DEPARTMENT: Convention & Sports Facilities
DEPARTMENT HEAD: Michael J. Sawaya
COUNCIL DISTRICTS IMPACTED: Council District 1
SUBJECT:
Convention Center Chilled Water Contract with SAWS
SUMMARY:
This Ordinance authorizes a Chilled Water Contract with San Antonio Water Systems (SAWS) to provide chilled water service to the Convention Center for a period of twenty years and thereafter for consecutive one-year automatic renewals until cancelled by either party. The estimated annual amount is $2,775,780 million for the first year of the contract. Upon completion of the Convention Center expansion in FY 2016, the chilled water cost will be approximately $3,271,828 million annually. Due to the expansion, included in these amounts is the added annual cost of approximately $396,778 for the permanent increase in demand, and $132,360 in added surcharges to support the debt service to acquire the additional chilled water capacity that is needed. The City can decide to pay upfront the full cost of the additional capacity that is needed, which is $1,741,223 million.
BACKGROUND INFORMATION:
The current Convention Center Chilled Water and Steam Contract was executed in June 2000 between the City of San Antonio and the San Antonio Water System Board of Trustees. The term of the contract was for 25 years and included a provision for two year automatic renewals until cancelled by either party. SAWS no longer provides steam service for the Convention Center due to the facility transitioning to micro boilers in July 2014. COSA currently pays approximately $2,742,690 million annually for chilled water service for the Convention Center and the Lila Cockrell Theater. Although the contract has not expired, it is necessary to modify the agreement due to the additional chilled water that will be necessary to service the expanded Convention Center. Key terms of the original contract included:
· Assessment of Demand and Commodity Charges
o Demand charge recovered fixed costs based on a contracted demand of 7,019 tons
o Commodity charge recovered variable utility costs associated with operation of the plant and was based on actual monthly metered chilled water usage
· Penalty imposed for subsequent 12 months if contracted demand was exceeded
· SAWS constructed a 4,000 ton capacity chilled water production facility
· COSA pays a monthly surcharge in the amount of 0.85% to recover the new plant cost in excess of $6.5 million
ISSUE:
A new Chilled Water Contract has been negotiated with SAWS to more accurately reflect the needs of the Convention Center given the expansion that will be completed in FY 2016. Upon completion of the Convention Center expansion, the chilled water cost will be approximately $3,271,828 million annually. This contract also includes chilled water service for the Lila Cockrell Theater. Below are the key terms of the proposed contract:
· Term - twenty-year contract with automatic one-year renewals
· Increases demand level from 7,019 to 8,816 tons
· Maintains the Standard Capacity Charge of $18.40 per ton
· Changes the calculation of demand level adjustment by averaging the three highest demands measured on any given day during three separate weeks over a twelve month period
· SAWS will install additional capacity equivalent to a 1,800 ton chiller at an estimated cost of $1.74 million to be funded by the City of San Antonio
· Retains all other service-related provisions
ALTERNATIVES:
Alternatives include keeping the same terms as the current contract and renegotiating the terms of the contract with SAWS; however the current contract does not include the additional chilled water needed to cool the expanded Convention Center. Both the City and SAWS agree that the terms of the current contract need to be revised.
FISCAL IMPACT:
This Ordinance authorizes a Chilled Water Contract with San Antonio Water Systems (SAWS) to provide chilled water service to the Convention Center in the amount of $2,775,780 million for FY 2015 and $3,271,828 when the Convention Center expansion is final. Funds for this contract are included FY 2015 Adopted Community and Visitor Facility Fund. Included in the FY 2015 amount is $33,090 in surcharge fees for July through September to support the debt service to acquire the additional chilled water capacity needed for the Convention Center expansion. The total annual cost in surcharge fees would be $132,360 thereafter and paid from the Community and Visitor Facility Fund.
The City could decide to pay the full cost of $1,741,223.00 for additional Chilled Water capacity that is needed. In the case of additional capacity being purchased upfront, the City would not pay the estimated annual cost of $132,360 in surcharge fees.
Funding for subsequent years will be contingent upon City Council approval.
RECOMMENDATION:
Staff recommends authorizing the proposed Chilled Water Contract with SAWS for the Convention Center's chilled water services.