Monday, December 31, 2012

MedHab Raising Funds via Gust

MedHab is in their third capital raise according to SEC documents.  The company is listed on GUST, a website that matches angel investors with firms needing capital.  Gust, formerly AngelSoft, was renamed in September 2011.

Early MedHab funding came from the Concho Valley Angel Network.  GUST had this to say about our local angel funder:

Exit strategy. Our members typically seek returns of at least ten times their initial investment within seven years. This level of return on investment is essential due to the high risk and likelihood of failure among early stage ventures. Thus, a clearly articulated exit strategy - how angel investors will extract such returns - is essential. For example, do you plan to sell the company to an established corporation in your industry? Or, will your exit be through subsequent rounds of financing - venture capital or the public markets? Angel investors are not just interested in the strategy you select, but more importantly in the how - the operational strategy that shows specific steps you will take to achieve the exit.

Concho Valley Angel Network Expects Their Investments To Generate

  • Expected Revenue By Year 5: USD10,000,000 - USD50,000,000
  • Expected Returns: 10x Investment - 30x Investment
  • Expected Years to Exit: 2 Years - 7 Years
  • Expected Years to Break Even: 1 Year - 3 Years
The site matches private money with companies needing seed capital.  A year ago the City of San Angelo offered MedHab a $3.6 million economic incentive to setup a production facility.  In August MedHab agreed, promising 3 to 11 jobs by year end.  So far city leaders have been silent on MedHab's performance.  Maybe the new year will bring information in this regard?  One can hope.

Monday, December 24, 2012

Medicare: Santa/Grinch for Area Hospitals

Which San Angelo hospitals have been naughty or nice, according the the Center for Medicare/Medicaid Services (CMS)?

Medicare published a list of hospitals receiving bonuses or penalties from two extrinsic motivation programs, Value Based Purchasing and Hospital Readmissions.

Shannon Medical Center gets a .22% bonus, while San Angelo Community Medical Center receives an extra .15% under the Value Based Purchasing initiative.

The Readmissions program only issues penalties.  Shannon avoided this lump of coal, but SACMC was awarded a .38% Medicare penalty.

Overall, CMS Santa left Shannon a .22%  increases in Medicare payments, while Community received a -.23% lump of coal.

Medicare Grinch or Santa?

Ginch--Your soul is an appalling dump heap overflowing with the most disgraceful assortment of deplorable rubbish imaginable, Mangled up in tangled up knots.

Santa--But I heard him exclaim, ‘ere he drove out of sight, "Happy Christmas to all, and to all a good-night!"

It's the sharpened blade of reward/punishment.  Medicare wants the public to believe it's rewarding good providers.  If that's the case, why would all these "bonuses" add up to an average .15% payment reduction across all Texas hospitals.  The aim is Grinch-like, to save money. 

Unfortunately, it gets worse.  Next up is 30% of hospitals cheating to get the reward.  That's the rate CEO's backdated stock options to maximize their income.  Surely, doctors and nurses are as smart as corporate executives.

Saturday, December 22, 2012

Council Approved without Identified Funds

San Angelo City Council approved two items in December without expressly identifying a funding source.  The first was a surprise New Year's Eve holiday. while the second approved funding Phase 1 of a downtown Master Developer.  It's rare for this council to authorize anything without a clear funding stream.

The last time Council approved a new holiday, the cost was estimated at $135,000.  Phase 1 of the Catalyst Urban Development proposal came in at a $90,000 estimated maximum.  These total $225,000.

Will Santa deliver a surprise $225,000 to Council?  Should that not happen, what plans does the city have to fund these two decision?

The last time council gave an extra holiday to staff, it passed on huge health insurance premium increases to employee and retiree dependents.  That move drove nearly 200 people from city sponsored health insurance coverage.

The New Year's Eve holiday comes before Council revisits its pension plan.  This is the next area for huge funding increases or benefit cuts.  If elected leaders go the same route as under health insurance, expect city contributions to remain steady.  Employees will have the choice of stepping up to fund the difference or face dramatic cuts in retirement benefits.

Remember the city can only do what it wants to when funding isn't there. 

Saturday, December 15, 2012

One Master Developer Leaves, Another Rides into Town

If this were a Western, it would show one man riding out of town toward the setting sun.  The next morning a gaggle of fancy dressed men would ride into downtown San Angelo, ablaze in morning sunlight.

The man riding out is Economic Development Director Shawn Lewis.   Lewis is headed to Longmont, Colorado where he'll work as Assistant City Manager for his old boss, Harold Dominguez.  The Longmont Times-Call had this to say about Lewis:

According to his resume, Lewis coordinated 16 downtown building rehabilitations in San Angelo, completed the creation of the city's first tax increment reinvestment zone for downtown and aging corridors, doubled the number of dangerous buildings that were demolished or repaired, and cut the time for the city to review development plans. He also wrote the reorganization plan that created San Angelo's new development services department; as director of that department, among other things, he oversaw $22 million of capital projects and oversaw the privatization of the city's social services division to the Concho Valley Community Action Agency.

On reaching his current position, he organized the creation of the San Angelo Business Resource Center, which put all the city's economic development partners into a "one-stop shop," housed in a former Coca-Cola warehouse. He also led a reorganization to cut costs in economic development and recruited a medical device manufacturing company to the city.

The San Angelo Standard-Times named him in November as one of the city's top 20 leaders under 40. 

Riding into San Angelo to develop downtown is Catalyst Urban Development.  The Master Developer proposes a four phase engagement, with fees associated with each chunk of work.  The outline of their proposal showed:

Phase 1: Implementation Action Plan - $68,000 (plus expenses) and up to $22,000 for outside groups. 

Phase 2: Horizontal Development Positioning - $10,000 per month for the life of this phase, estimated at six months.  Fee of 3% of purchase price.

