Cities received a wake-up call in the mid-1980s after the Environmental Protection Agency (EPA) implemented more stringent standards for water and wastewater treatment plants. When EPA categorized several communities as "restricted status" and threatened hefty fines, the cities efforts to attract new industry were hampered. Cities began looking for new alternatives for managing their water and wastewater treatment plants.
One company found its niche by developing public-private ventures with medium to large communities in the Midwest. Since its 1980 startup, Environmental Management Corp. (EMC) has grown to manage more than 40 water and wastewater treatment facilities by offering contracts for single source design-build-operate service with turnkey residuals management. The companys agreements guarantee compliance and annual savings through power company rebates, tax benefits, aggressive clean and repair programs, and careful workforce and safety management.
The following are case studies examining four successful public/private partnerships for EMC.
Evansville, Ind.
The partnership with Evansville began with a five-year, $11.3 million contract for managing the citys two wastewater treatment plants, laboratory and more than 60 sewage lift stations. The agreement delivered a guaranteed $500,000 annual savings to the city over the life of the contract.
Evansville, Ind.
Evansville augmented the $24 million treatment plant renovation with a diffuser retrofit for improved treatment efficiency. The retrofit, originally budgeted at $600,000, was completed at a net cost of $246,000. The city saved $167,153 in capital costs by installing the retrofit with its own people working under EMC supervision. As an added bonus, the city received a $187,000 rebate from the local power company because of the new designs energy efficiency.
Evansville, Ind.
After the success of the initial contract, the city awarded a new five-year, $20.5 million contract to manage both the wastewater treatment plant and sewer collection system. In addition to the continued $500,000 annual savings, sewer operation costs dropped by $200,000 annually. The contractor created the additional savings with aggressive sewer cleaning and quick damage identification and repair. A television camera was used in the sewer lines to search out problems that were repaired before efficiency dropped.
Evansville, Ind.
Other benefits that Evansville has realized in its privatization venture included:
Evansville, Ind.
* Shared overtime costs; * Shared maintenance and repair costs; and * Provision for payment to the Utility Board for each improperly handled customer complaint.
Evansville, Ind.
Ratepayers gave the city utility an earful over the 17.5 percent rate hike needed to cover the $13 million in water capital projects. For help, the city turned to an alliance formed by EMC and two major water organizations, American Water Works and American Anglian Water. The alliance, known as EA2/Systems, suggested answers that cut the proposed rate hike to only 11.6 percent.
Evansville, Ind.
Breaking new ground, Evansville then signed a contract with EA2 for an unprecedented 10 years. One of the first of its kind, the agreement took advantage of new IRS regulations allowing utilities to enter into long-term private contracts.
Evansville, Ind.
Although the new agreement offered huge savings, the mayor adamantly opposed layoffs of municipal employees. EA2 adapted and fashioned an extended agreement that allows the city to save $19 million in operating costs over the next 10 years. Roughly a $10 million savings comes through natural employee attrition via retirement, resignations and transfers. The remaining $9 million comes through using EA2s buying power through economies of scale to reduce electrical, chemical and maintenance costs.
Evansville, Ind.
With water and wastewater operations netting savings and showing improved service, the city of Evansville brought its remaining public services into the partnership fold by signing another 10-year contract extension. The new agreement expanded the services to include managing utility engineering and billing/customer service departments. The Utility Board maintained accounting and financial management responsibilities.
Evansville, Ind.
"EMCs ability to adapt in our partnership has made it an extremely successful venture," said Evansville Mayor Frank McDonald II.
Evansville, Ind.
While cities need to control costs, they remain keenly sensitive to the human factor and the loss of jobs. The complexities of transitioning employees from the public to the private sector require a plan based on empathy as much as on cost savings.
Evansville, Ind.
