What a Bunch of Garbage: Outsourcing Won’t Save City to Fill Deficit
Outsourcing Waste Disposal, Recycling Won’t Save Money as Thought for 2015 Budget, Treasurer Says
A Stevens Point disposal truck. (City-Times photo)
By Brandi Makuski
City leaders have just weeks to determine how to proceed if more than $300,000 in expected 2015 deficits aren’t covered by a new employee insurance plan.
In September Mayor Andrew Halverson said he was “beyond 100% certain” the city can fill the gaps in revenue for next year’s city budget. Halverson said changes with the city’s health plan could make all the difference.
“I think by small moves with our own health insurance plan, which would have almost no impact on our employees, the shortfall can be made with one stroke of a pen- with maybe even several hundred thousand more to save, on top of it,” Halverson said, adding copays could be modified slightly if the city no longer self-funded its employee insurance plan, which costs the city about $2.8 million annually.
Big hopes are pinned to the possible savings of outsourcing health insurance, said City Comptroller-Treasurer Corey Ladick. Last month the city sent RFPs (requests for proposal) to several respective companies to determine outsourcing costs for both health insurance as well as garbage and recycling services. The city’s estimated 2015 budget shortfall comes in at $323,000- down from last month’s figure of $371,000, but only because, according to Ladick, the city saw a slight increase in transportation aid
from the state level.
Ladick and Halverson last month said the city was likely to see a cost savings if garbage and recycling collection were outsourced to a private company. According to city documents, the city paid $379,586 in 2012 and $380,155 in 2013, and budgeted $355,122 in 2014 for garbage costs, which included labor expenses. Ladick said the city was not aware, at least to his knowledge, of how much money the city could save by hiring a private company, but noted there was no expense associated with the RFP process.
It was a bust.
“To be honest, yeah, I was kind of surprised,” Ladick said. “You always think outsourcing and hiring a private business could do something cheaper, but doing this kind of analysis speaks to the efficiency of the city’s operations. We’re actually able to do it for the same cost as a private company.”
Ladick said it’s not likely the city will proceed with outsourcing waste and recycling collection, and while it may speak to the city’s efficiency, Ladick also said that’s part of of the problem- it leaves very little fat to trim from the budget to make up the deficit.
“I think right now, because we took this laser focus to this piece of the budget, we have to take a broader look of the budget to see where we’re going to find the savings.” He says he believes the city’s budget problems should have been taken more seriously sooner, but he did not elaborate by whom.
About six years about the city spent just shy of $900,000 on a four-truck fleet of new garbage trucks. The hydraulic arms on the new trucks were thought to be more efficient and less taxing on workers. To date, the city has spent $400,000 on maintenance and repairs to those hydraulic arms.
Ladick says there’s a system of not preparing for the worst-case scenario that has brought the city to its current financial state.
“It’s easy to get caught up in wishful thinking,” Ladick said. “And that’s the part that’s frustrating for me, because I think that there was a little bit of a reluctance to take our budget situation seriously. We need to get more in the mindset of preparing for the worst, rather than assuming that we’re going to get lucky.”
Halverson was quoted by another local media source as not trusting the validity of Ladick’s math, and while Ladick says it’ not his job to follow along with the mayor’s office, the lack of trust makes his job difficult.
“We’re not always on the same page and we don’t always agree. I think that is not a bad thing because this position in particular is elected for a reason so you have a bit of a check and balance, and a second set of eyes on things, and you have someone a little more independent who can represent a more independent perspective,” Ladick said, adding the city should have “planned this a little farther ahead”.
Now city leaders are waiting for a response from one insurance carrier that Ladick said could “possibly save us a couple hundred thousand”, but said no other company returned a reasonable quote.
City documents show about $300,000 in lost revenue from a combination of state reimbursements and interest from a special assessment which was paid off before 2015, and
Ladick said there’s no one department responsible for the shortfall. But finding funds to make up for it are going to be tough, he said.
“When you abe to come up with savings of some 300k thousands dollars, that’s never going to be easy,” Ladick said. “I know there have been budget issues in the past where the city has had to come up with money, but what you have to understand is that going forward it won’t be as easy to cut as it was before. When you go around the first time, maybe you eliminate some positions,or find a little bit of fat to cut, but then you have a leaner operation when you have to come back and cut again. It’s not fat- now you’re cutting at the meat.”
Ladick said “there’s no plan B” but he’s working with department heads to determine if small cuts to the budget are still an option. But he also pointed out state reimbursement programs aren’t what they used to be.
“We have to accept the future of local government- and the future of local government in Wisconsin is leaner.”
Ladick will present the proposed 2015 to the City Council at the end of October.