Phase 3: Vertical Development Positioning - Public-private partnership stake would identify compensation.  Firm will submit a fee proposal for direct sale to outside investor

Phase 4: Construction Management / Project Oversight - 1.5% of improvements

Other On-Going Tasks - Fees developed as services are needed outside the scope above

How long will it take Catalyst to achieve 16 downtown rehabs using public private money?  Continuing the Western theme, Was San Angelo not big enough for Lewis and Catalyst to work together?

Update 12-20-12:  Council approved phase 1 of Catalyst's proposal.  Is it the beginning of a long term franchise, with hundreds of thousands in public money?

Update 3-9-13:  Shawn Lewis' Longmont will contribute $27.5 million of the estimated $80 million Twin Peaks Mall redevelopment project.  The city's bonds will be repaid by the additional sales and property tax the mall generates.

Final MedHab Update from Shawn Lewis?

2012 began with City Council endorsing a $3.6 million incentive package to bring MedHab's production facilities to San Angelo.  The sales pitch had MedHab

Donna Osborne, the city's economic development coordinator, said if it takes the deal, the company plans to start operations in San Angelo in March, creating 11 jobs in the first year and 23 the following year.
March turned into August before MedHab accepted San Angelo's incentive package.  The company returned to equity markets in October, seeking $750,000,

City Council's final meeting of 2012 is also Economic Development Director Shawn Lewis' last.  Lewis accepted an Assitant City Manager job in Longmont, Colorado where he'll rejoin former City Manager Harold Dominguez.

Will Shawn give an update on MedHab as his final present to area citizens?  Did the product launch in Australia in June as visioned?  How many of MedHab's promised 11 jobs materialized in San Angelo?  It'd be nice to get a report.

Update 12-27-12:  Shawn's final public update, published in the Standard Times, did not include MedHab.

Thursday, December 13, 2012

Where Are Fredd's Handlers?

Three weeks after being arrested for Driving While Intoxicated, potentially his third DWI conviction, San Angelo City Councilman Fredd Adams gave a "no comment"when asked about the arrest.

Locals harken back to State Representative Scott Campbell and his antics with drunk driving.

Campbell survived late-breaking election news in 2004; a few weeks before the general election, news reports of a drunk driving arrest and of his allegedly seeking an illegitimate massage in a legitimate massage parlor got out.

Three years later the Standard Times reported:

* An investigation into an October 2004 suspected drunken-driving incident, which led Campbell to say he had recently undergone treatment for alcohol abuse.
It took Republican incumbent Campbell two years to seek treatment.  Scott had a Republican Party structure to keep him out of trouble.

Councilman Fredd Adams has the Baptist Church structure.  Unfortunately, I've seen few congregations, of any denomination, with the ability to conduct an intervention when their priest or pastor was in severe crisis. 

Today I noticed a light colored Mitsubishi (with a broken driver side mirror) swerving erratically on North Bryant.  The driver acted like they'd just finished a three martini lunch.  Part of me wanted to get close enough to see if it was Fredd, but the rational part screamed to keep my distance. 

Does Adams have his foot to the floor on self-destruction?  He had three weeks to control this story.  First, arrange for treatment, take a hiatus from City Council until he could get his life in order, then release the story on his terms.  That didn't happen.

Stay tuned for developments.  Will Fredd sell his funeral home and move to Austin, like Scott Campbell?  Or will he face the music at home, seek help and make amends?  The ball's in Fredds court.

Update 12-24-12:  U.S. Senator Mike Crapo (R-ID) was arrested for drunk driving in Virginia.   His office released a statement the same day.  Crapo is a Mormon.  His faith does not allow practitioners to drink alcohol.

Wednesday, December 12, 2012

Oilfield Boom: Bane to Roads

Representative Drew Darby described how oilfield trucks around Big Lake tore up roads.  Tom Green County will experience an oil boom, thanks to the Cline Shale.  The Standard Times reported:

An oil industry bonanza appears to be looming over Tom Green County. The Cline Shale, a massive oil-bearing geological formation that intrudes into the northern part of the county, is coming under development, and Tom Green County Commissioners Court members talked giddily about it in the Commissioners Court meeting.

The toll on area roads will not be borne by oil companies, not under the current system.  First, Texas relies on federal money for highway construction and maintenance.

Texas has relied almost exclusively on revenue generated by the gasoline tax, vehicle registration fees and federal funds to build and maintain its highways.

Second, oil production taxes effectively are saved.

If any oil and gas production taxes collected are higher than the taxes taken in 1987, then 75 percent of those taxes go to the Rainy Day Fund.
Thus far, the Texas Legislature refused to tap the Rainy Day fund for education or healthcare.  Early suggestions have $1 billion going to develop a water infrastructure development bank.

Will the oilfield boom and bust before Texas Legislators get their hands out of their pockets and design something?  If education and healthcare are an indication, the answer is no.  That said, Representative Darby is ready to lead the charge on roads.  Will it involve any of the coming oilfield bonanza money?

Update 12-21-12:  Roads may be the purview of a new Energy Caucus.

Update 1-31-13:  Pioneer Natural Resources sold a portion of its Wolfcamp Shale holdings to a Chinese energy company.

Councilman Adams' Political Move?

San Angelo City Councilman Fredd Adams was arrested and booked for driving while intoxicated on November 18th.  On November 20th Fredd missed the vote on granting city employees an additional day off on New Year's Eve, a noted party night.


Human Resources Director Lisa Marley presented background information.
Motion, to close City offices on Monday, December 31, 2012, as presented, was made by Councilmember Silvas and seconded by Councilmember Alexander. AYE: Alexander, Morrison, and Silvas. 
NAY: New, Hirschfeld, and Farmer. Motion tied 3-3, thereby rendering the issue null and void.

