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Managed Competition on the Back Burner

San Diego Mayor Jerry Sanders launched an ambitious plan at the beginning of 2008 to cut costs by opening city departments to competition with the private sector. But the so -called “managed competition” program has made little headway this year.

KPBS reporter Alison St John finds most of the new city council members are against widespread privatization, and the focus remains on how to cut existing labor costs.


San Diego voters supported Prop C in 2006, saying they wanted city departments to compete with private contractors to provide services like trash pick up or park maintenance.


Mayor Jerry Sanders talked in his state of the city address last January about his efforts to move ahead with managed competition.


Sanders :  "Functions are already being considered for the competition process, more will follow later this year,  as part of a carefully crafted process  designed to protect the public interest while improving the efficiency of service delivery."


But no city departments have been outsourced this year, and managed competition is on hold, blocked in the courts by the labor unions.  

The city council has four new members, three of whom are against privatization. Marti Emerald is one.


 Emerald : " I’m not a supporter of outsourcing city jobs… You undercut the job market,  you lower wages, you continue to degrade the earning power and spending power of people in the community."


Emerald says getting the private sector to do city jobs doesn’t necessarily save any money.


Emerald :  "For example, in Portland Oregon, which is a comparably sized city, the city outsourced janitorial services - didn’t work -  they had to come back and rebuilt the whole department, it wound up costing a lot of money."


City council members Ben Hueso, Toni Young and Donna Fry are not fans of privatization, and new city councilmember Sherri Lightner also opposes it. So does recently elected councilman Todd Gloria.


Gloria : " I have seen efforts in the past to try to privatize a lot of the work of local government and I’ve never been that impressed.. It seems to me there are grand promises made that are rarely met."


Gloria says when salaries and benefits are cut, the taxpayer ends up covering the costs anyway by subsidizing  housing or health care for people who can’t afford rent or medical care anymore.


Gloria : " I also just fundamentally have questions about whether or not there should be a profit motive involved in putting out a fire or lending a book or cutting grass at a park. I think we can do a lot of this work within the context of our current employees."


That brings the focus back to the labor negotiations going on at city hall. All five of the city’s labor unions will be negotiating new contracts in 2009.


The unions have already made significant concessions for new employees.  But newly elected city councilman Carl DeMaio says he believes, unless labor is willing to make more concessions, the public is unlikely to agree to pay more in taxes. 


DeMaio: "The real problem here continues to be the runaway labor costs at the city of San Diego, until that’s addressed, the public is smart enough to reject any notion of increased costs for the city government."


DeMaio is a strong proponent of privatization as a way to cut labor costs.


But with managed competition delayed, San Diego’s Chief Administrative Officer, Jay Goldstone, is still looking for ways to limit the spiraling cost of guaranteed pension and retiree health benefits.


Former city attorney Mike Aguirre failed to overturn pension benefits that the courts ruled were vested and therefore guaranteed.   But Goldstone says there’s one area the city is still fighting : the so- called “DROP” program, where current employees five years or less away from retirement can start to withdraw their retirement benefits while still working. Goldstone wants to change that.


Goldstone : " I am hearing that the numbers are in the hundreds of millions of dollars in savings, in terms of our pension liability, which on an annual basis, could save the city tens of millions of dollars in budget savings"


The city’s annual pension payments could jump from 160 million dollars to more than 200 million in 2010. That’s mainly because the current economic downward spiral means the city will have to back fill the pension fund to fulfill its guaranteed pension obligations.


With little guarantee that outsourcing will solve the city’s problems, the battle over which pension benefits are vested - and therefore legally binding -  promises to continue into the New Year.


Alison St John, KPBS news.


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