September 2, 2011

Report critical of light plant spending

By Jesse Roman
Staff writer

PEABODY — The Peabody Municipal Light Plant is a woefully inefficient department that outspends both the school and other city departments on nearly every administrative task, according to a report released this month.

Among the key findings in the report prepared for the city by Financial Advisory Associates Inc.:

  * The light plant's human resources department spends more than $1,000 per employee per year in administration, compared to $298 per employee in the city and $246 per employee in the schools.

  * The light plant is spending about four times as much as the city, or $354 on each employee per year, to process its payrolls.

  * Plant officials spent 480 hours and $39,196 to prepare, present and manage its budget in 2010 — roughly the same amount of time and $6,000 more than city employees used to perform the same task for the entire city budget.

  * The light plant spent about four times as much as the city to process its accounts payable.

  * The plant spent $128,685 on its annual reporting requirements, more than the city spent for all of its annual reporting.

  * The plant spent more money last year on technology support ($153,421) than either the school department ($147,394) or the city ($94,197). The light plant's cost per computer was about 3.5 times more than the city expended last year.

In short, "we have found significant evidence of duplication and inefficiency across most of the business functions we reviewed within the PMLP," wrote the authors of the report. "We strongly recommend that the City help the PMLP to become and behave like a more traditional City department."

Plant Manager William Waters said he was surprised by the report and skeptical about some of its conclusions considering that he had no idea it even existed until he read about it in The Salem News this week.

"The report was basically done without our participation. I don't know how they got the data to reach the conclusions they did," Waters said yesterday. "A couple of staff here had a very brief 30-minute conversation (with the consultant) but they had no conversation with me, and I was never allowed to give any feedback to anything in the report."

Waters said he's called the consultant to inquire about some of the conclusions. He does, however, agree with the premise that the plant could be more efficient.

"We're always interested in looking at ways to improve our efficiencies, and the report brings up some things we should take a look at," he said. "I think the goal is a worthy goal for sure, but the process was a little strange."

Light Plant Commissioner Thomas D'Amato said he didn't receive the report until late this week and hasn't fully digested it, but he finds it hard to believe the plant can be that inefficient considering it has some of the lowest rates and best service in the state.

"As a board member and utility our main focus is on rates and services and those things we do very well, as well as anybody in the state," he said. "Ask your neighbor is Saugus with a similar house what their electric bill is and compare it to yours. ... How can we do what we do so well and be so inefficient?"

Unlike every other city department, the light plant exists largely autonomously, run by a board of commissioners and a manager separate from the rest of city government. Neither the mayor nor City Council have much say over how it is run, or its roughly $65 million budget, according to City Solicitor John Christopher.

Massachusetts law "grants to the manager of a municipal light plant under the direction and control of the Electric Light Commission, broad powers with respect to the operation and management of the plant," Christopher wrote to the City Council in May, in response to questions about whether the council could do anything about the plant's escalating salaries. "In light of the well established precedent ... I necessarily conclude that nothing can be done with respect to light plant salaries."

That autonomy — essentially a separate government within a government — leads to lots of duplication and high costs, especially viewed on a per-employee basis, Financial Advisory Associates said. The high costs are not necessarily the result of mismanagement, the report said, but rather a problem with economy of scale.

"We think this is simply a case of a small organization with a single mission trying to be an entire business organization," the report said. "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."

But it's not just economies of scale that hinder the utility — its costs are also bloated by the high-salaried senior officials in top management, the report said. Six of the top eight wage earners in the city last year — including the top four — were all light plant workers.

As a result, administration costs within the plant are much higher than elsewhere in the city, the report said.

When salary, vacation time and benefits are factored in, the light plant's 11 full-time administrators cost a combined $823 for each hour they work. In the schools, the 17 administrators cost a combined $745 per hour worked, and in the city, the roughly 14 main administrators cost $729 combined for one hour of work. Broken down hourly, PMLP's individual administrators earn on average $67 per hour worked, school administrators earn $44 per hour and city administrators earn $52 per hour worked, the report said.

