This is the end of the video. I'm not sure if you're watching this video. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. guitar solo It's 11 a.m. on Tuesday the 12th of November, 11, 12, 13. This is the Environmental Quality Committee meeting. I promise to have everyone out in time for UK game time. If not sooner. If not sooner. I know we have a full agenda, so we'll go ahead and get started. First up is the October committee summary. There have been several corrections made in terms of typos. Are there any corrections other than what we've already seen presented to us? Anybody else have any corrections? If not, I'll have a motion to approve. A motion by Vice Mayor Gordon, second by Council Member Clark. All in favor say aye. Aye. Any opposed? All right, we'll get those corrections made. Council Member Farmer, thank you. Number two on the agenda, Energy Investment Fund. Our CAO, who's going to present on behalf of the administration? Okay. All right, Mr. Bush, welcome. It is. Thank you. We're queued up. Okay. I will be giving an update on the Energy Improvement Fund, as it's referred to in its resolution. And I'm going to start with, well, provide an update and identify where we intend to use these funds. I will start with a brief background, because it's important to understand the intent of this fund and where it fits within our approach to building improvements. If you'll talk the microphone a little closer. I'm having trouble hearing you up here. I'll lean in a little bit. And we'll start the clock at 15 minutes. Okay. Thank you. I will hustle. The EIF was authorized in 2010. It's commonly more generally known as a revolving loan, And this is where incremental savings from some sort of energy conservation measure are collected over time to be reinvested in the next project. Now, to kickstart something like this, you do require some seed funding, which the EIF was written into our application to the U.S. Department of Energy, so as part of a stimulus-funded project. and the intent then is the EIF, it fills a gap between your general repair and maintenance of buildings and your larger capital-intensive projects. In this sense, it's really a true initiative where your equipment may not be, it's still functional, would not be broken and need replacement, but you've identified an opportunity for savings that will pay for itself. If you're a visual person like me, it would look like this. Operational budgets, of course, are being used for the emergency repair, replacement of broken equipment, as you move in then into preventative maintenance and service agreements on your larger equipment. But as you start getting into retrofits, that can be more a year-by-year basis. Do you have surplus funding towards the end of your budget cycle that you might want to replace an older aging piece of equipment that's still functioning today? And obviously in the tight budgets we've had of recent years, this gap has been strained more than usual. So the EIF is a good complement in this area. Okay. Now, the process, it is slow, and that's both by nature and design. If you look at the image there on the bottom right, you conceptually have some original utility budget been allocated to provide some service or operation of the government. Now, we make a change such that the actual utilities then are reduced, and we begin encumbrances. So we can quantify that reduction, and on a quarterly basis, encumbrances then are made during the fiscal year. Once the certified audit financial report is complete and those encumbrances are known to be available, that's when we'd make a transfer through a budget amendment to the EIF. Council would also approve then the new utility budget, so it's at a lesser amount, and savings, which then can be used in the Energy Improvement Fund. In this first round, we were very conservative, and the monitoring of those encumbrances went on for more than 12 months, even up to 24 in some cases. there is more than one EIF just as you have dedicated revenue streams for different operations in government we have to track the dollars within the energy improvement fund by their fund number so utility accounts that address general services are tracked differently than those in the urban service area for example in that sense it's a pooled resource Oversight of these projects comes from the energy team, so they are aware of what's been proposed. Any division can propose a project. The team would review that. Now, we follow the same procurement guidelines as everyone else, so council still has approval over selection through an RFP process or your larger bids and payments to vendors. criteria in in general to to keep things fairly simple uh you've obviously have to be affecting a bill that's paid by lfucg those savings need to be verifiable and there's a 10-year limitation then in terms of the ability to encumber funds and i i say ideal because not all projects would would meet these criteria but as an aggregate to keep the pool solvent they need to adhere to these rules now this is a great slide just as a summary of what's occurred since the beginning again the seed money for this came from the u.s department of energy energy efficiency and conservation block grant that was a 2.7 million dollar grant the city received about half of that was invested in the projects that I oversaw in the buildings, the largest being the boiler removals from the Dunbar and Black and Williams Community Center. We had a fairly sizable work at police headquarters and then some smaller retrofit projects. And the last one was our purchase of utility tracking software known as EnergyCap. Now, through June of this year, the cumulative savings related to those projects was $1.3 million. That is just coincidence with the seed money invested. And that's a conservative number. We were tracking the rate-based utility savings. We didn't get into the minutiae on retrofits and which accounts have been closed and which services have been deactivated. So it's a conservative number, but half of that then was returned to fund balance. The other half is what has been deposited in what we now refer to as the EIF. So during this time frame from C money, it was created and became an account that we could actually deposit to. So today there's $420,000 in the Energy Improvement Fund. There are $230,000 that were encumbered during last year, which are still waiting for the completion of the financial report to be moved into the EIF, and the summation of which, of course, is $650,000. Here are that $420,000 if you look at it by budget pool, the bulk of which is obviously in the general services area, which pays much of our utilities, and then the other particular funds. the project list that we're currently working on I should note that not all of these will be done and I don't plan to go in bullet by bullet but these are the ones either in process or under review to verify or at least get a better estimate on their savings before we go forward Let me highlight three, I guess, the second bullet, police headquarters, that's direct digital controls. The reason I highlight that is to stress the importance in guidance from council on long-term occupancy of buildings, because you sit in a building that's very energy intensive, but how long we're going to remain in this building affects our selection of projects. knowing we need a return within a 10-year period to pay back that investment. Further down on the list, toward the bottom, we have a T12 replacement. T12 lighting technology, it's a very old, inefficient lighting technology that we have