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HomeMy WebLinkAbout1993-12-27 94-57 ORDERDate WY112-27-93 Item No. 94-57 q✓D&2: AcoepLug the Report of tale l ivatizatinn Crnmission Itsm/Subjeco Responsible Department. 8ssntt re Commentary: gbe privatfzatiDn Camdarian gart.bv v:.nw ty the City CIumrc1.S in May, 1993, Your mgaleted its review of City se =ass, fucilitiee, and assets and figs evaluated privatization ties, gfie attautcd xep= slamexizes the xook of the (kximiaeim ircludi de%n t by drFaxmmt wexvlcw of cuaerRly privatized fmctiae, areae for possible privatfzetim, discuaad pofams avd zstnrmrl [irnis. Rpm +ocmg;F ^w of t1m xepm_t by tM City Caumll, it 1s ar ip rt that the various x tions made by tta tbmoission erLU be os m to appmluiati (bunDil camittees for fwrt action. Ixpvmxm Hme Manager's Comments: C� ManaBn Associated infa ism low UidPi, il* Budget Approval: Fire ,e Dm Legal APprm'al: I CYy Solioirm Introduced For ®Passage ❑ Firn Reading Page _ of ❑AeMrml Aeei�ed to GamcJor Smoe December 2�, 1993 CITY OF BANGOR (TauMrba----- ....,cceecing-ths.,epvct -ofa srinacizatiom..�issLom By Qty Coeaet{ of As My ofDaew . ORDERED. TWT the Report of the Privatization Cm slon is Hereby acceptai; and BE TT FVR1i�R OROHtED� TW the recd m tions pnripo by the Pri� be referred to a reviaai by the appropriate City Council Caozlttees far any necessary actio. 94-5] ORDER IN CITY COUNCIL Title, Accepting the Report of the Privatization December 27, 1993 Commission. Pea d .......................... 4........... CI CLLKRK sfa� ..............................unci Councilman T REPORT PRIVATIZATION COMMISSION BACKGROUND 94-5J The Privatization Commission was established by City Council Order 93-260 of Nay 30, 1993. The Commission was charged with undertaking a comprehensive review of City services, facilities, and assets to identify and evaluate privatization opportunities which will result in savings or enhanced returns on City assets. In areas where privatization options were identified, the Commission was also asked to provide guidance to the Council regarding methods of implementing these options which take into account the status of existing City employees through either maintaining employment or providing new employment opportunities for effected employees. Then Council Chair John Bragg appointed seven members to the Commission in July of 1993. The Commission membere are: Raymond J. Cote, Webber 011 Kenneth A. Newel, ERNE Robinson Speirs, Retired Businessman Carol Epstein, Semba-Epstein Don Soucy, Councilor Dale Gass, Rome Quarters Ruth Shook, Retired from non-profit sector The Commission has met on numerous occasions. The first several meetings of the Commission were devoted to review of the City's three largest and most expensive departments: Police, Eire and Public Services. In order to complete its task, the Commission then divided into subcommittees to review the remaining City Departments and operations. Bistory of Privatization in Bannon: In order to evaluate alternatives for privatization, it is neceasary to briefly review current privatized functions as well as areas where privatization has either been studied, rejected, or attempted and failed. The City of Bangor has actively pursued privatization over the years and with a reasonable level of success. Currently privatized functions include: 1. Pickering Square Parking Garage, Abbott Square Parking Lot, Bangor International Parking Lot The City currently contracts with National Garage, Inc. to manage the parking garage and Abbott Square. it also contracts with Apcoa, Inc. for the operation of the parking system at Bangor International Airport. These contracts have been very effective in terms of their coat/benefit to the City. They have brought to these parking operations a level of expertise not available within the City's staff and have relieved the City of the problems associated with staffing and operating these functions. 94-5) -2- Different approaches to privatization have been taken in these areas. National Garage operates under a fairly standard management contract where all revenues from the parking operation come to the City and National Garage aperates under a budget approved by the City which includes a management fee. Apcoa operates under a contract which provides the City with a fee based an revenues generated by the parking system and an incentive program which shares operating budget savings between the City and the operator. Both systems appear to have Worked well. The Committee recommends that when these contracts are again put out for proposals, firms be asked to bid on both system. 2. Solid Waste Disposal Since 1988, the City has contracted with the Penobscot Energy Recovery Company (PERC) in Orrington for the incineration of municipal solid waste. Over time, the contract has been modified on number of occasions until today the PERC operation resembles a regulated public utility with PERC's operation and costs periodically reviewed by an organization established by contracting municipalities which then agree to the tipping fees established by PERC. The transition which has occurred over this period has been difficult and at times controversial. However, the situation has stabilized recently and the oversight system appears to be working well. 3. Crossing Guards The City contracts with NDA Security to provide crossing guard services for children walking to and from the City's public schools. Contracting for this service has relieved the City of the administrative burden of hiring and supervising part-time and temporary personnel. While periodic complaints have been received regarding the quality of the individuals employed by HDA Security, it is unlikely that the City could or would do any better if it provided this service directly. It is also clear that the Police Department does not have the administrative depth to assume this function. 4. General Aviation Services Bangor International Airport has recently privatized general aviation aircraft repair services at Bangor International Airport. These services are now provided by a private operator, Telford Aviation. It is too early in this arrangement to evaluate its success. However, it has already removed a subsidized operation from the City budget. 5. Airport Janitorial Services Janitorial services at the Airport are also provided by a private contractor. Here again, the major advantage has been to free Airport management of the administrative burden of staffing, organizing, and overseeing the daily cleaning operations. This approach hoe worked well at the Airport. 94-5] -3- ther Privatization Efforts and Reviews In addition to the generally successful privatization efforts outlined above, a number of other major efforts to review or analyze privatisation have occurred in the recent past. These include: 1. Lease of the Pickering Square Parking Garage In 1991, the City reviewed the possible lease of the Pickering Square Parking Garage to Privatisation International, Inc. After detailed analysis of the proposed lease agreement, it was rejected for several reasons including a determination that the arrangement was not in the financial best interests of the City and concern that parking rates would rise too rapidly and be counterproductive to the City's interests in downtown development. 