In an earlier post I reprinted an expose by the Times Union regarding Saratoga County’s fiasco with Siemens Corporation. Briefly, Siemens convinced the county that it could save many, many thousands of dollars if it built a co-generation plant to provide power to its now defunct nursing home, Maplewood Manor. According to the Times Union the plant, which was built in 2002, was badly designed and it lost money from the very outset.
In 2012 in an attempt to save money the County decided to rid itself of the nursing home. Unfortunately for the County the company purchasing the nursing home made getting rid of the plant a condition of the purchase . It was only then that the County decommissioned the plant. According to the TU, Spencer Hellwig, the County Administer, first alleged that the plant was “revenue neutral.” When confronted with the facts he back pedaled in a stumbling attempt to minimize the losses related to this boondoggle.
I then wrote to our two Saratoga Springs Supervisors asking what actions they planned to take to determine how all of this happened and who was responsible. It remains unclear, for example, just how much money was lost. Even though the New York State Energy Research and Development Agency agreed to cover half the cost of a study of the problem plagued plant, the County insisted the study be limited to just the most recent year. Even without the full study, we can safely assume that hundreds of thousands and possibly millions of dollars were wasted (the plant cost $3 million dollars just to build).
Warren County had a similarly disastrous experience with Siemens and there the Sherriff’s Department is currently conducting a criminal investigation.
Following is a summary of the response to my email by both Supervisors. The full texts of the emails are included at the end of this post. I
Mr. Veitch a Republican, first noted that he had not been involved in the original decision to hire Siemens. He then repeated that the plant had to be decommissioned as part of the deal to sell the nursing home. In a charming piece of irony he ended by noting that for him the matter was closed and then opined that it was too bad that the problem was not identified earlier. I cannot keep myself from offering the snarky observation that I fully agree with him that it is too bad that they did not identify the problem earlier. In fact, that is the very point of my email. Shouldn’t the County do an analysis as to how this fiasco occurred in order to help prevent future problems? If an employee failed in this matter and cost the county a staggering sum, should they not be accountable? And does Siemens have any liability in this matter? None of this appears to be any concern of Supervisor Veitch.
Mr. Martin who is a Democrat and an attorney took a more sophisticated approach to slipping the issue. He promised just to send my piece on to Mr. Hellwig and the County Attorney. Since I included the article from the TU that noted Mr. Hellwig’s inept attempt to cover up the mess, I was not encouraged by Mr. Martin’s offer. What is clear is that he personally made no commitment to actually pursue the matter
So much for protecting the taxpayers’ money.
For those interested in the details, here are the emails.
From: Peter Martin [firstname.lastname@example.org]
Sent: Tuesday, January 19, 2016 2:36 PM
To: John Kaufmann
Subject: Re: Energy Plant
I am forwarding your inquiry to the county administrator for his thoughts.
I have no personal knowledge of discussions surrounding the acquisition and development of the
co-gen plant as that preceded my time on the county board by a dozen years. At the time of the
decommissioning, I was informed that the purchaser of the Nursing Home required the County
to decommission the plant as a condition of sale. I am not certain whether Siemens lived up to
their contract from 2002, but the statute of limitations on contract claims generally in New York
state is only six years, so this would be an item for the county attorney to determine whether
there is any viable claim.
From: John Kaufmann [mailto:email@example.com] Sent: Wednesday, January 20, 2016 1:52 PM To: ‘Matthew E. Veitch’ Subject: RE: Co -Generator
I very much appreciate your response. While I understand the necessity of the decision to decommission the co-generator plant in light of its sustained liability, your response does not address the questions which most taxpayers would want answered.
- How did the County come to agree to build a plant that was doomed by its design to fail? As you may note in the TU article, in the case of Warren County, they did investigate their own similar experience with Siemens Building Technologies, and they are now exploring potential criminal culpability regarding the then county administrator and this company.
- How was it that the County allowed the plant to continue to operate at a loss for more than ten years?
- Did Siemens misrepresent what the plant would achieve? If so, why is the County not pursuing litigation to recover some of its losses?
- Did the County fail to incorporate in their agreement with Siemens a requirement that it achieve the proposed savings and if not, why not?
- Were any current employees or Supervisors involved with this fiasco?
Without answers to these questions it appears that the County is uninterested in looking into what systemic problems may exist in the County’s procedures that need to be addressed. This concern is only underlined by the contradictory statements made by County Administrator Spencer Hellwig. With respect Matt, the unwillingness of the County to pursue answers to these questions will make many wonder if the County has something to hide.
