02.28.12
Adrienne McCarthy continues to make a lot of sense
Adrienne McCarthy listened to the entire dog and phoney show the selectmen put on last night and she called it for what it was. She cautioned that taxpayers may not wish to be as strident as their town officials, who are now convinced they are paupers, when just a few weeks ago suspended town manager Mike Coughlin and Mary Gallagher, director of finance, told selectmen things were tight but it looked like they could get through the year without any deficit.
Selectmen are now convinced they have to do a level-funded budget for FY13 and all of a sudden acting town manager Mike Milanoski has discovered the town is facing a structural $350,000 deficit this year…and he is foraging through town hall looking for unspent funds. This in spite of $650,000 in new growth. But then – didn’t the town just assume $500,000 in water dept in order to pump up water’s books for their RFP? Oh, that probably has nothing to do with it. Wait a second and DeCaprio will tell us! Probably any second now.
AND. OH MY GOD. The Town has a 32M in unfunded pensions, health insurance. Yep. It’s still there. And I can tell you this. As hard as Capital Budget works, and even if Budget Planning attends 1000 meetings, they are not going to put a dent in that little honey until the state legislature works its magic. Perhaps it’s Coughlin’s fault? Milanoski blamed the out-of-sight legal budget on him last night. But I think the selectmen had a lot to do with that with all the designer counsels they hired. Coughlin kept pushing them to use town counsel.
Well, now water commissioners want a 10-year Water RFP, and the inspector general has supposedly blessed it and Peter DeCaprio, who out of the goodness of his heart, not because he has to, is not going to vote to decide the winner of the 10-year contract, which is not the 20-year RFP Coughlin sent to the Inspector General. It is a different one. No one has yet seen this RFP – selectmen haven’t anyway. But they cheered DeCaprio anyway.
Monday, March 26 the citizens of Cohasset will be invited to the high school auditorium to meet DeCaprio’s tar baby. It will start at 7PM…a two-hour presentation. Perhaps it will be on TV. He says he is pleased with it. He projects we will get $1.5 million up front and it will generate $500,000 in cash every year after 10 years. And that’s all we know and all the selectmen, who love it to death, know.
In related news – selectmen voted to allow the suspended town manager back in town hall to pay his taxes and such. Initially, they had banished him from all public buildings. That was a bit harsh, I thought. Acting TM Milanoski threatened to call the police on him Monday when he tried to return his computer. Milanoski found Coughlin to be so dangerous that he had to walk him to the parking lot and did not return to town hall until he saw Coughlin drive away. Such drama. You know, you sail by this sleepy looking little town on the Atlantic Ocean and think, what a perfectly pleasant place to live. And then you land.
The point is this. There was absolutely nothing wrong about our now suspended town manager Mike Coughlin. He walked into a financial pit and worked like a dog to put things together. He found us a terrific director of finance. He made all the DOR deadlines. He tried to build a team. But he made the mistake of worrying out loud about the 20-year concession agreement the water department was looking for. And, alas, he stuck his nose into Cat Dam and ruffled many important feathers.
Did you know there is only one Adrienne MacCarthy in the entire United States?
I wish she would run for selectmen this year. The last day to take out papers in March 22.
peter decaprio Said:
February 29, 2012 at 2:27 PM
From Wikipedia: “The Twilight Zone is an American television anthology series created by Rod Serling. Each episode (156 in the original series) is a mixture of self-contained drama, psychological thriller, fantasy, science fiction, suspense, or horror, often concluding with a macabre or unexpected twist. A popular and critical success, it introduced many Americans to serious science fiction and abstract ideas through television and also through a wide variety of Twilight Zone literature.”
And, apparently, gave birth to the Tinytown Unleashed blog. . .
Sorry I’m late, boys and girls. Busy morning. Let’s start with more fun facts. Remember, I took zero as the number of accurate water company posts here in Fantasyland, and so far you are holding up your end of the bargain. Thanks. BTW Tanna, “nonetheless” is one word. You’ve been reading too many Coughlin emails.
