Beyond the BIG DEAL

They have been publicized primarily in big-city, big-money ventures, yet public-private partnerships are proving useful in communities and projects of all sizes.

In the United States, public-private partnerships have a history older than the country itself. There are examples of such ventures predating the American Revolution, and one of the country’s earliest – and greatest – public-private partnerships produced the Trans-Continental Railroad. Still, the public-private partnership is widely regarded as a modern concept, coming of age only recently with the advent of the 20-year contract.

A water or wastewater contract saving a city hundreds of millions of dollars attracts wide attention. So, too, does a major urban rail system or an inter-city turnpike funded with private capital. Each of those projects captures the historical spirit of the public-private partnership – to combine resources for the achievement of a common good – yet, as a group, they do not sum up the possibilities for partnering.

In other words, public-private partnerships do not necessarily refer to utilities or transportation. In fact, today’s partnerships address a wide array of public needs, and local governments of all sizes are finding ways to benefit from them.

San Mateo County, Calif. In 1996, San Mateo County, Calif., began examining public-private partnerships as a means of standardizing and managing its emergency medical services. With a population of 676,000, the county comprises 20 cities, and emergency medical services varied across jurisdictions.

At the time, a couple of the municipalities had full paramedic services, which were affiliated with their fire departments. Others had licensed emergency medical technicians in their fire departments, and the county’s ambulance service provided additional licensed paramedics. However, response times often were inadequate, the level of medical care was sometimes substandard, and coordination between jurisdictions was difficult. The fragmented system meant that the quality of pre-hospital care could vary widely from one community to another.

To address the problem, several city managers and fire chiefs organized a working group and ultimately formed a Joint Powers Authority (JPA) under provisions of the California Government Code. The group’s goal was to bring consistency to countywide EMS by establishing uniform levels of service, standards of training, and ways of addressing personnel and equipment shortages.

The JPA formed a partnership with Burlingame, Calif.-based American Medical Response West (AMR), which already provided ambulance services for the county. Under the terms of the agreement, the public fire agencies provide first-response paramedics; the private partner provides a second medic via ambulance, and it provides all medical supplies, equipment, training and clinical oversight for public and private medics.

San Mateo County’s Office of Emergency Medical Services (EMS) oversees the emergency response program, which was officially launched in December 1998. It provides centralized communications for all fire and medical activities, regardless of jurisdiction. As a result, it is able to dispatch the closest available fire engine and fill the resulting vacancy with an engine from another jurisdiction.

The JPA and AMR have agreed to operate on a performance-based contract with EMS. The fire departments, or first responders, are required to reach the scene of an emergency within seven minutes of dispatch, and the second paramedic, provided by the private partner, is subject to another time limit. If either of the partners fails to respond on time, it is fined.

Furthermore, the private partner has agreed to share its revenue with the public fire agencies, making monthly payments to compensate them for providing first-response services. Without that assistance – which exceeded $3.6 million in 1999 – several cities and some of the unincorporated areas of the county could not provide an adequate level of service.

Since the program’s inception, San Mateo County has increased the number of licensed and certified paramedics from approximately 60 to more than 220. In nearly 98 percent of emergencies, fire department paramedics are responding on time; and, in 95 percent, private paramedics are meeting their time limits.

District of Columbia Cost savings and improved services are the benefits most often cited by local governments that opt to partner with private entities. Washington, D.C., got both when partnerships involving parking and stop light surveillance boosted revenue and enhanced traffic enforcement.

The first of the partnerships addressed the District’s parking meters, which, for years, fell under the jurisdiction of the District of Columbia Metropolitan Police Department (DCMPD). The operation was not cost effective because vandalism, high maintenance costs and losses during the collection process cut into revenue. To make matters worse, nearly one-third of the meters was stolen, leaving a significant number of parking spaces free to users.

That began to change when DCMPD entered into a partnership with Washington, D.C.-based Lockheed Martin IMS. Under the terms of the agreement, the company provided new meters that are more vandal-proof than the old ones and include high-tech components to verify cash collections. The company covers all capital costs and maintenance, and provides personnel for collection and administration. It is paid a percentage of collected revenue, and the city retains the remainder.

By privatizing its parking meter maintenance and collection, the District has eliminated many of its costs, and meter revenues have jumped from less than $200,000 per month to at least $1 million per month. (Under the contract, the city is guaranteed $1 million or a fixed percentage of the revenue, whichever is higher.)

