Contact: Mr. Billy Edwards, City Manager, City of Hinesville, 115 East Martin Luther King, Jr., Hinesville, GA 31313, 912/876-3564, 912/369-2416 (fax), edwardsb@clds.net
Description of Effort
The City of Hinesville has entered into an operation and maintenance (O&M) contract with a private firm to operate the city-owned regional wastewater system and water supply and treatment services. The selection of a contract operator was based on two equally weighed managerial considerations: technical expertise, and cost of service.
The City of Hinesville and Liberty County have grown considerably over the last two decades. Fort Stewart Army Base, partially located in Liberty County, was revitalized in 1975 making it the largest military installation east of the Mississippi River. As a consequence, Hinesville’s population grew from about 4,000 in 1970 to about 31,000 in 1998.
The City of Hinesville had operated two aerated oxidation lagoons to treat wastewater. In the early 1980’s the city entered a cooperative arrangement with Fort Stewart Army Base to construct a regional activated sludge wastewater treatment facility to serve the base and the city. Although the facility was built on federal land, the city owns it and is responsible for its operations and maintenance.
The City of Hinesville, did not have the technical expertise to run such a modern facility. This deficiency led the city to examine the advantages of hiring a contract operator or privatizing the service.
As part of this process, the city solicited qualification information and management and financial proposals from private firms. With the assistance of an engineering firm, the city developed an O&M budget that established an estimated financial baseline for operating the facility. The city screened the submitted qualifications of O&M contract operators and reviewed the management and financial proposals of those determined to be qualified to operate the facility.
Comparing the budget proposal prepared in-house with those submitted by contract operation firms, the city realized it could save money and enhance the level of expertise available by hiring an O&M firm. As a result, Hinesville selected the firm of OMI to operate the regional wastewater facility and master pumping station and entered into an agreement with the firm in August 1984.
The city selected OMI because it most closely met the pre-established set of criteria even though its cost proposal was not the lowest. Hinesville was looking for a firm with enough employees and in-house expertise to solve unforeseen, unique problems at no additional cost to the city. Further qualifications the city used to select OMI were its long-standing contractual relationships with other jurisdictions and an estimated cost that was less expensive than the city’s projected budget.
In 1992, some of the city’s public works areas were having management problems. In response, Hinesville asked OMI to conduct an assessment to again increase expertise available to the city and realize cost savings. High levels of accountability were required because the firm would be responsible for all of the city’s public works functions including public safety services such as water production and distribution and highly visible services like street cleaning and mosquito spraying.
After negotiations, OMI was awarded a public works operations based on the established relationship with the city of mutual respect and trust as well as their technical capabilities and the competitiveness of their proposal. The scope of the existing contract with OMI was expanded to incorporate the public works operations including water supply services and the balance of the city’s wastewater collection and transportation operations.
Managerial Considerations
The City of Hinesville and Fort Stewart Army Base cooperated to develop a state of the art regional wastewater treatment facility. The U. S. Army took the lead on facility construction through the Army Corps of Engineers, which hired an engineering firm to design and build the facility. The city leases the federal land on Fort Stewart where the facility is located and provides wastewater treatment services for the army base. Approximately 56 percent of the facility’s treatment capacity are used to serve the needs of Fort Stewart, with the remaining 44 percent used to meet the needs of the City of Hinesville.
The Mayor of Hinesville and the City Council accepted responsibility for owning and operating the facility and took the lead on contracting with an operator. The city manager, with the assistance of a consultant, managed the selection and hiring process. The city manager negotiates the O&M contracts and provides recommendations to the Mayor and the City Council, which together make the final selection decision. Fort Stewart has remained aware of the status of the contract operations and has been given opportunities to discuss service provision, but does not have a formal role in the selection process or the ongoing management of the contract operator.
In 1984, the initial O&M contract was written for a five-year period. In year four, the contract was extended for an additional 10 years. The expansion of the scope to include all public works service provision was accomplished through an amendment to the contract in 1992 for a 19-month trial period. The financial element of the contract is renegotiated annually when the contract is reviewed. The city has recently redrawn the contract with OMI for another 10-year period that became effective November 1998 and which includes a more defined scope of services. Although these 10-year contracts are renewed annually, the city can be released from its contract obligation at will.
OMI submits a monthly report to the city that details the activities of each department and includes a 12-month schedule of facilities maintenance and other major operations functions. The city has retained its regulatory permit role with the Georgia Environmental Protection Division (EPD) as an additional contract oversight mechanism. The regulatory permit reports come from the facilities to the city and, if a noncompliance issue arises, EPD contacts the city directly.
No new information systems were needed to monitor operations, personnel or performance. An operations monitoring system, however, was built into the plans for the new wastewater treatment facility. Furthermore, OMI brought new personnel to the operation of the wastewater treatment facility. It hired an experienced project manager when it assumed responsibilities for the public works service provision in 1992, but the remainder of the personnel was existing OMI employees or city employees that were hired by OMI under the contract provisions.
OMI’s project manager is answerable to the city manager for the operation of the system. The city manager is accountable to the City Council, which along with the Mayor, is accountable to the citizens.
