Not until after budget season. That’s the consensus Gardner City Council members reached following a discussion about utility leasing agreements on Monday night.
According to Interim City Administrator Melissa Mundt, the city could enter a private-public partnership in which the city retained ownership of its water, wastewater and electric utility assets, but the services would be managed by a private company.
“There are organizations that enter into these types of agreements,” Mayor Dave Drovetta told council members during a work session on April 25. “The question is: Is this something we would entertain discussing?”
Drovetta said he wanted to broach the subject with the council because the city faces challenges related to maintaining its utility infrastructure.
He said although there is a plan to increase utility rates incrementally each year, the rate hikes likely won’t fund growing maintenance needs.
“What options are out there to be able to manage this?” Drovetta said.
A few years ago, a previous council debated selling the electric utility. However, offers to purchase the utility were much less than projected, and they opted instead to turn its management over to a newly-formed Electric Utility Board.
Under a possible utility-leasing scenario, a corporation would lease the city’s utilities and manage them. A public utility board would then have oversight of the corporation.
Council member Larry Fotovich worried that a corporation would take the city’s excess utility capacity and sell it to people in other locations.
“My fear would be that you give (a corporation) lease rights and they find 6,000 more people to serve,” he said.
Chris Morrow said the city staff’s request to seek information and a possible partner in a leasing agreement was vague.
“There’s an awful lot of information out there,” he said. “You’re talking about putting out a request for information and it sounds like you don’t know what you’re requesting.”
Fotovich said the city would likely see savings by getting rid of the overhead of employees.
Drovetta said the only utility-lease agreement he would entertain would require that the company take the city’s existing utility employees – between 30 and 40 of them.
Fotovich said city officials could create similar savings by re-examining employee’s benefit packages.
“They’re going to move our employees from a government plan to something that’s private market,” he said. “They’re going to cut costs and we can do that…
“Why can’t we cut costs ourselves? Before we go off on that, I think it’s better we get more familiar with the budget process.”
State statute requires that municipal budgets be approved and filed with the state no later than Aug. 25.
“Right now, I want to focus on the budget at hand,” he said. “I don’t think we need to bring in anyone at this point to add another variable.”
Council members Dennis Pugh and Brian Broxterman weren’t opposed to having city staff create a request for information – in essence seeking a business partner in a utility leasing venture.
“I’m open to the question getting asked,” Pugh said.
Council member Kristina Harrison said she wasn’t opposed to seeking information, but she worried that such an agreement would cede control of city assets.
“I honestly believe when you start losing control, you get into issues,” Harrison said.
While she said she lacks experience in public-private partnerships, she said she has seen plenty of private-private partnerships.
“In my experience less than 10 percent of these work out,” she said. “You don’t’ get the service. They’re cutting services. They’re cutting benefits.”
Morrow said he researched the idea online and found few cities with agreements similar to the one the city of Gardner might seek.
Mundt said there are other cities where public-partnerships have been tried – including in Junction City, Kan. However, most of the partnerships don’t include a bundle of water, wastewater and electric utilities.
“I don’t know that I want to be a guinea pig for someone that’s pitching something new,” Morrow said.
Fotovich said the concept sounds a lot like pawning.
“It’s more risk than it is reward for someone who’s already upside down on the assets,” he said.
Council members decided to reconsider the idea after they approve next year’s budget.
In other business, the council reached a consensus not to increase the city administration salary scale in anticipation of hiring a new administrator.
Council debates utility-leasing concept