Thank you,24 Madam Chair.25 86 11/29/11 - FINANCE - BILL 110733, ETC.1 So just out of curiosity, what2 is the timing on this project? When are3 they due to begin the work?4
Would you7 state your name for the record again,8 please, as you speak and you have to9 identify yourself for the stenographer.10 Even though she may know you, we need to11 have it in the record.12
Adam Agalloco,13 the Mayor's Office of Sustainability.14 Regarding the timing of the15 project, currently we're scheduled to16 begin in the spring. The project would17 take about 18 to 24 months to complete.18
It really21 depends on when we can get the financing22 completed and get the project technical23 review completed as well. We'd hope as24 soon as possible.25 87 11/29/11 - FINANCE - BILL 110733, ETC.1
When is2 Noresco prepared to begin the actual work3 in the buildings?4
Would you6 come to the table, please, identify7 yourself and then speak.8
Paul Boyd, Noresco.9 We're basically prepared to10 start the project as soon as the11 contractor signed with the City. There12 will be a short implementation, kind of13 pre-phase, where we sit down -- our14 construction department sits down and15 discusses with the City what the actual16 construction phase will entail. We17 discuss with the City's project managers18 and construction team, and then we19 basically begin. It would be a phased20 approach, as Adam said, over the 18 to 2421 months.22
The actual25 88 11/29/11 - FINANCE - BILL 110733, ETC.1 discussions?2
So if we're6 not beginning this until the spring, is7 there a reason not to just switch it to8 the Energy Authority?9
That's -- I guess10 it could be proposed to the Energy11 Authority. They have not -- as I said,12 they have met once. I think they're13 scheduled to meet early in January. We14 could ask them to convene a meeting15 earlier than that to consider this16 project.17 I think that at this point,18 they don't feel like they have a lot of19 internal capacity to create a project,20 but perhaps this project would give them21 the means to do that.22
The reason I23 ask is because we created that really to24 have a group of experts tell us whether25 89 11/29/11 - FINANCE - BILL 110733, ETC.1 or not the things that we are proposing2 to save energy make sense. We're not3 experts. We have to rely on essentially4 what the Administration is telling us in5 terms of what the savings are going to be6 and otherwise, and that was the sole7 purpose or one of the main purposes of8 the creation of the Energy Authority, and9 it seems to me that personally I don't10 know why the Administration wouldn't just11 change it to the Energy Authority. I12 mean, that decision could have been made13 a month ago or two months ago, too.14
Nancy, this is15 probably a question for you.16 At this point, this would be17 their first project. They have never18 issued any debt because they haven't been19 in existence, and I'm wondering if --20
It's the21 same lawyer in the Solicitor's Office who22 would handle it and instead of saying23 Philadelphia Municipal Authority, the24 offering documents would say Philadelphia25 90 11/29/11 - FINANCE - BILL 110733, ETC.1 Energy Authority. I mean, as long as2 they approve it, which is the whole3 purpose of their existence, agreeing that4 it's actually making sense.5
I guess I was more6 curious about any issues with regard to7 the organization itself without having8 much of a history in terms of its -- I9 mean, it's backed clearly by the City,10 but is there any issue that might arise11 in going to the market?12
Before you13 answer, Ms. Winkler, if that's true with14 respect to a $12 million offering, I15 mean, what's the point of even having it?16 If that's true, then we shouldn't have an17 Energy Authority, which the18 Administration supported.19
