DEPARTMENT OF PUBLIC WORKS: EXAMINE CONTRACT MANAGEMENT OPPORTUNITIES FOR WATER AND WASTEWATER UTILITIES
Baltimore’s Water Bureau should be allowed to operate more like a private sector utility. Baltimore City (‘City’) owns the raw water utilized throughout its water system (‘BWS’ or ‘System’). Baltimore City either owns solely or jointly with a participating Maryland County all, except one, of the existing water treatment plants utilized throughout the System. The City solely operates all of the BWS piping and facilities that service over 1.8 million people in the City and surrounding Counties (the ‘service area’).Soon, the Federal Safe Drinking Water Act (‘Water Act’) will require Baltimore’s water system to dramatically expand its capital improvement program to comply with the Water Act. Given a public tendency to minimize or limit rate increases, there is a need to be more efficient with existing staff and resources.
Barriers to Implementation:
Additionally, the water system annually funds other centralized City services. At present, the system annually transfers approximately $11,000,000 to the City’s General Fund as payment for the direct and indirect costs of services provided other City departments. If a private entity were selected to operate the system, the annual $11,000,000 transfer to the City’s General Fund might be lost. In Atlanta, the same situation existed regarding centralized City services and was resolved favorably as a part of the operationsand maintenance privatization process.
In addition, there are ‘soft’ services that the system’s personnel can provide in equipment and personnel to other City agencies in times of emergencies and need on an immediate basis that could be lost if a private entity operated the system.
In Atlanta, outsourcing was implemented resulting in a 40 percent reduction in their operations and maintenance costs (compared to their previous years budget) and saved the City $20,000,000 in workers’ compensation and benefits costs without having any involuntary layoffs. An additional result was the start of an annual Payment in Lieu of Taxes (PILOT) program and franchise fee payment transfer from Atlanta’s water enterprise fund to their general fund.
Other cities have benefited from similar comprehensive reviews of the benefits of contracts for the management of their water utilities even when the outsourcing option was not ultimately chosen. In Philadelphia, the study made its water department re-evaluate how it operated its facilities and cost efficiencies and reductions were achieved. At Philadelphia’s Southwest Water Pollution Central Plant, nearly $4.5 million in annual operational costs savings were achieved.