NOTE: Endnotes for the report are available in the PDF.
When the current economic crisis hit, the Committee of
Seventy decided that championing government effectiveness needed to
become one of the essential elements of its mission.
“Government that works” is a natural extension of the
organization’s other goals–clean government, a well-functioning election
process and a better informed citizenry.
The Committee of Seventy is a 105-year-old
non-partisan, non-profit group that is focused on improving local
government in the Philadelphia region. Its Board of Directors is made up
of individuals from nearly 70 of the most influential institutions in
the area.
This report is our second major effort intended to
foster debate concerning Philadelphia’s financial situation. The earlier
work, a Q & A on the complex economic challenges facing the city
entitled “Philadelphia’s Long, Hot Summer,” is available on our web
site, www.seventy.org.
Both reports were written and directed by Ellen
Mattleman Kaplan, Vice President and Director of Policy for the
Committee of Seventy. Aiding in the preparation of “Tackling True
Reform” were members of the Committee of Seventy’s Board, along with
Sean Scully, Loretta Depka, Jonathan David, Daniel Bright and Leah
Pillsbury.
To offer your thoughts on how to improve the
effectiveness of Philadelphia’s government, contact Zack Stalberg,
President and CEO of the Committee of Seventy, at
zstalberg[at]seventy.org.
^ Return to top ^
“Tackling True Reform” challenges the city’s leaders to take on the
genuinely hard work of creating a government that is capable of driving
growth in Philadelphia and effectively battling the city’s social ills.
The report, the latest in the Committee of Seventy’s “Roadmap to
Reform” series, argues that short-term solutions to the city’s budget
crisis must be accompanied by bold reforms that will shrink and
modernize local government. We urge decisive action that businesses and
other organizations would undertake during difficult economic times in
order to survive.
The recession represents a moment of opportunity for Mayor Nutter
to begin to achieve long-term structural reforms that normally would be
strangled by inertia or politics – if he has the will and the skills.
There is no bible of best practices this city can pick up and
follow. Instead the real goal should be to adopt an urgency and
determination to push aside the political constraints and the tendency
to stick with the status quo.
Some of the reforms must be innovative. Most are just common sense
and have been raised before. The ideas in this report include:
• Reduce the cost of city government, related agencies and
authorities.
• Launch a sweeping effort to make Philadelphia
friendlier to business, development and job growth. That includes
reining in the unwritten practice of “councilmanic prerogative.”
• Move
swiftly to fix the property tax assessment machinery so assessments are
trustworthy and revenue is maximized.
• Act on Mayor Nutter’s idea
to abolish four independently-elected “row offices” that are no longer
needed – except to house patronage workers and the relatives of
politicians – and move their necessary functions to other parts of
government.
• Realize the full potential of the city’s 3-1-1
customer service system, including elimination of redundant efforts in
City Council and elsewhere in government.
• Fully examine the
constraints of the nearly 60-year-old Home Rule Charter.
Finally, “Tackling True Reform” urges Philadelphians to understand
that city government can not afford to provide every service they want
or have come to expect.
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Philadelphia can emerge from the Great Recession with a government
that is significantly smaller, yet functions far more effectively and
less expensively. A restructured government that can drive economic
growth, attract new jobs and businesses, and enable Philadelphia to be
far better positioned to compete in the global economy.
This is a vision that Philadelphia’s leaders – its elected
officials, its civic and businesses leaders and its union chiefs – have
the talent and ability to achieve.
More importantly, there is an imperative to make it happen.
The city has an aging and less affluent population. Among big
cities, Philadelphia has the highest tax burden in the country. Its
infrastructure is crumbling. Overwhelming poverty and failing schools
have driven away companies, their employees and their tax dollars.
In younger or less-troubled cities, post-recession growth will
occur more naturally. Philadelphia is likely to have to claw its way
back to prosperity.
Short-term cuts in government jobs and services – even hiking the
sales tax or delaying pension payments – will not be enough to bring
about a rebound. If the union negotiations do not result in cost
reductions, or if tax revenues continue to decline, or if the unfunded
pension liability grows larger, these temporary measures may not even
dig us out of the current budget shortfall.
Philadelphia can only catch up by uniting behind a long-term and
aggressive transformation of its government. This is what it will take
to spark growth and to attack the pervasive educational and social
problems that stifle opportunity for the poorest of us.
As Harold Epps, the head of a group created by the mayor to propose
strategies to make the city more competitive, recently said, “First, we
need to make sure our own house is in order.”
State Rep. Kate Harper, a Montgomery County Republican, confirmed
the view from outside the city. “Let’s be honest,” she wrote.
“Philadelphia’s need for the legislation to raise its sales tax (again)
is largely due to its own budget and employment-benefit practices for
the last 40 years…”
While it may seem counterintuitive given that the city is still in
the throes of a budget crisis, now is the best time to move forward.
According to The William Penn Foundation’s President, Feather
Houstoun, who spent much of her earlier career as a government
administrator and state cabinet officer, the fiscal crisis presents an
ideal climate for reform: “The current economic situation facing state
and local governments creates an imperative and opportunity to
streamline service delivery in order to reduce waste and improve those
services…Everyone will benefit from delivering more public value per
public dollar by identifying obvious redundancies in programs and
working collaboratively to merge resources.”
In fact, a recent Arizona State University study concluded that the
willingness of city governments to try innovations during times of
financial upheaval can be essential to survival: "Local leaders can use
hard times to pursue organizational change or shed outmoded business
practices that might seem too risky when all economic indicators are
positive."
“Tackling True Reform” is about a number of bold, yet common sense
actions Philadelphia must take in order to prosper. And, in what should
be a welcome relief from the last six months, the success of most of the
long-term reform efforts we propose will not rise or fall on what
happens in Harrisburg.