2. Motor Pool In 1991, the City reviewed two proposals for the operation of the City's Motor Pool. The two proposals were for the motor Pool's day to day operations and did not include provisions for "emergency repairs" outside of regularly scheduled hours, gasoline, or insurance coats. These costs were included in a subsequent proposal submitted by Lear Siegler. The City Council formed an ad-hoc committee which included several representatives of the private sector to evaluate these proposals. This group recommended that aanagement contract not be pursued based on two primary considerations: uncertainty regarding the total annual costa of such an arrangement and concern that the City would lose direct control over its fleet maintenance operation. Based on this recommendation, the Council declined further discussions. However, it should be noted that significant changes and efficiencies have been brought about at the Notor Pool based on the analysis of the management proposals received from outside firms. 3. City Nursing Facility In 1991, the City reviewed numerous options regarding the possible sale or privatization of the City Nursing Facility. A decision was made at that time not to proceed in this manner. A fuller discussion of this effort can be found below in the Commission's discussion of this Facility. 4. Bass Park Bass Park Associates (BPA) proposed to lease Base Park for five years with a five year option. BPA's proposal contained no management fee and BPA guaranteed the City against any loses except those incurred through debt service. However, under this proposal, BPA was to keep all profits. Also, the City was to be responsible for funding $1.2 million in capital improvements during the first year of operation. -4 - United leisure Services (ULS� proposed leasing Bass Park from the City for five years. The lease would contain a 120 -day termination provision which either party could exercise. Under this proposal, MS was to receive a $100,000 management fee. The City was to receive e 808 of the annual net profit, half of which would be spentonimprovements. However, ULE would not guarantee the City against operational loaves. The proposal included a $50,000 advance to the City from ULE for concession stand improvements. City staff also proposed to continue operating Bass Park. Under this proposal, the City was to receive all profits and to absorb all losses. Any capital improvements were to be funded through the net profits on a year to year basis. Initially, the City Council directed the City staff to begirt negotiations with EPA. However, the Council later withdrew this order and directed City staff to begin negotiations with Centre Management. Centre Management was previously part of ME which had submitted an earlier proposal. Negotiations with Centre Management were later dropped after the company made changes to its proposal. These changes were driven by the downturn in the regional economy of New England and Centre Management's concern over the potential future performance of harness racing. More recently, the City solicited and accepted proposals for private operation of harness racing. One proposal was ved from Fred Nichols, representing an investor group. This proposal was originally rejected on the basis that it would require a continuing subsidy to harness racing in the form of capital maintenance expenditures. Subsequently, a revised proposal was made and accepted in principle by the Council and City staff has been directed to negotiate a lease agreement. Guiding Principles for Privatization A review of the City•a current privatization efforts as wall as those areas where privatization has been reviewed but not pursued, coupled with a review of therelevantprivatization literature and experience around the country, have led the Commission to recommend the following guidelines and criteria in the analysis of areae for privatisation. Privatization should be pursued when: 1. There exists a soundly based anticipation that the privatization of ar function will result in actual coat sa i nbotha full and inal cost basis. when savings are evaluated solely on a full -cost basis, they are often overstated in terms of actual budget savings. Those costs associated with administrative supervision and overhead may not be reduced or eliminated. As a result, any analysis must look at both the direct coats associated with the program and function and the marginal costs or actual savings which will be achieved. -5- 2. The area under review is one where the City's operations are clear.y Inefficient cannot be quickly or dramatically improved. 3. There exists an actual or anticipated level of competition within the private sector which will insure that the City does not become a captive market to a single provider. 4. The service or function in question can be privatized in such a way as to m efficiency based community goals and values provided by the service in question. In some instances, privatizing a service may result in a marginal cost saving. However, to accomplish these savings, other important community values oWeis may be unacceptably threatened. For example, savings might result from privatizing certain public safety functions. However, these functions may be so core to the mission of local government that the Commission questions whether privatising, with the associated dilution of control exercised by democratically elected officials, is appropriate• Finally, other considerations meet also be taken into account. These include legal and regulatory constraints, the effect on City employees as outlined in the Comission's charge, and the ability of the City to develop adequate and comprehensive contractual agreements with measurable performance standards and the ability to monitor and administer these contracts. It is not necessary that all of these conditions he met in order to proceedwith a privatization effort. However, all of them should be evaluated and considered and the majority of them should be present prior to proceeding. The sections that follow present the results of the Commission's review of the City's departments and services and include our recommendations for current and future efforts. 