quite a bit of in some of our facilities. The business case is fairly sound. As long as that light's on more than eight hours a day, you can replace it at a cost-effective solution. I say unit price there because that's a very scalable project where we could get a fixed bid to replace any given light, and it can scale then just however many lights we want to do. The last one, it falls under that category, somewhat violating the rules, in that the waste management, I should say the string of buildings along Byrd-Thurman, they all share one electric meter. That's problematic because both fleet services and the solid waste building are paid from separate revenue streams, yet we only have a good estimate of how much energy each respective building uses. So it's just best practice if we had an individual meter on each of those buildings, but for me to justify an actual reduction in energy savings due to that meter, it gets more difficult to quantify. So it's the type of project that should be done, and it can be done today given the available seed money, but it will somewhat be paid for by more higher ROI projects in the pool. Other options for the Energy Improvement Fund include complementing existing CIP projects. And, again, the capital-intensive projects are not a sweet spot for the EIF. It's unlikely that just conservation alone can recoup that investment. But we can complement them. And under what I believe is referred to as fund balance projects, you have a Dunbar window upgrade. and Parks has also expressed a desire to complete the second and third floor renovation of the HVAC systems. So that's one where the EIF might be able to complement those fund balance and broaden the scope then in that particular project. Likewise, the Bell House boiler and the pool pumps are to be upgraded, but we might be able to expand that by complementing with EIF. I think what you'll find is alternates are often value engineered out of your original project scope, and we try to bring those back into play. Some of the larger initiatives that have been identified, these have potential high returns, but we haven't completed all due diligence on them, are the purchase of the downtown Granville streetlights. We know how much we lease them for today. We know how much they're likely to cost us if they were a metered service that we own. What we don't know as much about is the maintenance requirements of these lights, and we have an ongoing conversation with Kentucky Utilities at the moment to determine that. Town Branch flares its biogas. It does reuse a third of it, but it flares the rest. And that's a known resource that we'd like to take better advantage of, but something of that nature is likely to require a phase A study to begin just to get a better feel for the costs and return on that type of project. And then lastly, the detention center. We are in the process of reviewing it for what's known as an energy savings performance contract. this is a very capital intensive, a large project likely to be bonded, and whether the EIF has a place in that type of project as well. So these are bigger initiatives. Again, you're stretching the intent of the EIF, but they haven't found a firm home elsewhere within our approach or our portfolio of resources. And I can entertain questions in on any specific projects or the process of the EIF. Thank you. With two minutes to spare, I appreciate you being concise. Just to be clear, your current fund balance is $650,000? $420,000. But with the money coming in after the audit, it will be $650,000. I have not heard anything to the contrary that that $230,000 will not be available. I've not been made aware of that. Does that include the money we talked about during our fund balance discussion, too? It should, but I'm probably not the appropriate person to ask. It's encumbered in that $650 total. It's not in addition to. Chair, I think so. I can verify that to make sure we're giving you the right answer. Okay. I just know he covered it real quick in the presentation. We want to make sure exactly what we know we're working with money-wise. All right, first up we have Council Member Massadi. Thank you, James, for the presentation. One quick question. Can you tell me again what EECBG stands for, please? Energy Efficiency and Conservation Block Grant. And that's from the feds? That was, yes. So you received that stimulus money. Do we receive any type of rebate as well? I know when you do green initiatives and try to reduce energy, do we receive money in that respect as well? Yes, we did receive, I've completed maybe half a dozen rebates through the utility programs for our conservation projects. Okay, thank you very much. Next we have Councilman Farmer. Thank you, sir. Thank you for the report today. Just a couple of follow-up things. I guess on the management, the one marked management at the top, which I guess was like the second slide in. Okay. The last one there, 10-year savings should exceed initial cost, initial cost being what? The cost to implement the change. I mean, if you bought new equipment, put in new lights, that had a fixed cost. And what we're doing is over a 10-year period, we're diverting then the savings attributable to that action to an account. It builds up over time to pay back the loan. So that number would rise, too, as you continue to make purchases, wouldn't it? Your initial cost, I mean, you're going to make purchases over the 10 years, aren't you, or are they all in the first year? Correct. That is, it's a pooled resource, so you have multiple projects putting in incremental savings, and as it grows to sufficient size to fund the next project, you would pull the trigger, so to speak. So I guess we'd see a balance sheet along the way of what's been saved and what's been spent. That's correct. compare initial versus actual or ongoing. Yes, and that's where we're getting our feet under ourselves. We did a lot of scoping last year, and some of those projects were delayed. Actually, on the final list, both the pool pumps and the DDC controls, I believe there's another, but those were all kind of in queue, but then the operating capital was able to fully fund them. Then on the slide marked EIF Future, quote-unquote discrete projects, the Downtown Arts Center Tune-Up, gas line isolation. Correct. Give me a tune-up. Okay. Okay. Tune-up is where we sense that our control strategy for that building has either changed or it's no longer appropriate for how that facility's... But we've had a strategy. Yes. Good. Okay. So we actually just hired an engineering firm to review what's known as the sequence of operations for that building and recommend changes. My intuition tells me that we're not properly using seasonal setbacks, which it's kind of like the dead band. You like your house maybe a little, you can tolerate a little warmer in the summer versus a little cooler in the winter instead of trying to fix a target and use it year-round. So you're trying to establish a baseline to measure against there with that tune-up, I guess. We have the baseline, and it looks out of whack. So it floated to the top as it's a worthwhile investment. There were, again, enough suspicion about how those controls are being utilized that we thought they need to be reviewed and verified that this is a computer system. What's in that computer system matches what we thought we told it. Well, beyond your work, I think the downtown art center is an opportunity for us still to explore, even though it's our building, it needs various help. It's an underutilized facility. It has a couple floors