While the recommendations in this
report are wide-ranging, they are by no means exhaustive. Or even brand
new; many of these ideas have been proposed in the past. Different
essential reforms are being addressed in great depth by others.
For this reason, we do not examine tax policies or abatements,
which are included in the preliminary recommendations of the Mayor’s
Task Force on Tax Policy and Economic Competitiveness. Nor do we deal
with pension reform or controlling the taxpayer’s share of health care
costs for municipal workers – two vital and expensive issues that have
been publicly discussed at length and are now squarely in the middle of
the bargaining table.
Philadelphia is at a critical crossroads. Chipping away at the
edges of reform will cost the city – and the mayor who was elected on
his continuously-repeated promise to turn City Hall upside down – the
chance to become a national model for ingenuity and best practices.
Seizing the moment will require leadership. As the ultimate decider
and dealmaker, that job primarily falls to Mayor Michael Nutter.
^ Return to top ^
In undertaking genuine reform, the city starts with many
advantages:
• As the recession ebbs and the sustainability movement picks up
even greater steam, the appeal of cities will grow. Given Philadelphia’s
location, its amenities, its network of neighborhoods and its mass
transit system, it is in a particularly good position to benefit from
this historic shift.
• Swift and continuous reinvention is going on in the business
world. While government is different than business – it provides
essential safety-net services and must deal with political
considerations that business leaders rarely have to consider – City Hall
must use the private sector, and especially its reliance on technology,
as a model.
• Local elected leaders have spoken with a single voice in
Harrisburg with regard to resolving the financial crisis. This model of
cooperation – if repeated – can be a key to restructuring this
government.
• Unlike other cities with one-year spending plans, Philadelphia is
required to operate under a 5-year plan overseen by the Pennsylvania
Intergovernmental Cooperation Authority. Thinking five years into the
future allows the city to confront challenges and phase-in reforms –
rather than dodge real solutions by relying on short-term budget
gimmicks.
• Though all municipalities are being squeezed, few are using this
moment creatively. The city has much to gain by becoming a trailblazer.
• The mayor seems to have the urge to tackle reform. Michael Nutter
was elected in large part because he presented a convincing case that
he was the candidate who could fix City Hall. He restated his commitment
as one of the guiding principles of his very first Five Year Plan:
“Smarter, Faster, Better: We must never be satisfied with the status quo
and we must always strive to push the quality of our customer service
to a higher level.”
The opportunity is clear. However, the waste and the inertia are
equally clear.
Never was the ground-level effect of this more apparent than at an
August 13 public hearing of the Mayor’s Task Force on Tax Policy and
Economic Competitiveness.
Sarah Van Aken, the owner of a small business, stopped the hearing
cold when she testified about her three-year battle to try to pay city
taxes she was sure she owed.
She cited the difficulty of reaching an actual person on the phone,
the need to start her story over every time she called the Revenue
Department and the lack of coordination among city departments.
In a city of 1.5 million residents, a staggering $3.7 billion is
spent on municipal government. (Another $3.2 billion is spent on the
schools.) With a city workforce of over 23,000 – or one employee for
every 65 residents – there clearly are more than enough hands on
deck.
But, even with all those workers and all those taxpayer dollars
being spent, it is still hard to find a satisfied customer.
^ Return to top ^
In the last year, City Hall has focused almost exclusively on how
to dig out of a $1 billion budget gap in November 2008, followed by an
additional $1.4 billion shortfall four months later.
Like most cities and states, Philadelphia gravitated towards the
most tangible and quickest ways out. This approach is understandable.
But should not be confused with permanent reform.
For example, a temporary sales tax rate increase might help in the
short-run, but moving from 7% to 8% will not provide a stable – let
alone growing – stream of recurring revenue over the long haul. Not to
mention that the sales tax is considered the most regressive form of
taxation and makes Philadelphia less competitive with its neighboring
counties.
To be fair, the Nutter administration has started to make some
promising long-term improvements, such as Phillystat, which is making
progress in requiring city departments to report and assess their
performance.
But other improvements are difficult to track because they appear
to be scattered across different departments. This makes it difficult to
determine if there are areas of potential overlap or even if the
changes are part of a larger, coordinated and carefully orchestrated
reform plan.
And because the budget information is also contained in various
documents, reconciling the numbers seems impossible.
For example, (1) Nearly $38.9 million in FY09 and $43.6 million in
FY10 are cited as “efficiency savings” in “Efficiencies Services
Enhancements for FY09 and FY10 Budget,” (2) $28 million in savings are
attributed to the efforts of a Private Sector Outreach Board in a letter
to the editor of the Philadelphia Inquirer, (3) $39 million in annual
efficiencies – including $29 million in reducing overtime citywide and
$1 million in electricity efficiencies and reductions in the Streets
Department – are included in the November 2008 Rebalancing Plan for
Fiscal Year 2009 – Fiscal Year 2013, (4) $14.5 million in estimated
annual efficiencies are listed in the Fiscal year 2010 budget, including
$2 million in overtime cuts in four departments and $875,000 for solar
powered compacting litter baskets, (5) $103 million for Fiscal Year
2009 (as part of the November 2008 Balancing Plan) and $60 million for
Fiscal Year 2010 (included in the proposed Fiscal year 2010 – Fiscal
Year 2014 Plan) are identified as “efficiencies and reductions” in
budget information provided by the Finance Department to the Committee
of Seventy.
Finally, the 2010 – 2014 Plan submitted by the Mayor to City
Council in March 2009 also makes numerous references to other reforms
that have been instituted, or are planned, in various departments and
under several Deputy Mayors. But, in many cases, no actual cost savings
accompany these efforts, and it is unclear how or if these reforms
relate to any of the documents referenced above.
