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HomeMy WebLinkAboutIR 7438 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7438 f 0 To the Mayor and Members of the City Council January 30, 1990 -�"-uw"y Subject: PRODUCTIVITY INVESTMENT FUND Program Description The Productivity Investment Fund (PIF) is a program presently suggested to City Council for adoption to be established as an internal grant program that City departments may apply to for financing any projects or any operating changes that will result in reduced operating costs or increased revenue. For FY 1989-90 it is proposed that $100,000 be appropriated from the General Fund to Fund 72 to establish the program. The PIF would be established in a separate Fund account to simplify program administra- tion and project tracking. The grant application process will be administered by the Office of Management Services. The process would first begin with submittal of the application to the Office of Management Services. The Productivity Section would for- ward the application first to the applicable Budget Analyst for analysis and then to a committee of five to seven personnel appointed by the City Manager for ranking and recommendations. A list of recommended projects will then be forwarded to the City Manager for review. The City Manager will then forward to City Council a list of pro- jects for Council approval and funding. Initially, the program will be open to General Fund departments only. Proposals are due April 1st based on the following schedule: April 1st First round of proposals due to Office of Management Services. May 1st PIF committee recommended projects to City Manager. May 15th City Manager recommends projects to City Council. If funds remain after the first round of grants, a second round of proposals will be requested by August 1st. If there are still unallocated PIF funds after the second round of grants, there will be an open application period throughout the remainder of 1990. Examples of projects that might qualify under the program include: investments in new equipment or new equipment or data processing applications that will reduce the number of staff or other operating costs needed to do a job; or enhance revenue flow or the design and implementation of new operating procedures that save costs. Program Guidelines 1. Projects should require only a one-time investment of PIF funds to implement. 2. Projects should earn an annual rate of return at least equivalent to the rate (9.8%) earned on current cash investments as supplied by the City Treasurer for the year in which the grant is applied for. Projects should represent an innovation or significant change from current operations aimed at reducing costs or increasing revenue. Proposals that request funds for expansion of current operations without introducing innovations should be funded through the normal budget process and not through the PIF. -ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No.-7438..—p*2.. Mo�4okr � T o the Mayor and Members of the City Council January 30, 1990 rtyp Subject: PRODUCTIVITY INVESTMENT FUND 4. Project savings should be captured during the first full year following project completion. 5. Project savings should be real dollar savings to the City, not simply a transfer of costs to another department or fund. 6. Project savings should primarily benefit the General Fund over the long term. 7. Project objectives should complement departmental priorities established in the nor- mal budget process. 8. No limitations on funding amounts or number of proposals submitted by individual departments should be established. However, departments submitting more than one proposal should rank proposals in priority order. 9. Projects should be ready for implementation within one year or less after award of funding. 10. Projects with broad applicability to other departments should be given priority over those with applicability to only one department. 11. Projects should be carried out with existing staff levels, and should not reduce ser- vice delivery to the citizens of Fort Worth. 12. Priority for funding will be given to projects that are submitted as a result of a PAYS suggestion but for which no other source of funding is for implementation available. APPLICATION INSTRUCTIONS The application should include the following information: 1. Project Title 2. Department Name, Division, Section 3. Project Managers or Administrators 4. Project Summary (include sufficient detailed narrative for the committee to under- stand the project) 5. Project Implementation (describe how the project will be implemented and include any Gantt chart or timelines, as necessary) 6. Specific cost items the Grant pays for 7. Estimated completion date -ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS I INFORMAL REPORT TO CITY COUNCIL MEMBERS No.,7438 p-3 j to To the Mayor and Members of the City Council (29'% rS January 30, 1990 r"E X zxih� Subject: PRODUCTIVITY INVESTMENT FUND 1873 8. How cost savings would be achieved 9. Intangible benefits if applicable 10. Impact on public or public services 11. Impact on other departments 12. Positions to be eliminated 13. Detailed budget 14. Cost/benefit summary and/or revenue enhancement(s) An example is attached from a similar program in Minneapolis for your information. (SEE ATTACHMENT 1). APPLICATION PATH AFTER SUBMITTAL The grant proposal would first be submitted to the Productivity Section for financial review. The Productivity Section would then forward a copy of the proposal to the appropriate Budget Analyst to ensure conformity with departmental objectives and financial review. Upon