|
DEPARTMENTS
From the Editor-in-Chief
Recent Court Decisions
Business Management
Insurance & Bonding
Public-Private Ventures
Calendar of Events
COLUMNS
Finance
Technology
Labor
International
Washington, D.C.
Environment
Law
Archive
About
Order
Advertising
Let Us Hear From You
Editorial Advisory
board
CBR Staff
|
Focus Issues
Competition,
Strategies, Rebuilding
by Mayor Stephen Goldsmith
- The Benefits of Competition -
A few years ago former New York Governor Cuomo said that his state was so
financially strapped that it "had" to privatize some services. That is often
the attitude of cities and states to opening up government services to
competition: wait until the last possible moment and use it only as a last
resort.
Nothing could be more wrong. Competition may be necessary to stave off
impending doom. But competition is also a good way to avoid ever getting
close to that situation.
Let's take a quick look at what competition has allowed us to do in
Indianapolis. Since 1992, the year our competition program began, we have
saved over $240 million, spent more on infrastructure and public safety than
ever before, held the line on taxes, and trimmed our non-public safety
workforce by 45 percent. The interesting thing is that no crisis made us
take this course. It was just common sense.
Fast-food restaurants illustrate what I'm talking about. They're always
competing in terms of price, food quality, and service. No one says they're
perfect. But imagine what they would be like if there were only one fast
food chain. If people had no choice, if there were no competition, if fast
food were a monopoly, two things would definitely happen. Prices would go
up, and quality would go down.
Most of government is run that way. We are monopolistic providers of certain
services. Over time it is inevitable that our costs and budgets would
balloon, taxes would be raised to make up the difference, and the quality of
our services would decline. Then to avoid our tax increases, wealthy
individuals and businesses would move across the city line leaving behind a
bigger proportion of poorer people. The problem escalates until a point of
desperation is finally reached.
That's what is happening in many cities across the nation.
Now imagine that the government opens up some of its services to competition
from the private sector. Suppose that it said, for example, let's have
private firms compete against government workers to patch streets.
This is what we have done in Indianapolis. And here are some of the lessons
we've learned over the last few years.
Competition in services means improvements and cost savings.
Whenever we have opened up city services to competition, the costs of
providing those services have gone down anywhere from 20 to 60 percent. The
services have also gotten better — usually much better. We recently competed
out our public transportation system. The savings generated from competition
paid for three new routes that we could not have otherwise afforded.
Government workers should be included in the competitive process.
The way to get efficiencies is not necessarily through privatization, but
through competition. Private monopolies are only marginally better than
government ones. The most robust competition involves government workers
competing against private vendors.
In Indianapolis, street maintenance, vehicle repair, and trash collection
were all opened to public-private competition. In each of these cases, city
workers won by finding cheaper and better ways to do their jobs. Too often
people outside of government view our workers as incompetent. That's
nonsense. Almost always, their inefficiencies are due to bureaucratic limits
on their ability to change their jobs in ways that make sense. They should
be included in the equation. Competition leads to innovation.
Four years ago a minority-business owner approached us about opening our
internal mail delivery to competition. We acted on his suggestion, and his
firm submitted a proposal. They won hands down because they thought of ways
to deliver interoffice mail that had never occurred to us and of doing it
far more cheaply. Whatever is touched with competition is always touched
with innovations that no one person could have imagined but that come out in
the competitive process.
Indianapolis has submitted its budget for next year. It calls for spending
cuts, no tax increases, and the lowest municipal workforce in over 20 years.
None of these would have been possible without competition. But competition
was not the only thing that led to these achievements.
- Strategic Tools -
It became clear on the first day of my administration that if the city was
going to be successful in creating a more efficient and responsive
government, a whole new set of financial and management tools would be
necessary. City employees would need new financial tools in order to
compete, and the administration would need to be able to make "apples to
apples" comparisons of public versus private sector provisions costs.
Five new practices formed what came to be known as the City's Strategic
Tools Initiative. These strategic tools are: activity-based costing;
performance measures; popular budgets; infrastructure balance sheets; and
customer surveys. These tools have served us well in our battle for
efficiency and accountability in government. We would not be where we are
without them.
