Cultivating Change

Bob Hyres

How one small town used big business resources to improve community service.

For years, the city of Holly Hill, Fla., faced two significant problems: its tax base had been declining steadily and the majority of its 11,500 residents have moderate to low incomes. The city's administrators realized that these two factors were affecting their ability to maintain quality community services.

To revive its sluggish economy, the city in 1999 devised a growth and development plan focusing on construction projects and community service programs. The city also strived to improve efficiency in local government services, such as solid waste and recycling.

To lower residents' garbage fees, improve collection and free-up funding for community programs targeting "at-risk" youth, the city commission began looking at privatization.

A Willing Gardener Holly Hill was one of the few cities in Volusia County still using city personnel and equipment to provide solid waste collection and recycling services.

When the city decided to privatize these services, it contacted Waste Management's Ormond Beach office. Located approximately 10 miles north of Holly Hill, the branch already was serving the nearby Florida cities of Daytona Beach Shores, Oak Hill, Ormond Beach, Ponce Inlet and South Daytona.

In fact, Waste Management's Ormond Beach representatives had long considered Holly Hill to be a good prospect - even before the city mentioned privatization - because they believed the company's and the municipality's routes were synergistic.

Waste Management said that the equipment and manpower needed to accomplish the city's job could be cut significantly, saving the city money. Further, they said, the company's surrounding service area density and spare equipment allowed for a more consistent delivery of services.

Planting the Seed After considering Waste Management's arguments, Holly Hill officials decided to begin negotiating a contract. Because the city and private contractor's relationship had been developing over several years, negotiations took less than one month.

During several preliminary negotiation meetings, city officials compared Waste Management's rates to existing city rates. They also looked at rates in surrounding cities in Volusia County.

Early in the negotiations, Holly Hill required a franchise fee to be built into the contract to offset administration costs and to provide a future revenue source. In return, the city guaranteed it would pay Waste Management's fees in full once a month to alleviate company concerns about payment collection and bad debt.

The parties eventually agreed to a 10-year contract with a five-year renewal option. The long contract term allowed for cost depreciation of the equipment, which the private contractor had to purchase.

With privatization, however, comes more than just monetary concerns. Once negotiations were completed, the city commission reviewed the contract at a public meeting attended by city solid waste employees, the employees' family members and Waste Management personnel.

City employees expressed concerns about job stability, pension funds and other issues related to Waste Management's non-union operations. However, because Waste Management had heard similar employee concerns at previous privatization negotiations, it was prepared with a response.

The company guaranteed employment for every city solid waste and recycling employee, and presented written wage offers for each employee. Additionally, the company provided a brochure comparing Waste Management's benefits package to the workers' existing benefits. And the city announced a pay-out program for the employees' existing pension plan.

As an example of its benefits, Waste Management presented the case study of a former city employee who joined its company to work for another municipal operation and eventually was promoted from driver to route supervisor.

After the meeting, company representatives also met informally with city employees and employees' family members to further alleviate individual anxieties about privatization.

The Seeds Sprout One week later, the city commission met again to discuss how to involve city employees in the privatization process. The city's solid waste manager also notified the labor union of the meeting, but union representatives did not attend. Convinced that Waste Management would provide reliable service with its existing local infrastructure, by the time the meeting ended, the commission had voted unanimously to award the contract.

Within two weeks, Waste Management began providing solid waste services to Holly Hill residents. Because the company hired many of the city's employees, training was not required because the drivers already were familiar with the routes. Using city employees was especially beneficial to Waste Management because of the state's low unemployment rates and a shortage of trained mechanics, commercial drivers license (CDL)-qualified drivers and other employees.

Bearing Fruit According to Holly Hill, the partnership has yielded many benefits. Almost immediately, residents' garbage fees were reduced, and the city received $500,000 in net proceeds from the sale of unneeded trucks and equipment. Additionally, former city employees who joined Waste Management received the same or higher wages than they had been previously paid by the city. And, because of the company's size, Waste Management contends that employees now have more opportunities for advancement.

More importantly however, with the $500,000 from the sale of its trucks added to debt refinancing funds, Holly Hill was able to build a $1.2 million gymnasium and 62,000-square-foot activity center for at-risk youth. The facilities were constructed on city-owned land adjacent to city hall and are the first phase of Holly Hill's recreation improvement plan.

Although it was implemented at a break-neck pace - progressing from final negotiations to service delivery in only four weeks - this partnership was the product of more than a decade of planning. In fact, the city of Holly Hill and Waste Management agreement recently gained national attention when it received the Outstanding Award for Public/Private Partnerships from the Washington, D.C.-based U.S. Conference of Mayors.

Encouraging privatization is central to Waste Management's government affairs marketing program in Florida. Following are some steps the company's Florida office has taken to promote privatization in the Sunshine state.

- Company management has joined the Florida League of Cities and the Florida Association of Counties to keep abreast of statewide issues.

- The company sponsors annual networking events, including a "Death by Chocolate" dessert function, which last year was attended by more than 1,000 city officials.

- The company uses a press clipping service to track local current events and search for privatization opportunities.

- The company reviews city council agendas to track local governmental developments.

- Company government affairs employees work to develop strong relationships with elected officials to facilitate a dialogue about privatization.

- Company representatives attend council meetings and annual conferences to present privatization's benefits.

- The company advertises in city and county publications prior to annual conferences.

- The company's government affairs office maintains an educational file of privatization efforts, including reprints of news articles, statistics on privatization trends and questions and concerns public officials should consider when evaluating privatization.

Questions: - Will privatization prove to be more efficient?

- Should you privatize all solid waste and recycling services or just certain portions?

- Can the private contractor be held accountable?

- Can a contract do this to your satisfaction?

- How long should the contract term be?

- Do you have a reputable and financially stable contractor available?

- Can you eliminate current and future debt?

- Will this provide access to new capital?

- How will this affect the public entity's liability?

Concerns: - What will happen to the public employees?

- Are there ethical and legal considerations?

- Will employees oppose privatization and, if so, how strongly?

- What's the public opinion of the change and the public vs. private?

- Are there service concerns?

- Will the same level of service be provided?

- Could work interruptions cause service stoppage?

- Can the public entity take back service if necessary, once all the equipment is sold and the employees are gone?