by the TU Water RFP Expert
(Click here to read the 10-Year Cohasset WaterRFP)
Last night sounded like a clear signal that the water commission is feeling the heat and light of public scrutiny. I wonder, did Aquarion back off – too many bright lights and too much controversy for the Cohasset deal to be worth their while under the concession RFP? Congratulations are owed to the Fourth Estate if this reading of the water commission’ statements is correct!
Next on the list will be a full going over for the one-year management contract RFP, which will probably reveal itself as a measurably less expensive route for the procurement of water system management services. However, Cohasset water watchdogs will want to be on watch to be sure that the management contract RFP is not written either as an unattractive straw man for the concession RFP or a stalking horse for a ten-year concession that it evolves into at the end of the first year, when the water watchdogs are tired and distracted.
Here are a couple of new questions that come from listening to the proceedings:
1. How does the water commission expect the concessionaire to earn a profit if it does not “mark up” its labor and other costs (something they see as a short-coming for a management contract, like the one the Town currently has)? Certainly the concessionaire will not provide services at cost and leave at that. Is it expected that they will reduce staffing? If so, why can’t American Water or another company do this within the context of a standard “qualified” management contract?
2. Does We haven’t applied to the state for permission (to sell surplus water into another basin i.e. Hingham) mean we never will? Or does it mean that the water commissioners will never do this until the controversy has died down, people have gone to the beach for the summer and an addendum to the concession contract can be slipped under the radar. (By the way, Scituate, which is in the same basin as Cohasset, meaning that no state permission for an out of town sale is needed, is looking for a new source of water.)
(Publisher’s note: We already have an inter-basin transfer permit
which was required for the current sale of water to Aquarion.)
3. How do costs go down if Cohasset just shifts them to another party? Doesn’t the other party (the concessionaire) need to cover the same costs and then add a margin for a profit, even if the annual fee is “fixed” and the contents of the concessionaire ‘s grab bag are not subject to examination?
4. Cautionary tale: Back in the 1990s and the early years of this century, municipalities entered into opaque interest rate swaps that were meant to stabilize outlays for interest on variable rate bonds. Unfortunately, these agreements were built on faulty assumptions and tilted in favor of the banks. All of this fell apart in 2008 and some major municipal bankruptcies, including the notorious bust-out of Jefferson County, Alabama were the ultimate result. The refrain at last night’s Cohasset Water presentation, a breathless infomercial for utility concessions as the ultimate solution, was “stability” of operating costs. As interest rate swaps demonstrated, you can’t “stabilize” volatile costs without paying for it. People who take on transferred risk only do so if they are being paid for it.
5. Another cautionary tale: One of the names that came up tonight was United Water. Selecting that firm to do major work for the Town after the Atlanta fiasco would be like hiring Bechtel to design and manage the construction of a tunnel after the Big Dig.
6. Since Cohasset has some large new watt customers, whose demand will add to net revenues and the Town is nowhere near to being I excess of permitted (by the Commonwealth) retained earnings, why can’t repair and replacement reserves and a rainy day fund be built up to help smooth out the variability of net revenues that relate to factors such as weather and housing cycles?
7. Is Cohasset still at a point where the Town can’t execute credible cost accounting and deliver what an auditor needs to give a clean opinion on water? If this is the true rationale for a water concession, then the Town is still in trouble after a concession is granted. Or maybe we pay the concessionaire to do the job within the opaque “prix fixe.”
8. If Cohasset has to be in a position to track licensing and other compliance matters and report to the Commonwealth as owner of the Town’s water system, how does this tracking and reporting obligation get offloaded to the concessionaire without paying the concessionaire for the services?
9. Bottom line: Tonight sounded like “New lamps for old.”© Copyright 2012 Tanna K, All rights Reserved. Written For: Tinytown Unleashed