The minutes don't reflect the discussion, i.e. the number of holidays already given, the ability for employees to use vacation time if they want New Year's Eve off.  I looked for Lisa Marley's presentation on the City's Slideshare site, but it hasn't been uploaded.

Adams did get the item returned to Council agenda for December 4.  

Discussion and consideration of closing City of San Angelo offices on Monday, December 31, 2012 and Tuesday, January 1, 2013 to coincide with Tom Green County offices New Year’s holiday
(Requested by Councilmembers Adams and Silvas)

The discussion was remarkable in its lack of depth.  The main reason for giving the extra holiday was Councilman Adams requested it.  Was that a move to build political good will before news leaked regarding his DWI?

For a council that cut an essential program to save $139,000, it cavalierly spent $135,000.  In hindsight it reads "Help Fredd Adams."

Addiction is no laughing matter.  Fredd needs help and plenty of it.  It begins with a harsh examination of his personal accountability, then a serious treatment and follow up regimen.  I wish Councilman Adams courage and tenacity in facing the many ways addiction destroys oneself and others. 

Update 12-13-12: If Councilman Fredd Adams was driving a Mitsubishi with a broken driver side mirror this afternoon on North Bryant, this story is far from over. The driver was all over the road, swerving in erratic movements. Whoever was behind the wheel drove like they had a three martini lunch.  Should that've been Fredd Adams, the self-destruct button remains on.

Monday, December 10, 2012

Men Who Brought MedHab Work in Longmont

With the announcement that Shawn Lewis will join Harold Dominguez in Longmont, Colorado, San Angelo will have lost the two City leaders that brought MedHab to our community.  Shawn's last day will be December 24. 

Harold and Shawn built an economic development palace, while health care became an afterthought, at least someone else's responsibility.  Why did neither stay to enjoy the splendor they created, a newly renovated City Hall, Business Resource Center and hundreds of jobs coming for local citizens?  Only they know for sure.

If Longmont pays well enough, Lewis and Dominguez can own a stake in MedHab.  The company is on its third capital raise in three years.  Minimum investment is $2,083.  

Harold's consistent in adding senior leadership staff during a tight budget.  Shawn Lewis is the beneficiary of that.  Who else might have Longmont in their future?

Update 3-9-13:  Lewis made it to Longmont, where his city was the first in Colorado to ban hydraulic fracking.  That's in direct contrast to San Angelo, which expects an fracking energy boom.

Sunday, December 09, 2012

Add City Health Insurance to Audit Request

The City of San Angelo stuck to their original 2011-2012 budget for health insurance, long after City Council approved an exclusive provider arrangement with Aetna - San Angelo Community Medical Center.  Finance staff surprised City Council with a last minute budget amendment in September.  The amendment had been prepared by staff in early July.

However, the amendment wasn't sticky enough to make the 2012-2013 budget, reflected by the UT burnt orange colored notes in the image below.  Red lines lead to numbers in Council's approved budget amendment.  Green boxes and lines show the savings promised relative to the prior year.  Blue boxes are where the city has told a number of stories.  On September 18th Human Resources Manager Lisa Marley presented a fund balance of nearly $1.6 million.The image below shows virtually no change in fund balance from the prior year.

I see $1.7 million unaccounted for in the year ended 9-30-12.  Of that, nearly $700,000 made it into fund balance.  Another $200,000 went to higher reinsurance costs.  That leaves roughly $800,000 in premiums, paid by the city, employees and retirees, unaccounted for by my estimation.  That doesn't mean anyone absconded with it. 

Add this to the list of things needing audit at City Hall.  Employees and retirees should know how their premium contributions are being spent or saved.

For better viewing, click on an image to make it larger.

Thursday, December 06, 2012

Council Cuts, Feds to Backfill?

San Angelo City Council drastically cut the Nursing Department budget beginning October 1, requiring the "closure" of the Sexually Transmitted Disease Clinic and reduction in Immunization services.  Below are the city's STD statistics:

A state health department physician testified before Council in September.  She pleaded with Council members not to hack what little remained in the City Health Department.  The Nursing budget was reduced by 47% or $138,000.  Council chose to lecture the good doctor, saying the state wasn't doing its part financially, so the City would do likewise (my interpretation).  It read shakedown. 

The City put out a news release stating immunizations would be drastically curtailed and the STD clinic closed September 28.

However, a nurse told council on December 4th the clinic was still treating STD patients.

"Anyone who is identified as positive by the state can be treated through us."

Might this revelation blow a hole in the City's basis for asking for 1115 waiver money?  A Standard Times piece confirms that services were curtailed but not eliminated:

"If someone has context ... is positive for STD, but can't access treatment, we can still do that (provide STD treatment)," Villarreal said.

The feds don't like paying for services already provided and Weise told council it could not be an "ongoing program."  His presentation included Medicaid waiver goals: 

There was nothing in the presentation delineating how the clinic explicitly meets any of the above goals.  Infrastructure development was underlined several slides later, but this City Council just destroyed that infrastructure to save $138,000.  Restoring that which was eliminated does not seem an improvement.  It's building back what was.

Additional oddities included Rick Weise providing little detail on STD clinic operating costs and stating that the grant had already been submitted.   Also, the packet mentioned buying a building near City Hall to house the clinic, yet Rick would clearly tell any staff their jobs would only be funded for 4-5 years.  Who buys a 30 year asset for a 4 year program?  Also, the grant would fully fund this new location.

The final absurdity came from City Council approving another holiday.  The last time Council did such, adding Veteran's Day, the cost was estimated at $135,000.  That's virtually the same number that eliminated the STD clinic, $138,000.  Apparently, the city had an extra $135,000 laying around.  Funny, they didn't ask about the cost of the extra holiday.

Update 12-7-12:  The Standard Times did a story on the new holiday.