I'm Nancy20 Winkler, City Treasurer.21 I haven't been involved at all22 in participating in the development of23 the Energy Authority. I have a very24 substantial professional background in25 91 11/29/11 - FINANCE - BILL 110733, ETC.1 working on financing energy projects,2 billions of dollars of energy projects,3 with authorities which were created for4 the purpose of financing such projects,5 and it's been my extensive experience6 when you are working with a new start-up7 Authority that it can take some time to8 put the Authority in a position to be9 able to actually undertake a new --10 undertake a financing.11 I'm not familiar with the12 members. I've been trying to look them13 up on my BlackBerry while I've been14 sitting here who is on the Authority.15 And I would be happy, if you would like,16 to sit down with those folks and get a17 sense of how able they might be to very18 quickly come up to speed to undertake a19 financing. I've certainly got lots of20 experience working with new Authorities,21 so I think it would be more work, but22 could be possible. And then I guess the23 question is, I'm just really not in a24 position to answer the question of how25 92 11/29/11 - FINANCE - BILL 110733, ETC.1 much more time would that add to the2 financing timeframe and whether that3 really then begins to interfere with some4 of the contractual arrangements which I5 understand exist between the City and6 Noresco with respect to the period of7 time that Noresco is holding the price8 which they have quoted the City. It's9 been my understanding that Noresco, as10 really an accommodation to the City of11 our approval process, has actually12 extended a longer period of time to hold13 the prices that they have quoted, with14 the understanding that we would move very15 quickly in January to complete the16 financing, and it was with that general17 understanding that we selected the18 Municipal Authority, because at the time19 that we had to make that decision, there20 was still a lot going on for the creation21 of the Energy Authority.22
Look, I23 appreciate that and I appreciate what24 Councilman Clarke said, that it may be25 93 11/29/11 - FINANCE - BILL 110733, ETC.1 too late for this project, but it was too2 late for the cogen project. Now we have3 this project, which is a small project.4 At some point the work you talk about to5 do the first offering will have to be6 done. If you're going to have a7 discussion with them about whether or not8 this could be the first project, with the9 understanding that it may well not be, I10 would like you -- it would be good for11 that discussion to at least take place,12 and I guess I personally would have13 appreciated if it took place prior to14 this hearing.15
I believe that16 in their first meeting in October that17 there were questions and concerns around18 getting up with the administrative19 capacity and getting up and running and20 that this project was related and that we21 noted that a briefing would be held. And22 I think certainly -- I just want to be23 clear -- that our intention is to use the24 Energy Authority, and, again, with both25 94 11/29/11 - FINANCE - BILL 110733, ETC.1 the cogen project and this one, it was a2 matter of timing, and had there been a3 few more months, it would have been4 appropriate I think to work directly with5 the Energy Authority, but because of the6 timeframe with the live prices being held7 with this project with the contractor8 pricing, it felt like rushing it through9 the Energy Authority --10
No. You've11 made that point. My question is, will12 you in the next month talk to the Energy13 Authority --14
-- about16 this and whether or not they would be17 interested in having this be their first,18 and if it can be done quickly, would you19 be willing to try to pursue that?20
Okay. So22 I'm assuming -- I heard a discussion when23 I guess it was Theresa being discussed24 about training and providing -- and then25 95 11/29/11 - FINANCE - BILL 110733, ETC.1 I also heard as part of that that is this2 the same person who is going to be doing3 the audit of whether or not the energy4 efficiency gains were made or accepted?5 In other words, is Noresco training the6 person who is going to determine whether7 or not they're meeting the energy savings8 goals?9
No. Theresa was10 basically just learning how to do site11 audits for all the different types of12 ECMs.13
Okay.14 That's my question.15 So I'm wondering typically when16 you do a project like this, there's not17 savings that come back into the entity18 that's doing them. Basically you take19 all the savings that are possible and you20 do additional energy efficiency things21 that wouldn't necessarily have a payback22 to create a break-even type project so23 that you're far more aggressive about24 reducing energy consumption and meeting25 96 11/29/11 - FINANCE - BILL 110733, ETC.1 the City's goals of the amount of energy2 reduction that we're going to achieve, et3 cetera. And it seems to me that if we're4 putting money back in the General Fund,5 this is not an aggressive project with6 respect to creating as much savings as7 possible. In other words, it seems to me8 aren't we shorting ourselves the9 opportunity to get more bang for the buck10 by doing this on a larger scale?11
