And I know you in your written testimony say two to three proposed technologies was unproven without any long-term demonstrated experience. Long term was the five years, I think we were -- is that what you were calling long term? What was long term?
Long term -- five would be a good definition of that. Yes, I agree with that.
Because I know the Deputy Commissioner, I think it 84 6/3/08 - FINANCE - BILLS 080495 and 080498 was you, mentioned a five-year window. So, in your opinion, nothing has changed there. Ms. Racey, just one question. I know this came up at previous hearings last year. One of your sites, I think it's the one in New York, there were allegations at least or reports that there were some problems in it.
Sure. Synagro acquired a company in 2001 that already had an existing ESP heat drying and pelletization facility in New York.
This is an Andritz system. So they're in the same category, but they're different manufacturers and different generations of the technology. And, in fact, this is a great example of why you want to go with something that's 85 6/3/08 - FINANCE - BILLS 080495 and 080498 been operating for a while. Because when something first comes out, it gets better. You get it working and you figure out how to make it better and then it's perfected. So this is an older version of a heat drying and pelletization system. It has a lot higher emissions because it doesn't recirculate the air, a lot lower energy efficiency, and this particular facility had some design flaws in the odor control system from the get-go. What Synagro did is, they came in, assessed the situation, worked with the community to figure out some of the issues and what we could do to solve the odor issues, and we spent $5 million of our own money, with no reimbursement from New York City, to enclose the truck-receiving bay, put in odor scrubbing and retrofit some of the trains with air recirculation. And this has greatly improve the situation there. We've gotten a positive response from the 86 6/3/08 - FINANCE - BILLS 080495 and 080498 community. And, in fact, we have just started discussions with the city about taking the final step to really make it as good as it can get and ripping out the old equipment and putting in the Andritz, what we're proposing here for Philadelphia. The city is very interested in taking that step to bring that first-generation technology up to snuff with the current available technology.
Thank you. And one last question. Again, back to Mr. Donovan, on one of the proposed technologies by Local 394, just so I'm clear by your testimony, you're saying the biggest problem with that is the odor issue if it was proposed for this site?
Well, let's see. Because you say, most importantly, two of the three proposed technologies are unproven. The one that's proven. There must be -- 87 6/3/08 - FINANCE - BILLS 080495 and 080498
The one that's proven -- yes, sir. The one that's proven is the composting process.
Obviously the Water Department has had many years of experience with that out of doors. The company that has been proposed by Local 394 would haul the cake long distance to existing composting facilities, and then at a point in time they would build on-site facilities. Now, the details of their proposal weren't enough so we knew whether or not all of the on-site facilities would be totally enclosed. But one of the things we were asked to do is to speculate what would be the reaction of long distance hauling, and their facilities are in rural Virginia and North Carolina, and in our analysis of it, we said that that might well be problematic, to bring Philadelphia biosolids to those locations. And as I 88 6/3/08 - FINANCE - BILLS 080495 and 080498 just said, we weren't sure whether all of the facilities would be enclosed. In order to conduct composting, you need acres and acres of buildings, and it's very cost prohibitive to treat all the air, and that's really why Synagro chose not to propose composting. Not that it's not allowed and not that it's not a good process, but just massive costs in order to do it properly.
I was going to say what was the cost factor in that.
We actually, Councilman, if I may, we have indoor compost facilities and, in fact, over in Burlington County, New Jersey, we operate an enclosed composting facility, and we did an analysis of that, because it was allowed here. So what we said is, what can we do? Should we do all composting enclosed, all drying enclosed or one of 89 6/3/08 - FINANCE - BILLS 080495 and 080498 each, split the baby, and what we found in our analysis -- we hired an outside odor expert to work with us, Odor Science & Engineering -- is that the best odor control and the best cost could be attained with the single heat drying system, and that's why --
The thermal drying? Okay. I saw Ms. Cutler. Were you going to address -- DEPUTY
I have a response to your question. I'll wait until you're finished, Councilman.
The Chair recognizes Ms. Cutler. Would you state your name for the record, please. DEPUTY
For the 90 6/3/08 - FINANCE - BILLS 080495 and 080498 record, Rina Cutler, Deputy Mayor for Transportation and Utilities. I've been listening to the hearing since it began, and I guess I'd like to clarify a few points, if I may. When the new Administration came in, we also had many of the same questions that have been raised today by both the employees as well as the Councilpeople. So I want to just give you a perspective that I have as to how we got back in front of you today. The first piece that I want to talk about is really the employees of the Water Department. This is not an attack on those employees. In fact, many of the employees, particularly here but also back at work, have spent the majority of their life working for the Water Department, and this is family for them. This is not something that has been viewed as an attack on those employees in any way. In fact, we think the employees of the Water Department are some of the 91 6/3/08 - FINANCE - BILLS 080495 and 080498 best employees in the country, and we applaud them for the work they've put into the Water Department in the past 30 years. So I don't want this to be viewed as, first of all, an attack on those employees. They've done a great job. We expect to continue to have them do a great job. And so I want to be clear on that. Secondarily, we also had the same major issue, which is what happens to the employees in question here. I don't want to leave their impression on the record that in any way are these employees to be harmed, either economically or in terms of their work set. We met with the union recently, the Mayor, myself, and I met with the union prior to that. They absolutely have the Administration's commitment that they will not be harmed. And I have someone, I believe, now going to draft that in response to Councilman Goode's issue. I 92 6/3/08 - FINANCE - BILLS 080495 and 080498 agree, if it isn't in writing, it doesn't exist, and we will put that in writing. There is no way we are going to sacrifice those employees. Secondarily, I want to talk for a minute about the issue that's been raised here which is the Water Department's contention that it's a $200 million savings versus the Comptroller's assertion that it's a hundred million dollar savings. First of all, a hundred million dollar savings -- I will stand by the Comptroller's number for the first part of this discussion -- is an amazing amount of money, and that money, frankly, saves the ratepayers money. As you know, we are going through a rate increase piece right now for water rates. While I have no idea and do not wish to get involved in that process, as it is a legal one, it is certainly our belief that saving dollars, whether it's a hundred million or 200 million, is in the best interest of the ratepayers of 93 6/3/08 - FINANCE - BILLS 080495 and 080498 Philadelphia. But the distinction between that hundred million, at some point we are going to argue -- and I will do it to some degree. The hearing is the opportunity for us to present why we believe those numbers are not accurate, and at the point the Comptroller put that together, one of the pieces I'd like to point out -- and I do concede I'm new at this, so please bear with me. The cost of gasoline at the point that argument was made several years ago is not at all relevant to what it is today. So whether it's a hundred million dollar savings or whether it's a 200 million dollar savings, it's a great deal of money, and while it isn't the driving force behind this, even if we concede we agree with the hundred million dollar number, it would not be fair of us to deal with the ratepayers and say that is not significant to people who pay water bills.
