Water and Sewer Advisory chairman says jury’s still out on privatization

Written by Administrator
 | Tuesday, 25 August 2009 21:12

As the town is without a water superintendent after Paul Anderson left for a position in Middleboro, Duxbury is taking a hard look at the structure of the water department, including the idea of privatizing some aspects.

George Wadsworth, chairman of the Water and Sewer Advisory Committee, said Town Manager Richard MacDonald tasked his committee with exploring the options. He said his group isn’t looking at a model where the entire department would be run by a private company, but merely the operations and management.

“As part of this operation they would take over title of the vehicles. That would be the only thing they would take title to.”

This means that the private company wouldn’t own any of the assets of the water departments, such as water mains, or equipment other than vehicles, Wadsworth said.

Other towns have explored partial privatization options in recent years. Plymouth’s sewer department is run by a private company. In Cohasset, the company American Waterworks is under contract to run that town’s water department.

Wadsworth said the idea of a private company completely running a town’s utilities, including buying the town’s assets, is “not unheard of but it’s pretty rare.”

MacDonald stressed the fact that the idea of full privatization isn’t anything he’d recommend.

“We would never sell our water system,” he said.

Wadsworth said that Cohasset actually bought its operation back from American several years ago, then re-contracted with the company.

The potential benefits of having a private company manage a department would be seen by the ratepayers in the form of lower rates, Wadsworth said. The town itself wouldn’t save much money, although they could make a little bit because any assets (in Duxbury’s case, it would only be department vehicles) would become taxable.

“Because it’s an enterprise account [separate from the town’s general fund] the benefit would be to the rate payer,” Wadsworth said. “The town is very careful in ensuring that the Water Department pays for any expense related to water. They are very careful about that ... because the tax dollar is so hard to get a hold of.”

In a semi-private system, the town would cut a monthly check to the company each month to cover payroll and other expenses. The amount of the check would be negotiated and would remain fixed over the life of the contract.

Wadsworth said there are circumstances where the town would have to pay additional money to the private company, for example if water mains were destroyed in a freak storm, but he said those examples are rare.

“Acts of God kind of things,” he said.

As far as the current water department employees go, Wadsworth said in the examples he’s looked at, the private company interviews each employee and generally hires back everyone who wants to come back at similar or sometimes higher wages. He said that inevitably, some workers want to remain in a municipal situation and move on, and the private company may not always fill those slots.

“You end up with an operation run by fewer people,” he said.

The committee is currently speaking with several vendors, and will make a few site visits. They will then put together a request for proposal and see what kind of interest it generates. Wadsworth said that although the members of the Board of Selectmen act as Water Commissioners and set the water rates, any final decision on privatization would be made by the town manager, as he is the only town official who can enter into a contract.

“I think the jury is out with our committee,” Wadsworth said. “We think we should go through a complete process here. This is of great concern to the employees themselves because change is threatening. I think we should go through the process and see what comes out.”

He pointed out that even if the town decides to have a private company manage the water operations,  it’s not permanent because the town remains in control of the department’s assets. This means that if after a five-year contract expires, town officials feel the move isn’t working, it wouldn’t be hard to switch back to the old way.

MacDonald reiterated the fact that any move to privatizing the department is only in a fact-finding phase.

“Nothing is set in stone,” he said.

He pointed out that at this year’s annual Town Meeting, he promised to be looking at every way possible the town could save money.

“There would have to be a substantial cost savings,” he said of partial privatization.