While we are pleased with the final RFP, I did not say we will get $1.5 million up front and $500,000 per year for 10 years. Were that to be the case, I WOULD actually try and buy the water company for my own portfolio. But, when asked by a questioner why we shortened the term from 20 to 10 years, and what that would mean for our economics, I explained that the upfront payment would likely drop from a range of $4.5 mil to $5.5 mil down to $1.0-1.5 mil. Then I explained that in years 10-20, our free cash flow would probably average $500,000 annually. Of course, that assumes we have no large projects to fund. So, we are essentially trading less money up front for more ability to fund capex from cash in the outer years (unless I buy the company first, then all bets are off. . .)
Why wouldn’t the selectmen, or any rational soul for that matter, like this type of contract? After all, it reduces our expenses by almost $800,000 annually, money that can immediately be repatriated back to our customers. Furthermore, it will actually fix our expenses for ten years. As I have said before here on Irrationality Unleashed, in this market environment, fixing expenses for long periods of time – trading the known for the unknown – is a good outcome for any municipality. Lastly, while the contract fixes expenses, it still allows us to capture revenue growth without limit.
Our current business model is not optimal. We assume too much risk the way we do business now. We have too little operating flexibility. We aim to fix that with this new contract. We are not selling the water company (yet. I’m still trying to figure out how I can buy it, partner with Aquarion, and watch heads explode all over town. . .) We are not giving up any growth. We are not doing anything any differently from how we do things now, except we are paying for services differently and more efficiently, and our operator will become a true partner with skin in the game. The risks of this transaction are significantly less than the cumulative risk we assume now. In fact, I would make the argument that the model we are proposing should be rolled out in other departments town-wide.
We know as a town what our likely revenue growth will be (at least we do now that true professionals are in charge of the budget). What we should do is lock in the expense side. Then we can actually plan for the future with confidence.
As for your other points regarding Coughlin, I think last night exposed his budgets to be deceptive at best, fraudulent at worst. Either way under Mike The Taxpayer’s Best Friend, taxpayers were eventually going to get hosed, as they have in every town he mismanaged (four as of the last count – a 100% success rate). That alone ought to be reason enough for Tom Callahan, the Thomas Jefferson of our Age for Coughlin’s dismissal. But alas, he appears to need more than a blown budget and happy employees as proof. The only thing Coughlin worked like a dog at was stalling, so he could create the fiction that was his budgets. The least of his mistakes was worrying about an RFP.
Enter Rod Serling. . .
Tanna K Said:
February 29, 2012 at 2:35 PM
So when do we get to read the very latest rendition of
the Cohasset Water 10-Year RFP which nobody has?
What’s the hold up?
Is that what you do at night – rewrite the RFP?
Mary A. Parsons Said:
February 29, 2012 at 3:42 PM
Peter,
You talk about a guy who barely had 6 months to do anything in town government. You had 2years and look what you came up with an RFP for 20 yrs reduced to 10yrs, because you got grief for it. by the way, that doesn’t instill confidence in your ability to carry out a contract that has all the details about running a water company in it.Tom Callahan and others have valid questions. you claim you will reduce the rate taxpayers pay for water, but reality is unless the company contracted to run the water dept. does it for free, you are giving the ratepayer a false since of reduction. The company will build their profit into the concession contract.
I’m sure you have the best of intentions, but there is an old saying tht the road to hell is paved with good intentions.
peter decaprio Said:
February 29, 2012 at 5:17 PM
hoo boy.
hard to tell where to start with this one. We changed the term because the economics were better with a shorter deal. Tax counsel had an issue with the way we had structured the fees around revenue, and once we had to fix revenue at a level, we needed to determine what the appropriate level was given historical demand levels. We set a floor under our worst demand year and ran a series of regression analyses against that number. That’s what drove the change in term. But keep believing what you’d like to believe if it makes you feel better.