94-57 -7- DEPARTMENT: FIRE Currently Privatized Functions: None Possible Areas for Privatizationi Firefighting, Emergency Medical Services Discussion The Fire Department also provides key public safety services through: fire suppression, emergency medical services, and code enforcement and fire prevention efforts. The Commission is extremely impressed by the quality of the fire services currently provided to the citizens of Bangor. The Commission also compliments the recent efforts of Fire and City management to expand the Department's role and efforts in emergency management services and fire prevention. At the same time, the Commission recognises that the Fire Department is the City's most expensive General Fund function and the cost of the Department has been increasing at a rate above that of the general rate of inflation. Nevertheless, the Commission does not recommend that the fire suppression or emergency medical services be considered fax privatization at this time. Periodic discussions have occurred in the recent past regarding the possibility of privatizing or eliminating the City's ambulance service. Recognizing recent upgrades in the City's overall emergency medical system including updated dispatching services and the new first responder program, and recognizing that emergency medical responses are growing and now significantly outnumber fire calls, the Commission finds that these services are a necessary part of this community's emergency medical system and should continue under direct City operation. In light of expanded collection efforts in recent years, the marginal costs of this service are insignificant when weighed against the benefits provided. A number of communities, primarily in the South and West, have successfully privatised fire suppression services. Given the existing quality of these services in Bangor, the Commission does not recommend this be pursued in Bangor. In addition, the Commission does not feel the community would support such an effort at this time. At the same time, the cost of the fire service is significant and growing and is of concern. The Commission recommends that other efforts to control costs be pursued. Recommendations: 1. The City should remain in direct control and operation of both fire suppression services and current emergency medical services. 94-5] -6- DEPARTMENT; POLICE Currently Privatized Function: School Crossing Guards Areas for Possible Privatization: Parking Ticket Collections Discussion: The Police function is at the core of the local govermsent's responsibility to provide a safe living and working environment In the comunity. The Bangor Police Department operates through three key divisions: Police Patrol, Investigations, and Services. The Commission does not believe that any privatization opportunities are present or should be pursued in regard to Police Patrol or Investigations The Services Division, which largely supports patrol and investigations, may offer the possibility of some further privatization efforts. The Police Department has recently investigated the possibility of contracting for parking ticket collection. However, the Department's collection rate of nearly 808 indicates that turning all collections over to a third party (at a cost of about 208 of revenues collected) would not result in cost savings. This is particularly the case since front desk staff at the Department provide a range of functions, and it is unlikely that positions would be eliminated. At the same time, a significant am in parking citations is outstanding. Recommendation: The City should consider contracting with a collection agency to pursue outstanding parking fines, particularly those over sir months old. 94-5] -S- 2. The City should explore alternatives for controlling and reducing Fire Department costa including enhanced regional cooperation in the Fire Service and continued efforts to control benefit costa including retirement and workers' compensation. 3. Should alternative methods to control costs not be successful, the City should consider a full evaluation of the alternative of private provision of fire suppression and emergency medical services. 94-5) 9 - DEPARTMENT: PUBLIC WORKS Currently Privatized Functions: Garbage disposal, major road overlay and reconstruction, major tree takedown Possible Areas for Privatization: Street light and signal maintenance; fire alarm system maintenance; garbage collection; recycling collection; demolition debris disposal; recycling processing; cemetery maintenance; snow Flowing; street sweeping; street painting; street patching; sewer maintenance. Discussion: In general, the Public Works Department is highly integrated. Few individuals within the Department are assigned to single functions. For example, an individual might plow snow on one day, haul material the next, and drive a garbage truck on a third day. This integration has resulted from the broad range of functions assigned to the Department (Public Works is truly the City's housekeeper) and the change in its responsibIlitles as the seasons change. It has also resulted from the steady down sizing of the Department which has occurred over the last fifteen to twenty years and the assignment of such new functions as recycling and street painting and signage, assignments which have occurred without adding personnel. As a result of this integration, the Commission does not believe contracting for most services provided by Public Works would be cost effective. At certain times of the year, the Department is heavily stretched to meet its responsibilities. Examples include snow plowing and removal, leaf collection, and spring clean-up. In order to meet these peak periods, the full current staffing of the Department is required. Under these circumstances, the privatization of most functions would add to rather than reduce costs. Given this situation, privatization in Public Works should be reviewed only in regarding to such on-going year round functions as garbage collection or to areas where selected privatization could substitute for increasing the workforce. A good example of such an approach was the decision several years ago to contract all large tree takedowns. Recommendations: 1. The City should issue a request for proposals for private garbage collection. This is a year round stand alone function. Based onour preliminary review, we believe the City could realize approximately $50,000 in savings through private collection. At the same time, we recommend that the City consider structuring this proposal to allow for public/private competition. This could be accomplished through allowing both the public and private sectors to submit bids on each route or area of the City. Should a private firm be hired, we also recommend that any savings be used to transfer existing personnel to other areas of the Department which are currently heavily stressed. Should some positions be eliminated, we recommend this be done through attrition. 94-5] -10- 2. In other areasrecommend that functions be considered for privatization prior to adding new personnel. One area mentioned as in need is the City's electrical division. Prior to expanding this division, we would recommend a detailed analysis of the division's workload and areas of that workload (such as general electrical work on City buildings and perhaps maintenance of the City's fire alarm system) which might be considered for privatization prior to adding personnel. 