,000 will increase $156.29. Meanwhile, the average tax bill for someone earning more than $250,000 will drop an average of about $5,239.
    The average tax bill for someone making between $25,000 and $50,000 will decrease an average of $130.
    Joan Wagnon, former Kansas revenue secretary and Democratic Party chairwoman, blasted the governor’s tax plan Tuesday.
    She said Brownback’s plan hurts working families and the poor by “literally picking their pockets, while it preserves tax credits for banks and wealthy corporations.”
    Under the plan, individual Kansans would lose $180 million in tax credits, while banks and wealthy corporations would retain almost all of their credits and deductions.
    “The governor has said he’s not picking winners and losers, but he is, he’s choosing banks and wealthy corporations over people,” Wagnon said. “This isn’t even remotely fair, and it drains funding from education.”
    Brownback’s tax plan lowers the highest tax bracket from 6.45 percent to 4.9 percent. The lowest tax bracket applying to those making less than $15,000 a year would drop to 3 percent from 3.5 percent.
    The plan relies heavily on eliminating tax deductions and credits, including the mortgage home interest deduction and the earned income tax credit which benefits the poor.

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