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HomeMy WebLinkAboutPacket - 09/25/2006 - Finance and Personnel Committee City of McHenry 333 South Green Street , www.ci.mchenry.il.us McHenry,Illinois 60050-5495 7. Mayor's Office (815) 363-2108 Fax (815) 363-2119 Clerk's Office FINANCE/PERSONNEL COMMITTEE MEETING (815)363-2100 Fax(815)363-2128 Administration Monday, September 25, 2006 — 6:-30 PM (815)363-2108 City of McHenry Municipal Center Fax(815)363-2119 333 South Green Street Public Works Aldermen's Conference Room Community Development (815)363-2170 Fax(815)363-2173 AGENDA Parks and Recreation (815)363-2160 Fax(815)363-3186 Police Non-Emergency (815)363-2200 Fax(815)363-2149 Mayor 1. Purchase of Wireless Alarm Monitoring System Susan E.Low City Clerk 2. Adjournment Janice C.Jones Tlreasurer David M.Welter Aldermen WARD 1 Victor A. Santi WARD Andrew A.Glab WARD 3 Jeffrey A. Schaefer Posted and Delivered:09/20/2006 WARD Steven C.Murgatroyd WARD 5 Richard W.Wimmer WARD 6 Robert J.Peterson WARD 7 Geri A.Condon FINANCE AND PERSONNEL COMMITTEE TO: Finance and Personnel Committee FROM: Douglas P.Martin,Assistant City Administrator FOR: September 25,2006,Finance and Personnel Committee RE: Purchase of a Wireless Alarm Monitoring System STAFF RECOMMENDATION: To direct Staff to prepare a Request for Proposal,for City Council consideration, to solicit responses to provide a wireless municipal alarm monitoring system. Staff has been investigating the possibility of converting the current alarm monitoring system in the police department to a wireless system. Currently,any new business in the City has the option of directly connecting to the alarm monitoring system located in the police dispatch center. When the offsite alarm is triggered a direct signal is sent to the municipal center through a phone line. The City does not require businesses to connect to the system but does require each business to have an Underwriters Laboratory (UL) approved fire alarm system at their facility. Currently, there are 128 connections tied into the City's alarm board. There are another 24 nonpaying subscribers and the majority of these are City-owned facilities, such as lift stations or remote buildings, as well McHenry Township Fire Protection District facilities. Currently Norshore Alarm owns and maintains the alarm monitoring board in the dispatch center;however, there is no written agreement currently in place with Norshore. Staff has been attempting to convince Norshore to update their equipment,which is approximately 30 years old,but they have not responded. Consequently,staff has initiated discussions with two alarm monitoring companies, Inner Security Systems and Chicago Metropolitan Fire Prevention, about providing wireless equipment to the City. Below is a comparison between the City's existing alarm monitoring system and a new wireless alarm monitoring system. Existing Alarm Monitoring System New Wireless Alarm Monitoring System Uses phone lines Uses no hard wiring Linked via individual phone lines User radios form a wireless web network UL allows up to 15 min. emergency response Emergency response within 2-3 minutes Existing equipment is 30 years old Brand new system would be installed City receives no income City to receive constant revenue stream City does not own equipment City will own equipment Multitude of false alarms occur Drastically reduces number of false alarms Staff time-responding to false alarms Saves staff time-responding to false alarms The City has a couple of options in regards to acquiring a wireless alarm monitoring service. The first is to have an independent company own and maintain the entire system. An alternative is for the City to purchase the capital equipment and maintain the system. If the City decided to purchase the equipment, an alarm monitoring company could maintain the equipment for$10/account/month. In evaluating these options, Staff believes that it is in the best interest of the City to own the equipment. The primary reasons are practical as well as financial. Practically, by owning the equipment,the City is not tied to a long-term lease with an alarm monitoring company and has complete control over the system. Financially, if the City owns the equipment, once the initial investment is recovered, the City will receive a recurring revenue stream to offset the billing/administration costs,as well as funds to help defray operating costs in the dispatch center. Approximately 40% of the municipalities who have a wireless monitoring system own the system. Naperville has had a wireless system for five years and Bloomingdale has had the same system for three years. In the first year, Naperville's out-of-service accounts or the number of alarms not functioning properly at any one time decreased 86%and trouble signals dropped 28%. Because the City dispatches for the McHenry Township Fire Protection District and the overwhelming majority of the alarms monitored are fire,City staff has been working closely with officials from the fire protection district. The district supports the transition to a wireless system for many of the reasons previously discussed. In addition, City Staff, as well as Fire Chief Amore, visited the Algonquin Lake in the Hills Fire Protection District who purchased the wireless alarm monitoring system approximately one year ago. In order to pay for the purchase,the district has taken out a short term loan(5-year note) and uses recurring subscriber revenue to pay off the debt. In addition,the district worked with the villages of Algonquin and Lake in the Hills in implementing ordinances which require all businesses connected to a central alarm monitoring company to connect to the district's wireless alarm monitoring system. By doing this,the debt is paid down quicker and the yearly revenue stream increases. The Algonquin Lake in the Hills Fire District also likes the system because they use the revenue to pay user fees to the SECOM dispatch center for dispatching services. The fire districts strongly support this system for the simple fact that emergency response time is dramatically reduced. Central alarm monitoring services essentially act as a "middle-man" in that when they receive an alarm signal, they must then contact the local dispatch center. This process can legally take up to 15 minutes prior to the arrival of an emergency responder to a fire. In order to evaluate the financial implications of owning a wireless alarm monitoring system, Staff has attached a spreadsheet showing potential annual revenues and expenses. The one-time capital equipment cost can be absorbed up-front or paid over several years. Once the initial capital costs are paid, future revenue from the system can be utilized for administrative expenses and costs involved with dispatching services. Subscriber billing would be handled by the City and can be done quarterly, semi-annually or annually. Staff has outlined three potential scenarios for consideration. The municipal monitoring fee and monthly radio lease charges are common industry rates used by other municipalities and the monthly maintenance charge of $10/account is also a standard rate. The revenue and expenses are based on the City's current 128 subscribers with no assumptions made for additional subscribers to the system. The loan rates are current rates charged by local financial institutions. If the City decided to purchase the equipment upfront,this initial capital investment would be recovered in approximately 29 months. The City would have to maintain a reasonable supply of radios for any new subscribers connecting to the system. If purchased,there would be roughly a six month transition period from one system to the other. The next step in this process,with the concurrence of the committee,is for Staff to bring forth a request for proposal (RFP), for City Consideration, to solicit responses from alarm monitoring companies to provide a wireless monitoring system to the City. 2 Capital Equipment Costs Individual radio cost $1300 (128 current hook-ups) $166,400 Receiving equipment $68,750 ($20,000 installation) $88,750 $255,150 Yearly Revenue Municipal monitoring fee $30/month(128 connections) $46,080 Monthly radio lease charge $40/month(128 connections) $61,440 $107,520 Option 1 Purchase equipment upfront Payoff on initial investment 28.48 months Option 2 2-year loan* Yearly Expenses Maintenance charges (recurring expense) $10/month(128 connections) $15,360 Loan payment for receiving equipment $11,194/month $134,328 $149,688 (Expenses) 107 520 (Revenue) Option 3 $42,168 (Deficit) 3-year loan** Yearly Expenses Maintenance charges (recurring expense) $10/month(128 connections) $15,360 Capital Equipment Costs $7,647/month $91,764 $107,124 (Expenses) 107 520 (Revenue) $396 (Surplus) *2-year loan based on 5% interest-total interest cost of$13,506 **3-year loan based on 5% interest-total interest cost of$20,142