without occupancy. Those are the sort of things that we need to ensure being properly. I think just stepping up to the back there in any way is very good, so I appreciate that you have that there. Then on the EIF future things on the next page, the downtown Granville street lights are the green ones that are out front, up and down. Yes, sir. Main Street and Rose Street. And so what are you saying here, bigger initiatives? You're trying to say we should buy them? Is that what you're saying? That's correct. What we know, we lease those from KU for $300,000 per year. Right. The energy that's necessary to light those lights would cost approximately $20,000. So we paid $280,000 for KU to maintain those lights. We believe that's more than sufficient to adequately address their needs. There's a light occasionally knocked over, bulbs go out about once every six years, and they need paint about every decade. So do we have the resources available if we wanted to purchase those? It was in an original discussion of use of fund balance monies. I've not heard it. It never surfaced during that discussion? I haven't heard of it recently. And that's where the EIF could be an obvious resource to acquire them. I would think if we delve into this further, it's the absolute right thing to do for us to buy those as quickly as possible, make them ours. And we appreciate KU for the years of maintaining them, but it's a resource that we should own. It will cost us a lot less to own and go right to your bottom line. So I'm very much in favor of this. I'm glad you had it as a bullet point. I would like to get it done. Okay. All right. Thank you all very much. Thank you, Mr. Chair. Thank you, Mr. Farm. Council Member Akers. Thank you, Chair. Can you tell me a little bit more about the Dunbar windows? Parks had requested $150,000 of fund balance to replace those windows. I have not seen their actual quotes on those or the type. I do know today they're a single-glaze with broken glazing, so they leak a lot of air and water. They would be replaced with a more modern window, most likely a double-pane vacuum gas type. That was my question. I remember that we funded it from fund balance, so I just was making sure that it wasn't duplicated on your list or from your budget in the fund balance. No, that's what I mean by that. And then HVAC was separate, though. Correct. Are you funding HVAC? That's where we need to work coordinating our efforts. Okay. Because they, too, will need to go through a bid process. And where does the actual cost come relative to that $150? It could give them a little leftover to work on HVAC, and I can complement that. Or maybe they just need a little additional funds simply to complete the window project. What we know is that project, whether it's windows and or HVAC, will reduce the utility bills on that building. So it's a worthwhile endeavor. Well, I thought that HVAC was worked on a few years ago and the Dunbar Center replaced. That's correct. It was a boiler removal project that only addressed the first floor. Okay. We simply didn't have the funds to address the second and third floors. Thank you very much. That's why you see the window units poking out the side of the building. Right. Okay, thanks. Thank you, Councilman Akers. Councilman Lane. Thank you, Mr. Chairman. My question has to do with the management sheet. Could you flip back to that for me? Right. I like the part in here that says ideal criteria, must lower LFUCG, utility payment, verifiable savings. and the question I have, how do you know what our cost of operating these different components in the building, how do you verify what the costs are and how much we're going to save? There's four different methods that are commonly given through international protocol for measurement and verification on building projects. The first being more of a whole building approach, If your project's going to impact it at that level, you can look at the entire utility bill. As you start narrowing down and you're focusing maybe just on one piece of equipment within a building, it could be prescriptive, and that's just with the tech data sheets, say on a lighting change out from a certain wattage to another and knowing how long that light's on. or we would invest in sub-metering of that piece of equipment, and we have the appropriate data loggers to do that. So the answer is it depends very much on the project, and that's part of the oversight by energy team. One of our criteria is that we, up front, we say, how are you going to monitor this particular project? Is it prescriptive? Is it utility bill? Is it data logging? And the fourth component would be building simulation, which we haven't used to date, and that's a very specialized field and rarely invoked. Well, are you able to look at our accounting system and pull up what the utility costs for one building are, what the water costs are, the gas costs? How much detail can you currently get from our accounting system? Quite a bit. In this bottom left box where it says energy cap, that's the software we purchased to provide this service. And it has cost avoidance modules built into it. I can rely on those. I can do my own ad hoc analysis. But it provides us both the energy use as well as the cost that was paid through the accounting system. and it includes more sophisticated features such as normalizing them for changes in weather and occupancy. How frequently do you look at the operating costs on different buildings? Do you get a monthly report on what the utility usage is by building or something like that? Correct. The utilities provide me with a monthly, what we call a batch file. So each month I get all of our accounts in a single electronic format. That's imported into EnergyCap. I did Columbia Gas this morning before this presentation, so we review the 84 accounts that are in there, run it through some automated checks. It kicks out things that I should probably investigate, make sure they're commiserate, or do they warrant more investigation. And so that is just part of my daily responsibilities, but it's heavily done once a month for each of the primary utilities. The buildings that you selected, the projects you have noted up there, are these ones that you feel have the greatest potential for savings? And that's why you selected those? Or could we apply this concept throughout all the buildings that the urban county government has to save energy everywhere where we're operating? That is the first cut of the approach, is looking for high-intensity buildings based on function. I also balance that with simply what are the highest cost users. So you have a magnitude as well as an intensity to deal with. And then a third layer is often the long-term viability of that building. I have been hesitant to invest heavily in this building, not knowing if it will be here in five years. I certainly don't want to get into a long-term relationship with an outside vendor or contractor because they'll, of course, demand payment for those savings regardless if we're still using the building. So there's a lot of factors that come into the selection process, and there's a need-based one I should mention as well, and that's when you're at the end of a life cycle on certain equipment, you know you're on borrowed time. Perhaps that should move higher up in your priority list. We're simply not at the place where everything has a very, looking for a good word here, but a planned replacement period. We tend to push things out a little further than need be. So that's a very real impact that needs to be entered into the