Loading...
Minutes 11-07-97 MINUTES OF THE CITY COMMISSION WORKSHOP MEETING HELD IN COMMISSION CHAMBERS, CITY HALL, BOYNTON BEACH, FLORIDA, ON FRIDAY, NOVEMBER 7, 1997, AT 4:00 P.M. PRESENT Gerald "Jerry" Taylor, Mayor Jamie Titcomb, Vice Mayor Matt Bradley, Commissioner Shirley Jaskiewicz, Commissioner Kerry Willis, City Manger Michael Pawelczyk, Assistant City Attorney Sue Kruse, City Clerk CALLTO ORDER Mayor Taylor called the meeting to order at 4:06 p.m. The purpose of the meeting was to provide a recommendation on how to proceed with the issue of "privatizing" certain City Utility functions. City Manager Willis advised that staff studied the bids submitted and determined that we did not have clear goals and objectives for the purpose of evaluation. Staff requested six months to study the issue and make recommendations to the Commission. City Manager Willis assigned Dale Sugerman to work on this task with Utilities Department representatives. Dale Sugerman, Assistant City Manager, provided a packet of information for the Commissioners and the audience. He advised that his presentation would be read directly from the printed material. (The printed material is attached to these minutes.) Mr. Sugerman explained that privatization is the transfer of assets or services from the tax- supported and politicized public sector to the entrepreneurial initiative and competitive markets of the private sector. Even though the RFP identified the process as privatization, the process was not designed to privatize the City's utility functions. The effort should have been viewed as an exploration of the opportunity to use contract services for these functions. Staff's current position is that the City Commission should not privatize the City utility functions, but rather consider the opportunities provided by contracting for services if there are vendors who can meet the City's specific needs and deliver the services with the highest of standards. We do not recommend transferring any assets and do not suggest that there be any transfer of tax-suppo rted activities The idea of privatization came about in the fall of 1996 during the annual budget process since our utility billing computer needed to be replaced. In November of 1996, the City Commission reached a consensus to use an envelope billing system to allow us the flexibility of using this system as a newsletter stuffer. RFPs were drafted in December and mailed to prospective proposers in February of 1997. Six proposals were submitted on March 25, 1997. The six bids received ranged in price from a high of $890,136 from Atlantic Utilities Corporation to a Iow of $223,216 from Municipal Meter Reading Services, Inc. MEETING MINUTES CITY COMMISSION WORKSHOP BOYNTON BEACH, FLORIDA NOVEMBER 7, 1997 Staff analyzed the bids, and based on the submittals, recommended rejection of all bids in May of 1997. On May 20, 1997, the City Commission tabled a decision on either awarding a contract or rejecting all bids to allow staff to review the issue and make a recommendation within six months. In September, the City made a decision to replace the existing AS/400. The computer that has been purchased can support a fully functional database that can meet all of the needs of the utility, or it can integrate with an outside contractual service provider. We have not purchased new utility billing software and printing equipment but we have quotations for those items. At the time of the original bids, the City did not have a clear vision with respect to its citywide computer that supported the utility billing function; therefore, we were uncertain whether we should replace the computer or privatize that function. The computer has now been purchased and the prices of certain functions not yet purchased are available to us. In addition, employees were not given a great deal of encouragement to construct their own accurate bid at the time of the original RFP. The City did not have a clear determination on its obligation to incumbent employees. That qUestion was left unanswered in the original RFP. Questions arose regarding why the City would try to privatize this function when it had never tried to privatize any other City function. However, that question was answered by looking at janitorial services, mowing services, food services that have been contracted out in the past. A major question throughout this process had been trying to determine exactly what the City wishes to accomplish in this effort. Three questions arose. They are: 1. Did the City want to save money for the utility system? 2. Did the City want to improve customer service? 3. Did the City want to reduce monthly costs to the customer? The City's goals were not clearly definedl After reviewing this issue over the past six months, staff believes the following: · The City/utility should retain ownership of the customer database. However, that database can be shared with an outside contract service. · If the customer service functions, as well as the billing functions, are contracted out, the City should mandate that the proposers take all existing employees and guarantee them employment for at least six months. · The City should retain the meter reading function, but be prepared to contract the function out if the utility customer base expands rapidly. · The City does not necessarily need to retain the cashiering function and should look at the options associated with contracting for that service. · If these services are contracted for, the proposer will need to stipulate a price for leasing some of our computer equipment and our office space. 