94 6/3/08 - FINANCE - BILLS 080495 and 080498 And the third piece I want to talk about here a minute is really the issue of where do we go in the future, because the current process for all of its use and for a long time it was acceptable, albeit with a lot of problems in the community, the union is absolutely correct that since the City stopped composting, there is a severe reduction in odor, and they are absolutely correct. It is not at all what it was five years ago. ) DEPUTY
It does not mean, however, that there are, A, no 17 odors nor, B, that we are using a process that is sustainable in the future. So when we have a company coming in saying we've looked at the technology, when we have one of the utmost expert companies in the field tell us that they have also looked at the technology, we would not be managing our responsibilities if we did not deal with only acceptable, proven 95 6/3/08 - FINANCE - BILLS 080495 and 080498 technology. We cannot afford it. We cannot afford for there to be a mistake ten years from now or five years from now, and we are in fact planning for the future of technology. We're looking to go into a sustainable model for how we manage waste, and that is, as been pointed out by a number of Councilpeople as well as a number of people at this table, a problem that almost every major municipality in the country is facing. So the issue here is really do we have a proven technology that we believe is sustainable and, that is, sustainable not only in terms of the environment but also in terms of risk and liability. One of the issues that exists currently is that all of the product that we currently manage in the Water Department makes the City liable for it cradle to grave. Wherever it gets deposited, whatever process is used for it, it is our liability cradle to grave. What the new contract allows is 96 6/3/08 - FINANCE - BILLS 080495 and 080498 in its entirety that liability to be shifted to the vendor. If we do not touch the product, that liability is not the City's. And so going forward, that is a fairly big deal as to how we got here. Please understand, even though the new Administration has only been in for several months, we did the due diligence here, because our initial inclination was why would we move this proposal forward, and in doing that due diligence, while we did not agree with all of the previous assessments that had been done, we really believed both from an aesthetic perspective, from an environmental perspective, for a long-term issue in terms of protecting the work of our employees and in terms of finances and in terms of liability, that this is the best deal we could find for the City. I thank you.
Don't 97 6/3/08 - FINANCE - BILLS 080495 and 080498 leave the table. I want to recognize Councilman DiCicco, because he has his light on. But I do understand that Councilman Goode and Councilman Green have questions for you. Is your question for --
Oh, I'm sorry. COUNCILMAN DiCICCO: I'll yield to the President.
Councilman DiCicco yields to the President. I'm sorry. I thought the light was for Councilman DiCicco.
Thank you. I want to have the record eminently clear. If for any reason there is a problem at the plant and the biosolids cannot be processed, what happens and who is financially responsible? 98 6/3/08 - FINANCE - BILLS 080495 and 080498 DEPUTY
Council President, one of the benefits of using a vendor that has 600 municipal outlets is that they can move that product anywhere they need to to dispose of it. The liability is entirely theirs and the financial problem is entirely theirs.
Thank you. I have another question, but that's for the Commissioner. Councilman DiCicco. COUNCILMAN DiCICCO: Thank you. Thank you, Madam Chair. Earlier this morning there was some concern about the fuel consumption. I believe the Chair was attempting to call someone from PGW, but they're not able to, I understand, today.
We had originally scheduled PGW to have a hearing on a bill that they have before the Council, but they couldn't appear because they're doing -- they have another project going on that involves 99 6/3/08 - FINANCE - BILLS 080495 and 080498 the Commission and the staff of PGW. So there's no one there to come here. The purpose -- I mean, there are people there, but the person to testify is not there. COUNCILMAN DiCICCO: And with that, there was also some concerns raised about -- and I think Ms. Cutler answered many of the questions or concerns I would have had -- about the differential between savings of a hundred million versus 200 million, and I think everyone would agree that a hundred million dollar savings is certainly significant, and with that, I was just wondering if we might want to consider bringing the Controller over, because I'd like to know, A, when was his last audit, how did he get to this decision that it's only a hundred million dollars as compared to 200 million dollars, and I think there's some questions that were raised earlier that he may be able to answer for us, in addition to what Ms. Cutler spoke to 100 6/3/08 - FINANCE - BILLS 080495 and 080498 about the due diligence, and I do appreciate that. But I'm wondering where he gets his knowledge and how he arrived at that number and whether he doesn't think that this is a worthwhile project because it's only saving us $100 million.
We will ask the staff to see if we could contact the Controller if the Committee would like to have him come.
