This is How Sandy Springs Saved Millions, Would it Work for South DeKalb's Newest City?

Saving millions with only seven employees

Concerned Citizens for Cityhood of South DeKalb is behind an initiative to incorporate much of southern DeKalb
County. Metro Atlanta has seen a half dozen new cities born in the last decade. Sandy Springs is the largest of the newest cities and has over 30 years behind its effort to incorporate. Sandy Springs also has another distinction: it’s one of the largest cities in the United States that have almost completely outsourced its everyday municipal services to private contractors. We’ll explore their experience with privatization.

If your vision of a city hall is a stately building with Roman pillars or an elaborate gothic building with gargoyles guarding the corners; Sandy Springs offers something of a shocker. Sandy Springs’ operational backbone is housed in a one-story industrial park, along with a restaurant and gym. While this center houses a large staff, only seven are actually on the payroll, including the city manager. The staff works for a variety of contracted private companies. Sandy Springs’ city court is even handled by a private company, the Jacobs Engineering Group out of Pasadena, California. The judge, Lawrence Young is essentially a legal temp; is paid a flat rate of $100 an hour. “I think of it as being a baby judge, because we don’t have to deal with the terrible things that you find in Superior Court.” says Mr. Young.

Need a business license? You’ll speak with someone who works with Severn Trent, a multinational company based in Coventry, England. Have trash collection issues? You would contact the URS Corporation, based in San Francisco.

Cities have adopted privatization of services for years, but few have taken it as far as this city of 100,000 have. From the day it was incorporated, December 1, 2005, Sandy Springs have exported just about every municipal service to private enterprise that could be analyzed through metrics and contracted out.

Sandy Springs has a conventional police and fire department because the insurance premiums for a private company providing these services were considered too high. A 911 dispatch center, however is operated by a iXP, a private company based in Cranbury, N.J.

Joseph Estey, who manages the 911 service says, “When it comes to public safety, outsourcing has always been viewed with a kind of suspicion. What I think really tipped the balance here is that they were outsourcing just about everything else.”

The things that Sandy Springs does not have are a fleet of road repair vehicles, no pension obligations, no owned city hall, yes it rents space for its city hall and there’s no long-term debt.

John F. McDonough, the city manager says this approach works-for Sandy Springs. He points out the city’s healthy balance sheet and residents’ high marks on quality of life and quality of government services surveys. This doesn't mean that privatization would work as easily in other cities. Sandy Springs’ wealth provides a built-in advantage, which allows widespread adoption.

Critics of Sandy Springs’ incorporation contend that it was about ‘escaping’ from association with 70-mile long Fulton County, which includes majority African-American Atlanta and points south. While the city’s leaders deny that race had anything to do with the incorporation, but the area simply had grown weary of the municipal services provided by Fulton County. Meanwhile, Fulton County manager Zachary Williams say the new city’s siphoning off $38 million in tax dollars is hurting the county’s coffers during a time in which tax collections are lower than normal because of the Great Recession.

Sandy Springs is not the most outsourced city in the United States. Maywood, California, a city located eight miles southeast of Los Angeles can probably claim this distinction. All city employees except the city manager work for private contractors. The police force are members of the Los Angeles Sheriff’s Department, which is paid $3.5 million a year to patrol the streets.

Maywood almost went bankrupt and lost insurance coverage for its public work force, thus its reason for outsourcing its municipal services; while Sandy Springs chose this route from day one and evangelizes about its success.

Mr. Porter, Sandy Springs’ interim city manager says that the Sandy Springs experiment was a way out of the financial mess that has taken over many cities in the wake of the Great Recession. Mr. Porter says, “Many are on the verge of bankruptcy. They have significant unfunded liabilities, like pensions and other benefits. It’s almost like a poison that a lot of people are unaware of, and this model could be an answer.”

The privatization debate begs the question: what’s the purpose of local government? For many years, the implicit answer was “to provide steady jobs with good wages.” In today’s times, this answer is considered not politically tenable. John D. Donahue of the John F. Kennedy School of Government at Harvard says, “A lot of jobs in government are middle-class jobs that in the private sector are not middle-class jobs. People aren’t willing to support conditions for public workers that they themselves no longer enjoy.”

Fulton County still receives about $190 million from Sandy Springs residents through property taxes and half of this goes to the schools, including those in Sandy Springs; but the city can keep $90 million in taxes to spend as it pleases.

Going private has increased the cost of running the city of Maywood, California and municipal service quality has dropped. City councilman Mr. Aguirre says, “Let’s say a tree falls on a car, previously, we had an employee who would deal with it. Now, you have to make an appointment and they’ll come out when they can. They’re not our people to control anymore.” Mr. McDonough, the Sandy Springs city manager, says his city has avoided this type of problem, saying the key lay in drafting contracts.

Sandy Springs used only one company in the first five and a half years, CH2M Hill, based in Englewood, Colorado to handle every service it delivered. This saved the city millions compared to the cost of hiring conventional staff, but a couple of years ago, the city divided the work up in pieces and solicited competitive bids.

After the competition was over, municipal services were spread to a handful of private corporations and total outlays dropped $7 million. For every winner it hired, Sandy Springs would award contracts to a couple of losing bidders-to dissuade companies from raising prices or reducing service quality. The losing bidder’s contracts don’t come with any work or pay- unless the winning bidder fails to deliver.

Privatization on paper looks extremely attractive and viable, but as in the case of Maywood, California where their outsourcing experience has not been as good; this approach should be considered and carefully vetted against other options. Do you think the new city in South DeKalb would be successful in adopting Sandy Springs’ outsourcing model?

Source:

New York Times. “A Georgia Town Takes the People’s Business Private” 21 August 2014. http://www.nytimes.com/2012/06/24/business/a-georgia-town-takes-the-peoples-business-private.html?pagewanted=3&_r=3&ref=business

Written by: 

Ari Meier handles the social media and content creation for CCCSD and is a resident and advocate of the future Greenhaven. His day job is Social Media Marketing and Content Creator at Hawaii-based real estate solutions provider, PEMCO Limited. He's also an author of three books, a modern painter and plays keyboards in his indie rock band, blue.math.