Even if there were no overlap in the examples cited above, their
combined cost would not make much of a dent in a $3.7 billion annual
budget.
To make sure there is no misunderstanding: The Committee of Seventy
is not dismissing the value of smaller, sensible cost savings or
operational changes. They help.
For example, no one would dispute
the value of bringing overtime under control. In the Police Department
alone, court-related overtime cost an estimated $22.8 million in Fiscal
Year 2009 – including $15,500 collected by four narcotics officers
removed from street duty after being accused of fabricating evidence.
But
even slicing overtime costs can be done more aggressively. San
Francisco sharply reduced overtime payments by 23% after passing
legislation barring city employees from exceeding 30% more hours than
usually scheduled.
There is a major distinction between
garden-variety cost cuts – such as eliminating already vacant positions –
and sweeping, permanent efficiencies – such as consolidating
departments or generating revenue and reducing costs through
significantly upgraded technology.
^ Return to top ^
Fresh ideas for “reinventing” local government are rare.
To a great extent, reform recommendations are common sense
approaches that the private sector would take if an aspect of its
business wasn’t performing well. Such as getting rid of non-essential
departments. Or ensuring that different divisions are not performing
similar services. Or reducing excessive layers of middle management.
One thing is for sure. There is no perfect one way to restructure
government.
One route is to articulate an end goal and figure out how to get
there. Michigan’s Governor Jennifer Granholm has asked the lieutenant
governor to spearhead an effort to consolidate 18 of the state’s
departments to as few as eight.
Another route is to evaluate government by cluster area. In
coordination with Mayor Nutter’s Private Sector Outreach Board, the
administration has assembled ten reform teams, each composed of city
employees and business leaders and chaired by a deputy mayor.
The teams are assigned to study specific priority areas: Police;
Fire and Emergency Medical Services; Prisons and Criminal Justice; Human
Service; Education; Energy and Sustainability; Development Process;
Streets; Administration and Technology; Customer Service. However,
there are different views of the goal of the Private Sector Outreach
Board. Some say the primary purpose is to identify cost savings. Others
believe it is to increase productivity, improve the quality of services
or secure loaned executives.
Still another route to real reform is to throw away the playbook
altogether and design an affordable government that makes the most
sense.
Philadelphia will have to find its own way to restructure
government, taking into account the city’s distinctive political climate
and personalities.
Whichever reform process the city decides upon, the Committee of
Seventy urges the mayor to take the widest possible view. All corners of
government must be included. That even means the “quasi” city agencies
and authorities that exist outside the City Charter and city budget.
Mayors tend to concentrate on the narrow boundaries of their
authority. But the taxpayers quite sensibly care about wherever their
money goes.
Certain core questions must be asked at all turns: Is this service
still a necessary government responsibility? What does it cost? Is a
department achieving what it was created to do? Is there a way to
accomplish the same result for less money? Are any other entities – in
or outside of government – doing, or capable of doing, the same thing?
Some aspects of government may be working quite well, but may not
be worth preserving in a newly-configured government. The late Peter
Drucker, who has been described as the leading authority on modern
management, once said: “There is nothing so useless as doing efficiently
that which should not be done at all.”
Fortunately, in undertaking a reform effort, the administration has
plenty of resources to rely upon. Many potential reforms, some of which
are contained in this report, have been raised before – including by
Mayor Nutter himself while on City Council and on the campaign trail in
2007.
There is also the work of past and current boards and commissions
created to examine local issues and develop reform recommendations,
including the report of the Philadelphia Independent Charter Commission
which was created by then-Mayor Rendell and City Council in 1992.
There are reports written by Mayor Nutter’s transition teams and
the transition teams of his predecessors. The ideas in these reports can
be resurrected, and their core recommendations made public, to take
advantage of well-researched guidance on how an incoming mayor should
structure the government.
Despite good ideas and careful studies, progress and implementation
have ranged from slow to non-existent. Members of the Mayor’s Task
Force on Tax Policy and Economic Competitiveness have acknowledged that
some of their preliminary recommendations echo those raised by the
Philadelphia Tax Reform Commission almost six years ago.
As the mayor and City Council move beyond the immediate budget
struggle, and into the post-recession era, the Committee of Seventy
offers the following recommendations:
SHRINK GOVERNMENT:
With modern technology and a diminished city population,
it’s time to rethink the size and organization of our government. With
6,000 supervisors in a 19,000 person workforce focused on performing
traditional city services – and some supervising only 2-3 individuals –
it begs the question: Why does the city need so many middle managers?
When in February 2009 the mayor offered his own office for budget
cuts – including slashing his salary and the salaries of his cabinet,
requiring employees making over $50,000 to take one week of unpaid
leave, and laying off some workers – the Philadelphia Inquirer reported
that non-civil service employees reporting directly to Mayor Nutter cost
9% more than in John Street’s last year in office (2007), and 21%
higher than during the former Mayor’s first year (2000).
The individuals reporting directly to City Council President Anna
Verna far outnumber those on any of her colleagues’ staffs. Members of
Council have complained about her reluctance to share her large
“technical and planning staff.”
While we are taking a look at the size of government, the city
should also take a full inventory of its libraries, recreation centers,
fire and police stations and other facilities. Mayor Nutter blundered by
announcing 11 library closings without convincing the public on the
need for the closings. He was forced to pull back. But many of these
facilities are falling apart. Before investing massive public dollars in
capital improvements, a frank talk must take place about whether the
number and location of facilities truly serve the public.
