Veolia produces savings, cultural shift at Pittsburgh water authority

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About 11 months ago, on a rainy day in mid-August, Pittsburgh Water and Sewer Authority gathered its employees along the Allegheny River at the authority's far-flung water treatment plant for a barbecue.

It was a month after the authority's board had voted to bring in a water management company, the Chicago-based Veolia North America, with hopes of redeeming a utility that had been beleaguered by scandal, tragedy and complaints of poor customer service. But Veolia, too, brought concern and suspicions. Employees worried about privatization and layoffs.

In the midst of all of this, over ribs, chicken and pie, Jim Good, the man who would become the face of that effort, introduced himself. A tall man with a steady voice, he spoke over a public address system and reassured employees huddled under tents that he was not there to take over the authority, not there to eliminate their jobs.

Mr. Good, who led Veolia's West Region, was flown in from San Francisco, replacing two longtime administrators who had jointly led the authority on an interim basis. He was named its new executive director.

"I gave the hallelujah amen sermon," he said in an interview this week. "I told them that we were there to work with the employees as their partners.

"I provided assurances that there wouldn't be any layoff and that together we could achieve anything."

On Wednesday, two days short of the expiration of Veolia's one-year contract with the authority, board members will decide whether to keep the management firm, and if so, in what capacity.

And they'll reflect on whether Veolia delivered on its promise.

Checkered past

For the past few years, it seemed, any time PWSA was in the news, it was bad news.

Tom Palmosina, whose four decades working on the city's water and sewer system predates the authority, is now the director of water operations for the authority. He believes the authority did good things but lacked the kind of expertise to update an antiquated system for modern needs and modern regulations. Like many, Mr. Palmosina originally was hired as a laborer and rose through the ranks.

"A lot of us felt we were struggling and we needed some help," said Mr. Palmosina, who jointly led the organization immediately before Veolia came. He said the authority's focus was on "maintaining the status quo" instead of updating itself.

Some of the authority's problems were illuminated in a 2009 report by an outside consultant. The report, by Resource Development & Management, highlighted many of the authority's failures. A third of service calls were never answered. Staff turnover was high.

Like Mr. Palmosina said, the study showed that most of the authority's efforts went into reacting to problems instead of preventative maintenance. The authority also had a tendency to use outside contractors on projects that could be done in-house.

In 2010, the authority discreetly forged a relationship with Utility Line Service, a company run by friends of then-executive director Michael Kenney. The company started providing insurance for customers in case they had problems with their waterlines at a cost of $5 a month. But the charge was levied automatically, unless customers opted out of the program, an arrangement that resulted in a class-action lawsuit.

A judge ruled the waterline insurance to be illegal because it unfairly competed with private-sector warranty plans.

The debacle led to Mr. Kenney's resignation in late 2010.

Mr. Palmosina said he thought the waterline insurance was a good idea but poorly thought out. In the end, he said, "it was a big black eye." Mr. Palmosina and another administrator, Stephen Simcic, were elevated to jointly lead the organization as the board figured out what to do next.

On Aug. 19, 2011, Mother Nature helped to created another dark day for the authority. A thunderstorm released a torrent of rain in the East End, pounding a hillside, releasing debris that choked overwhelmed storm drains. For the second time in two months, Washington Boulevard became a torrent, drowning a mother and her two daughters in a minivan that was found underneath 9 feet of water.

An elderly woman was swept away after she escaped from her car, her body found the following day.

State Rep. Dan Deasy, D-Westwood, the authority's board chairman, said the flash floods on Washington Boulevard were not among the seminal events that led to the board deciding to change management.

But it nonetheless illuminated serious weaknesses in stormwater management, which is overseen by multiple agencies, including the authority. In February, the families of the victims filed a wrongful death suit against the authority along with a bevy of other government agencies, including the city of Pittsburgh, Allegheny County Sanitary Authority and the state Department of Transportation. The suit charged that PWSA and others knew -- and saw -- the potential for flooding on Washington Boulevard but did nothing to fix it.

