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MIIA is a Membership Service of the Massachusetts
Municipal
Association

Shared Services Provide Both Opportunities and Risks

Published in News on by Joe Callahan, MIIA Marketing Manager

The “sharing economy” allows people and organizations to rent, lend and share products, services and assets rather than having to purchase or create them. Airbnb, Uber and Freecycle are examples of sharing economy companies.

PricewaterhouseCoopers estimates that the sharing economy will grow to more than $300 billion by 2025, from $14 billion in 2014. In both the private and public sectors, sharing can increase access to important resources.

 

Municipal sharing in Massachusetts

The municipal sharing economy is also growing among Massachusetts cities and towns, which are sharing services, personnel and property. Such sharing includes:

• Emergency services

• Veterans services

• Animal control officers

• Regional dispatch centers

• IT/data center services

• Council on aging services

• Machinery, equipment and vehicles (construction, safety, maintenance, etc.)

• Municipal spaces (libraries, recreational centers, athletic fields, etc.)

Sharing services and equipment presents significant opportunities for towns and cities with budget, staffing and resource constraints.

The following are just a few of the benefits of municipal sharing:

• Affordable access to expensive equipment, tools, services and expertise

• Increased resilience due to the location of resources to prepare for, respond to, and recover from disasters

• Revenue generation from idle or underutilized public assets and equipment

• Improvements in innovation and economic development by making local and regional resources more affordable and easier to locate

• Improved connections among communities to create efficiencies and reduce waste

One area where shared services can make strategic and financial sense is information technology infrastructure and services. Many smaller towns do not have the required expertise on staff, cannot afford to hire a full-time IT expert, and rely on consultants or even volunteers to help manage their IT services.

The Baker-Polito administration’s Community Compact Cabinet (www.mass.gov/orgs/community-compact-cabinet) recently awarded a grant to Danvers, Middleton, Topsfield and four other towns for a year-long North Shore IT Feasibility Study. The purpose of the award, part of the CCC’s Efficiency and Regionalization competitive grant program, is to provide financial support for municipalities interested in implementing regionalization and other efficiency initiatives that promote sustainability.

Tanya Stepasiuk, the assistant town administrator in Middleton, said her town has benefitted from contracting for IT services with the neighboring town of Danvers.

“Access to shared IT resources will assist us with software selection, cybersecurity guidance, access to specialized experts, and achieving economies of scale through group purchasing and training and support,” she said. “Danvers IT understands our unique municipal needs and procurement process, and will help us build and run a strategic and effective IT program.”

 

Risks and liabilities

The sharing economy presents an expanding and unique set of risks and issues for municipal leaders to consider. Most important, the shared services, materials and facilities may not be adequately covered by their current municipal property and casualty insurance agreements. As a result, they are subject to claims and legal action.

Attorney Deborah Ecker of KP Law recommends that municipalities determine if their insurance policies cover shared equipment, motor vehicles and employees, and potential claims arising from them. They should also ensure that there is a specific scope of services, and that the responsibilities of each entity are clearly stated in a written agreement.

The municipality should consider whether to request that it be named as an additional insured on the liability insurance policy of the entity to whom it is lending or sharing equipment or personnel.

It is important to consider the following issues:

• Which municipality or entity is responsible for the maintenance and repair of the equipment, in the event that a failure to maintain it leads to injury or damage to property?

• Which municipality or entity is responsible for damage caused by the equipment or operator of equipment in the event that there is a claim for negligent operation of equipment leading to damage or injury to a third party?

• Which municipality or entity employs the employee(s), and which entity is responsible for supervising the employees? Which entity is responsible for the training and supervision of “shared employees,” such as a school nurse, animal control officer or regional dispatcher, in the event that a claim is brought against the shared employee (including negligence claims or claims for violation of civil rights)? Likewise, which municipality or entity’s policies govern the shared employee in the event that a workplace dispute arises or there is a claim for discrimination or harassment?

• Is there an indemnification provision, also known as a “hold harmless” provision, to the extent permitted by law?

Sometimes sharing among towns and cities is informal, and the municipal counsel may not be involved or asked to review any memoranda of understanding between parties. It is important to review existing agreements and contracts and check with your insurance agent to ensure that municipal employees, equipment and property are properly covered.

Intermunicipal agreements for shared services, like other types of contracts, require hammering out the fine print so attorneys, consultants and everyone involved is clear on the terms.

 

Minimum insurance requirements

To protect a city or town’s liability, MIIA recommends that the municipality obtain certificates of insurance affording the following coverages and maintain the coverage for the duration of any sharing agreement:

  • General liability: $1,000,000 Bodily Injury and Property Damage Liability, with a $3,000,000 Annual Aggregate Limit
  • Automobile liability: $1,000,000 Bodily Injury and Property Damage Combined Single Limit per accident
  • Workers’compensation: As required by law
  • Umbrella liability: $2,000,000 per occurrence, with a $2,000,000 annual aggregate

The above are MIIA’s minimum recommended limits. It is up to towns and cities to determine if higher (or lower) limits are needed.

Municipal sharing agreements area valuable and efficient mechanism to share common municipal costs and services, but their multiparty nature brings a level of complexity. In terms of insurance, there are liability coverages and protections that must be addressed. If municipal staff are involved, there are workers’ compensation exposures to be considered.

Lastly, if property or equipment is involved, the agreement must address who is responsible for any damage and payment of any related deductibles.

All the factors outlined in this article must be carefully considered and built into the ultimate agreement so that all roles, terms, insurance obligations, responsibilities for deductibles, and legal provisions are fully documented and in place.

 

 

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