A good model is the process the federal government now uses to
minimize politics in military base closing decisions. A nine-member
independent panel appointed by the President – the Base Realignment and
Closure Commission – evaluates a list of recommended closures submitted
by the Secretary of Defense, visits the bases themselves and holds a
public hearing. The Commission then gives a list to the President, who
either approves or disapproves the entire list. Approved lists then
require the endorsement of Congress. A local equivalent could be
devised to make sure that the best decisions are made.
ELIMINATE REDUNDANCIES:
By recently announcing that he would house all small business
lending operations in the not-for-profit Philadelphia Industrial
Development Corporation, Mayor Nutter showed a willingness to behave
like the architect of a new government.
Too many other areas remain touched. For instance, during his 2007
mayoral campaign, Mayor Nutter pledged to consolidate “the alphabet
soup” of agencies that regulate housing, including “the Redevelopment
Authority (RDA), the Philadelphia Housing Development Corporation
(PHDC), the Office of Housing, the Philadelphia Housing Authority (PHA)
and others.”
Two years later, it is hard to tell what has changed.
The RDA, PHDC and the Office of Housing & Community Development
(OHCD) still exist under the oversight of a Deputy Mayor for Planning
and Economic Development. An Office of Supportive Housing (OSH) is
supervised by the Deputy Mayor for Health & Opportunity.
Every city’s government is unique. But, where helpful, best
practices elsewhere should be imported here. In Arlington, Texas, for
instance, has consolidated various city inspector services designed to
enforce the city’s commercial and development codes into one "Universal
Inspector" program. Arlington also has a "One Start Development Center"
that brings together development and permitting functions from five
previously separate departments. As a result, staff levels and
turnaround time for development applications have been reduced.
FIX THE BOARD OF REVISION OF TAXES:
The mayor responded to the Philadelphia Inquirer’s revelations about
gross mismanagement and political favoritism at the BRT, which controls
property assessments and therefore property tax revenue, by calling for
the members of the Board to resign. They rejected his demand.
Then came the creation of a “study group” made up of members of the
staffs of the mayor and City Council. Their work, if any, remains a
mystery.
Faith must be restored in the BRT so the city can make assessments
fair and maximize revenue – under the existing assessment system or the
proposed “Actual Value Initiative” the BRT supports. Given the financial
crisis, it might no longer be financially possible to implement an
Actual Value Initiative that is “revenue neutral,” as originally
intended.
One big opportunity to repair the property tax collection system is
at hand. The Board of Judges could and should fill the vacancy on the
BRT. Mayor Nutter, Council President Anna Verna, Common Pleas Court
President Judge Pamela Dembe, the leaders of the Democratic and
Republican parties and Congressman Bob Brady and Michael Meehan, have an
opportunity to pick a person of great competence and integrity in order
to impact the direction of the BRT.
MAKE CITY HALL BUSINESS FRIENDLY:
Mayor Nutter has made it a priority to take backroom
dealing out of relationships between government and business. He wants
to place more emphasis on planning, rather than case-by-case
decision-making. Given Philadelphia’s history, these are important
reforms.
But, anecdotally, developers and business people report that the
city is no more business-friendly than it was during the years when John
Street – who was often perceived as being anti-business – was mayor.
One business writer calls this the city’s “penchant for delay, decry and
deny.”
Philladelphia has lost 250,000 jobs since 1970. Over one-fifth of
the total (53,600) job losses have occurred since 2001. The city’s
population has also declined – from 1,948,609 in 1970 to an estimated
1,450,000 in 2009. Over 68,000 left between 2000-2007, the largest drop
in residents except for New Orleans, which had the excuse of having
been heavily destroyed.
The 2008-2009 economic recession precludes a fair evaluation of the
Nutter administration’s economic development efforts.
But the
city’s economic development efforts continue to be handled by a range of
offices and agencies. The once-heralded czar of economic growth efforts
is gone.
In June 2008, Mayor Nutter spoke of his plans to return the
“Planning Commission…to its historic, Charter-based leadership role in
shaping our vision of the future and managing the development of our
city.
Curiously, however, the Commerce Department and Philadelphia City
Planning Commission were targeted for a complete shutdown under the
city’s so-called doomsday budget “Plan C.” This plan, which outlined the
massive job and service cuts anticipated if the General Assembly did
not approve its budget-balancing proposals, has to be viewed as some
indicator of the Nutter administration’s priorities.
Now is an opportune time to assess all the resources in the city
and region – both public and private – that are devoted to economic
development. There are more than a few. There may be duplication that
can be eliminated by handing certain functions over to groups whose
employees are not on the City’s payroll. Two possibilities are Select
Greater Philadelphia, a private non-profit regional economic
development-marketing organization affiliated with the Greater
Philadelphia Chamber of Commerce, or the Center City District, which has
reinvented itself as an economic development agency.
Creating jobs is not just the mayor’s problem.
City Council must find a way to put reasonable controls on
“councilmanic prerogative,” the unwritten practice that gives a district
Council person veto power over what happens in his or her district. As a
practical matter, the unrestrained use of councilmanic prerogative
discourages development.
The mayor, a former district Council member, and Council President
Verna, a sitting district Council member, have the know-how to bring
this destructive practice under control.
IMPROVE CUSTOMER SERVICE AT LOWER COST:
A wide and costly array of customer service efforts is
spread across many departments and agencies. The 3-1-1 non-emergency
hotline is designed to handle citizens’ requests for information and
services. When the call center was launched at the very end of 2008,
Mayor Nutter predicted: “3-1-1 will fundamentally change the way
Philadelphians interact with the city government.”