3. In conjunction with other area municipalities, the City has been reviewing alternatives for the disposal of demolition debris. The alternatives currently under review are all based on the provision of this service by the private sector. The Commission supports this approach and recommends that this area be privatized if at all Possible. 4. The City should also investigate, perhaps through the mechanism of the Bangor area Traffic Study organization, the possibility of contracting for street painting services on a regional basis. 94-9 -11- DEPARTMENT: HEALTH AND WELFARE Currently Privatized Functions: None Areas for Possible Privatization: General Assistance, Children's Dental Clinic, Public Health Nursing Discussion: The Department of Health and Welfare operates a variety of programs, many of which are partially or wholly funded by grants or reimbursements from the State and Federal Governments. programs which are completely grant funded include: the Sexually Transmitted Disease program, the Womens, Infants and Children's Supplemental Food and Nutrition Education program, the Immunization Program, and the Childhood Lead Poisoning Prevention Program. The Commission sees no point or reason to pursue the privatization of these programs. Programs which depend on General Fund support include:" General Assistance, the Children's Dental Clinic, and Public Health Nursing. The Commission does not believe that privatisation is viable option for these programs. The General Assistance program is not suitable because it is a State mandated and. State policy driven program which provides assistance payments. We do not believe it is in the City's interest to turn the distribution of funds over to a third party. This is particularly the case since the State oversees the program and holds the City directly liable for its administration. In regard to the Children's Dental Clinic, the Commission does not believe that the private sector could perform this function with the same level of expertise or at the same cost as the City. In regard to the Public Health Nursing Division, the Commission recognizes that the individuals assigned to this program are also used and necessary to support a variety of other departmental functions. To privatize this division would have a negative impact on other programs of the department. Recommendations: 1. The Commission does not believe there to be sound opportunities for privatisation within the current programs offered by the Health and Welfare Department. 2. In view of the possible City operation of a significant number of apartment units in New Capehart for homeless Purposes, we support the recommendation of City staff that a property management firm be hired to oversee the maintenance and day to day operation of this housing. 96-5] -12 - DEPARTMENT: WASTEWATER UTILITIES Currently Privatised Functions: None Areae of Possible Privatisation: Treatment Plant Operation, Composting, Sewer Maintenance Discussion: The Wastewater Department of the City has changed dramatically over the past five to ten years under the impact of State and Federal Clean -Water Regulations. The most noticeable change has been the construction of the City's new secondary treatment plant. Prior to the development of this plant, some preliminary exploratory discussions took place regarding the possibility of contract operation of the City's primary treatment plant. These discussions involved OHI, incorporated, a subsidiary of the CH2M-Hill Engineering firm. At that time, OMI indicated their belief that contract operation would not result in any savings to the City. Since then, the secondary treatment plant has come on-line and treatment expenses have increased dramatically. As a result, it may be appropriate to once again review contract management. It should be noted, however, that uncertainty still exists regarding the full cost of operating the expanded treatment facility. The new plant did not come on-line until December of 1992. To date, plant operation costs have been significantly less than expected. Until the City has a longer history of actual costs, it would be premature to devote time and energy to evaluating contract management alternatives. The Commission recommends that two to three years of operating experience he acquired prior to exploring this alternative. The Commission notes that the City is currently exploring alternatives to its current sludge compostIng operation. It appears that these alternatives will all require either an ,vestment in capital facilities or additional staff. We believe that these alternatives should include a full range of private options and that the City should seriously consider contracting out its sludge composting operation. Recommendations: 1. After two to three years of operating and financial history have been achieved at the City's expanded Treat- ment Plant, a full evaluation of contract management should be undertaken. In this process, it must he re- cognized that the City will remain liable for any waste- water discharge permit violations and that the City's significant investment in its plant must be protected. At the time of the evaluation, therefore, the City's analysis should include the coat of a fulltime contract compliance officer. 2. The City should strongly consider the privatization of its sludge composting operation should it find that the current low cost composting system is no longer feasible. In addition, the planned review of alternative systems should also take into consideration the possibility of a regional approach to sludge disposal. 94-5] -13- DEPARTMENT[ PARKS AND RECREATION, GMF COURSE Currently Privatized Functions: Certain concession operations Possible Areae for Privatization: Parke Maintenance, Sawyer Arena, Golf Course Discussions The Parks and Recreation Department is another area of the City which has experienced downsizing over the years. Permanent park maintenance staff has been reduced, a number of small recreation programs have closed, and additional cost savings have been generated through replacing fulltime personnel with parttime personnel and placing the Department's Director o contractual basis. The Department is also currently undergoing a number of changes. This includes assuming the management of Sawyer Arena and possibly relocating to a new facility which offers alternatives for an expanded program mix. The Golf Course is currently operating well and has exceeded the projections provided in the 1991 management study performed by REG Associates, Incorporated. The Department has implemented nearly all of REG's recommendations. The major future management issue facing the Golf Course will arise at the point where the current Golf Professional/Superintendent retires. At that point, the City may be required to hire two separate individuals to perform his functions. Recommendations: 1. After one to two years of experience in operating Sawyer Arena, consideration should be given, in conjunction with Bangor Youth Hockey, of possible private contract management of this facility. This option should be strongly evaluated particularly if significant capital investments are required for this facility and if a potential operator can be found who would be willing to undertake these improvements as part of a management contract or lease. 