From: Matthew E. Veitch [mailto:firstname.lastname@example.org] Sent: Wednesday, January 20, 2016 7:35 AM To: John Kaufmann Subject: RE: Co -Generator
I don’t see any need for any further investigation. I see it as a decision from the Board, trying to do right by the taxpayer, that didn’t meet expectations. You can make your own decision as to how you want to characterize it. Maybe I should have said “It’s too bad we couldn’t get out from under this sooner,” as there was a 10-year maintenance agreement with Siemens that we had undertaken.
Here’s my rationale for why I believe this:
- In 2002, Maplewood Manor was already losing a substantial amount of money, and the Board of Supervisors was looking for any way possible to try and stem the tide of the losses.
- Siemens came in and presented the Board with a proposition that claims would save the County up to 50% of their energy costs at the facility. I believe the State also indicated they would increase the Medicaid reimbursement rate for Maplewood IF the County would make upgrades to the facility, not an insignificant thing, as the Medicaid reimbursement being too low was the primary reason why the Nursing Home was losing money. Siemens gave the Board and Administrator all the projections on how much energy it might save. The Board agreed to have Siemens to build the Co-generation plant, with a 10-year maintenance contract; which if it met the projections would have saved signification money for the County. I wasn’t there, so I don’t know what the main discussions were at the time. The Supervisors at the time were Skip Scirocco and Phil Klein, and Spencer Hellwig was not yet the County administrator.
- It was probably known fairly quickly that he Co-Gen was not meeting it’s expectations, and my guess is that the Administrator and Public Works Director (again, a different person than who we have today) attempted to get the Co-Gen up to it’s savings potential, working with Siemens through their maintenance contract.
- As the maintenance contract was nearing its end, 10 years later (new Supervisors, new Administrator), Maplewood Manor was losing even more money, not related to the Co-Gen plant. At that point, the County was also ready to privatize Maplewood Manor, because of those losses. A Study was commissioned to confirm what the County already probably knew: the Co-Gen plant was not meeting its promised savings, and that a new maintenance Contract for more money was being proposed by Siemens. The case was then made to the Supervisors that the plant should be decommissioned.
- The Board then voted to decommission the Con-Gen, and as I stated before, at least for me, because of the reasons I stated: A new Nursing Home owner wouldn’t want it, and at the same time it was costing us rather than saving us, and so we should decommission the plant.
The decision to have the Co-Gen built I believe was made with the best of intentions, with the taxpayer in mind, as was the decision to decommission it. So I am comfortable saying this issue is closed and there is no longer anything for me to do in regard to this. My job now is to move forward and to try and make the best decisions I can for my constituents.
Enjoy your day.
Matthew E. Veitch
Saratoga Springs, NY 12866
—–Original Message—– From: “John Kaufmann” <email@example.com> Sent: Tuesday, January 19, 2016 1:43pm To: “‘Matthew E. Veitch'” <firstname.lastname@example.org> Subject: RE: Co -Generator
Thank you for responding to my email.
According to the TU story, the co-generation plant was overbuilt and functioned inefficiently from the very beginning. Whatever the impact the subsequent fluctuations in natural gas prices may have had on the losses, if the TU story is to be believed, the project was ill conceived from the start. Many thousands of dollars were wasted year after year.
I was confused by your response. In your note you stated that for you the issue is closed, and you “have no plans to take any further action…” You also say, though, that “It’s unfortunate that we didn’t get out from under this sooner.” Matt, isn’t that really the question that needs to be answered? Why did it take so many years for the County to act on a project that, according to the TU hemorrhaged money for years?
The public is increasingly frustrated that there does not seem to be any accountability when the taxpayers’ money is squandered. You are someone who prides himself on being a fiscal conservative. It is hard to understand why you do not share the outrage that people reading this story experience. I would have expected you, as a manager of the public’s money, to call for a thorough independent review of this debacle.
The key questions have not been answered. Who was responsible for the design failure of the plant? Who was responsible for monitoring its effectiveness? Why did it take so many years for the County to acknowledge the on- going waste of money?
Don’t the taxpayers of Saratoga County have a right to know the answers to these questions?
I hope that you will reconsider your decision to take no further action. I look forward to your response.