We determined --12 clearly there are tens and tens of13 millions of dollars of potential14 improvements in the buildings that could15 be financed through this model. We16 determined that because this was our17 first time going through the GESA model,18 that there was a level of comfort in not19 taking on the risk of a larger project,20 but going through this process,21 understanding how it works, ensuring that22 we can manage the process and guarantee23 the savings and realize the savings. So24 we looked at developing a project that25 97 11/29/11 - FINANCE - BILL 110733, ETC.1 was driven by fairly straightforward2 energy conservation measures, and this is3 a very aggressive energy conservation4 project. The payback of the measures5 we're implementing are among the highest6 that we could achieve in these buildings,7 and it's slightly cash flow positive,8 which was a directive that we received9 initially from Finance when we were10 developing the project. But slightly11 cash flow positive project, but it's12 largely energy savings driven through13 very straightforward energy conservation14 measures.15
Right. In16 other words, what you're saying is, we're17 taking all the low-hanging fruit,18 bundling it up and not using the savings19 from the low-hanging fruit, which is20 typically used for the bigger, larger21 projects like HVAC, potential solar, et22 cetera. I mean, is that a fair23 characterization of what's happening24 here?25 98 11/29/11 - FINANCE - BILL 110733, ETC.1
It is fair, and,2 again, we determined that we wanted to3 take this approach and this way for a4 first project and understand what project5 implementation is, with the hope that6 this is a very positive experience for us7 and we can replicate through other GESA8 projects that would do that, that would9 use the high payback energy conservation10 measures to pay out more longer payback11 capital improvement projects.12
One of the13 things you'll never, I hope, hear me14 criticize is the Administration's15 Greenworks plan and its commitment to16 this area, et cetera, which I think17 really has become a model that other18 cities look at across the country. My19 disappointment in this project is that if20 we're really going to wait to see the21 results of this before we move forward,22 that's an 18- to 24-month period, and23 what you're really talking about is not24 really doing any of the complicated or25 99 11/29/11 - FINANCE - BILL 110733, ETC.1 hard things within the Nutter2 Administration, because 18 to 24 months3 after the spring, you'll be in your third4 year or the beginning of your third year5 and this great momentum we have will be6 unfortunately, in terms of being the7 national model and an example and people8 following, will be undermined by a very9 risk averse approach to energy10 conservation.11
I appreciate and12 share those perspectives, and I think our13 hope is that there will be multiple14 energy projects taking place over the15 next couple of years. Again, the16 guidance that we received from Finance17 was this was the scope that felt18 comfortable working with Public Property19 and Capital Projects, they felt20 comfortable in being able to manage the21 implementation process of this project.22 But I agree with you, we would23 like to be able to be in a position to24 undertake larger and more projects, and25 100 11/29/11 - FINANCE - BILL 110733, ETC.1 we hope to work with you all to see if2 there are ways in which we can do that,3 and I think certainly the Energy4 Authority can be another tool for us in5 making some of those determinations.6
Thank you.7 This is a fixed-price contract8 and was done in a recent Water9 Department -- as was done in a recent10 Water Department cogen project. It seems11 to make sense to include cost overrun12 provisions, requiring further Council13 approval if project costs exceed 1014 percent or more than the agreed-upon15 fixed price. Is that acceptable to the16 Administration?17