equation. Okay. Thank you very much. Got some good answers there. Thank you. Any other questions from Councilmembers? All right, sir. Thank you very much, Mr. Bush. We appreciate it. You're welcome. Next on our agenda today are the contract change orders, and this is modification to CAO Policy 15R. And we have Mr. Acevedo coming forward, who is our project manager for the remedial measures projects, all 82 of them. Welcome, sir. Thank you. Thank you. Thank you, Councilmembers, Senate, members of the committee. Thank you for allowing me to be here today to discuss with you the not always popular topic of change orders and the change order approval process. When we hear these words, and perhaps already just since I've started, we hear the words change order, we conjure up negative thoughts. Immediately we conjure up these thoughts. And it's just part of the process, part of human nature. But we think of cost overruns, poor project management. And for you as elected officials, perhaps you're saying, am I doing my job, if I approve this change order, as being a good steward of the public's money? And I think that's very typical in the process. But change orders can be good. We can improve a project with a change order. and many times we will increase the cost of a project with a change order. We may have to adjust the time of a project, of a contract, with a change order. Regardless of the reason, the purpose of that change order, it is a necessary element of the construction process and the contract administration process. So what is exactly a change order? and I didn't think I saw anybody from the law department. I'm not a member of the bar, but as Charlie and I went through engineering school, I think the way we were taught that a change order is an amendment to the construction agreement or we typically say construction contract. It's typically executed after the agreement and when construction is in process. Reasons for a change order, and we typically have two types of change order. There are other types of change orders. We really don't get into those. Most often with the types of construction projects that we have, and certainly with the remedial measures projects, we're going to be looking at directed or constructive change orders. And if I could take just a minute to talk about these two types of change orders, and I want to use an example from a construction project. A directed change order would be, let's say we've got a sewer construction project underway, and the plans call for the sewer line, however shallow, to go underneath a sidewalk. And our construction inspector out there with the project observes that we're going under this four-inch thick sidewalk, and we're digging a hole that's perhaps eight to ten feet deep, and what's going to happen? The sidewalk, even though the plans call for the sidewalk, the pipe to go under it, the contractor to dig under the sidewalk and not remove it, and it's a sidewalk that's in poor condition, it's going to fall in. Our construction inspector would say, let's go ahead and replace that eight feet of sidewalk. That, in effect, becomes a directed change order, a directed change order. We've changed the terms of the contract by instructing the contractor to replace an additional 8 or 10 feet of sidewalk that was not contemplated in the bid documents. There is no specific quantity in the bid document for that directed change order. Another situation for a constructive change order, as we're digging through an area, and I can tell you this has happened already with our projects as we've started out, Unknown sinkholes. We can encounter an unknown sinkhole where we're excavating for a manhole or a sewer line construction 14 or 15 feet deep. We can't place a manhole on top of a sinkhole. It's going to go away. It causes a collapse. Sewer overflows to the underground water. So the engineers have to consider then and negotiate with the contractor a constructive change order. Now, many times these types of change orders go ahead and they are approved prior to coming through the formal process of council approval. Nonetheless, we have changes to the construction plans. We have unexpected conditions. We need to document final pay quantities, and we need to document changes in contract time. And these are the reasons for our contract change orders. The terms of the change order is generally always the same. We have a change in the scope of work, as I just described. We have a change in the quantity, as I just described. We can have changes in time or we can have changes in cost. Most often, we're going to have a change in work, in the scope of work, in the quantities, and in cost. And sometimes the contractor will request a change in time. Our present policy is CAO Policy 15R. And in summary, I think you have a copy of this policy in your agenda packet today. But in summary, this policy says that all change requests, and it's still a request until it's approved and becomes a change order, all change requests must come to the council for approval. The goal being oversight and control of these construction projects. But if we go back to my example of the directed change where we've got 8 feet or 10 feet of sidewalk that needs to be replaced, technically we're violating the contract. We're violating the policy. If that has already been directed to occur by either the on-site representative or the construction engineer, if it's already occurred, we've already incurred that liability to the city. The city is thus responsible for that cost. Now, again, I'm not trying to play lawyer on this situation, and I'm sure that there are two sides to every legal question. But at the same time, the contract documents say that we have a legal representative on site to make decisions on behalf of the city. So there is basis to say that we have incurred liability with a directed or constructive change, even though that change request has not come back to the council for formal approval. The impacts of this current policy, and as Councilmember Stenard said, we have 82 projects with the RMP, we have the potential to delay or slow construction. Now, if we go strictly by the letter of the policy, strictly by the letter of the law, and bring every change request back to the council for approval, we run the risk of delaying the contractor, of slowing construction, and therefore we incur potential costs and potential claims from a contractor if that contractor experiences downtime, because we need to administratively move through a process of change order approval. Now, our goals in the RMP management are to be efficient in the implementation of the consent decree and the remedial measures plan, to be efficient in contract administration, and to maintain proper oversight. It's our goal as well to be a good steward of the public's money. As we looked at this process of change order approval, we've surveyed our peer group of utilities, albeit structures are sometimes different in these other entities, and we looked at the Knoxville Utilities Board, the Cincinnati MSD, Metropolitan Sewer District, Nashville Metro Water Services, which includes water and sanitary sewer. All three of those entities, all change orders are approved at the staff level. With regard to the Louisville MSD, they have a requirement that it be brought back to their governing board if a single change order exceeds $50,000. And with the sanitation district and the Louisville Water Company, if a single change order exceeds $250,000, it comes back to the governing board for approval. our recommendation here today is