Wastewater operations partnership helps Indianapolis avoid 33 percent rate increase

United Water's contract operation of two Indiana-based wastewater treatment facilities and related collection systems eliminated the need for the city to raise rates by 33 percent.

Feb 17th, 2003

Feb. 17, 2003 -- United Water's contract operation of two Indiana-based wastewater treatment facilities and related collection systems eliminated the need for the city to raise rates by 33 percent.

The partnership between the City of Indianapolis, Ind., and United Water served a population of 800,000 and was initiated in 1994 and renewed in 1998 for total of 14 years.

The contract involved the operation of two wastewater treatment plants; Belmont (275 MGD) and Southport (150 MGD). United Water also operated a biosolids incinerator (150 tons per day), maintained 3,200 miles of wastewater collection lines, operated 215 wastewater lift stations and administered an industrial pretreatment program.

The contract assigned all operation and maintenance activities to the private partner, while the city retains ownership of the facilities and responsibility for all capital improvements.

Indianapolis was the first major U.S. city to enter into a public-private partnership. Indianapolis Mayor Stephen Goldsmith was elected with a promise to run government more like a business, and the 1994 contract for the operation of two wastewater treatent plants helped to fulfill that promise.

The contract was perceived as a positive step from the city's point of view. "The savings from our contract with WREP have allowed us to invest more than $90 million in rebuilding the system - without raising sewer user fees," commented Goldsmith.

During the 14 years that United Water has operated the city's wastewater systems, operating costs have been reduced by 44 percent, producing annual savings to the city of over $20 million. The city had been projecting that it would have to increase consumer rates by 33 percent, which it was able to avoid through the contract.

Permit exceedances were reduced from an annual average of 7 to 2.6 and the systems received 11 AMSA Gold Awards for "perfect" environmental compliance. In addition, employee grievances were reduced from an average of 43 to one per year. Lost-time accidents were reduced by 66 percent through the contract.

Seventy-five percent of the current staff are original city employees.

COST SAVINGS - The private partner has succeeded in reducing operating costs by 44 percent. Prior to soliciting bids, the city had estimated potential cost savings at only five percent. The city has used the savings to stabilize rates while improving infrastructure, supporting public safety costs, and repairing and replacing aging sewers.

Over the course of the two contracts, the city is guaranteed to save over $250 million. Prior to the public-private partnership, the city had projected that user rates would have to increase by 33 percent to fund needed capital improvements to the wastewater system. Instead, rates have remained constant.

OPERATIONAL EFFECTIVENESS - United Water has improved effectiveness and efficiency by introducing predictive and preventive maintenance programs, adopting energy practices that resulted in a 30 percent savings, improving purchasing practices for supplies, and installing a new pump station.

ENVIRONMENTAL COMPLIANCE - The contract requires "equal or better treatment" of all discharges. United Water has achieved superior environmental compliance, in part, by instituting rigorous employee training programs based on the best practices applied at its other facilities.

The training provided employees with the capability to treat more wastewater during rain events, which reduced the amount of raw or partially treated sewage discharged into the White River.

Average permit exceedances were reduced from seven per year (five-year average) under city operation to 2.6 per year (six-year average). The Association of Metropolitan Sewerage Agencies (AMSA) has awarded the plants with 11 Gold Awards for "perfect" compliance with environmental discharge regulations.

LABOR MANAGEMENT - United Water has complied with the collective bargaining agreement requiring no layoffs during the life of the contract. By taking advantage of voluntary departures, the number of treatment plant staff declined by 46 percent over the first year of operation.

Today, 75 percent of the current staff were employed by the city prior to the private contract. The Executive Director of the local union has praised United Water's management programs for establishing new career ladders, training employees to provide services previously obtained from outside contractors, unfreezing salaries, providing participation in private company benefit programs, and establishing a new pride among employees through empowerment programs.

As a result of sound labor management practices, employee grievances dropped from an average of 43 per year (1991-1993) to one per year (1994-2001). Compared to equivalent city positions, treatment plant employees earn an average of 11 percent more in base wages and in addition are eligible for bonus and performance award opportunities. Loss-time accident rate at the facilities has been reduced by 66 percent since the beginning of the contract.

COMMUNITY RELATIONS - More than 10,000 visitors from around the world have visited the Indianapolis facilities to investigate the success of this private operation. An independent panel of environmental experts provides a separate body to help oversee the operations.

Economic and community development are also important aspects of WREP's contract, emphasized by a commitment to contribute five percent of pre-tax profits to community, charitable and cultural organizations in the local area.

Additionally, United Water has created an International Center for Development and Training and committed more that $1 million in research and development projects.

This case study was provided by the Water Partnership Council. To learn more, visit : http://www.waterpartnership.org/.

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