June 27, 2007

THE MLGW 2006 ANNUAL FINANCIAL REPORT

Well the audited MLGW statement for 2006 has finally been published and is on the MLGW website. Watchdog and friends have begun to look it over and here are the initial findings. It will take some time to really analyze the figures.

• The Electric Division made $70.3 million, up from $66.8 million in 2005. They have total current assets of $432 million and current liabilities of $266 million, a $166 million surplus.
• The Gas Division lost $12.6 million, a swing of $20 million from 2005. Their excess of current assets over current liabilities is $62 million down from $73 million in 2005.
• The Water Division made $7.9 million, up from $7.1 million in 2005. Their excess of current assets over current liabilities is $31 million up from $28 million in 2005.

There are some interesting items in the report. Here are just some.

• Write offs of trade receivables from the three divisions are up $3 million, about 33%.
• Management claimed in the report that the loss in the gas division was due to a 6% decrease in sales. This is clearly not so. The November 2006 statement shows the operating income negative variance of almost $24 Million as compared to 2005. You can see the lower 2006 volumes (MCF) were a small part of the problem, as was the Operating Expenses. The problem is the gas purchasing, and the .05 per ccf negative impact of natural gas sold. In 2006, as compared to 2005, the amount per ccf MLGW billed to the customer increased by .03 /ccf as MLGW's cost for that gas increased by .08 /ccf. They paid too much for the gas and did not recover it in their PGA add on.
• The pilot payment in the gas division was $15.6 million. This makes the total overpayments of pilots to the City of Memphis $45.6 million since starting in 2001. There is clearly a problem here as the City Charter and state laws are being violated. The gas division reserves are being sent to the City illegally.
• There is a history of the Memphis Networx debacle. This shows clearly that MLGW should never have been involved in this high tech business and also shows that transparency is critical in this kind of public/private business. It appears that the executives stripped the company of the investment through high salaries, benefits, perks etc. and the agreement that the MLGW signed did not allow any public disclosure. Further investigation is definitely needed in this affair. We have nothing to lose as we have lost our investment already.

Watchdog and friends will be studying the 2006 statement further and will have further reports as we get information hidden under the figures.

June 26, 2007

AN INJUSTICE PERPETRATED AT THE MLGW

I was shocked to see that the MLGW Board approved "lifetime" insurance benefits for JL3, going to pay his legal fees and then at age 55 he is eligible for a MLGW retirement.

I call on the taxpayers and voters of Memphis to have some influence with City Council on this issue? Tom Marshall said it will be reviewed tomorrow. Joe Lee resigned "while under investigation" and would not be eligible for severance even if he had not dissolved the severance policy when he took office. He came in and with the backing of the Mayor, did away with the severance policy because they were upset that Larry Thompson wanted the benefits of the then in place severance policy. Now the shoe is on the other foot.

Most of the people this unqualified patronage employee forced out could retire and thus had some sort of protection (pension/benefits) but there were others who were hurt tremendously because they were forced out with no job, no insurance and no pension. Attorney Max Williams and Mike Whitten fall into this category. Both had more MLGW service time than Lee but get zip!!!! They did not leave under un-honorable circumstances

Lee was given special consideration by moving his City pension to MLGW---Lee did away with severance but he receives it from a Board heavily influenced by the Mayor. This is truly an injustice and I hope that the voters and taxpayers can make a difference. Editorial in today's paper took proper stance.

Let Joe Lee sue---he will lose.

June 25, 2007

THE TRUE COST OF MINORITY PURCHASING AND WHO BENEFITS

Watchdog has been studying the subject of minority purchasing for some time, trying to get to the true cost of this practice. The Herenton administration has undertaken to hide the cost of minority preferences from the taxpayers through a very clever mechanism, the ACS subcontract.

This contract started in the year 2000 with a service agreement contract dated December 15, 2000 between SCT Government Systems Inc and the City of Memphis. The genesis of the contract is interesting. What has actually happened to this contract of which Tom Marshall said was fair?

