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)
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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]
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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.
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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
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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]
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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]
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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)
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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]
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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
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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]
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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]
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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)
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.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)
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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..
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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]
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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.
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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.
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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)
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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]
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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]
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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]
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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.
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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.