Paris City, TX water plant privatization considered

By Jeff Parish
The Paris News

Published April 23, 2003

One of the first things new Paris City Council members could see next month is a presentation on privatization of the water and wastewater treatment plants.

After hearing a presentation from Operations Management International Inc., members of the council’s Water and Sewer Subcommittee decided the entire council should hear the presentation. The next council meeting is May 12.

On average, privatization saves clients 10 to 30 percent, OMI representative Shirley Ross said. Sometimes that savings can be hard to
compute.

“Sometimes when cities go through this procurement, they may choose to add services,” she said. “It’s hard to compare if they add services.”

There is no set cost for OMI’s services, said Greg Higgins, regional vice president. Each case is different with different technology, energy costs and other needs. A team from the company spends several days on site
looking at the plant, equipment and operations before a proposed amount is
reached, Ross said.

OMI, founded in 1980, is based in Englewood, Colo. The company has about 180 water and wastewater plants it operates for 125 clients,
Ross said.

“We have grown an average of 15 percent every year,” Ross said. “The way we have done that is add clients just like Paris, Texas. We haven’t bought any companies or anything like that.”

Operations Management International has a large presence in Oklahoma and Texas, she said. Projects closest to Lamar County are located in Stephenville; Temple; Georgetown; Pampa; Duncan, Okla.; Broken Bow, Okla.; and Fayetteville, Ark.

The company started work with the Fayetteville wastewater treatment plant in 1984. During that time, the plant’s capacity has increased from 12.4 million gallons per day to 17 million gallons per day. In the first couple of years, Ross said, OMI reduced chemical costs by $150,000 and energy costs by $30,000.

Temple’s wastewater treatment plant rated at 7.5 million gallons per day is similar to Paris’, Ross said. Since starting operations there in 1994, the company has reduced chemical and power demands while improving quality, she said.

Ross cited several advantages to a company such as OMI being able to help reduce costs for a municipality, including nationwide purchasing agreements, energy and chemical management programs, treatment
optimization, employee cross-training and contractual and financing flexibility. Also, making a plant more efficient can help reduce personnel costs, she said.

A contract gives a guaranteed price and performance, Ross said. When the private company takes over the plant, it also assumes risks associated with the operations, such as ensuring compliance, she said.

Councilmember Francine Neeley asked who is responsible for fines if an inspection finds something wrong. It is the company’s responsibility if it is due to OMI’s negligence, Ross responded.

“We take great pride in our compliance record. We have to because that’s the business we’re in. We can’t be getting citations from regulators,” she said. “From time to time, we might have some minor violations. What those are due to usually are delayed capital investments where we may be
operating a facility beyond its capacity.”

Contract lengths vary from customer to customer, Ross said. In the past, agreements have traditionally been for about five years, but contracts of 15 to 20 years are growing more common, she said.

Before entering into such an agreement, council members need to make sure there is a consensus among them that this is a route they wish to take, Ross advised. The city will need to determine what sort of process it will
follow in implementing the contract.

Defining the scope of the project is also important, Ross said.

“Are you looking at water treatment?” she said “Are you looking at wastewater treatment? Do you want us to look at distribution and collections?”

For some client cities, OMI performs all the duties of a public works department, including streets, parks and garbage. For others, all the
company does is perform maintenance, or just handles the operations and management of water and wastewater treatment plants.

“If you take a look at your facility, everything you do in that facility, we do somewhere,” Higgins said.

Any new mandates or regulations could be an expansion of the scope in the private company’s contract, Ross said. It would depend on how much extra operational cost or manpower, if any, it required to meet those new regulations.

“We try to stay ahead of those things and see what’s coming down the pipe and let you know what the effect will be,” Higgins said.

Many in Paris are afraid of privatization because they fear rates could spike, Councilmember Benny Plata, the committee chairman, said. The contract would specify what would mandate increases in the agreement price, Ross said. Common factors include annual Consumer Price Index
adjustments, increases in the amount treated at the plant and energy or chemical costs going up.

In some agreements, OMI and the customer share in the savings generated. That provides incentives to keep making operations more efficient, Ross said.

However, setting water and sewer rates would remain the city’s purview, Higgins said.

Ross provided committee members with a list of clients, inviting them to call the municipalities.  “And I will,” Plata said.

Plata made several recommendations for cutting costs to reduce a proposed water rate increase at the last council session, but those were not the recommendations of the committee. The subcommittee hadn’t met
before Plata was asked to provide the information.

Plata’s ideas included cutting $158,000 budgeted for a new truck, sludge removal equipment and new valves. The old equipment is serviceable or can be rebuilt, he said.

The city has a high number of water and wastewater personnel compared to cities of similar size, Plata said. He recommended reducing work force to bring the city more in line with the others.

“Everybody is not going to like the recommendations I made,” he said Tuesday. “I wasn’t entirely in favor of giving them, but I see a need for cost-cutting features. Certainly the city hasn’t come forward and offered any cost cutting.”