Madam Chair, we have PGW coming in a week from yesterday, the 9th, for their capital budget.
We probably could get an answer from them in writing. We'll figure it out. We'll get some response from them. Councilman Green.
I'm sorry. Hold it. Hold it. Councilman Goode. I'm sorry. 101 6/3/08 - FINANCE - BILLS 080495 and 080498
Thank you, Madam Chair. Ms. Racey, would you walk through the goals for disadvantaged business participation again.
There's three components to the disadvantaged business enterprise on the project. There is an equity partnership in the ownership of the company. Philadelphia Biosolids Services is owned percent by McKissack 13 and McKissack, ten percent by Len Parker 14 Associates and 70 percent by Synagro. 15 That's the first -- and each of those 16 teams has a role in the project, which I 17 can cover, if you'd like. 18 McKissack and McKissack is the 19 owner's agent overseeing the design/build 20 portion of the work, and Len Parker Associates is going to be doing both some mechanical contracting as well as some machine maintenance support throughout the life of the project.
So that's 30 102 6/3/08 - FINANCE - BILLS 080495 and 080498 percent of what?
Thirty percent ownership of the company. It's a limited liability corporation.
Okay. In terms of the business contracting that will be done on the project.
Okay. Then the next phase where we'll be subcontracting out work, again, the project is around 60 million in construction, plus financing costs and --
You're talking in generalities. The reason why I ask the question again is because I want to know what the total project costs are and then I want to know how it's broken down in terms of participation goals.
Okay. I don't have everything memorized, but I do have also -- I have that chart you asked for.
If you don't have it memorized, does that also mean 103 6/3/08 - FINANCE - BILLS 080495 and 080498 it's not attached to the legislation?
No. It's part of our contract and the contract is part of the legislation.
Yes. And so we could get the exhibit. We also put together a more detailed booklet for the Minority Department.
Before the end of this hearing, I need to know specifically what the goals are for minority and women participation.
Sure. We'll get those and I can review those. Again, my memory is it's overall about 30 percent, but to give you the exact breakdown of how much is woman, how much is disadvantaged and how much is minority, I need to have the paper in front of me. 104 6/3/08 - FINANCE - BILLS 080495 and 080498 But there is a component in the construction and then in the long-term operating contract for each year of the contract. And, again, my recollection is that overall the goals are between and 7 30 percent. Let me get the exhibit so we 8 can be exact. 9
Once 10 again -- and let's leave it in 11 generalities. 30 percent of what? 12
Okay. I have the 13 chart in front of me. For example -- I 14 have the chart and I'll read right off of 15 it. For the interim ops period -- 16
What are the 17 total contract dollars that will be 18 contracted out in terms of the 19 businesses? At the end of the day, what 20 I need to know is the percentage of total contract dollars that will go to minority-owned businesses and the percentage of total contract dollars that will go to women-owned businesses, and I need it in a form that's attached to the 105 6/3/08 - FINANCE - BILLS 080495 and 080498 legislation.
All right. In the interim ops period, the total project costs are million. The eligible costs 14 are 5.5 million. The DBE dollars are 2.8 15 million. This is over a four-year 16 period. And it totals $11 million. The design project dollars are 2.8 million. The eligible costs are 2.8 million. The DBE dollars is a million. Our participation is 40 percent. Construction costs that don't include the Andritz equipment, because we can only --
Ms. Racey, is there a total in terms of total 106 6/3/08 - FINANCE - BILLS 080495 and 080498 contract dollars and is there a total in terms of total contract dollars that would go to minority-owned businesses?
Well, it doesn't have a percentage on the bottom line, so I'd have to add them up.
Thank you, Madam Chair. I want to say, Deputy Mayor, that we, I think, are all sitting here with the full knowledge and understanding that the Administration has gone over this and reviewed what the past Administration did and, quite frankly, 107 6/3/08 - FINANCE - BILLS 080495 and 080498 given that fact, the fact that you're sitting here testifying for it and the Administration is asking for it, gives me a great deal of comfort that I would not otherwise have with this project, and I start with the disadvantage that I haven't been going through this for three or four years, so some of my questions are some of the same questions that you've been asking and I just want to try to get some of those things on the record. So has there been an opinion from the Law Department regarding the City's liability under the owner/operator Superfund law? I understand that under the contract, Synagro is required to pay for it, but if they -- I'll get it right. If they go out of business or this becomes no longer financially viable for them, who is the obligor under the contract? Is it Philadelphia Biosolids, which would have a corporate veil that couldn't be pierced, or is it the parent 108 6/3/08 - FINANCE - BILLS 080495 and 080498 company, Synagro, that is going to be responsible? And then also since we are the owner of the property, I don't think we can avoid liability under a Superfund law. All we can have is indemnification. So if we could get on the record what really our liability is, I'd appreciate that. (Witness approached witness table.) DEPUTY
Although I have been known occasionally to practice law without a license in front of my lawyers, I will add, I have asked the Law Department to come up to give you a legal answer.
Hi. I'm Barry Davis. I'm the Chief Deputy for Regulatory Affairs in the City's Law Department and I've actually been involved in this contract for probably about seven years, since the beginning of discussions about the RFQ. So I feel 109 6/3/08 - FINANCE - BILLS 080495 and 080498 like I've been living with this for quite some time. With regard to the liability, particularly associated with Superfund liability, one of the big differences between what will happen under this contract and what is currently the status quo at the BRC is that we are producing these Class B biosolids, which are municipal solid waste, and so when we take municipal solid waste to a landfill or to another site, there is some potential liability associated with that material. If it goes to a landfill and subsequently that landfill gets in trouble for one reason or another, we would be part of the Superfund process at that facility, one of the potentially responsible parties, as they're called.
