City not sure $6.5M contract will save money

By AMY FOSTER / Staff Reporter for the Southern Standard

Johnson Controls, Inc. representative Trey Crayford gives a slide show presentation to the city’s Finance Committee on Tuesday. Crayford and JCI are negotiating a $6.5 million contract with the city. (Amy Foster photo)

It is with mixed emotions, and many questions, that McMinnville’s Board of Mayor and Aldermen is currently considering the issue of signing Johnson Controls, Inc. to an estimated $6.5 million, 10-year performance contract.

A special session was called Tuesday night in which a presentation from JCI, a performance planning company from Roswell, Ga., was given to the Finance Committee. City officials later unanimously voted to postpone a yes or no vote until more research could be done and new numbers calculated on the proposed contract with JCI.

“I don’t want to rush into this contract over the need for a new roof,” Vice Mayor Patti Nunley said, referring to a new roof for the Civic Center, which is one of the points of interest listed in the contract.

After much discussion, some city leaders were not so enthusiastic about the contract.

Rodney Boyd, general manager and CEO of McMinnville Electric System, voiced concerns about a private contractor working with aspects of the city’s electric system, such as installing new poles and fixtures, and not his own employees.

“I would have to see the calculations but sitting here running them through my head, I am having a hard time committing to why we would do this,” Boyd said. “If we are going to have to change units out, I would rather change them out and us still be responsible for them because that is part of what we do for the city.”

The current contract that has been presented to the city board consists of nine “scopes of work,” essentially a list of the improvements the company will provide, with a price tag of $5.2 million to be paid over the next nine months through a loan or bond. Along with accrued interest, the city will make a yearly payment through the life of the loan. JCI guarantees this payment will be covered by the money McMinnville will save each year.

“The beauty of a performance contract is you will not make a payment until you have reaped the benefits,” JCI representative Trey Crayford said. “Remember this is self-funding. You do not come up with any money upfront.”

The initial $5.2 million will pay for materials and labor that will be put toward building lighting improvements, traffic and street light upgrades, HVAC and control system improvements, roof replacement for the Civic Center, water conservation measures and water meter replacements.

Overall, JCI’s current numbers have the city saving $7.3 million over 10 years and claim the savings will last long after the 10-year contract is up.

Under this contract and plan, the city of McMinnville will also be required to pay a performance measuring and verifying fee to JCI in the amount of $461,214 in unequal, yearly installments over the following 10 years with the first payment beginning in May of 2006.

With this fee, McMinnville will have a warranty which includes JCI paying the balance if something happens within their control and prevents the city from making enough money to cover the payment.

“Our goal here is to find inefficiency in the city, replace it and then guarantee the results,” Crayford said.

JCI currently has similar plans active in 1,800 other U.S. cities.

City officials will review and possibly vote on this matter Aug. 22.