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Agenda Item: 15(b) |
Prepared By: Jeffrey E. Poteet, General Manager |
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Business: City Council Item |
Department: Water and Sewer |
Subject:
Title
Award of Contract to Johnson Controls, Inc. (JCI), to Implement Advanced Metering Infrastructure (AMI) and Lead and Copper Service Line Survey in the Amount of $11,582,180.00 - Jeffrey E. Poteet, General Manager, Water & Sewer Department
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BACKGROUND:
The City of Marco Island’s Water & Sewer Department manages approximately 11,500 water meters across the community. Many of these meters are aging mechanical units (many over a decade old) that gradually lose accuracy. This decline in meter precision (16%) has led to a revenue loss in 2024 due to under-registration of water usage. While the City has historically funded an annual meter replacement program, the scale of losses and aging infrastructure now demand a more comprehensive, robust, and long-term solution. Compounding this need with the Environmental Protection Agency’s Lead and Copper Rule Revision (LCRR), which mandates every water utility to conduct a field verification to document the material of each service line (both on the utility side and customer side of the meter) that was listed as “unknown” on the initial inventory. On Marco Island, roughly 4,900 service lines are currently listed as “material unknown,” meaning thousands of connections need inspection and documentation to meet compliance. These two drivers - revenue loss from old meters and new federal requirements for lead service line surveys - provide the ideal context for the City to move forward with state-of-the-art technology within a single project.
In April 2024, the City entered into a project development agreement with Johnson Controls, Inc. (JCI), a nationally recognized energy service company, to evaluate the feasibility of implementing Advanced Metering Infrastructure (AMI) citywide. This agreement was facilitated through piggybacking off of a competitively bid contract through Equalis Group. Pursuant to Section 2-255(g)(5) of the City of Marco Island Purchasing Ordinance, the City may adopt contracts or purchasing agreements established through competitive procurement processes by federal, state, county, or other municipal entities (cooperative purchasing agreement) instead of initiating its own Requests for Bids (RFBs) or Requests for Proposals (RFPs). For this contract, it is the staff’s recommendation to use a cooperative purchasing agreement. The Equalis Group is a cooperative purchasing organization that secures contracts through competitive solicitations on behalf of public agencies. Following a comprehensive review of both the solicitation process and resultant contract, the City has determined that the JCI contract with the Equalis Group aligns with the City's objectives regarding the acquisition and implementation of an Investment Grade Audit for our water meters. Furthermore, the agreement includes provisions for upgrading the meters, a move anticipated to generate cost savings for the City while enhancing the efficiency of data collection processes.
Under this agreement, the City Council authorized the development of an Investment Grade Audit (IGA) at a cost of $375,000 (this cost will be rolled into the project’s capital cost if the AMI project proceeds, if not, this audit remains the City’s only expenditure). JCI conducted field accuracy assessments on a representative sample of existing meters - spanning typical residential sizes (5/8″ up to 2″) and larger commercial meters - to gauge how much the aging meters are under-reporting consumption. This data has been used in a comprehensive benefit-cost analysis that will help guide the City Council’s decision. The partnership with Johnson Controls brings expertise in AMI performance contracting, ensuring that this proposed solution is both technically and financially sound.
If approved by the Council, the AMI and service line survey rollout would begin in 2025 and conclude by early 2026. The project scope integrates the meter modernization and lead-service line inspection into one coordinated effort to maximize efficiency.
Key components of the project include:
• Full Meter Replacement: All existing water meters citywide (approximately 11,500 in total) will be replaced with modern Neptune MACH 10 ultrasonic smart meters equipped with LoRa WAN communication endpoints. This includes about 10,693 small residential/commercial meters, 501 intermediate-sized meters, and 103 large meters, covering every connection in the City’s system. The ultrasonic meters have no moving parts and carry a much longer accuracy lifespan (around 20 years for typical residential sizes), ensuring long-term measurement reliability for both residential and commercial users. Each new meter will be paired with an AMI endpoint that communicates via a low-power, long-range wireless network (LoRa WAN).
• AMI Network: An island-wide AMI network will be deployed to collect usage data from the new meters remotely. Meters will record water consumption on an hourly basis (or more frequently) and transmit the data wirelessly to the utility every 3 hours. This near-real-time data collection will virtually eliminate the need for manual meter reading and drive down operational costs related to labor and vehicle trips. The AMI system will be integrated with the City’s existing Tyler Technologies billing software for seamless data transfer and billing accuracy, so that the enhanced meter data translates into accurate, timely utility bills without manual intervention. The network installation includes the first year’s AMI software and network fees-fully covered by Johnson Controls. Thereafter, ongoing software and network expenses, averaging about $120,000 per year, will be built into the utility’s operating budget.
• Lead Service Line Inventory and Audit: In tandem with meter replacement, field crews will conduct a service line material audit at each location, as required by the EPA’s revised LCR. This involves inspecting the piping on both the City side and customer side of the meter connection, determining the material (copper, lead, galvanized, etc.), and capturing photographic evidence and GPS coordinates for record-keeping. The project specifically budgets for documentation of approximately 4,871 service lines that had previously been identified with unknown material. By performing this audit during the meter change-out visits, the City avoids a separate mobilization solely for service line inspections. This bundled approach yields significant savings in time and cost, as crews and equipment are utilized efficiently to address both meter upgrades and compliance inspections in one trip.
