Where Do We Stand On The $12.8 Million Siemens Contract?

  • Have you received notification of the free Aquahawk Alerting system?
  • Dealt with a water leak not far from your new water meter?
  • Do you even know that you have a new water meter? 
  • Or what an Aquahawk is? 

Welcome to the $12.8 million dollar City of Bellaire contract with Siemens Industry Inc.  Curious?  Almost a quarter of the 2016 Better Bonds for Bellaire $54 million bond issue was devoted to it, but not for new water lines or drainage.  Read on.   

In early 2016 Bellaire’s City Manager Paul Hofmann, and the Public Works director, Brant Gary, arranged to have Siemens Industry Inc. evaluate our water system. By August 2, 2016, City Council viewed the Siemens evaluation at a workshop session. (Links to the August 2nd Workshop Session can be found at the end of this article.)

Click to enlarge

Siemens had seventy (70) meters, out of over 7,000 City water meters, tested by a third party lab.  Some meters showed inaccurate readings at ‘low flow’ – described as .25 gallon or about four cups of water or less per minute.  The chart at left is confusing, but it was enough to convince members of City Council.

According to the Siemens representative the ‘low flow’ water did not register on some of the meters.  The meter inaccuracies led to a discussion that some people were getting free water while neighbors were paying full price. That the City may be losing out on the revenue from the loss of ‘low flow’ water, estimated to be over $500,000 in non-billed water usage per year.  Most of the problems were with the 5/8″ meters.

There were 2,673  5/8″ meters.  Siemens stated that most of the City meters were over 15 years old, so rather than upgrade the 5/8″ meters to new 3/4″ x 3/4″, the suggestion was to replace all meters in the City at one time, over 7,000 meters of various sizes.

And the replacement meters would be Advanced Metering Infrastructure, or AMI meters. Solar powered and radio controlled.  The estimated life of the new meters is 15 – 20 years or 1.5 million gallons of flow, at which point the accuracy is estimated to be 85-90%. 

The cost?  $4.6 million dollars.

The Wastewater Treatment Plant

Siemens also proposed repairs and upgrades to the City’s wastewater treatment system.  The additional cost?  $7.5 million dollars.  Plus a management fee.

City Council’s due diligence on the $12.8 million proposal was a written Q&A list of questions prepared in advance and presented by Council member Montague and answered in advance by Siemens and/or City Manager Hofmann, plus questions or comments. 

Click to Review Q&A

Members of Council posed questions during the presentation:

  • Why replace all the water meters when only a few may be inaccurate? 
  • Why make all repairs to the wastewater treatment system now, rather than over time? 
  • Why devote funds to replace meters before replacing the old water lines? 
  • What about moving the wastewater treatment to the Houston plant on Beechnut?

No other companies were invited to examine the water meters or inspect the wastewater treatment system. No other proposals were received. The decision to award the final contract was made through a numerical ranking system on the Choice Partners Cooperative Purchasing Program, based on the Siemens evaluation.

The Public Works director and the City Manager insisted that the meters and the repairs were necessary. 

What Next?

By August 15, 2016, the Siemens proposal moved to City Council for consideration and approval of a contract.

Knowledgeable residents questioned the replacement of all water meters before replacing water lines.  Others suggested soliciting other bids for the projects, and suggested that before Bellaire spend almost $8 million on the wastewater treatment system it would be wise to investigate using the City of Houston wastewater plant located just across Beechnut. (During the flood mitigation meetings after Harvey the possibility of moving wastewater treatment to the Houston facility was again discussed.)

Of Interest: Our wastewater treatment plant is located off Edith St. in the lowest area of Bellaire’s flood plain, the worst area for flooding in the City. The Public Works office building there was demolished after repeated flood events. The new water meters stored on the site were damaged during the Harvey flood in August of 2017 and had to be replaced.

Joe Keene, our longtime Public Works director who retired shortly after Paul Hofmann took over as city manager, had privately stated that he felt many of the suggested repairs to the wastewater treatment plant were unnecessary or could be made over time. And when queried, Public Works director Brant Gary responded that the plant was in compliance with all regulations of the Texas Commission on Environmental Quality.

However Council looked no further, the contract was approved.  We went from a few ‘low-flow” meters to a $12.8 million contract.  Links to the meeting can be found at the end of this article.

The Final Cost And The Chosen Vendor

The final contract with Siemens Industry, the PERFORMANCE CONTRACTING AGREEMENT between City of Bellaire, Texas and Siemens Industry, Inc., Building Technologies Division (the Agreement) is outlined below.  Find a link to the Agreement at the end of this article.

