Tale of Two Cities

Savings in Indianapolis
Editor's Note: Graph did not appear in The Detroit News article.

The cities of Indianapolis and Toledo competitively bid their respective wastewater treatment facilities. An international private firm won the bid in Indianapolis. A joint municipal union-management team walked away the winner in Toledo. In both cases, the bottom line was a windfall for taxpayers.

The two Indianapolis Advanced Wastewater Treatment (AWT) facilities had won national awards when Mayor Stephen Goldsmith considered the privatization option. In January 1994, the mayor settled on a five-year agreement with the White River Environmental Partnership (WREP) to run the day-to-day operations, the largest contract of its kind in America.

The WREP was experienced in both predictive and preventive maintenance. The city still pays for any capital expenditures, capacity increases and costs associated with corrective maintenance. But more efficiently run equipment has resulted in a substantial reduction in energy costs. The average AWT monthly electric bill under city management was about $450,000. Today, power costs are about one-third less.

Additional savings were realized by cutting 160 workers from the 328 employed by the city and transferring them to other jobs. This helped shrink the operating budget from $30 million annually to $17.5 million a year, about a 40% savings. The city administration plans to put an expected $65 million over the life of the agreement back into the aging infrastructure.

WREP also recognized AFSCME Local 725 and entered into one of the first contracts in the country between a private company and a municipal union. It was ratified by more than a 20-1 margin. Since then grievances, which averaged 38 a year, fell to one the first and none in the second year. The accident rate dropped 80%. Workers now earn an average of 3% more than in their former city positions.

Environmentalists worried that "money-hungry, private profiteering people were going to do nasty things to the water." However, WREP spokeswoman Lou Ann Baker told The Detroit News that the contract specifically says the firm "will provide water treatment equal to or better than previously provided by the city." And, she says, it has lived up to that commitment.

Toledo’s Bayview Wastewater Treatment Plant was poorly managed, overstaffed and inefficient. Mayor Carleton S. Finkbeiner entertained bids from ten private sector managers, as well as the city’s labor-management team. Last March, Professional Services Group was selected as the best of the private proposals. But in the process of negotiating a tentative contract with PSG, Mayor Finkbeiner opted to retain the city/union operating team and keep most of the in-house staff in place.

When AFSCME Local 2058 discovered the city was serious about bidding the work out, says Mayor Finkbeiner, labor got serious about new work rules, cutting costs and cooperating with management. The city administration, in turn, committed a new cadre of managers to the operation.

The number of workers at the plant dropped to 125 from 135. Through attrition, the mayor expects that number will eventually drop to about 85 employees. Today, a more efficient water reclamation operation saves Toledo close to $2 million a year.

As Detroit looks for ways to pare costs and improve city services, Indianapolis and Toledo offer two contrasting models that work.