a tiered approach and i want to explain this and answer any questions but if we look at the cumulative contract amount and we have 82 projects again and of those 82 projects i took a look at our plan and our budget only eight of those projects are planned to cost more than $10 million, just eight of the 82. So if we look at the cumulative contract amount and the proposal, this three-tiered approach, the first up to 5% of the cumulative award of the contract could be approved by the RMP or construction manager. Now, cumulative is the key word here. So if we have 5% of the contract award and it's cumulative, it doesn't matter whether there's one change order that's up to 5% or 10 change orders up to 5%. It's still cumulative. When you hit to that 5% and it goes to 5.1, we go to Tier 2. Tier 2 would require approval by the RMP or construction manager and the directors of the Division of Water Quality and the director of purchasing. So in that Tier 2 range from 5.1 to 10 percent cumulative of the total contract award, it would require the approval of three individuals. If we go to Tier 3 greater than 10 percent or $1 million, whichever comes first, then that still comes back to the council in our proposal. Now, again, to get to the million-dollar change order, you have to have a contract, an initial contract, that's more than $10 million. And we only have eight of those in the entire 82 project plan. So 74 of those projects will never hit that million-dollar threshold before it automatically would come back to the council for approval. And the other element, as I said earlier, could be for cost or time extension. For a time extension would be the RMP manager and the director of the Division of Water Quality. As we move through this process today, and I want to try and answer your questions about all of this, again, I want to say that our goal is to focus on effective project management, to be efficient in the application and the implementation of this remedial measures plan, and to watch and be good stewards of the public's dollars as you as council members are. We have this recommendation today. It would be my request of the committee for you to consider this and in your deliberation if you could resolve to support this proposal, and we would forward that then to the Chief Administrative Officer, Ms. Hamilton, here for her consideration and work with the law department in possibly considering this revision to CAO Policy 15R. With that, I will take questions, sir. Vernon, thank you, sir. We appreciate you coming today and presenting this option for our remedial measures project committee. Also, if there is a committee member willing to make a motion to at the end of our deliberations to accept it, that would be the time to do so. So first up we have Councilor Massadi. Thank you. Thank you, Vernon, for your presentation. I fully support your recommendation. I think any time anyone's dealt with any kind of construction, whether it be small or large, there's unforeseen consequences that come up in situations that you don't know about. I guess, and I'm not sure if you could answer this or maybe Mr. Slayton could, historically we always take the low bid when we have any type of project, it seems like, and then we have multiple change orders. And I always have thought in the back of my mind, maybe if we didn't take the lowest bid and we took a bid that was a little bit higher, we wouldn't have so many change orders. And that gives the person with the lowest bid always the upper hand. I mean, am I incorrect or correct on this? You're correct. We do, I would say, 95% of our bids, it's awarded on the bid price, low bid wins. We have done bids in certain situations where we do a best value, where there's other factors involved, maybe the completion of the project, maybe they have some special skill that we're going to factor into our decision, but for the most part, it's low bid wins. I think the perception is that doing that results in a lot of change orders. I'm not sure I agree with it. I'll let Charlie kind of chime in on that. He's probably closer to that piece than I am. It doesn't matter if it's this department or any department. I mean, I've just historically seen a ton of change orders when it's a low bidder and then they didn't either put it in the initial RFQ or RFP or they determine down the road that, yes, this is something that they need. And I guess that's where my difficulty lies. My experience has been is that predominantly change orders will occur, they're directly proportional to the quality of the plans and specifications as you advertise them. A weekly put-together set of plans and specifications leaves a lot of ambiguity that you end up paying for in change orders. Now, that's not to say that there's not been occasions where companies might attempt to lowball those. And that's really taught in our challenge is to make sure that when you look at all of the bids, that there's not the low one, which is a significant outlier compared to the rest of them. We've had the conversation about quantities. I mean, that's one of the things that we look at in those quantities and why quantities are in the unit price for that quantity is so important. is rock removal is one of those things that's really hard to figure out because you're doing rock soundings at a spatial area once every 100 feet. And if you're going 5,000 feet, there's a lot of guesswork in that, and that a contractor may put together a unit price thing that puts a really high amount towards rock removal because they're banking that there's going to be a whole lot more rock to remove from there than what the engineer's estimate was. Those are the things that we have to look at in quantifying or evaluating a bid of whether it's not only the lowest bid but the best bid. So I'm agreeing with you on that is that low bid sometimes is a little bit challenging, but I think you have to drill down and look at how did they arrive at that low bid and make sure that their bid is balanced such as that any ambiguity in your plans doesn't end up costing you a whole bunch of money. Great, and that's the answer I was looking for. I guess the more specific the RFP, the better off we are as far as trying to determine if we're getting the bang for our buck, so to speak. Thank you. Next up we have Council Member Lane. Thank you, Mr. Chairman. As a council member, I normally don't feel I have enough information to either approve the basic contract or any of the change orders because I have not been that intimately involved in the decision-making process to select a contractor in the scope of the work. And so I basically, when it comes to the new contract, rely on the bidding process we go through, the vetting of the contractor and review of all the contract documents there, track record and the competitive bids that are in place. With regard to change orders, I feel the same way about that. To bring a change order in and ask the council to approve it, I think is not a very valuable exercise because we still don't have that much information as to all the details. And as you said, there are a lot of change orders that come before us. So that being said, I'm pretty much in agreement with the policy that you're advocating to accelerate the change orders because when we don't approve something on a timely basis, then it's not a good business practice to delay the work, and it also costs the taxpayers a lot more money. So I think this is a good system. Now, in reviewing the policy that was outlined here, I have just a couple of suggestions that I would like to