Something tells me no matter what I say I won’t convince you, but that’s okay. I’m hoping the occasional stray rationalist finds his or her way here from time to time. My posts are for the open-minded.
I hadn’t realized I needed to burnish my street cred with more time in town government. That perhaps says more about your perspective than anything. I’d rather have free market and utility experience. But I’m nutty like that.
While I’ve only read what Tom Callahan writes and do not know him, based on the 30 emails I’ve already gotten from people that do know him, I feel confident stating the last thing he has is an objective viewpoint.
Your comment regarding what we can do with rates belies your complete ignorance of our operations and is perfect for this blog. You will no doubt one day make the Tinytown Hall of Fame if you keep this up. The entire point of the concession contract is to fix the profit for the operators up front so that everything is known to everyone day 1. The point is to also fix our costs too, so we can face the Great Unknown with confidence. I have a sneaking suspicion you’ve never run a business. . .
I’m quite certain the last contract was done with good intentions, as was sewer’s. As was every permit issued by Concom. Or every ruling handed down by the ZBA. Other than the people that inhabit this blog, I suspect the rest of us want the best outcome for the town, town being not just a small subset of chronic complainers. But then Karen thinks we have a vested interest (so does Tom Callahan).
Please, please, please tell me what I am supposed to gain from pushing a contract for a company whose product I don’t even consume? Other than living with a bad contract for the past two years and seeing up close exactly what not to get from our next contract, exactly how do I benefit from pushing a concession contract? Is it possible that after considerable analysis (you guys should try it) it turns out to be the best thing for the water company’s customers? Why is that never a possibility with this crowd? I think it says more about you than anything.
Why continue doing things in a way that have been proven to be sub-optimal? Why are you all so afraid of a different approach? Especially one that evens out the risk, and makes the water company a better operation?
I hadn’t realized you were either a former water commissioner or that you had been to all of our commission meetings in the last two years. I’m surprised I missed seeing you. We usually notice who attends our meetings. Your knowledge of our business model is impressive.
teepeecreaper Said:
February 29, 2012 at 6:37 PM
Please. Can we cease all this personal banter. It doesn’t help anyone make a decision. It makes the the individuals involved look immature.
What we do need are facts.
What are the financial projections for the proposed water contract? That is, a spread sheet with real $$$’s.
What are the assumptions these projections are based on? We need best case, typical case and worst case analysis.
What are the alternatives for the town if the projections are not realized? How do we get out of a (the) contract?
What is the tax, bond rating, etc. impact on the town if: things go well? Things go wrong?
The Water Commission is chartered to deal with the town’s water. There is at least one opening this year for a BoS seat. If someone desires to be involved with town issues with greater scope, perhaps they should consider that.
peter decaprio Said:
February 29, 2012 at 10:22 PM
March 26th, 7pm. Middle/High school auditorium. Finally someone on this site is interested in facts. What a welcome change.
What are the projections? Tell me how much you want us to lower rates, and you’ll back into the projections. We are fixing costs at the level at which we ran the operations for the past two years, with no markup on employee salaries. So build up from there.
Our assumptions are that the operator can be at least as efficient as American Water has been, but that’s his problem and his risk. Our goal is to cut rates to the maximum amount such that we will have a cushion over expenses. We are assuming no new growth in year one, even though we know Avalon is coming on line. we just don’t know to what extent. Hence no new revenue assumption. The best thing about this approach is since we’ve fixed expenses, we can actually wait and see how much new revenue develops and then make a decision whether we want to build up cash or cut rates even more. An informed decision. The way a business should be run.
We don’t need to meet any projections, only the operator does. His profit comes from years five through ten. It’s up to him to make the first five years work. If he’s good and efficient, he makes money. Either way, it doesn’t impact us.