In addition to privatizing its parking meter operations, the DCMPD has entered into a partnership for the use of photo surveillance at stop lights. Begun in March 1999, the program was designed to reduce the number of drivers running red lights and to lower resulting fatalities. (Between 1992 and 1998, red light running resulted in 26 fatalities in Washington, D.C.)

Again, the partnership relies on the private sector provider – Lockheed Martin IMS – to cover capital expenses, including camera and underground sensor installation. The company maintains the equipment, administers fines and collection, and is paid a percentage of the fines it collects. In the first four months of operation, the company installed 39 cameras and collected more than $6 million in fines. (Another 20 cameras are being installed.) The city reports that red-light violations at intersections with cameras have dropped an average of 47 percent.

Monmouth, Ill. While many people presume that public-private partnerships benefit only the largest localities, Monmouth, Ill. (population 10,000), proves them wrong. There, the city had privatized its water and wastewater operations, and, bolstered by that success – improved service, compliance with environmental regulations and cost savings – local officials decided to privatize the city’s public works program.

In 1998, St. Louis-based Environmental Management Corp. (EMC) took over operation of Monmouth’s public works functions, including street maintenance, water/wastewater services, garbage collection and billing. The city maintains ownership of all equipment and facilities, and it retains control over water and sewer rates.

In a move that boosted public support for the venture, the city transferred all of its public works employees to EMC. Salaries and benefits were transferred intact, and the workforce was not reduced. Payroll costs are passed on to the city, but Monmouth is still saving money through the partnership. For example, the company is able to purchase in larger bulk than the city, achieving economies of scale; and centralization has resulted in improved workplace efficiency and financial management. As a result, Monmouth’s public works costs were reduced $260,000 in 1998 and $300,000 in 1999.

Keys for success A common denominator of all successful public-private partnerships is creativity and a willingness to harness the strengths of both sectors. Additionally, there are four keys to making the partnership work.

Statutory authority. There should be clear authorization for the creation of the partnership, and elected officials should express their support for the venture publicly.

Organizational structure. Within the public sector, an individual who has specific responsibility for oversight of the partners should be named.

Detailed business plan. The goals and objectives, as well as the specifics of operations – who does what, and when? – should be spelled out in detail. Furthermore, all those details should be included in the contract, and the contract should include provisions for negotiating the unexpected.

Stakeholder support. Everyone needs to be fully informed about the intent and the formation of the partnership. The general public, users of the service, public employees and their union representatives should be engaged in discussions. Inclusion is critical in eliminating misconceptions and the fear of change.

Contract allows Dallas to augment sewer crews The summer was shaping up to be a long one for Dallas’ Wastewater Collection Division (WCD). One week, the city discovered a partially collapsed sewer main in the heart of downtown. A few days later and six miles to the east, inspectors determined that a fuel leak in an underground storage tank posed an immediate threat to a deteriorated sanitary sewer line.

Typically, the city might need weeks – even months – to repair the 36-inch sewer main and the 8-inch line. However, through the use of an undefined work contract, the WCD was able to complete the repairs in fewer than two weeks.

An undefined work contract (also known as a “term” or “annual supply” contract) aids cities and counties that hire contractors for work done on a regular – but unpredictable – basis. For example, it often is used for sewer and street repairs, painting and other maintenance needs.

The contract is bid competitively, requiring the contractor to provide the customer with a menu of services and corresponding prices. By knowing the costs up front, the customer can determine when it is most cost-effective to use the contract, and it can better budget for the work. Additionally, the undefined work contract eliminates the need to bid every maintenance or repair project.

In Dallas, contract pricing and staffing has proven particularly valuable because, with 4,000 miles of aging sewers to maintain, the WCD’s workload can shift unexpectedly. “With a wastewater system the size of ours, we never know what we’ll be faced with in routine inspections,” says Zachary Peoples, interim assistant director for the division. He notes that 25 to 30 percent of Dallas’ system is 50 years or older.

Through its undefined work contract with Chesterfield, Mo.-based Insituform Technologies, the WCD is able to augment its 230-person workforce. Division staffers target sites for inspection, and, when a problem is discovered, repair work is assigned to in-house crews or to the third-party crews. At a cost of $800,000 per year, the contract covers preventive maintenance and emergency repair services. The WCD has similar contracts with other companies for video inspection of pipelines, root control and line cleaning.

The WCD has used undefined work contracts for more than a decade and plans to continue using them. According to Peoples, the partial privatization has helped Dallas improve maintenance efficiency and meet an EPA mandate to reduce inflow and infiltration in its sewers.