2 MEETING MINUTES CITY COMMISSION WORKSHOP BOYNTON BEACH, FLORIDA NOVEMBER 7, 1997 · The utility will need to ensure that there is a strong coordination of the meter repair/meter change-out program between the successful proposer and the utility. Staff's recommendation is to reject all current bids and solicit new proposals with a new Scope of Services: · Develop a Request for Proposal for contract services. Do not "privatize" any aspects of the City utility. · Requests that contract services include utility billing, customer services and possibly cashiering as an alternate proposal. · Mandate hiring of incumbent personnel (6 months minimum). · City should maintain ownership of up-to-date customer database, but be prepared to share it. · Proposer needs to be made cognizant of need for coordination of meter repair and meter change-out program with utility. Mr~ Sugerman reminded the Commissioners that John Guidry, Robin Matchett, Pete Mazzella and Diane Reese worked with him on this project. Questions & Answers How is the issue of database management handled in the City? We do not have a major database management program at this point. We have only one person in ITS who handles the historical records on the AS 400. We maintain separate databases for building permits, code enforcement, etc. Each of those databases will be migrated to the new system. No decision has been made about utility billing. That could go to the new system or to a stand-alone system in Utilities. 2. Explain what customer service includes. This is the counter function where bills are paid, beach decals are sold and golf permits are issued. Customer service and Cashiering are'two independent functions. They provide a system of checks and balances. The person who sets up a utility account does not accept money. Even though we may contract out customer service, we may want to retain Cashiering. The public would not have to go to two locations to be served. We would mandate that the services be operated from City Hall. The contractor will lease space and computers from us. 3. What is the cost of the software? The software for utility billing and customer service would be approximately $90,000. 4. Will the new system incorporate an envelope system for bills? That quote does not include the printing of the bills. We would have to get a direct quote for that function. 3 MEETING MINUTES CITY COMMISSION WORKSHOP BOYNTON BEACH, FLORIDA NOVEMBER 7, 1997 5. Who handles our direct mail functions? Customer service handles the direct mail functions. 6. If we go to an envelope system, would the purchase of equipment be needed? We received a quote of $53',400. This would allow for the newsletter to be stuffed into the envelope. What is the prospective completion date on the meter change-out and repair program? Bob Kenyon said this program would go on forever. Change-out to the touch/read will take eight to ten years. Are you considering contracting the meter reading function once the repairs are completed? Investigations to determine the price of contracting out the meter installation revealed the cost would be three times greater.than our cost. He did not get a quote for the meter reading function. 9, Would the proposer include a price for meter reading? The meter readers and meter change-out are the same people. They also do turn-ons and turn-offs. We are not recommending contracting out this function at this time., Commissioner Bradley recommends rejecting all current bids and moving into another RFP for the specifics included in the outline. City Manager Willis noted that the recommendation is to have the contractor hire the personnel for a six-month minimum. Other RFPs she has seen included a longer period of time in order to ensure that the contractor will not let these employees go in six months. Dee Zibelli asked how many employees would be disturbed by this move to contract services. The response was nine. Mr. Sugerman explained that when staff looked at the RFPs, there was a range from zero to 12 months. Six months is an arbitrary figure because it was an average. Most of the proposers are not new companies. They are already doing utility billing and customer service for a number of jurisdictions. They will try to use economy of scale to make our system part of the bigger system. Some of the proposers may not have use for these employees on a long-term basis. MEETING MINUTES CITY COMMISSION WORKSHOP BOYNTON BEACH, FLORIDA NOVEMBER 7, 1997 Ms. Zibelli questioned whether these employees would be able to be relocated to other positions within the City. Mr. Sugerman responded affirmatively and explained that these employees can move into any other City position that is open and that they are qualified for. Ms. Zibelli questioned the length of this