Given that19 the City is taking execution risk whereby20 its contractual remedy would be21 undermined should the contractor go22 bankrupt -- no offense there -- did the23 City consider the suggestion that it get24 a parent corporation guarantee on the25 101 11/29/11 - FINANCE - BILL 110733, ETC.1 performance bond for the project?2
I'm going to ask3 Scott Schwarz, who worked on that portion4 of the project from the Law Department,5 to speak to that quickly.6 (Witness approached witness7 table.)8
Thank you. Scott9 Schwarz from the Law Department.10 After hearing comments from11 Council, we did add a performance energy12 security performance bond. There was no13 such bond in the model Pennsylvania14 contract that we used to write this one,15 but Maryland had that provision, so we16 added that to the contract. It's in the17 amendment that Katherine mentioned today.18
Thank you.19 Also, in the draft lease20 agreement there was an inconsistency in21 how the guaranteed savings were defined22 and measured. Specifically -- and this23 is the one that's been presented to24 Council previously -- it wasn't clear25 102 11/29/11 - FINANCE - BILL 110733, ETC.1 whether the guarantee was with respect to2 annual and/or project lifetime savings.3 Please describe if you've addressed that4 ambiguity.5
Yes. Also in6 response to Council raising that issue,7 we've added a definition of "annual8 guarantee" and a second definition of9 "total guarantee" and clarified that both10 guarantees will need to be met by11 Noresco. The state law specifically12 refers to a total guarantee. It was13 amended last year to add the annual14 guarantee. And so we believe we've15 clarified that language.16
And I guess,17 finally, Noresco's duty to perform in18 terms of guaranteeing savings, et cetera,19 is conditioned upon the City's satisfying20 certain service responsibilities with21 respect to what's being installed, et22 cetera, which gives the City all the23 execution risk. In other words, if we24 don't meet our maintenance requirements,25 103 11/29/11 - FINANCE - BILL 110733, ETC.1 Noresco walks away if we don't get2 savings. So my question is, given that3 the City subcontracts out the maintenance4 work for the quadriplex buildings, we're5 not even in control of whether or not6 we're meeting our service obligations.7 How is the City going to ensure that the8 subcontractors' scope of work is trued up9 to the City's obligations to Noresco10 under the agreement? Are we amending all11 the agreements with our subcontractors so12 that they're responsible if the service13 requirements are not met?14
I'm going to15 bring one more person up for you, Joe16 Palantino, Deputy Public Property17 Commissioner, who is working on that18 portion of the project.19 DEPUTY COMMISSIONER PALANTINO:20 Good morning, members of Council. Joe21 Palantino from Public Property.22 Yeah. The timing couldn't be23 more perfect with the 18 months. Our24 period from starting from now, our25 104 11/29/11 - FINANCE - BILL 110733, ETC.1 existing maintenance contractor, their2 fourth term will be up in about 183 months. So what we'll do is amend the4 new bid that goes out with language that5 sort of puts some teeth into the -- sort6 of ties both contracts together and7 guarantee in that performance.8
And if9 that's more expensive than our current10 maintenance contracts, that's not11 reflected in the savings that have been12 projected as a result of this? In13 theory, that service contract,14 maintenance contract, could be more15 expensive because of the additional16 requirements; is that correct?17 DEPUTY COMMISSIONER PALANTINO:18 Actually, what we've done is through19 those ECMs evaluated sort of the20 aggregate maintenance burden, and for the21 most part, all the scope of each one of22 them actually reduces the maintenance.23 So there shouldn't be any additional24 maintenance effort. Actually, it should25 105 11/29/11 - FINANCE - BILL 110733, ETC.1 reduce the maintenance. The language2 should just require them to meet their3 obligations as they are right now. So it4 shouldn't increase the cost.5
But we don't6 know, because we have to rebid it.7 DEPUTY COMMISSIONER PALANTINO:8 I mean, it should reduce the cost of the9 maintenance. I mean, even through a10 rebid with the contractor --11