make, and maybe, Mr. Azevedo, you could sort of comment on that. But in the policy under item number one, where it says a detailed cover memorandum, I would like that cover memorandum to be prepared by the professional engineer or architect or whoever the professional was that drew up the original plans and who reviewed the change order for approval so that we know that the quality of the change order is consistent with what the basic concept of the contract was. I did like the fact that the responsible government staff overseeing the project shall document and refer the contract change orders. and therefore we know that we basically have a check and balance here and that we have the engineer on one side looking at the technical parts of it and the representative of the government approving the concept also, but also approving the cost. And then the only other item that I would have added to this would be that for each document we would provide a copy to the council members to look at all of them so we would see what changes are going on, what the costs are. And then if any question came up about it, we could always bring that matter before council for discussion or ask questions about it. But I think this is a good start to saving money, accelerating the work, and having a good check and balance on change orders. And I would feel a lot better with this process than bringing it before council for me to vote on it because I don't know what I'm voting on, and I don't think any of the other council members do either. So this would be a better system. That's basically my thoughts on it. Would you like to respond to anything that I've said? I concur with everything that you said. I think to start the process, our design engineers would have to document and certify the need for the change and certify the basis for the cost of the change, and that needs to be a part of our change order process to make sure that we have proper documentation, that it is a fair and equitable request in terms of change of cost and time as we move forward, and that we have the proper checks and balances once it comes from our design engineers, starting with the contractor to the design engineer, and our design engineers are providing contract administration and then coming to the staff level for the appropriate levels of approval before it gets into this approval, this tiered approach as we discussed. I want to add one other comment, and your last one was talking about copy to the council, and at the recommendation of Council Member Stenet, And we have, and I sent that just this week to Mark York, and Mark's here, and maybe he can update us as well. But Council Member Stinnett recommended that we maintain on the website, in an effort to further transparency in this entire process, that we maintain on the website the status of each of these projects as it moves forward. So certainly we're going to communicate that to the council as well, but it is going to be on the website. We've already sent the information to Mark for his staff to begin the development of that element of the website so that everyone can see where we start in terms of what was our initial budget, what was our contract amount, and have there been changes to this contract through the change order process, and here's where we are today. I think that's a great idea, and I have been beating the drums on this because we are talking about spending approximately $50 million a year or possibly $600 million over 12 years. That is a huge investment in our infrastructure, and most of it's underground. People can't even see the work that's being done because it's buried after it's constructed. And there have been problems in cities all around the country where on an EPA consent agreement that these costs spiral out of control. And so to have as much transparency, I think that is terrific, too. And hopefully, with the current contracts that are now under force and effect, we could put those in from the beginning and then any change orders added to them later. So we'd have complete documents of everything that's gone on. But I'm very pleased with this. I think this is a very good move forward. Thank you. Thank you. Council Member Akers. Thank you. I wanted to follow up, I guess, on Council Member Masati's question. I understand, too, that changes happen in construction projects, and that's pretty normal. But you described the sidewalks, for instance, and said how that would be a change order later in the project. even though you kind of know if you're going to put a pipe under a sidewalk that you would need to replace it. So I guess my question is when we create the bids and the RFPs or RFQs, are we sure that we have included everything or been more proactive versus waiting and then finding things that we need to change later so that the bids are accurate and that those who bid on them know the scope of work and it doesn't change? I'm going to fully agree with Charlie and his comments. I think there's a direct relationship between the quality of our bid documents, the contract documents, which is the contract documents are the specifications and the drawings. I think there's a direct correlation between the quality of those documents and the potential for change order. The better job that we do on our design, the better job that we do managing the project throughout the design and construction process, that reduces the potential for change requests, change requests being the first step in the change order process. So we have to do this, and we're going to try in every instance to identify. Charlie referenced that we're the rock. That's always one that's difficult to quantify. It's underground. It might be eight feet underground, but we've got to go ten feet. And what's the change in grade on that rock as we move along the alignment? We're actually taking samples every 50 feet, not every 100 feet, which is a change to the way we've done business in the past. And we're trying to do the top-notch job on quality control in review of our documents before they go to advertisement for bid. May I add something? Using the sidewalk example, sometimes this isn't even a factor of the quality of the work that the design engineer did. It's a factor of our desire or the council's desire or the administration's desire. You're out there, the sidewalk's kind of crappy, and then people start saying, well, you know, while you're here, can you take care of that sidewalk or can you do this or can you put in handicap ramps? and you get into a scope creep. And sometimes the scope creep is not a good thing. I think Verna and I have a good plan to try to keep that under control. But otherwise, there may be some things that just make sense that while we're there that we can kind of resolve two problems at the same time, and this will give us the ability to do that. And I think this helps you all. It helps us. Ultimately, it helps the citizens who are paying the bill of this thing is that while we're out there, let's do it. We had one in Council Member Stennis District where we were essentially stabilizing a creek that was falling in. Well, when the change order came to me, they had added 26 squares of sidewalk to this project. Certainly not one that was one that probably could not have been controlled through a different process, but I knew what was driving it. It was the citizens out there. It's like, listen, you guys are out here. This sidewalk has been in disrepair for a lot of years, and it was not in front of their houses, mind you. It was part of more of a common part of the road, and we