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A New Model For Local Governance - By Benita Dodd (GPPF)

June 20, 2013 J

BenitaDodd2013 150x150 A New Model For Local Governance   By Benita Dodd (GPPF)What if you created a city that improved services for residents yet avoided the bloat of government bureaucracy and the long-term liability of government pensions? That’s just what happened in 2005 to Sandy Springs, when it became Georgia’s first new city in 50 years.

Before it became a city in December 2005, residents of unincorporated Sandy Springs spent three decades complaining about “substandard” county government services despite the high taxes they paid to an inefficient Fulton County government.

Their campaign for cityhood followed unsuccessful attempts to annex Sandy Springs into the City of Atlanta. But Sandy Springs’ own efforts to incorporate were repeatedly resisted by the Democrat-controlled Legislature, which rejected a referendum because Fulton County resisted the loss of taxpayer revenue.

When Republicans took control of the General Assembly in 2005, they voted to allow the referendum on cityhood. The move was promptly approved by 94 percent of Sandy Springs voters in June 2005; a mayor and six councilmembers were elected in November and, in the blink of an eye, the new city of Sandy Springs was born on December 1, 2005. And this was a city with a twist: It opened business with just two city employees: the city manager and city clerk; after a bidding process, everything except police and fire services was contracted out to a private company through a public-private partnership (PPP).

Before it became a city in December 2005, residents of unincorporated Sandy Springs spent three decades complaining about “substandard” county government services despite the high taxes they paid to an inefficient Fulton County government.

Why is this so important to the city’s success? When local governments all around were in the economic doldrums, Sandy Springs was sailing forward. That’s thanks to the efficiencies involved in handing over operations to the private sector, according to Oliver Porter, one of the architects of cityhood who became interim city manager and is now considered an international expert on privatizing local governments.

“One of the great benefits of the public-private partnership is the breaking down of the budgetary process,” Porter maintains.

“The typical government builds departmental budgets. What is the incentive the department head has? To provide more services. Each one builds a budget and it goes to the top, then you have to arbitrarily whack it. That’s broken down in the PPP model by the profit incentive.”

Another advantage was that, by outsourcing all services except public safety, the fledgling city’s management company could move resources around as needed.

Third, when there are no government employees, there are no long-term liabilities, such as public employee pensions, or union negotiations. Until Sandy Springs set up its own police and fire departments in 2006, it contracted with Fulton County for those services. By law, the county can bill no more than the actual cost of providing services to the new city, but when unhappy county governments lose revenue as new cities are formed by pockets of higher-income residents, “costs” of services contracted can be high: “We were killed in Sandy Springs for police and fire until we could get out of it,” Porter recalls.

Today, apart from police and firefighters, Sandy Springs has fewer than 10 employees, including the city manager, the city clerk, court clerk and finance director.

The city receives about 15 percent of taxes for local services; 52 percent goes to the county for schools. Porter, who modestly attributes Sandy Springs’ success to being “lucky,” has one regret in hindsight: “We should’ve taken welfare services, too.”

Today, apart from police and firefighters, Sandy Springs has fewer than 10 employees, including the city manager, the city clerk, court clerk and finance director.

“I’m not sure if there are constitutional prohibitions, but I bet we could take that remaining 33 percent – twice what we spend on local services, mind you! – then do the same job with welfare for 15 percent.”

In 2011, the city switched from managing company CH2MHill, which had succeeded in getting Sandy Springs up and running in three months, to service contracts with several companies with lower bids. The move is expected to save $35 million over five years.

Has the city’s PPP model met with satisfaction? Yes, according to citizen surveys. Yes, according to the first election after incorporation: 84 percent was the lowest vote for an incumbent. That’s no surprise, considering the millage rate and taxes haven’t increased, parks and roads are improved, the city boasts a $35 million reserve against a budget of $85 million and there are no unfunded liabilities, all despite the economic downturn. Sandy Springs’ success has spurred six new cities in Georgia alone, and the Sandy Springs model is trumpeted as efficient, effective and closer to the people.

Sandy Springs is not perfect. Residents do complain, but rarely about operations. Most complaints arise with City Council decisions, such as when residents are unhappy with zoning.

“I say to people, look at this: You actually went in and you were heard,” Porter says “How much chance did you get of being heard in Fulton County? The very fact that there was discussion and debate – even an argument – is a plus for our side.”

Benita Dodd is the Vice President at the Georgia Public Policy Foundation. This commentary first appeared in The Ripon Forum, Volume 47, No. 2, Spring 2013.

Reprinted with permission of Georgia Public Policy Foundation.

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