We do have12 to rebid it, so we don't know the cost;13 is that correct?14 DEPUTY COMMISSIONER PALANTINO:15 Correct, we don't know the cost, but16 looking at the scope of ECM for ECM as a17 total aggregate reduction, it does reduce18 maintenance.19
Okay. Which20 we'll find out after we rebid it. We21 think it reduces maintenance.22
Okay. What25 106 11/29/11 - FINANCE - BILL 110733, ETC.1 recourse would the City have -- so you're2 going to add in recourse in all new3 contracts?4 DEPUTY COMMISSIONER PALANTINO:5 Correct.6
Okay.7 Those are my questions, Madam8 Chair. Thank you.9
One12 follow-up to Councilman Clarke's13 inquiries around the Authority. Have you14 and/or a member of your team had a15 sit-down with members of the Energy16 Authority at any time for any reason?17
Rina Cutler, the18 Deputy Mayor for Transportation and19 Utilities, is the point person on the20 Administration side for the Authority.21 So they've been having regular contact22 with the members who have been present at23 their meetings and have held briefings.24 So we haven't met as our office with the25 107 11/29/11 - FINANCE - BILL 110733, ETC.1 Authority yet. We're scheduled to2 present to them on our projects, I think,3 at the January meeting.4
Thank you.8 Are there any questions?9 (No response.)10
Is there11 anyone else here to testify on any of12 these bills?13 (No response.)14
Thank you.15 We will now close our public hearing and16 we'll go into our public meeting.17 The Chair recognizes18 Councilwoman Blackwell to report out Bill19 No. 110733 with a suspension of the20 rules.21
Thank22 you, Madam Chairman. I move that Bill23 No. 110733 be reported out of Committee24 with a favorable recommendation and also25 108 11/29/11 - FINANCE - BILL 110733, ETC.1 a recommendation for the suspension of2 the rules so as to permit first reading3 at our next session of Council.4 (Duly seconded.)5
It has6 been moved and seconded that Bill 1107337 be reported out of Committee with a8 favorable recommendation and a request9 for the suspension of the rules so this10 bill can be heard at Council's next11 session.12 All in favor will say aye.13 (Aye.)14
There18 being none, the motion is carried.19 The amendment to Bill 110758,20 Mrs. Blackwell, would you please move the21 amendment.22
Thank23 you. I move for the adoption of the24 amendment to Bill No. 110758.25 109 11/29/11 - FINANCE - BILL 110733, ETC.1 (Duly seconded.)2
It has3 been moved that the amendment to Bill4 110758, which changes the effective date5 of the ordinance, will be approved.6 All in favor?7 (Aye.)8
There12 being none, the motion is carried.13 The Chair recognizes14 Councilwoman Blackwell to report Bill15 110758, as amended, out of Committee with16 a suspension of the rules.17
Thank18 you, Madam Chairman. I move that Bill19 No. 110758, as amended, be reported out20 of Committee with a favorable21 recommendation and a recommendation for22 suspension of the rules so as to permit23 first reading at our next session of24 Council.25 110 11/29/11 - FINANCE - BILL 110733, ETC.1 (Duly seconded.)2
It has3 been moved and seconded that we report4 out Bill 110758, as amended.5 All in favor will say aye.6 (Aye.)7
There11 being none, the bill will be reported out12 of Committee. The motion is carried.13 The Chair recognizes Councilman14 Green for the amendment to Bill 110787.15
Thank you,16 Madam Chair. There are two amendments to17 this bill which have been circulated and18 approved by the Administration, and I19 move for the adoption of those20 amendments.21 (Duly seconded.)22
It has23 been moved and seconded that we adopt24 amendment 110787.25 111 11/29/11 - FINANCE - BILL 110733, ETC.1 All in favor?2 (Aye.)3
There7 being none, the motion is carried.8 The Chair recognizes Councilman9 Green to report the bill out of10 Committee.11
Madam Chair,12 I move that Bill 110787 be reported from13 this Committee with a favorable14 recommendation and a suspension of the15 rules so that this may be heard at16 Council's next session.17 (Duly seconded.)18
It has19 been moved and seconded that Bill 110787,20 as amended, be reported out of Committee21 with a favorable recommendation and that22 the rules of Council be suspended so this23 bill can be heard at Council's next24 session.25 112 11/29/11 - FINANCE - BILL 110733, ETC.1 All in favor will say aye.2 (Aye.)3