The big difference under this contract, though, is that when you make Class A biosolids, you're not making municipal solid waste. You're 110 6/3/08 - FINANCE - BILLS 080495 and 080498 transforming that material into something that is no longer regulated as a waste material. So when that material leaves the dryer and goes out into the world, it is now fertilizer, and so it's not going out with the stigma associated with being a waste product.
So Class A biosolids don't have things like heavy metals or other things in them that could end up on people's property or in landfills?
Well, there are going to be trace amounts of metals in the pellets as well.
Wouldn't that give you Superfund liability going forward?
It's the same kind of liability that a fertilizer manufacturer would have for trace amount. I mean, it's not going to be classified --
I 111 6/3/08 - FINANCE - BILLS 080495 and 080498 understand. I'm just trying to get a clear understanding of the fact that we will continue to have owner liability under CERCLA for everything that comes out of that plant forever. Is that correct?
I would disagree, because I don't think we're the owner of a generated waste material.
We're the owner of the facility where the manufacturing process is.
Well, we're actually not -- under this -- we will be the -- it's --
We won't be the operator, but we're going to own the land.
We're not going to be the owner either, because under this contract, Synagro is the owner of the facility. I'm trying to think exactly whether there is any residual liability that we would have as the provider of the 112 6/3/08 - FINANCE - BILLS 080495 and 080498 material before processing, and I don't really think that there is. The other fact of this is that you're not going to see this material ending up in a landfill very regularly. I mean, it could potentially get into a landfill in some way or another. It could go there as cover for a landfill, but when it goes there, it's going there not as a waste material. So the liability that you could --
Other than for very small trace amounts of metals. The biosolids that the City produces is actually very low in metals. One of the reasons for that is that we have a very good industrial pre-treatment program that requires the industrial polluters to remove those kinds of pollutants before they go into the wastewater system. So one of the reasons that we had a successful composting program was 113 6/3/08 - FINANCE - BILLS 080495 and 080498 that we had very low metals and that didn't disqualify our compost from being a fertilizer.
Okay. So who is on the hook for indemnification of the City? Is it Philadelphia Biosolids or is it Synagro?
Under the agreement, Synagro is the guarantor. So there's a separate guarantee agreement which is part of the contract, which it's one of the many, many attachments to this contract, but it is an executed guarantee.
So we have the guarantee of Synagro for all of the obligations of Philadelphia Biosolids?
Okay. Do we have a listing down to direct ownership by individuals rather than other LLCs of who exactly will own percentage interests in biosolids?
In Philadelphia Biosolids, the company we're entering into --
Philadelphia Biosolids Services. They're our equity part -- I guess it's an LLC. So there are equity agreements in the LLC that provide for an equity ownership to McKissack and McKissack for percent of 11 the total shares of this corporation and 12 ten percent to Len Parker Associates. 13
And they're 14 holding directly rather than through a 15 separate entity? In other words, 16 McKissack is holding directly interest in 17 Philadelphia Biosolids, Len Parker 18 Associates is holding directly in 19 Philadelphia Biosolids? 20
Okay. So we know who 100 percent of our partners in this project are?
That's correct, yes. 115 6/3/08 - FINANCE - BILLS 080495 and 080498
Okay. And I found it interesting that one of the advantages to having Synagro be our partner is that if there's any trouble with the process or the way things work, they are at 600 municipalities and they can take our waste elsewhere to be dealt with. I'd like some assurances from the Law Department that our contract, given the discussion about metals we just had and everything else, our contract will prevent them from bringing waste from other cities into Philadelphia to be treated here. (Applause.)
This contract does not allow Synagro to process other biosolids at the facility.
This contract does not allow Synagro to process other biosolids at this facility.
Okay. 116 6/3/08 - FINANCE - BILLS 080495 and 080498 Great.
That actually was an issue and one that we discussed and decided that it was one that we were not interested in.
Thank you, Madam Chair. Ms. Racey, I've reviewed the information. It is very complete. It is something that's contained within the legislation. The only question is the same question I was asking before. Do we know, not based upon this document because this document does not tell us, what percentage is actually going to minority-owned businesses and what percentage is going to women-owned businesses? It is actually combined into just a DBE goal in general, and what I find very significant about this is, it 117 6/3/08 - FINANCE - BILLS 080495 and 080498 looks as if all the firms have already been selected. And so to some extent, it suggests that we already know what the participation rates will be.
We definitely have not selected all the firms. What we've done is put in a list of qualified firms. For example, under construction, these are firms that we've talked to and that are qualified. And we will be hiring a general contractor. We haven't selected a general contractor yet, and they will be, for example, picking from the list of minorities. These minorities will have to compete for the work. Say we may take bids from four companies.
And so since the contractors have not been selected and since you have identified a pool of qualified contractors, you can set specific goals for the project.
You can set specific goals for the -- 118 6/3/08 - FINANCE - BILLS 080495 and 080498
Right. They're not exact, because the nature of a design/build/operate facility is that it's only percent design now. So the 10 final design, whether it ends up costing 11 us 58 million or 62 million, won't be 12 determined until we finish our design, 13 but that's our risk. Those costs are our 14 risk. So during the design -- 15
That's not my point. My point is that you can actually break it down in terms of the various disadvantaged businesses in terms of what's going to go toward minority businesses and what's going to go toward women businesses and what's going to go toward disabled businesses. You can further define the goals within here.
So since you 119 6/3/08 - FINANCE - BILLS 080495 and 080498 already know that you have a qualified pool of disadvantaged firms here, you can set specific goals within this document.
