November 10, 2004
It has always been my intention as a City Councilor to move forward
with privatizing the wastewater treatment plant (WWTP) as long as the
rate-payers would benefit from the move.
But after analyzing the data, observing city-hired consultant
presentations and learning the proposed 20-year contract could cost
rate-payers $5 million to $7 million if the agreement does not work out,
I am skeptical.
I believe one cannot come to a favorable conclusion about the project
because of the inherent flaws in the methodology used to sell the
project to Holyoke.
The consultants calculated Holyoke's baseline financial numbers using
the EPA's 1973 guide ("Estimating Staffing for Municipal Wastewater
Treatment Facilities") and comparing that number with Holyoke's
However, I believe historic costs are not a true representation of
future costs because they are based on the present-day WWTP, which is
over 20 years old.
When the city, as previously determined, makes improvements to the
WWTP, it will be possible to implement operational improvements that
will reduce costs. For example, new high-efficiency equipment could be
installed to lower energy costs and automate processes that would reduce
At a recent presentation, the consultants indicated that the baseline
analysis was based on 33 city employees. Later, they indicated there are
not 33 WWTP employees at the present time, so why use that number for
I still have not received an answer as to how many employees
currently work at the WWTP or how many would be required when
operational improvements are made to the facility. The number of
employees is important, because minor reductions to the work force
dramatically change the analysis.
To move forward and sign a contract with Aquarion Water Services, the
only bidder, the project should realize at least a 5 percent savings,
the consultants said. The Aquarion contract, the consultants concluded,
would save the city 6.16 percent of projected costs, 1.16 percent over
the 5-percent minimum.
If the city can operate an improved WWTP with fewer employees,
however, the projected savings evaporate quickly.
Using the consultants' figures, Aquarion's savings would drop to 4.88
percent if the city's model utilizes two fewer employees. That
recalculation would also drop Aquarion's plan below the 5-percent
savings threshold the consultants cite as the "proceed - not
proceed" figure. The numbers fall further if you account for
Comments made at the public presentation might lead one to believe
that Holyoke is not capable of implementing creative measures to reduce
costs simply because they are a governmental body, and governments are
Over the last four years, the mayor and the City Council have worked
together to reduce government costs through reorganization,
consolidation and technology. Several city departments with similar
functions have been combined and savings have been realized.
To the best of my knowledge, Aquarion has not operated a comparable
WWTP for a substantial amount of time. I believe this is important,
because there is no performance history over five, 10 or 20 years to
It is also crucial to understand that the city will not be able to
terminate the contract for at least five years, even if things are going
poorly. Furthermore, at the five-year mark, the city would have to pay
Aquarion $5 million to $7 million just to end the contract.
If such a payout becomes a reality, the city will be forced to borrow
the money. And since no one can predict the bond rate in five years, it
is conceivable that rate-payers could suffer more increased costs, or
that Holyoke could be saddled with a contract that is too costly to
terminate. The risk does not seem to outweigh the purported benefits.
I believe that, if the City of Holyoke builds a new combined sewer
overflow facility and makes improvements to the WWTP facility,
operations and maintenance costs are sure to be less than for a
20-plus-year-old facility, without having to privatize. (Mark A. Lubold
is Ward 6 City Councilor in Holyoke.)