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Tuesday, May 18, 2010

Finance Committee Signs Off On LED Deal But Questions Remain

Posted By on Tue, May 18, 2010 at 1:38 PM

  • Festive.

After a five-hour plus meeting yesterday afternoon, City Council’s finance committee greenlighted a controversial proposal from Mayor Frank Jackson that would lock the city into a sweetheart deal with a Chinese-based manufacturer in exchange for job creation. The proposal, which failed to pass in full council but is expected pass at the next meeting, has kicked up opposition from local businesses who feel left behind.

According to the deal’s fine print, in exchange for setting up their North American headquarters in Cleveland, Sunpu-Opto Semiconductors will supply the city’s lighting needs for the next 10 years. The company, which has no presence on this side of the world, will use the Northeast Ohio location as a manufacturing and distribution hub, and claims the project will create 350 new jobs for the region.

At Monday’s meeting, administration officials maintained the deal is an out-of-the-box approach to job creation; critics countered the no-bid contract could drag the city into murky legal waters.

“This troubles me greatly, this whole process troubles me to the point where my gut tells me something’s wrong,” Councilman Mike Polensek told representatives from the administration at the meeting. “What you are suggesting we embark on, I believe it violates the charter.”

According to that charter, any government purchase over $50,000 must be bidded out through a competitive process. But the Mayor’s office maintains they can skirt the bidding process entirely if their requirements can only be met by a “sole source.” In the case of the LED fixtures, Cleveland Public Power Commissioner Ivan Henderson, the mayor’s point man on the proposal, told the committee Sunpu-Opto is the only option that meets the city’s needs.

But that was an assertion the spurned hometown crowd didn’t take too lightly. When it was his turn at the table, Andre Morrison of Akron-based Green Mill Global contested Henderson’s statement that his company didn’t have the technical chops to provide a sufficient product for Cleveland’s lighting overhaul. Longtime Cleveland heavy weight General Electric also took on the administration’s claims. Flanked by a number of GE high brass, company President and CEO Michael Petras not only pressed the committee for a fair bid process but questioned the city’s chosen path to energy efficiency.

Citing a recent Plain Dealer article, Petras pointed out that the U.S. Department of Energy doesn’t consider LED products competitive; Jim Brodrick, the department’s top lighting guy, told the PD he’s never even heard of Sunpu-Opto. No single building in the U.S. is lit by LED products alone, according to Petras, who added that fluorescent tubes are widely considered the best bet for energy efficiency.

Prices and technology morph rapidly in the lighting business, Petras also pointed out, and by locking into a 10-year contractual straitjacket with an unknown player, the city risks losing the flexibility to adapt to changes.

“To suggest that there’s only one option, one company, one way is to purposely turn a blind eye to the plain facts,” he told the committee. “It’s not credible.”

The defense of Sunpu’s credibility fell largely on Henderson; no representatives from Sunpu attended the meeting, much to the chagrin of some committee members. To establish the company’s cred, Henderson handed out a thick packet of paper to the group, materials that he claimed documented Sunpu’s legitimacy, although more than half of the documents were in Chinese and untranslated.

Also troubling to some was the absence at the table of Peter Tien, the man at the center of the deal. First hired as an energy consultant for the city, later a middleman between the Mayor’s office and Chinese businesses, Tien revealed at a May 3 finance hearing he was going to be a part owner of Sunpu-Opto’s USA branch. Yesterday, Henderson told the committee Tien would now be the sole owner of the Sunpu’s North American business. Tien’s ever-evolving roll in the Sunpu deal raised suspicion among committee members; Councilman Jay Westbrook pressed the city to get a full disclosure agreement from Tien before moving forward.

Conventional council wisdom says the proposal is likely pass next week. Regardless, there’s still a hovering question about the legality of the measure. Although Cleveland Law Director Robert J. Triozzi signed off on the city’s “sole source” argument, last week lawyers from GE mailed a letter to the council outlining an argument that counters that claim, stating the “sole source” idea “does not appear to be derived from any applicable statute, ordinance, or administrative code section under City or Ohio law.” — Kyle Swenson

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