The state determines staffing levels, and the state determines our permit levels and the quality of our finished product. Just like it always has. If the operator performs well, and meets his performance bogey, he is eligible for a small bonus payment of up to 5% of his fixed fee. If he doesn’t, he wont, and he stands to be in breach. Since his real profit comes from years five through ten, the onus is on him to really perform early in the contract. But never lose sight of the fact that the state, through its permit requirements, is the governing factor.
So, we don’t need to meet projections. We will start out with a cash cushion. That cushion can cover shortfalls if there are any, and expected capital expenditures for at least six years, possibly ten. If Avalon comes on, and Cedarmere, and the new car wash, we get that revenue over the operator’s marginal cost of operations. Giving us the choice to build up cash or cut rates.
What’s a worst case scenario? That we cut rates too much, and revenue doesn’t ramp as expected, causing us to raise rates the following year. But that’s likely to be only a one year phenomenon. Because we retain complete control over our rate structure, we move revenue up and down. Hopefully down.
This is what everyone has lost sight of in the hysteria over Aquarion. In EVERY concession deal that we looked at, and we looked at more than 27, there were built-in revenue escalators every year – rate increases were built into every other contract. We didn’t take that approach. Our cash flow gains will come from debt roll-off (please look at our debt schedules on line) NOT revenue increases. Because of the cash payment up front, it is highly unlikely that we will ever have to raise rates to cover a deficit. Maybe to cover a large capital project, but not a deficit. THAT is the point of a concession contract.
You tell us how much you want rates to drop. That’s the decision point. We move revenue DOWN to meet costs. Many that have advised us (we appreciated all the help) have suggested less of a rate cut and more of a cash cushion for future capex. That idea has merit. My preference however is for the maximum rate cut as the upfront payment gives us room for years to see what our needs will be. But, we need to wait until we see what the bids are first. If we get any.
We get out of the contract the same way we get out of the one we are in now – if there are material breaches, we can get out. The contract language will be standard as to exit clauses. But, we won’t have to exit the contract due to the failure to meet projections because the onus is finally not going to be on us. If the operator wants to make money, he needs to perform. Which is as it should be.
There are no tax impacts, as this was the most important consideration. The tax memo written by bond counsel is worth reading and will make things clear to anyone that wants to read it. Public/private partnerships cause tax issues for municipalities. THIS IS NOT A PUBLIC/PRIVATE PARTNERSHIP, in spite of what Coughlin tried to make you all think. This is just a different way of paying for a contract. Had we shared in profits with the operator, we would have jeopardized our tax status. That’s why we shortened the term and why we went to a fix fee schedule.
The bond rating should improve as you will not get an explosion in costs from the contract. It’s the benefit of locking in expenses. It makes our risk go down by eliminating the possibility of a spike in operating costs. Our debt rolls off rapidly. If we don’t have a disaster and the need to fund a huge capital project, THIS CONTRACT SHOULD HELP IMPROVE THE TOWN’S CREDIT PROFILE AND IMPROVE OUR BOND RATING. That’s half the point. Make the water company a non-factor in the town’s risk profile. And make sure it stays that way for a LONG time.
Mary A. Parsons Said:
March 1, 2012 at 12:43 AM
Peter,
remember this statement by you,”we’re not doing a 20 year contract. It’s 10 years. And rates will, pending any natural disasters, stay flat for the entire term of the contract. How’s that for a rate study?
now for your more recent statement,”What’s a worst case scenario? That we cut rates too much, and revenue doesn’t ramp as expected, causing us to raise rates the following year. ”
You contradict yourself so many times it is hard to keep up. You aren’t doing anything outside of the box for Cohasset. Your doing the same old same old. the best thing Cohasset could do for itself is drop the concession contract idea and actually run their water dept. Other towns are successful at it. They actually factor in those natty details into their water rates. the enterprise funds take care of all expenses and capital projects are paid for out of the enterprise fund and they don’t have to ask the taxpayers for more money over and above what they pay for water. Those natural disasters you talk about are built into the rate. That is why Hingham wants to buy out.