The final contract with Evansville balanced cost control needs with employment concerns by melding private management with public employment. The contractor employs the management personnel, while the city employs the union workers. Without bureaucratic barriers, employee management became more efficient. While union workers retained their job security with the city, management personnel saw enhanced career opportunities with the private company.
St. Charles, Mo.
Located at the confluence of the Mississippi and Missouri Rivers, the St. Charles Mississippi and Missouri River wastewater treatment facilities operation recently celebrated a five-year record for zero lost time accidents. At the beginning of the St. Charles partnering, EMC recognized the need for a structured safety program to reduce injuries and save money. The company implemented a program of more than 24 hours of specialty training in confined space work, chemical management, laboratory safety, environmental protection and electrical hazard avoidance.
St. Charles, Mo.
Despite the inherent dangers of their jobs, St. Charles workers reduced the company-wide accident frequency rate to 4.0 per 100 employees. As a whole, the wastewater industry averages 8.7 incidents per 100 employees. Insurers use a related figure, the experience modifier rate, to figure workmans compensation insurance costs. EMCs company-wide experience modifier rate dropped to 0.72, 28 percent below the industry norm.
St. Charles, Mo.
For the public-private partnership to be viable, the public must achieve a degree of certitude over cost control. With federal dollars drying up, cities search for creative, reliable ways to stabilize budgets. In 1992, in a rather unconventional way, EMC competed for the contract to upgrade the St. Charles Missouri River wastewater treatment plant by entering the highest bid. They won the contract by offering a broad scope of service and guaranteeing effluent quality to the city for a fixed price.
St. Charles, Mo.
In late 1998, EMC offered the same guarantee in its winning bid of $12.4 million for overseeing the Mississippi River wastewater treatment plant expansion project. After completion in the year 2000, the project will increase the peak capacity of the plant by more than 130 percent.
St. Charles, Mo.
"EMC has virtually eliminated the citys financial and regulatory risk," wrote Robert Moeller, then Mayor of St. Charles. "They guaranteed the cost of the upgrade, guaranteed that the plant would perform to specification and guaranteed the cost to operate it in subsequent years. It really helped stabilize our budget."
West Frankfort, Ill.
Like many cities burdened with an aging infrastructure, West Frankfort ran out of time. Following a brutal cold spell in 1989, the citys 75-year-old cast iron water main network literally was bursting at the seams. Residents went days without water. Businesses questioned the wisdom of locating in the small southern Illinois town.
West Frankfort, Ill.
The city found an answer in privatization. Based on experience with similar public water systems, EMC evaluated the problem and developed a solution for upgrading. The $4.5 million project involved laying almost 300,000 feet of plastic PVC piping and improving water pressure. The next bitterly cold winter produced only 81 calls for service, compared to the 200 calls received in 1989.
Monmouth, Ill.
A unique partnership rescued Monmouth from the brink of losing a major employer. Monmouths North Plant was built in the mid-1960s to treat wastewater generated by a hog processing plant. The meat packing operation produced a waste stream 10 times more contaminated than domestic wastewater. When the discharge into a nearby creek exceeded agency standards, the Illinois Environmental Protection Agency (IEPA) threatened to take the city to court.
Monmouth, Ill.
With insufficient funds for improving the discharge, Monmouth formed a three-way partnership with EMC and the new owners of the meat packing plant. The plan called for the company to design and build a $1.6 million upgrade, operate the plant and guarantee that it meet IEPA standards. The meat packer agreed to fund $1.2 million in bonds for the project while the Illinois Community Development Assistance Program chipped in with a $400,000 grant. The key to dissipating the environmental cloud haunting Monmouth for years proved to be the guarantee that upgrades would meet tough IEPA standards.
Conclusion
Public-private partnerships appear to work best when all parties involved - city officials, ratepayers, public employees and service providers - commit to adapting to community needs and to developing win-win solutions. Finding common ground creates successful alliances. Private business must be willing to become part of the community. They must share the communitys vision for a better life without running roughshod over lives affected by implementing that vision.
