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HomeMy WebLinkAboutMinutes - City Council - unsigned - 1991-12-11 - Adjourned Regular Meeting1 12/11/91 City Council, Adjourned Regular Meeting City Hall Conference Room, 760 Parkview Redding, California December 11, 1991 5:17 p.m. The meeting was called to order by Mayor Dahl with the following Council Members present: Buffum, Moss, and Dahl. Council Members Arness and Fulton were absent. Also present were City Manager Christofferson, Assistant City Manager McMurry, City Attorney Hays, Director of Electric Utility Lindley, Electric Utility Resources Manager Coleman, Director of Finance Downing, Electric Utility Project Coordinator Gilfoy, Public Information Officer Bachman, City Clerk Nichols, and Secretary to the City Council Moscatello. Also present were Electric Utility Commissioners Potter and Barzin. RESOLUTION - Letter of Intent with Industrial Power Technology re Electric Power Generation Facility Project (E-120) Mayor Dahl stated that the matter of the Letter of Intent with Industrial Power Technology (IPT) was removed from the regular City Council meeting of December 3, 1991, in order to review the matter further. Director of Electric Utility Lindley recalled that on November 23, 1991, City Council directed staff to proceed with development of a definitive agreement with IPT for the purchase of combustion turbines and to begin the permitting process. On December 5, 1991, the Electric Utility Commission (EUC) reviewed the proposals further and recommended that City Council continue to proceed in the development of a combustion turbine project and move forward with the IPT proposal. It is also the recommendation of staff to approve the Letter of Intent (LOI) with IPT. Mr. Lindley conveyed that the Letter of Intent will only establish the principles defining the framework for further negotiations and provide for payment to IPT in the amount of $240,000.00 to begin the required permitting process. Mr. Lindley outlined recent modifications to the Principles in the Letter of Intent and explained that the LOI was modified to increase the benefits of IPT's proposed project to the City of Redding. Electric Utility Commissioner Potter stated that the Electric Utility Commission met on December 5, 1991, and concluded that IPT's proposal was the best of the two proposals. The Commission voted five to one in favor of IPT. Mayor Dahl asked staff for a response to Electric Utility Commissioner Iwanick's memorandum dated December 5, 1991. Mr. Lindley noted that Commissioner Iwanick developed a separate economic analysis of the two power projects and questioned Henwood Energy Services, Inc.'s analysis. Mr. Lindley indicated that staff found substantial errors in Commissioner Iwanick's analysis, and the response from the Electric Utility Director dated December 10, 1991, was reviewed in detail. Mr. Lindley conveyed that subsequent to the City Council meeting of November 23, 1991, when Council voted to move forward with IPT's proposal, a new proposal was received from Energy Services, Inc., and a local company expressed interest in submitting a proposal for a combustion turbine project. He suggested that these proposals be considered at a subsequent time for an additional combustion turbine project in three to five years. Mayor Dahl noted that local labor leaders questioned if IPT would use local labor to build the project. He conveyed that City Council is also concerned about this issue because the project can have a strong positive economic impact on the local community. Robert Walther, President of Industrial Power Technology, stated that IPT has directed its contractor, Zurn/NEPCO, to hire local labor. Mr. Walther conveyed that the Economic Development Department (EDD) awarded Zurn/NEPCO the 1987 Employer of the Year in Shasta County and the 1988 and 1989 Employer of the Year awards in Lassen County for hiring local labor on projects. Mr. 2 12/11/91 Walther explained that non union and union labor will be hired through EDD, and IPT will offer training for those skills not available in the area. He noted that the only personnel IPT anticipates bringing in from out of the area are for turbine control and project start-up work. Mr. Walther said IPT will be happy to make hiring local labor a contingency of the contract and EDD will monitor the program within the Redding area. Mr. Walther referenced the letter City Council received from Zurn/NEPCO to IPT dated December 11, 1991, with copies of awards and certificates received for hiring local laborers and veterans attached. In response to Mayor Dahl's question, City Attorney Hays stated that staff can condition the final agreement to include a provision to hire local labor. Council Member Buffum reiterated that City Council supports hiring local labor for this project. She pointed out that the EUC has diligently reviewed both projects and made their recommendation to accept IPT's proposal. She stated that it is the intent of the City to buy the best equipment, and IPT's proposal offers standardized equipment and a track record that holds up. Energy Services, Inc. (ESI) does not offer that, and Council has received copies of letters from bonding agents who do not recommend ESI. Discussion on the capacity and efficiency of both projects was held. Jay Nagori, Black & Veatch, commented on the capacity of the IPT proposal. Jack Kenealy, attorney for Energy Services, Inc., stated that Smith Barney has indicated a willingness to bond the ESI project; therefore, the bonding issue is not an issue at all. Regarding the issue of parts, Mr. Kenealy conveyed that Dresser Rand, as outlined in the video submitted to City Council, has committed to providing controller parts for up to 50 years. Mr. Kenealy referred to a caller on the Open Line Talk Show who stated that Zurn/NEPCO said they were hiring local labor on the Anderson project, but 90% of the labor was from outside the area. Mr. Kenealy suggested that Council look into this issue further. He stated that City Council is on the threshold of getting the best project at the best possible price, and it would be very beneficial to the