The management of Gardner’s water and wastewater utilities may not be under the auspice of the city council at some point in the future.
Council members decided to create a committee that will study all three of the city’s utilities – water, wastewater, and electric — during a council meeting on Aug. 13. Council member Chris Morrow will chair the committee, and council Vice President Brian Broxterman will also be a member.
Morrow said he hopes the committee will examine the potential of creating a Board of Public Utilities (BPU) similar to what oversee Gardner’s water, wastewater and electric utilities.
“What we’re hoping to accomplish first and foremost is look at the ideas of BPUs and determine whether or not this is a viable alternative for something to do with our utilities,” Morrow said.
The committee will also be tasked with examining another possibility – creating a public-private partnership. Under such an arrangement, a corporation would pay the city for the opportunity to manage the utilities and collect the profits. Council members agreed earlier this month to send a request for information to companies that may be interested in entering such an agreement.
Mayor Dave Drovetta suggested a public-private partnership last April, but council members asked to put the idea on hold until after they adopted a 2012 budget. Council passed next year’s budget on Aug. 13 as well as agreeing to create a committee to research utility management.
Morrow is not a fan of the public-private partnership idea.
“I’ve done an awful lot of research on public-private partnerships. Depending on what you read, there are some merits there. There are some immediate fund benefits,” Morrow said. “But there are other things I find alarming especially if they’re not working well.”
The best example he found in his research is London’s subway system. They had just such an arrangement.
“The city of London spent nearly a billion dollars U.S. in legal fees and buyout just to take their subways back from their private partners,” Morrow said. “That was knowing full well that when they got it back, they were going to have to fix some problems that haven’t been addressed in a timely manner.”
One advantage to such a partnership, Drovetta explained during an April meeting is that the city draws immediate revenue from the deal. In the meantime, the company running the utilities will be charged with maintaining the utilities.
For the last few years, Gardner’s water and wastewater utility funds were too sparse to do much to maintain and upgrade the system. A public-private partnership would alleviate some of those cash flow issues.
“The best I can tell, the water and wastewater utilities are run professionally and efficiently and meet all of the guidelines and requirements that the state and federal government put on us,” Morrow said. “The problem is fund balance.”
Meanwhile, the management for the electric utility was farmed out to a newly-formed Electric Utility Board a few years ago. At the time, council members considered selling it, and instead opted to create the EUB and have them run the utility like a business. Morrow said it’s working well.
When the utility was turned over to the board, which is comprised of members appointed by the Mayor, the electric company had limited reserves.
“They hadn’t instituted a fuel cost adjustment for political reasons. The EUB, not having to answer to voters, but being tasked with running it like a business, set pricing in such a way that they were able to recover and ran it much more efficiently.”
Today, the utility has ample reserves that it continues to build and electric rates haven’t been raised for the last several years.
Morrow took some heat during the Aug. 13 meeting. He put out feelers for potential committee members on a Facebook page and sent emails to other council members asking for suggestions. He thinks he has the committee fully staffed, but the city attorney and city staff said Morrow needs to run the committee using city and not personal resources.
The actual agenda item the council approved at the meeting said Morrow would work between now and Oct. 3 to build his committee, but that work is mostly complete. At press time, Morrow was waiting to find out whether the members he’s found could be approved and start meeting before then.
The potential members he’ll bring to council are all Gardner residents and have a variety of skills that Morrow said will serve the committee well.
“We’ve got people with financial backgrounds – a former credit union executive; We’ve got someone that has done internal auditing for large organizations. We’ve got several people who have engineering ties, and I want to say four different people with MBAs,” Morrow said.
The committee will basically consider three options – continuing to run the utilities as they’re currently operating; establishing a Board of Public Utilities to manage them; or enter into a public-private partnership.
Morrow said he’d like the city to maintain local control over the utilities, but ideally, he hopes the committee which reach a consensus and bring a compelling recommendation to the council.
“In the long term, if we choose to do things ourselves, there’s going to be some bitter pills I think with increases in water and wastewater,” Morrow said. “But once we get our house in order, we’ll get to a point where we’re not juggling fund balance but responsibly building it.”
Morrow to head committee to review utility management