City officials with greater experience with 3-1-1 talk about its
great promise when operating at peak efficiency: “an always-on
constituent service engine…a budget-trimming, shared-service
consolidator…a revenue-maker [helping bills get paid by phone]…a
transparency machine for managing government.” There are also future
possibilities for “crossboundary integration efforts as well as
cross-sector linkages between the private and public sectors.
Given the mayor’s ambitious plans, it is hard to understand why
among all the possible service cuts, the administration decided that on
August 29, the 3-1-1 system would close on Sundays, and reduce its hours
of operation from 9 a.m. to 5 p.m. on Saturdays, and from 8 a.m. to 8
p.m. on weekdays.
A well-functioning 3-1-1 system has huge potential cost savings,
including eliminating customer service functions within individual
departments. This applies to City Council as well, where many staffers
are assigned to “constituent service.” Those constituent services might
be valuable. But the political by-product is that taxpayer dollars are
used to help the incumbents get reelected.
PARE THE DEPARTMENT OF HUMAN SERVICES:
With a budget of close to $591 million, DHS is the single
most expensive item in the City’s general fund – even higher than the
Police Department, which spends $522 million.
Services provided by DHS that impact the most vulnerable
populations touch a raw nerve. The city has a moral obligation to ensure
that no one is denied these essential services. But this imperative
cannot stand in the way of a thorough examination of the department.
What makes this particularly critical is that DHS has been ravaged
by recurring problems for many years. Most recently, the U.S. Attorney’s
Office announced the federal indictment of 21 employees of a social
service agency with which DHS contracted whose neglect was found to
contribute to the starvation death of 14-year old Danieal Kelly. Two DHS
staffers are awaiting trial after being indicted in connection with the
same incident. District Attorney Lynne Abraham has called for “a total
revamping, a total shaking up and a total overhaul” of DHS.
According to a January 2009 report of the Philadelphia Community
Oversight Board, which was established by Mayor Nutter, DHS has made
significant progress in the wake of a devastating May 2007 report by a
Child Welfare Review Panel. But the 2009 report also cited major areas
requiring urgent attention, including that “DHS does not have the
appropriate Information Technology (IT) and regular access to
performance data to sustain true reform.” Shifting from work now
performed manually should streamline operations, reduce the workforce
and point the way towards greater efficiencies.
The Community Oversight Board can be helpful to the citywide
reinventing government effort by ensuring that all DHS services,
programs and contracts with outside vendors are being performed
effectively and for the purposes specified, and guaranteeing that the
entire operation is as fiscally lean as possible.
LEVERAGE PURCHASING POWER:
The City should aggressively seek out every opportunity to
save money and improve efficiency by joining with other city
departments, the School District and quasi-governmental agencies that
purchase the same type of goods and services.
Some of this is already underway, with the City/School District’s
Shared Services Task Force, formed in 2008. We hope the Task Force will
raise its expectations far beyond the $5 million in cost savings that
were to be identified as part of the Fiscal Year 2009 operating budget
approved by the School Reform Commission. Given the $7 billion budgets
of the city and the schools, a far more ambitious program must be
undertaken.
Audits by the City Controller have led to recommendations for other
joint initiatives by city departments. Most recently, the controller
called for the Procurement Department to establish a citywide
requirements contract with one vendor for automated time-keeping systems
rather than have individual departments contracting with different
vendors.
Pennsylvania and New Jersey each participate in the Western States
Contracting Alliance, a multi-state cooperative purchasing program to
buy computer equipment at the lowest possible price. In joining the
Alliance in 2007, New Jersey’s Treasurer’s office estimated that local
governments should expect to save between $17 million and $30 million
annually, depending on the volume ordered. The Iowa Department recently
recommended that state government could save millions of dollars if all
departments joined its bulk purchasing program. Fifteen state
departments now opt out of the program.
ENCOURAGE MANAGED COMPETITION:
In the give-and-take of the current labor negotiations, the
unions should be pressed to support opening up the delivery of more
public services to competition from the private sector. Under the
leadership of Mayor Stephen Goldsmith, Indianapolis pioneered this
technique successfully with the City’s garage mechanics. The city
eventually won the bid by presenting a proposal to thin the ranks of
management by 75 percent and to share in any profits of the new
arrangement – giving them an incentive to increase productivity and
profits.
As Mayor, Ed Rendell instituted a competitive contracting program
involving 37 different city services, including custodial work,
maintenance services and security at the Philadelphia Museum of Art.
Thirty-three of the services were contracted out; four were won by the
municipal workforce.
However, this is one area where entrenched interests can pose high
hurdles. As San Diego has discovered, even voter support for allowing
private companies to compete for certain municipal work may not quiet
the opposition. But when the economic stakes are as high as they are
now, and done judiciously in areas such as sanitation and perhaps
juvenile justice, managed competition could be an important efficiency
measure.
OVERHAUL THE
PHILADELPHIA PARKING AUTHORITY: Democratic officials in
Philadelphia may throw up their hands at a recommendation to fix an
agency that has been in state and Republican hands since 2001. But the
agency is far too problematic to be ignored.
The PPA continues to wreak havoc on residents, businesses and
visitors – ranging from increased parking meter fares to giving out free
parking passes at the airport. A recent audit by the City Controller
cited severe managerial and financial problems at the agency, whose
budgets for fiscal years 2009 and 2010 are $207,980,136 and
$221,044,051. While this audit faced some criticism for not going far
enough – for example, not addressing the PPA’s unrestricted cash
reserves – the Philadelphia Inquirer found sufficient concerns to call
for the city and state to share the costs of an independent
top-to-bottom review of the authority.
In the meantime, the city should initiate discussions with the
state aimed at improving PPA and returning some of its functions back to
the city, where they belong. If – that is – the city can resist the
temptation to replace Republican patronage with Democratic patronage.
