Is GWP the Cash Cow for the City’s renovations at the Perkins and MSB Building?

by Kenneth Landon · March 31, 2014

On November 13, 2013, the Glendale City Council approved Resolution authorizing the General Manager of Glendale Water & Power Department (GWP), or his designee, to obtain proposals for the Design and Build of Central Plant HVAC Renovationsat the C.E. Perkins Building, located at 141 N. Glendale Ave (Corner of Wilson and Glendale Ave.) and Municipal Services Buildings (MSB), located at 633 East Broadway, corner of East Broadway and Glendale Ave. (1)

The C. E. Perkins and MSB Buildings are served by a common central plant cooling and heating system. The central plant arrangement is the most economical means of providing conditioned air to large, occupied spaces. The central plant system located at the Perkins Building provides heating and cooling to near 170,000 square feet and over 500 employees on a daily basis.

The major components of the Perkins HVAC system are now 22 years old and beyond the serviceable life expectancy. Specifically, the centrifugal chillers, cooling towers and ancillary equipment are in need of total replacement. The two air handlers at the MSB building are over 40 years old and have provided service well beyond their life expectancy. (1)

Over the past ten years, the City has applied significant resources and methods both in-house and through contracted services in order to defer the capital expense associated with replacing major central plant equipment. This past summer proved to be the tipping point as staff struggled to keep the equipment online. Last winter and this past summer, staff had received our highest volume ever of repair orders and employee concern regarding unsatisfactory air temperatures. (1)

GWP intends to establish a Professional Services Agreement (PSA) with an experienced and qualified HVAC engineering/construction firm to provide design and build services for major HVAC equipment renovations at Perkins and MSB including a new chilled water system, air handling systems and automated controls.

Under Fiscal Impact, Funds for this project are budgeted in the FY 2013·2014 budget under Account No. 43111 (Fund No. 551, Organization No. 911), Project No. 14213, and Activity No. UM027. (1)

The CofG has 14 Department annual Budgets: Administrative Services – Finance; City Attorney; City Clerk; City Treasurer; Community Development; Community Services & Parks; Fire; Glendale Water and Power; Human Resources; Information Services; Library, Arts & Culture; Management Services; Police; and Public Works.

Out of 14 City Departments, with annual budgets, only GWP and Public Works maintains activity pertinent to Account No. 43111, representing Construction Services.i.e. for the City’s 2011-12 adopted budget, Account No. 43111, construction Services was noted under GWP and PWs as follows:

GWP- Pg 6 Public Benefit Fund; Pg7 Electric Operation Fund – Administration; Pg16 Electric Works Revenue; fund – Power Management; Pg18 Electric Works Revenue fund – Electric Services; Pg22 Electric Depreciation Fund – Power Management; Pg23 Electric Depreciation Fund – Electrical Services; Pg25 Water Works Revenue Fund – Water Services; Pg29 Water Works Depreciation Fund – Water Services

Public Works- Pg9 Engineering; Pg12 Building Services; Pg14 Street Maintenance; Pg15 Sidewalk Maintenance; Pg16 Street Tree Maintenance; Pg20 Traffic Engineering; Pg21 Traffic Signals.

Although GWP maintains its billing office at the Perkin Building, 141 N. Glendale Ave , and Public Works has offices at the MSB building, 633 East Broadway, there are several other city departments and other non city tenants occupying space at both building addresses. So, how does the City intend to allocate the costs for the Central Plant HVAC Renovations at the C.E. Perkins & MSB Building to the other City departments, when it only charging Account 43111, Construction Services, used solely by GWP and Public Works?

Former City Manager C. E. (Gene) Perkins, from 1952 to 1972, also known as the man who established the city’s conservative pay-as-you-go spending philosophy four decades ago for the City of Glendale. Among Perkins’ innovative programs was creating a capital improvement fund, by setting aside half of all sales tax revenue, Perkins established a policy still in effect as of 1993, of paying for municipal improvements without incurring debt–a rarity among governments. When he retired in 1972, his conservative financial policies were followed by succeeding city managers and council members for the next two decades. (2)

Unfortunately Perkins conservative financial policies are no longer true today. Rather than the City annually setting funds aside to pay for future replacement of depreciable assets, beyond their life expectancy, as evident by elimination of the City’s “Capital Improvement Fund”, it appears that the City intends to pay for asset replacements and capital improvements by increasing utility rates and fees, including other new fees and taxes, and by the issuing of new bonds.