went ahead and did it because the backhoe and the workers, everybody was there, and it all came within budget. It worked. So I think there's always going to be those kind of things that it makes sense for the community itself. The other side of it is that we, as Vern and I have talked about a lot, is that we don't get our employees just adding things on here because they can and they're not paying for it. We're being very tight with this is the equipment that we're putting in. Oh, by the way, I wanted a door over there. It's kind of like the remodeling show, you know, is that you start out with a budget and then you start adding in different kinds of floors and different kinds of stuff. We cannot do that or otherwise we'll blow it. That's what I want to see. I mean, I support this as well. I think that I understand that time is of the essence, and you shouldn't have to wait for us to approve something that's common sense and that we don't really have the expertise to make a real decision anyway or a sound decision. But I just want to, I mean, I know that you all probably go on site and you look at the sites before you develop the RFPs, so I just want to make sure that we're considering all of those potential change orders on the front end versus having them come up on the back end, I guess. Thank you. Thank you, Chair. Council Member Scotchfield. Thank you, Chair. Vernon, as always, your office, your department impresses me. Always looking to try to save the city taxpayers' money with ways to get things done easier and better. With most things that deal with engineers, I always defer to your expertise. I don't think we have an engineer on the council right now, So I think when you come forward with something, we usually agree with you. I guess one of the things, I know you said you'd keep the updates online. I think myself, I would like to have an update with the change orders, how they come through. I don't know if this is on a weekly basis sent to us, just so that we don't have several different places to have to look. so that we can have it, be informed of it on a timely basis. And I know you said that other locales do this same concept of the 10 percent change order. Is that a typical, is 10 percent typically what they look at? Well, each entity is different, and each entity has its own policies. As I said, Cincinnati, MSD, Knoxville, Nashville, it never comes back to the governing body. But those are utility-type entities. They're not divisions of local government as we are here in Lexington. Northern Kentucky Water has a different type of structure, and they go back to their board at a certain level. It's not necessarily the one we proposed here today, as does MSD in Louisville, as does Louisville Water Company. The major difference between all of those entities and Lexington is we're a division of government. Those are separate entities, separate structures. They're an extension of local government, but they do not report. They report to separate boards other than the elected officials, to an appointed board. but they have different levels of going back to their governing body for approvals. And that's what I was saying. Three of them, it's all at the staff level. The other three, it's based upon a dollar amount. For a single change order, if we have a change order in this dollar amount, it's got to come back to the governing body. Otherwise, it's done by staff. Okay. So, I mean, but in your best estimation, the 10% is a best practice. I think it's a good practice. I think it's the best practice, and I think it would be well-suited for LFUCG. All right. And something else that I'd like to see written into it, I guess, you know, the 10 percent, but if we get updates on it, you know, I think the council still needs to have overall oversight since it is public funds, And I don't know how it would be written into the legal contract to make sure that we either post-approve it, something along those lines, so that we do have a stamp of approval on the decisions that are made. We need to further think that one through, but it's something that we can work on, and I can come back to you. And I'm not exactly sure how I'd want it to look, but something along those lines. And that's all I have right now. Thank you, Council Member Stenet. Thank you, Council Member Scotchfield. One thing we did talk about when we discussed this was when we put all these projects online, all 82 of them, have a column for change orders and update every time one's done. We know exactly how much we can incorporate a column for change orders in there. So you can see it. Any of us could go to it at any given time and look online. So that's another option. Last up, we have Councilman Clark, but not least. We hope not. Thank you, Chair. You're right. Your initial comments that we are a little skeptical of change orders, we'd say, oh, no. And this presentation clears up some things for me, and I appreciate that. But one thing I wanted to ask, and I'm not sure who would comment on this. Perhaps C.A.O. Hamilton would like to comment on this. But my understanding is that if we take this recommendation, which I like, Vernon, I think we're absolutely on the right track, it's any change order. It's not just the consent decree or water quality. It's all change orders within the government. Is that correct? I think that's best answered by Ms. Hamilton. Sally, I ask the question. If we make this change for the consent decree and the construction and contracts there, that would affect all change orders throughout government. Our initial plan before coming here and seeing what the council felt and committee was that we would do this only for the remedial measures. Okay. And the reason behind that was, and that may not be the best reasoning, But the reason behind that was that, you know, recently we got internal audit, did an audit on change orders, and they pointed out that we needed to strengthen what we were reporting to the council because the council wasn't getting the full story on these change orders. So we had a committee that we went back and looked at CAO Policy 15 to make sure it was what we should do, And then we made sure that we were reporting correctly to you. Our thinking was that that is not so overburdensome to us now on these other projects that we perhaps would see more how this worked and how you all felt about this before we changed the whole thing. The whole thing. And that was our intention, that you probably would want to see how this progressed before we did anything, because these are going to be the big contracts that are coming for you. So that was our reasoning. Okay, that clears it up then. And so any motion that we made today should be made with the idea it would only consider the consent decree project. Is that correct? That was our thinking. And then I have asked legal to look into the fact of how is the best way for us to implement that. Is that another CAO policy that we would have? A separate policy. A separate policy with just what you've seen up here. Okay. Okay. Thank you. I apologize. Thank you very much. Thank you, Chair. And I think that if we make a motion of some kind, that ought to be very clear, that it is just consent decree matters and leave it to the CAO to put that in the language. For remedial measures. For remedial measures. Yeah, not all of consent decree. I don't think this would apply to it. That's correct. Just remedial measures. That's correct. Thank you. Any other questions from the committee? Any motions moving forward to the full council? Councilor Morissati. Yes, I'd like to