For San Diego, the Road to Privatization Gets Bureaucratic

Friday, Nov. 2, 2007 | While campaigning for his outsourcing measure last year, Mayor Jerry Sanders described the privatization of city services as a tool for saving an unwieldy city government mired in fiscal distress.

When the measure, known as Proposition C, passed a year ago next week, Sanders found a new way to energize his political momentum from the 2005 mayor’s race.

But, with his reelection bid fast approaching, Sanders could have trouble convincing the voting public that his outsourcing program, called “managed competition” within City Hall, is a success.

Beginning the bidding process between government workers and private companies is a year behind schedule. Critics from the City Council, labor and taxpayer communities continue to question the program’s methods and potential benefits. High-level officials who were in charge of managing the privatization efforts have departed from the Sanders administration.

“I think there has been a lot of uncharted territory that we’ve had to go through,” Sanders said Thursday. “It’s taken longer than I thought.”

The challenges add up to a simple, but troubling, reality for Sanders as he embarks on the 2008 mayor’s race.

By the time votes are cast in June’s primary, the city will still be several months away from making its first judgment on whether a municipal service should be contracted out to a business or kept in-house.

Two days after the votes for Proposition C were counted, Sanders held a press conference to pledge his administration’s swift action in launching the program. In the first wave of services that could be competed over, businesses would begin sending in bids as early as the summer of 2007, he said.

Instead, the summer came and went. Many of the rules and terms that Sanders and others say need to be put in place before a service can go through managed competition are still far off. The board of appointees who would review the solicitations for companies as well as their bids hasn’t even been put into place yet.

The earliest it appears businesses and employees will be judged, side by side, for the same contract is late 2008, according to Sanders’ estimate.

“I think the city should be aggressive in its timelines, but the mayor’s timeline was too aggressive,” San Diego County Taxpayers Association president Lani Lutar said.

Sanders acknowledges the timeline he submitted a year ago proved to be too rapid for a government organization that was still learning how to wield its new cost-cutting measure. But he has also blamed employee unions for slowing the program’s progress by demanding more meetings and information.

For the unions, preparations for privatization haven’t been deliberative enough. They have complained to the California Public Employee Relations Board that Sanders’ negotiators rushed the bargaining over the rules of managed competition before the two sides reached impasse.

If the city government is found to be at fault, Sanders’ negotiators could be forced to return to bargaining sessions they thought were over last December.

Anna Daneggar, the managed competition director for Sanders, said the program is on track to meet the revised schedule, but she declined to comment on the PERB hearings.

Sanders’ most likely opponent, businessman Steve Francis, has already pounced on the mayor’s predicament.

“It’s one of the many issues in which he promised to deliver and failed to fulfill his promise,” said Francis, who has declared his intention to run.

Like Sanders, Francis included privatization as a method for cutting costs from the city’s rolls while on the 2005 campaign trail. After losing in the primary race to Sanders and Councilwoman Donna Frye, Francis pursued privatization, even spending $110,000 on the campaign supporting Proposition C.

With his own think tank, the San Diego Institute for Policy Research, in tow, he announced at a press conference that the city of San Diego was missing out on between $80 million and $200 million in potential annual savings because Sanders was “lethargic” in mobilizing the program.

If he runs, Francis says he will make the delays in privatization a prime example he would use to scold Sanders for not pursuing his campaign proposals with the pace he promised during his first run for mayor. Local consultants think it’s likely to be Francis’ most effective message against the incumbent Sanders.

“[Managed competition] is not going to be the issue. But if I were running Francis’ campaign, I’d use this as an example that Sanders is a do-nothing mayor,” said political consultant Chris Crotty.

The privatization issue, from a policy standpoint, is significant. As an alternative to raising taxes, which the mayor has ruled out, Sanders has instead used the streamlining process that precedes contracting out as the centerpiece of his financial strategy for paying long-neglected expenses pertaining to its pensions, retiree healthcare and infrastructure.

But reaping the savings from that process, which has been performed on 11 departments from fleet maintenance to sewers, has been backed up because of privatization’s delays. As a rule, the city will not switch a department from its current model to its streamlined shape in order to protect city employees from contractors who could potentially cut just enough from the trimmed down version to win the contract. But without the changes in the department, savings for the city don’t come to fruition.

For a city that has counted on Sanders to harvest the bureaucracy for funds to help bridge an $87 million deficit this year and tens of millions more in upcoming budgets, officials said they’re eager to start seeing the financial help the mayor has promised.

“It may have been a little overaggressive, but I would have expected to see something probably by end of calendar year at least,” Independent Budget Analyst Andrea Tevlin said.

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