All equipment installations and field data collection will be carefully scheduled to minimize disruption to customers. Residents and businesses will be informed prior to meter change-outs, and the utility will coordinate any brief water service interruptions. The overall implementation schedule anticipates a phased installation, starting with pilot areas and scaling up, with full project completion targeted in early 2026.
Financial Overview:
The City will invest $11.6 million in a single, performance-based contract to:
• Replace all 11,500 aging meters with ultrasonic smart meters
• Deploy and integrate an island-wide AMI network with Tyler billing
• Audit 4,871 service lines for EPA compliance
• Provide full project management and a $446,941 owner-initiated contingency (released only with written City approval to cover tariffs and unforeseen field repairs)
Key budget items include:
• $375,000 for the Investment Grade Audit (capitalized only if the project proceeds)
• $275,000 for the service-line survey
Under the Johnson Controls (JCI) performance contract, recovered revenue (recapturing the 16% annual loss) and reduced reading costs will offset the majority of upfront expenses over time. By bundling meter replacements with service-line inspections, the City secures both operational and compliance efficiencies in one streamlined effort.
Performance Guarantees
• AMI Communication: JCI guarantees that 98% of meters will report daily and the remaining 2% within 72 hours. If these thresholds aren’t met, JCI will deploy additional equipment at no extra cost.
• Meter Accuracy: Neptune MACH 10 meters carry a 99% accuracy warranty. Any premature failures or under-registrations will be replaced under warranty, and JCI will reimburse the City for any lost revenue attributable to meter inaccuracies.
Anticipated Benefits:
• Revenue & Accuracy: New ultrasonic meters eliminate under-registration, recouping lost revenue and improving conservation tracking.
• Efficiency & Savings: Automated hourly reads and 3-hour transmissions cut manual reads by up to 90%, reducing labor, fuel, and vehicle costs.
• Customer Experience: Customers will have access to a real-time portal which will empower users to monitor usage, avoid surprises, be notified of leaks and trust their water and sewer bills.
• Compliance & Health: A georeferenced audit of every service line meets EPA rules, pinpoints lead or galvanized lines for replacement and protects public health.
• Coordinated Upgrade: Bundling meter swaps with line audits minimizes customer disruptions and maximizes return on investment by tackling two mandates in one streamlined project.
• Projected Total Annual Benefit: $1,465,052
• Return on Investment: 7.76 years
This is a pivotal moment: Council approval will greenlight a unified effort to modernize aging meters and complete federally required service‐line documentation. Upon authorization, the City and Johnson Controls will finalize the performance contract and financing, mobilize materials, and deploy installation crews. By early 2026, the City of Marco Island will have state‐of‐the‐art ultrasonic metering and a fully documented, regulation-compliant service line inventory.
FUNDING SOURCE / FISCAL IMPACT:
The approved FY 2025 Water and Sewer Capital Improvement Program budget (Fund 430 & 431) contains sufficient appropriations to cover the first $4 million of the $11,582,180 contract. To address the remaining $7,582,180 needed, we will pursue financing through one of three vehicles-a ten-year loan, a utility bond issuance, or a Florida Revolving Fund loan - to ensure the project advances without delay.
METER REPLACEMENT PROGRAM CONTRIBUTION
The Meter Replacement Program, which receives an annual allocation of $800,000, currently has a balance of $1,578,527.11. This entire amount will be applied toward the initial $4 million contract payment. To fund the remaining balance of $2,421,472.89, additional resources will be drawn from other funding sources. Specifically, $163,075.69 will be utilized from the unappropriated line item of Fund 430, while the remaining $2,258,397.20 will come from project cost savings in the unappropriated line item of Fund 431. This funding approach ensures the initial payment obligation is met in full, leveraging both allocated program funds and available savings.
INITIAL PAYMENT ASSEMBLY
Together, the CIP budget contribution of $4 million, the Meter Replacement Program balance of $1,578,527.11, and the $2,421,472.89 from Fund 431’s unappropriated savings comprise the full $4 million initial payment required. No additional appropriations are necessary in FY 2025 beyond these existing sources.
DEBT SERVICE
Once financing is secured, the ongoing $800,000 annual allocation for the Meter Replacement Program will be redirected to cover principal and interest payments on the chosen financing instrument. This strategy ensures that debt service is fully funded by existing program revenues, maintaining a net-zero impact on the operating budget and preserving flexibility for other Utility needs.
RECOMMENDATION: Authorize the City Manager to deploy $4,000,000 of available Water & Sewer Capital Improvement funds and secure the remaining $7,582,180 through a ten-year conventional loan, then enter into a performance contract with Johnson Controls, Inc. in the amount of $11,582,180. Under this single contract, Johnson Controls will replace approximately 11,500 existing water meters with advanced ultrasonic AMI meters and endpoints, establish the island-wide AMI network fully integrated with our billing system, and conduct the EPA-mandated service line material survey.
This combined financing and performance contracting strategy guarantees that the project is fully funded, leverages Johnson Controls’ specialized expertise, accelerates our infrastructure modernization schedule, and satisfies all regulatory requirements in one comprehensive initiative.
POTENTIAL MOTION: “I move to authorize the City Manager to apply $4,000,000 of Water & Sewer Capital Improvement funds, secure financing for the remaining $7,582,180, and execute a performance contract with Johnson Controls, Inc. in the amount of $11,582,180 to replace approximately 11,500 water meters with Advance Meter Infrastructure (AMI), deploy the island-wide AMI network fully integrated with our billing system, and conduct the EPA-mandated service line material survey.“