Wednesday May 16, 2012
Options range from closer cooperation to consolidation
of Louisville Water, MSD
There are numerous opportunities for Louisville Water Company and the Metropolitan Sewer District to more closely collaborate — and potentially consolidate — that would result in significant savings and improved operations and efficiencies, according to a report delivered today to Mayor Greg Fischer.
Fischer formed the task force in January after the changes he initiated at MSD following a state audit that found significant management problems ranging from conflicts of interest to questionable business practices.
The Louisville Utility and Public Works Advisory Group has spent the past five months working with Black & Veatch, a national engineering consulting group, to identify potential synergies between Louisville Metro Public Works, MSD and Louisville Water.
The Advisory Group offered a phased approach for cost savings that includes joint operating agreements with the three agencies — such as purchasing and fleet/vehicle management — to a complete consolidation between Louisville Water and MSD.
Public Works — which handles everything from garbage and recycling pickup to snow removal and road paving — is not a candidate for consolidation, but is a candidate for numerous partnering activities that could reduce Public Works cost of operations.
After full implementation of partnerships with the three agencies and potentially combining Louisville Water and MSD, savings range from $14 million to $24 million annually.
Fischer said he would spend up to 60 days studying the findings, discussing the possibilities with citizens, civic and political leaders and the boards and management of MSD and Louisville Water.
“This is an exciting opportunity for operational efficiency and the maximum financial return for our citizens,” Fischer said. “The ultimate goal is to deliver to our citizens stronger, leaner and more efficient public utilities.”
Fischer acknowledged that much work lies ahead, especially if MSD and Louisville Water were to consolidate, including questions of how the two separate boards would operate and how management would be structured. There are also questions to consider about the two agencies’ assets and liabilities and how they would be structured in a new entity.
“From a business perspective, consolidation, which would occur incrementally over many years, appears to be the best option but that there are many steps to that goal,” Fischer said. “I need a full understanding of all risks associated with consolidation before recommending that course”.
Structured properly, a combined water and sewer company should better serve customers, Fischer said.
“Many cities around the country and the world already operate combined water and sewer works,” he said. “We will evaluate the global best practices before a final course is selected.”
Fischer thanked the task force for its detailed work, which he said lays a good foundation for the future.
The task force members are:
· John Huber, served for 16 years as president of the Water Company, with expertise in utility management. Huber will be chairing the task force;
· Wendell Wright, retired from Qk4 engineering firm and the former Director of Jefferson County Public Works and former Chief of Operations for the Jefferson County Judge/Executive. He brings expertise in government, Public Works, the environment and development;
· Pete Mahurin, chairman of Hilliard Lyons, with expertise in finance;
· Al Cornish, vice president at Norton Healthcare and former vice chairman of The District of Columbia Water and Sewer Authority.
· Joe Wise, business manager at Greater Louisville Building & Construction Trades Council, with expertise in labor issues;
· Scott Brinkman, former State Representative and an attorney, with expertise in mergers and acquisitions;
· Diane Cornwell, founder of StarFish Consulting, with expertise in auditing and business and tax issues. She also spent 23 years with Arthur Andersen where she was a tax partner.
The Louisville Utility and Public Works Advisory Group includes seven members, appointed by Mayor Fischer on January 12. The group’s purpose was to evaluate synergies with MSD, Louisville Water and Metro Public Works and identify opportunities for partnerships and cost savings. The Advisory Group has held 10 public meetings and reviewed a series of presentations from Black and Veatch. The consulting group researched and benchmarked data, interviewed staff of Louisville Water, MSD and Metro Public Works and made a series of observations and presentations to the Advisory Group.