2. The Department should continue its efforts to develop an area -wide recreation council to review recreation programs offered by the public, non-profit, and private sectors with the assignment of reducing or eliminating duplication of programs and efforts and developing cooperative arrangements to insure that a full range of recreational activities is available to all Bangor residents. 3. While REG, Inc. has recommended that the City should not go to contract management of the Golf Course, we believe this alternative should not be lightly dismissed and it should be once again reviewed at the point where the current Pro/Superintendent retiree. 94-5) -14- .DEPARTMENT: BANGOR INTERNATIONAL AIRPORT Currently Privatized Functions: Terminal Cleaning Services, General Aviation Repair Services Discussion: In general, airports are publicly owned and operated. Under certain circumstances, public airport owners will contract with private parties for management activities. Under most circumstances, aircraft services are conducted by private parties. The following chart outlines the various configurations: OWNERSHIP MANAGEMENT SERVICES CONCESSIONS A. 1008* 100% 100% 100% B. 1009 1004 100% 0% C. 1009 1004 09 09 D. 08 04 08 08 E. 09 09 04 04 BUR 1009 1009 604 04 *9 expressed as proportion of public ownership Typically, examples of type "A" are found in all European Eastbloc countries and certain western countries. During the past 10 years, in nearly all western countries, variations of type 'B" have replaced "A" type facilities. In the U.S., type "C" airports would be most common. Type "D" airports tend to be smaller facilities in early development phases. Type "E" airfield are nearly always general aviation facilities (with the exception of Ross Perot's airfield near Dallas, which is also a developmental facility). Clearly, Bangor is different from moat other U.S. airports and there are good reasons for this. In its early days, BGR could not support a private service operator. Crucially important revenues were diverted from the operation rather than "plowed back". Consolidated municipal control made it possible to plow, back 1009 of all revenues received from the air c This has allowed the airport to cut costa (and margins) so as to be able to compete with subsidized international competitors without having to rely on subsidies itself. Where the largest proportion of revenues are received from transiting carriers which have no local investment, it is crucial that this financial efficiency be preserved. The absence of such efficiencies at other airports has been a key reason for their inability to compete successfully with Bangor. 94-5) -15- As BGR has grown, it hoe been able to increase the private share of its overall operations. It is important, however, to limit such conversion to those situations where efficiencies can actually be improved by provide entities. Recommendation: 1. Given the highly volatile economic and regulatory climate of the aviation industry, it is important that the Airport remain as lean and unencumbered as possible. The Commission has found Airport Management to have an open mind about the various possible combinations of public/private business combinations; however, we also view with skepticism any general claim that "private" is always better. In any Industry where the private and public sectors must collaborate, the appropriate boundaries will fluctuate with the specific conditions that exist. 2. in regard to economic development of the Airport I property, the Commission supports the current emphasis on private/public cooperation. Current policies on the sale/lease Of Airport properties provide appropriate returns to the City and the necessary flexibility to encourage apprcprlate development. The recent expansion of the role of BeMir in reviewing and advising the Council on Airport leases is an excellent move which the Commission supports. He would recommend that additional consideration be given to further expansion of this group's advisory role on Airport matters. 3. The Commission also finds that Bangor International is a crucial community resource which must be managed not only with a view toward sound financial airport management but a a key element of our overall economic future. As such, the Commission would strongly support the current public/private partnership approach while being very cautious of any privatization efforts which might impact negatively on o Ability to manage this operation as a community resource.. -16 - DEPARTMENT: COMMUNITY AND ECONOMIC DEVELOPMENT Currently Privatized Functions: Property appraisals, architectural/ engineering services, market analysis, marketing materials development, traffic engineering services (DBP Permit Review), planning studies and wetland studies. Possible Areas of Privatization: Legal services for loan and lease closings; real estate broker services for marketing property at Bangor International Airport and BanAfr Industrial Park The Department of Community and Economic Development consists of three divisions including Community Development, Economic Development and Planning. In addition to the specific responsibilities of each division, the Department also is responsible for a variety of other programssuch as downtown parking management. The Department often serves as a catalyst in coordinating special projects among several departments of City government. The Community Development is primarily responsible for managing the City's annual Community Development Block Grant program. As an entitlement city, Bangor receives approximately $1.2 million dollars which can be used for community development activities which principally benefit low- and moderate -income persons. Major program areas include housing rehabilitation activities, acquisition and clearance of blighted property, a business development loan program, Infrastructure development in the downtown area, waterfront and eligible neighborhoods. Housing rehabilitation activities include the inspection of potential projects, work write-ups, loan underwriting and financial management. Division staff are also involved in other redevelopment and housing activities throughout the City. The Economic Development Division is responsible for a variety of development activities ranging from business retention and attraction programs to property management responsibilities at Bangor International Airport. This includes responding to inquiries by local and out-of-town companies, preparing and distributing demographic and economic data to various parties, developing the City's marketing program, and interacting with other development entities at the local, regional and state levels. The Division provides staffing for sanAir Corporation, a non-profit development corporation which i responsible for non -aeronautical development at BIA. BanAir activities include managing a business incubator, foreign trade zone, negotiation of building and land leases, and development of busines and industrial parks. 