The Democrats didn’t do it much better when it was in city hands
pre-2001.
Greater city control of the PPA could bring major benefits to
Philadelphia. The city could even privatize or contract out certain
functions, as Chicago’s Mayor Richard Daley has by privatizing parking
meters. While the jury is still out on the benefits of that move – the
mayor says the $150 million from the deal helped plug the budget
shortfall while others say that Chicago could have benefited from
keeping control and raising fees itself, as the private consortium has
done – it does suggest a potential city revenue source.
ABOLISH THE NEEDLESS, INDEPENDENTLY-ELECTED
ROW OFFICES:
In December 2008, Mayor Nutter suggested eliminating four
independently elected but obscure and patronage-laden “row offices” –
the Clerk of Quarter Sessions, the Sheriff, the Register of Wills and
the City Commissioners. In March 2009, the Committee of Seventy
published a report outlining the steps needed to accomplish the
elimination of these offices, and transferring their necessary tasks to
governmental entities that can handle them efficiently, professionally
and at a lower cost. Together, they cost the taxpayers millions. Except
for the one mandated minority party member of the three-person set of
City Commissioners, all of these offices are filled by Democratic Party
leaders.
Managing Director Dr. Camille Barnett was assigned the project, but
the politically-charged issue seems to have lost the interest of the
Nutter administration. Even the administration’s doomsday budget assumed
no harm to the row offices over the next five years – while almost
every department in the city was slated for cuts.
CUT BACK THE ENDLESS STRING OF BOARDS AND
COMMISSIONS:
As of December 2007, the Board of Ethics counted 81 city
Boards and Commissions. Mayor Nutter has created several others since
he took office, although some with set termination dates.
Many have little value. They generate cost and may replicate
services in the non-profit community or in federal or state government.
One such example is the Veterans Advisory Commission, headed by
Democratic ward leader and former City Commissioner Edgar Howard.
Howard, who was handpicked by City Council President Anna Verna, earns
$80,000.
In 2008, Washington state examined 470 Board and Commissions to
determine areas for cost savings. 154 were eliminated as a result,
either by Executive Order or by the legislature. Other states,
including Maine and West Virginia, are conducting a similar exercise.
TIE FUNDING TO PERFORMANCE:
During his campaign, Mayor Nutter promised to “revolutionize
the budgeting process by linking spending to performance.” In other
words, City departments will be required to provide data on actual
program performance results in order for those programs to receive
additional budget allocations. This is not a novel concept, either in
government or in the private sector.
According to PICA, the city has made a significant commitment to
the adoption of performance management and, through Phillystat, is
generating useful information about performance-related data. But, so
far, there hasn’t been much progress in using the data in
decision-making about financial allocations or in departmental strategic
planning.
There are, for example, countless examples throughout the city’s
budget documents relating to various departments’ “purchase of services –
totaling millions and millions of dollars. But information is scarce
about what these services are, whether they were purchased as a result
of a competitive bidding process or why those services are needed at
all. Under these circumstances, how can the public know if it is getting
its money’s worth?
Even the mayor’s office can be caught off guard. It took an “It’s
Our Money” report by the Daily News and WHYY to expose the severe
budget-related problems in the Mayor’s Office of Community Services,
which is the city’s leading anti-poverty organization. According to that
report, over $1 million of MOCS’ $12 million budget was spent on
salaries in other city departments. Although this practice predated the
Nutter administration, twenty months later the new mayor’s spokesperson
conceded: "I don't think anyone is arguing that this is being done in
the right way. We need to take a long look at MOCS and make it operate
better.”
It is hard to imagine a private sector company succeeding in the
absence of realistic budget information.
In researching best practices in government that tie funding to
performance, the city might look to New York City’s Center for Economic
Opportunity, a 2009 Harvard Kennedy School Innovations in American
Government award finalist. This Center, which like the MOCS handles
anti-poverty initiatives, is recognized as a national model for its
meticulous scrutiny of the initiatives’ performance and outcomes and for
making funding decisions based on its findings.
Corpus Christi, Texas uses performance-based budgeting decisions in
an effort to make its public utilities more competitive. A computerized
system specifically defines the goals of “good customer service,” and
routinely measures whether those goals are being met. An online citywide
scorecard provides the public with real-time performance data.
USE TECHNOLOGY SMARTLY:
Philadelphia is way behind the curve when it comes to
sufficient or modern technology – a deficiency that already has had an
enormous impact on the efficiency of its operations. To take just one
small example: At the July 24 meeting of the Mayor’s Task Force on Tax
Policy and Economic Competitiveness, former City Solicitor Joe Dworetsky
commented that the Law and Revenue Departments do not share a database,
which hampers revenue collections.
Many of the Task Force’s preliminary recommendation require
enhanced technology. One of its proposals for short-term implementation
(0-24 months) – Upgrading Property Information and Tax Administration
Technology & Human Capital – requires “a state-of-the-art, networked
property information and tax databases with adequate professional
staffing to make collection of all tax types more efficient, to monitor
trends and to measure, over time, the impact of the entire Philadelphia
tax structure and development policies on job creation and income
growth.”
Hopefully, the recent reorganization of the city’s Division of
Technology, under newly named Chief Technology Officer Allan Frank, will
jumpstart the transformation process. The mayor’s plans call for
consolidating the entire information-technology system - including
equipment and employees in 33 separate departments – into Frank’s
department, which is scheduled to employ 520 workers.
There are endless yet to be discovered technological advances, but
the city’s immediate goal must be to propel government into the 21st
century. Councilman Bill Green made this point forcefully in his April
2009 report, “Paperless Government: Maximizing the Transformative Power
of Technology.”
