published Sunday, April 13th, 2014

Months ago Lepard received a hero's welcome for his green streetlights; today his project has stalled

A light fixture lies on the counter at Global Green Lighting.
A light fixture lies on the counter at Global Green Lighting.
Poll
Should the city expand green lighting throughout Chattanooga?
Hakeem letter to Berke on Global Green
Hakeem letter to Berke on Global Green

Chattanooga Mayor Andy Berke and U.S. Rep. Chuck Fleischmann held the red ribbon tight so Don Lepard could make a clean cut with an unwieldy pair of extra-large scissors.

Gov. Bill Haslam began to clap before the ribbon hit the ground. Lepard grinned and turned to shake the governor's hand as the applause washed over him. It was Aug. 16, 2013 -- a good day for the former UTC football star.

Lepard, founder of Global Green Lighting, had just opened a 180,000-square-foot factory that he had relocated to Chattanooga from China, much to the delight of officials across the Volunteer State.

He moved here to get closer to his biggest customer, the city, as part of a deal engineered by former Mayor Ron Littlefield that would pay Global Green Lighting $18 million to replace all 27,000 of Chattanooga's streetlights with locally made LED bulbs.

The move to a business park in Hixson would create 250 jobs and cut the city's power bills in half. Haslam even suggested that state officials would explore buying the lights all across Tennessee.

But less than a year later, the ambitious LED streetlighting project is on the ropes amid questions about the reliability of the Chattanooga-made LED lamps and city-owned light poles, as well as a projected taxpayer outlay that has soared 50 percent, to $27.5 million.

Hopes for Global Green Lighting dimmed last fall when the Berke administration, in response to concerns about the project and worries about millions of dollars in possible future repair costs, backed away from a quick implementation of the plan.

A city study on the lights' performance and savings was supposed to be completed by the end of January, after a third of the LED lamps had been installed. But officials now say that date has slipped to May 10.

Meanwhile, Lepard said he has furloughed most of his workforce here and has started to sell the lights made for Chattanooga to other cities.

"We've got $3 million of inventory, 5,000 lights, it's ready to go," Lepard said. "It's painted Chattanooga green. All we need is the green light."

The city's study will go a long way toward determining whether some initial reservations about an unproven company that has never before filled such a large contract were prescient, or whether Global Green Lighting has the chops to not only deliver on Lepard's promise but achieve a foothold in what is quickly arcing toward a $100 billion industry.

If Lepard is vindicated, then Chattanooga, a city that prides itself on innovation, could end up watching one of its most promising entrepreneurs flee into the arms of a regional rival. Though Berke in February launched an initiative called Startup Chattanooga, designed to help local entrepreneurs do business with the city, Lepard is considering moving his business to Memphis.

To end the standoff, Lepard said he needs to know whether Chattanooga is in or out by April 15, two days from now.

"I simply would like to know if the city's going to go into business with us or not," Lepard said. "Myself and my investors are questioning whether we should invest here in Chattanooga, or whether we should put that money somewhere else. We have other opportunities in other cities."

The Berke administration said it can't have an answer by then, citing conflicting information provided by Global Green Lighting and EPB concerning how many lights needed to be repaired and how much money they saved the city on electricity.

Lepard said the conflict goes deeper than data. He claims that EPB, the company that stands to lose its streetlighting contract with the city, is trying to undercut Global Green Lighting.

EPB denies the charge.

"It's a he-said, she-said between EPB and Global Green," said City Councilman Larry Grohn.

EPB VS. GGL

EPB maintains that one in five of the new lights failed and needed to be replaced or repaired, but Lepard said those figures are mired in faulty data. He blames some outages on EPB's poles, most of which are wired for the old lights.

EPB said the new lights are only 55 percent more efficient than the previous system. The power savings were supposed to be in the range of 70 to 75 percent, according to early pitches by Lepard.

"I think the mayor is doing his job; he's vetting this thing out," Lepard said. "But you've got someone who lost the business and someone who gained the business, and they've got two separate reports."

Jeff Cannon, chief operating officer for the city, said that if EPB is right, taxpayers could be on the hook for millions of dollars to replace the broken lights after the warranty runs out -- a liability he's trying to avoid.

That's not the only financial headache officials face. Just paying to install the rest of the lights would require Chattanooga to borrow more money than it typically borrows in an entire year, straining the city's capacity to take on other projects.