94 -5] -ll - The Planning Division is primarily responsible for long-range planning related to growth and development within the City of Bangor. This includes management of the City's Comprehensive Plan and Land Development Code and the review of development projects such as site plans and subdivisions which are subject to local development regulations. The Department is also responsible for reviewing certain Site Location Permit applications on behalf of the Maine Department of Environmental Protection. In addition, the Department receives federal funds for undertaking transit planning activities for the Bangor Metropolitan area and in association with The BBS. Staff also provides design and technical assistance for services to other divisions and departments within the City. For example, park improvement design services re undertaken and department staff have recently prepared successful grant applications for forestry and trail projects. Department staff have a variety of responsibilities outside the operations of the three divisions. This includes downtown parking policy, administration of private parking management contracts, and provision of staff support to Bangor Center Management Corporation. Department staff also provides support to several commissions, committees, and sub -committees including the Bangor Planning Board and the Bangor Economic Development Advisory Commission. Recommendations: 1. In reviewing this Department, the Commission supports the general approach which has been taken which provides a care staff of City employees who frequently contract with and use outside expertise. This allows staff of the Department to be held at a lower level while allowing for the necessary expertise in such a s property appraisals, architectural and engineering services and the development and implementation of marketing materials and programa. 2. The Commission recommends that some additional services be looked at for the potential of privatisation. This would include legal services for loan and lease closings associated either with the City's Community Development Block Grant Program or its leasing activities both for the City and Bannir corporation; consideration should also be given to contracting for real estate broker services for marketing property at Bangor International Airport and Banhir Industrial Park. This latter recommendation has been under review for soma time by City staff, and we anticipate that a more complete discussion of this issue will come forward to the City Council in the near future. -18- DEPARTMRNT: PAWING FUND Currently Privatized Functions: 94-5] The Parking Fund is responsible for the operation of the Pickering Square Parking Garage, surface parking lots, on -street parking and leased parking spaces. Included within those responsibilities is the enforcement of the City's parking ordinances. The management of the fund is split between Economic Development (non -enforcement operations) and the Police Department (enforcement operations). no FY94 Parking Fund budget relies upon a General Fund subsidy of $4785,881 to balance its budget. This amount is moat of the $692,782 M4 debt service payments. As the city refunds the 1989 and 1990 debt issue, interest savings will be realized which will reduce the debt service and subsidy required. The Parking Fund contracts for the management and operation of the Pickering Square Garage and the Abbott Square Parking Det (surface lot). These contracts have proven to be cost effective and efficient. They have provided controls over operating casts and revenue collections, but do not Impact debt service oats. Given the positive impact of these contracts, they will be continued. Enforcement of parking ordinances is provided through the Police Department Parking Enforcement Division. This unit employs City staffers who are not police officers. They have the authority to issue tickets, and the division pursues ticket collections, which includes towing and booting vehicles. Areae of Possible Privatization: The City has been contacted concerning a private contract for ticket collection. The current collection rate is approximately 788, with the City retaining all amounts collected. At a 208 retainage, a private contractor would have to collect 1008 of tickets issued to increase City collection to the maxvsum 808 -- an increase of 28 over current activities. Past Privatization Opportunities: In 1991 the City was approached by a Privatization International, Inc. which proposed a 20 year lease of the Pickering Square Garage and a payment of $1.5 million to the City. The City would remain responsible for the debt service, constructing the retail apace planned at the garage and guaranteeing retail apace rental for the private contractor for a period of time, and providing revenues from surface lots to the private contractor for a period of tisse as well. The City Council refused to the deal because aside from the transfer of existing revenues and guarantees required by the contractor, the estimated revenue stream was based upon an increase in the parking rates which the Council would not support. -19- Recommendation: 94-5] Given past efforts in this area, the Commission believes that appropriate privatization has been accomplished and that additional efforts are not feasible at this time. We would reference, however, the earlier recommendation in regard to the Police Department that outstanding parking tickets be referred to a collection agency. 94-5) -20 - DEPARTMENT: ADMINISTRATION DEPARTHSHT Currently Privatized Functions: Legal services relating to certain labor relations issues; employee assistance program Discussion: The Administration Department comprises six divisions plus the City Manager's Office. These divisions are: Human Resources, Purchasing, Central Services, Information Services, Motor Pool, and The Bus. In addition, the Director of Administration provides labor/management (collective bargaining) services. In 1991, a review committee was formed to discuss the privatization of the Motor Pool. Upon completion of the review, the City Council rejected the proposals received and maintained City management of the facility. Since that time, a change in the supervision of the facility and cooperative efforts between the new supervisor,employees of the division, and user divisions has led to Improvements and improved efficiencies in this operation. The Department of Transportation's Private Enterprise Participation Rule requires the periodic solicitation of private carrier services for routes and schedules provided by The Bus. The U.S. Department of labor Rule 13C, however, prohibits any grant project which would adversely affect current employees of The Bus o Eastern Transportation. For example, operation of The Bus could not be