OF EVANSVILLE, IN
DESCRIPTION OF PARTNERSHIP ARRANGEMENT
In 1991, Evansville's Utility Board subcommittee undertook a one-year study on creating a public/private partnership for the operation of the City's wastewater treatment system as a means of increasing efficiency and cutting costs. After comparing proposals from several private contractors, in 1992, the City's Water & Sewer Utility chose Environmental Management Corporation (EMC) of St. Louis to manage its two wastewater treatment plants and laboratory and to maintain more than 60 sewage lift stations. The initial five-year contract with EMC provided for a payment of $2.263 million per year from the City. In August 1995, the City created a new five-year contract with EMC, which combined management of the wastewater treatment plant and sewer collection system. Under the new contract, the City began paying EMC $2.6 million per year to operate the wastewater treatment plants and $1.5 million per year to maintain the department's 450 miles of sewers and to oversee 25 workers in the maintenance department. On February 25, 1997, the Evansville Utility Board approved a 10-year management contract with EA2 (a partnership of American Water and Anglian Water, and Environmental Management Corporation (EMC) of St. Louis), establishing a partnership between the private company and the Evansville Water and Sewer Utility. This contract was one of the first of its kind to take advantage of the new Internal Revenue Service regulation changes, effective January 14, 1997, which allowed utilities to enter into long-term private contracts to realize greater savings. The City's contract calls for EA2 to be paid $54.3 million to manage meter reading and maintenance and to operate the filtration plant and water distribution system, while it allows the City to continue managing customer service, billing, capital project planning and engineering, and the monitoring of all contracts.
ESTIMATED/ACTUAL COST SAVINGS -- IMPACT ON RATES
Under the initial five-year contract, EMC guaranteed that the City would save at least $500,000 per year. Under the new five-year contract signed in 1995, the City has continued to save well over $500,000 annually in wastewater treatment plant management while increasing cost savings by $200,000 annually in sewer management. Since the 10-year contract became effective March 3, 1997, the City has been able to reduce to proposed 1997 water rate hike by one-third and now projects savings up to 30 percent of $19 million in operating costs over the next ten years. Approximately $10 million of the $19 million in operating cost savings will occur through attrition which includes retirement, resignations, and transfers. An additional $9 million in savings will occur through reductions in electrical, chemical and maintenance costs.
Union resistance to the public/private partnerships was minimized because both the
water and wastewater contracts contained provisions for retention of union workers under
their previous contracts maintaining their status as city government employees. The
Teamsters Union will continue its role as bargaining unit at the facilities. City
management supported the contract due its provisions that the private partner be required
to hire city employees at equal or better wages and provide job guarantees for a period of
one year. Union workers were required to pass physicals and drug screening and may be
dismissed during the first year for just cause.
The United States Conference of Mayors
J. Thomas Cochran, Executive Director
Copyright © 1996-97, U.S. Conference of Mayors, All rights reserved.