Update 12-10-12:  The grant application posted on Texas Regional Health Plan 13 shows a December 3rd date.  City Council met on December 4th to consider applying for the Section 1115 waiver money.  Oddly, the grant shows incentive payments for certain milestones vs. detailed budget projections.  There were no operating projections in the application, which explains why Rick Weise was stumped by what appeared to be a simple question.

Update 3-5-13:  The State will backfill the void with the assistance of city health department staff. 

Friday, November 30, 2012

Second Unapproved $101,000 Expenditure

An October 4 e-mail from City of San Angelo Purchasing Director Roger Banks indicated two $101,000 items needing City Council approval.  The first, now known as Furniture-gate or the Furniture Fiasco, came to light on October 16.  No purchase order was issued "as required by local and state law" prior to the selection and installation of Water Department furniture.  Over several months the furniture amount rose from $91,000 to nearly $101,000.

The second $101,000 project also involved City Hall, specifically Change Order #7.  I search city council agendas and minutes and couldn't find this item in October or November.

Councilman Johnny Silvas asked new City Manager Daniel Valenzuela to check into "other purchases of over $50,000 that are out there" via e-mail.  Change Order #7 is one, at least in the eyes of the city's Purchasing Chief.

Click on the image above to make it larger (more readable)

Thursday, November 29, 2012

Council Agenda to Show Water Department Audit?

San Angelo City Councilman Dwain Morrison asked to put an audit of the water department on the agenda for the next council meeting.  Morrison said he'd gotten 42 e-mails in the last week regarding a petition to audit the Water Department.  Morrison asked that it be on the agenda for December.  He closed with "It may be time to do that (audit)."

Morrison already expressed concern about a possible conflict of interest with Hickory employee on November 6th.  That employee turned out to be the son of Will Wilde, fired from the City and not eligible for rehire.

Since the November 20 meeting Water Chief Will Wilde and his assistant Tom Kerr retired.  Will that remove the pressure?  The agenda should be posted tomorrow.  I look forward to seeing if a Water Department audit is up for consideration. 

Update 12-8-12:  It didn't make the agenda and Councilman Morrison shared his disappointment that his request wasn't honored. The City met with some petitioners and has a committee on audits looking at what might be done.  

Saturday, November 24, 2012

Furniture Fiasco: The Production

The City of San Angelo's Furniture Fiasco began in early March of 2012.  In some ways it's ongoing, giving the sudden resignations of Water Chief Will Wilde and his Assistant Tom Kerr.

I offer the following slide set which shows a timeline of events, information from city documents and e-mail communications from key leaders.   I attempted to put a voluminous amount of information (kindly shared with me by Matt Waller of The Standard Times) into succinct, chronological order.   

Clearly, top city leaders had their fingerprints on this problematic purchase, which violated state and local law according to Roger Banks, the City's purchasing director, by not issuing a purchase order.

Water Utilities Assistant Director Tom Kerr played the largest role, while Water Chief Will Wilde served as furniture overseer.  Assistant City Manager Elizabeth Grindstaff cheered the initial order, something she omitted in her October 16th characterization to City Council.  CFO Michael Dane was Interim City Manager for virtually the whole timeline and the City Manager's office also cheered the order.

Purchasing Director Roger Banks seemed out of the loop until September, when he cited three concerns about the furniture situation.  However, Banks was the recipient of hand me down Water Department furniture from Kevin Krueger, a Water Engineer.

Bottom Line:  The responsibility to initiate the purchase order fell with the Water Department.  It's their budget and furniture.  Failure to work with the Purchasing Department and Interim City Manager Michael Dane in late May, early June resulted in furniture being ordered and installed in violation of policy and law.

There's more to the story, like how the parties reacted while being questioned by new City Manager Daniel Valenzuela.  Water Chief Will Wilde had the added pressure of a possible conflict of interest from his son Blake, fired by the City for cause and not eligible for rehire, working as a subcontractor for the Hickory pipeline project (a story broken on this blog).

As Councilman Alexander stated during the October 16 furniture discussion, "Grace is under pressure."  City Manager Valenzuela finished his investigation and meted out justice.  Hopefully, a large dose of honesty can relieve more of that pressure.

Update 11-28-12:  Kerr and Wilde finally spoke to their sudden retirement, citing a desire to slow down.  

Friday, November 23, 2012

Financial Audit & Pension Liability

Armstrong Backus presented the results of their audit of the City of San Angelo's financial statements to City Council.  Two items struck me.  One, the city's deficiencies in accounting for federal grants and two, a looming financial hammer from unfunded liabilities.

The city's inadequate handling of federal grants was its third strike in this arena, given it was an audit finding twice before.  The root cause cited was lack of knowledge of federal accounting requirements, which would normally point to greater support from the finance department.  Yet, this did not happen.  Auditors expressly pointed away from having finance take over federal grant accounting due to gross under staffing.  This would seem a great reason to add accounting support staff.  Instead the city will look to name/hire a grant administrator.

The problem arose from the city investing federal grant proceeds.  The feds don't like grant recipients making interest off their money.  This provided a chuckle given the city's sitting on $343,000 in federal ERRP money for over a year.

The auditor spoke of a $38 million unfunded liability from Texas Municipal Retirement System, the city's pension provider.  This liability will hit the city's balance sheet in 2015.  Councilman Hirschfeld spoke of other unfunded liabilities, like retiree health insurance.  Mayor New shared his concern regarding the expected rate of return for the city's two pension funds.  Under a low return environment, the city must pony up more to meet pension obligations.

The pension topic arose later in the agenda when council entertained the idea of re-instituting a 70% cost of living adjustment (COLA) so retirees could conceivably get a bump up in their pension checks.   When the city cut the pension benefit by decreasing the COLA from 70% to 50%, it effectively froze many retirees pension checks, some permanently.