There are numerous examples of governments making technological
leaps. Maryland’s Governor Martin O’Malley is pioneering an online
technology he calls StateStat to help citizens track government
spending. The website was rated #1 in the country for state tracking of
federal stimulus funds by Good Jobs First, a national policy resource
center.
TAKE ANOTHER HARD LOOK AT WHAT SERVICES THE
CITY CAN AFFORD TO PERFORM:
City residents have become accustomed to a long list of
government-subsidized services, ranging from water, gas and trash
collection to the removal of graffiti and snow plowing. Every service
must be examined to determine whether there is a more efficient – and
cheaper way – to deliver these services. Or, in some cases, whether the
city can continue to provide these services at all.
These decisions often require balancing competing interests. Will
the new $500 annual trash fee for small businesses drive these valuable
assets away? Are these concerns sufficient to offset the estimated $7
million in annual savings? Alternatively, should small businesses be
required to hire private trash collectors like larger companies?
According to PICA, the Philadelphia Gas Works continues to present
an “enormous risk” to the City and region’s economy as a result of its
“expensive and oversized workforce,” the burden of an “outstanding $1.2
billion in debt,” and the “real possibility that future fiscal crises
…will require additional City subsidies.” Despite diminished troubles
at PGW, a 2008 Economy League of Greater Philadelphia report underscored
the need for transformational change at PGW involving everything from
controlling a “labyrinthine governance structure” to reining in free gas
program to selling the utility.
Providing free basic services to truly low-income residents has at
least at least has some redeeming value. But government lets too many
people off the hook – especially those of its own payroll. For example,
723 city employees owe more than $700,000 in water bills. (This is on
top of the 2,000 city employees and spouses who owe about $5 million in
unpaid property taxes.) The Committee of Seventy joined the city
controller in calling for deducting up to 20% from the city paychecks of
continuing tax deadbeats, and shutting off water service, particularly
for delinquents working for the Water Department.
What about Philadelphia International Airport? Allegheny County
Executive Dan Onorato wants to privatize all parking facilities at
Pittsburgh International Airport in order to generate more than $500
million to pay off the airport's $499 million debt. Chicago was poised
to privatize Midway Airport in the spring, but the deal collapsed
because of the tight credit markets. Selling the airport, or even
creating a new operating authority, may not be a viable option in the
current economic climate. But privatizing individual functions at the
airport should be considered.
DEVELOP STRATEGIES TO DEAL WITH “COUNTY”
COSTS:
One more overarching problem that must be addressed is
Philadelphia’s heavy burden of paying for services traditionally
subsidized by state or county governments: prisons, courts and human
services. These responsibilities now rest on Philadelphia because, in
Pennsylvania, it alone is both a city and a county.
The problem is heightened by the absence of more affluent
taxpayers. According to the city’s Finance Director Rob Dubow, the
city’s poverty rate is 24%, almost double the national average.
Philadelphia pays almost $250 million for the prisons and almost
$100 million for the courts – over 9% of the general fund budget,
amounts it can not afford even in good economic times.
Councilman Bill Green’s study of City/County employment trends over
50 years found that, while the total number of budgeted positions has
dropped by 4.86%, the number of employees performing traditional county
functions has doubled (3,274 in 1960 compared to 7,634 in 2010). By
contrast, the number of employees performing traditionally city
functions (such as public safety, sanitation, parks and recreation, for
example) has been significantly reduced (24,710 in 1960 compared to
18,942 in 2010).
At the very least, the city should develop strategies to:
• Bring down the crushing costs of its “county” burdens as long as
Philadelphia is required to pay for them, and
• Work more
aggressively to “upsource” these functions to the Commonwealth.
It may be a fool’s errand to try to compel the General Assembly to
enforce the Pennsylvania Supreme Court’s 1987 decision requiring the
state to fund all costs of the court system. Oddly, neither the state’s
highest court nor the legislature seems to have taken this ruling
seriously. A number of counties have now filed a lawsuit to force
compliance. Philadelphia’s refusal to join them makes no sense.
The prison system is an even bigger problem. Interestingly, during
the City’s budget forums, Deputy Mayor for Public Safety Everett
Gillison told WHYY’s Chris Satullo how impressed he was by the
overwhelming interest of citizens in closing a city prison by, for
example, releasing non-violent criminals. Discussing the pros and cons
of this idea is far beyond the scope of this report. But it should be
included in discussions about reconfiguring the government.
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Mayor Nutter is approaching the mid-way point of what is likely to
be his first term. It is the point at which a term-limited mayor usually
has the greatest influence.
The challenge to remake government could easily consume the rest of
his mayoralty – and last well beyond it – but it certainly cannot be
viewed as Mayor Nutter’s task alone.
Here are ways to get the job done:
USE ALL THE AVAILABLE TALENT:
Philadelphia is rich with people who will help if they are
empowered to do so.
Government is filled with talented individuals, many of whom have
served in many administrations.
The Mayor’s Private Sector Outreach Board has been assembled and,
through its ten reform teams, is looking into specific areas of
government. The Board should be used aggressively and a Reform Plan
written in February 2009 should be continually updated with information
on its progress.
The Mayor’s Task Force on Tax Policy and Economic Competitiveness
is close to finishing its work. We hope its final report will expand
upon its very useful preliminary recommendations, and will also address
in far greater detail the issues the Mayor assigned the group when he
formed it in March. And, rather than disband when the report comes out
this fall, its members should work to make sure their recommendations do
not get ignored.
Business people are facing many of the same problems as government
during the economic downturn. Their experience in remaking their
companies – and, yes, in downsizing their workforces – can be
indispensable to reform efforts in City Hall.
