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Prop. C Aims to Generate Competitive Drive for City of SD Contracts

Audio

Aired 4/19/09

San Diego is under more pressure than most cities to cut costs. It has a massive pension deficit, and a giant backlog of deferred maintenance.  The mayor put a measure on next week’s ballot that could lower costs. Proposition C, the Managed Competition Initiative, would pit public employees against the private sector to compete for city contracts. KPBS Metro reporter Alison St John asks whether the measure really would save money and help pull the city out of its financial problems.

On a busy street in Hillcrest, city workers are filling a trench for a new water line. Scott Tulloch, head of San Diego’s wastewater department, says the men worked overnight to finish on time. 

Tulloch: Back in the old days it might take six to eight weeks when somebody calls for a new water service and now they’re down to two weeks so as long as someone gives us two weeks the water department can come out and give new service to a client..

Tulloch says a program called “Bid to Goal” has made both the sewer and water departments dramatically more efficient, and saved the city huge sums of money.

Tulloch: . . . between ‘98 and 2006 we’ve saved $190 million. 

In the “Bid to Goal” program, city departments hold themselves to the standards of a hypothetical private sector contract, and in this case they surpassed their own goal. The Managed Competition Initiative would take the city a step further, allowing Mayor Jerry Sanders to open certain city services to competition from private contractors.

 Sanders: We simply cannot get to where we have to get in the next five years and straighten out the city’s finances unless we start thinking differently about the way we do business.     

The city’s labor unions are naturally up in arms against the proposal. Joan Raymond of the city’s blue collar workers’ union, says privatizing public services is a big mistake.

Raymond: Companies go out of business, they go bankrupt, there’s low balling, there’s change orders, it’s all ultimately a drain on the city’s budget.

The Unions aren’t the only ones skeptical that the private sector can do it better. Norma Damashek of the League of Women voters says the civil service was created in the first place to reform problems created by private contracts.

Damashek: Back in the 19th century, most cities  city services were all privatized,  what characterized the 19th century was an amazing era of political corruption, scandal, patronage, cronyisms.   

However Carl Demaio, the lead proponents of Prop C, says there are safeguards written into the measure. Demaio, formerly of the libertarian Reason Foundation, is founder of the Performance Institute, a think tank with million dollar Federal contracts to use business efficiencies to cut costs. He argues Prop C. would not open the door to corruption.

  Demaio: Our initiative requires that an independent review board -- not politicians, not city bureaucrats -- an independent review board. Where their conflict of interest would be publicly disclosed and would make an independent evaluation outside of politics. 

 Damashek is not reassured by a seven person, part-time board appointed by the mayor, who must oversee hundreds if not thousands of city contracts.

Damashek: That kind of review board is a bogus security measure for San Diego.

San Diego City Council is split on Prop C. Councilman Kevin Faulconer has actively campaigned for it. Councilman Tony Young suspects it’s the business community out to feed from the public trough. 

Young: I’m very fearful that this is just a big grab that San Diego is a big piece of pie for private industry to carve up.

However, managed competition doesn’t necessarily mean privatizations. Harvard’s Steven Goldsmith, the former mayor of Indianapolis, says his city saved $400 million by simply making city employees live up to market forces. Goldsmith says his public employees won the contract about 80 percent of the time.    

Goldsmith: You have to liberate your workers, you have to give them more discretion, remove the layers of middle management, give ‘em better tools, better training. So what you do is you say “reinvent your work, we’ll give you some consultants and bid against the private sector” and really quite remarkable things happen.

Indianapolis is the poster child for successful privatization, but even there, major problems cropped up. The company that took over managing the water supply led to a grand jury investigation over falsified water quality data.

Professor Elliot Sclar of Columbia University’s urban planning program is author of You Don’t Always Get What You Pay for: The Economics of Privatization. He says arguing for or against privatization is missing the point. He says in the end it all comes down to How city services are managed.

Sclar: Incompetent management with contracts can be a disaster. Competent management with good workers can do things well. Some things ought to be contracted out and some things ought to be done in house. If you don’t have competent management it doesn’t matter what you do.

San Diego has already saved hundreds of millions of dollars over the past decade by challenging its workers to meet private sector standards of cost and efficiency -  like the workers putting in the water line here in Hillcrest.

If San Diego voters approve Proposition C next week, the city may hand over more public services to private contractors. But the change won't necessarily save taxpayers money unless the city manages those contracts better than it has managed its affairs so far.

Alison St John, KPBS News.

 

 

 

 

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