shifted to another employer who mould pay lower wages or benefits in order to reduce operating coats. Further, a successful proposer would be required to use the existing equipment purchased with federal participation. Therefore, while there is a requirement for soliciting privatization, the practical application of these Department of Labor rules would preclude savings being realized. During prior budgets, the Central Services Division was reduced by one person, and a change was made to desk top publishing. Comparisons of unit coats have demonstrated that Central Services is able to provide service to the City at lower coats than use of the private sector. Collective Bargaining, including negotiation and administration of labor contracts, is a function performed by the Director of Administration. while this service could be contracted out, the cost of hiring someone to perform these services would outweigh the cost of having this function on staff. In addition, a staff member would still be required to handle post -negotiation administration of labor contracts and to work with the City's various staff members in complying with these contracts. The Human Resources Division is responsible for City wide recruitment and employee selection, affirmative action and equal employment opportunity, wage and compensation issues, pay plan administration, and employee assistance and referral services. The City contracted for the preparation of its pay plan, and currently contracts for the employee assistance program. The City has also recently contracted with an outside consultant for review of its facilities for compliance with the Americana with Disabilities Act. 94-5] -21- purchasing prepares, analyzes, and reconsmends purchasing awards based on quotes, proposals and bide; processes regular and limited purchase orders; administers contract negotiations, awards and management; oversees s certain construction project administration; and is responsible for City Nall operation and maintenance. Information Services operates and maintains the city-wide computer system; provides user support including program creation and modification; prints tax, water and sewer bills, payroll and accounts payable checks, 1099s and W -2s, and other tax forms; and processes internal financial reports. Recommendations; 1. Based on comments from a variety of sources, it is apparent that the City's current payroll system is outdated, difficult to operate, and requires considerable staff time on a routine basis. Strong consideration should be given to either contracting with a service bureau for the preparation of payroll or purchasing a new payroll system from a private vendor. 2. As a follow on to the previous recommendation, it is also apparent that there exists a need to update the City's overall financial software. The City does not have nor should it acquire an enlarged level of in-house staffing which would be necessary in order to revise and/or develop new software. The Commission strongly recomends that current efforts at investigating the purchase of software from the private sector be continued and that the City generally avoid efforts at developing and/or doing major modifications to its own software. 3. The City should maintain and continue to contract for the existing employee assistance program. 94-57 _z2_ DEPARTMENT: CITY NURSING FACILITY Currently Privatized Functions: Contract for medical director; consulting dietician; consulting social worker; consulting pharmacist; speech/occupational therapist, as needed; and contracted laundry service Areas for Possible Privatization: Entire facility Discussion: In 1991, a private consulting firm, Ernst s Young, completed a report on the Bangor City Nursing Facility. The purpose of the report was to identify opportunities to reduce the Facility's operating costs. Four privatization alternatives for the Facility were presented in the report. The first option involved establishing a nonprofit organization to &same the Facility's responsibilities. By transferring the Facility to a newly established nonprofit organization, the Facility could potentially reduce certain staff and benefits costs. The second option involved Belling the Facility. The consultants indicated that the value of the Facility's operating license could potentially be valued at $500,000 or more and the proceeds from the sale could be used to recover past operating deficits. The third option was to enter into a joint venture with an outside organization. This option would allow non -City capital to be introduced to the Facility. However, under this option the City could potentially lose some control over the operation. The fourth option was to close the Facility. However, the report stated that closure of the Facility would require a Certificate of Need approval from the Maine Department Of Human Services. The report further explained that this approval was unlikely due to the medical bed apace needed in the Bangor area. In addition to outlining privatization alternatives, this report also identified other steps which the City might take to reduce General Fund subsidies to the Facility. This included expansion of the Facility'sla and programming options. After review of the report, the City Council opted to expand the size of the Facility. Five additional beds were added in FY1993, and another five were planned for FY1995. Due to State budget problems, the number of nursing beds is frozen, and the State is looking to reduce the number of beds by 800. The State is looking for a voluntary change from nursing home to boarding home beds or the outright removal of beds. Recommendations: The assumptions on which the Ernst s Young report were based have changed. The state is attempting to limit and then reduce the number of nursing home beds to address its budgetary problems. Further, the State has levied a 78 gross receipts tax, which is not fully funded by the State reimbursement rate. 94-5] -23- Given the situation with state and federal regulations and the extent to which the Mursing Facility is dependent on Medicaid, we believe continued direct public operation of this Facility may represent an unacceptable financial risk in that it is all too likely the general taxpayer will again be called upon to subsidize this Facility. This is further emphasized by the current uncertainty surrounding health care issues. In addition, the size of the Facility also makes it unlikely that space will be available when needed or desired by any individual Hangar resident. As such, it is a limited service not available to all which eventually may be subsidized by all. The Commission recommends that the following options be once again reviewetl: 1. sale of the City's license; 2. A management contract; and 3. Leasing of the Facility. 