When one head is better than two: cities find savings in cooperation

The Annandale-Maple Lake-Howard Lake wastewater treatment plant stands on a patch of stark, snowy farmland like an arctic weather station.

I'm touring the 1 1/2-year-old facility with three guides, including plant operator Joe Haller, who carries a blowtorch in case any of the exterior doors are frozen shut.

It's still below zero as we approach the pre-treatment building, the brick structure where sewage from the three cities flows together.

Haller opens the door, but only he and I step through. Annandale City Administrator Mark Casey and plant engineer Brad DeWolf opt to wait in the cold. Immediately, I understand why. The smell inside is overwhelming and penetrating, like rotten eggs in a steamer.

Haller provides a hyper, abbreviated rundown of the inside of the room: the forcemains from Annandale, Maple Lake and Howard Lake, and the mechanical fine screens that, according to Haller, "pick out anything bigger than a pea."

The plant serves as a somewhat earthy metaphor for the messy, if often rewarding, process of cooperation among governments. Coping with reduced local government aid (LGA) and Market Value Homestead Credit (MVHC) reimbursements from the state, a tough economy, and aging populations, Minnesota cities are searching for innovative ways to continue to provide services. Some foster volunteer networks or cross-train their employees.

Others have partnered with neighboring cities or counties, sharing software, large equipment, staff and even entire departments. A recent report called Navigating the New Normal from the University of Minnesota's Humphrey Institute, authored by fellow Jay Kiedrowski, touts collaboration between governments -- and between governments and other entities such as non-profits -- as an effective tool.

"It has become a very popular approach to innovation and redesign," Kiedrowski notes in the report. "Some collaborations are surprisingly informal, while others require formality to make them work."

He cites examples: 15 school districts that formed a food-buying group in order to garner better pricing, a partnership in Duluth that addresses the transportation needs of low-income people, shared 911 and transit services, and a mental health crisis team straddling Washington, Dakota and Ramsey counties.

Consolidation can make sense from a fiscal standpoint and still be a tough sell to residents and public workers since it may involve lost jobs and a diminished sense of community identity. The treatment plant was challenged by environmental advocates and area residents who didn't want the plant located in their townships. It took nine years and a lot of cajoling to complete the project. As a goodwill gesture, the plant gives its sludge to local farmers as fertilizer.

"We're similar to a lot of cities," says Casey. "We've had cuts, lots of reductions in everything from staffing to operations. If there ever was fluff it's gone. All the low-hanging fruit is gone, too. It's enough just to keep the lights on."

Since 2008, Annandale has cut more than $200,000 -- or over 12 percent -- from its budget.

The plant, because it is co-owned, cost each city about half as much to build and a third as much to run as three individual plants.

"Given how tight it is now," says Casey, "I can't imagine what it would be like if we weren't able to spread these costs out."

This is the sort of economizing the state, facing a $6.2 billion budget shortfall, is pushing via committees like the Minnesota Commission on Service Innovation, charged with developing "a strategic plan to re-engineer the delivery of state and local government services."

The commission released its first report in December, recommending that the state's streamline-inducing Enterprise Lean Program be extended to every governing entity and that each create an inventory of services that can be shared or consolidated.

At a Minnesota Chamber of Commerce meeting in early February, commission member Steve Dahl of Deloitte Consulting warned, "If people are thinking once we get past the recession we'll be great, we're being shortsighted. The problem is structural in nature. Once we're past this budget cycle, these structural issues will come back every budget. They're not going away."

John Gunyou, Minnetonka's city manager who was finance commissioner under Gov. Arne Carlson, gets a tad exasperated when he hears the state urging cities to "re-engineer" or get "lean" or think outside the box.

"Cities have always cooperated with each other to provide services," he says. "We're just doing it more now out of necessity. When people say we need to start thinking creatively, it's been going on."

He cites LOGIS, a technology-sharing effort that's been around for decades. Started in 1971 by a handful of budget-conscious city finance directors, the company provides centralized software to members, covering finances and payroll, utility billing, permits and inspections, and even public safety records.

It's cloud computing for governments, says LOGIS executive director Mike Garris, who estimates that a small-to-medium city can save between $60,000 and $180,000 per year on software and information storing costs.

In the wake of rampant budget tightening, Garris says LOGIS membership is on the upswing.

"Ten years ago, we probably had 25 members," he says. "Today we have 45. We recently picked up St. Paul and Austin, plus New Ulm in the last few weeks. There has been interest expressed by at least a half dozen more. Lots of entities are looking."

Around two years ago, Minnetonka made $2 million in permanent cost reductions and downsized its workforce by 6 percent. It lost 14 positions, about half through attrition.

The problem wasn't a loss of LGA, which Minnetonka doesn't receive, but rather a loss of MVHC reimbursements to the tune of a half million dollars.

"We took some major steps," says Gunyou. "The pitch I made to the council was, 'We need to do this now.' We agreed, we are never going to count on that half million dollars again. We stopped budgeting for it."

Minnetonka also has an aging population, which could affect the city's tax base in years to come.

"Right now, we are about 21 percent under 18 and 29 percent over 55," says Gunyou. "In five years, that 29 percent will be 33 percent."

The city is trying to draw young people, by adding play equipment to the recreation center and, perhaps, even offering down payment assistance to first-time home buyers.

One way it's saving money is by sharing services.

After three positions were lost in Minnetonka's inspections department, the city forged an arrangement with St. Louis Park whereby the two swap inspectors.

St. Louis Park focuses on electrical inspections and Minnetonka on food, beverage and lodging.

John Weinand, Minnetonka's environmental health supervisor, carries two badges on his rounds, one for St. Louis Park and one for Minnetonka. If anyone questions his authority (a rare occurrence, he says), he hands them a brochure explaining the arrangement.

Cooperation works well, says Gunyou, but he warns that municipal reinvention isn't a panacea. "We can cut back, do things smarter," he says. "But there are limits to how much you can reform." At some point, "cities will do it to the point of hurting services."

Governments tend to be the providers of last resort, he adds. They don't get to choose which roads they wish to maintain. They can't send 911 callers to a phone tree.

"We're servicing everyone. We can't say no shirt, no shoes, no service."

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