HOLYOKE CITIZENS FOR OPEN GOVERNMENT
485 Hillside Ave. | Holyoke, MA 01040
May 11, 2005
Gregory W. Sullivan
Office of the Inspector General
John W. McCormack State Office Building
One Ashburton Place, Room 1311
Boston, MA 02108
Dear Mr. Sullivan,
We, the Holyoke Citizens for Open Government, are writing to request that the Inspector General’s office review the process of privatizing the Holyoke Wastewater Treatment plant for its vulnerability to waste, fraud and or abuse. We are asking that the process be halted until a full review can be done by your agency.
We were heartened by your letter of March 31, 2005 to Holyoke Mayor Michael Sullivan cautioning the city “it would be prudent to ensure that all information relevant to the privatization decision [on the 20-year design-build-operate (DBO) contract with Aquarion] is accurate and complete.” We hoped that your warning would inject professionalism into the process and end the name-calling and ideology.
Unfortunately the Mayor dismissed your letter. The local press quoted the Mayor as saying: “..that a spokesman for the Inspector General told him [Mayor Sullivan] Friday the agency would have cracked down on faulty data if it saw any, and that the debate on Aquarion was ‘clearly political’, something the agency will continue to avoid.” (Springfield Republican 4/3/05)
We hope to impress upon you in this letter that the path the city has taken on the road towards privatization is not “just political”, but is also aimed at dismissing legitimate concerns of legal and financial clarity by both citizens and city councilors, and shows a lack of concern for protecting the public interest in the process.
LACK OF TRANSPARENCY & CITIZEN DISMISSAL
Our non-partisan citizens group, Holyoke Citizens for Open Government, formed in November of 2004 after the city ran a small notice in the local paper of record, The Springfield Republican, with a date for a deadline for public comment on a proposed 20 year $176 million contract with Aquarion Water Services of Bridgeport, CT. It was curious to our group that the city would make so little effort to notify the ratepayers of a comment period on the largest contract the city has ever signed. Our group was formed to correct this situation, so that more citizens would be made aware of this important public policy decision.
At the point they were ending public comment, there was no final contract to view. The contract was in draft form and neither City Councilors nor the public had seen a final copy.
Our group attended a Department of Public Works meeting to make four demands of the city. The city eventually met our demands, however it was our feeling at the time that it seemed odd that we had to make these requests.
We called on the city to:
1) Delay the public comment period until there was a final draft of the contract
2) Put the contract on the city’s website so more citizens could read it
3) Hold a public meeting for citizen feedback.
4) Mail a notice to all ratepayers about the public meeting.
On February 7, 2005, in response to our demand, the city held a public meeting on the sewer rate increases that were tied to initiating the Aquarion contract. Some 500 citizens (the number is disputed by the city but those there acknowledge that 3./4th of the high school auditorium that holds 800 was full) attended, indicating citizen interest. Nearly everyone who spoke at that meeting questioned the process by which the city was choosing a private company. In addition, most citizens spoke out against entering into a contract with Aquarion.
Before and since that meeting our group and many citizens have had deep concerns with the entire contract process. We realize that some of our concerns are with exemptions in construction laws permitted by the Special Legislation and that the Holyoke citizens and city councilors were misled by the impact of that special legislation. We are told the same misinformation about the Special Legislation permitting a DBO process was used in the Town of Lee. That said we feel the city is moving ahead without legal clarity.
LEGAL CONFUSION
Several matters of law are unclear to us:
1. Is the city permitted to transfer monies from the wastewater treatment plant surplus fund for the Aquarion service contract or only for rate reduction or capital expenditures?
2. Can an “Acting” Department of public works director be the sole official with municipal oversight of this twenty-year contract?
3. Can a city employee serve as an “Acting” department head and a city solicitor indefinitely while on personal appointment by the Mayor or is there some term limit?
Without any of these legal issues clarified, the Holyoke City Council On May 3, 2005 moved ahead with a first reading on a simple majority vote (8 to 7) to adopt the 20-year $176 million design-build-operate contract with Aquarion Water Services by transferring $470,000 from the Wastewater Treatment Plant reserve (surplus) fund to start the Aquarion Management Service contract for the rest of this fiscal year.
