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In these challenging economic times, public administrators must respond to shrinking public budgets. Current and projected budget shortfalls have prompted Ann Arbor Public Schools (AAPS) to explore whether the privatization of two school support services, bus transit and custodial-maintenance, will save the district money, presumably without jeopardizing service quality. Before the AAPS makes that decision, it seems prudent to evaluate and discuss what happened to food service, which was fully handed over to a private company, Chartwells, in FY 2007-08. The following report is based on an analysis of public data filed with the State of Michigan by AAPS, documents from AAPS, and interviews with food service personnel.1 Prior to the full Chartwells takeover, AAPS contracted with Chartwells for their food management services only, with a main responsibility for food procurement. For this role, Chartwells was paid about $2 million per year from FY 1003-04 to FY 2006-07. Public records do not detail how much of this amount covered food versus Chartwells’ management expenses and corporate profits. However, since the initial 2001 agreement, Chartwells has operated under a flat fee basis for food service management. The fee was $0.07 per meal from 2001 to 2008 ($0.03 management fee and $0.04 administrative fee); as of 2008 this was increased to of $0.08 per meal ($0.05 administrative fee). AAPS also reimburses Chartwells for all operation costs, including inventory (food and beverage), all materials and service expenses, and the compensation for all involved Chartwells’ employees.

The relationship between AAPS and Chartwells changed after FY 2006-07. Starting in FY 2007-08, the management-only service contract ended, and Chartwells became responsible for staffing. During this transition, AAPS food service workers had to accept employment with Chartwells to keep their jobs. Most accepted the offer of work, not out of gratitude but out of necessity: to refuse the job with Chartwells would have made them ineligible for unemployment benefits. Workers lost their state pension and union representation. A comparable health care benefit is offered by Chartwells, but the annual co-pay is over $3,000 – a fivefold increase from when these workers were AAPS employees.2 The co-pay increase effectively priced many food service workers out of premium coverage. Further, as senior workers exit Chartwells’ employ, new hires are brought in at slightly more than $9.00 per hour.

This brief report describes how this policy decision affected the AAPS food service budget and operations. Our intent is to draw lessons from this experience in order to anticipate the probable effects of privatization on bus transit and custodial services.

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