"This is one of the largest investments that the city is currently undertaking," said Cannon.

Meanwhile, delays are turning into dollars. The estimated cost to taxpayers has risen by half because of borrowing costs, an extended warranty on the lighting and a surprise $2.8 million charge from EPB to remove its existing lights.

Labor costs also have spiked. Lepard said EPB's crews charged the city $120 per light for installation, though Global Green Lighting had quoted $70 per light.

WANTED: ANSWERS

The City Council wants answers from Berke about the delay.

"Global Green Lighting is in my district, and if this [delay] keeps going then [Global Green] won't be," said City Councilman Ken Smith.

Nine City Council members signed a letter in February demanding more information from the mayor about the ongoing analysis. The council recalled that Berke's staff said in October that a monthlong evaluation would take place once the initial 6,100 lights were installed by the end of 2013.

"We as a council wish to take swift action on this initiative and feel that we must be fully apprised of the current evaluation," the council wrote. "This matter is of the utmost importance to our council and your assistance and immediate attention is much appreciated."

Chairman Yusuf Hakeem said the council took what he called an unusual step of writing the mayor, when information was less than forthcoming.

"There has been difficulty in getting information, period," Hakeem said.

Impatient with the administration's extended analysis, the council has tapped city auditor Stan Sewell to investigate the entire deal, including taking a hard look at numbers provided by EPB, Global Green Lighting and Berke's administration, Hakeem said.

"I guess you could say we have not wanted to be a part of this company going out of business because of some paperwork we haven't done as a city," Hakeem said.

That leaves everyone blaming everyone else for the delays.

Global Green Lighting blames EPB. Administration officials say the city is the mediator between EPB and Global Green Lighting, while EPB says every action it took was at the behest of the administration.

"It's been the city who's been asking us to do stuff," said David Wade, executive vice president of EPB and chief operating officer, who manages the utility's electric system. "We've really just provided information to the city that they've asked us for."

Wade denied that the utility has attempted to make Global Green's project look bad. EPB doesn't care "one way or the other" what happens with the lights, he said, and the utility has "no intention to undermine" Global Green Lighting's efforts.

NEW TECHNOLOGY

Global Green Lighting's LED lamps, which use less electricity than a typical high-pressure sodium bulb at the same brightness, are projected to halve the city's annual $3 million streetlight charge from EPB, save taxpayer money and grant police the ability to remotely brighten lights at crime scenes from their in-car laptops.

Some of the cost savings depend on the city's ability to remotely dim the Global Green lights very early in the morning.

Littlefield's administration first brought the lights to Coolidge Park in 2011 after shots were fired as police tried to break up a feuding group of 300 youths. The LED lights also were installed on the Walnut Street bridge.

As the city and Global Green moved closer to a deal, Lepard sank $11 million into building his operation in Chattanooga. He hired more than 60 workers, with promises to hire hundreds more once the lights caught on in other cities.

But council members at the time, including then-Councilwoman Deborah Scott, had questions about an emerging, unproven technology coming from a company without a track record as a city contractor.

Scott worried whether hail, wind and rain would be too much for the lights, which had only been working on the city's North Shore for nine months.

To satisfy the council's questions, Lepard agreed to move the project forward in three phases. After the first phase, officials would study the costs and ensure that the lights were holding up to the wear and tear of illuminating the Scenic City each night.

Then Lepard hit a snag. His company wasn't allowed to install and maintain the lights itself, since he didn't have the special licenses needed to work with the power grid. Instead, city officials required his technicians to work directly with EPB crews, placing his technology in the hands of a potential rival.

"EPB lost the business, the city gave it to us, then the city turned around and gave authority to the people who lost the business to install our lights," Lepard said. "They want the business back."

But that's not the way EPB sees it.

"The [existing] streetlights are just a straight cost pass-through for us from the city," Wade said. "We take in as much money as we spend on them. It's not designed for us to make or lose money."

The utility then asked the city to pay $2.8 million over five years for the "stranded" cost of the old but still-functional lights that would be removed. That surprise helped push Global Green's payback period out to as much as 15 years, according to current city estimates.

Lepard and Grohn have questioned EPB's upcharge to remove the existing lights, which they say should be covered under the utility's $3 million annual fee.