During the course of this session there was confusion about the legality of the vote before it was taken. City council president Joe McGivern--who is an open advocate for the private contract-- wanted to do the two readings required by law on the same night. He insisted that both readings could be voted on with a simple majority. When some city councilors insisted that two readings could only be done in the same night with a 2/3 vote, the acting city solicitor, Karen Betournay was asked for an opinion. She supported the city council president’s view. When the city clerk’s interpretation of the law contradicted the solicitor and council president, the council voted to table the motion.
Another legal confusion at this same meeting: several city councilors argued that the transfer of these funds to initiate the contract is illegal under Mass General Law 44 Chapter 53E.1/2. Their interpretation is that these surplus funds can only be used for rate reductions or capital improvements, and not a service contract. (Acting DPW director Bill Fuqua had testified that there would be no rate reductions or capital improvements in the expenditure of these funds.)
It gave the citizens the appearance of eagerness to rush into the contract before independent legal or expert advice could be sought.
APPEARANCE OF CONFLICT OF INTEREST
In other municipalities there has been a pattern of the appearance of conflict of interest and pressure from industry that signal offers of jobs for public officials who push contracts. Because of the pattern shown below, our group is worried about the implications for Holyoke.
a) Former Mayor of Taunton, Richard Johnson, whose city signed a contract
with US Filter (now Veolia) is now working with that company.
b) Former Mayor of Lynn, Patrick Mc Manus, whose city signed a contract
with US Filter went to work with that company
c) Town moderator of the town of Lee, Chris Hodgkins, was an employee
of Veolia throughout the contract negotiations with Lee and appeared in public meetings promoting the Veolia contract with his colleague Richard Johnson
d) Former Mayor Sara Hathaway of Pittsfield has been quoted in the press that she was “courted” for water privatization by Richard Johnson while she was mayor but could never get accurate figures on how it would save her city money. She said MA mayors were invited to gatherings sponsored by Veolia in Boston.
The following concerns us about Holyoke:
e) Holyoke Mayor Sullivan’s testimony before Congress on behalf of the water industry and “public-private partnerships” can be heard in streaming audio on the US Mayors website, in a section called “Meet the Mayors” sponsored by Veolia water company. The Mayor is a member of the Urban Water Council, a small committee of the US Conference of Mayors, which supports water and wastewater treatment privatization.
f) George Neves, who we understand was hired by Aquarion to represent them, and who contacts Holyoke city councilors on Aquarion’s behalf (but says he is not a ‘lobbyist,”) raised funds for the mayor’s political campaign and continues as his private fundraiser.
g) Former State Rep. Dennis Murphy is now a lobbyist for Aquarion and comes
to Holyoke City Council meetings.
h) The one-vote majority of city councilors who voted for this contract rely for
their legal opinions from Acting city solicitor Karen Batourney who has served for two years at the pleasure of the Mayor on 60-day renewable appointments despite a vote of no-confidence in her by the city council. The council’s attempts to hire an independent attorney to advise them in this process have been vetoed by the Mayor.
i) For many years one of the strongest advocates for sewer privatization has been Acting DPW head Bill Fuqua. While he is entitled to his personal opinion on the matter, he has not provided citizens, or the city, with supporting analysis as to why public operation of our wastewater treatment plant is no longer viable. When Mayor Sullivan was asked why there was no city run option, he said that the DPW had the opportunity to submit a bid but chose not to. When Mr. Fuqua was asked the same question, he said that the employees had an option to submit a bid, but chose not to. Mr. Fuqua is in charge of both the DPW and the wastewater treatment plant employees, and therefore has great influence over their actions. And Mr. Fuqua has a demonstrated bias towards privatization. As a result, the appropriate exploration of any option other than privatization was rendered impossible.
LACK OF PROTECTION OF THE PUBLIC INTEREST
… The Mayor and acting DPW head Bill Fuqua argue that the private contract will and must be implemented faster, in order to meet the EPA July 1 deadline. We are aware that the EPA has a record of being very supportive of these contracts. The EPA itself uses the term “public private partnerships” for these long-term contracts with a private corporation. Mr. Fuqua, in speaking to the public, talks about the contract as a “give and take” relationship, yet we are concerned that he is making an effort to cause the public to see it as a real “partnership” instead of the business deal that it actually is, thus avoiding accountability for details in the contract.
… The complete lack of transparency and public education about what the Special Legislation exempts the city from doing, and lack of city efforts to reassure the citizens that this will still give them protection, is of great concern. While we understand that Special Legislation passed by the City of Holyoke in 2002 allows the city to seek out bids for a DBO project with private companies and does not require the city to obtain more than one bid, when the legislation was presented to the Holyoke City Council, the Mayor assured councilors that this was being passed to give the city more options to choose from. Councilors were surprised to find that in the end there was no public option to choose from.