make a motion that we support the Division of Water Quality's recommendation in reference to the, I guess you would say, bid process. Or not? Change motion. Change orders, I'm sorry. Change orders for remedial measures only. Yes, sir, for remedial measures only. Thank you. We've got a motion by Council Member Massati and a second by Council Member Scutchfield and Acres, so we'll let them bite it out. Any discussion on the motion? Again, it's to approve the contract change orders in CAO Policy 15-R as it applies to the remedial measures only. Council Member Lange. Thank you, Mr. Chairman. I would just like to say, this is sort of a general motion, but I would hope that we could incorporate those changes I proposed in the new CAO rendition when it comes forward for final approval. Thank you. All right, there's a motion on the floor. And a second. Any other discussion? Okay. All in favor say aye. Aye. Any opposed? Okay, that passes, and I'll report that out at our next council work session. I know, Councilman Rosati, you had a question. I'm sorry. I guess with Council Member Lane, would that be an amendment to my motion? No, he didn't make an amendment. Okay. Thank you. Just a suggestion. All right. Next up on our agenda is the climate adaptation follow-up. This was a presentation last committee meeting by Mr. Rick Cluett about climate adaptation preparedness, I believe it what it was. And, Mr. Shapiro, are you going to respond from the administration side of it? I know the council has not signed any forms yet. None have been passed out. I was waiting to hear back from the administration, so here we go. Sure. So thank you for that. So last meeting we were asked to take a look at the Resilient Communities of America agreement, and we really appreciate Rick Cluett bringing that to our attention. We, as you know, we as a city government are asked to look at a lot of these kinds of agreements. certainly took this one seriously. We went and spoke with a number of our departments, and it seems clear to the administration, in this case, it's not necessary to sign this agreement. The city, if you go and take a look at the agreement and its various parts, the city seems to be making some very good progress on these elements. There's one part of the agreement where it seems to be asking the city or community to take responsibility for something that they don't have control over. We had some concerns about that. But in our research, we spoke with the Department of Emergency Management. They let us know that FEMA has had rules around the guidelines for the last three years around resiliency that they've been following, and these have to do not only with cities preparing for large events, emergency planning, like weather events, but also to prepare for the repercussions of those events happening nearby or within the region. We know that we are, we just heard the presentation from James Bush, we know that we're reducing our, or increasing our energy efficiency. We're also switching some fleet vehicles to compress natural gas. DM also let us know that they work with the Department of Homeland Security on critical infrastructure assessments locally. We know all about the consent decree and the upgrades we're making there to provide some resiliency in case of major weather events. And the Department of Emergency Management also works with local businesses to create recovery plans in case of emergencies. So because of these and other measures that the government has already taken, we didn't feel that it was necessary to sign on to this agreement. To leave it there to see if there are any questions about this. Committee members, does anyone have any questions in regards to the discussion we had at the last meeting in the response by the administration? I see none. Well, thank you for your feedback. I do have one question, though, and this is probably the million-dollar question. Why would it be not appropriate just to go ahead and sign if we're already doing it anyway? What's the harm, I guess, is the question. There was section there was some concern over around energy security. It seemed to ask for movement on an issue where the city really has no control. And what issue is that? Energy security. So this is the section where it talks about transitioning to a renewable energy future. Oh. That's something that might be difficult for the city to do on its own. I understand. Mr. Martin, did you want to add anything to that? Okay. He's covered it. Does the committee have any questions or follow-up at this point? Okay. Very good. Thank you. Thanks. Last on our agenda, we have the monthly financials, and this is more for information only since there hasn't been a lot of change year to date in the monthly financials. Does anyone have any questions for Mr. O'Meara? He's here right now. Unless, Mr. O'Meara, you want to present anything, any changes? We're still new into the fiscal year, so there's not a lot of update to go through. Anyone? Okay. Mr. Schonegger, absolutely. Commissioner Romero, I had a question on page 34 about the Sanitary Sewers Construction Fund. You have a fund balance unaudited of $60.7 million, and you have for the amended budget you have $25 million of revenue and then $94 million of expenditures in that fund for FY14, leaving a negative balance, am I to suppose that the administration is going to propose a rate increase in this fiscal year for that? I would not encourage you to suppose that at all. Okay. I would say that the budget was presented, I mean crafted, very early in the year. As Director Martin has talked about, we have been very blessed in getting a lot of Kentucky Infrastructure Authority grants at 2% or 1.75%. We also have a cash reserve here, and we also are working very closely with Charlie and his group to do a cash flow analysis. We're meeting actually this Thursday again on that. And so, as Charlie and I discussed, you have budgets that authorize the expenditures to occur. Then you have actual construction. And then you have actual use of dollars to pay the bills. Those are not all the same. We do not want to borrow money or have rate increases until we actually have to pay the bills. So it's a planning process to see what gets approved, where the dollars come from, multiple areas of funding as well as then when to implement rate increases or go to the bond market to borrow money. I was concerned about the $51 million of amended budget increases. That's all. Okay. Very good. Anyone else have any questions on the monthly financials? I do have one quick question. We have an update on the KIA loan process. Have we been awarded those? and I know the $60 million doesn't include those in there yet. I've been pestering KIA about getting those loan documents. Yesterday I delivered the commitment documents for three of the loans back to Cassie, so I think you'll probably be seeing blue sheets on those very soon. I was really, like I said, pestering the KIA about getting them all through council before your last meeting on December 10th. That's still the goal, is to get the binding agreement letters in place. But I know that there are three of them back at the Tate Building right now in process. Thank you for that update. Anyone else on the monthly financials? Okay. Last time on the agenda is items referred to committee. Does any committee member have a pressing issue that needs to be heard at our next meeting in December? Any recommendations to take anything off our list? Seeing none, I'll entertain a motion to adjourn Motion and a second All in favor say aye We're adjourned, thank you all