Technical Considerations
The City of Hinesville remains responsible for developing and delivering water supply and wastewater services. Sources of technical assistance, drawn on by the city during the contracting process included a consulting engineer, accounting firm, and the City Attorney. Both elements of service provision, water supply and wastewater treatment, were developed and are operated in compliance with all state and federal standards and codes.
The Floridan aquifer serves as the region’s water supply source. The city has a water supply plan and the county is developing one, in response to state requirements. Because of state imposed limits on the amount of water that can be withdrawn from the aquifer, the city has developed several water conservation efforts.
Its Conservation Drought Contingency Plan has instituted an inclined block rate structure for water service and eliminated separate water meters for irrigation uses that did not include charges for wastewater services. The city has also submitted water reuse and recycling proposals to EPD. In expanding the regional wastewater treatment facility, the city will provide for the reuse of treated wastewater for golf course irrigation at Fort Stewart.
Financial Considerations
The cost of constructing the regional wastewater treatment facility was shared between the U.S. Army and the City of Hinesville. The city paid its share through grants from the U.S. Environmental Protection Agency and the EPD and by issuing revenue bonds. OMI provides input as to where system improvements are needed based on operating experience and demands on the water distribution system and wastewater loadings. These estimates are the basis for developing the city’s capital improvement budget for the system.
The cost of the O&M contract is wholly supported by rate revenues. A limited cost of service analysis was undertaken to estimate the operations budget. In 1998, the operational contract budget for water supply services was $1,647,851 including:
administrative expenses at $243,700;
meter reading and maintenance at $323,804;
water laboratory and pump maintenance (water production) at $597,403; and
minor construction and line maintenance/work at $482,944.
The 1998 total operational contract budget for the wastewater treatment facility was $857,079.
In 1995, the city instituted an inclined block rate structure that promotes conservation. As water consumption goes up, the unit cost increases over the monthly base fee and the previous consumption block rates.
Up to 3000 gallons is sold at a base fee of $9.50 per month.
Between 3000 to 7000 gallons is sold for $1.25 per 1000 gallons in addition to the base fee.
For 7000 to 12000 gallons the added cost is $1.35 per 1000 gallons.
For 12000 to 20000 gallons of consumption the rate is $1.50 per 1000 gallons.
Consumption over 20000 gallons is sold at $1.70 per 1000 gallons over the previous rate blocks.
So, if a consumer uses 15000 gallons during one month, the charge would be $9.50 for the first 3000 gallons, $1.25 per 1000 from 3000 to 7000 or $5.00, $1.35 per 1000 from 7000 to 12000 or $6.75, and $1.50 per 1000 from 12000 to 15000 or $4.50. Under the inclined block rate structure, a monthly consumption of 15000 gallons of water costs $25.75 ($9.50 + $5.00 + $6.75 + $4.50 = $25.75).
A similar inclined block rate structure is in place for wastewater services.
From 0 to 5000 gallons the base fee is $9.50 per month.
Between 5000 to 7000 gallons the cost is $1.25 per 1000 gallons in addition to the base fee.
For 7000 to 12000 gallons the added cost is $1.35 per 1000 gallons.
For 12000 to 20000 gallons the rate is $1.50 per 1000 gallons.
Use over 20000 gallons costs $1.70 per 1000 gallons over the previous rate blocks.
Outcomes
The O&M contract relationship with OMI has been beneficial for the City of Hinesville. The city has received high levels of service, technical and operational expertise, and financial management. In the first 12 months of the public works contract, the city realized a $125,000 saving over its 1992 baseline budget.
The City of Hinesville found that when entering into a contract with an operator for water supply and/or wastewater services, the most important consideration is that the selected provider has a good track record in its relationship with clients. The local government must know that the operator will be a long-term partner and will operate the facilities, maintain equipment, and work through any system problems.
Other lessons have been learned as well.
The longer the contractual period, the less likely the contract operator will leave with savings incurred by not maintaining equipment.
There must be a relationship of mutual trust and respect; not all contingencies can be defined in the contract.
Treating an O&M contract operator like a department of the government increases the integration of information and responsibilities.
The operator that has sustained contracts with clients over long periods of time is more likely to work with the community to meet current and future water supply/wastewater needs.
Privatization of operations and maintenance responsibilities for a government service is not a panacea that will solve everything. It may or may not fit another jurisdiction’s situation. Even if it fits the needs, contract operations must be carefully studied and considered before a final decision is reached. Although an O&M operator assumes a great deal of responsibility for managing and delivering a service, ultimately, the local government remains accountable for providing the service and for the quality of service provided.
Although contract operations has been a successful venture for Hinesville, it is worthwhile to note that the initial joint effort between the U.S. Army and the city has significantly contributed to this effort. The value of cooperative efforts that use the resources and capabilities of each of the participants for mutual benefit can not be overstated. Through collaborative ventures, jurisdictions, whether local or federal, realize individual and collective gains. In this case, Fort Stewart gained wastewater treatment capability without the long-term concern of managing the system, while Hinesville gained ownership of a highly technical facility without bearing the full cost of construction.
As a result of the inclined block rate structure instituted through the Conservation Drought Contingency Plan, the annual water usage has deceased by 80 million gallons annually over the last two years, during which period the City of Hinesville continues to grow. In addition, by replacing the use of aquifer water with the reuse of treated wastewater, gains will be realized in the amount of potable water that can be used for other purposes like supporting development.
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