BALANCE SHEET BLOG – HOLLYWOOD, FL


WiFi Mess: May 23, 2010
May 23, 2010, 4:15 PM
Filed under: WiFi

May 23, 2010

The City Commission must re-examine its role in how the city is governed. Being overly deferential to staff is no more a virtue than meddling micro-management. Both create a climate for trouble, and in the case described below, trouble that can cost the taxpayer dearly and make life miserable for city staff.

The deal involved a “performance contract” with Johnson Controls (JCI) to build a city-wide WiFi network. The Interim City Attorney and the Director of the City’s IT Department both told the City Commission that the JCI contract guaranteed that WiFi would save the City $23 million over 15 years. They said JCI would provide a “shortfall check” to the City in any year the savings were not achieved.

In April 2008, the City borrowed money from Bank of America (BOA) to pay for the network. The repayment terms were structured to match the savings the city was “guaranteed” to receive each year under its WiFi contract with JCI. The City would repay BOA $22.9 million ($16 million principal, $6.5 million interest) from the $23 million in supposed savings that WiFi would provide. In fact, the city misrepresented its ability to repay the loan. The JCI contract does NOT assure the City $23 million in savings. A close reading of the contract documents shows that $18 million of the “savings” are simply “deemed” to occur whether or not they actually do. Furthermore, it appears the city may not be receiving much of a “savings” at all since we are required to engage in five separate WiFi operational/maintenance contracts, the cost of which has not been included in the city’s calculations to date. Unsurprisingly, now we’re in trouble. The WiFi network, which was supposed to be fully operational by November 2009, still does not work and to date the City has saved no money from the project. In addition, the City Attorney has now clarified that there is no $23 million shortfall guarantee in the JCI contract. (JCI does guarantee savings of about $5 million over 15 years and if these are not achieved, there will be a shortfall check. But $5 million is not nearly enough to cover the debt to BOA.)

The City’s obligation to BOA requires us to repay $1.4 million this year, with no WiFi savings to offset this amount. Will the City Commission raise taxes to cover the missing revenue? What programs and services will the City Manager cut to make up this loss? And what about next year? and subsequent years, all the way through 2024 when the final payment will be due?

The Balance Sheet editors have met with the Director of IT, the City Manager, and the City Attorney, first calling attention to the problems, then urging that steps be taken to address what went wrong, assign responsibility, and revise procedures so that nothing like this occurs in the future.

What this case brings to light is mismanagement, pure and simple. We don’t make this charge lightly but there is no other reasonable conclusion. City staff has misrepresented contract terms, covered up the mistakes, maintained silence, and tried to reassure the public and the City Commission that everything will be fine.

From the outset, two things were going on. IT and Budget staff were dazzling the City Commission with promises that this WiFi project would make the City of Hollywood “a regional provider with ‘best in class’ municipal services.” And at the same time, staff recommended and the City Commission approved a contract that shifts the financial risk to a shocking extent from JCI to the City.

Questions

  1. Who is responsible for the approval of a contract such as this that is so unfavorable to the City?
  2. Who is responsible for creating such a climate at city hall that IT, and Budget, and Finance, and the City Manager’s and the City Attorney’s offices can all recommend such a fiasco?
  3. Who is responsible for creating a climate at city hall where staff at all levels remain silent year after year about problems of this magnitude?

No one is accountable. The situation is intolerable. The City Commission has been looking the other way.

Plea to City Commission

You, our elected officials, must re-examine your own role in how the city is governed. We are told that WiFi will be on the City Commission agenda on June 2. What steps will you take to clean up this mess and install accountability at city hall? What steps will you take to get this WiFi project to produce the required savings? What steps will you take to ensure that the information presented to you on June 2 is accurate and complete?

As we said at the outset, extreme deference to staff is no more a virtue than meddling micro-management. With the 2008 city election, it appears the pendulum has swung from one extreme to the other.

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