Finally, in a highly political town, the political party bosses and
the political warlords can help – if the mayor is adept at asking.
Democratic Party chairman Bob Brady stands at the top of the list.
Without his approval, reforming the BRT or eliminating the row offices
will be impossible.
NUTTER AND COUNCIL MUST PULL TOGETHER:
The City Charter envisions a “strong mayor” form of
government, but when it comes to both structural changes and budgets,
both branches of government have a strong hand. As a practical matter,
it is up to the mayor to create a genuine working relationship with
Council.
Mayor Nutter has a shared history with most members of Council.
There is every reason for the two branches to become full partners in
the government’s transformation. The focus can not be on who gets the
credit.
Councilman Green, in particular, has staked out government reform
as a key area of interest and he is gaining respect in Council. The
mayor and the councilman have a special obligation to work together to
create a more efficient government.
CONSIDER LARGE-SCALE CHARTER CHANGE:
It has been nearly sixty years since Philadelphia’s
governing document was written. Computers, which are now an everyday
necessity, aren’t the only changes since that time. City officials might
have grown too accustomed to the Charter’s limitations.
It is time to take a close look at the Charter as a whole. It has
been 15 years since the Philadelphia Independent Charter Commission’s
review. Their effort to amend the Charter went down to defeat, but these
are very different times. Lessons can be learned about why the effort
failed in order to avoid making the same mistakes.
To again quote Peter Drucker: “[A]ny organization, whether a
business, a nonprofit, or a government agency, needs to rethink itself
once it is more than forty or fifty years old. It has outgrown its
policies and its rules of behavior. If it continues in its old ways, it
becomes ungovernable, unmanageable, uncontrollable.”
And if the state is unwilling to pick up the $1 billion in court,
prison and human service costs that do not fall on any other city in the
state, it might even be time to rethink the concept of “home rule” that
is embedded in this Charter.
INCLUDE THE UNIONS:
Governments often make a critical mistake by failing to
communicate regularly with the unions’ leadership. Talks tend to happen
when contracts expire and the emotions run high. Developing mutual
respect and relationships may not result in seeing eye-to-eye, but
keeping up an honest and regular dialogue is important.
Failing to partner with the unions, which represent a vast majority
of city workers, is a strategy that will never pay off.
MAKE USE OF THE WATCHDOGS:
The official watchdogs are supposed to be at arm’s length
from those they regulate. But a genuine effort to reinvent government
can make good use of these resources without compromising them.
Through financial reports and departmental audits, and service on
city Boards and Commissions, the City Controller has an in-depth
knowledge of the workings of government and can bring tremendous value
to the reform initiative.
So can the Pennsylvania Intergovernmental Cooperation Authority,
which oversees the city’s finances and must approve its Five-Year Plan.
PICA has more outside expertise on budget matters than anyone in town.
There is a potential conflict-of-interest risk, of course. But within
the constraints of the rules, PICA’s staff should be included in the
discussions.
KEEP IT TRANSPARENT:
The paying customers must be kept informed. The city must
make information easy to find online. And make what are often the
mind-numbing complexities of government easy to read and understand.
Develop full agendas for meetings – such as Phillystat, where the
Private Sector Outreach Board makes monthly reports – so that citizens
know more than just the barest details. If they can’t attend a meeting,
make sure the minutes are available electronically.
MAKE THE PUBLIC PART OF THE CHANGE PROCESS:
Mayor Nutter learned the hard way about the importance of
soliciting public opinion. To avoid the furor that erupted over his
attempt to close libraries last November, he held public forums to
solicit residents’ views on how to close the budget gap. These outreach
efforts paid off.
The public’s attitude needs to change as well. Government,
especially a government strapped for cash, can’t do as much as its
constituents might like or might have come to rely upon.
Council members can be helpful in creating realistic expectations
of government by their constituents. Frankly, there are problems that
city government should not have to fix. In the wake of large chunks of
buildings crashing onto city sidewalks, the knee-jerk reaction might be
to hire more city inspectors. Council members Jim Kenney and Frank
DiCicco are on the right track by introducing a bill to require owners
of buildings higher than six feet to get them inspected every five years
and to fix any defects.
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In his first address to a joint session of Congress, President
Obama said: “[W]e have lived through an era where too often short-term
gains were prized over long-term prosperity; where we failed to look
beyond the next payment, the next quarter, or the next election.”
Over the last year, the city’s leaders have understandably been
preoccupied: first, by figuring out how to continue operations during
the most devastating fiscal crisis in our lifetime, and second by
gambling on a short-term budget deal in Harrisburg.
But there are only so many times temporary fixes can bail us out.
Philadelphia has many long-term problems that will be exceedingly
difficult to fix if we wait any longer to fundamentally reform the way
our government works.
As former Indianapolis Mayor Stephen Goldsmith warned, pressures to
remedy immediate shortfalls tend to inhibit innovation: “In the crunch
to deal with the ‘crisis du jour,’ it [is] hard to find the time to
identify best practices and cutting-edge technologies.”
Philadelphia must find the time.
The heavy lifting needed for reform will fall on Mayor Nutter’s
shoulders, of course. If he has the courage for it, his skills as a
chief executive, as a policy maker and as a politician will be tested.
But we urge him not to focus on how history or the polls will judge
him or even his prospects for reelection. Inevitably, these
considerations take a politician down the less gutsy path. Instead, he
must heed the advice of long-time Atlanta Mayor Shirley Franklin: “If
you have to worry about your legacy,” she says, “you don’t have one.”
Creating a new government that will be able to take advantage of
this period of great economic upheaval is a shared responsibility.
Once it succeeds, it will be a shared success.
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