Yeah. Yes. I believe I agree with what you said. We have identified the pool. When the work comes out, we're going to bid them. At that time, we have to clear with the Minority Office our program and report what our actual achieved --
I'm not talking about actual achieved. I'm talking about goals that are set within the legislation. This is actually pretty good.
Do you 120 6/3/08 - FINANCE - BILLS 080495 and 080498 really want to know?
I'd like it broken down by each racial, ethnic group, women and disabled, Philadelphia businesses versus non-Philadelphia businesses. I would like it to be comparable to what we do at the City level, which is break down each category of disadvantaged business and look at Philadelphia businesses versus non-Philadelphia businesses across the board, set goals across the board for who is going to benefit from this in terms of businesses. And MBEC should be able to provide you with that type of template, because essentially per the Charter, per an amendment that was made a couple of years ago, MBEC actually is due to submit annual participation goals for City contracting, which are not done yet, which should be done. So they know exactly what is due to us from their agency. So essentially they can provide 121 6/3/08 - FINANCE - BILLS 080495 and 080498 you the template for what we would expect.
Madam Chair, I'd like to state for the record I hope the Administration appreciates this, as well as my colleagues. We're sitting here almost half the Council on this Committee and we have a very difficult issue, both financially, both in terms of technology and also in terms of human issues. The human issues we understand, but particularly the technology issues. I get the distinct impression -- and it's no knock on anybody in the Administration -- that you could not be presenting this testimony without a consultant and the vendor. A lot of questions are answered by them. A lot of 122 6/3/08 - FINANCE - BILLS 080495 and 080498 exchanges are made quietly to get an answer from them. And that's the way the process works. What I believe, though, is that this City Council is seriously or has seriously handcuffed itself on difficult issues that are beyond our reach where we don't have similar expertise. We don't have a consultant. We are making judgments based on what the union can tell us about technology -- and they know as much about it as we do. They don't have the range of expertise here -- and what the Controller has told us, and the Controller's information is months old almost, November of '06. 17 I think it's a flawed process, 18 us trying to decide a 25-year contract, whether it's a $200 million savings, whether it rises to 300 because of gas price increases, heaven forbid, or the 100 that is the bottom level is off by $4 million a year and there's no savings. That's really where the number gets smaller, and you divide it by 25, the 123 6/3/08 - FINANCE - BILLS 080495 and 080498 error factor becomes much larger. So I mention that because I really think in this case we should have somebody who is independent of Synagro, independent of relationships with the Water Department that can tell us this technology is the best or, as Councilman Green was alluding to and the Controller alluded to in their report very specifically, other technologies should have been considered, it shouldn't have been such a narrow window of one company's recommendations. So I find it difficult. I will try to ask some questions, but I do find this to be a very difficult process. And even for the Administration. The Administration has come in, fresh look, but they're basically relying on the same consultants and the same experts that we have and to the experts from 2003, 4, 5, 6, 7 that have done on this. And I say that to start with because I'll try to limit my questions as 124 6/3/08 - FINANCE - BILLS 080495 and 080498 much as possible to what we can understand. There's 60 employees at the plant. How many unfilled positions are at the plant right now? I guess that's a Water Department question. (Audience member yelling "zero.")
Zero? So the plant is running full levels of personnel? (Audience member speaking without microphone.)
Okay. The composting stopped a little over a year ago? DEPUTY
Councilman, I just want to clarify because I'm not sure I understood your question.
In the 60 jobs that are in question here, they are 125 6/3/08 - FINANCE - BILLS 080495 and 080498 all full. If you're asking me how many vacancies there are in the Water Department --
No, no. I was not asking. I understand there's a lot of vacancies. And it's a good thing probably if you're going to need spaces for people. But that would just be good planning. But something was mentioned and I guess I'm missing the point. We stopped composting in March of '07, and I understand why. There are serious community problems, and we went through this at other hearings last year. But did I hear correctly that Synagro will compost for five years? And maybe I just missed something. Synagro is going to compost for five years? DEPUTY COMMISSIONER McCARTY: No. No. They will continue with moving Class B product off site, but they will not compost. They will not start composting on the site. 126 6/3/08 - FINANCE - BILLS 080495 and 080498
Okay. I had a question no matter what the answer was, but it's a different question. If Synagro is basically for five years going to be doing what we're doing now while the plant is being constructed, why can't we be doing for five years what we're doing now? (Applause.) DEPUTY COMMISSIONER McCARTY: I'm going to pass it to --
The icing is -- you have to understand, I don't need a consultant for that question. Some of these are just basic human questions and -- DEPUTY COMMISSIONER McCARTY: Right. It's a very reasonable question and I can understand the question, and what I'd like to do is answer it and turn it over to Synagro, if that's all right. But basically the answer is that -- DEPUTY
I think I can answer it without a consultant as 127 6/3/08 - FINANCE - BILLS 080495 and 080498 well, at least I hope so. I think the majority of the reason why we wish to have Synagro take over the current process while they're building the new facility is because a portion of the current building is going to be used as part of the new facility. So it will, in essence, become a construction zone. And so part of what needs to happen is, they need to be able to get to the site unfettered, because the design and construction are going to incorporate a portion of the current site. Now, that's my understanding of that, and if there's a different answer, someone should jump in. DEPUTY COMMISSIONER McCARTY: In addition to that, they will not need to store as much cake as we currently store on site, the Class B product on site. They'll be able to move it out to the many outlets that they have more so than we can. 128 6/3/08 - FINANCE - BILLS 080495 and 080498
Okay. I can't comment. Does Synagro agree with that, since you were almost going to answer?