"I wonder how many of these lights that we've already [purchased] that we're paying again for," Grohn said. "EPB should be able to give us that information, but amazingly, they say, we don't do that, we just put them into one [category]. So there are all sorts of issues with this."

FACT FIGHT

Coming up with power savings figures for Global Green's lights isn't easy because of the technology differences between the old and new lights.

Unlike Global Green's distinctive green LED lights, EPB's old-school lamps don't have individual power meters. The utility must calculate the contested power savings figures using only the stated wattage of each bulb as it is removed from the pole, Lepard said.

That has led to a few mistakes, EPB officials acknowledged. In some cases, the city has been paying for a high-wattage bulb, but when crews remove an old light from the pole, the bulb turns out to be a less expensive, lower-wattage model.

Lepard says the utility's maintenance figures, which show that about 20 percent of the Global Green lights failed in some way, were recorded by EPB crews that didn't have access to Global Green Lighting's computerized fault readouts.

He concedes that a recall from one of his suppliers contributed to about 200 malfunctions, but he said that early teething problem has been addressed and repairs are down across the board. That leaves about 60 lights that failed for a variety of reasons, of which roughly 50 percent were related to EPB's infrastructure and "bad installs," Lepard said.

Both parties agree that about half of the nonrecall faults are due to EPB's aging light infrastructure, which wasn't built to handle the higher-wattage LED bulbs, Lepard said.

"The question is, why did EPB even keep track of the GGL quality issues when they never do it for their own product?" Lepard said. "The city pays over $95,000 per month for repair of the EPB lights [as part of its $3 million annual contract] and there are no records."

Some of the reported faults may even come from EPB's old lights rather than Global Green's LED lamps, Lepard said.

"We give each light a pole ID tag so we can track it, and some of these faults are on poles that still have EPB lights on them," Lepard said. "We find discrepancies every day."

EPB has said that its contract with the city complies with industry standards, and that its flat-rate pricing negates the need to keep track of individual lights.

MONEY-BACK GUARANTEE

These arguments aren't new to Berke's top lieutenants, who meet twice per month to discuss the topic. Still, officials want more time to sort out the mess before moving ahead with the next phase.

"The sticking point is that there's a tremendous amount of data," said Blythe Bailey, director of transportation for the city. "What EPB might be calling a failed light, Global Green is calling a relay switch issue."

The lights are warranted for eight years, but the city wants a 15-year warranty to match what could stretch to a 15-year return on its investment. That's almost double initial estimates based on finance charges, a longer warranty and $2.8 million to pay back EPB for the existing lights.

Lepard says extending the warranty from eight to 15 years will cost $1 per light per month. That will add even more expense to an already pricey project, and city auditors are looking at Global Green's finances to ensure that the company can hold up its end of the bargain.

Though officials expect to present a recommendation to the mayor by May 10, City Attorney Wade Hinton pointed out that Chattanooga can legally, according to the contract, wait until 2015 to order more of the green lights.

That could be too much waiting for Lepard. The company is repainting Chattanooga's lights at its own cost to sell to other clients, and if Memphis commits to a lighting plan, officials there will want the factory moved across the state.

Lepard anticipates that even with the delays, he can sign up about $80 million in business in the next 18 months, but it is unclear how potential customers would react if Chattanooga doesn't complete its deal.

In the meantime, competitors aren't wasting any time. The potential market for green lighting, which other suppliers now are installing in major cities such as Los Angeles, Detroit and New York, is an estimated $92 billion.

"What I don't want to do is get into a public argument with public utility and city," Lepard said. "All I want to do is grow my business."

Reporters Joy Lukachick and Joan Garrett McClane contributed to this article.

Contact staff writer Ellis Smith at 423-757-6315 or esmith@timesfreepress.com with tips and documents.

about Ellis Smith...

Ellis Smith joined the Chattanooga Times Free Press in January 2010 as a business reporter. His beat includes the flooring industry, Chattem, Unum, Krystal, the automobile market, real estate and technology. Ellis is from Marietta, Ga., and has a bachelor’s degree in mass communication at the University of West Georgia. He previously worked at UTV-13 News, Carrollton, Ga., as a producer; at the The West Georgian, Carrollton, Ga., as editor; and at the Times-Georgian, Carrollton, ...

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