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City Council Minutes 03-10-2014 SpecialMINUTES SPECIAL MEETING — MONTICELLO CITY COUNCIL Monday, March 10, 2014 — 4:30 p.m. Mississippi Room, Monticello Community Center Present: Clint Herbst, Lloyd Hilgart, Tom Perrault, Glen Posusta, Brian Stumpf Absent: None Others: Jeff O'Neill, Wayne Oberg, Mark Pultusker (FiberConnect), Brian Estrem (U- reka Broadband), Dan Olsen (Windomnet) 1. Call to Order Mayor Herbst called the special meeting to order at 4:32 p.m. 2. Purpose of Meeting: Review options for FiberNet management services Jeff O'Neill noted the purpose of the meeting followed by a summary of provision of services within the last two years with Mark Pultusker from FiberConnect. A one -year contract with Mark Pultusker was approved in October of 2012 and later made retroactive to September 1St. In June 2013, negotiations for a new contract between the City negotiations team and Mark Pultusker were underway. After several months of no movement on negotiations, Pultusker exercised his 6 -month exit clause in November of 2013. On multiple occasions after that, Mark Pultusker reaffirmed his intention to exit FiberNet and indicated he would assist with transition. During the six -month termination notice period initiated by Pultusker, Estrem and Olsen had expressed an interest in managing FiberNet. Both were subsequently introduced to the negotiations team. Plans were being made to present their proposal for providing interim services to Council on March 10' to assist with the transition. However, before the presentation could be made to the full Council, on February 21 st, Mark Pultusker communicated via email that he would no longer be working with FiberNet for the City and ceased work that day. The negotiations team, with input from City Attorney Joel Jamnik, then requested that Brian Estrem step in to provide general manager services with support from Dan Olsen, which they agreed and have continued to do. Mark Pultusker contacted the City shortly after February 21 st and was willing to continue providing billing and related support under the terms of his current contract. Around March 5th, Pultusker asked if he could continue negotiations with the City for a 3 -year contract. Following that, Mayor Clint Herbst called for a special meeting to consider proposals for FiberNet management services. 3. Candidate Proposal Presentations Mark Pultusker, FiberConnect Clint Herbst turned the meeting over to Mark Pultusker and stated that he would have 50 minutes to present followed by a period for question and answers. City Council Special Meeting Minutes — March 10, 2014 Page 1 Mark Pultusker indicated that he provided a written report of the tasks that he completed since he joined FiberNet. He emphasized the vision that he has for FiberNet. Although the negotiations team was not willing to accept his proposal back in June, he was willing to continue discussions with the city for a transition plan. Mark Pultusker asked Council to look at his plan for a multi -year contract to ensure that he can carry out his vision. He feels that the amount he is asking is needed for completion of what he feels is necessary to get done. Pultusker stated that he was not happy with the reactions from Council and staff to some recent happenings. An example he gave was when the newspaper published his salary and the funding he received from the City. Instead of explaining why those costs were approved and needed, Pultusker claimed Council decided to do a study, which he did not think was needed. Another example Pultusker gave was when he requested and got approval to adjust the FiberNet office hours and made that change. Pultusker stated that a citizen posted a negative comment and the Council questioned the policy. Mark Pultusker commented that when he suggested the idea of putting up a tower at an investment of approximately $300,000, the City could expect to lose $60,000. Pultusker said that he was misquoted that this project could make $1 million. When Mark Pultusker was questioned about completing FiberNet 2.0, Pultusker said he would finish that up and not accept his $20,000 fee for February, which he returned to the City. Mark Pultusker made a number of comments about the difficulty in getting a contract in place and that he was underpaid. He gave an example of how he was dedicated to making FiberNet a success. The proposed contract incentivized him for not disconnecting nonpaying customers, and he was instrumental in getting that changed. Mark Pultusker commented on the city's proposal to give him a one -year contract. Pultusker was convinced that was not a good idea, and it would be better to have a 3 -year contract to ensure his commitment to the city. Mark Pultusker stated that he was given