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The cost calculus has changed for the Milwaukee Metropolitan Sewerage District (MMSD) when it considers whether to continue outsourcing its wastewater treatment operations.
But other risks related to staffing and economic factors have mounted. And additional considerations may prove more difficult to quantify but nonetheless will factor significantly into the decision.
MMSD was considered a national pioneer in the privatization of public sector services when it entered into a contract with United Water Services to operate the district’s sewers and two treatment plants in 1998. Two successive 10-year contracts with Veolia Water Milwaukee followed.
A 2011 Wisconsin Policy Forum report provided a favorable assessment of MMSD’s privatized framework. Now a new Forum report, commissioned by MMSD leaders, provides an independent, early look at the pros and cons of continuing to outsource as the district mulls its wastewater treatment operational options before its contract expires in 2028.
The new report finds that continued economic turbulence linked to factors such as high inflation and an historically tight labor market may call into question whether the timing would be right for MMSD to discontinue outsourcing most operations. The ability of senior MMSD leaders to focus on big-picture objectives, such as environmental goals, might also be compromised by such a move.
However, under the current 10-year contract with Veolia, a projected profit margin is established for the company, which had not been delineated in the previous contract. Eliminating this profit margin represents a potential financial benefit for MMSD.
The growing frequency of contractual disputes also is a point of concern with the current arrangement, the report notes. Another tradeoff for MMSD is that it must cede some authority over operational decision-making, including wastewater treatment processes that impact water quality. Disagreements about such matters between MMSD and Veolia officials have become more frequent in recent years.
While science is at the core of MMSD wastewater treatment operations, our research finds the decision on whether to take back those operations will extend beyond scientific or fiscal considerations. Instead, MMSD leaders will need to account for murkier issues involving risk, managerial capacity and priorities, and the district’s vision for the future.
This information is a service of the Wisconsin Policy Forum, the state’s leading resource for nonpartisan state and local government research and civic education. Learn more at wispolicyforum.org.