A turnaround

Before the board decided it was going to bring in a management firm, it conducted study groups with customers and nonprofit stakeholders. Mr. Deasy said the board learned that developers were frustrated with red tape and customers were frustrated with call wait times.

As a result, they issued a request for proposals for a management consultant and hired Veolia under a contract that pays $150,000 a month plus bonuses when it achieves benchmarks and a cut of new revenues and cost savings.

Councilman Patrick Dowd, another authority board member, said Veolia has given the authority more than it expected. The company, which is typically contracted to run water and sewer utilities, began what could be described as an intensive intervention with the authority.

Through Veolia's Peer Performance program, many of the managers in the authority were paired with mentors from Veolia. The management company flew in experts from across the globe to assist the authority.

And the results speak for themselves.

Board members said Veolia has overseen an impressive turnaround at the troubled authority, reaping cost savings by finding more efficient ways to operate without any layoffs. Late last year, the authority held the line on rates in large part because of the cost savings and new revenue.

When someone calls the customer service line, the caller will wait an average of half the time a person would have waited a year ago, thanks to a revamped customer service operation.

After the arrival of Veolia, the authority lured back a big-ticket customer and started collecting a service line fee. The fee, which applies mostly to commercial customers with sprinkler systems, had been ratified by the board in 2005 but never collected.

The two moves brought in more than $1 million in revenue. Veolia, as part of its contract, will take a cut of the revenue gains.

Mr. Dowd said he was most impressed with the way Veolia helped the authority alter the way it deals with water in the Highland Park Reservoir so that less water had to be re-treated after it sat exposed. By altering the process, Veolia helped the authority save $650,000 a year.

"They took what was a lawsuit problem and turned it into a national model ... without any additional capital expense," Mr. Dowd said. "That's insane. That's wonderful."

But one of the subtler changes, for those within the authority, is what many described as a cultural shift. Mr. Good said prior to Veolia's arrival, PWSA had a very "top-down" authority structure. Mr. Good has completely upended that. Every week, he meets with employees from every level of the organization over pizza and hamburgers. Sometimes, he said, he gets an earful.

The result of this cultural shift is that employees feel empowered to suggest changes in the organization. In fact, many of the operational alterations that resulted in cost savings came from the employees themselves, Mr. Good said. Veolia has formalized its "suggestions box" for employees so that they can email ideas to make the authority better.

"Most of the good ideas or the best ideas reside within the employees here," he said.

One program generated by employees was an idea that had been circulated for years but wasn't implemented until the arrival of Veolia. Employees suggested that some of the water crews, who traditionally had all been housed in the eastern part of the city, be shifted to the more centrally located Mission Yard in the South Side. It wasn't a radical change, but it cut fuel use and response times.

Mr. Good also has instilled a stronger safety culture among laborers, said Pat Bigley, a board member who is also president of Pittsburgh Plumbers Local 27, which represents about 20 PWSA employees. The authority began sending workers to more training and offered to reimburse employees for purchasing steel-toed boots as part of the new collective bargaining agreement.

"That was all without any prompting or any battle," he said. "Not usually do the employers care so much."

He also commended Veolia for moving away from using contractors. It recently moved its camera inspection operations, for example, in-house, creating additional jobs.

Moving forward, though, Mr. Dowd and Mr. Deasy said they envision a smaller role for Veolia. In the coming year, they hope the authority will be groomed to manage itself without Veolia's help -- but without losing the gains the company brought to the authority.

The authority is entering a crossroads as it braces for a monumental capital project to comply with new federal standards that regulate how the city controls sewer overflows. An engineering firm estimated the project, which would involve 24 upstream municipalities, could cost nearly $300 million.

Despite the strides, Mr. Good believes work still remains to be done. Though the board technically could let him go on Wednesday, he hasn't packed his bags for San Francisco quite yet.

"I've never had a job that's as challenging as this job, and I've never had a job that's as rewarding as this job," he said. "I really love this town."

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