contract. Mr. Sugerman said the first time the RFP went out, it was for a one-year contract with a two or three-year renewal. In response to Ms. Zibelli, Mr. Sugerman advised that he was not prepared to answer whether or not we will save a great deal of money. Ms. Zibelli said our utility bills are the lowest of any of the cities in the vicinity and we get a great deal of service for the money. In addition, Ms. Zibelli explained that she does not want to talk to someone in South Carolina if she has a question about her water bill. Mayor Taylor said it is impossible to determine the goal we want to achieve until we know the proposals. However, Mr. Sugerman advised that if customer service is the ultimate goal regardless of the cost, then it is important to know that when the RFP is restructured. Perhaps reducing monthly costs to the customer is not as important as customer service. With regard to saving money for the utility, Mr. Sugerman said that will affect the budget year to year and that will ultimately work its way into the rate base and reduce the rates. Mayor Taylor said he has a problem with hiring the emploYees for six months. He would want a minimum of one year. Vice Mayor Titcomb explained that a fourth priority is the implementation of the envelope system to provide a vehicle to talk to the community. Mr. Sugerman said it would be an envelope system. Mayor Taylor asked what it would cost the City if we keep these functions. Mr. Sugerman said it might be close to $150,000; however, he was not prepared to provide those costs at this time. He offered to provide that information before a decision .is made. The employees' cost is the cost of labor and benefits. Johnnie Overton, Avatar Utility Services, was one of the proposers who bid on the entire job. There are more expenses involved with laser printed bills. Avatar now has two people working six hours a day getting a billing ready to go. There will be significant time and costs associated with laser printed bills. However, for two or two and one-half cents a month, the City can communicate with its citizens. Avatar also does meter reading, meter change-outs, tum-ons and turn-offs. He recommends inCluding this in the RFP as a separate function. Mr. Overton explained that if contracting out these services does not save the City money, there is no point in doing it. With regard to manpower, Mr. Overton has experienced contracts from zero to 24 months. Contractors will look for improved efficiency. In order to keep the employees for a longer period of time, the contractors need a longer length contract. They would need a two or'three year contract with a one-year renewal, r There are clauses included in these contracts for non- performance. MEETING MINUTES CITY COMMISSION WORKSHOP BOYNTON BEACH, FLORIDA NOVEMBER 7, 1997 Commissioner Jaskiewicz questioned whether the employee benefits would be the same as they are currently receiving. Mr. Overton explained that it is difficult to match the benefits exactly, but he tries to provide benefits as similar as possible. This can be made a requirement of the RFP. Mr. Overton requested that the City leave the meter reading and the meter change-out program in the bid because the Commission may be surprised by the amount of money involved. Tony Soviaro, Data Management Associates, Inc., said it is important for the contractors to have a longer contract in order to amortize and provide a better return to the City. Most city contracts have out clauses. Therefore, there is little risk to the City. He recommended a five- year contract. Vice Mayor Titcomb feels it is clear from the presentation that there are unanswered questions and it would be prudent to bring this back in-house for definition before bids are requested. The only complaint Mayor Taylor has received relates tothe fact that there is a base fee for water whether or not it is used. He has not received complaints about customer service. Vice Mayor Titcomb agreed with Commissioner Jaskiewicz that the initial catalyst for this discussion was the information system. It is important to define whether that has an importance outside the utility billing area that would amortize the cost over a number of City functions Commissioner Jaskiewicz would like to get the proposals from the bidders and the employees for comparison purposes. Commissioner Bradley agreed. Consensus There was a consensus of the Commission to put together a new RFP. Once the proposals come back, they will be compared with the in-house proposal. Mr. Sugerman recommended that the City Commission formally reject all current bids at the November 18th meeting. Staff will then take approximately 30 days to draft a new RFP that will be presented to the Commission for approval. The RFP will be released and we will await their proposals. The Utilities Department, Finance and Customer Service employees will put together a proposal for their labor and costs. City Manager Willis questioned whether staff should compare the benefits offered to the employees in this package and include the one to two-year employee tenure in the event the Commission decides to contract the services. Mayor Taylor responded affirmatively. Mr. Sugerman suggested that we ask for a three and five year contract that includes meter reading and meter change-out as an alternate. If the proposals are rejected on November 18th, the new RFP will be brought to the Commission at the second meeting in December, or the first meeting in January. 