Sean C. Morgan
Of The New Era
Sweet Home city officials are considering privatizing the city’s wastewater system.
The City Council tabled a recommendation to issue a request for proposals to operate and maintain the system during its regular meeting on Jan. 24.
The request for proposals is essentially a request for information and quotes by potential private operators, said Public Works Director Mike Adams.
The recommendation will return to the council at its next meeting, with some language changes, for approval.
In January 2005, consultant Dale Merrell presented a list of options to the City Council detailing ways to fund repairs and improvements to the city’s wastewater system. The city is facing some $30 million in repairs to limit inflow and infiltration. I&I is water that leaks into the sewer system through cracks and cross connections with storm drains.
During heavy rains, storm water can overload the wastewater treatment plant forcing the city to discharge untreated wastewater into the South Santiam River. The city is under an agreement with the Department of Environmental Quality to reduce its I&I by January 2010.
Sweet Home has borrowed some $6 million from the state already and completed several sewer main and lateral replacements.
Among the options for funding repairs, Merrell suggested the city look at privatization “in its many forms” of the wastewater utility, Adams said. During the process, the council asked city staff to gather information about privatization in May.
Staff reported its findings to the Public Works Committee in November.
During that information-gathering period, “efforts focused on finding ways that least impact rate payers and the city of Sweet Home’s economic well-being while also meeting city obligation to deliver needed facilities at a minimum level of risk and reasonable level of return,” Adams said. “There was also an assumption the city has a desire to maintain ownership of the utilities so attention was focused at this point to public-private partnership.”
Any further action required the council to authorize a formal request for proposals process “to determine viability,” Adams said.
In a public-private partnership, a private company would be responsible for operations, management and maintenance of the utility while the city would retain ownership of the system.
The arrangement could save on operations, management and maintenance costs, Adams said.
With high numbers of retirements coming up in the industry and fewer people entering the field, a partnership could help in recruiting and training new workers, Adams said. It could also help deal with decaying infrastructure.
“You have an obligation to keep user rates as competitive as possible,” Adams said. Under the partnership scenario, the city would also gain an asset, a technical partner who could bring additional expertise.
Adams said he has talked with officials in other cities that have opted for public-private partnerships.
The Dalles needed a specific type of management to get some projects done that it couldn’t do with its existing staff, Adams said. It entered a public-private partnership in 1993 and has three years left on its contract. The city will re-evaluate its contract at that time.
Wilsonville partnered with a private company in 2001 when it opened a new water treatment plant at a new water source, Adams said. Officials there were happy with the arrangement but had recommendations about negotiating the contract.
Sandy has had difficulties maintaining staff for its sewer system. Employees tend to move on to larger local jurisdictions for more pay, Adams said, so Sandy hired a private partner.
Lebanon started a public-private partnership in 1981, Adams said, and he heard several recommendations based on Lebanon’s experience. If Sweet Home should end up using the same company, OMI, a subsidiary of CH2M Hill, that could provide some economies of scale and savings.
Other cities using a partnership arrangement include Canby, Adair Village, Philomath and Coos Bay.
“Each community had their own reason for wanting to consider going that route,” Adams said. “I want to see if it’s feasible for this community.”
Requesting bids will not obligate the city at all, Adams said, but the city needs information from contractors to see if this is something the city wants to do. It could be right or wrong for Sweet Home, but the city won’t know until it has more information.
The request for proposals (RFP) will “require” interested companies to come into Sweet Home and do an in-depth analysis to see if it’s something they could do, determine whether they are interested and whether they could somehow improve the operation or offer cost savings, Adams said. That leaves a strong possibility that the preferred company could contract with Sweet Home.
City Council members were mixed in their reaction to the idea of issuing a request for proposals.
“If they wanted this business, they would want it whether you did the RFP or not,” Councilman Jim Gourley said during the council’s discussion of the issue on Jan. 24. He said companies would come to Sweet Home with this information, request for proposals or not. “I have a problem doing an RFP. This sends the wrong message to our employees.”