… No cost comparisons were ever provided for the public to evaluate the figures in this one-bid process. The city council in a 14-1 vote requested that the Mayor authorize an independent optimization study to compare with Aquarion. Mayor Sullivan denied it by citing a study done by Faye, Spofford & Thorndike that was not an optimization study, but a study of already existing data. Faye, Spofford & Thorndike never visited the wastewater treatment plant to perform the study.
… Acting DPW head Bill Fuqua has chosen to ignore any independent guidelines for embarking on privatization.
a) Association of Metropolitan Sewerage Agencies (AMSA) and Federal Office of Management and Budget guidelines for considering privatization (that our citizens group supplied) among many other cautionary checklists, suggest hiring at least two full time professionals to oversee a contract of this magnitude. Mr. Fuqua has stated that he will use 20% of his time to oversee the contract. We are concerned that Mr. Fuqua--who has been intimately involved in both the procurement and contract negotiation process—is the sole contract administrator overseeing the contract on the City’s behalf.
b) He has also chosen to ignore guidelines from the same agency that state if a city stands to gain a savings of 10% or less switching to a private contract is not warranted. With savings now projected at 5%, it is more than likely that these small savings will be lost during the course of the contract.
… The Mayor and Mr. Fuqua have tried to sell the Aquarion contract to citizens claiming it would save the city millions of dollars. However throughout this process their figures have been ever changing. Currently the estimated percent savings run between 3.4 and 5%. Far less than the promised 20-30% savings touted by the Special Legislation and the Mayor.
… Aquarion has less than the 5-year minimum experience in wastewater treatment recommended by consultants in a city of Holyoke’s size. It is primarily a water company. Aquarion has used the experience of its parent company, the Kelda Group in Yorkshire, England, as a reference. While we know the Special Legislation exempts the city from complying with the traditional construction laws, we understand that newly enacted Reform Legislation would require that contractors must be qualified. It does not reassure the citizens that the city would exploit that exemption to contract out our wastewater treatment plant for 20 years with a contractor that could not meet the current legal standards.
… The complexity of this 700-page contract makes it impossible for citizens to grasp without an effort at transparency by city officials. One citizen protested at the February public hearing that there were more than 4,000 changes in the contract posted on the city website, making the contract a moving target for Holyoke citizens. A city-retained law firm insisted the changes were typos and corrections.
… Below are examples of some of our concerns about hidden or unexplained extra costs:
i. No budget item for an independent city engineer required by the Special Legislation to be hired to review design documents and oversee construction. Consultant HDR’s recommendations were for $500,000 to be budgeted for the first few years of construction.
ii. No budgeted item for a “transition cost” of $5.8 million over the 20 years of the contract (with the city financing the contract with our 2 per cent borrowing rate) in chapter 12.7 of the contract.
iii. The service fee is based on an estimate of processing at the plant, and if the actual amount processed is greater than the estimate, the ratepayers pay the difference, but if it is lower than the estimate, ratepayers do not get a refund.
iv. A cost of about $600,000 is charged for repair and replacement annually, however Aquarion does not have to repair and replace at a value equal to that and they get to keep the difference.
v. If the city recommends cost saving improvements, Aquarion does not have to implement them.
After almost six months of trying to open up this process for citizen involvement, to get answers to our questions, we are concerned that the confusing and ever-changing answers we are given on financial figures and on the law creates, at the very least, an appearance of mismanagement (that could lead to waste and abuse) and possible conflict of interest (that would indicate fraud).
For the several reasons stated above, we respectfully ask the Office of the Inspector General of Massachusetts to halt the privatization process in order to make a full review of the current situation and ensure that our concerns of possible waste, fraud and abuse in the city’s attempt to privatize its waste water treatment plant are addressed.
We await your response.
Sincerely,
On behalf of
Holyoke Citizens for Open Government.
Jeremy Smith (413) 532-6392
485 Hillside Ave.
Holyoke, MA 01040
Carolyn Toll Oppenheim (413) 540-0149
19 Yale St.
Holyoke, MA 01040
Suzanne Jean (413) 536-8958
2 Day Ave.
Holyoke, MA 01040
Ward Morehouse (413) 540-0147
19 Yale St.
Holyoke, MA 01040
