Friday, July 6, 2012

District was warned about McKinstry contract

Trustee Paul Bates cast the lone dissenting vote

Express Staff Writer

The Blaine County School District board of trustees approved a $15.1 million contract in March 2010 with McKinstry Essention, in spite of warnings that the district was moving too quickly on the project. The board is shown here at a meeting in January of that year. Photo by Mountain Express

Diane Barker, a local certified public accountant, warned the Blaine County School District two years ago that it was moving too quickly in entering into a contract with McKinstry Essention.

But her warning was ignored. Now, the district is embroiled in a multimillion lawsuit with its energy savings performance contractor. McKinstry is claiming that it performed work worth $25.8 million and that the district still owes the company about $7 million. The district is claiming damages at least equal to the $18.9 million it has already paid McKinstry.

Barker's warning came during the public comment portion of a school board meeting on March 9, 2010, when a $15.1 million contract was approved with McKinstry for geothermal energy development and heating, ventilating and air conditioning retrofits at eight district schools and facilities.

"The data upon which you will base your decision is incomplete," Barker said then. "You are being sold a $15 million contract without an independent report by a third party of the economic and technical feasibility of the project.

"Smart people compare products prior to purchases. You are being asked to make a decision on a project with far-reaching effects while having only the merest understanding of the financial, environmental and technical components.

"If you approve this contract then you will have retroactively misled our community. If you approve this contract, you are going too far too fast."

Barker was one of 10 people who commented at the meeting, but was the only one that had anything to say about the McKinstry contract. Nearly every other comment concerned a bio-diesel fuel storage tank that the district planned to install at the district's bus garage near the Community Campus on Fox Acres Road.

The only other person at the meeting who expressed concerns similar to Barker's warning was Trustee Paul Bates.

"It's my perception that we're racing down this road," Bates said. "It's hard to understand why we've moving so quickly with this. But I've got the feeling that I'm the only one who feels this way."

Bates' assessment of board sentiment turned out to be correct. The vote was 3-1 with Bates casting the only dissenting vote.

The motion for approval was made by Trustee Steve Guthrie, who is now board chair, and seconded by former Trustee Mari Beth Matthews. Former Trustee Daniel Parke, who wasn't physically at the meeting but attended via telephone hookup, voted to approve. Former Trustee Julie Dahlgren, who was then board chair, did not vote.

"The ayes have it so we have approved the McKinstry contract," Dahlgren said after the vote was taken.

The McKinstry discussion only lasted about 10 minutes and came toward the end of a marathon board meeting that lasted almost five hours.

Before the vote was taken, district Business Manager Mike Chatterton explained that district officials were anxious for approval and that the work was already about six weeks behind an earlier schedule.

Chatterton said the district was entering into an "energy savings performance contract," a type of contract allowed by Idaho law through which a public entity need not award a contract to the lowest bidder, as a way of keeping most of the work local. Chatterton estimated that 85 percent of the money spent would go to local subcontractors. He further said the district would gain about $270,000 per year in energy savings once the work was done.

Chatterton had discussed the McKinstry contract at an earlier board meeting on Feb. 9, 2010, when the board approved a separate $269,901 contract with McKinstry so the company could get started on project designs.

At that meeting Chatterton stressed an urgency of getting started so that the district wouldn't lose a $4 million grant from the U.S. Department of Energy to help pay for the work.

Also at the meeting, Chatterton and district Superintendent Lonnie Barber acknowledged that they had no prior experience in energy savings performance contracts and that they were relying on the expertise of McKinstry and on the advice of Power Engineers, a Hailey-based company hired to serve as a district consultant for the McKinstry project.

The contract was also discussed at a special school board workshop on March 8, 2010, when McKinstry made its sales pitch to the board.

The Idaho Mountain Express and other news media were not notified in advance about the March 8 workshop, as the district used a now-discontinued practice of only posting special meeting notices at the district office in Hailey and at local post offices.

Barker was one of only a few members of the public who knew about the March 8 workshop. She attended that meeting too and presented the board with a detailed economic analysis of the McKinstry proposal, claiming then that the district's information was either flawed or incomplete.

"The board and the administration completely disregarded the advice and analysis of myself, a CPA experienced in financial analysis," Barker said Thursday. "It was like they were all drinking from the same Kool-Aid. It baffles me to this day that they did not give some credence to my warnings and shelve the approval, for at least a few days, until they could get the advice of another professional.

"People who know what I did back then have asked me if I feel vindicated," she said. "And I don't. I just feel sick."

Terry Smith:

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