Retired Police Chief Russell Smith spoke to the tremendous difficulties many retirees face as their pay was 40-50% below area and benchmark cities.  This low pay is the basis for their retirement benefit, meager for many at $500 or less per month.  Smith stated, "Not one good thing came out of that committee."  The city took away the pharmacy, decreased the COLA and raised dependent coverage 10 times what employees paid for health insurance.

The cost to return to a 70% COLA is projected at just over $1 million per year.    The city's current cost for the retirement benefit is $5.99 million.  It would rise to $7.02 million, an increase of 17.2%.  If the unfunded liability increased similarly, the $38 million would rise to .$44.6 million.

This City Council isn't interested in adding to unfunded liabilities.  Mayor New wants to explore investment returns, which could lead to riskier investments like private equity.  I expect another committee.  Will be a redux, one where nothing good comes to retirees?  It remains to be seen, whether benefits are raised or razed..

Thursday, November 22, 2012

Council to Revisit City's Website

San Angelo's City Council postponed a $90,000 request to update the City's website.  Council approved $40,000 for a new website six months ago.  The meeting minutes from May 1, 2012 stated:


Requested by Councilmember Morrison and responding to questions from Citizen Jim Turner, Multimedia Coordinator Brian Groves presented background information regarding the capability of the various functions the web host would build and design; the cost, related expenditures for the project, and the timeframe to complete the project; and the length of the contract.

General discussion was held on the capability of the web host, continuous technology changes, open source solutions, user friendly features, back office capability, and possibly considering Code for America as an open source framework provider.

Public comments were made by Citizen Jim Turner and Ann Joseph.

Motion, to accept, as presented, was made by Councilmember Adams and seconded by Councilmember Alexander.  Councilmember Morrison expressed his concern on the specifics of the proposal and the unknown facts to move forward with the website design.

A vote was taken on the motion on the floor. AYE: Alexander, Adams, Hirschfeld, and Farmer. NAY: New and Morrison. Motion carried 4-2.
Anthony Wilson was not in the Public Information Officer role when council addressed this subject..  Ty Meighan was.  However, Anthony is the one explaining the need for $90,000 today.  I look forward to his presentation.

Update 11-25-12:  ConchoInfo, the Jim Turner mentioned in the minutes above, ran a piece on the recent council discussion regarding the city's new website.  It's worth the read.

Update 12-8-12:  The Public Information Office will apply for funding for a server through an Emergency Preparedness grant.   This may or may not impact the amount of funds requested for the website, given servers can perform multiple functions. 

Wednesday, November 21, 2012

Wilde & Kerr Quit Water Department

The Standard Times reported:

The two top administrators in San Angelo's municipal water department both announced their retirements today, effective immediately.

Will Wilde, water utilities director since 2004, and Tom Kerr, assistant director since 1994, are leaving. No reason was given in the announcement, which came out through a public information division news release.

This is big news.  It's highly unusual for someone in such a critical role to retire, effective immediately.  It's even more unusual for their #2 to do likewise at the same time.  I'd love to hear from the fly on the wall during these discussions.  

Update 11-19-23:  Wilde Engineering received 2nd Place in the Development Corporation's business plan competition.  The firm includes Will and his son Blake, who was fired from the city Engineering Department.  The prize for 2nd place is $20,000.

Tuesday, November 20, 2012

ASU's Third National Search May Promote Internal Candidate

Might Angelo State University's national search for a top slot land an internal candidate for the third time in a row?  It May.  At least the first two searches did.  Dr. Brian May beat out a national panel for the Provost/Vice President of Academic Affairs slot in April of this year.  A mere six months later Texas Tech named May ASU's President from a national pool of applicants under an AGB Search.

May's second national victory opened the Provost/Vice President for Academic Affairs position for yet another national search.  Which internal candidates could get the nod?  Interim Provost Nancy Allen is not a candidate for the permanent job, much to the relief of ASU office coordinators

College of Health and Human Services Dean Leslie Mayrand sat on the Presidential Search Committee which recommended May.  Could this be a feather in her cap for the Provost slot?  It May.

President May,  Provost and Vice President of Academic Affairs Mayrand, they both have a nice ring. Ah, I've gotten ahead of myself once again.  Let the search process run its course.  I've yet to see a timeline, but I hope it culminates in May.

Update 12-5-12:  The National Search Committee has been named.  ASU's website states the search committee will "make recommendations for a new provost and vice president for academic affairs by May 1."

Update 3-10-13:  The top 3 candidates for Provost/VP of Academic Affairs are all outsiders, like Anthony Blose.   Leslie Mayrand helped Brian May become President, but the favor was not returned.

Monday, November 19, 2012

Giving the City Its Due

I submitted questions to the City of San Angelo on the possible conflict of interest regarding the Hickory Pipeline Project, which I stated "were yet to be answered."  They included:

1.  When did Blake Wilde's Wilde Engineering become a subcontractor on the Hickory Pipeline project?
2.  Please send me Wilde Engineering's proposal with scope of work and conflict of interest documentation for doing business with the City
3.  Please send me Water Chief Will Wilde's conflict of interest filing with the city regarding Wilde Engineering's subcontractor work for the project Will oversees.
4.  Please share how much Wilde Engineering has been paid between June and now for subcontractor work on the Hickory project.
I said I'd post City responses after they're received.  Truth be told, Anthony Wilson responded to these questions on two occasions.  Here is his response to questions #1-4 on Halloween (10-31-12)

As for your remaining questions, the City’s contract for the Hickory Aquifer project is with Carollo Engineers. The City has no contractual relationship with any subcontractor Carollo may be using. Questions regarding its subcontractors should be directed to Carollo

That's answer #1.  As Carollo has no obligation to share information with the public, I pressed the city more directly.  This reply came the next day (11-1-12):

It would be atypical for pay applications from a general contractor, such as Carollo Engineers, to the City to include any invoicing from a subcontractor. In almost all circumstances, those pay applications are based upon certain benchmarks the contractor has met toward completion of the project. 

