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Thursday, Oct. 19, 2006 | For a clue of how Mayor Jerry Sanders’ proposal to allow private businesses to compete for city jobs might work, look to Indianapolis.
About 2,000 miles away and with a population about half the size of San Diego, Indianapolis is being held up as a shining example of why voters should – or shouldn’t – vote for Proposition C in the Nov. 7.
The campaigns for both sides of the measure are pointing to municipalities across the country to better illustrate outsourcing’s effects on the tax rolls and neighborhoods, a strategy designed to assure or discourage voters about the proposal. The campaigns have listed off their favorite examples of outsourcing gone right – or awry – at debates, press conferences and on their websites.
Indianapolis, whose former mayor is viewed as a pioneer in the field of outsourcing government, has made the cut for both camps.
Backers of Proposition C point to the bonanza-like savings the Midwestern city found after it began outsourcing certain services a decade and a half ago, implying that cash-strapped San Diego could clear-up some room for its mounting pension, retiree health and infrastructure costs after a healthy dose of privatization.
The proposition’s opponents counter such bragging with sharp criticism of the glitches caused by errant companies more interested in their bottom line than the welfare of the city’s residents.
Some experts said Indianapolis’ experience is blurrier than a rush of cars whizzing along the city’s famous speedway.
“The jury is still out on Indianapolis,” said Elliot Sclar, an urban planning professor at Columbia University who studies privatized government services.
The tale of Indianapolis begins in 1992 when Stephen Goldsmith was inaugurated as mayor. The Republican mayor unapologetically took city agencies and public employees to task during his campaign, saying he preferred to let businesses handle some services that the city provided if it meant lowering the cost for taxpayers.
Instead of raising taxes, which he feared would chase companies away from the capital city into nearby suburbs, the city could start chipping away at its $1.1 billion infrastructure backlog by squirreling away the money it saved from outsourcing.
Indianapolis now contracts out its information technology, golf courses, wastewater treatment, some of its trash collection and snow-plowing services, and its airport operations. (Here in San Diego, Lindbergh Field is run by the San Diego County Regional Airport Authority, a public agency that is separate from the city.)
In addition, some city employees in the heartland city beat out their private-sector competitors when it came time to put the services to bid, downsizing their own operations in the process.
Public employees in the city agency that oversees the government’s 2,700 vehicles won a competition over three larger companies, trimming their staff from 129 to 82 within three years. As a condition of the workers’ thriftiness, the employees themselves split a fraction of the money the department saved as a result of finishing the year under budget.
Estimates vary about how much the Goldsmith administration saved during its eight-year tenure, depending on who does the accounting, but figures range from $200 million to $400 million. In his first term, he shed 42 percent of the city’s non-public-safety workforce.
As a result, the city was able to pour more than $700 million into its roads and parks and lowered taxes slightly.
“Everything I have read and seen shows that Indianapolis has been a tremendous success over the years,” Sanders told the Catfish Club last week at a lunchtime debate.
Proposition C supporters enjoy the Indianapolis model so much that they invited Goldsmith, now a professor at Harvard University’s Kennedy School of Government, to espouse the virtues of outsourcing and to fundraise. The Yes on B and C campaign committee lists articles that brim with compliments about Goldsmith’s privatization efforts.
But skeptics of the measure like to talk about Indianapolis too.
They point to the city’s waterworks, which the city purchased from a private owner in 2002, only to hire Veoila, an international company, to manage the system for the next 20 years.
Right away, more than 15,000 incorrect bills were mailed out to customers. Fire hydrants froze because of maintenance problems and a boil-water order was issued when a treatment plant failed.
A federal grand jury is currently investigating the company’s Indianapolis operations for allegedly falsifying water-quality reports, although some city officials said they question the probe’s credibility.
“A lot of questions that have come up came up because of former disgruntled employees,” said Steve Campbell, the chief deputy to current Indianapolis Mayor Bart Peterson, a Democrat.
Media reports have also stated that water customer complaints tripled in the first year, but Campbell said he doesn’t know where that data hails from.
One term removed from the Goldsmith’s efforts, the current administration said it is indifferent to privatization.
“I think there are clearly instances where it was a good move, but there are some where all the cost savings that had been anticipated are not necessarily there,” Campbell said. “It’s not something we or residents have a strong objection to. I don’t think they’re receiving worse service than they were before privatization.”
Skeptics say there could be some complications that result from Goldsmith’s outsourcing binge.
For example, some contractual loopholes have allowed companies to bill the city over budget. In its wastewater contract, the city agreed to allow the contractor to bill the city for any maintenance costs of its treatment plant. That artificially drove down the cost of the contract, causing the savings to be overstated, according to researchers at American University and Indiana University who studied the Indianapolis outsourcing system.
The researchers also found that the $26 million saved in the wastewater bills did not result in lower bills for ratepayers.
In addition, with the layoff of public employees that follows a private company being awarded a contract, the city’s workforce is too depleted to compete the next time that service’s contract comes up for bid, Campbell said.
The deputy mayor said it would be “very hard” for city workers to win back the ability to perform major functions such as wastewater or airport operations.
“It’s close to impossible to try to bring something like that back under the auspices of city government,” he said.
Sclar, the Columbia professor, said Indianapolis’ success was forcing the employees to lower their costs, like in the vehicle maintenance agency, but he echoed Campbell’s concerns about competitions down the line.
“You can use competition to an extent, but once you get rid of the department, you don’t have that back-up,” he said.