Saving Private Coleman

St. Paul launches a campaign to open bidding wars on city services

During his State of the City Address in 1998, St. Paul mayor Norm Coleman fired off this salvo: "We need to aggressively introduce the element of competition into the delivery of city services." So began the campaign to put some city services out for bid between private companies and the city's own employees. In short order, the 11-member Compete St. Paul Task Force, headed by City Council member Mike Harris and former Deputy Mayor Tim Marx, formed to do what task forces do: meet, mull, make recommendations. In late September the group issued its advice in a report that argues that transferring some city services to the competitive marketplace could promote "fiscal restraint"; what's more, it reads, "the city could eventually save millions of dollars, improve service quality, and develop a cutting-edge culture of innovation."

The task force suggests several ways to tighten the city's belt in the short run, including privatizing the city's Animal Control department (estimated budget: $700,000), parking enforcement ($1 million), and various building maintenance duties (about $3.1 million). In all, the areas that could be looked at first have an estimated annual cost of just over $8.6 million, but a small chunk of the city's roughly $400-million annual budget. Services that could be targets for a long-term conversion to competitive bidding include snow plowing ($4.2 million) and oversight of public golf courses ($3 million).

Despite Coleman's call for "aggressive" forward movement last year, the initiative is unfolding slowly. Where there was once talk of finding $200,000 in the mayor's '99 budget for two or three staffers to administer the bidding process, now there is only an unspecified amount earmarked for a single project manager. According to task forcer Joe Reid, director of St. Paul's financial services office and Coleman's point man on the issue, the mayor plans to tap someone for the position shortly.

Animal Control's Bill Stephenson says when the city last checked, no private company cared to take over the doggie patrol
Craig Lassig
Animal Control's Bill Stephenson says when the city last checked, no private company cared to take over the doggie patrol

Private contracts aren't new to the city, which jettisoned its garbage collection in the late '70s. And the latest ideas aren't surprising, coming from a mayor who has never made a secret of his affection for business interests in St. Paul. Reid stresses, at this point the task force's recommendations are only suggestions: some may be chosen for further study, while others are likely to die on the vine. He says the city plans to tackle the list with caution: "I think we will probably look at a small number of those opportunities in 1999"--and, Reid adds, the city expects to move no more than three service areas to the bidding pit this year.

For all the talk of innovative governance, there's a sense of déjà vu about the whole push. Bill Stephenson, who supervises Animal Control, recalls that in 1996 the city concluded that it would make more sense to leave departmental duties in the hands of city employees because "interest from the private sector to do what we do just hasn't been there." The lack of enthusiasm isn't likely to have changed in the two years since that last round of brainstorming. Similarly, this past December the City Council rejected a proposal from a private group to take over administration of the Highland Golf Course, a plan which would have upgraded the course but reduced public access.

On another front, if parking enforcement were privatized, as is proposed in the report, Police Chief William Finney says his department would then need to develop new channels for securing rookie cops: "We've recruited large numbers of people of color through that; we've recruited a large number of female officers through that. If that became private, I would just get very creative about finding another avenue to get people into city service."

Still, Reid suggests that the mayor's strategy may simply be to raise the specter of privatization, a tactic that has been known to prompt city departments to re-evaluate their own budgets and cut costs under the threat of open bidding. The possibility alone, he points out, can lead to savings without the services ever shifting away from city employees' domain.

That view is shared by outspoken critics of privatization. Macalester College professor Peter Rachleff, who specializes in labor history, says that privatizing traditional public services has become a global trend as politicians look to cut budgets and private entrepreneurs see the possibility of new profits. He says that ultimately the services don't have to be opened up to bidding for city officials to have achieved cost-cutting objectives.

"The drive for concessions is coming to the public sector, and the hammer that's being used is the threat of privatization," Rachleff says. "It allows public employees to cut their own throats, rather than have their throats cut for them. Bidding with private contractors, they're either going to cut jobs or they're going to cut wages and benefits. They will win by losing."

 

The only model offered in the Compete St. Paul report is the city of Indianapolis, which since 1992 under Mayor Steve Goldsmith has thrown some 70 city services out for bidding between city employees and private vendors. Since then it's become a municipal mecca for other politicians interested in privatizing government services around the nation. Washington, D.C.'s new mayor, Anthony Williams, is one such disciple, pointing to Goldsmith as a guru of innovative urban policy; he trekked out to Indianapolis for edification within weeks of being elected. But given key differences between Indianapolis and St. Paul, shrinking city government in St. Paul is likely to be a much more perplexing riddle.

Indianapolis officials tout projected savings in the range of $400 million over the life of private contracts recently sealed with the city, some of which extend well into the next century. The Compete St. Paul Task Force recommends that St. Paul set a similar goal. But look closely and you'll see that the lion's share of that savings in Indianapolis--some $294 million--came from turning over wastewater treatment and the management of the Indianapolis International Airport to the private sector--two services that don't exist in St. Paul's budget because they're handled on a regional level.

Perhaps more to the point, under Goldsmith's leadership, full-time municipal jobs plummeted from nearly 4,700 to 3,541, a 25 percent drop. "Middle managers were fired, basically, not the guys plowing the streets and picking up the trash," says Kate Healey, Goldsmith's press secretary.

Steve Fantauzzo, executive director of the American Federation of State, County, and Municipal Employees (AFSCME) Council 62 in Indianapolis, says that no union employees lost their jobs during the integration of competitive bidding and notes that city employees are winning four out of five projects currently put out for bid.

The difference is that in Indianapolis, only a rough 65 percent of the city's workforce is unionized. In contrast, as of the end of November, all but 60 of St. Paul's 3,629 full-time, part-time, and temporary employees were represented by a union. That's 98.5 percent representation, excluding only department heads and mayoral and council staff.

And for all of its austerity measures, Indianapolis's 1999 budget of $441 million is just 4 percent less than its $460 million budget in 1992. One might ask how the city cutting its staff by a quarter has yielded only a single-digit savings. The answer? The city's spending on public safety skyrocketed by 29 percent in the same period. On the St. Paul front, Reid says Coleman isn't interested in simply moving piles of money around: Compete St. Paul is, he says, "designed to make sure we're being as efficient as we can; it's not designed to produce savings that could be spent somewhere else."

That still leaves open the possibility of job cuts as the proposal is put into practice. Professor John Remington, who teaches at the University of Minnesota's Carlson School of Management, has researched labor relations for years. He says middle management typically gets the squeeze when cities shift into privatization gear. As for St. Paul's blueprint, "I think we're talking about, well, maybe more trouble than it's worth," he concludes, adding that putting services out for bids often ends up eating more of the city's time and money than anyone predicted. "You may be able to downsize, you may be able to lay off some of the workforce, but at what cost?" Remington asks.

Jerry Serfling, assistant director for the AFSCME Council 14, which represents about 1,000 St. Paul clerical and technical employees, says his membership is open to the possibility of competition in some areas. But so far, he says, he has not been provided with any details concerning the two issues that union members are most concerned about: job protection and assurances of a "level playing field" in the bidding process. Reid believes that meetings with union officials have so far gone well, though the specifics of the plan still need to be ironed out.

The Compete St. Paul report makes clear that the move to invite private-sector contractors to vie for public services will require a great deal of collaboration between the city's administration and its employees. In that spirit, union officials asked in the wake of the report that they be part of the selection process for hiring a staffer to spearhead the crusade. But, in what could be read as a portent of things to come, they were told, thanks, but no thanks. "We were told that that would not happen," Serfling says, noting that Coleman's administration has never been keen on collaboration between city employees and administration. "It looks like it's business as usual."

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