Lawrence Township Council Tuesday evening (Sept. 4) directed Township Manager Richard Krawczun to solicit competitive bids from vendors in an effort to determine if the township could save money by laying off its civilian police dispatchers and emergency medical technicians and, in their place, privatize the township’s police dispatching and ambulance services.
The directive comes as council tries to figure out how to solve the problem of the 2013 municipal budget being – using projected numbers – significantly in excess of the state’s 2 percent tax levy cap. That overage was initially estimated at being about $1 million, but the means that council now needs to cut “only” about $750,000 from the 2013 budget in order to comply with the cap law.
Until bids are submitted by vendors, it will not be known how much money, if any, the township could save by privatizing the police dispatching and ambulance services. But in terms of the tax levy cap, it doesn’t really matter.
Under the confusing and seemingly-contradictory provisions of the tax cap law, any savings the township could generate by privatizing those services could not be applied toward lowering the 2013 municipal tax cap overage.
Any savings would be beneficial – from a strictly financial standpoint – to taxpayers because that amount would reduce the overall total that would be raised through municipal taxation, but in terms of the cap overage the township would still need to make other budget cuts equal to the estimated $750,000 overage, Krawczun said as he tried to explain the complex situation to council members and the public.
[The discussion begins at about the 18:20 mark of meeting Audio Part 3 in the media box above.]
“Under the municipal cap law, when a municipality transfers a service, and that transfer can either be to another municipality or to a contractor and there is – and this is my term – a ‘thread’ that connects the municipality and the vendor to provide that service, there is, for the purposes of calculating the tax levy, a cap base decrease,” he said.
“Why is that significant? Because we know that in the I presented to council that we had, generally, a $1 million overage on the 2013 cap, on the levy, based on our estimates....” he continued. “With the transfer of the police officers that were at least scheduled to be employed by Lawrence Township into 2013, in round numbers, we reduced the $1 million shortfall, or overage, to somewhere between $700,000 and $750,000.
“So if you have $700,000 as your starting point, if you were to privatize ambulance service, you still have a $700,000 problem because the deduct comes off the base. You don’t get the benefit of finding an efficiency because there’s no credit given to you for reducing this excess by finding another way to provide the service,” Krawczun explained. “So I want to caution everyone that though it may be a good idea to privatize the service, or to look to an outside vendor to provide that service, it doesn’t solve the $750,000 problem. It just maintains it at the same level, or $700,000 depending how we work some of these numbers.”
Krawczun said the projected expenses for running the township’s fulltime ambulance service this year total about $1,028,000. The township, using a third-party service, bills the insurance companies of ambulance patients. The amount generated by that billing varies annually, he noted, but in 2011 the township collected $691,000 in revenue through ambulance billing.
Applying that same amount as anticipated income to the projected 2012 expenses results in an estimate that the ambulance service will end up costing the township about $337,000 this year, he said.
Lawrence Township previously used Capital Health System to provide ambulance service, after the township’s volunteer first aid squad could no longer muster enough volunteers to respond to emergency calls. The township did not renew the contract with Capital Health System and created its own fulltime ambulance service because, in part, many residents complained that they were being billed by Capital Health System the balance of what their respective insurance companies did not pay.
Currently, Lawrence Township residents are not “balance billed” by the township’s fulltime ambulance service; the township only bills insurance companies and accepts whatever payment those insurance companies submit.
“I brought up the EMTs: one, because it’s a service that’s eligible to be privatized; two, it demonstrates the difficulty of managing the cap,” he said. “Even though you may make reductions – and this is my term – there’s a ‘disincentive’ for some because you’re not going to create any room in your cap for other costs.”
At that point in the meeting, Councilman Greg Puliti asked: “I just want to make sure I get this straight. If we were to privatize this with a service that could provide the exact same service without missing a beat, and that’s what the state’s telling us to do, we don’t get the benefit of what we would spend on that to go towards the cap?”
“That’s correct,” Krawczun answered.
“So state wants us to be leaner and meaner, find ways to do things smarter…but we’re also going to have to go someplace else and cut because of the way they figured out how we do the cap adjustment,” Puliti said, obviously frustrated.
