Technical Report indicates City is throwing money down a pothole

This past year the City of Lake Elsinore invested a couple hundred-thousand dollars in new technology and associated staffing for repairing potholes. In a Press Release article (7/11/13) the City states… “The City of Lake Elsinore will be the FIRST California entity to use a promising, new in-place asphalt repair technology designed to repair local roads for good.” (http://www.lake-elsinore.org/index.aspx?recordid=826&page=26).---------------------------------

 In the Elsinore-Wildomar Patch News Article (June 1, 2013), City Manager Grant Yates raves about investing taxpayer dollars in this new technology.---------

…”But arguably the most remarkable street improvement proposal for 2013/14 is the acquisition of two “Heatwurx” machines from the well-known heavy equipment manufacturer, Caterpillar. The Heatwurx, which cost approximately $60,000 each, would allow city workers to repair potholes and cracks in about 20 minutes per location, according to Yates who is excited about the technology that he believes will result in much cheaper and faster repairs.  “We are the first city in the state to utilize these,” he said.  During Thursday’s meeting, long-time community activist Chris Hyland raved about the equipment. “This is so exciting,” she said. "I am thrilled about this."  (P.S.: At least City Manager Yates has one steadfast supporter.)---------------------------------------

This boast by City Manager Grant Yates flies in the face of a Technical Report published June 2012 that was co-sponsored by the Texas Department of Transportation and Federal Highway Administration as performed by the Texas Transportation Institute at the University of Texas A&M.  According to the report entitled “Evaluation of Asphalt Pavement Patching Using Infrared Heat”, the new infrared technology by Heatwurx was significantly more expensive than all other methods where significant quantities were repaired.  For example, the cost comparison table shows that the unit cost for traditional semi-permanent pothole repair using hot mixed asphalt at only $36.43/SY versus the new infrared technology at $190.88/SY.  That’s 523% more expensive.  Furthermore, the report had concerns about the low production rate and failure of many patches.  The report states there are benefits to Heatwurx for the right application, but not in locations where hot mixed asphalt is available.  I urge everyone to read Chapter 6. Summary & Conclusions of this report, which is available at the following weblink….............

(http://d2dtl5nnlpfr0r.cloudfront.net/tti.tamu.edu/documents/5-9043-01-1.pdf)...............................

Excerpt from Press Enterprise News Article (July 18, 2013).

.........“Aging streets and roads require the city to do pothole and crack repairs on a daily basis. Last year, the city spent $190,000 to repair 31,000 square feet of roadway. De Santiago says the new system, because it is more efficient, should allow the city to nearly triple the amount of work that gets done while providing longer lasting repairs.”.--------------------

Fact Check: For the City to triple the amount of work from the previous year would require 242 repairs per month at 32-SqFt (4’x8’) per repair.  According to the City’s own “Monthly Reports” to the City Council the best month totaled 77 repairs and the worst month had only had 38 repairs.  It appears the City Manager and his staff over-estimated the production rate and greatly under estimated costs.-----------

Below are excerpts from Hearwurx’s Security & Exchange Commission Filings (12/1/13).

----> We have a limited operating history…--------

--->  We have limited sales and a history of substantial operating losses. -------------

--->  According to Heatwurx’s Prospectus issued June 5, 2013…”We have not yet commercialized our products and we are therefore classified as a developmental stage enterprise.”.---------

--->  Given we are still in a start-up stage, sales of our equipment have not been material to date.  Accordingly, for accounting purposes we consider ourselves to be a development stage company.----------------

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -----

--->  Auditor’s Statement (March 27, 2014) - As discussed in Note 2 to the financial statements, the Company has incurred recurring net losses from operations since incorporation and recognized minimal revenues since inception.  Additionally, the Company has an accumulated net deficit of approximately $6,800,000 as of December 31, 2013. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.-------------

Why would City Manager Grant Yates recommend to the City Council to take such a high risk on this pioneering technology?  Did he forget that many pioneers catch the arrows! ---------------

The City purchased an iPad for City Manager Grant Yates, so why didn’t he or his staff perform a simple internet search to find this Technical Report that is readily accessible online?  Hey, we all want better streets and less traffic, but there’s no reason to take a risks on new technology when the traditional technology is more cost-effective. ----------------------

I witnessed City Manager Yates’ cheerleading on this issue and egg-on his staff to buy into this new technology, without asking the hard questions about cost-benefit.  For heaven’s sake, why did the small City of Lake Elsinore need to be the first Ginny-pig among California cities to spend money on this thing?  We want value for our tax dollars, not Press Releases and Headline News.  In my opinion, City Manager Grant Yates believes “image is everything”; however, I think his work performance shows a real lack of substance.  City Manager Grant Yates has a lot of explaining to do as to why the City is spending significantly more money than all other cities on pothole repairs and respond to this Technical Report from the experts in asphalt repairs.