You’ve shown that you don’t know what a rate study is or a future build-out is.
Anything that is not spelled out in the contract; the Cohasset taxpayer will be paying for over and above their water payment.
peter decaprio Said:
March 1, 2012 at 11:18 AM
Teepeecreeper:
You raise an interesting point about the personalization of this issue, and it is worthy of discussion. Since most of the personalization is directed at me, and away from the issues at hand, I think I can offer some insight.
Had any town official presented a solution to taxpayers that called for a 25% reduction in a budget item which allowed for the reduction in taxes/rates and gave taxpayers immediate relief, such a proposal likely would have been viewed without any controversy. Quite the contrary. So what actually has happened with the water RFP?
Bear Hill.
Your side – the inhabitants of this blog – has been whipped into a frenzy by the same two people, one of whom cannot hide her personal antipathy of me because of Bear Hill. Once we were friendly. Indeed, on January 4th, 2010 she sent me a long email asking me to run for Selectman because my unique skills were badly needed according to her. She’s probably mortified she ever penned such to me, but alas, she did.
I joined the water commission after the Bear Hill controversy had begun. During it, the abutters (a) accused Glen Pratt of taking payoffs from Stevens Development; (b) said that the water commission would have “blood on its hands” should we proceed with the installation of a driveway (one of 27 that already exist on Reservoir and Clayspring Roads) given the traffic we would add to the road; (c) filed no fewer than two ethics complaints against me, both of which were dismissed; (d) filed three OML complaints against the commission, all of which were dismissed; (e) introduced a motion at town meeting calling for the elimination of the elected sewer commission, which was soundly defeated; (f) filed a ten taxpayer lawsuit against the commission, which was dismissed with prejudice; (g) the lawyer for the Ogrodnick lawsuit, a resident, referred to me in an email to our attorney as “a member of the Taliban,” which my wife found oddly amusing; (h) and said in that same email that we never would have proposed such a road “had the tank been on Atlantic Ave. or Jerusalem Rd.”, thereby practicing the worst and lowest form of debate – an appeal to class warfare – the very last refuge of scoundrels.
Personalizing the issue much?
I responded to the Bear Hill opposition as I did with Coughlin, forcefully, because the law was on our side, as was sentiment in town, and we were right to do what we did, as we are now, because the outcome will be best for the most people involved. Special interest politics, which your town manager practiced vigorously, and your side embraces with gusto, has no place on an elected commission and in a PUBLIC utility. So, I am now persona non grata with this crowd, and I am now, and was during the Bear Hill fiasco, happy to assume the mantle. Bring it. If you want to make me the face of evil and ignore the merits of the argument, please continue. As with Bear Hill, your agendas and motivation will become abundantly clear to all.
Your maniacal attempts to vilify me and stop a worthy civic issue in its tracks have followed the Bear Hill playbook to a T. Indeed, your beloved town manager sent out an email in his (thankfully) last week in office proclaiming that he was “stopping the RFP.” He sent it to five people, including me, but also to one of the leading opponents of the Bear Hill access road. Freudian slip? I doubt it.
Some of the Westport selectmen have reached out to some of us these past few months. What they described happened in Westport has happened here, almost identically. A beleaguered town manager reaches out to a narrow subset of residents in the hopes to build a power base when needed. The same beleaguered town manager heaps favoritism on employees to the detriment of taxpayers. Budgets go to hell. Efforts to reach out to the vocal minority by the beleaguered town manager reach a fevered pitch toward the end of his sad and sorry reign, all to no avail. Desperation sets in. Said town manager plays every dirty trick imaginable on his way out, including the requisite ethics charges – the final attempt at a Hail Mary pass. Sound familiar?