Yes. We're doing improvements to the de-watering building, and that's part of our construction process. And in addition, we have lots of outlets, so we intend to reduce the amount of material stockpiled on the site in the interim to bring --
Well, let's keep Synagro there for a minute. If this contract and this Water Department issuing it had said to you, Until you start construction, our people are going to continue to do the composting, would you have walked?
I know. Whatever they're doing. What used to be composting, now it's being done somewhere 129 6/3/08 - FINANCE - BILLS 080495 and 080498 else.
We would not have walked. But I do want you to understand that part of the savings you are getting involves the fact that we have those years of operation as well, and that helps us to front-end load the financing costs as we put up the money for the facility.
Right, but one of my concerns from the beginning here has been that unless absolutely necessary -- and I understand, there's a liability question later on, and the attorney spoke to it very clearly -- that we not be replacing or having our savings replacing municipal jobs, City jobs, with private jobs that are paid less. I don't know if that's the case or not, but I want to hear more about it, because even 130 6/3/08 - FINANCE - BILLS 080495 and 080498 if it's just for a five-year period built into these savings, I don't know if this city is ready to establish a policy that we want to save money on the backs of our workers. (Applause.) DEPUTY
Councilman, if I may respond to that. The Administration shares the question as well, and we do not believe that allowing Synagro to begin to operate our current facility in any way harms our employees. The savings benefit and the liability question -- although I'm not sure the liability question applies as long as we're the owner, going back to what Councilman Green had referenced earlier. So I don't know that the liability question is in play until the new facility is built. But I certainly think that the savings piece is a very big deal, and the sooner the savings can happen, the less impact there are to the ratepayers in the 131 6/3/08 - FINANCE - BILLS 080495 and 080498 City. So I don't think it is being done, however, on the backs of the employees because I believe we have crafted an agreement which, of course, we will put in writing and that there is a commitment that we will not in fact harm current employees, and I believe --
No, but I think you're misunderstanding me. I absolutely and I think everyone here understands that 60 people are not going to lose their jobs. Let's get that off the table. DEPUTY
There are 60 positions that they will fill. There's 60 positions that we won't have to hire somebody else to fill that they will fill. There will be 60 positions 132 6/3/08 - FINANCE - BILLS 080495 and 080498 that Synagro employees will be doing for five years. There are savings to Synagro and to us that was just explained because of those 60 positions that Synagro will fill rather than us. That is a savings that maybe some people think it's a strong word, but it's being done at the expense of our employees and -- (Applause.)
That may be a policy that the last Administration wanted to focus on. It may be a policy that this Administration wants to focus on. But with 60 employees in that position for a five-year period, I can show you all kinds of areas around this city that we could -- right in the Water Department, I can find cheaper people to do their work. We never think about doing that. Why are we carving out areas where we think about doing it? That's all I'm saying. You can find it in Streets, L&I. There's companies out there that just don't pay our wage 133 6/3/08 - FINANCE - BILLS 080495 and 080498 scales, have our pension benefits, our health benefits, our union benefits, and I just hate to see us go down that road even for five years, even for 60 positions if we don't have to, if this company had said, We couldn't do it otherwise. They didn't say that. They said it helps us tremendously. Well, I understand that. Any company we brought in and did the same thing would help them tremendously. They'd have work where they didn't have work otherwise. (Applause.)
But it is a policy question that I think is a serious one, I think we all have to look at. Not just are the individuals -- are we finding spaces for them. I mean, it's good management if you're doing this to make sure that you haven't been hiring so you have spaces for them, and it seems like we have plenty of spaces because we have a lot of openings, but it doesn't change the fact that 60 private company, 134 6/3/08 - FINANCE - BILLS 080495 and 080498 more than not non-residents -- certainly have no control over that -- come in and take City jobs for a period of five years. That's the only point I want to make on that. I think it's a serious one. (Applause.)
And I understand that going beyond that, we'd have liability issues if we touched the product, and that I'll leave to the lawyers that specialize. The --
I thought we had -- I don't know if there's any more we can talk about on this. I understand what you're saying. I hope you understand what I'm saying. DEPUTY
I do, Councilman. Just two quick points. I believe Synagro will not be replacing 60 employees. I believe it's half that. 135 6/3/08 - FINANCE - BILLS 080495 and 080498 (Audience booing.)
We could, but I just -- I guess we're going -- we can reasonably disagree on a policy perspective. That was the only other point I wish to make.
Okay. In the City Solicitor's report or analysis that we've been focusing on on the numbers and the differences in the numbers and -- City Controller. I'm sorry. The City Controller's numbers are quite different. It's more than a hundred percent overestimate of our savings, which is a lot. But still there's a lot of savings. I can't argue that point. But it's also enormous to go over a hundred percent above what the City Controller believes to be the savings. They talk about that, and I think it was Councilman Green, but I 136 6/3/08 - FINANCE - BILLS 080495 and 080498 think all of us would agree, for months to go by and for the Water Department knowing this serious issue is before us so many times in the last Administration, still coming back five months into the new Administration, to not have sat down, maybe not with the Controller, but at least have their people talk to his people, try to work out the disparities, I think would make this an easier decision to make. And I think that's an important point, because we're all supposed to be on the same team here in the end and we sound like we're wearing different uniforms when we don't talk for that period of time over some fairly simple data issues that could be maybe compromised, agreed on, whatever. And so I wish that it happened. I hope it happens in the future, because that's not a small issue, that there has been no 23 contact between those two departments over that period of time over those numbers, which leads me to another thing 137 6/3/08 - FINANCE - BILLS 080495 and 080498 that I think is more important even than the savings in the Controller's report, and, that is, the hardest thing we have to deal with, we don't have an expert right now. You guys do. And could I just ask the Water Department to tell me how much this expert has been paid up to now on this issue? I think it might be big, but that's okay. I just want a number. I think the best person probably to ask is Mr. Donovan. The lawyer usually knows and the consultant usually knows. The client necessarily doesn't.