The city paid Financial Advisory Associates Inc. $12,000 to look at all areas of city government and find efficiencies and savings through collaboration and consolidation. The 147-page report was largely positive, and commended the school and city for working together in a number of areas. In addition to taking more control over the light plant, the authors suggested consolidating the plant, city and school department's human resources. It also recommends that the city take a better inventory of its buildings. But by far, the topic that came up again and again was the plant.

Mayor Michael Bonfanti, a former light plant commissioner, said that the city isn't trying to "take over" the light plant and even admitted that its management was mostly beyond the purview of the city government. He does believe, however, that there are opportunities to work together.

"Over time, (the plant) got its own PR person, HR, IT person, and because of its size that does not necessarily make sense. Some of those things we can share," the mayor said. "I want to see the plant remain an independent city department, but there are some things we can collaborate on."

Peabody comparison

Category                    City     Schools    Plant    total

FTE administrators     13.81    17.19     11.06    42.06

Total salary/benefits  $1.27M  $1.27M  $1.18M  $3.49M

Total hours worked    20,477   28,138  17,505   66,121

Hourly cost                $729      $748     $823    $2,300
September 7, 2011

Letter: Always room for improvement

To the editor:

In response to a recent Salem News article about key findings in a report prepared for the City of Peabody by Financial Advisory Associates Inc., my zeal to defend the light plant, and tout the good work of its employees, led me to make a statement, which, upon second glance, could possibly be construed as less than conciliatory.

For the record, I wish to clarify and expand upon some of the points I made to the staff writer.

While it is certainly no secret that Peabody's own Municipal Light Plant offers its consumers electric rates that are among the lowest in the commonwealth, while providing exemplary, year-round service, as well as storm response that is second to none, I, as a board member, know full well that we have much room for improvement. As you can imagine, the utility business is constantly evolving, and for our plant to be well-positioned to continue moving forward, we need to become leaner and more efficient.

If sharing administrative and finance functions with City Hall can help our plant achieve that end, then I enthusiastically endorse it.

Municipal Light Commissioner
September 23, 2011

Our View: Peabody should consider appointed light board

The cost of Tuesday's preliminary election in Peabody — which drew only 12 percent of the city's registered voters — provides yet another argument for reform of the Municipal Light Commission.

That contest was the only one on the citywide ballot, narrowing the five candidates to four who will appear on the Nov. 8 final election ballot. Obviously, not that many people were interested.

Yet according to Jesse Roman's story in yesterday's paper, taxpayers shelled out almost $40,000 — or $18.70 per ballot cast — to staff all 19 precincts with police and poll wardens from 7 a.m. to 8 p.m. (There was also a primary for the Ward 3 seat on the City Council, but the number of Municipal Light Commission candidates required a citywide vote to eliminate one of them.)

Don't blame the candidates, who ought to be commended for their willingness to run and serve. And don't blame the city clerk who is required to properly staff all polling places when there's a citywide vote.

The same thing would have occurred had there been more than 10 candidates running for the five at-large seats on the City Council.

But unlike with the City Council, which serves as the city's chief legislative body, there's reason to question the need for an elected light commission.

The municipal utility in the town of Danvers next door has a three-member board whose members are appointed by the town manager. If things go wrong — and unlike in Peabody, it's rare that the operations of the Danvers Electric Light Department hit the front pages — the town manager, and by extension the selectmen who appoint him, can be held accountable.

Peabody would do well to adopt the Danvers model. Election to the Peabody Municipal Light Commission is rarely, if ever, determined by a candidate's expertise in power generation or management skills, but more on the basis of his (only one woman, Edite Pedrosa, has served on the board since its last reorganization in 1951, which might be part of the problem) last name, circle of friends or incumbency. For example, the late James "Tex" Paras served on the board from 1954 to 1971, and again from 1974 to 1985; and his son, Tom, has been a member since 2003.

Again, not the candidates' fault, but few people bother to look carefully at the qualifications of those running for this board. The mayor, on the other hand, would have a vested interest in making sure there were qualified people overseeing the operation of the light plant since if service declined or rates soared, he would be held accountable at the next election.

It's something for voters and the next mayor to think about.