WHAT IS NEEDED FOR REAL ETHICS REFORM

April 30, 2007

The conviction of Senator John Ford points out the problems and the difficulties of controlling corruption in local and state politics. Does anyone doubt that after serving his jail time, if he does in fact go to jail or does not have his conviction overturned on appeal, that John Ford could and probably would run for public office again and get elected. Also the same for Ricky Peete, Edmund Ford and others. This says volumes about the electorate. The public interest, honesty and integrity are low on the voters list of items to appreciate about the candidates. Charisma, phony promises and backroom deals mean more. Therefore, watchdog believes that the single most important thing that needs to be done to improve public ethics is open records and transparency in government. All requests for proposals (bids), all responses to those RFP’s (request for proposals), all purchase orders resulting from the bids, the selection process for awards and the reasons for the selection, and all purchases orders should be available in real time on the internet. Also all professional contracts should be advertised and bid and the results put on the internet. Furthermore all salaries, benefits, overtime and pensions should be public information and available on the internet. The contributions to candidates for elected office and their expenditures should be required to be put in electronic form so that a data base could be made available to determine who is contributing to whom and how the money is being spent. There are many other improvement to the City Charter that are listed below but open records and transparency in government is the most important factor in controlling and revealing corruption.

• A charter section like the Shelby County charter sections which allow citizen generated referendums like the voters used in 1994 to set term limits on County Commissioners.
• An open records charter amendment requiring election commission reports of donations and expenditures to be submitted electronically in spreadsheet format so that they can be entered into a unified database and published for notification and verification of information. All required election commission documents detailing contributors to and expenditures from all local elected officials needs to be put in an electronic data base so that the public can tell who is contributing to whom and how the contributed money is being spent.
• TERM LIMITS- Prevent elected officials from getting the tenure that gives them the position to sell their influence to developers and other buyers of political influence exhibited by Tennessee Waltz and Main Street Sweep.
• NO SALE OF MLGW WITHOUT VOTER APPROVAL- Because MLGW is piling up cash at the ratepayers expense, politicians want to get their hands on the cash. As of December 31, 2005, MLGW had $167 million in unrestricted cash, up from $111 million in one year. The law says that any surplus remaining after establishment of proper reserves, shall be devoted solely to the reduction of rates. Also the board of MLGW should be expanded to seven or more members to include members from the largest Shelby county cities outside Memphis such as Germantown, Collierville and Bartlett, those members to be appointed by the Mayors of those cities.
• THIGHTEN ETHICS RULES- No election official should be able to serve if he benefits from any contract involving City taxpayer money even if he recuses himself from voting on that particular contract or issue.
• PENSION REFORM- the January 2001 pension change has cost millions of dollars to date and will go on costing millions more as these elected and appointed officials retire. Since hardly any of the taxpaying public who work in private industry has a defined benefit pension plan anymore, a defined contribution plan should be instituted in the future for all newly hired public employees.
• OPEN RECORDS- The following should be put on the internet promptly. All RFPs (Request for Proposals), replies to RFPs, contracts, purchase orders, related correspondence and selection justification. All professional contract awards with related correspondence. All building projects, related contracts, purchase orders, change orders and correspondence e.g. the FedEx Arena and the Cannon Center and school projects. All salaries, benefits, pension details, land deals and minutes of meetings. All budgets, financial statements and audits. Only by making open records access easier, can we keep the sunshine on government practices which politicians like to conceal. The current no bid purchase orders given under the ACS contract shield is an example of gross abuse and lack of transparency in bidding and awarding contracts.
• APPOINTEES- There are over 400 appointees whereas the charter, according to Sara Hall’s reading, only allows about 110. This needs to be defined and limited to much less. The January 2001 pension resolution allowing elected and appointed officials to collect pensions and health benefits after only 12 years regardless of age has already cost millions and has the potential to cost $60 million if all of the current eligible elected and appointed people retire under that provision.
• RESTRICT ELECTED OFFICIALS FROM VOTING MEMBERSHIP ON CITY AND COUNTY BOARDS AND COMMISSIONS- This is where the influence peddling starts and needs to be stopped.
• CONTRACTING AUTHORITY- Prohibit the Mayor, any Mayor, from signing any contract unless it has been approved and funded by the City Council.
• Reinstate a separate non political Park Commission as it was previously constituted before the City Council dissolved it to its detriment.