Activity-Based Costing
One of the most important strategic tools Indianapolis uses is
activity-based costing (ABC). ABC gives the costs of city services and
activities on the basis of outputs. ABC determines the costs of all inputs
that go into producing an activity.
Unlike other cost-estimating methods, activity-based costing focuses
attention away from inputs (e.g., the number of labor hours used, the amount
of budgeted dollars, or the number of vehicles bought) to give costs on the
basis of outcomes (e.g., the number of street miles repaired or plowed or
the number of acres of grass cut).
Activity-based costing has had its widest and most significant application
in developing cost information that city managers and front-line workers can
use for competing successfully against private sector vendors for the
provision of government services.
Union president Steve Quick observed that because of activity-based costing,
"We're a better educated workforce now."
The Popular Budget
Indianapolis reformed its budget in 1994 in order to create a document that
citizens could understand.
Government budgets normally are enormous, cumbersome documents describing
sub-funds and using terminology that makes them incomprehensible to most
employees and citizens. Traditional city government budgets do not define
outcomes and performance measures.
The Popular Budget describes: the for goal of each department and how it
fits in with the City's vision; "external outcomes" (what accomplishments
are expected — example, smooth streets); "performance activities" (what is
done to accomplish those outcomes — for example, crack sealing); the cost of
each performance activity; and performance measures.
By spelling out the goals, external outcomes and activities that are
expected to be accomplished, the Popular Budget invites and facilitates
debate over whether these outcomes and activities are appropriate actions
for city government to pursue. Furthermore, by indicating the cost of each
activity performed and the specific measurements by which each activity is
judged, the Popular Budget increases the accountability of everyone in city
government. In addition, by concentrating on goals, outcomes and activities,
traditional organizational boundaries are crossed, allowing you to see the
overall impact of a program.
The Popular Budget also provides a vehicle for public debate on city
operations. Taxpayers have the ability to influence the process and specify
what activities they feel should be prioritized. My office and the
City-County Council are also able to assess city operations because a more
defined outline of activities is presented in the Popular Budget. This is
important when evaluating the impact of budget cuts or revenue changes.
In 1996 the regular and Popular Budgets were combined into a single
document.
Performance Measures
Every time the City enters into a contract, it identifies standards for
evaluating whether a contractor is fulfilling the terms of the contract. The
City uses performance standards internally, too, so that the effectiveness
of City employees and their departments can be evaluated. The standards are
compared to actual results to see whether the standards are being met.
The performance measures correlate to individual and departmental goals and
let management take action based on actual work performance. Pay increases
are based on attaining individual goals and on the unit's attaining its
performance goals.
There are several kinds of performance measures. They measure quantity,
efficiency, productivity, and quality of work produced.
Output measures identify how much of an activity is produced or performed
(for example, the number of acres mowed, applications processed, vehicles
serviced, lane miles plowed, or feet of sidewalk repaired). Efficiency is
measured by the cost per unit of an activity performed (for example, cost
per ton of garbage collected, or the cost of snowplowing a lane mile).
Efficiency measurements enable comparisons with industry or with other
divisions in government. Efficiency measures also serve as a benchmark for
evaluating the performance of the same group over time. Productivity
measures indicate the output produced or performed relative to time (for
example, the number of lane miles crack-sealed per week or the number of
feet of sidewalk repaired per month). Outcome measures describe the
effectiveness of service delivery (for example, the percentage of critical
indicators met or customer satisfaction).
These measurements help assure a high level of service by the City to its
citizens and by contractors to the City.
Infrastructure Balance Sheets
The City of Indianapolis is responsible for managing such assets as streets,
the sewer system, curbs, sidewalks, and traffic control devices. The
Infrastructure Balance Sheet (IBS) is being developed to ensure that the
best use is made of City resources.
The IBS will provide better information about the investment needed to
maintain the value of the City's assets, what the value of those assets are,
and the framework for making informed decisions about when those assets need
to be maintained, rehabilitated, or replaced.