You are, of course, welcome to obtain copies of those pay applications. Because they are voluminous and may include Carollo tax identification numbers that may have to be redacted, we’d ask that you please fill out an open records request. You will need to fill out the form only down to where you, as the requestor, signs it. The rest of the form is for internal use and tracking. Also, here’s a link to the City Clerk’s open records page, in case you need further info about such requests. 
That's answer #2.  I'd hoped the information would be readily retrievable from the City's financial records or on EADOC, the computer software specified for use on the Hickory Project:

The CONTRACTOR shall utilize EADOC (EADOC is a registered trademark of EADOC LLC) for submission of all data and documents (unless specified otherwise in this Section) throughout the duration of the Contract.
1. EADOC is a web-based electronic media site hosted by EADOC LLC.
2. EADOC is paid for by the CONTRACTOR.
3. EADOC will be made available to all CONTRACTOR’s personnel,
subcontractor personnel, suppliers, consultants, and ENGINEER.
4. The joint use of this system is to facilitate electronic exchange of information, automation of key processes, and overall management of Contract Documentation.
5. EADOC shall be the primary means of project information submission and management

EADOC has financial applications.

A. Schedule of Value, Pay Estimates, and Change Request Proposals shall be submitted on EADOC. Supporting material for Pay Estimates and Change Requests shall be submitted on EADOC as PDF attachments. Examples of compliance submittals include, but are not limited to:
1. CONTRACTOR’s Schedule of Values.
2. CONTRACTOR’s Monthly Progress Payment Requests.
3. Contract Change proposals requested by the OWNER

I hoped a quick financial records/EADOC search could produce the information.requested, without printing voluminous pages and redacting confidential information.  It was not to be.  As Anthony Wilson told me over the phone, the city answered my questions, just not to my liking.  That fact we agree upon.

Sunday, November 18, 2012

Minutes on Hickory Possible Conflict of Interest

Within a spirited discussion on the Hickory Water Project, draft City Council minutes state:

Councilmember Morrison commented on a potential conflict of interest and asked staff to review the issue.

After listening to the taped meeting several times, I heard Mr. Morrison ask Carollo's Hutch Musallam to call him regarding a possible conflict of interest with one of Carollo's employees.

I never heard Morrison ask staff to review the issue.  I did see City Manager Daniel Valenzuela slide his chair over and say something to Morrison.  His words weren't audible to the general public.  Might Valenzeula have said something about a review?  Could this be the reason it made the draft minutes?

Wildes Say No Conflict of Interest: Investigation Needed

The Standard Times ran their first story on the fired son of Water Czar Will Wilde and his hiring as an inspector on the Hickory Water pipeline project.  
Blake Wilde said his father has no involvement in his work.

If Blake read Texas law on conflict of interest, he'd know:
A local official is considered to have the same interest in a business entity that his or her close relatives have in that business entity. 

Conflict of interest applies to elected and paid positions.  "Within a governmental unit, “local public officials” are defined to include:
1. elected officials such as the members of the city council or county commissioners (whether paid or unpaid); and
2. appointed officials (paid or unpaid) who exercise responsibilities that are more than advisory in nature.

The City's Comprehensive Annual Financial Audit lists Principal Officials, one of which is Will Wilde:

Given principal officials exercise responsibilities that are "more than advisory in nature," state conflict of interest law would seem to apply.

As I read the Standard Times piece, many of the statements didn't add up.  While the city is yet to answer my first set of questions (including how much Wilde Engineering has been paid to date), I offer these additional questions:
1.  Did Carollo's Musallam know Blake had been fired from the city when he hired Blake as an inspector? There may or may not be an issue of misrepresentation.

2.  What kind of engineering work did Blake do for the city and does that qualify him for work on a water pipeline?  Blake's website shows roads.  There could be an issue of competency.

3.  If Musallam talked to the city attorney prior to hiring Blake, was he told by city officials of Blake's termination status, not eligible for rehire?  When did the conflict of interest conversation between Musallam and the city attorney occur?

4. The safe thing for "cautious people" to do would be to fill out conflict of interest forms.  Did either Blake or Will do so in regard to Wilde Engineering's work as a Hickory subcontractor?  If so, the city could easily produce these for the public

I doubt Hutch Mussallam got the whole story prior to hiring Blake, but I've been wrong before and will be again.  Musallam is now caught between a proverbial rock and a hard place.  Two councilmen chewed Musallam's backside on the schedule.  The same duo gave Will Wilde wide berth on the unauthorized purchase and installation of $100,000 in furniture for the Water Department.  Mr. Musallam would get council's wrath long before Wilde.

Precedent on conflict of interest had city officials misrepresenting Mayor Alvin New's Board of Director position with MedHab, a company receiving $3.6 million in economic development assistance from the City.  While New filed two affidavits in  regard to his MedHab investment, these were not produced for the public to view.  The public found Council's relaxing local conflict of interest standards to not pass the smell test.  Has the odor returned?
City residents will need to conduct their own "smell test" and ask whether they see a director unfairly singled out, or whether they smell something gone afoul.

It's not residents job to ensure paid city leaders act ethically and responsibly.  That's City Council's and the City Manager's.  I see paid city leaders not answering my questions, when they freely did so in the past under Ty Meighan's tenure as Public Information Office.  I've yet to see follow up in council on concerns previously identified, like the furniture fiasco.

So far it's been sweep, sweep, but that could change.

Update:  GASB is very concerned about conflicts of interest, as is the Engineering profession. Other groups, like most local nonprofits, have higher conflict of interest standards than the City of San Angelo. 

Update 11-19-23:  Wilde Engineering received 2nd Place in the Development Corporation's business plan competition.  The firm includes Will and his son Blake, who was fired from the city Engineering Department.  The prize for 2nd place is $20,000.