CDM has been working continuously since 2003. I believe our contract is something in the order of a half a million dollars over that period of time.
Okay. Can you get us some specifics on that after you leave here today?
Thank you. So you can see where we're 138 6/3/08 - FINANCE - BILLS 080495 and 080498 strapped here. We have zero consultant fees and we're trying to match our knowledge and judgment against a half a million dollars of consultant fees, plus whatever Synagro has been able to add to the discussion from a value standpoint, because they've been the vendor for a long time that's been the vendor in this project. It makes it very difficult. So one of the questions we would have asked our consultant -- and if we get one, I believe we would -- is other than this drying -- what's it called? Thermal drying process which the Water Department's consultant has said, This is it, you did the right thing, we would say to our consultant hopefully, There are other municipalities out there, there are other sludge sewage treatment facilities, what are they using? What are people migrating to? What are they starting to use instead of composting where they've had a problem with that for different reasons? And surely one of them would be 139 6/3/08 - FINANCE - BILLS 080495 and 080498 the proposal in front of us today, but other than the Controller's report, we really don't have any other name. And, again, working on the same team, when the Controller says that the majority are the most popular that they scanned when they were talking to other municipalities, their staff, was thermophilic anaerobic digestion. Now, the reason I mention it as the same team versus acting like we're on different teams is, it would have been nice since this has been around for 15 months, 18 months for the Water 16 Department to have met with them, 17 explained it to them, came in today, saying, We understand there was an alternative. I mean, this is serious, serious business, and to have ignored this other more popular, 18 months ago at least, alternative to me is a failure in this process of Council deliberation and the Administration's presentation. So can somebody at least today 140 6/3/08 - FINANCE - BILLS 080495 and 080498 tell me first what thermophilic anaerobic digestion is and why it wasn't even considered for an RFQ as what may have been among other alternatives? DEPUTY
Yes. Councilman, I will turn it over to the experts to explain it to you. It is a little outside of my bailiwick.
I know they already concluded, which makes it a little more difficult. DEPUTY
But I would like to say it's agencies of the City acting on behalf of the City, which of course includes the City Council, often bring in subject matter experts. We do think we're playing on the same team and, therefore, our experts are in fact your experts. So we do not want to -- we're not going to shop consultants to try to get the answer that somebody thinks we ought to have. If we have undeniably one of the best consultants in the world on 141 6/3/08 - FINANCE - BILLS 080495 and 080498 this topic, it would seem to me that that consultant's expertise serves not only the Administration but also serves members of Council.
Yes, but there is a difference. I think we have failed, not you. They have an opinion and it's a very strong opinion. Mr. Donovan couldn't have been clearer that he firmly believes this. He may also have -- and I don't mean this in any unethical way. He may have a bias. He believes in this so much that he doesn't go too far away from it. We may get a consultant who has the same bias somewhere else or has equal opinions about whatever. I'm not going to mention that again until somebody answers me, but that could help us with this very, very serious deliberation. And, yes, the Water Department would be remiss if they didn't have a consultant. I'm just saying, I don't think we would be spending a half a million because we 142 6/3/08 - FINANCE - BILLS 080495 and 080498 would be reviewing, not going through five years of work with you. But that is just the facts, and it makes it very, very difficult. And even whether we go to -- I'll try it again -- thermophilic anaerobic digestion, we may have the same issues about the five-year period or something else. It may not be any different. It may have the same liability issue that if you touch it, it's yours, that kind of -- you break it, it's yours. But I would like to know from someone, at least to have something on the record, other than the Controller, who is not here today, but it is in that analysis what that other process is, how long it's been around, why at least the Controller may have found it popular when they were doing their scan probably 18 months to two years ago.
Thermophilic digestion was around in 2003 when we looked at the technologies. Basically 143 6/3/08 - FINANCE - BILLS 080495 and 080498 thermophilic digestion looks exactly like your current digestion process, but instead of temperatures of 100 degrees Fahrenheit in the digesters, the temperatures are in the 140, 150 range. What that accomplishes is better kill of the disease-causing pathogenic bacteria such that you get to a Class A material. You can produce a Class A material. So that technology is appropriate if you're only worried about getting to Class A. And, in fact, Los Angeles has adopted that. But our problem out in Carbon County and Schuylkill County and the rural areas this material is being brought to is not just about the fecal coliforms in the product. It is about the odor of the product and it is about the truck trips. If we didn't have those other products and we were merely looking for pathogen, that would be on the table. But there's a myriad of other issues and public concerns about biosolids, and that's the difficult part that the 144 6/3/08 - FINANCE - BILLS 080495 and 080498 Department is trying to work with.
Okay. Thank you. There is an energy cost that -- we didn't have the numbers today of what our expected costs are, but somewhere we have them and we know we're going to be paying them. So that was established today, that we're going to be paying the energy costs of this project, the City. And then it was mentioned that with that cap of the expected gas usage -- I forget what the terminology is -- it was 80-some somethings, that now digester gas, which is just going into the air, would be used and it would reduce the costs we had originally estimated without the digester gas. Is that correct? Did I hear that correctly? I have a question. How much will the savings of the digester gas mean to us per year and over the contract, however you want to say that? DEPUTY
You all 145 6/3/08 - FINANCE - BILLS 080495 and 080498 want to talk into the mikes here. I don't want Councilman Green getting upset.