• SCB Computer Technology, a Germantown Company, had a $467,000 contract to help choose the outsourcing firm but was involved in various legal problems such as its own admission of overstating earnings and lawsuits alleging stockholders were defrauded.
• In late 2000, just prior to the City awarding the IT outsourcing contract, Reginald French purchased Associated Softworks (ASW) from Ronald Jung for roughly $100,000 and Jung sued French claiming French funneled company money to start a new IT firm called Integrate Technologies.
• The City awarded Systems and Computer Technology (SCT) an IT outsourcing contract for $41 million in November 2000, which would be purchased by ACS six months later.
• Due to a watchdog open records request the cost of the ACS contract as of May 22, 2006 was $69.4 million. This contract which was to cost $41 million over seven years has cost $69.4 million in 4-1/2 years. At this rate, the seven year cost will be $108 million. See the attached file showing the monthly minority report from ACS.

In April of this year I sent an open records request to the City of Memphis asking for various breakdowns on payments to various favorite minority contractors. The mechanism used by the Herenton Administration to steer these contract to buddies is contained in the attached RFP dated January 5, 2007. Under this RFP, only authorized resellers can bid.

The City has standardized on the following products:
 Dell Desktops Must be an Authorized Reseller
 Dell Laptops Must be an Authorized Reseller
 Hewlett Packard Printers Must be an Authorized Reseller
 Extreme Routers and Switches Must be an Authorized Reseller
 Nortel Telephone Equipment
 APC Brand UPS
 Microsoft Products Must be an Authorized Reseller


The effect of this is that only the firms shown on the ACS monthly purchase sheets get to bid without any real competitive bids. The result is predictable, the taxpayers are paying up to 30% more for millions of dollars worth of computers and other equipment.

Recently in an open records request, I verified this when I received documentation about a computer purchase. The bid was for Dell GX620MT computers Type 1. Thomas Consultants bid $1033.55 each. Tech Express bid $1064 each and Mitchell Technology Group bid $1145 each.

The MLGW is still buying through these parties and Shelby County used to do the same. However recently, Shelby County purchased the same computers through the Dell State Contract for $751, a 28% savings. See the attached documentation and the complaint from Darryl Thomas about the County buying direct from the Dell State contract.

We could save millions of tax dollars by competitive open bidding so that the taxpayers know who is bidding, who has the low bid and who gets the contracts. Only by opening up the process to the light of open records on the internet can we hope to bring honesty to local government.

Click here to see the monthly reports of Minority contracts given without true competitive bidding


Click here to see how much more we taxpayers are paying for minority preferences

June 15, 2007

THE CLOSE CABLE CONNECTION BETWEEN WILLIE HERENTON AND REGINALD FRENCH AND THE NETWORX AFFAIR

It was interesting to here Mayor Herenton talk about the snake in the grass and the conspiracy against him by Richard Fields and others unnamed in his press conference. He referred to his good friend Reginald French.

There is no doubt about their close relationship. Reginald French has benefited greatly by his relationship to Willie Herenton and his many no bid purchase orders under the ACS cover contract. Recently the ratepayers at the MLGW were informed that they suffered another $29 million dollar loss with the collapse of the ill advised Networx venture. Take a look at the attached contract between Integrate Technologies Inc and ACS and also the contract between the City of Memphis and Memphis Networx LLC. In the former, Reginald French got the non competitive contract to terminate the Networx fiber optics cables in various City facilities and in the latter contract, Willie Herenton agreed to pay Networx to run the various cables and maintain them. If Herenton is looking for a snake in the grass, he does not have to look very far from his office. I am reminded of a paraphrased Spanish saying. “We taxpayers have fewer tears than reasons to weep, for it is a vain labor to offer light to the blind, words to the deaf, science to the ignorant, and honor to politicians.”

Click here to read the contract that Willie Herenton signed with Networx for a million plus

Click here to read the no bid contract given to Willie Herenton's good friend, Reginald French, for the Networx deal

June 14, 2007

IS LEMOYNE OWEN WORTH SAVING?