Saturday, November 17, 2012

City's New Website Jumps in Cost

San Angelo City Council will consider a budget amendment for the redesign of the city's website.  Council approved the redesign in May for $40,000.  For some reason this original amount is not mentioned in the budget amendment.

Is the original $40,000 spent and the contractor needs an additional $90,000 to bring the project to fore? If so, something's wrong with the city's bid generation and evaluation process.

Why the omission of the original contract amount? This comes on top of the purchase and installation of over $100,000 of furniture without required approvals.

If I were a City council representative, such behavior would lead me to question the intent of staff.

Update 11-19-12:  City Public Information Officer Anthony Wilson called to inform me the $90,000 amount is for more than the Vision web site contract.  It includes servers to host the city's website, as well as equipment used to video and produce City Council meetings and content for Channel 17.  When I asked why this information was not in the packet, Anthony said his memo was "inartfully worded."

Update 12-6-12:  City Council approved a grant application that would provide the Public Information Office with $17,000 in technology, including servers.  It's not clear how these servers relate to the initial $90,000 budget request.

Update 12-15-12:  The web redesign went from information lite to information overload in the council packet.  It shows multiple options on services and maintenance.  Halfway through the memo, I felt I was reading Vision Internet's marketing brochure.  The proposal deals with redesign and hosting only.  There are none of the servers or video equipment/software mentioned as in the $90,000 on 11-19.
Despite having twice the amount of the project in a special fund, the presentation mentions possibly charging a fee for departments or users in FY 2013.

Will Wilde: Rainmaker

The City of San Angelo produced a graph (cartoon) showing the impact of its business-type activities in its latest Comprehensive Annual Financial Report.

Principal Officer Will Wilde, Director of Water Utilities, is the city's biggest rainmaker.  Between Water and Sewer it looks like the City produced $12 million in profits on nearly $40 million in revenue.  A 30% profit margin, that's PEU sweet.

Update 12-6-12:  Despite making $8 million off water alone last year, the City has a $4.8 million fund that could be used for rebates.  Council targets 90 days of water revenue, roughly $4.9 million.  That should be closer to $6 million a quarter from the graph above.  While the rainmaker retired, questions remain as to how the bounty has been used.  It's not much a stretch for citizens concerned about Will Wilde's ethical gaffes to wonder if he acted like Yantis Green with the public's money.

City's Comprehensive Annual Financial Report

Item #9 on City Council's November 20 agenda is approval of the City's financial audit by CFO Michael Dane and accounting firm Armstrong Backus.  I found a few items curious from the year ended September 20, 2011.

First, health insurance provided over $1 million in cash from operating activities.  Over $250,000 was invested, leaving a nearly $750,000 increase in cash, bringing the total to $967,000.  The statement does not show whether the $250,000 investment is obligated to employee/retiree health insurance or if it can be used anywhere.

This extra million came from the city imposing draconian premium increases on employee and retiree dependents.  Their health insurance premiums rose from 36 to 58%.  City Council chose not to apply any ERRP funds to break the hardship.  As a result nearly 200 people dropped city sponsored health insurance. 

Ironically, this Council meeting has a 2012-2013 budget amendment for $343,000 in ERRP funds, buried in item #15.  Might it take three years for early retirees to benefit from federal money intended to make health coverage more affordable?.

Also odd about the audit report, the city claims it is 100% responsible for health insurance risk.  The city has reinsurance that shifts a portion of that risk to an insurance company.  Also employees and retirees share in both risk and premiums.  The city paid 70% and employees 30% of premiums during the audited fiscal year.  

A review of the document reminded me of the City's stepped up efforts to hide over $1.1 million in 2011-2012 health insurance savings    Nearly a year after Council approved an exclusive provider arrangement with Aetna using Community Medical Center, they executed a last minute budget amendment which purported to have equal offset.

I'll have to wait another year for Armstrong Backus to report what actually happened. 

Sunday, November 11, 2012

No Answers Yet on Furniture Fiasco Investigation

The Standard Times ran a piece titled "City Council Sitting on Furniture Details."  However, story content pointed more toward paid city leaders not sharing the results of any investigation. 

Despite getting hundreds of pages of documentation on the unapproved purchase, the paper was not able to identify who signed the purchase order or put together a timeline showing:

1.  The beginning of communications with West
2.  When the purchase order was executed and who approved it
3.  When the furniture was delivered and installed
4.  When West first requested payment
5.  When the item was placed on City Council agenda for approval and by whom
This information may come, however there's another odd thing about the piece.  The Standard Times produced a story on the furniture fiasco without the name Wilde in it.  Water Chief Will Wilde stated in the October Council meeting, "We were given the furniture."  Any investigation needs to ask Will, by whom?  

The two names mentioned in the piece are  Assistant Water Director Tom Kerr and Assistant City Manager Elizabeth Grindstaff.  At the October Council meeting Grindstaff clearly stated the purchase occurred outside her bailiwick.

I wonder how many violations of city policy occurred in this one purchase? New City Manager Daniel Valenzuela deserves some latitude in this matter, as everything but the final approval occurred before his shift.  That said, enough time has run (nearly a month) for an investigation to be finished.  Time is not any investigator's friend.

The story stated:

City Manager Daniel Valenzuela said he might talk with Human Resources about what to do regarding the furniture purchase.

"I have a request I've submitted to HR," Valenzuela told me. "It's still an internal matter. It's something that is being addressed."
Public trust eroded with the unauthorized purchase.  Sharing the results and any corrective action will help regain that trust.  The only problem is another investigation calls regarding Will Wilde.  It involves Wilde's son Blake, fired as an engineer for the City, yet hired as a subcontractor on the Hickory Water project.

Might there be a drought of ethics in the City Water Department?  Rapid, thorough and transparent investigations are badly needed.  That's Valenzuela's responsibility.  It's a bad hand, but it's his to play.