From: Matthew E. Veitch [mailto:email@example.com] Sent: Monday, January 18, 2016 6:22 PM To: John Kaufmann Subject: RE: Co -Generator
I wasn’t Supervisor in 2002, so I had no hand in setting up the Co-generation plant.
I believe my votes were to decommission the facility both on Law & Finance committee as well as at the full board meeting when the issue came up. As far as I can remember, both issues in the TU report were why I voted they way I did. I seem to recall that we were told that we needed to decommission in order to privatize the nursing home, and that a the new operator wouldn’t want to have a money-losing plant as part of the package.
I see this issue as settled, so I have no plans to take any further action regarding this. Unfortunately, a promising project as it was presented didn’t live up to its expectations. It’s unfortunate that we didn’t get out from under this sooner.
Matthew E. Veitch
Saratoga Springs, NY 12866
—–Original Message—– From: “John Kaufmann” <firstname.lastname@example.org> Sent: Monday, January 18, 2016 4:59pm To: “Matthew Veitch” <email@example.com> Subject: Co -Generator
Could you comment on the Times Union story regarding the co-generation plant for Maple Manor. Is the story accurate? If it is, what actions do you expect to take regarding this matter? Here is the story: $3 million Saratoga project big loser before closure Saratoga County leaders, told of shortfalls, deflect blame By Dartunorro Clark Published 6:32 pm, Saturday, January 16, 2016 Ballston Spa A $3 million co-generation plant built by Saratoga County and Siemens Building Technologies lost hundreds of thousands of dollars even though county leaders publicly touted the success of the project, which was designed to provide self-sustaining energy to a county-run nursing home. A Times Union review of engineering studies and other records for the project — which were never made public — indicate county leaders were informed of the project’s failures even as they publicly blamed energy-market conditions for the losses. The project began in 2002 when Saratoga County officials were eager to upgrade the utilities at Maplewood Manor, a 277-bed nursing home. The county struck a deal with Siemens Building Technologies to install a cogeneration plant for $3 million to produce heat and electricity, which at the time was touted as a way to save money by cutting the facility’s annual utility bill in half. Nearly 15 years later, however, the plant has been decommissioned, the equipment sold and the nursing home privatized. Documents obtained by the Times Union through a Freedom of Information Law request, and interviews with people familiar with the project, show the county’s estimated losses reached $180,000 a year by the time the facility was proposed for decommissioning. The revelations come as other government projects involving Siemens have come under scrutiny. In October, the Warren County Sheriff’s Department released records from a multi-year criminal investigation that said there was probable cause to consider criminal charges against a Siemens engineer, and that a company representative may have falsified documents related to a cogeneration plant built for that county’s nursing home in 2004. The sheriff’s report suggested Warren County Administrator Paul Dusek could have faced a misconduct charge for his role in advising, and allegedly misleading, county leaders about his understanding of the deal.
The sheriff’s investigation found Siemens officials may have inflated energy savings. Internal documents obtained by the investigators included a spreadsheet labeled “Contract $” with savings listed at $118,512. But another entry labeled “Actual $” calculated the savings at $68,262, according to the sheriff’s report. An investigator characterized the discrepancy as “intentional deception.” The sheriff’s investigators also found evidence a Siemens supervisor chided an engineer who complained about the alleged fraud and encouraged him to be a “team player.” The employee later quit.
In November, the Times Union reported that Rensselaer County officials took part in a “fact-finding” meeting with members of state Attorney General Eric Schneiderman‘s Taxpayer Protection Bureau on the county’s use of so-called “energy performance contracts,” including $56 million in energy performance projects with Siemens. The attorney general’s office declined to discuss the scope of the inquiry.
In Saratoga County, county officials commissioned a $37,000 study on the cogeneration plant as the end of a 10-year maintenance agreement with Siemens approached in 2012. An engineering firm, New York-based Guth DeConzo, and the New York State Energy Research and Development Authority, which paid half of the cost of the study, were hired to assess the performance of the facility. But, at the insistence of county officials, the scope of the study was limited to one year and did not examine prior years of performance.
Still, the study recommended county officials decommission the plant and re-connect the nursing home to National Grid because it was losing hundreds of thousands of dollars, at least at the time it was proposed for decommissioning, according to documents.
When it was announced, the project was expected to trim Maplewood’s $264,000 annual electricity and gas bill to $131,000 — the cost of the natural gas needed to fuel three natural-gas-fired generators — and the project was expected to pay for itself within 10 years of operation.