Lemoyne Owen has been much in the news recently as the City Council voted to give them $3 million over three years. The County is being asked to give $1.5 million over the same three year period. I decided to do some research on this organization and the associated organizations and I found that in their latest 990 tax filings (2005) they were sitting on $10.4 million dollars. Also the Lemoyne Owen Community Development Corporation shows a net worth of over $800,000. These documents are attached.

Lemoyne Owen College needs to open their books to the public and reveal all their operations so that the tax payers who are forced to support this operation can judge whether it is worth the cost. Also I have attached a number of transactions involving the college and the college’s community development arm which shows lots of real estate transactions that need an explanation.

Click here to see the 990 tax report showing Lemoyne Owen with over $10 million dollars


Click here to see the 990 tax report showing Lemoyne Owen Community Development Corporation with over $800,000 dollars


Click here to see just some of the real estate transactions involving Lemoyne Owen

June 12, 2007

ANOTHER BOONDOOGLE AT THE MLGW, THE PRICE TAG $29 MILLION

The recent revelation of a $29 million dollar loss at the MLGW can be laid at the foot of Mayor Herenton, the City Council and the MLGW. It has now been shown conclusively that they never had the expertise to run a high tech, fast changing operation as was envisioned by Networx. The Mayor was pressured into it by his high dollar contributors who wanted to leverage the business with public rate payer monies. As it turned out, the fast changing cable business passed them by and all their promises about future profits turned to dust.

I have attached a contract that was signed by Mayor Herenton in 2004. I am checking to see if any of the promised work was ever done. Herenton calls the shots at the MLGW and this is another example of his incompetence and bad judgment.

Click here to read the Networx contract signed by Mayor Herenton in May 2004

June 8, 2007

There was in interesting report at the most recent MLGW meeting yesterday, Thursday, June 7, 2007. There was a report by Chris Bieber on hiring some 30 temps to man the telephones from July 8 to August 8, 2007. The reason: the MLGW is returning some $26 million dollars they collected illegally from their customers when they needed the money to pay for filing up several caves with natural gas. Then when the books were audited, the auditors decided that what they did was wrong and that they should return the money to the customers. What you heard from the MLGW and the media was that it would average some $50.00 per customer. What the customers heard was that they would get either a check for $50.00 or would get a credit on their bill for $50.00.

Now, what was obvious all along was that each customer would get a credit amount that depended exactly on the amount of gas that they used during the months during which they were charged for this gas filling operation. Some will get nothing, some will get $25.00, some will get $62.37, etc, etc, etc. However because most of the public is expecting $50, all those who get less than $50 will call and that is why they are hiring the extra temps. Also another additional cost is the programming that is necessary so that the temps can explain to Mrs. Jones that she is not entitled to $50.00 and here are the calculations. As you might expect, no one will understand these gross management errors. Things have improved at the MLGW since Joe Lee left but the hangover from Larry, Curly and Mo (Willie, Edmund and Joe) is still having an effect on the MLGW and still costing the ratepayers lots of money.

Also, there was a report by one of the board members, William Taylor, about a possible lawsuit by Joe Lee to get the division to pay for Joe Lee’s legal expenses from Robert Spence, who represented him during the examination of the Edmund Ford affair. Sounds to me like they will pay some, if not all of this bill, in order to avoid a lawsuit. IT IS CALLED LEGAL BLACKMAIL. How does that sit with the ratepayers who pay their bills each month on time?

June 7, 2007

A BAD SAD DAY AT CITY COUNCIL

Yesterday the City Council hit rock bottom in profligate, spendthrift management of the taxpayers’ money. Look at what they did.

• Three million dollars for that bottomless hole called Lemoyne Owens College.
• Approved $29 million dollars for the Beale Street Landing project, a completely worthless boondoogle intended to benefit the downtown supporters and contributors to the Mayor and also to provide good jobs to former supporters and administration people who worked for the Mayor and now work for the Riverfront Development Corporation.
• Passed a toothless, worthless ethics ordinance which will not stop or even slow down the unethical conduct of many of the City Council members. Only complete and transparent electronically available open records will have any ethical benefit on the now corrupt system.
• Completely ignored the GASB 43 and GASB 45 requirements that have been due and supposed to be accounted for in our City budget for several years and which would require a tax increase. However the Mayor does not want to talk about a tax increase before the October election.

