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?