completion of these analyses, the proposals would be forwarded to the PIF review committee, a five to seven member committee appointed by the City Manager representing a cross-section of city departments that would be established to evaluate and rank proposals. The Productivity Section representative would act as chairperson of this committee. Funding recommendations made by the review committee would be forwarded through the City Manager to the City Council for approval. Prior to receipt of the PIF funds, the department would submit an implementation plan to the review committee detailing how and when the project would be submitted on a quarterly basis to the Productivity Section of Management Services to monitor the progress and measure performance against the implementation plan. The Productivity Section is also responsible for monitoring the budget expenditures on a monthly basis to insure conformance of the implementation plan. Quarterly reports should include: budget expenditure information for the period of the report and year to date information, a narrative section discussing project progress to date and any other areas the project manager desires to address. Quarterly reports are due by the 10th day of the next month following the quarter for which the report covers. Repayment of Project Funding Reimbursements to the Productivity Investment Fund Program will be made annually by either one of two ways; first, by either a reduction in budget funding to capture the anti- cipated savings and/or second, by transferring funds over a period of time to replenish the fund with interest from actual revenue enhancements as identified in the application at the end of the fiscal year from the general fund to Fund 72 to the Project Account if -ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7438 p.4 T I To the Mayor and Members of the City Council January 30, 1990 N 0 0 SUN (#U= 01� Subject: PRODUCTIVITY INVESTMENT FUND additional revenues are, in fact, realized. The amount to be repaid would include the amount of the loan plus an annual interest rate equal to the current rate of return earn- ed on cash investments. Initially, the rate of interest rate is 9.89 . For example if the initial amount of the loan is $100,000 the total amount to be repaid would be calculated as follows: $100,000 x 1.098 — $109,800. This rate used will be the one supplied by the City Treasurer for the year in which the grant is applied for. The interest rate will not change for each payment. Only the rate initially used to calculate the amount of repay- ment will be used. If the method of payment is through a reduction in expenditures, a one to three year pay- ment schedule will be established with the agreement of the Office of Management Ser- vices. Departments utilizing this method of repayment will reduce their base budget the first year by two-thirds of the estimated annual savings. The department will be per- mitted to retain the remaining one-third as its incentive to accomplish the program objec- tives. The department will also budget in the base budget for a new line item to repay the Productivity Investment Fund in the amount equal to the first year's payment. At the beginning of the new budget year, this line item will be expensed and the amount will be credited to Fund 72, the Productivity Investment Fund Project. If the repayment is through a revenue enhancement, the following procedure will be used. As part of the project approval process OMS and the department will agree on expected 0101 revenue enhancements. At the end of the fiscal year if the amount of money in the reve- nue source exceeds the amount forecast in the Adopted Budget, the agreed upon enhance- ment amount will be transferred to the Productivity Investment Fund and the amount will be deducted from the subsequent year's required repayment for a period not to exceed three years (or the department's maximum payment whichever is less). After that, all revenue gains will accrue to the General Fund. That figure will be administratively moved from the revenue source to Fund 72, the Productivity Investment Fund Project. This will be done over a period not to exceed three years. If for some reason the revenue does not exceed projection, the department's annual repayment(s) of principal interest are not reduced. David A. Ivory City Manager ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS ATTACHMENT I PRODUCTIVITY INVESTMENT FUND GRANT-APPLICATION OCTOBER 18, 1988 PROJECT TITLE Municipal Parking Ramp Energy Savings DEPARTMENT: Public Works (Traffic) COST CENTER: Off-Street Parking PROJECT LENDERS: James Koll, Traffic Engineering George Peterson, Energy Office PROJECT SUMMARY: The six municipal parking ramps (MPR) were analyzed by the Minneapolis Energy Office. The total annual energy costs for the six ramps is $235,724 per year, Table 1. The ramps have a variety of potential energy conservation opportunities (PECOs). By choosing only those with the shortest paybacks, a total annual energy cost savings of approximately$25,040 is possible,Table 2. Due to the availability of State funds to cover part of the audit costs, the total PIF Grant cost of this project would be $92,665. This includes $78,665 for retrofit costs and mate- rials, and $14,000 for Maxi-Audits, engineering, and construction management -- for a total PIF Grant cost of $92,665.00. The State of Minnesota would also provide $5,500 towards the Max!