City to take another 60 days to evaluate the most recent modification by ESI. He noted that there is a $10 million difference in capital cost between the two projects, and it is in the City's best interest to keep this matter in a state of flux and allow the process to work. Mr. Kenealy noted that ESI submitted a bid for the project, and IPT's proposal was the result of negotiations. He commented that he would be surprised if at the end of 60 days, City Council would even be looking at the same proposal from ESI or IPT. John Kenny, attorney for Industrial Power Technology, stated that the fact that Council is meeting with ESI and IPT today proves that the process is working. He noted that ESI chose not to participate in the process or work with staff and chose instead to approach Council directly. The matter was referred back to the Electric Utility Commission, and there has been a two month hiatus. Mr. Kenny stated that there could be a number of proposals submitted within the next 60 days, the process has been ongoing for two years, and it is time to make a decision. Kevin Johnson, representing Zurn/NEPCO, reiterated that Zurn/NEPCO hired 70% of its employees locally for the Anderson power project, and 72% local employees for the HL Power facility in Lassen County. Mr. Johnson stated that City Council is welcome to contact EDD to verify this matter. Noting that IPT is willing to condition its agreement with the City to hire local labor, Council Member Moss said he would be in favor of the City Attorney drafting an agreement to heavily favor the employment of local labor. Council Member Moss stated that he received a call from Commissioner Iwanick who conveyed that ESI submitted another proposal for a 60 megawatt proposal similar to IPT's proposal. He said he assured Commissioner Iwanick that this information would be conveyed to Council. Council Member Moss questioned if City Council moved forward with the Letter of Intent with IPT, would it be ethical for Black & Veatch to analyze ESI's proposal, under payment from ESI. 3 12/11/91 Mr. Nagori stated that this would represent a conflict of interest for Black & Veatch; however, if the City of Redding is considering a new proposal, they would be glad to look at it for the City. Council Member Moss agreed that it is important to get the best deal possible; but sooner or later, Council must make a decision. He pointed out that every 4 12/11/91 delay costs money and the sooner the construction of the project begins, the better. Council Member Moss stated that Council should move forward with IPT's proposal. Council Member Buffum stated that a 60-day continuance may be critical because the City has to buy peak power from PG&E during the Summer months. She pointed out that construction practices do not allow new bids after a deadline has passed. She noted that it may not be fair for ESI to continue to make new offers. Mr. Lindley conveyed that each independent power producer had the same proposal, the same information, and the same opportunity to negotiate. Mayor Dahl relayed that Council Member Arness expressed his full support for the Electric Utility Commission's recommendation; and if he were here tonight, he would support the IPT proposal. Mayor Dahl stated that City Council has listened to ESI's concerns, and the Commission has spent long hours studying and scrutinizing the proposals. The other concern of Council is to ensure that the community is put to work because this project will be a major economic stimulus for the Redding area. Mayor Dahl suggested that Council move ahead and not procrastinate. MOTION: Made by Council Member Moss, seconded by Council Member Buffum, that Resolution No. 91-533 be adopted, a resolution of the City Council of the City of Redding approving and authorizing the Mayor to sign the Letter of Intent between the City of Redding and Industrial Power Technology, for the purchase and sale of an electric power generation facility. Voting was as follows: Ayes: Council Members - Buffum, Moss, and Dahl Noes: Council Members - None Absent: Council Members - Arness and Fulton Resolution No. 91-533 is on file in the office of the City Clerk. MOTION: Made by Council Member Moss, seconded by Council Member Buffum, pursuant to Industrial Power Technology's commitment to employ as much of the local labor force as possible, to direct the City Attorney to include a condition in the Agreement with Industrial Technology Power to hire as much of the local labor force as possible. The Vote: Unanimous Ayes Noting that Redding has a highly qualified labor force, Council Member Moss stated that he will be extremely disappointed if IPT cannot do better than hire 70% of its work force from the Redding area. Council Member Buffum questioned if the motion should include a requirement to train local people for jobs. Stating that City Council has made its concerns clear and IPT will work with the City to achieve Council's objectives, Mr. Kenny cautioned Council not to make too many restrictions because the possibilities may be limited, rather than expanded. Council Member Moss pointed out that City Council will have the opportunity to accept, or not accept, the final Agreement. Boyd Evans, representing Local Builders Trade, asked if the power project is subject to public works laws regarding prevailing wages and apprenticeship. City Attorney Hays stated that the City of Redding considers this project to be a public works project. In response to Mr. Evan's question, Mr. Walthers stated that IPT is aware that this is a public works project, and that the project is subject to the minimum prevailing labor rates published for this area. William Davis, Industrial Power Technology, noted that bonding and other requirements were the subject of lengthy discussion between the City of Redding and IPT. 5 12/11/91 ADJOURNMENT There being no further business, at the hour of 6:10 p.m., Mayor Dahl declared the meeting adjourned to 6:30 p.m., December 17, 1991, at the City Council Chambers at 1313 California Street, Redding. APPROVED: _____________________________________ Mayor ATTEST: ___________________________________ City Clerk