The Riehl World: Outsourcing Why?

A year ago we learned Carlsbad is considering outsourcing city services, but to this date we haven’t been told why.

At a July 2011 workshop, city council members heard a presentation by Carrollton, Texas’ Director of Competition, Tom Guilfoy (“City to explore some outsourcing of government work,” NCT, 2011). He told the council his city saved at least $25 million over nine years under its Managed Competition plan.

Liking what they heard, the council directed City Manager Lisa Hildabrand to conduct an internal review to see if outsourcing could make city government more business-like.

City park landscaping work has been suggested for potential outsourcing, which added irony to Councilman Mark Packard’s warning that council members should not “let the grass grow under our feet” waiting for Carlsbad to “handle its operations the way private businesses do.” Packard is apparently not as worried about the weeds growing under his feet while he’s strolling through Aviara Park if a private contractor is maintaining it with lower paid employees.

Carrollton’s Guilfoy proudly pointed out how much money was saved by outsourcing solid waste management collection and laying off 50 city employees. Carlsbad outsourced waste collection long ago. Carrollton’s Parks and Recreation department escaped outsourcing by reducing costs of equipment replacements.A closer look at why and how the Texas town adopted outsourcing suggests Carlsbad’s city leaders may have found a solution in search of a problem.

In an April interview with the Reason Foundation, Carrollton City Manager, Leonard Martin, explained he was hired in 2001 to help the city close a $2.5 million budget deficit. He created the position of Director of Competition, hiring Guilfoy from the private sector. Guilfoy introduced Managed Competition for all city services, requiring each to prove it could deliver “cheaper, better, faster and friendlier service” than private businesses contracted to do the work.

The first objective listed under Carrollton’s 2002 goal to transform the city’s culture into a competitive service business was to “achieve high citizen satisfaction with services and organizational values.”

When I asked Guilfoy a week ago if he could produce evidence the objective had been met, he told me Carrollton, unlike Carlsbad, doesn’t do citizen satisfaction surveys. “We know intuitively that they like the results,” he explained, adding, “Citizens everywhere want better quality services at lower prices. We have delivered on that promise.”

In his Reason Foundation interview City Manager Martin was asked if residents were happy with the city’s changed business practices. “We know residents are pleased with what’s happening,” he explained, “because there’s no political turmoil.”

For city officials who take such pride in running their city like a business, it’s hard to understand why they have no interest in customer feedback, especially after investing so much in the program’s administration. The city’s organization chart shows a Director of Competition, an Organizational Development office, and a Marketing Services Director, none of which Carlsbad has at this time, and all of which add costs to the administrative bureaucracy.

Carrollton may no longer be running a deficit, but the city’s financial condition, as posted on its website, is nothing to crow about. While Carlsbad’s growing general fund balance is projected to be over $53 million this year, 47 percent of its spending plan, Carrollton projects a $2 million decline in its general fund balance over the last three years to $12.6 million, a mere 16 percent of its budget.

Council members Keith Blackburn and Ann Kulchin have expressed less enthusiasm than Packard for adopting a competitive business model for the city. I think they recognize the risk of messing with success by trying to do city services on the cheap.

So the question remains: Why would Carlsbad, with an enviable record of fiscal responsibility and customer satisfaction, want to emulate the business model forced on a Texas town as life-support for a failing city budget?

Richard J. Riehl writes from Carlsbad. Contact him at riehlworld2@yahoo.com

Links to sources:

North County Times story
http://www.nctimes.com/news/local/carlsbad/e06d7912-a9da-5c30-8ed5-65bdc9a999c4.html

Reason Foundation Interview
http://reason.org/news/show/innovators-carrollton-texas

Managed Competition 10th Anniversary Report
http://www.cityofcarrollton.com/Modules/ShowDocument.aspx?documentid=8334

Carrollton city budget:
http://www.cityofcarrollton.com/Modules/ShowDocument.aspx?documentid=7767

Carlsbad city budget
http://www.carlsbadca.gov/services/departments/finance/Documents/Budget/2011-12%20Prelim%20Budget.pdf