Seventeen million dollars. That is the savings that can be achieved over the next seven years if Newport Beach contracts out its trash collection service. That's a lot of money, too much to be dismissed, and it could be put to good use providing community infrastructure to keep Newport Beach in top shape.
However, while $17 million in cost savings is highly significant, it is our view that contracting should only be undertaken if we can guarantee that service will remain at the same high level or even be improved. We now believe that can be achieved.
It is important to note that Newport Beach is the only Orange County city that picks up trash with municipal employees, and one of very few that does not charge for trash collection. The municipal code prohibits charging residents for trash collection, and this cannot be changed without a vote of the people. Contracting the service to a private vendor will not change that in any way.
There are compelling reasons to consider outsourcing trash collection. One big reason is that so much of Newport Beach already has outsourced trash collection. Newport Coast, Newport Ridge, Crystal Cove, Belcourt, Bonita Canyon, Bay Knolls, the area west of Irvine Avenue near the Upper Bay, and East and West Santa Ana Heights all have been served by private refuse collection providers for many years.
Our customer satisfaction surveys show the service level in these places is equal to the service provided by the city's crews. Even places like Laguna Beach, with its challenging hillsides, trees, and narrow streets and alleyways, have privatized and automated trash service.
When the decision was made to consider outsourcing trash collection, we followed a methodical process to evaluate service options and to measure actual costs and potential savings. We want an apples-to-apples comparison and no surprises. We talked with residents, neighboring cities and our employees. An outside expert with no ties to the city or the industry was brought in to ensure that we were accurately measuring our costs and to ensure that we did not create any loopholes or diminish services through this process.
The request for proposals (RFP) asked all proposers to submit a plan to collect trash identically to what our residents have now, including continuing to pick up everything you leave at your curb, canned or not. Plus, for those interested, we would offer several new enhancements. You can have the number and size of cans you wish, small, medium or large, at no cost. Many residents have expressed a desire to more actively recycle. Those residents could request additional cans to separate waste. These additional cans would also be free. However, no one would be required to separate their trash and recyclables.
The RFP elicited seven proposals with the lowest cost proposing $17 million in savings, (or about $2.4 million a year in lower costs) over the seven-year period of the contract. Our trash-collection employees were asked to participate in this process and submitted a proposal. While non-responsive to some of the requirements of the RFP, a comparison of their proposal to the others places them second highest in cost.
Many residents have commented on the high level of service provided by "their" trash route operators. Unlike some places, we appreciate the great service of our employees and we are proud of the work that they do.
What you might not realize is that we are down in the number of employees from 25 to only 16, with two of them on workmen's comp disability. This has resulted in extensive overtime charges: 515 hours in the past 60 days. Were we to keep the service in-house, we would be required to fill several positions with new employees or part-timers, with 10 of the 16 workers becoming eligible for retirement within three years.
All proposers are required to interview and offer employment to qualified city employees wishing to transfer. In addition, we have identified other jobs within the city for some displaced employees. In a few cases, our staff will be able to retire from the city and take a job with the new company — drawing both a pension and a salary. All of our employees will still be vested in the city's pension system, given their years of service.
The savings from contracting out comes from many sources. We would reduce our operating costs as well as long-term pension and benefit obligations. We could sell our existing vehicle fleet for $1.5 million, which would otherwise need to be replaced at a cost of over $250,000 per vehicle for more than 10 vehicles. We could also then release our $4.3-million vehicle replacement reserve and use this cash for other needed community enhancements. The private provider would pay the city to use our transfer station.
Seventeen million dollars is enough to operate our award-winning library system for two and a half years. It operates our Recreation and Senior Services Department for 22 months. It is nearly equal to the cost of our police patrol operations. In enables us to get a jump start on the needed community facility and beautification enhancements for the Peninsula and Westside of our city, while allowing us to continue to operate our city more effectively.
We expect our employees and their union representatives to continue their aggressive campaign to convince you to keep the status quo. They have been engaged in this for some time now — without benefit of any comparative cost numbers.
But by their own proposal, they are substantially more costly. The savings from contracting are real, compelling and vital if we are to keep our city efficient and well run, while continuing to provide the highest levels of service.
KEITH D. CURRY is the mayor of Newport Beach. MICHAEL F. HENN is a councilman.