New Water Leader Dives In

The Pittsburgh Water and Sewer Authority (PWSA) has just entered into a one-year contract with a private company to provide managerial services for the Authority. The company will be paid a base monthly amount and can earn more money if it finds efficiencies within the system. When the PWSA purchased the water system of the Borough of Millvale in 2009 is was expected to be just the first in a series of purchases as part of what the Mayor of Pittsburgh described as one of the "…unique ways, as government officials, to be efficient".

The management agency now fits into this arrangement: it answers to the seven member board (four appointed by the Mayor); employees participate in the City’s non-uniformed pension plan; the PWSA is seventeen years into a cooperation agreement and system lease in which the one-time City Water Department employees became PWSA employees and PWSA provides 600 million gallons of water to the City without charge and is involved in an arrangement whereby PWSA reimburses the City for keeping the rates of customers in the City’s southern neighborhoods served by other companies the same as if they were PWSA customers.

Looking at the finances of the PWSA (available through 2009) shows that there might be ample opportunity for the management firm to make the bonus money. Here are two. Under "direct operating expenses" the PWSA cost of production in 2009 was $29.1 million: going back to 2001, the cost was $16.6 million. That’s a 74% increase in eight years (about 9% per year). In addition, the payments made to the City of Pittsburgh under the cooperation agreement have grown from $7.1 million to $9.6 million (35%) over that same time frame. Think customers who were just hit with a 5% rate increase would like to see some efficiencies?

Chief Executive Goes to Washington

The Allegheny County Chief Executive participated in a meeting yesterday with other county level officials from around the country as they met with the President and other high ranking Federal officials on the issues pertaining to county services. Since "Federal policy, regulatory and budgetary decisions can have tremendous impacts on county governments" the meeting "was a great opportunity to share our thoughts and positions on a number of critical issues" according to the Executive’s press release.

Infrastructure and air traffic were topics, as was the jail. The Executive raised the Federal regulation that suspends Medicaid benefits after the end of the first month of incarceration, which cost the County $11.3 million in 2010 (the County contracts this service out to Allegheny Correctional Health Services according to the 2010 budget) and the Jail’s budget for 2011 is $55.6 million.

Allegheny County’s jail is one of 69 county jails in Pennsylvania. Some operating statistics from the PA Department of Corrections: in 2009, Allegheny County’s jail "usage" (average in house daily population/bed capacity) was 87%; the statewide average for all county prisons was 83%; its average cost of housing an inmate was $57.04, roughly the middle of the pack for the county prisons in the state; Allegheny was also lower than the statewide average of full-time security per 100 prisoners (based on the average daily population) at 17 to 21. Data from the County Jail’s annual reports shows that the average number of inmates maintained grew 8% from 2005 to 2008.

Short of a major change in Federal policy on Medicaid coverage for incarcerated people, could the County find savings elsewhere at the jail to offset the expense? The sunset review stated "the County contracts halfway house programs, food services, and laundry services. The County could contract additional functions to make the jail a private facility". Note that the review did not specify what the additional functions were. And it is not clear if by the last part of the statement the review the intention was a full privatization of the jail. That idea would likely be quickly dismissed by the public sector unions and their backers.

Principals of Merging

Upon visiting the newly merged Central Valley School District-hailed as the first voluntary merger of independent school districts in the Commonwealth in anyone’s memory-the PA Secretary of Education noted last September that "No one really talks about the wastefulness behind the scenes in schools…Where there’s waste is having seven or eight different people doing payroll in a county when it could be done by one."

Note that the Secretary made the same point at a hearing of the Senate Education Committee a month earlier (a hearing at which the Allegheny Institute testified). So it would be interesting to hear how the Secretary would react to the news this morning that Central Valley High School will have not one, but two, principals: one to handle academic programs and one to handle student programs. The superintendent of the district said that "they do not want to feel, nor do I want to see, a pecking order…they are both principals."

So which principal has the ultimate authority at the district? It won’t be clear until a problem arises. But it is easy to see why merging governmental units is very difficult, especially with powerful public sector unions will resist consolidation and would strongly resist changes that would downsize the workforce. Sounds like a compromise meant to satisfy competing interests. But it certainly is a far cry from the talking points of merger proponents that claim consolidation will go a long way to wiping out duplicative functions (two police chiefs, two fire chiefs, two auditors, etc.). The teachers and administrators in the merged district that did go as a result of the merger took buyouts to leave. Imagine what an organizational chart of larger merged entities would look like.