Or Councilman O'Neill, for that matter. As long as nobody is laughing, I won't get upset. DEPUTY
Energy costs are in the order of four and a half million dollars. Approximately percent can be 15 satisfied through the use of this 16 digester gas, which is currently being 17 flared into the atmosphere. 18
Okay. 19 That's a good number, and I appreciate 20 it. But as a Councilmember, knowing that 21 this plant has been around for a long 22 time producing digester gas that's been 23 flaring into the atmosphere, we could 24 have saved as much by reusing it up to 25 now as we're -- or can we only use it on 146 6/3/08 - FINANCE - BILLS 080495 and 080498 this project? (Applause.)
I'm just curious. That's a large number. DEPUTY COMMISSIONER McCARTY: May I speak to that?
Oh, anyone can speak to it. DEPUTY COMMISSIONER McCARTY: What is being flared is excess gas, and that might sound like a play with words, but we use a majority of the gas, and in the winter months during the heating season, we actually -- you should see those flares very infrequently, because we're typically using a hundred percent of that gas for our boilers for heating and we do use it in the -- all year round to keep those digesters, which I think Ms. Racey mentioned earlier, just like our stomachs, keep them at the temperature they need to be. So there is some gas that we can't use right now that gets flared. 147 6/3/08 - FINANCE - BILLS 080495 and 080498 We're looking at having --
But my question is -- I understand all that and I think I understood it before. DEPUTY COMMISSIONER McCARTY: Why haven't we used it --
Why have we not been taking advantage of over a million dollars of gas being blown or flared off and not using it or selling it or getting the value of it somewhere when we're so concerned about our ratepayers? I mean, that's a lot money. It's not a hundred million over, but it's pretty close to a quarter of our savings that the Controller per year says. (Applause.) DEPUTY COMMISSIONER McCARTY: We have been looking at it. We're looking at a project at our Northeast wastewater treatment facility. It is a capital investment, so we have to go cautiously. You want to make sure that you're going to get the payback you hope 148 6/3/08 - FINANCE - BILLS 080495 and 080498 to get and it makes sense financially. So --
Is the airport a potential user or it's not? DEPUTY COMMISSIONER McCARTY: That is one of the areas we're exploring.
Because they're pretty close by, and they have money. DEPUTY COMMISSIONER McCARTY: That is one of the areas that we are looking into, sir.
Other than the Water Department, they're the only other people that have money in the City because they have separate funds. Okay. You might want to talk to the airport. We have the head of the airport here. DEPUTY COMMISSIONER McCARTY: We recognize --
I'll 149 6/3/08 - FINANCE - BILLS 080495 and 080498 speak on behalf of the airport, yes. DEPUTY COMMISSIONER McCARTY: We recognize it's a resource going up in flames, if you will.
That's all I wanted to get at. DEPUTY COMMISSIONER McCARTY: And we want to harness it.
Okay. There is a provision, I understand, in the contract that the City could terminate the contract due to an extraordinary increase in cost if it would have to -- that it could terminate the contract due to an extraordinary increase in cost and it would have to sustain more than a percent increase 19 in one year. 20 Can somebody -- and then my follow-up is, do we actually project that we could have up to 20 percent a year in increased costs? The Controller might be right.
That provision was 150 6/3/08 - FINANCE - BILLS 080495 and 080498 put in to not anticipate but to protect the City in the event that there was a very, very dramatic increase in costs, particularly in the area of energy. I think as was stated earlier today, we looked in terms of the analysis on this project where the break point might be with regard to does this project have savings or doesn't it have savings, and that looks -- I think as it was presented, it looked only really at the natural gas side and didn't really factor in all the other increase in costs that would go along with increasing natural gas costs. So we all know that if natural gas prices go up, the cost of diesel fuel is going to be going up at the same time. So it's pretty difficult to do an analysis that factors in every possible cost that could be moving and potentially moving in different directions, but at any rate, we tried to do a simple study, and what we came up 151 6/3/08 - FINANCE - BILLS 080495 and 080498 with is if the price of gas were to go from what it is today, which is about, I think it was said, $11 -- it was recently 9, so it's gone up recently. If it went to and, again, not looking at all the 7 other costs that would be increasing but 8 looking at natural gas costs in 9 isolation, at that point that would zero 10 out the savings. 11 So that's -- so we felt that 12 looking at where the gas markets were, 13 looking out at gas futures, which are -- 14 it's very interesting to go -- you can go 15 online now and you can look out to, say, 16 2015 and see what's being projected in 17 terms of gas costs, and they're basically 18 in and around that $10 figure. 19 So no one right now is saying 20 that five years from now we're going to 21 be looking at gas costs that are two and 22 a half times as high as they are today, 23 but it could happen, and let's say it 24 happened in a way that other costs were 25 not also increasing and that this seemed 152 6/3/08 - FINANCE - BILLS 080495 and 080498 to be not a good deal for the City any longer. The idea was that if we had this sort of precipitous climb in these costs, that we would be able to get out of the contract.
And assuming that, assuming that we got out of the contract because of precipitous cost increases, what is in the contract in terms of what happens to the plant? Does Synagro then use it, continue to have it? Do they turn it over to the City? Do they tear it down? I mean, what can we learn about the "what if" on us cancelling?
I think that was a pretty clear answer. I appreciate that on the --
What we would anticipate is that if it's uneconomical for the City to use it, since our biosolids are right there, it's going to be uneconomical for anybody to use it. 153 6/3/08 - FINANCE - BILLS 080495 and 080498 And we've gone into this contract asking that they would finance this project and that they would incur the capital costs associated with it. So the buyout essentially gives the City a liability for the capital cost of the plant. If we decide that we want to abandon the plant, we buy out the then-current capital cost that's there.
So we don't just walk. It costs us a whole lot of money --