It included

  • $4.6 million for new radio-controlled meters,
  • $7.5 million for upgrades or replacement of equipment at our wastewater treatment plant,
  • $678,280 for Project Design and Management, all payable to Siemens and all to be funded through a bond issue.

City Council approved the $12.8 million Agreement on August 15, 2016, in conjunction with an ordinance calling for a bond election in November of 2016.  

Click to view

View the spreadsheet on the left to see what was approved as part of Proposition 3 in the 2016 Bonds for Better Bellaire.  Find the actual ballot verbiage for Proposition 3 at the end of this article.  It’s wordy and non-specific, there’s nothing to inform voters about water meters or contracts.

There are future costs for this contract.  Annual fees for Siemens’ Performance Assurance Program, annual fees to monitor the AMI infrastructure, to pay for software hosting, and to pay to maintain a customer portal – apparently that’s your free Aquahawk Alerting system.  The list of annual payments can be viewed at the end of this article.  Meanwhile the City is saving the $75K annual cost for meter readers.

The estimated final cost for the contract over 20 years, including fees and interest, is $19,554,139.

How Are We Paying For All This?

With bonded debt.  Half of the 2016 bonds for Proposition 3 Water and Wastewater Improvements ($24.68 million total), and almost a quarter of the entire $54.98 million bond issue, was devoted to the Siemens contract. 

At some point, around the year 2026, the improvements are supposed to begin to be self-funding due to energy savings, more billable water, and operational savings.  The chart at the end of this article shows the proposed savings from the project.  Brant Gary was not on hand to oversee the project. He left Bellaire in early 2017 shortly after the bond election for a position in Fulshear. 

Where Do Things Stand?

All water meters in the City, a total of 7,684 meters according to the contract, were replaced in 2017-2018 at an average cost $598.50 each.

(By comparison, West University Place approved the installation of 6,244 radio-controlled meters in 2013 at a cost of just under $2 million, at an average cost of $312.00 each, paid in cash with funds held in a Capital Reserve fund. Southside Place replaces their water meters as necessary.)

A Siemens subcontractor, H2OMC, LLC, oversaw the project, and the actual meter installations were made by a Louisiana company called Pedal Valves.  Numerous leaks in the area of the new meters have been reported to the City.  In some cases a City crew makes the repair, in others the residents are told to call a plumber.  The Agreement states that Siemens would be responsible for repairs within 2 feet either side of the new meter. (Exhibit A, par. 4, pg. 3 of 19).

The entire project was scheduled to close out by City Council on June 17, 2019, at which time the balance of the $12.8 million contract, or about $1 million, will be due to Siemens.  Then the City takes ownership of the project.  However, as of August 30, 2019, no date is now scheduled for closeout due to problems with equipment at the Wastewater Plant.

Note: Council was informed that no inspections of the new water meters or the labor and equipment on the wastewater plant have been performed. When can we expect those inspections? Per Public Works director Michael Leech:

The “Annual Assurance Report and Measurement/Verification tests will not be performed until 1 year after the City has taken ownership of those items. That will take place once the project is closed out.  We will receive those in 2020”.

So apparently no inspections until the project has been accepted, paid for, and in place for a year after the closeout.

Has There Been An Increase in Water Revenues?

Click to view new Rates

The easy answer is yes, however new meter installation began in mid-2017 and then in October of 2017 City Council voted to increase the rates for water usage. 

That raises the question – with a rate increase, how will we know if the new meters are actually increasing revenues? Or by how much?  The calculations will be interesting.

The chart below shows the increase in water revenues for a 6-month period in 2017 and the same 6-month period in 2018.

The Certified Financial (CAFR) reports for 2017 and 2018 show an additional $760,000 in water revenue for 2018.  Again, apples or oranges – water rate increase or more accurate meters?

What About Savings In Water Usage?

Public Works records how much water is pumped through metered City water lines. Usage is recorded for both revenue and non-revenue (free to the City) water.  In theory, since all City water usage is metered, these amounts should be equal.

The variable in this formula is the amount of water lost to leaks or hydrant flushing, which Public Works estimates is 150,000 gallons per year.  So annual water usage should equal water pumped less 150,000 gallons, more or less.

But based on the information supplied by Public Works for water pumped versus water metered for a 6-month period in 2017 and the same period in 2018, over 95 million gallons of water was unaccounted for in 2017 and over 33 million gallons was unreported in the same 6-month period in 2018.

The table below shows usage for both periods.  By mid-2018 most meter installations were complete. For the same 6-month period in both years the amount of water pumped by the City was much greater than the amount reported through the water meters.

Tens of millions of gallons of water are unaccounted for in both years. Since Bellaire buys much of our water from the City of Houston it would be helpful to know the exact causes of this variance.  Are there still problems with meters?  Were the numbers provided by the City correct?  Or are we really losing that much water in leaks throughout the City?  Perhaps new water lines should have been the priority after all, not the new meters.