This can be done and passed if only the Charter Commission has the courage and resolve to propose it for the voters. If we can bombard them with enough email and letters and calls, they may be forced to put these items on the ballot and let the voters decide.

Joseph N. Saino
6560 Kirby Forest Cove
Memphis, Tennessee 38119
754-0699

April 25, 2007

RECENT EFFICIENCY STUDY CONFIRMS WE ARE LEAN

The above is the headline of the Mayor’s City Pride bulletin for April 2007. Do you believe it? I would love to see an independent poll of the Memphis taxpayers. I suggest that the review did not look at the following items that come to mind immediately.

• The Linebarger contract for the collection of unpaid property taxes given to a Texas law firm at 20% commission when Bob Patterson was willing to do it for 2%.
• The 283 appointed positions over and above what the City Charter allows costing $16 million dollars a year in 2005 and over $60 million in future pensions due to the stupid January 2001 pension resolutions allowing elected and appointed officials to retire after 12 years of service regardless of age.
• The FedEx arena deal costing the MLGW water division over $60 million dollars through the length of the life of the bonds. Also this deal left the Pyramid and the Coliseum in limbo with no source of income due to the stupid contract with HOOPS giving away the store.
• The Cannon Center, part of the new Convention Center which was supposed to cost $47 million and which ended up costing $106.5 million. $59.5 million down the drain.
• Memphis Area Transportation Authority built the three trolley systems with $10.9 million in City money (plus federal and state money) and loses $3.4 million per year. $3.4 million down the drain.
• Herenton and the City Council are currently building the Beale Street Landing Project which is completely unneeded and unwanted (except by downtown and beale street interests). The City portion of this is $19 million, down the drain.
• The City Council with Herenton’s approval spent $6.5 million on the Whitehaven and Riverside golf courses and club houses (at the insistence of Tajuan Stout Mitchell and Edmund Ford) and now these two courses are closed and not likely to reopen. $6.5 million down the drain.
• And now the real cost of retiree health care is coming home to roost due to the government requiring GASB 43 and GASB 45 to be implemented starting in the new fiscal year on July 1, 2007. This is going to put millions of dollars in unfunded liabilities on our financial statements requiring a tax increase to fund these promised health care benefits for our retirees. Current politicians have ignored this unfunded liability for years.

And of course the report did not mention the ACS contract with the City of Memphis. Watchdog has investigated this contract under which the City of Memphis has been directing no bid contracts to their minority buddies for years. Watchdog noticed an RFP (Request for Proposal) due January 5, 2007 for computer software and hardware. The proposal was to pre qualify bidders for these future contracts. Guess what, only four were approved, all minority firms. They were TEL-XL, PROSYS, INC, MITCHELL TECHNOLOGY GROUP, LLC AND SOS COMPUTERS, LLC. Dell bid but did not qualify but what does Dell care because they will get the business anyway but the taxpayers will be paying a higher price. The original RFP stated that the supplier must be an authorized Dell reseller. In other words the City and the MLGW will not buy from Dell direct which they are able to do from the Tennessee State Dell contract and also from the Western State Contract Alliance. Shelby County, which previously gave the same group of buddies the computer contracts, recently broke with the past and is buying from the Tennessee State Dell Contract saving the taxpayers 30%.

This whole effort to present the City of Memphis government operation as lean and efficient is a farce and is directed to lull the voters in view of the upcoming October elections. Don’t be fooled. Know the facts. See below the information about the RFP and the information about Shelby County’s recent actions to break with the past.

