Light Plant Manager Questions Accuracy of Consolidation Study

The City Council is set to review a controversial new feasibility study aimed at helping the city save money through the consolidation of some departments and services.

The study, performed by an independent consultant — Financial Advisory Associates, Inc. of Buzzard's Bay, examined the city’s three major areas of municipal functions: , the and , with an eye on combining duplicative services to save some money in tough economic times.

PMLP is highlighted throughout the report as a major area for potential savings despite the fact that it offers its utility customers some of the lowest rates in Massachusetts. The light plant operates as a largely autonomous municipal entity, answering to a board of publicly elected commissioners rather than the mayor or the City Council.

"We have found significant evidence of duplication and inefficiency across most of the business functions we reviewed within the PMLP. We think this is simply a case of a small organization with a single mission trying to be an entire business organization," wrote the authors of the report.

"This group seems to get their vital mission done well. We suggest it could do even more for its customers if it focused on the delivery of services to users and let the bigger, more robust city organization handle the administrative and finance functions," the report concluded, suggesting collaboration or consolidation in several areas.

Receiving particular scrutiny were the plant's expenses (compared to the city's) on administrative and financial tasks, such as human resources functions, payroll, purchasing and reporting, and which were also critiqued for involving too many internal steps. At the same time, the study commends PMLP for looking into updating it's financial system software.

The study found that PMLP’s estimated current human resources cost is more than $1,000 per employee — three times what the city spends. If all three human resource departments were combined, however, the net cost is estimated at $298 per employee.

Similar high costs were revealed on payroll processing, preparing and managing budgets, processing accounts payable, annual reporting and technology support. Additionally, most of the highest paid city administrators work at PMLP.

The study showed that plant management staff costs the city an average of $67 an hour, while school administrators on average cost $44 an hour and general government staff costs $52 per hour.

Plant manager William Waters, however, argues the report is fundamentally flawed in the way it was conducted, and questions the findings contained within.

According to Waters, the consultants never contacted him or his staff with anything other than “rudimentary” questions, and he was never asked to provide any financial documentation during the process.

“Basically we just question the results in the study because we don’t know how they got their information,” he said. “We weren’t asked to participate in the study. I didn’t even know about the study until it was already released. Then I am looking at it and they have somehow decided how I use my time, how much time I have and how much time my staff has.”

Waters says he has placed a call to a consultant at the firm to discuss where the information came from, but has not heard back.

“I find it rather disappointing that we were not given an opportunity to participate in the study,” he said. “They called my staff and asked very rudimentary questions. I mean very rudimentary, like: ‘How many computers do you have’ and the next thing I know there is this study saying we need to consolidate IT.”

While he is opposed to the way the study was conducted, as well as its findings, Waters says he fully supports the city in its effort to save money through consolidation, something that has been discussed at the highest levels of City Hall for years.

“I’m not closed minded to anything that will improve the way our operation works, especially from the financial side of it — that would be foolish,” he said. “We are a fairly unique business that has unique needs and I think it is a worthy goal to look at how we can improve things. I, again, just do not agree with the way they went about this study.”

Among the recommendations for the city were the combination of services in human resources, accounting and information technology all under the roof of City Hall. As it stands now, each of the three departments handles these tasks independently.

Other departments mentioned as possible solutions were payroll, purchasing, budgeting and reporting.

The study states a goal of bringing all of these services to one location to cut down on cost and to streamline the effect that each has on the city. For example, by combining human resources to one office, the study suggests the city will be able to better handle the hiring of new employees with more consistent job descriptions and selection process. The same can be said for payroll and accounting departments where, in theory, the consolidation would allow for more fluid bookkeeping.

Some other recommendations mentioned were the creation of a citywide facilities maintenance department, using licensed professionals to evaluate the condition of existing city buildings and then develop a capital plan, decentralizing accounts payable and payroll efforts within the School Department and having PMLP expore creating an energy efficient equipment replacement subsidy program for its customers.

The report did commend the city for existing collaborative efforts between City Hall and the schools and the .

The report also noted that based on 20 similarly-sized public school districts, Peabody was sixth among the group in spending per pupil and 13th in administrative spending in FY 2010.

Councilor-at-Large David Gravel, who will head the Ad Hoc committee charged with reviewing the study, was cautious when speaking about its effectiveness, noting only that he and his colleagues would have a lot to review and discuss before adopting any of the recommendations in the report.

“The approach was a lot different than the approach that I think I would have taken, but you have to step back and look at it from an outside perspective and try to see if there is any possible synergy there (between the departments),” Gravel said. “It is an interesting report, and I think they may have hit some targets with the light plant over there, but we will look at it more closely at the subcommittee meeting and see if there are any recommendations that we can make.”

Gravel says he expects the council to meet later this month to review the report, and says he hopes to have the recommendations, if there are any, ready to present to the city’s new mayor after the first of the year.

“This is actually a good year to do something like this, the timing works out really well with the election,” he said. “Usually you get something like this and you are under the gun to present something because you don’t have much time. But this way we will look at it in September, meet through October, then there is the election, and we can have something well thought out to present to the new mayor next year.”