Just as it is difficult to know how much of the increase in water revenues is due to the increase in water rates versus improved meter accuracy, there’s no simple way to determine how much of the increased water usage through the meters is an increase in water usage versus improved metering.

 What About A Warranty Or Guarantee From Siemens?

In order to maintain the Siemens guarantee for this project the City must adhere exactly to the terms of the contract and pay the annual fee to Siemens for project management and performance assurance for the next 20 years.  The City of Bellaire will be responsible for oversight and maintenance of the meters and the wastewater equipment (Exhibit C pg 7 & 8 of 33).  The annual fees to other entities will remain a necessary part of the new AMI system.

The work on the wastewater treatment plant and system assumes some cost savings. You can find pages of incredibly complicated formulae for those computations in the Agreement.  Siemens will be responsible for the calculations.

Although the Siemens project was promoted as self-funding, estimates are that the project will not become ‘cost effective’, that is begin paying back, until 2026.  To date the City has received a rebate from Centerpoint Energy for $36,146.80 based on projected future energy savings for a piece of equipment installed in the wastewater treatment plant.  Only time will tell if the City will achieve the savings and recoup the cost of this contract as promised by Siemens.

One more thing – the 5-Year Capital Improvement Plan FY2020 includes another $1.2 million in electrical work to the Wastewater Plant.


Find informative links below.


See the Siemens Cash Flow chart below, included in the original Siemens presentation.

Click to view full size


Bellaire’s Debt is $123.8 million at the end of FY2019
Not including the interest.  The estimate FY2020 is over $126 million.


Access the Siemens Contract here: Performance Contracting Agreement between Bellaire and Siemens Industry Inc (1)

The entire 8-2-2016 Workshop Session and Siemens presentation can be viewed here http://bellairecitytx.iqm2.com/Citizens/Detail_Meeting.aspx?ID=1555

Video of the meeting can be accessed here. http://bellairecitytx.iqm2.com/Citizens/SplitView.aspx?Mode=Video&MeetingID=1555&MinutesID=1247&FileFormat=doc&Format=Minutes&MediaFileFormat=ismv

The City Council meeting of August 15, 2016, can be accessed here: http://bellairecitytx.iqm2.com/Citizens/Detail_Meeting.aspx?ID=1432

Video of the meeting can be accessed here: http://bellairecitytx.iqm2.com/Citizens/SplitView.aspx?Mode=Video&MeetingID=1432&Format=Minutes

Find information on future bond issues here.


PROPOSITION THREE

SHALL THE CITY COUNCIL OF THE CITY OF BELLAIRE, TEXAS, BE AUTHORIZED TO ISSUE AND SELL AT ANY PRICE OR PRICES THE BONDS OF THE CITY IN THE AMOUNT OF $ 24, 380, 000, MATURING SERIALLY OR OTHERWISE WITHIN 30 YEARS FROM THEIR DATE OR DATES, AND BEARING INTEREST AT SUCH RATE OR
RATES, NOT TO EXCEED THE MAXIMUM INTEREST RATE NOW OR HEREAFTER AUTHORIZED BY LAW, AS SHALL BE DETERMINED WITHIN THE DISCRETION OF THE CITY COUNCIL AT THE TIME OF ISSUANCE, FOR THE PURPOSE OF IMPROVING, REPAIRING, REPLACING OR EXTENDING THE CITY’ S WATER AND WASTEWATER DISTRIBUTION AND COLLECTION LINES AND RELATED DISTRIBUTION AND TREATMENT FACILITIES, AND TO LEVY TAXES UPON ALL TAXABLE PROPERTY WITHIN THE CITY ANNUALLY SUFFICIENT TO PAY THE INTEREST ON THE BONDS AS IT ACCRUES AND TO CREATE A SINKING FUND TO PAY THE PRINCIPAL OF THE BONDS AS IT MATURES?

What you saw on the ballot in the voting booth:

PROPOSITION THREE 

FOR
OR
AGAINST:
THE ISSUANCE OF $ 24, 380, 000 IN BONDS FOR WATER AND WASTEWATER IMPROVEMENTS

From the Agreement:

SIEMENS will be responsible for line breaks within two (2) feet of the meter set, while the CLIENT will be responsible for line breaks outside of this area, unless the break results from the negligent acts of SIEMENS in which SIEMENS will be responsible for said repair.

To contact the Mayor and members of City Council please email Tracy Dutton, City Clerk, tdutton@bellairetx.gov
and ask that your correspondence be forwarded.

This entry was posted in Government. Bookmark the permalink.