two large tasks: to help with the bond negotiations and to reduce the $400,000 deficit for FiberNet. Pultusker talked about his quest to try and improve the efficiencies of scale for FiberNet to match revenues to expenditures. If he would succeed at this, he would be able to hire additional staff. To start with, Mark Pultusker eliminated some of the more expensive staff at FiberNet and took over their responsibilities. Mark Pultusker talked about the money that the city paid to HBC over a four -month period, which was deserved, and they earned it because they built the system during that time. Mark Pultusker noted that when he took over, he had to replace portions of the system, and felt that expectations were for him to pay those costs out of his monthly contract. Mark Pultusker said that the proposal he is giving to the city includes hiring and training a general manager for FiberNet, who could then be hired by the city. His fee represents his desire to dedicate 100% of his contract time to FiberNet, and mentioned that would equal 80 hours a month. He did note that he would not be in Monticello all of those hours, but City Council Special Meeting Minutes — March 10, 2014 Page 2 would work remotely from Cleveland when not here. He mentioned that he would assist outside of those hours in case of an emergency, such as he did on Valentine's Day when he repaired a video cable. Mark Pultusker pointed out some of the value he can add to his contract such as finding, hiring and training personnel as he did with Myles McGrath, Stephanie Faber, and Rachel Leonard. Mark Pultusker stated that there is no one in city hall or on the City Council that knows what FiberNet really is. He questioned the ability of the City Administrator to oversee the general manager and suggested that the FiberNet Advisory Board be staffed with people that understand telecommunications. Clint Herbst asked Mark Pultusker to provide an example of when City Council did not support his requests. Mark Pultusker stated that it was city hall where he ran into lack of support and not the city council. An example Pultusker gave was a request from city hall to assist with economic development and provide six months upfront credit for a new business customer. Mark Pultusker also discussed several instances when his monthly fee was withheld: once because he did not submit verification for a portion of the expenses, and once after he submitted his exit notice. Clint Herbst interrupted and noted that there was only a short time left for his presentation and asked Mark Pultusker to review the numbers that he put into his proposal. Mark Pultusker pointed out the savings of almost $400,000 that he provided to FiberNet, which he had itemized within his proposal. He is asking for about $5000 extra per month beyond the contract that he is operating under. The 3 -year contract he is asking for includes payments on the current billing system at $9,500 per month, which becomes city property at the end of the contract; management fees of $25,000 per month; and a consulting fee of $3,000 per month to run the city's IT department. Without running the IT department, the management fee would go up to $28,000 per month. Mark Pultusker recommends a budget of $400,000 annually for FiberNet operations. Question and Answer Clint Herbst asked Mark Pultusker what the cost would be if the city purchased its own billing system. Mark Pultusker said he would not consider implementing and running a system that he does not control. Glen Posusta stated that he is not comfortable having Mark Pultusker run the system remotely from Cleveland and prefers that he would be onsite more. Rachel Leonard commented that she does not agree with the management of the system being done remotely. It has been her observation as Communications Coordinator that management issues both internal and external are the direct result of attempting to manage the department from a remote locations. She also noted that FiberNet is a municipal entity and is beholden to the citizens of the city and as such the program needs to operate in a manner consistent with the desires of City Council and citizens. She stated that she works well with Mark Pultusker but does not agree with the remote operations and she believes that the vision for FNM professed by Pultusker is not consistent with the original citizen based vision for the system. City Council Special Meeting Minutes — March 10, 2014 Page 3 Lloyd Hilgart asked Mark Pultusker about the contract outline where Mark Pultusker states that the management fee would increase to $28,000 if he doesn't run the IT department. He wanted to know how he would accomplish the extra work and Mark Pultusker replied that he would need to prioritize. Michelle Fleischacker, IT Director for