The city of Sandy Springs’ shift away from its “public-private partnership” system of outsourced, privatized government services in May was done in low-key fashion, presented as a mathematical cost-savings move. But it was a dramatic change for a city that touted many other benefits to privatization and pitched itself in books and magazines as an ideal, revolutionary “model for the 21st century municipal government.”
Has the notion of Sandy Springs exceptionalism and its privatization philosophy been proven false? Does the shift put the city at risk? Did the particular system ever really matter as much as the people running it? Some of the most expert opinions differ.
“In no way do I see this decision as a repudiation of our model. I think the model can be considered, after 14 years, a success,” says Oliver Porter, a Sandy Springs engineer and artist who founded the privatization idea as he helped to organize the new city in 2005, noting it remains in good fiscal health and has never hiked taxes. But he also believes the city has already deviated too much from that model and that the current shift is risky.
“I am concerned now the city may fall into what I call the bureaucratic morass,” said Porter. “We can become like everyone else over time, is what concerns me. And everyone else is wrong.”
The Reason Foundation, a prominent libertarian think tank, gave Sandy Springs a lot of attention as a privatization model in its early days. Austill Stuart, a Reason policy analyst, said he was surprised by the change, but also believes the city’s inherent management philosophy is keeping its eye on the real prize.
“Libertarians, a lot of them, are probably going to look at it and see failure,” Stuart said, “but from our perspective, delivering services efficiently is the priority.”
Meanwhile, some other recently formed local cities that imitated Sandy Springs’ model to varying extents – including Brookhaven, Dunwoody and Johns Creek – say they’re not concerned by the shift and not doing any special review of their forms of government.
Another big question is how long Sandy Springs’ change will last. The public-private partnership was supposed to make it easy to change government operations quickly, but didn’t account for switching between contracted and in-house forms. Mayor Rusty Paul says the decision will be reviewed in a year and was made “we believe temporarily,” while Porter says he thinks it will take longer than a year to measure any effects and that by then the political tendency would be to avoid changing back.
Meanwhile, the city continues to outsource certain departments, such as 911 and its Call Center, in what it now calls a “hybrid” model of competitive contracting and traditional government.
An experimental model
In now-deleted language, the city’s website long touted Sandy Springs as a “trailblazer” in the public-private partnership model, which it claimed had been “shown to provide the city with lower costs, higher performance and greater degree of accountability.” There’s no doubt that the city drew praise for service delivery, low taxes and a lack of debt, but the private-contracting model itself was more of an experimental work in progress with many nuances, challenges and changes over the years.
Academic study of the Sandy Springs model was rare and one of the few published found the government to be less efficient on certain metrics than that of some other local cities. Analysts at Reason debated whether it was truly competitive contracting or more of a decentralization of traditional government. While Porter has long consulted with international cities about the model, none have adopted it to date.
City officials ran into several significant issues with private contracting: the cost and effort of rebidding entire city departments; lack of financial transparency in contracts; staffing turnover; vague or nonexistent performance metrics; and contractors that lacked expertise in specialized city services. The biggest previous change came in 2011, when the city found that its single-source contractor, CH2M Hill, was costing $7 million more than deemed reasonable and the model was shifted to several department-specific contracts instead, awarded to different companies.
Underlying the experiment was an often-forgotten fact from the city’s incorporation: the public-private partnership was a start-up necessity that the city attempted to make a long-term virtue.
When residents won legislative approval to incorporate, they had to do so in a matter of months. Hiring a massive corporation to provide staffing and resources was the only way to do it. And because the city didn’t exist yet, the corporation had to be convinced to do the start-up without a contract or up-front payment. In part, the idea of Sandy Springs as a small-government conservative utopia of outsourcing was a sales pitch designed to attract a contractor with dreams of breaking open a new market of privatized cities, as Porter recalls in his 2006 book “Creating the New City of Sandy Springs: The 21st Century Paradigm: Private Industry.”
The city founders “did a bit of a selling job,” he wrote. “It was pointed out that Sandy Springs was going to be the premiere showcase for the role of private industry in municipal government in the entire country. Therefore, the firm that got our business would have the spotlight, and a ‘leg up’ on penetrating an enormous market.”
Debating pros and cons
But the founders also were sincere in their belief that private corporations would be more efficient and effective than traditional government. Bottom-line cost savings was one assumed advantage, but not the only one. Several were noted in Porter’s book or cited by city officials over the years: avoidance of pensions and benefits costs; better technological innovation; higher employee performance; the flexibility to reduce or add staff at will; “freedom from political influence” on city operations.
Paul, in a written statement, acknowledged several of those advantages and said they had proven benefits.
“However, the greatest benefit historically is cost control and cost certainty over a multi-year period,” Paul said, explaining the recent shift away from the privatized model. “But in periods of tight labor markets, tariffs on key commodities and work backlogs, such as today, private companies demand premium pricing to take on additional work. That premium was more than we felt was fiscally prudent.”
Porter emphasized that he was not involved in the city’s thought process and that he defers to the officials making decisions today. But he also expressed strong concerns about the loss of competitive advantages and said he believes the city is having trouble with contracting bids today because of its 2011 move away from the single-contractor model.
“I’ve made a strong effort to not second-guess those who are involved,” Porter said. “But the principles I enunciated earlier still stand… I’m concerned some of those principles might be violated. I trust they are making a good decision and only time will tell.”
Porter notes that the $14 million the city says it will save by bringing most government functions in-house is only an estimate, and he questioned the saving from breaking up the original single-source contract as well.
“I think over the long, broader picture, that wasn’t true,” Porter said of the 2011 savings estimate. He said it illustrates that “you lose when you break it up into small contracts. That incentive goes away. The incentive to bring new technology in goes away when you have small contracts… I think they lost incentive for businesses to go after any of those contracts.”
Porter acknowledged some of the challenges the city faced in private contracting, but saw some of them as positives. For example, a lack of transparency in contractor operations is “absolutely true” – but good, he said.
“It’s going to be a black box… OK, that’s a [model] most people probably wouldn’t agree with,” he said, but only because of natural curiosity and an urge for control, not good government operations. He warned against “the desire to have a little more control, and a little more control, and not have faith in the partnership…What we started successfully was against human nature. What we started was a public-private partnership, with emphasis on the final word, ‘partnership.’”
Porter echoed advice in his book to “not try to squeeze the last dollar out of the contract” and instead focus on long-term results of a company driven by making a fair profit.
“I know if we start seeing tax increases, we’ll know we have made a mistake,” Porter added.
Stuart, the analyst at Reason, said he expects Sandy Springs will continue to have good delivery of services despite the shift due to its other unique attribute: a clean-slate start as the state’s first new city in the previous 50 years. The young city likely is still focused on its founding principles and has learned from contractors how to deliver them, he said, adding, “Sandy Springs is in a much better place to achieve that [service delivery] than most other places.”
Meanwhile, the city’s webpage about the public-private partnership has been rewritten to emphasize the cost savings of the two major shifts in the model over the years, and Paul talks in terms of practicality, not purity.
“Also, we still use P3 [the public-private partnership] for a number of services, so we have adopted more of a hybrid P3/traditional model than a pure version of either delivery model, which has always been the case in Sandy Springs,” Paul said. “We just shifted (we believe temporarily) more services to the traditional model due to the premium pricing that exists in the private sector today.”