Outsourcing city services can be a double-edged sword.

On the plus side, turning over management of a city service or program can free up staff and save on salaries and expenditures.

But making the switch can also cause customer-service problems and may mean losing a dependable revenue stream.

Killeen and Copperas Cove have seen both sides of the equation.

The most recent — and perhaps most talked-about — example has been Copperas Cove’s outsourcing of billing for municipal water service, which was problematic almost from the start.

The city signed a 15-year agreement with Arizona-based Fathom in 2016, calling for the billing contractor to handle water service issues such as starting and ending service, billing inquiries, payment arrangements and customer complaints.

Early on, the city became aware of a problem, as residents complained of abnormally high bills, service disruptions and difficulty contacting customer service representatives.

Though Fathom representatives pledged to improve their service and even traveled to Copperas Cove to directly address customer concerns, the problems got worse rather than better.

In August, Cove City Manager Ryan Haverlah said service calls to Fathom were running around 2,400 a month —about 20 percent of the customer base. It was also 1,400 calls more than the city got for free before Fathom started charging the city $10 per call. That overrun could have cost Cove an extra $14,000 a month if Fathom had assessed the charges, but the billing and service problems were well documented, so the contractor held off.

In early November, Fathom dropped a bombshell — the company was going out of business, with its last day of operation scheduled for Nov. 30. That deadline was subsequently extended to Dec. 9, but Cove officials still had little time to pull together a plan to handle billing and customer service issues in-house.

Because of Fathom’s sudden departure, the city finds itself needing to expand the city utility administration office, hire customer service representatives and a billing technician, as well as select as billing software provider.

Certainly, it’s a hassle — and an unexpected one — but given the troubled history with Fathom, it may be worth it in the long run.

Killeen’s history with outsourcing services has been a little less dramatic, but it’s had its share of controversy.

In June 2018, after nearly two years of research, planning and discussion, Killeen City Council voted 4-3, by consensus, to halt the potential outsourcing of the city’s solid waste service.

There were several good reasons to contract out the city’s trash collection. At the time of the vote, the city was struggling with budget problems, and outsourcing would have helped greatly in that regard — eliminating salaries and benefits for nearly 100 workers, purchase and maintenance of vehicles, fuel costs and administrative expenses.

In addition, the sale of vehicles and equipment to an outside company would have generated significant revenue for the city.

All of the three finalists that submitted bids offered curbside recycling — something the city did not (and still does not) have. As proposed, the winning bidder would have been required to pay the city a portion of proceeds from the sale of recyclables, if recycling were part of the contract, as well as a 9 percent franchise fee.

No doubt, there were several obstacles to outsourcing, including a short amortization schedule on purchases of equipment and vehicles, as well as a requirement that the outside company hire and retain former city workers for at least five years.

But one factor may have been the key to the council’s decision — the solid waste fund.

The city frequently taps the fund for other expenditures. It pays for $1.6 million of city services annually, including $800,000 in mowing costs. And in late 2016, then-Interm City Manager Dennis Baldwin transferred $1.67 million from the solid waste fund to the general fund — with council approval — to boost the city’s bottom line in advance of an anticipated bond rating.

If the solid waste service had been outsourced, the city would have lost that funding source.

One outsourcing decision the council did make has paid dividends for the city so far.

Earlier this year, the city agreed to turn over management of the city’s municipal golf course, Stonetree Golf Club, which had been losing money for the past five years.

Nationally established Billy Casper Golf is now managing the club for $90,000 per year — a far lower figure than the $318,000 annual loss the golf course had been seeing previously. Projections call for the course to be operating in the black by 2021,

Another outsourced function — the city’s former red-light traffic camera program — was steeped in controversy from its first day in operation back in 2010.

The city contracted with Arizona-based Redflex to place, monitor and maintain cameras at several high-traffic intersections in Killeen, with the intention of increasing motorists’ awareness of the traffic signals and reducing accidents.

The cameras took photos and videos of vehicles that ran red lights, and a $75 citation was issued to the registered owner for each recorded infraction.

Motorists complained they couldn’t contest the fine in-person, and the vehicle’s owner got the citation, no matter who was driving when the infraction occurred.

Others complained that Killeen was using the program as a cash cow.

Indeed, in 2016, the city received more than $302,000 from the cameras’ citations. From 2010 to 2014, the cameras generated $1.4 million for Killeen. As part of the contract the city and Redflex split the revenue, with a portion also going to the state.

However, the cameras also freed up patrol officers at the city’s busiest intersections and reduced dangerous T-bone crashes at those locations.

The council voted to remove the cameras in early 2017, and red-light cameras have since been banned by state law.

Obviously, there are several reasons to outsource, or not outsource, city functions — from trash pickup to billing operations and ambulance service. In general, smaller cities, with lower budgets and limited staff, may have more motivation to consider outside management of operations.

For example, both Harker Heights and Nolanville outsource their trash collection to Waste Management, and the arrangement has worked well for several years.

However, although saving money — or generating it — may be a major consideration in the decision, it shouldn’t be the only one.

Residents are the ones most affected by shifts in service and changes in oversight. Just ask water customers in Copperas Cove. As residents are the ones ultimately paying the bill — no matter where their money goes — it’s a city’s responsibility to ensure its taxpayers and rate payers get the best service possible, and at the lowest reasonable cost.

In other words, cities should always strive to give residents the most for their money.

With that in mind, it’s fair to ask Killeen city officials: Where’s that curbside recycling program?

dmiller@kdhnews.com | 254-501-7543

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