When questioned about the cogeneration plant two months ago, Spencer P. Hellwig, the Saratoga County administrator, said the cogeneration plant became “budget neutral” and the county saved hundreds of thousands of dollars over the years. Hellwig also said Medicaid rates and elderly cost-of-care concerns were the reasons to privatize the nursing home, which was sold to Zenith Health Care Group in January 2015 for $14.1 million. He also said the new owners had no use for the plant.
In the study commissioned by the county, the cogeneration project was characterized as economically unsuccessful.
“Cogeneration isn’t necessary to provide heating and cooling to your clients. Cogeneration is an economic proposition,” a Guth DeConzo presentation said. “If cogeneration isn’t (saving money), there (are) limited additional benefits. … It does not appear that continued operation of cogeneration plant is economically feasible, as compared to re-connection to National Grid.”
In an interview last week, Hellwig backpedaled when asked about the documents revealing the money lost by the cogeneration plant. Hellwig said the cogeneration plant became financially unsuccessful due to a number of factors, including market changes and energy costs. But his comments marked a shift from November, when he characterized the plant, overall, as successful but said decommissioning it had to be done prior to privatization. He said at the time of the original agreement in 2002, however, the county felt assured in the savings proposed.
“The expectations that were in place are why the decisions were made,” he said.
Still, county officials, including Hellwig, and the outside engineering company hired by the county to oversee the decommissioning, previously said falling electricity rates were reasons for decommissioning the cogeneration plant, which worked by converting natural gas to electricity and using the “waste heat” generated in the process.
But according to historical data from NYSERDA, natural gas and electricity rates showed annual decreases on average statewide for residential, industrial and commercial customers over the period in question.
For instance, according to NYSERDA, from 2011 to 2012 residential rates decreased from $13.64 to $12.87 per 1,000 cubic feet for natural gas, and 18.26 to 17.62 cents per kilowatt-hours for electricity,
Commercial rates fell from $9.28 to $7.79 for natural gas and 15.81 to 15.06 cents for electricity. Industrial rates decreased from $8.15 to $6.87 for natural gas and 7.83 to 6.69 cents for electricity.
Also, the county’s study noted the energy capacity that the cogeneration was built for was largely underutilized, which indicated it was inefficient for the nursing home at the onset. And when the 10-year maintenance deal expired in 2012, and the plant was proposed for decommissioning, Siemens was proposing a new $168,000 annual maintenance contract with an “escalation rate” of 4 percent, which the study concluded was “exceptionally high.”
Coupled with lack of savings, sources said, it became advantageous for the county to cut its losses.
“This is largely due to the reality that a large percentage of the equipment is idle for a good portion of the year, and has to still be maintained,” the study said.
Siemens stands by its project and its role in providing upgrades to the county and the cogeneration project.
“Siemens is proud of the work completed at Maplewood Manor, which added further protection from potential power failures at the facility,” said Amanda Naiman, a company spokeswoman.
There is no indication the Saratoga County project with Siemens is being reviewed any agency.
- 2000 Saratoga County sought proposals to upgrade equipment at the 277-bed Maplewood Manor Nursing Home and to improve energy efficiency. The Saratoga County Board of Supervisors recommended that a proposal submitted by Siemens for the construction of a cogeneration project be accepted, according to documents, with the intent to have the project paid for over a 10-year period with no cost to the county. The cost of the project was approximately $3 million.
- 2002 The county home went off the grid and the cogeneration plant was installed.
- 2012 The Saratoga County Board of Supervisors voted to commission a $37,000 study, produced by NYSERDA and outside engineering firm Guth DeConzo, to assess the performance of the cogeneration plant at the end of the 10-year agreement. The study revealed the cogeneration plant was underperforming and losing about $180,000 a year by not being connected to the grid. The committee voted unanimously to pay $20,000 to Guth DeConzo to decommission the cogeneration plant and reconnect the facility to National Grid to provide electric service. The committee also voted to resell the cogeneration equipment, which at the time had an estimated fair market value of $60,000 to $100,000, to recoup some of the investment.
- 2015 The county’s Maplewood Manor Local Development Corp. voted to sell the nursing home to Zenith Health Care Group for $14.1 million. Zenith renamed the Ballston Avenue facility Saratoga Center for Rehabilitation and Skilled Nursing Care. The company’s newly formed entity, Saratoga Center for Care LLC, is licensed to operate 257 beds, down from the former 277.
firstname.lastname@example.org • 518-454-5008 • @DartDClark