94 -5] DEPARTMENT: FINANCE Currently Privatised Functions: Annual external audit, presorting of City mail, courier service for bank deposits, account reconciliation services, tracking of outstanding checks, Workers' Compensation administration. The Finance Department operates through four divisions: Auditing, Treasury, Workers' Compensation, and Insurance. The Auditing Division is responsible for payroll, accounting, accounts payable and receivable, financial reporting, bank statement reconciliation, and external audits. Treasury handles taxes and sewer receivables and payments, auto excise tax and registrations, boat excise tax, and boat and ATV registrations, miscellaneous accounts receivable, parking permits, deposits, and payroll tax payments and federal tax reporting. Workers' Compensation administers the City's self-funded and self-administered Workers' Compensation program including claims administration, light duty program, establishment of reserves and evaluation of loss runs, and settlement of claims. The Insurance Division administers the City's insurance policies covering general liability, public official liability, property coverage, fleet insurance, airport liability, police and ambulance liability, and special events coverage. Discussion: As can be seen, some significant areas of the Finance Department have already been privatised or are using private services. Recommendation: We believe that the Finance Department has used appropriate privatization in the past and would urge them to continue these programs in the future. We would also recommend that once the City's Workers' Compensation liabilities are fully funded, consideration be given to contracting for full third party administration of the City's Workers' Compensation program. -25- InaIJ 94-5] Currently Privatized Functions: The Assessing Department Currently contracts for private appraisals of certain properties, particularly when those properties are involved in an abatement review. The Legal Department currently contracts for outside legal assistance in a number of areas Including; airport issues, sewer Issues, bond counsel, Workers' Compensation, and labor relations. Discussion: The Governance Department is comprised of those divisions of the City which report to individuals who are appointed directly by the City Council including: Assessing, City Clerk, and Legal. The Assessing Department currently contracts for private appraisals of certain properties, particularly commercial properties involved in abatement appeals. The Legal Department contracts for a variety of legal assistance depending on the circumstances and the issue. On a more or less continuing basis, the City has utilized outside legal assistance in regard to airport and sewer issues, bond counsel, Workers' Compensation and labor relations. The City Clerk's Office has been involved for a number of years in discussions with the Greater Bangor Humane Society regarding the possibility of combining a anal pound operations. The Humane Society has been approached with the concept of the City contracting with them for kenneling and care services. In order to do this, the Humane Society would be required to expand its current facilities. The Humane Society is currently considering this approach; however, the Humane Society has not moved very rapidly in evaluating alternatives. Recommendations: 1. The City Clerk's Office should continue to pursue the option of combining animal pound services with the Bangor Humane Society. 2. The City Solicitor has recommended that consideration be given to issuing a request for proposal for outside legal services. The intent of such an approach would be to establish a more long-term relationship with an outside legal firm and to also address some recent changes in Bar Association rules which have strengthened the conflict of interest requirements. One of the requirements of the request for proposal would be that the firm not represent other parties inactions against the City. The Commission recommends that this alternative be closely reviewed by the Legal staff as well as staff of those departments who currently work with outside counsel. While this idea has merit, it must be reviewed from the point of view of the adequacy of current representation and the ability of any single firm to meet the expertise required in all of the varied areas of City activities. 94-5] -26- OTHER RECOMMENDATIONS/COMMENTS In addition to the Information provided above, the Commission would like to offer the following comments and recommendations regarding other areas/functions of the City. 1. Utilization of Assets. The Commission notes that the City has recently completed a full fixed asset inventory, including an inventory of all City property and buildings. The Commission also notes the City's on-going efforts to maximize the utilisation of a number of specific assets ncluding: the miner Building, the Waterworks, and the Armory. We believe this is an appropriate time for the City to survey all of its underutilized assets and develop appropriate disposition plans. we also recommend that the City consider placing assets for disposition under contract with a real estate or brokerage firm. We note the City's traditional prosof issuing "P's is both time consuming and often results in minimal responses. Since land sales e generally market driven and the result of private sector timing decisions, we believe placing some or all of these properties with a private sector firm or £fres may be a more efficient and effective method of disposition. While certain properties may not be suitable for such an approach, we believe a number of the City's holdings may benefit from a more flexible disposition process. 2. Public/Private Partnerships. While much time and attention has been focused on the issue of privatization of functions, the Commission has found a strong history of public/private partnerships in Bangor, particularly in regard to the Airport and Economic Development. The Commission supports these efforts and urges their continuation. In particular, the Commission supports the recent expansion of the Eanxir Corporations functions and would urge further expansion this role in terms of advising Airport Management and the Council on a full range of Airport development and operation issues. Cost Control. In reviewing the City's various Departments, the Commission has been impressed with both the range of functions performed by the City and the professionalism of the staff members we have contacted. While the Commission supports privatization where appropriate, it also finds that there exists no inherent reason for the public sector to not be competitive and effective. In our discussions, two areas of benefit coat concerns were repeatedly mentioned - retirement and Workers' Compensation. The Commission is aware of the City's efforts in these areas and urges management and Council to aggressively continue their efforts to reduce these coats. _27_ CONCLUSION 94-5J The Commission wishes to express its appreciation to the Nembers of the City council and past Council Chair Sohn Bragg for the opportunity to take part in this process. we also wish to thank City staff members who assisted us in this effort.