“I like the employees,” said Councilman Bob McIntire said. “I like the way we’re set up.”
The council does not have enough information to even decide to look for more information, McIntire said, and he does not want to give up local control of the utility.
Mayor Craig Fentiman said the council would be remiss if it did not look at information and options.
“I don’t know, quite frankly, without this information, whether it’s going to be better or worse,” Fentiman said of the possibility of privatization. He said that when the city looked at using Linn County’s Central Dispatch services in the early 1990s, the move would have saved the city money, but it would not have served the community better.
“I don’t want to constrain ourselves,” Fentiman said. The city still has up to $28 million to spend fixing its sewer problems, and utility rates are going to go up.
“Our focus should be on the ratepayers and the people paying the bills,” Fentiman said.
McIntire said that if the council is guaranteed that this process is only to provide more information, he would support it.
City Manager Craig Martin said that an RFP allows all interested parties “equal footing” to provide the city information.
“It’s just like when you let a contract for a building,” he said. “This request for proposals process provides everyone that opportunity, but the city does not have to contract with anyone.”
Gourley noted that the request for proposals would rank potential companies and is not just a request for information or a price.
Adams acknowledged that the RFP would score companies, but said that the city’s decision in the end could be to end the process.
Councilman Dick Hill asked how much the city has spent thus far in the process, and he agreed with Gourley that the request for proposals suggests the city is headed toward a partnership, the only question being which company it would use.
Adams said he did not know how much time he had put into it, but the only cost so far has been his time.
Martin said there will be costs for publishing notices and more staff time, but it is a concept identified within the council’s goals.
Councilman Tim McQueary said he couldn’t believe companies interested in operating the wastewater system wouldn’t be willing to offer information outside this formal process.
Steve Marrs, representative for the employees’ union, told the council that his “members had some issues.” He said that in Philomath, the number of certified employees working in the plant went down to one individual, who got hurt in a woods accident. His replacement had three months of training and was put in the plant.
“This guy was barely certified to walk in the door let alone operate the plant,” Marrs said. “It’s a profit business. It’s there to make a profit. The city’s main focus is to provide a service, not to make a profit.”
A private operator will have to operate at a lower standard or charge more money to make a profit, Marrs said.
Elmer Roshone, a plant operator and local union president, told the council to take into account other costs to the city of switching to a private operator. The city’s operators help outside the plants, helping set up parades or fill sandbags during heavy rains. During the windstorm in 2002, they helped clear fallen trees out of the roads.
The plants operate all day, every day, Roshone said. He outlined a variety of operational details that a private company would have to make sure are completed and included in a contract.
A private company could go to minimum state guidelines for testing, Roshone said, and he wondered who was going to pay fines if tests go wrong.
“I don’t believe it’s a good idea,” Roshone said.
“If we don’t look at it, we’re never going to know,” Fentiman said, adding that Roshone’s comments about the versatility of city employees could affect the council’s decision on the matter.
“I find these (rates) to be extremely high. I would find it irresponsible of the City Council not to look at these options,” Deb Davis, a ratepayer, told the council. “I feel as a ratepayer, I deserve that little bit of information,” even just to consider whether it’s reasonable.
“You, in essence, owe it to me and every other ratepayer,” Davis said.
The wastewater “plant isn’t really outdated,” Public Works employee Tim Riley told the council. “It isn’t broken. It’s working quite well.”
The collection system has problems, Riley said, adding that he wonders how a business can charge less and still make a profit. He said his biggest concern, though, is how much time and energy the city is spending on what seems to be a minimal problem.
Short of building a tank to handle I&I, he doesn’t see how bringing on a private operator will fix the I&I problem, Riley said.
“I certainly agree with the ratepayer citizen back there,” McQueary said. “We need to get the information.”
The council asked unanimously that Adams return with a document that clearly says it will not obligate the city to a private operator and tabled the issue until its next meeting on Feb. 14.