by William Reinhardt
(as excerpted from Public Works Financing)

Less than 10 months after issuing an REQ, the Milwaukee Metropolitan Sewerage District (MMSD) signed a 10-year, $350-million management contract on Jan. 5th with New Jersey-based United Water Services. The largest wastewater operation and maintenance agreement ever signed in the U.S. and the first major privatization in Wisconsin guarantees savings to ratepayers of $145.8 million over the term of the very aggressively negotiated contract.

None of the privatization savings will fall directly on labor, which had been forced to accept large staff reductions during the past three years under public management. In a separate deal cut with the district’s unions, United Water agreed to equal or better pay and benefits, plus no layoffs without cause for the full 10-year term of the service agreement. In ex- change, the unions agreed to a strict, pre-employment drug testing program and to drop all litigation and grievances, allowing MMSD to sign the contract in time to meet the exacting schedule set by the district’s execu- tive director, Anne Spray Kinney.

Union contract talks are set to start in mid March with the district’s four bargaining units so the full extent of United Water’s business risk has yet to be determined.

By all accounts, it is considerable, especially given MMSD’s zero- tolerance for strikes. Unlike the district, unions are allowed to strike United Water. If they do, however, the service agreement is immediately terminated for cause. That contract provision, intended to ensure environ- mental compliance, gives the unions far greater negotiating power with the private operator than they ever had with the independent public authority.

With the backing of its unions and Milwaukee’s city council, MMSD is seeking a private-letter ruling from the IRS and permission from the Dept. of Labor to allow employees who sign on with the private operator to continue to participate in the city’s generous defined-benefit pension plan. (The multiplier for Milwaukee’s Employee Retirement System is 0.62, about 50% higher than the average for private pension systems).

United Water Resources' Press Release