Jim Starbird, former Glendale City Manager, and also Scott Ochoa’s mentor, also from Monrovia, responsible for Ochoa’s selection as City Manager, wrote an article in GNP mailbag, published 3/29/2014, titled “Utility Transfer has History on its Side”, in response to Roland Kedikian’s op-ed, on behalf of the “Glendale Coalition for Better Government”, (“It Takes Engaged Citizens’ to Make a City”). In Starbirds response, he said that,

· “I have long believed and have stated in the public record, that one must view the legitimacy of the GWP transfer in the context of the decisions that city councils made over the past several decades about how to pay for public services our residents need. Forty years ago city councils had broad discretion to adopt revenue sources to fund public services.” “Past Glendale City councils like our current one were fiscally conservative and took their fiscal responsibility very seriously”. (3)

Forty years ago, the CofG had a “conservative pay-as-you-go spending philosophy” and maintained a capital improvement fund, up and till about 2003. Forty years ago, the CofG did not have a spending problem, dealing with collective bargaining, union “Memo of Understanding” contracts, resulting in unsustainable promised salaries, pensions, and lifetime benefits, i.e. in 2001, the City council increased all safety officers pensions from 2.5% to 3.0% for each year of service (a 20% increase) retroactive for all prior years of service, rather than implementing it for only future years of service, and reduced their beginning retirement from age 55 to 50.

The City’s CalPERS pension contribution went from $1.3 million in 2003 to $13.7 million in 2007, to $31 million in 2012. Glendale’s unfunded pension liability— the difference between the assets it has and the cost of the promised benefits — increased from $191 million in 2011, to $227 million in 2012, to 239 million in 2013, per the City’s CAFR’s. The City of Glendale’s annual

Glendale’s Citywide Budget went from $438 million in 2000-01 to $700.9 million in 2012-13 (60% increase). Most of the $262 million budget increase went to employee salaries and benefits. During this same period, the Police Budget increased by 165.5% to 77 million; Fire Dept Budget increased by 134.6% to 61 million, while Glendale’s population decreased by 5%, from 203,734 to 194,973 during the same period.

On March 25, 2014 Glendale Water and Power (GWP) recommended that the City Council adopt a resolution dispensing with competitive bidding and authorizing the City Manager to award a contract to Johnson Controls, Inc., to design and build the central plant HVAC renovations at the C.E. Perkins (Perkins) and Municipal Services Buildings (MSB) Per the Glendale Agenda for March 25, 2014; ACTION ITEMS 8c. – General Manager of GWP, re: HVAC Renovations to the C.E. Perkins and Municipal Services Buildings, in Connection with Specification No. 3525; Resolution Dispensing with Competitive Bidding and Authorizing a Design-Build Contract with Johnson Controls, Inc. in the Amount of $1,400,000, plus Contingency of $100,000, not to exceed $1,500,000. (4)

Per the City Staff Report to the City Council, supporting Agenda Action Item 8.C.

The Heat, Ventilation and Air Conditioning (“HVAC”) system at the C.E. Perkins and Municipal Services buildings (the “Buildings”) in the City of Glendale are beyond their useful life, and need to be replaced. (5)

The proposal submitted by JCI was determined to provide the best overall value to the City. Specifically, JCl’sproposal will replace the two failing air handling units at the MSB building with two top-of-the-line magnetic bearing YMC2 chillers that provide minimal maintenance, maximum efficiency, and maximum longevity. JCl’s proposal offers two maximum capacity BAC cooling towers and two custom built air handling units. In general, the JCI proposal is comprehensive and replaces all of the desired major equipment and supporting equipment such as pumps and VFD drives. Funding for this project is budgeted for FY 2013/14 and 2014/15 budgets under Account No. 43111(Fund No. 551 , Organization No. 911), Project No. 14213, and Activity No. UM027. (5)

In reference to Harry Zavos’s GNP Mailbag March 25

The recent electric rate increases was due to lack of money for critically needed capital improvements; while millions of utility revenues went for general non-utility related government use. The Glendale Coalition’s lawsuit addresses legality of transfers. The Glendale City Charter allows only the transfer of surplus utility money for general government use — money left after all utility needs are met. The lawsuit alleges City officials violated its charter, transferring utility monies as a GWP budgeted appropriation, regardless of surplus.

Glendale City officials transferred water revenues to support general services in violation of State Proposition 218. . The lawsuit seeks return of some of those illegal transfers. The lawsuit also alleges the recent electric rate increase, a portion of which is used as general revenue without the people’s vote, violates Proposition 26. (6)

It’s apparent, that if the City Council members had adhered to C.E. Perkins conservative philosophy, and took their fiscal responsibility very seriously when negotiating with Union representatives, and refrained from accepting union monies during reelection, the City’s financial position would have been significantly higher and there wouldn’t have been a need to transfer funds from GWP to the General Fund nor raise both water and electrical rates.

Source Reference:

(1) www.ci.glendale.ca.us/government/…/CC_5e_111913.pdf