Aroplax Corporation, spoke about FiberNet 2.0 and wanted to know if that would be going away. She mentioned the use of virtual servers and her work with Mark Pultusker in the process. She was quite dismayed at the response from the city when Mark Pultusker quit and noted that the Aroplax conversion still has not taken place. Ms. Fleischacker mentioned that she found out that the license for the virtual servers was never ordered through the city and would not have been able to be used for their conversion. Clint Herbst assured Ms. Fleischacker that the City does not intend to drop FiberNet 2.0 and is willing to assist Aroplax. Myles McGrath also spoke about the vision of FiberNet and feels that Mark Pultusker has developed new services for business customers that could be beneficial to customers and to the bottom line. He would encourage the City to continue developing and implementing FiberNet 2.0. Brian Estrem and Dan Olsen, Muni Alliance Clint Herbst opened the presentation and asked the presenters to provide their information within 30 minutes leaving some time for questions. Brian Estrein and Dan Olsen introduced themselves to the Council. Brian Estrem led off the discussion by noting that their resumes are provided in the packet for Council along with a general layout of their plan for FiberNet. Estrem summarized his past experience in working with the technology and fiber industry which included involvement with Optical Solutions, Inc. for a number of years which eventually was bought by Calix. Overall, Estrem has experience working with over 100 different companies in the telecom and fiber industry during this time. Estrem was the Director of Operations for FTTH Communications, LLC where he worked under John Schultz. He partnered with John Schultz in a company called U -reka Broadband to turn up some of the first fiber in Minnesota. He met Dan Olsen from Windomnet during this time. Brian Estrem and John Schultz were instrumental in bringing many FTTH projects to Minnesota through the federal broadband stimulus programs. Brian Estrem noted that with the small size of FiberNet, they will also rely on outside resources for assistance. Brian Estrem and Dan Olsen bring many resources with them and wish to bring their experience to Monticello's FiberNet. Dan Olsen is currently the manager of Windomnet and has successfully implemented a FTTH network in Windom plus extended the network into four surrounding counties. Dan Olsen talked about his previous experience in phone, cable television, and fiber with Harlan Municipal Utilities, 21 st Century Communications, and Jones Intercable. The City City Council Special Meeting Minutes — March 10, 2014 Page 4 of Windom is fully supportive of the Monticello initiative and would welcome a municipal alliance. Dan Olsen outlined the highlights of their proposal for FiberNet: • Review equipment and staffing • Research FiberNet 2.0 to see what it can bring and implement that for the public • Training and skill development • Trouble shooting • Form Municipal Telecom Alliance to share fiber and resources with other public entities • Manage technical operations • Review and improve network design to become a carrier -grade network Brian Estrem stated that the city would not be asked to provide capital for equipment and system improvements without a business plan. Dan Olsen explained that there are many municipalities out there that could benefit from the system in which Monticello has already invested. Dan Olsen feels that there are other alliances that they could find for the city of Monticello due to the alliances that he has built. Jeff O'Neill asked Dan Olsen to talk about carriers. Dan Olsen explained that carriers are the big players like Verizon and AT &T, which control the major fiber hauls. Clint Herbst asked how Dan Olsen proposes to handle emergencies if he is in Windom. Dan Olsen felt that would not be an issue because the distance is 2 V2 hours. Brian Estrem explained that he would be working onsite daily and Dan Olsen would serve as a resource just like any other vendor that FiberNet would need to utilize. Clint Herbst asked about the situation that Aroplax is facing and what they know about it. Dan Olsen assured Council that they are familiar with VM servers and are well equipped to manage the situation and should be able to handle it within a short time frame. Brian Estrem mentioned that he has worked with a number of small independent telephone companies, some of whom are partnering in some ways with municipalities. He likes the community connections with these small companies and suggests there is potential for alliances in the future. Brian Estrem talked about his interest in serving Monticello and is looking for a good fit with a municipal telecommunications company. Dan Olsen