Guest Column – David Edwards, Senior policy adviser, Office of the Mayor
The city of Atlanta is not bankrupt. We have a potential budget deficit this year, but with the actions we have just taken, we are projected to end the year in the black. To suggest otherwise is simply inaccurate.
In 2002, Bain and Co. developed a Turnaround Plan for reinventing Atlanta’s government. At the time, the consultants at Bain found the city was suffering from:
• A budget shortfall of $82 million, or 19 percent of the general fund.
• An annual growth rate in expenditures of 8.1 percent.
• Spending of 2 percent to 4 percent per capita higher than peer cities.
• A work force 21 percent to 37 percent per capita higher than peer cities.
In response to those findings, Bain developed a blueprint with 29 recommendations designed to return the city to fiscal health by improving local government operations. In the years since, we have implemented more than 95 percent of the Turnaround Plan’s recommendations. As a consequence of these and other efforts, the city is now operating from 15 percent to 25 percent (depending on how you want to measure it) more efficiently than when the Franklin administration arrived.
The city of Atlanta is spending 15 percent less per resident on city services than we did in 2001. The city also has 25 percent fewer employees per capita, or 847 per 100,000 residents compared with 1,132 per 100,000 residents in 2001. We have vaulted from the second least efficient peer city, according to Bain Consulting, to one of the most efficient.
Most important: The city has not forsaken service to citizens to achieve its efficiency gains. On the contrary, service levels have increased:
• The city has 320 more police officers (an increase of more than 20 percent) on the street than in 2001. So we reduced the bureaucratic work force and increased the public safety work force.
• The city maintains more than 730 additional acres of green space than it did in 2001 and cuts the grass more often.
• The city processes 30 percent more building permits than it did in 2001.
Among the cost-savings initiatives we have completed:
• Based on third-party recommendations, the city has consolidated its court system, saving more than $20 million annually and reducing the number of employees providing court-related services from 480 to 145 while eliminating the positions of 12 elected officials.
• Through new technologies such as Oracle financial systems and KRONOS timekeeping software, the city has reduced its support department personnel by 15 percent.
• It has also streamlined the building permitting process, reducing processing time by nearly 50 percent despite an increase in volume of 30 percent.
• Through route restructuring and cost management, the city’s general fund no longer subsidizes residential garbage collection and disposal, which has saved more than $10 million annually.
On the issue of privatization, there is misinformation out there that somehow the city of Atlanta is uninterested in privatization. As Mayor Shirley Franklin’s point person on government efficiency, allow me to point a few things out:
• We have privatized a variety of services since we have been here, including worker’s compensation management, inmate food services, inmate medical services, building security, street vending management and parking enforcement (which we are about to complete). We are always looking for opportunities to outsource when it makes good economic sense.
• We asked CH2MHill in 2003 to advise us on whether we should privatize residential garbage collection. After an in-depth study, the firm advised against it and provided us with an operations improvement plan, which we have implemented. We have since asked another private waste management company to look at the issue again. I am skeptical they will come back with a different answer.
• We asked UPS in 2003 to review and advise us on whether we should privatize fleet management services. The company advised against it and instead provided a road map for improving the efficiency of our service delivery. We implemented that plan. Last summer we asked another fleet management consulting firm to review the progress we have made and asked again whether we should privatize it. This firm concluded that we were operating at a best-practices level for cost and service delivery and advised against privatization.
It is important not to get too caught up in the claims that some folks make about the gains from privatization. In my experience, privatization makes sense only when certain conditions apply:
• There exists a robust private market for the service you intend to outsource. This was the failing of the water system outsourcing, when all we did was move a natural monopoly from public to private hands.
• The public agency has a structural cost issue. This often comes in the form of union contracts. In our case, we have no collective bargaining, so we don’t have the labor cost issues that you see in the Northeast and Midwest. In many cases our labor costs are lower than those of private providers.
• The public agency can’t operate at scale. This is where we differ from some of the smaller cities that have gone the privatized route. Dunwoody, Milton, Johns Creek and even Sandy Springs in some areas are not large enough to gain the efficiencies from scale. When you are operating a city the size of Atlanta, private operators will not bring to the table the economic advantage of scale because we are already operating at close to the peak of the scale curves.
Take a quick look at the math on this. For any outsourcing opportunity to be attractive from the city’s perspective, we have to be convinced that a private operator can provide the same level of service for about 30 percent less than what it costs the city (15 percent to cover the returns the private operator needs to achieve and another 15 percent to make it worthwhile to the city). That is quite a hurdle. Although we have found areas where those savings are achievable, in many cases they simply are not.
Our mayor is not one to broadcast her achievements, but it is important our taxpayers understand the vast improvements in the efficiency of the city that we have achieved during her two terms. I doubt one will find a more aggressive reform program anywhere in the country (and I have tried to find one).