Click here to read the way this RFP was set up to exclude any real competition and to direct the contracts to friends of the Administration (see page 6)

Click here to see how Shelby County is now saving the taxpayer's money by buying computers at the lowest and best price whereas the City and MLGW are not

April 23, 2007

REMEMBER LARRY, CURLY AND MO? WELL NOW WE HAVE WILLIE, EDMUND AND JOE!

The recent announcement by the MLGW is more than a little strange and requires a full explanation. Consider the following points.

• First, they manage to lose $18 million dollars with a monopoly that can charge customers whatever they want to, regardless of what they pay for the gas, through the PGA, purchase gas adjustment.
• Next, they buy gas for inventory to store in two caves and charge the customers for the gas through the PGA even though they did not use the gas. They overcharged the customers during the winter heating season when many were struggling to pay their utility bills.
• Then, after the auditors came in they say, SORRY, we made a mistake and collected your $15 million plus dollars, held it for 8 months, earned interest on it but now we will return it.
• Finally, worst of all, they paid anywhere from 26% to 41% ($75 million to $150 million) above market price for the gas that they sold to the ratepayers.

It is not like they have never bought gas before and stored it. The November 2006 interim financial statement of the MLGW states on page 47 (note E) the following statement. “Prior to December 2005, during a refill month, MLGW recognized revenue collected from customers related to the costs of refill. However, gas cost was reduced by the cost of refill, and an inventory asset was recognized. During a withdrawal months, there was no recognition of revenue related to the sale of gas withdrawn from LNG, but gas cost was recognized and the value of inventory was reduced. To match sales revenue and gas costs, an adjustment was made to decrease retained earning. An adjustment was also made to increase liability in other accounts payable, accrued expenses, and deferrals by $7,202,584.37.”

No rebate was made to the customers. What is different this time? Well the auditors have finished their work and the final audited statement is in the hands of the MLGW management. Last year, the auditors signed off on April 4, 2006. The public needs to have a copy of the statement made available to determine what happened in 2006 that was different from 2005 and prior years. Also an independent examination needs to be made of the MLGW gas purchasing operation, futures and hedging contracts to determine why the MLGW paid so much above the market price of gas. We can no longer afford the incompetent management of the MLGW.

ON TAX DAY HERE IS A STORY THAT WILL MAKE YOU WANT TO CRY

April 17, 2007

One of the big untold and unreported stories in local government is the ACS contract with the City of Memphis. This contract allows the City of Memphis to give their special friends millions of dollars in contracts without competitive bids at a price above the market price that is undetermined. It is costing the taxpayers millions of dollars in the name of helping minorities. It is in fact helping friends of the Administration, not the general minority community. Watchdog has no problem in helping minority firms learn good business practices and learning to compete in the business world. But the taxpaying public is entitled to know what it costs above and beyond the competitive market price and which individuals are getting the benefits.

We list below a recent update under the ACS cover contract for four of the most favored firms, Lesure Computer Services, Integrate Technologies, Mitchell Technology Group and Thomas Consultants. Lesure is Paul Rogers, Integrate is Reginald French, Mitchell is Marvel Mitchell and Thomas is Darrell K Thomas. (Shelby County, to their credit, have finally cut off Darrell K. Thomas in a recent computer purchase RFP as his price was 30% above the Dell State Contract from which the County, City and the MLGW can buy). From July 2002 through March 2006 these four firms received $7.38 million dollars in non competitive contracts and for the eight months from July 2006 through February 2007 they received another $1.15 million. At 30% above the market price this is $2.5 million dollars of extra taxpayers money wasted. The ACS contract is a big deal with a total amount spent from August 2001 to May 2006 of $69.4 million. It is illegal to require minority firms be used to the exclusion of other competitive firms but that is in fact what is happening. Watchdog will be reporting more on this in the next few weeks.