6 MEETING MINUTES CITY COMMISSION WORKSHOP BOYNTON BEACH, FLORIDA NOVEMBER 7, 1997 Mayor Taylor thanked staff for doing an outstanding job of putting this package of information together. Mayor Taylor announced that Palm Beach County would be getting $137 million for education. Our lobbyist did a wonderful job for us and this is great news with respect to our high school. ADJOURNMENT There being no further business to come before the City Commission, the meeting properly adjourned at 5:10 p.m. CITY OF BOYNTON BEACH Mayor ~ ATTEST: (Two Tapes) Vice Mayor 7 CITY COMMISSION WORKSHOP "PRIVATIZATION OF CITY UTILITY FUNCTIONS" NOVEMBER 7, 1997 AGENDA Goal of this Workshop: To provide the City Commission with a recommendation on how to proceed With the issue of "privatizing" certain City Utility functions. Items to be covered: · Let's deal with the issue of "privatization". · Review of the timelines. · Review of the "bids" received. · Review of the stickier issues. · Clearing up some of the confusion. · Making a recommendation. NOTES: DEALING WITH THE ISSUE OF "PRIVATIZATION" SOME DEFINITIONS "Privatization, in its broadest sense, is the transfer of assets or services from the tax-supported and politicized public sector to the entrepreneurial initiative and competitive markets of the private sector".* [* From an article entitled Privatization and American Business as defined by Lawrence W. Reed, president of the Mackinac Center for Public Policy, a Michigan-based think tank dedicated to market-oriented education and research- Imprimis, October, 1997.] This whole process was not designed as an effort at privatizing the City's utility functions, despite the fact that our original Request for Proposals identified it as such. In reality, this effort has not called for: · A trensfer of assets. or · Having an affect on tax supported activities. This effort really should have been viewed as a call for exploring the opportunity to use contract services for these City utility functions. Privatization can mean many things. 'This private sector involvement can cover a wide range of options, from simply contracting out engineering or billing services, to contracting with a company to operate a system, to what is sometimes called 'full privatization", where a private company actually owns and operates the facility"*. [*From an article entitled Privatization Raises Questions, Answers in Water Programs as written by Laurie Klappauf, Editor, Water Sense- What's Working in State & Local Government, September30, 1997.] It is our current position that the effected City utility functions should not be privatized, but rather, that the City Commission should consider the opportunities provided to the City by looking at contracting for services; but only if there are vendors in the private sector who can provide those services by meeting the City's specific needs and delivering those services with the highest of standards. We are not suggesting that there be any transfer of assets. We are not suggesting that there be any transfer of tax supported activities. REVIEW OF THE TIMELINES Fall of 1996- Fall of 1996- November, 1996 December, 1996 February 24, 1997 March 13, 1997 March 25, 1997 April-May, 1997 May 20, 1997 September, 1997 November 7, 1997 City began consideration of "pdvatizing" the utility billing functions as part of the annual budget process because our utility billing computer needed to be replaced. City began looking at replacement of the existing IBM AS/400 computer for a variety of reasons, including the Year 2000 problem as well as the. utility billing function. (Remember the discussion about post card bills vs. envelope bills). The decision of what to replace and how to replace it was not made for some time to come. Commission consensus to go to an envelope billing system (which would allow for a City newsletter stuffer). Request for Proposals (RFP) for pdvatization of utility services is drafted amongst various staff members. (Would it be cheaper to purchase a new utility billing system ourselves, or should we "privatize" this function?). RFP's are mailed to prospective proposers. Pre-proposal meeting held by the City. Proposals due at 2:00 p.m. 6 proposals were submitted. Staff analysis of proposals completed. Based upon the submittals, staff recommends rejection of all bids. City Commission determines to table a decision on either awarding a contract or rejecting all bids, asking the staff to review the issue some more and make a recommendation back to the City Commission within 6 months. City makes its city-wide computer decision to replace the existing AS/400. The computer that is purchased can support a fully functional data base which can meet all of the needs of the Utility, or the new computer can completely integrate with an outside contractual services provider. New utility billing software and printing equipment is not