Something that I recently read about was Sandy Springs, Georgia. Sandy Springs, Georgia is a city in Fulton County, Georgia (about 15 miles north of Atlanta). What is unique about Sandy Springs is the city has for the most part privatized itself which has to led to more efficiency, lower costs, and higher satisfaction from residents, and the city doesn't have to worry about any unfunded pension liabilities, and hasn't had to increase taxes as a result.
Back in December 1, 2005 the city of Sandy Springs was incorporated. Before the city was incorporated a study from the University of Georgia said that 828 employees would be needed. The city has 271 public employees and 200 contractors for a total of 471 employees (about a 43% reduction from what was estimated). All other functions (except for the police and fire department) are outsourced. Despite the few number of city staff workers the town runs very efficiently. The town doesn't have any backlogs for permit requests, offers a 24/7 service hotline (most cities don't even have a line of communication with residents). The 911 is operated by a private company that is based in New Jersey. The outsourced companies also outsourced human resource, finance, accounting, information technology, permitting, trash collection, motor vehicles, back office operations for: police, fire departments, courts, parks and recreation. In June 2005 the city had to find vendors that could support public services. In just six months the city got the contracts it needed. The beauty of the contracts was the city could dictate the types of benefits/services they wanted which would also dictate the price as well. The city had written in their contracts that problems would be responded to within a 48 hour period and someone had to answer 7 days a week 24 hours a day.
For instance for potholes there was a number residents could call and talk to a live person 24/7 (in the contract the city can dictate how many rings are necessary). If there is an emergency the city will respond within 2 hours. The city pays for two people to operate road maintenance trucks 5 days/week but then tweaked the contract to just 9 days and as a result saved $50,000 (the beauty about about markets is tweaking things as conditions change).
When Sandy Springs started to outsource the city saved about $20 million/year (or a 40% reduction of their budget). The city doesn't even have a city hall and rents regular office space like regular businesses do. With all the savings from outsourcing the city was able to save $35 million as a reserve. Sandy Springs had a surplus $45 million during the recession. The city also is in quite good financial good shape, no loans, and no unfunded liabilities for the pensions and other benefits. In 2011 Sandy Springs looked to other providers beside CH2M and as a result saved the city $7 million by dividing the contracts between 6 contractors.
The city has been so efficient that it has been able to set aside monies to actually improve the infrastructure of the city. The savings has led the city to make $72 million in capital improvements since it was incorporated. With the savings the city has repaved 147 miles of streets, worked on 874 storm water projects, and built 32 miles of sidewalk. What is quite interesting is that after the changes were made the lowest vote that any politician in Sandy Springs received was 84%. Clearly, the residents appreciate the service for their taxpayer dollars.
The city of Sandy Springs, Georgia offers hope to other cities who may be wasting billions of taxpayer dollars, hiring more people than necessary, and ultimately not providing the residents of the city the best service (assuming they even offer this in some areas).
Take the case of the largest city in the United States (New York City). If even a fraction of the changes were made in New York City the city could run much more efficiently using fewer tax payer dollars too. For instance New York City employees with 325,000 employees. The city spends $92.2 billion per year. Recently, just the future health care costs for New York City has an unfunded liability of $98 billion. It is estimated that the New York City pension liabilities is $142 billion and continuing to grow everyday as no changes are in the near foreseeable future. You throw on top of all this a $100 billion of unfunded medical liabilities (NYC employees qualify for free healthcare after 10 years of service). Now let's say New York City started to contract out some of the services like Sandy Springs Georgia (assume for just the moment) did they would be savings billions of dollars per year meanwhile improving the satisfaction of New York City residents. Assume the city could conservatively save 20% per year. Using a budget of $92.2 billion per year the city would save about $18 billion per year which adds up to some serious money. The city could use a portion of the savings to pay down the unsustainable unfunded liabilities, pay down debt, and or use a portion to reinvest back into the city. The number of employees the city would most likely be cut in half and the best and most important feature is New Yorkers would be able to get better service, faster and more efficient service from their local government.
Of course the political reality of this happening in NYC or elsewhere is very low. Given the political power to make a change let alone a drastic change like this wouldn't be easy. Also many individuals, groups, and unions have a vested interest in making sure certain things don't change since their livelihood depends on it. The only practical feasible way it could work is if certain portions were outsourced (I would be curious to see what people would say when they have a response to a pothole within 48 hours).
In the end the idea of Sandy Springs, Georgia is fascinating story of outsourcing government services that reduces the cost, improves the efficiency, and most importantly increases resident satisfaction. It should be pointed out that Sandy Springs is a smaller city (100,000 people) so it would be hard to replicate in larger cities. However, if other smaller city starting adopting these strategies it could catch on. Oliver Porter who was a big influence for Sandy Springs published a how to book of how to book (which gives a step by step direction of how to make the changes). Hopefully this idea will be spread and shared to others as local governments are in need of reducing costs and improving customer service.