Click here to see the latest updates on who is benefiting from the ACS contract with the City of Memphis

Click here to see who benefited from July 02 to March 06 under the stealth ACS contract with the City of Memphis

Click here to see the size of the ACS contract payments, nearly $70 million dollars from August 2001 through June 2004

April 9, 2007

RAID BY THE CITY OF MEMPHIS ON THE MLGW GAS DIVISION RESERVES

Watchdog has been watching for some time the raiding of the reserves of the MLGW for the benefit of the City budget. Take the water division and the raid on it for the financing of the FedEx arena. Over $60 million dollars pledged to finance the arena bonds. At least this was done above board, legally, and with the approval of the City Council.

Now, for some time, the City Council has been raiding the Gas Division reserves without the approval of the Board of Commissioners of the MLGW and in violation of the Memphis City Charter. From 2001 to 2006 the amount of the illegal payments comes to over $45 million dollars. I have attached a chart showing the amount of overpayment and the Memphis City Charter provisions that apply to this payment. What is the next step? A lawsuit?

The whole situation at the MLGW needs an open study and explanation of 1) why the gas division overpaid the pilot payments and 2) why the gas division lost $18 million dollars through November 2006 and why they paid anywhere from $75 million to $150 million more than the spot natural gas prices during 2006 and 2007, costing the rate payers millions of dollars in high gas bills. Take a look at the city charter provision and the gas price chart which are part of the attached file. Hopefully Carol Chumney and the City Council utility subcommittee will discuss this situation tomorrow.

Click here to see the overpayment of gas division pilot payments to the city of memphis and the high prices paid by the gas division for the gas that they sell to the ratepayers

THE REAL COST OF INEXPERIENCE AND CRONYISM AT THE MLGW

April 4, 2007

MLGW Gas Division Income statement for the 11 months ended 11/30/2006 shows an Operating Loss of $16,267,442 as compared to Operating Income of $7,725,572 in the comparable 2005 period. This is a negative turnaround of $23,993,014.

The vast majority of this problem lies in the 2006 natural gas purchasing. Mr. Dana Jeanes, in a media interview, stated that the reason for the poor performance in 2006 was related totally to a decrease in customer gas usage. Mr. Jeanes is minimally correct … approximately $3,849,984 can be attributed to lower gas sales in 2006. There was a 2,228,000 MCF difference in the gas usage between the two years. That difference multiplied by the $.1728 Margin Block is the negative volume impact. That’s it, folks.

The very big problem was in the gas purchasing and the fact that all gas costs have not been passed through to the ratepayers. Apparently, MLGW made some major errors in gas purchasing, did not pass these costs through … and, had to "eat them". Being on the "outside looking in", it certainly appears as though the Gas Division made some commitments for future gas purchases (went long) during a period when natural gas prices were extremely high (Hurricane Katrina). Well, natural gas prices went down as fast as they rose … and, MLGW Gas Division was paying the very high prices they were committed to all through 2006.

This episode clearly demonstrates a serious lack of management competence and integrity in the executive offices of MLGW. A competent, seasoned professional utility executive would have had his thumb on this issue and it wouldn't have ballooned into a ~$20,000,000 loss for the stakeholders. Bottom line: there is, at least, a $20,000,000 screw up that was going to be paid for by ratepayers and stakeholders.

Seems, it is getting a bit more costly entertaining the Mayor's vagaries. When Lee was in the city Finance Division, he only fumbled with "budget numbers" … now, he is costing taxpayers real dollars. Almost everyone wanted an experienced utility professional to succeed Herman Morris as the President of MLGW, except the mayor. Now, it appears "the pigeons have come home to roost".

There are several exhibits contained in the pdf file below that supports our contention. It is hoped that the Board of MLGW and the City Council will review this information and take the prudent, and necessary, action.

Click here to see why your gas bills were so high for the last two winter heating seasons