Where is the outrage from the taxpayers? Only by throwing out the current collection of bums from the City Council and City Hall will we get any relief.

We have just received the GASB 43/45 projections for the MLGW. I see this requiring $36.6 million dollars extra for the upcoming year from the ratepayers of the MLGW to finance this benefit. And the MLGW in the past had the foresight to put some money aside ($56 million dollars) for this future obligation. The City and the County have not done anything. We have asked the City for their projections but they have not replied as yet and it is not shown in their 2008 budget. See the attached report of the extra money required of ratepayers to meet the new government accounting standards. Shelby County is already talking about cutting back promised retirement health care and insurance benefits in order to cut back on the cost of implementing this new accounting requirement. What is the MLGW and the City going to do? Nothing until after the election.

Click here to see the actuarial report on how much the MLGW is going to have to pay over and above what they have been paying annually to finance health and insurance benefits for present and future retirees

June 4, 2007

THROW MORE MONEY DOWN THE LEMOYNE OWEN BOTTOMLESS PIT OR SAVE IT FOR THE UPCOMING GASB STANDARDS?

Here is an email from a very smart and frustrated taxpayer of the City of Memphis. He points out the obvious facts about LeMoyne Owen College but will the City Council stop this nonsense or will they keep pouring money down this bottomless pit. Then the City of Memphis School system says that they will work with the college to build a program that will train teachers for city schools. Other parties have jumped in to try to lay off some expenses on University of Memphis and Southwest Community College and other institutions to try to save this failing institution. We have attached two pages from the 2007 budget of the City of Memphis. You will see that all such grants have been cancelled in 2006 and 2007 from a level of $1.77 million in 2005 to zero in 2007. Zero should be the level of support for Lemoyne Owen also.

Click here to see that the City of Memphis stopped giving these worthless grants in 2006 and 2007 but now are considering another one for LeMoyne Owen

Here is the email.

Let's see ...
• LO needs ~$4MM within 4 weeks just to pay the bills and maintain accrediation.
• The city council has tentatively approved a pledge giving this private school $3MM over a three year period.
• The city "bailed out" LO in 2002 at a cost to taxpayers of $1.25MM.
• Lipscomb has basically submitted nothing resembling a rational business plan (hard numbers) which could demonstrate just how the school will ever become an economically feasible operation.
• Lipscomb said "No one questions the value of a military school or a Catholic school or an all-boys school", but failed to mention the institutions referenced are not funded by tax dollars.
Bottom Line: There is little demand for the mediocre education offered by LeMoyne Owen. There is no way on God's green earth this operation will ever be economically feasible. This is not a "one time shot", ala 2002. If the city allows LeMoyne Owen to "nozzel up" to the taxpayer nipple, it will never end!

BTW, Shelby County has just released information indicating how underfunded their employee retirement benefit accounts are ... and, it's huge. Where is a similar analysis from the city and the MLGW ... oh, and MCS, huh? I believe these city run operations will dwarf the unfunded liabilities reported by the county. Stop this waste of taxpayer dollars NOW! I have a hunch "discretionary" tax dollars are going to become very scarce, very soon.

This last paragraph raises a very interesting question. Where are the numbers for the 2007 City of Memphis budget and where are the numbers for the 2007 MLGW budget. We show attached the requirements for application of GASB 43 and GASB 45 and also the pages from the 2007 proposed City of Memphis budget referring to this requirement. Could it be that the Mayor is not providing these numbers until after the October 4th election. Read the attached information from the City of Memphis budget. The real numbers will scare you to death.

Click here to read what the government says is required to meet this strict standard so that the bond rating companies will know the true financial situation of municipal governments

Click here to see the information, or lack of it, that the City of Memphis has in its 2007 budget where it is supposed to comply with