The IBS will produce tools to provide information for long-term strategies
for investment and management.
Currently the City is preparing life-cycle analyses of its most important
assets so that it can determine their expected rate of deterioration. The
assets will then be examined to estimate their monetary value as well as
their value according to how well they perform their intended functions.
Customer Service Surveys
Customer service surveys are conducted several times a year to explore
issues and concerns with the citizens of Indianapolis. They help gauge the
public's perception about the amount and quality of service delivery. The
City performs surveys on specific services (e.g. median mowing) and on the
maintenance of public amenities (e.g. golf courses). Although designed for
the city as a whole, these surveys also reflect attitudes of service by
township so that the City can assess whether services are being equitably
distributed.
We were not surprised to learn that citizens are concerned about
infrastructure issues and public safety on our streets. But the level of
concern about safety in City parks provided the impetus to the development
of the Park Ranger Program, which is working to provide citizens with the
peace of mind they deserve.
Customer service surveys provide valuable information to the citizens and,
likewise, to city hall. They show, for instance, that the Park Ranger
Program is having some effect. In 1995, for the first time, most people in
every Indianapolis township rated park safety as "good" to "excellent." The
surveys also demonstrated that Indianapolis citizens are generally pleased
with the city, the local economy, and police protection. An impressive 80
percent rated the quality of life in the city as "good," or "excellent," and
63 percent rated the value of the city services they receive as "good" to
"excellent" for the city taxes they pay.
In the fall of 1992 I created the Existing Industry Task Force to help
identify the critical issues and needs of existing businesses in
Indianapolis as well as ways the City could provide better support to the
local business community. Members of the task force developed an industry
survey to determine how local businesses perceive the impact of various
factors on business operations, to rate the performance of city and county
services, and to gather statistics about local businesses.
Surveys were sent to over 1,600 businesses, and about 25 percent responded.
The survey revealed strong optimism about the future of the city economy and
great confidence in many city amenities and services. The survey, however,
also showed significant concern about the burden of regulations and taxes.
This survey has played a key role in our efforts to resist tax increases,
downsize government, and lessen the regulatory burden on businesses.
Survey results are distributed to all departments for use in developing new
— or revamping ongoing — projects or procedures that address public needs.
- Infrastructure Improvements -
Part of the savings from our competition program have gone into
infrastructure.
One of the greatest challenges that governments at all levels face is
keeping up with the demands on infrastructure. Infrastructure upkeep
requires a tremendous investment, but any city, state, or county that wants
to leave its capital assets in good condition for its future citizens must
make the necessary commitments. Otherwise it will find itself, as
Indianapolis did a few years ago, facing an accumulation of infrastructure
projects that are difficult to complete and even more difficult to pay for.
In mid-1991 the Indianapolis Chamber of Commerce released its report Getting
Indianapolis Fit for Tomorrow. The study declared that Indianapolis had
developed a $1.1 billion infrastructure deficit. Some of the city's streets,
bridges, sewers, parks, and other assets had deteriorated to a critical
point and needed immediate attention.
For example, the report observed that sewer lines beneath the downtown area
were 75 years old with some in advanced stages of decay. In some cases, this
decay led to street and sewer collapses.
In 1992, after meeting with elected representatives, concerned neighborhood
groups, and businesses from across Indianapolis, I announced the structure
of Indianapolis.
One of the key aspects of the program was making these hundreds of
improvements without raising tax rates. Like most cities, Indianapolis has
suffered the flight of wealth to the suburbs. Any tax increase to pay for
infrastructure improvements would drive more people across the city line
into lower-tax suburban districts.
To avoid funding capital improvements through higher taxes, money for the
program came from two sources. First, some funding came from municipal bonds
that received considerable public support. Second, Indianapolis embarked
upon a wide-ranging effort to cut municipal government costs. Unneeded city
assets were sold. And most important, the city subjected the provision of
municipal services to competition.
Opening the provision of city services to competition has generated over
$240 million in savings. Plowing much of these savings into infrastructure
improvements has allowed the fBuilding Better Neighborhoods program to be
funded without a tax increase.
