Labour government taking on ‘subsidised racket’

Malta's local warden system is in the process of being reformed, 14 years after it was first introduced - but the jury is out on what government's plans for a centralised unit means for people like Kenneth De Martino, whose Guard & Warden Service runs the gamut of local enforcement services, deploying wardens to the councils, monitoring CCTV systems and also processing speed camera fines.

De Martino is set to meet former Kalkara mayor Michael Cohen, the government's consultant on the new centralised unit for local enforcement next week to see how Parliamentary Secretary for Local Councils  José Herrera intends to change the current privatised system.

The hints of nationalisation are in the air: on Saturday the parliamentary secretary for local councils said a "fairer and more transparent" system would reduce costs by 20% and become more efficient in collecting some €18 million in unpaid fines.

The key change is granting the current management committee that runs the local enforcement system, the power to create a centralised unit to enforce the laws delegated to the five regional committees.

But this means effectively taking on the administration of local wardens, from the private companies currently providing the manpower for the local councils.

"The management committee should have the necessary human and financial resources to have a fully functioning enforcement system," Herrera said, adding that the new unit would function independently.

During yesterday's presentation, Herrera said private firms today reaped 74% of the value of local fines being dished out.

And he clearly gave the impression that "no warden will lose his job", suggesting that the new unit will employ them and provide their training.

Kenneth De Martino yesterday sounded diplomatic when he told MaltaToday that he is looking forward to contribute to a public-private partnership. "I hope to be able to discuss and participate in the development of the enforcement system. Quite a lot of knowledge and experience has been gained over the years and I am sure I will be able to contribute to the further development of the system. A PPP would be possible. I look forward to some very interesting discussions."

But after years running Malta's local warden system - a multi-million business of fines dispensed by wardens, CCTV and speed cameras - people like De Martino must be watching the government's next move with some trepidation.

In 2011, Joseph Muscat declared he would stand up to the "subsidised racket" in the local enforcement system, claiming that "the bulk of the cash received by councils is going... to two companies" and ominously sounded a stark warning: "the days of big fish taking up everything are over."

According to an OPM report seen by MaltaToday, between 2003 and 2008 wardens and speed cameras issued a total of 1.6 million tickets at a value of €56 million. The actual number of tickets paid was much lower, with 'only' €39 million received by local councils - leaving well over 25% of unpaid tickets in bad debts.

The system is costly to run. Of the €23 million, €19 million was the cost of wardens and IT services for the running of the speed cameras by Datatrak. 53% went to Guard & Warden and Sterling Security (another firm, Aurelia, also provided wardens for two regional councils) and 31% went to Datatrak (now Loqus). The rest went to other direct costs.

Private companies have in the past defended themselves from Muscat's talk of "big fish" - De Martino had told MaltaToday that he has high labour costs due to the employment of the wardens and the provision of their handheld computers. As an example, in 2009 Guard & Warden made €2.5 million in revenues but its cost of sales was €2.1 million, leaving it with a gross profit of €400,000 before tax and other costs.

'A vicious circle'

There is an important flipside however. Herrera's White Paper yesterday said that local councils were not getting much cash from the local enforcement system, because they had to pay the private firms running it for them. And that means that the system can only survive if wardens issue more tickets.

Indeed, even De Martino had told this newspaper that speed cameras were making any cash "because motorists have got used to the system. Which is why people are mistaken if they think we are making profits over and above the norm."

"The system has entered a vicious circle, and it depends on more traffic fines being issued, otherwise the system crumbles," the White Paper says. "The system should reflect people's aspirations... it needs a serious cost-cutting exercise."

On Saturday Michael Cohen - who is well aware of how the system works, with its local councils grouped in regional committees that subcontract local enforcement to the private sector - accused it of being "expensive and inefficient".

Cohen - who was the subject of an OLAF investigation and together with other former councillors faces court proceedings on the misappropriation of EU funds claimed on air tickets - said that since 2013, local councils failed to collect up to €18.5 million in unpaid citations.

The unit is to be led by a chief executive "with vast experience in the enforcement sector" who will be responsible from coordinating the unit which will administer the local wardens system.

"If we take careful decisions we can obtain better financial results. Therefore the reform should give local enforcement a new direction, leading to a reduction in costs," Herrera said.

He explained that the reform could save the government up to €1.2 million a year, which in turn could be invested in training local wardens and strengthen environmental protection.

A number of public consultation meetings will be held in the coming weeks. The process will come to an end on 18 April.

How does the local enforcement system (LES) work?

There is no doubt that the devolution of police duties to the local enforcement system in 1999 developed into a money-generating mechanism for local councils.

In its introduction, the White Paper launched by José Herrera says that local councils "were given the misleading impression they could be strengthening their finances" and that the discrepancy between the amount of money actually collected led to infighting over councils who made more money.

Councils geographically located on busy thoroughfares, like Sliema and St Julian's, stood to make even greater revenues through the speed cameras located on Regional Road.

But in the past, people like former Siggiewi mayor Robert Musumeci refused to turn his locality in a cash-cow for the LES, only deploying a few wardens on a few days on the main road outside the village core.

In 2002, 44 councils - 30 in Malta and 14 in Gozo - created a pooling system and in 2011 this developed into the regional system: regionally grouped committees which took the collective decision to employ authorised officers and contract out private companies to deploy local wardens and process speed camera and CCTV fines, and to run their local tribunals.

According to the White Paper, despite the €50 million in collected fines, little of this cash ended up in the councils' budgets after the costs of the system were taken into account.

The White Paper says the LES is a vicious circle: if councils want to make more money, they have to pay the private companies to dish out the fines... and that means more fines. If they are not making enough cash now, the system will crumble unless more fines are issued.