purchased, but quotations for those items are obtained. City Commission workshop. REVIEW OF THE "BIDS" RECEIVED Bids were initially opened on March 25, 1997 Atlantic Utilities Corporation Avatar Utility Services, Inc. Bermex, Inc. City of Boynton Beach Employees Data Management Assoc. Inc. Municipal Meter Reading Services, Inc. $ 890,136.00 687,864.00 265,440.00 749,187.00 688,800.00 223,216.00 With deviations. (4) With deviations. (2) With deviations. (3) With deviations. (4) No deviations. (5) With deviations. (6) (4) meter reading and field services sub-contracted to another vendor. (2) bid price will change if city performs any one or more of the three functions to be contracted. (3) no bid on utility billing and customer services function. (4) bid was actually two separate bids split between meter reading/field services and utility billing/customer services functions. Total represented above was combined for display purposes only. Amounts bid were based upon budget amounts, not actual expenses. (5) none noted. (5) no bid on utility billing/customer services function. REVIEW OF THE STICKIER ISSUES At the time of the original development of the R.F.P., the City did not have a clear vision of what it would be doing to replace its citywide computer which supported the utility billing function. Should the City replace its new computer or should the City contract (privatize) that function? That question can now be appropriately answered because many of the computer decisionS-have either now been made, or pricing of certain functions yet to be purchased are now available to us. At the time of the odginal Request for Proposals the City was a bit unclear on encouraging existing employees to "bid" on this service, and what should the basis of that bid be? Should they "bid" based upon the cun'ent department budget amount? Proposed actual expenditures? Something else? At the time of the original development of the R.F.P., employees were not given a great deal of encouragement to construct their own, accurate "bid". When the R.F.P. was originally conceived, we wondered how much (or how many) of the City's assets should be transferred (loaned, sold, etc,) to the successful bidder?. Should the City hold on to its customer base information? Should the City maintain the cashiering function? What about the hand-held meter reading devices? All of these questions were left unanswered in the original R.F.P. What obligation does the City have to incumbent employees? Should the City mandate that the successful proposer absorb the current employees, guaranteeing them work in the future? The original R.F.P. left this question unanswered as well, using language such as "the proposer may...". Why was the City trying to "privatize" this function anyway? It had never privatized before! But what about contracting for services such as janitorial services, mowing services, food services, etc? While the City may not have "privatized" in the past, it did have a history of contracting for various city services. What really are the most important issues to the City? Saving money for the utility system? Improvinc~ customer service? Reducing monthly costs to the customer?. What does the City want to accomplish in this effort? What are the specific goals and can those goals be cleady articulated? CLEARING UP SOME OF THE CONFUSION Based upon our review of this issue over the last six months, the City staff now believes that: The City/utility should retain ownership of the customer database, however, because of the capabilities of the new city-wide computer system, that database can be shared with an outside, contract service. If the customer service functions, as well as the billing functions are contracted for, the City should mandate that proposers take all existing employees and guarantee them employment for at least 6 months. The City should retain the meter reading function (because of our meter change out/repair program), but be prepared to contract that function out if the utility customer base expands rapidly (i.e., annexation). The City does not necessarily need to retain the cashiering function and should look at the options associated with contracting for that service as well. If these services are contracted for, the proposer will need to stipulate a price for leasing some of our computer equipment and our office space. (The original R.F.P. was unclear on these points). The utility will need to insure that there is a strong coordination Of the meter repair/meter change-out program between the successful proposer and the utility. MAKING A RECOMMENDATION Formally reject all current bids. Solicit new proposals with a new Scope of Services: · Develop a Request For Proposal for contract services. Do not "privatiZe" any aspects of the City utility. · Request that contract services inclUde utility billing, customer services and possibly cashiering as an altemate proposal. · Mandate hiring of incumbent personnel (6 months minimum). · City should maintain ownership of up-to-date customer database, but be prepared to share that. · Proposer needs to be made cognizant of need for coordination of meter repair and meter change-out program with utility.