talked about the staff he has available and their plans to set up a V -line between Windom and Monticello to serve FiberNet's needs. Dan Olsen mentioned that when he first arrived at Windomnet, they had invested $1 million in a billing system. Eventually that billing system was dropped and they now contract out their billing services. Dan Olsen talked about some potential partnerships that the city could see down the road with PEER networks and bandwidth sharing. Dan Olsen stated that they have relationships with all the major carriers at the 511 Building in Minneapolis. Dan Olsen also has established connections with some of the major players in the industry that will be useful in this partnership. City Council Special Meeting Minutes — March 10, 2014 Page 5 Question and Answer Lloyd Hilgart asked about strengths and weaknesses that Estrem and Olsen have observed at FiberNet. Dan Olsen said the staff is great and there is a lot of talent, and the equipment and network are good systems. There are opportunities to improve training for staff. Lloyd Hilgart also asked about implementing FiberNet 2.0. Brian Estrem commented on some of the elements that he has found in the proposed system and calculates that it would take about three months to complete. Dan Olsen stated that Windomnet already provides 1 GB service (which is a component of FiberNet 2.0) and he has looked at the changes necessary to adjust the system. Torn Perrault asked them to talk about some economies of scale that could be realized with municipal alliances. Brian Estrem talked about sharing of bandwidth, resources, servers of different types, and billing system; and ordering supplies in bulk, for example. Wayne Oberg mentioned the two companies that he had looked at for billing and will be recommending staying with GLDS unless other circumstances come up. Brian Stumpf asked Dan Olsen how many hours a month he expects to put in to start with and what to expect later. Dan Olsen feels that the first year will be busy and involve a number of hours. Eventually he will not be needed as much. Brian Estrem discussed some of the operational changes they would like to make and to involve the vendors more for hands -on training. Brian Estrem wants to develop some methodologies for trouble shooting problems and to mentor employees in this area. Glen Posusta stated he has an issue with the letter from the Windom Mayor stating that "he (mayor) is fine with Dan Olsen providing support to Monticello as long as it does not affect his work with Windomnet." Dan Olsen commented on services he already provides beyond the Windomnet system and verified that does not interfere with his services for the City of Windom. Dan Olsen talked about the Windomnet system and noted that it has been cashflowing for the last two years. He noted that the City of Windom supports a low price offering and provides a lot of economic development support. Glen Posusta asked about the roles that Brian Estrem and Dan Olsen would play. Brian Estrem stated that he would serve as the hands -on general manager and Dan Olsen would be the resource for the network administration. Brian Estrem assured Glen Posusta that he has immense technical expertise but Dan Olsen brings some specific knowledge that will help with the FiberNet network. Dan Olsen also brings many affiliations with other resources that will be helpful to the city. Dan Olsen can also provide opportunities for partnerships to benefit FiberNet. Jeff O'Neill asked what could affect Dan Olsen's ability to serve FiberNet as well as Windomnet. Dan Olsen explained that he actually passed up two other side projects in hopes of providing service to Monticello. City Council Special Meeting Minutes — March 10, 2014 Page 6 4. Discussion and Consideration of providing further direction Wayne Oberg provided a comparison spreadsheet to Council and went through the pricing proposed by FiberConnect and by the Muni Alliance team. He noted that the Muni Alliance options is significantly less expensive than FiberConnect. The cost difference over 33 months is $726,000 and, if the billing service costs are equalized, the difference is $478,500. The difference overall for three years ranges from $500,000 to $800,000 depending on the billing system services utilized. Wayne Oberg talked about the options with the billing system and whether the City would benefit more with the Finance Department managing the billing for FiberNet. Due to the lack of time, Council did not consider further action or direction at this time. 5. Adjournment BRIAN STUMPF MOVED TO ADJOURN AT 6:54 P.M. TOM PERRAULT SECONDED THE MOTION. MOTION CARRIED 5 -0. Recorder: Catherine M. Shuman Approved: March 24, 2014 Attest: C� City ' strator City Council Special Meeting Minutes — March 10, 2014 Page 7