There7 being none, the motion is carried.8 I also want to go back to9 110758 and make sure that we note that10 the suspension of the rules will be11 requested for that bill.12 The Chair recognizes13 Councilwoman Blackwell for Bill 110788.14
Thank15 you, Madam Chairman. I move that Bill16 No. 110788 be reported out of Committee17 with a favorable recommendation and also18 that the rules of Council be suspended so19 as to permit first reading at our next20 session.21 (Duly seconded.)22
It has23 been moved and seconded that Bill 11078824 be reported out of Committee with a25 113 11/29/11 - FINANCE - BILL 110733, ETC.1 favorable recommendation and that the2 rules of Council be suspended so this3 bill can be heard at Council's next4 session.5 All in favor will say aye.6 (Aye.)7
There11 being none, the motion is carried.12 The Chair recognizes13 Councilwoman Blackwell for Bill 110789.14
Thank15 you, Madam Chair. I move that Bill No.16 110789 be reported out of Committee with17 a favorable recommendation and also a18 recommendation for suspension of the19 rules so as to permit first reading at20 our next session of Council.21 (Duly seconded.)22
It has23 been moved and seconded that Bill No.24 110789 be reported out of Committee with25 114 11/29/11 - FINANCE - BILL 110733, ETC.1 a favorable recommendation and a request2 for the suspension of rules so this bill3 can be heard at Council's next session.4 All in favor will say aye.5 (Aye.)6
There10 being none, the motion is carried.11 The Chair recognizes12 Councilwoman Blackwell for Bill No.13 110830.14
Thank15 you, Madam Chair. I move that Bill16 110830 be reported out of Committee with17 a favorable recommendation and also a18 recommendation for suspension of the19 rules so as to permit first reading at20 our next session of Council.21 (Duly seconded.)22
Before we23 move forward on this, we'd like to have a24 comment from Councilman Green.25 115 11/29/11 - FINANCE - BILL 110733, ETC.1
Thank you,2 Madam Chair. Sitting here today, I3 learned that Duane Morris represented the4 Gas Works in this matter, and although I5 am not certain that that is a conflict6 when Duane Morris represents a City7 agency, to avoid the appearance of8 impropriety, I'm going to recuse myself9 from taking action on this matter.10
Thank you.11 It has been moved and seconded12 that Bill 110830 be reported out of13 Committee with a favorable recommendation14 and that the rules of Council be15 suspended so this bill can be heard at16 Council's next session. And the record17 will reflect that Councilman Green has18 recused himself from voting on this bill.19 All in favor?20 (Aye.)21
There25 116 11/29/11 - FINANCE - BILL 110733, ETC.1 being none, the motion is carried.2 The Chair recognizes3 Councilwoman Blackwell regarding Bill4 110832.5
Thank6 you, Madam Chair. I move that Bill No.7 110832 be reported out of Committee with8 a favorable recommendation and also that9 the rules of Council be suspended so as10 to permit first reading at our next11 session.12 (Duly seconded.)13
It has14 been moved and seconded that Bill 11083215 be reported out of Committee with a16 favorable recommendation and that the17 rules of Council be suspended so this18 bill can be heard at Council's next19 session.20 All in favor will say aye.21 (Aye.)22
Is there23 any opposition?24 (No response.)25 117 11/29/11 - FINANCE - BILL 110733, ETC.1
There2 being none, the motion is carried.3 That concludes our meeting4 today on Committee on Finance.5 Are there any questions or6 comments?7 (No response.)8
There9 being none, we will stand adjourned.10 Thank you very much.11 (Committee on Finance concluded12 at 11:55 p.m.)13 - - -14 15 16 17 18 19 20 21 22 23 24 25 118 1 CERTIFICATE2 I HEREBY CERTIFY that the3 proceedings, evidence and objections are4 contained fully and accurately in the5 stenographic notes taken by me upon the6 foregoing matter on November 29, 2011, and7 that this is a true and correct transcript of8 same.9 10 11 12 13 --------------------14 MICHELE L. MURPHY15 RPR-Notary Public16 17 18 19 (The foregoing certification of this20 transcript does not apply to any reproduction21 of the same by any means, unless under the22 direct control and/or supervision of the23 certifying reporter.)24 25