Your side has done this. The attempt to raise ethics issues was a smear, plain and simple. It was deliberate, planned, and orchestrated by your side, the people that come here regularly to reinforce your collective, irrational ravings. Former selectmen were involved in the effort to raise bogus ethics charges, people that ought to know better. Anyone truly interested in the truth could have and should have come to me with concerns, and I would have allayed them in five seconds because there never was any issue. Yet no one in this camp had the decency to reach to me, or stop the slander as it was occurring. You climbed on your sanctimonious high horses and PERSONALIZED the issue, because you needed it stopped.
I have asked this before, I will ask it again: Why is your side always so afraid to debate an idea on its merits? Why do you deliberately misstate facts you know to be true when you have been told repeatedly what is or is not the case. Your constant refrain that we are “selling the water company” company to mind. You know that can’t happen, and won’t happen, yet you continue to advertise your lies.
Why do you insist on personalizing issues?
Mary A. Parsons Said:
March 1, 2012 at 5:32 PM
Peter,
The only one personalizing this is YOU. You flip flop back and forth in your posts. Bear Hill has nothing to do with the current issue. There are no sides here. Read what the editors at the Patriot Ledger have to say about you.
“OUR OPINION: Cohasset official’s actions demand closer scrutiny
By Anonymous
GateHouse News Service
Posted Feb 03, 2012 @ 09:00 AM
EDITORIAL —
“Cohasset Water Commission Chairman Peter DeCaprio’s stated interest in making sure the town’s new water department contract is thoroughly, independently and publicly vetted suggests he wants what’s best for the town.
Such laudable ideals might lead town residents to cut him some slack when they learned that he recently served beer at a public meeting to discuss that contract. It could be dismissed as an isolated error in judgment; an embarrassing mistake akin to the bra trick that last year forced Abington School Committee chairman and amateur magician Russell FitzGerald to resign.
Yet DeCaprio’s indiscretion was more than just a lapse of decorum and it is only one of several actions that suggest his leadership of the department deserves closer scrutiny.
Among the most troubling issues is his misinterpretation of the state Open Meeting Law, which requires a detailed agenda be posted before a public meeting and that minutes of the meeting be recorded. The agenda posted for the Jan. 23 meeting at which beer was served offered only a vague reference to “RFP Preparation.” DeCaprio has defended his actions by erroneously describing the meeting as “informal” and “private,” despite the presence of a quorum of water commission members.
He told our reporter earlier this week that he only filed a meeting agenda “to play it safe” and suggested that, if he wanted, he could have held the meeting in the privacy of his own home. Other DeCaprio comments also make it seem as if he sees the water commission as a private entity and himself as its CEO.
“We have had many, many, many private, catered gatherings at the water company, and we’ll likely to have more in the future,” he said recently when questioned about beer at the Jan. 23 meeting.
At the very least this mind-set suggests the state Attorney General’s Office should be called in for the type of informational meetings it conducts when public officials need help understanding the rules regarding public meetings.
As if this were not enough to hint at problems in the water department, another DeCaprio decision was recently challenged. At a meeting Tuesday, town officials questioned his hiring of a private law firm to do work for the water department. The firm, according to Selectmen Chairman Edwin G. Carr, is one that has previously represented DeCaprio in cases unrelated to town business. Carr also said the hiring of legal counsel must first be approved by the selectmen in a public proceeding. DeCaprio disagreed and dismissed attacks on his actions as “blatantly political.”
Despite his umbrage, there are reasonable questions as to whether his commitment to the town’s welfare and the integrity of its water department is matched by an understanding of – or commitment to – the rules and laws that govern how the people’s business is conducted.
This is not about four bottles of beer or possible bad blood between town officials. It’s about not treating a public entity like a private club.”
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Mary A. Parsons Said:
March 1, 2012 at 5:34 PM
By the way, Peter, when you schedule a water comission meeting at your house, make room for the public to attend. You don’t have a valid reason to have closed meetings.