Thursday, November 08, 2012

Councilman Morrison's Hickory Stand

San Angelo City Councilman Dwain Morrison stood during Tuesday's council meeting and asked Carollo Engineering's Hutch Musallum to give him a call.  Morrison wanted to discuss a potential conflict of interest with a Hickory Water project employee.

The Carollo employee is actually subcontractor Wilde Engineering, started by Blake Wilde.  Blake is the son of San Angelo's Water Utilities Chief Will Wilde.

Blake Wilde started Wilde Engineering in June 2012.

Prior to forming an engineering firm, Blake Wilde worked for the City of San Angelo.

Anthony Wilson, Public Information Officer, shared Blake's employment history (after an information request):

Blake Wilde was hired Oct. 8, 2007, and was terminated for cause on June 8, 2012. He was earning an annual salary of $65,100 at that time. He is not eligible for rehire.
Surely, Blake's father had some idea as to why his son had been fired from the city.  It's not clear if Carollo's Hutch Mussallam knew of Blake's termination for cause before subcontracting with Wilde Engineering.

It seems odd for a fired employee to suddenly become a "go to" project inspector for getting Hickory pipe laying back on track by working 80 hours a week (at what hourly rate?).  

I submitted other questions, which are yet to be answered.  They are:

1.  When did Blake Wilde's Wilde Engineering become a subcontractor on the Hickory Pipeline project?
2.  Please send me Wilde Engineering's proposal with scope of work and conflict of interest documentation for doing business with the City
3.  Please send me Will Wilde's conflict of interest filing with the city regarding Wilde Engineering's subcontractor work for the project Will oversees.
4.  Please share how much Wilde Engineering has been paid between June and now for subcontractor work on the Hickory project.
I'll post City responses after they're received.

Morrison's stand happened after City Council pressed Carolla's Mussallam on the project schedule.

I expected a similar grilling from Mayor New and Councilman Hirschfeld on Water Czar Chief Will Wilde's unilateral expenditure of $100,000 on furniture, but that never happened.

It remains to be seen how Will and Blake complied with conflict of interest requirements.

The document states:

Q:  What is considered a “substantial interest” in a business entity (such that it would amount to a potential conflict of interest)?

A:  Close family member with any of the above interests: If a close relative of the local official has any of the above types of interest in a business entity. A local official is considered to have the same interest in a business entity that his or her close relatives have in that business entity. In this context, close relatives of an official would include persons who are related to the official within the first degree by consanguinity (blood) or affinity (marriage).18 Such relatives would include an official’s father, father-in-law, mother, mother-in-law, daughter, daughter-in-law, son, son-in-law and the spouse of the official.

There are many questions that need answering.  Like the Furniture Fiasco, the public deserves transparency.

Update 11-16-12:  Draft minutes of the November 6th City Council meeting state:  "Councilmember Morrison commented on a potential conflict of interest and asked staff to review the issue."   Did he really?  I only heard Morrison ask Hutch Musallum to give him a call in regard to a possible conflict of interest.  I'll have to rehear the tape. 

Sunday, November 04, 2012

City Council Minutes Hide Extent of Furniture Fiasco

San Angelo City Council minutes soft pedaled the purchase and installation of $100,000 in furniture for the Water Department, prior to required Council approval.

Councilmember Morrison expressed his concerns of the additional expenditure required for office furniture at City Hall and recalled the meeting when staff presented the item.

Clarification:  The item was $200,000 in furniture and council members were assured this would be the last change order on the renovation project.

Assistant City Manager/Chief Financial Officer Michael Dane explained City Council approved the purchase for general fund departments and had understood the other departments with their own funding sources would purchase furniture for their offices within City Hall and Community Development Departments.

Clarification:  Where is "this understanding" reflected in any city documents or city council presentations on the project?  Also, Dane stated the $100,000 request came across his desk and he flagged it for council approval.  Yet, that didn't happen.  Not only did Interim City Manager Dane not bring it, somebody executed the purchase order without required approval.  

General discussion was held and concerns expressed regarding the approval of the furniture purchase, the City’s purchasing policy, a department director’s authority to make purchases over $50K when such actions are required by policy to be reviewed and approved by City Council, and directive to staff to implement preventative measures to ensure the proper procedures are followed.

Concern:  There was no approval.  Someone acted unilaterally.  Why can't the minutes state a city employee executed a $100,000 purchase and installation of furniture without authorization?  Why do the minutes talk about preventive measures, when they should ask for an investigation, with possible disciplinary action?

Councilmember Silvas suggested former Assistant City Manager Elizabeth Grindstaff clarify the furniture budget approved of $200K. Ms. Grindstaff remarked the scope grew out of the balance funds remaining from the project budget and another staff member was working with departments on the office furniture purchase.

Clarification:  Grindstaff clearly stated the $100,000 purchase occurred outside her responsibilities as project manager.  Who is the staff member that worked with the Water Department to execute the unauthorized purchase?  Not one City Council person asked for their identity:

Motion, to approve the purchase, with the understanding the City Manager will follow up on the purchase and related procedure, was made by Councilmember Adams and seconded by Councilmember Hirschfeld.

Further concerns were expressed noting dissatisfaction with the process, the integrity issues among staff, the obligation to pay the vendor, and the responsibility of such action to the voters.
Expectation:  Given the wording above, one might expect a presentation on the investigation, its findings and any disciplinary action at the next City Council Meeting.  It's not on the agenda for November 6, 2012.. 

The first mention of the infraction came as Mayor imposed a measure of "justice."
Mayor directed the City Manager to find savings within the Water Utilities’s budget to make up for the unauthorized expenditure. Council concurred.

A vote was taken on the motion on the floor. AYE: New, Alexander, Silvas, Adams, Hirschfeld, and Farmer. NAY: Morrison. Motion carried 6-1.

"Just us" done.  Issued buried.