-Audit costs. The simple payback of the project is 3.70 years. The pre- sent value of the savings over a five year period is$92,755.00. TABLE 1 MPR OPERATIVE COST SUMMARY AVERAGE PARKING FACILITY ENERGY$LYR Centre Village MPR $ 66,968 Gateway MPR $ 62,464 Government Center MPR $ 46,514 Orchestra Hall MPR 24,036 St. Anthony MPR $ 20,753 Seven Comers MPR $ 14,969 TOTAL:- $ 235,724 B. Project Implementation The Minneapolis Energy Office and Traffic Engineering has been working together for two years to reduce energy waste at the MPRs. The departments are now completing work on the Gateway MPR from a previous PIF. This PIF project would extend this energy conservation effort to all of the MPRs. All cost-effective conservation opportunities within the City parking ramps would be implemented. The Energy Office would provide engineering and construction management services to Traffic Engineering. Traffic Engineering would use PIF funds to reimburse the Energy Office for its expenses via IDTs. The Energy Office would retain two engineers on a part-time temporary basis in order to complete the project. Since State Maxi-Audit funding is based upon a 50% share of actual costs, the City should include all costs of doing audits -- including overhead. Internally, the Energy Office is only to be reimbursed for direct costs and not overhead, thus reducing PIF funding required by approximately$2,000.00. C. Specific Cost Items the Grant Pays For The PIF Grant would pay for half of the maxi-audit costs, all of the contractor labor I I costs, and almost all of the material costs. Maxi-Audit Costs. The Energy Division of the Minnesota Department of Public Service (State) now offers Cost-Share Maxi-Audit Grants (CSMAG). The State will pay half of the cost of a Maxi-Audit up to certain limits based on building size. The six (6) City ramps are eligible for$5,500.00 in grants. The Maxi-Audits would cost $11,000.00 to complete. The City would provide $5,500.00 of PIF funds and the State S5,500.00 of CSMAG funds. NSP Rebates. Some of the retrofit items are eligible for NSP rebates. About $250.00 -$500.00 in rebates is-expected. PIF Grant. The PIF Grant would pay for all of the contractor labor costs to install the retrofit. The PIF Grant would pay for all material costs (except for the small amount rebated by NSP). The PIF Grant would- pay for engineering and construction management services that are provided by the Energy Office. and IDTed to Traffic. Constructiob management provided by Traffic personnel.would not be charged to the PIF Grant. D. Completion Date During the,first part of the year, an engineer would work nearly full-time on the project. The vast majority of the project would be completed by December 31, 000, 1988. The project would be to-tally complete by June 30,"'1989. E. How Cost Savings Would Be Achieved The majority of energy cost savings would be electrical cost savings. These costs would be achieved in several fashions: Reduced-Electrical Usage. By turning off lights when they are not needed, and using more efficient lights, the electrical usage can be reduced. Additional savings are also possible by reducing overheating in those areas that are electrically heated. Reduced Demand, Charges. In addition to the electrical usage, a second component of the ramps' electrical bills is the demand charge. Demand measures the maximum rate of use. Smaller wattage lights and more efficient equipment reduce demand as well as electrical usage. Power Factor Correction. A penalty is assessed on the electric bill for low power factor. Power factor correction would eliminate this penalty. F. Intangible Benefits Several areas of the ramps which are now poorly lit would have bet-ter lighting after the retrofits. This would improve safety and appearance. G. Impact on Public or Public Services Better lighting in some areas of the ramps used by the public. H. Impact-on Other Departments None. 1. Positions to be Eliminated None. J. Positions to be Added There would be no FTE added. Extra staffing would be required for ten to twelve months. This staffing would be obtained by retaining, on contract, two engineers. • BUDGET SUMMARY A. Total PIF Grant funds would be$92,665 as follows: Table 4 PIF GRANT FUNDS EXPENSE AMOUNT SEE TABLE Maxi-Audits $ 5,500 .... 6 Engineering & Construction $26,185 6 Management Contractor Labor&Materials $60,980 2 TOTAL: $92,665 Table 5 COST OF PROPOSAL COST OF PROPOSAL EXPENDITURE SCHEDULE 1988 1989 199 Owl Grant Amount $68,065 $24,600 0 NEWFTE —----------- ------------ ----------- B. Energy Office Costs and Reimbursements IDTs. The Energy Office would IDT Traffic for the direct costs of its assistance with the project Traffic would use,PIF Grant and State CSMAG funds to reim- burse the Energy Office. The Energy Office will use its own funds fcr internal overhead and expenses. Energy Office Costs would be approximately $30,920 (see below). Of this, approximately $5,500 would be CSMAG funds from the State. Professional Engineer 155 hours @$50/hour $7,750 ($42 consulting fee plus expenses) Engineer 1 1165 hours @$15/hour $17,475 ($1S contract cost) Clerical &Administrative $ 960 (*salary plus fringe, cost will vary by employee) TOTAL- S26,185 -7- Table 6 ENERGY OFFICE COSTS AND REIMBURSEMENTS FUNDING SOURCE COST CITY PIF STATE CSMAG Maxi Audits $11,000 $ 5,500 $5,500 Engineering and $ 15,185 $15,185 Construction Management TOTALS: $26,185 $20,685 $5,500 C. Cost/Benefit Summary The present worth of the savings over a five-year period is $98,250. The total project cost is $92,665 for a net present worth of $5585. Energy savings would continue for many years in the future and would increase in value as electric rates increase. Table 7 COST/BENEFIT SUMMARY YEAR BENEFIT COST - NET 1988 $16,694 $88,065 (551,371) 1989 $25,040 $24,600 $ 440 1990 $27,043 $27,043 1991 $27,043 527,043 1992 $29,146 $29,146