More than a dozen municipal positions were eliminated last month, many through layoffs, to help balance this year’s budget. At the Krawczun advised that two possible solutions to the 2013 municipal tax cap overage would be additional layoffs of township employees in January, or the complete elimination of municipal government involvement in garbage collection in favor of a system whereby residents would be responsible for securing their own individual trash haulers.
Krawczun then proceeded to advise council that there had been no success in into a single regional dispatching service.
He went on to inform council that he had sought out and received permission from the state’s Division of Local Government to “use a provision in the local public contracts law known as competitive contracting. Competitive contracting is used in lieu of public bidding, although it appears to function in the same fashion. The difference is in public bidding you have to take the lowest responsible bidder. When you use competitive contracting you can create criteria that a vendor is judged upon and cost does not have to be the sole reason of choice. So you could actually use a vendor who may cost a little more but has all the equipment, experience and resources to provide you the service versus somebody coming in, ‘We have five walkie-talkies and we can do this for $50,000.’”
But, just as with privatizing ambulance service, any savings that could result from privatizing police dispatch could not be applied toward lowering the cap overage.
“Once again, because we create the contract, there is a thread between the town and the vendor. That thread causes us, if there is any savings, to reduce the cap base by the amount of those savings. So it wouldn’t necessarily preclude us from using this or exploring the possibility, but I don’t want to lead anyone down the road to think, well, if we cut these services and we save, you know, $400,000, that that $400,000 is a solution toward part of the overage on the municipal cap,” he said. “There still needs to be other action to reduce that overage of $700,000 to $750,000.”
Krawczun went on to reiterate that the clock is ticking with regard to making certain decisions about the 2013 budget.
“You’ve heard me say if we have to make any personnel changes that they would need to be in effect by the first few days of January. That being said, I would like to, if there’s consensus among the council, bring forward for the police dispatching a resolution to use competitive contracting,” he said. “I can use competitive contracting for the ambulance service because that was once-before authorized by council. Once the service has been authorized, you can continue to use the original authorization. Any new service that is eligible for competitive contracting, or that you receive permission for, needs a new resolution of the governing body.”
Such a resolution could be adopted at the next council meeting on Sept. 18, he said.
“That would allow us to proceed on parallel tracks. We could still work with the employees. We could go out for competitive contracts and see what the savings are. And then we would, basically, put the employees on notice at some point that they may be terminated,” Krawczun continued. “Now under competitive contracting, since the employees are represented through a collective bargaining agreement, they have two choices. They can participate as a vendor, if they wanted to create and become a vendor, or they can offer wage concessions or salary concessions that would generate the amount of savings that would otherwise be produced under privatization or competitive contract situation.
“So that’s why I wanted to give the employees notice upfront that this was occurring because they have the right, both statutorily and, I think, you know, we have a right to our employees to put them on equal footing with everybody else. I think we have that obligation,” he said.
Earlier in the meeting, Krawczun noted that he had been meeting with the various unions that represent municipal employees. While he had nothing definitive to report, he reported that the unions were receptive to having further discussions about possible labor contract concessions to help solve the township’s budget woes and save jobs.
He also reported that the township and the bargaining unit for township police officers had just agreed to scheduling changes that should reduce police overtime expenses.
The township and the police officers’ union are currently in negotiations for a new labor agreement.
Officer Andrew Lee, president of Lawrence Township Fraternal Order of Police Lodge 209, appeared at the meeting and told council that members of the police union know that times are “tough” for taxpayers and that they are willing to make concessions. In response to some complaints from residents about public safety accounting for 33 percent of appropriations in this year’s municipal budget, Lee pointed out that the police department is a 24-hour service that, unlike other municipal departments, is never closed for business.
He also said it is important to keep in mind that beginning Jan. 1, 2013, township police officers will be subject to the state’s new “matrix” that forces government employees to pay significantly more toward their health care premiums – starting at 8 percent in 2013, and then going up annually over the next three years to 18, 24 and 30 percent.
“That’s a concession,” Lee said.
“So we have this $750,000 gap?” Puliti said as Tuesday’s meeting drew to a close. “I get it about the trash and having that privatized. I don’t want to write a check. I don’t want seniors to write a check. I get that we don’t want any more police officers laid off. But nobody be disillusioned – we’ve got to have some kind of compromise here to fix this… We need to figure this out.”
For Municipal Budget Background, See:
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