General Infrastructure Improvements
The BBN program spanned every city department and included rebuilding curbs
and sidewalks, repairing sewer lines, resurfacing streets, improving parks,
rehabilitating bridges and public housing facilities, and upgrading police
stations.
Infrastructure spending tripled under the Building Better Neighborhoods
program.
The progress made on sewers is a good example of what the City accomplished.
Before 1992 the city spent $4 million a year in sewer improvements and
averaged five sanitary sewer projects a year. In 1994 alone Indianapolis
spent $32 million in such projects, an eight-fold increase and more than at
any time in the city's history. Under BBN the City spent $76 million on 85
sewer projects.
Other capital improvements speak to the enormous impact of this program. All
Indianapolis fire stations were improved or replaced. A new south district
police headquarters was built. Public safety infrastructure improvements
totalled $11.1 million. The City resurfaced 440 miles of streets. In 1994
alone, more streets were resurfaced, bridges repaired or replaced, drainage
projects started, and sewers cleaned than at any other time in city history.
Curb and sidewalk repair and replacement and street resurfacing all
quadrupled under the program.
A comparison with Philadelphia might be helpful. The BBN program invested
more than $500 million in infrastructure over three years. Philadelphia,
with a population double that of Indianapolis, spent $150 million over the
same period.
New Park Facilities
In 1992, most park facilities were over 30 years old and had never been
renovated. We realized that it would be necessary to improve parks in order
to make them a more vibrant element of the neighborhoods they serve. Under
BBN, $41.2 million was invested in more than 80 projects to upgrade park
facilities and add attractions. Six aquatic centers were built, whose
attendance within one year was 200 to 400 percent that of
previously-existing City pools.
One of the most outstanding of these facilities involves a novel partnership
between the parks department and a new school. The City gave 18 acres to
Warren Township to build Raymond Park Middle School on condition that
certain of its facilities would be open to the public when the school was
not using them. The result is a park that is a central part of the
surrounding neighborhood and the City's east side.
On the southeast side the City is teaming up with the local Boys and Girls
Club to build a $1.4 million recreation area. The City provided the land,
and the Boys and Girls Club will manage the facility, which includes a gym
and several multi-purpose rooms. Individuals from the neighborhood came
together to help raise funds for the project.
The largest recreational project is the transformation of the 976-acre
Riverside Park into a regional park. The park will include pedestrian and
bike paths on both sides of White River, docks for boat rental, a golf
academy, softball and basketball complexes, renovations to existing
facilities, and a new park ranger system. Private sources are contributing
$10 million of the $18 million investment.
In addition, the City has been adding to park lands. Since 1992, city parks
have grown by 159 acres. Nearly 175 miles of greenways are also being
developed that will serve as fitness and recreational trails throughout the
city. They will link more than 125 destinations, including schools,
neighborhoods, and retail areas. Bikers and joggers are already using the
several asphalt and crushed gravel trails that have been completed. Since
they will stretch around the city, they will be especially accessible.
A Continuation
The Building Better Neighborhoods program has been so successful that it is
being continued. In 1996 Indianapolis invested an additional $27 million in
more than 60 park improvements. From 1997 through 2000 the City will spend
$326 million on 119 parks projects and 342 bridge, drainage, road, and sewer
projects.
The Building Better Neighborhoods program has changed the face of
Indianapolis from run down and worn out to new and vibrant. It has been a
huge undertaking, but one that will benefit our residents well into the next
century.
- Conclusion -
Indianapolis has come a long way since 1992. Although taxes have not been
raised in eight straight years, we brought about the largest infrastructure
rebuilding program in city history. We have realigned our priorities so that
we now devote over half of our entire budget to public safety. In addition,
each of the past four years has set a new record in private sector job
creation.
Competition and the use of strategic tools can help every city and every
state lower costs and improve services. It is never too early to start.
Stephen Goldsmith is Mayor of Indianapolis, Indiana.
© Copyright 2004. All rights reserved.
|
