Town Manager’s Report to Mayor and Town Council

September 19, 2011

Mt. Rogers Planning District Commission (PDC) grant award for Meter Replacement

You have in your agenda packet a August 30, 2011 letter from Mt. Rogers PDC Executive Director Dave Barrett notifying the town of Marion that we were the recipient of a $40,500 grant from the Southwest Virginia Regional Water and Wastewater Construction Fund. I had applied for this grant in July. I believe the fund had approximately $400,000 in it from both federal and state sources.

The grant is for the first year of the five year meter replacement program, which we budgeted for this fiscal year. The grant requires a 50% / 50% match and the $50,000 we allocated for this fiscal year will meet that criteria. In the grant application, which I sent to the Mayor and Water Committee, I sent documentation of our efforts in trying to reach the 70% water accountability threshold, Health Department correspondence to that end and our water loss history for the previous twelve months I also documented the test results from our Engineering Department using both two gallon and six gallon per minute flow on ten randomly selected meters. This test showed an average inaccuracy of those meters at a 23.5% loss to the town. I then extrapolated the revenues we could fairly capture using that additional percentage on top of our expected $2,300,000 water and sewer revenues when the five year program is completed.

I was pleasantly pleased to be receiving this money because I was not very hopeful we would be funded for this project. I felt that if other applications from around the PDC came in that were for projects that offered water and sewer services that was not already then we would not be funded. However, we were.

This will be the fourth time we have been funded from the Mt Rogers Program. The first was in 2004 when we received $100,000 for the Water Treatment Plant Upgrade. The second was in 2007 when we received $41,422.26 for the Paxton Lane / Washington Avenue Project that put

12 inch encasement with eight and two inch water under I-81 (the county kicked in $34,670).

The third award was this year when we were notified we will be receiving $100,000 on the sewer treatment plant projects (which we have not received at this writing but will soon).

Situation on Sewer Treatment Plant (STP) Digester Project

The bids came in on the STP Digester Co Generation Project on August 31 and were way over budget. Thompson and Litton had estimated the base bid to be in the $818,000 range and the low bid came in at $1,076,000. There were only two bidders on the project – Waco, Inc. and Frizzell Construction. However, at the pre bid conference there were at least five general contractors and at least two subcontractors in attendance.

I am very concerned about this project. This project started as a $500,000 project with a $250,000 grant and a $250,000 no interest 20 year loan when the project was presented to me in 2010. Sometime in late 2010, in December I believe, Thompson and Litton approached me and said the project was under budgeted and said another $409,535 would be required for the project to make it a $909,535 one. I contacted the Department of Environmental Quality and they agreed to allocate that additional money through a no interest loan. They presented the new figures to Council. For that meeting, they revised their Preliminary Engineering Report (PER) to show still a net cost savings to the town of approximately $10,703 per year ($43,680 in savings for oil and electricity; $32,976.75 to service the loan). This scenario did not include yearly maintenance costs which we estimate to be in the $3,500 to $5,000 range.

As stated above, the August 31 bid came in at $1,076,000 or about $166,435 over the December 2010 new estimate. With that amount I believe we have met or exceeded the cost benefit to the town. I have asked Brian Tew of T&L to stop any additional engineering work until the project can be brought into budget. I have asked them to consider any number of options to that end including, but not limited to: scaling the project back while retaining its green project grant status, getting more grant money from the state, rebidding the project and advertising more widely, etc. etc.

I have asked T&L to come up with some contingencies to address these issues and bring the project back to budget. I have asked them to give me a suitable date before the end of the month so these issues can be addressed with the Sanitation and or Finance Committees.

Contract With District III Governmental Cooperative as it relates to the W. W. Scott, Jr. Senior Citizens Center (SCC)

You have in your agenda packet an agreement entitled “Memorandum of Agreement on Use of Designated Area Within W.W. Scott Senior Citizens Center” That agreement is one of three that with have District III Governmental Cooperative. The other two are a Site Control Agreement where we historically receive $120 per month that basically helps cover utilities, and a Site Management Agreement that basically helps covers having a qualified person being over the nutrition Site at $350 per month. The agreements are for the October 1 through September 30, which I assume coincides with the federal fiscal year.

Concerning the first agreement, Use of Designated Areas, the Town and District III agreed around 2003 or 2004 to revamp this agreement. Before that time the town was paid a nominal fee for the use of the kitchen. After that time we agreed to prorate fees incurred by the town on a 50% / 50% basis with District III. For instance, if repairs or replacement in the kitchen were made for sinks, refrigerators, freezers, etc. came to $5,000 during a particular fiscal year, that one half of that cost, or $2,500, would be allocated the following fiscal year to District III in monthly payments of $208.33. We set this system up because we did not think it should be the town’s sole responsibility to incur all the depreciation and replacement costs. This was especially so since District III cooks all of their meals at the center and serves them throughout the Mt. Rogers Planning District. The proportion served to Marion area seniors is very low.

As you are aware, the town had to do major repairs on the kitchen in May, June and July. The Kitchen was shut down for much of that time. As you can see on the attached sheet we incurred $14,461.32 in direct costs and another $7,716 in labor costs, of which all was of our staff. While the contract itself is somewhat nebulous on what constitutes a capital cost that can be split, I think at very least that the one half cost of $7,230.66 per year or $602.55 should be allocated to District III.

Equipment Committee Recommendations on Snow Equipment

Included in your agenda packet is a handwritten sheet giving the September 6 bid results on the four pieces of snow equipment listed for the 2011-12 budget. They are for a 10 foot salt spreader, a 10 snow plow, an 8 foot salt spreader and an 8.5 foot snow plow.

The bids were very close and the committee and staff recommend purchasing the 10 foot snow plow from Richmond Machinery in Richmond, the 10 foot salt spreader, the 8 foot salt spreader and the 8.5 foot snow plow from Mid – State Equipment in Buchanan. These recommended selections were either because of the low bids or they were for equipment that best matches what we have now, namely for Henderson Spreaders. Concerning the 8.5 foot snow plow, we think the Mid-State bid for the Western plow is a more heavy duty plow and more suitable

for us.

By matching existing equipment with the new equipment allows us more familiarity in operations, as well as the ability to interchange parts. Additionally, the total bid price is $28,580 is well under $39,000 in the budget.

Respectfully Submitted,

John E. B. Clark, Jr.

Town Manager