Out of Control Policy Blog

San Fran Considers Contracting Out Environmental Review of Development Projects

As the San Francisco Chronicle reports, city officials are considering hiring outside contractors to handle environmental reviews in order to accelerate development projects:

The proposal, apparently the brainchild of Mayor Gavin Newsom's administration, immediately drew fire as a dangerous move that could threaten union jobs, remove important checks and balances and open the city up to legal liability if it has to defend environmental reviews that are both conducted and overseen by private, development-friendly companies.

Supporters said the proposal, if adopted, would simply speed up a painstakingly long process and would free planning staff members to work on public projects while the contractors work with some private developers.

Currently, staff members in the major environmental analysis, or MEA, division of the Planning Department oversee the environmental reviews required for development projects. The studies, conducted by a consultant hired by the developer, are reviewed by city staff to ensure they are complete and accurate. The entire process can take months or more than a year.

But according to a draft request for bids obtained by The Chronicle, the city is considering initiating a $750,000 a year, three-year pilot program - a joint effort between the Planning Department and the Office of Economic and Workforce Development - that would reduce how long it takes developers to receive decisions on projects. The program would initially focus on transportation planning review but could evolve to include larger projects, the document states. It also would allow the consultant to continue working on environmental reviews for private and public entities in the city, so long as they don't review their own work.

Director of Planning John Rahaim said the department is looking into all of its potential pitfalls before deciding whether to move forward. The proposal would not lead to layoffs of city workers, he said, adding that most other communities in California do not have an in-house environmental review division.

Rahaim said the consultant would only be used on an "as-needed basis" to help the city staff during peak times - when many projects are being reviewed at once - and noted that there are a number of large public projects in the pipeline. He said it would not cost the city anything extra because project sponsors would have to pay their normal fee plus an extra fee for the private consultant. [...]

Opponents said the proposal would remove important checks and balances and threaten union jobs, and noted that development is stalled because of the recession. Supervisor Ross Mirkarimi called the idea "creeping privatization that undermines accountability and will eventually make the MEA seem less necessary."

There are several points to make on this:

  • Cities routinely contract out for a variety of development-related services and activities, including building inspections, plan reviews, and even planning and zoning services. See Reason Foundation's Streamlining San Diego study for some handy examples.
  • Hence, there's nothing inherently governmental about the nature of the services under discussion. To Supervisor Mirkarimi's point...well, many of these services are not necessary—or not necessarily performed by government employees, that is. As long as you're cognizant of potential objectivity issues upfront and structure the contracting process to mitigate them, then you can get a good handle on issues of accountability. And it's not as if de facto "permanent" government employees are immune from accountability issues themselves. At least you can fire contractors when they don't perform. As I often say, you can specify guaranteed performance levels in a contract (with financial penalties for underperformance) that you can't through the traditional civil service apparatus.
  • As reported in Reason's Annual Privatization Report 2009, New Jersey passed a new law this past legislative session to facilitate the use of private contractors for Superfund/contaminated site remediation. They were essentially facing a similar challenge as SF—under state operation, New Jersey developed a backlog of nearly 20,000 contaminated sites, and the state wasn't getting them back into productive use in any semblance of a timely fashion. So now property owners can turn to the private sector to get the job done faster. If New Jersey can do that, then tapping the private sector to review developers' compliance with the environmental review process seems like fairly small potatoes, scale-wise.
  • Though small potatoes relative to the remediation of 20,000 contaminated properties, what San Francisco is considering is nevertheless important. Both situations involve strategically tapping the private sector to accelerate property development, and they both recognize that there's no public benefit to dragging out a regulatory process and keeping development projects from coming to fruition. The longer the delays, the longer before lands are put into more productive use, and the longer until government receives the benefits of higher tax receipts.
  • All they're talking about in San Francisco at this point is a pilot project to supplement, not replace, the city's current planning staff on environmental reviews. Despite the inevitable public employees union rhetoric, this initiative is the equivalent of dipping a baby toe into the water—hardly something to throw a tantrum about.

» Reason Foundation's Annual Privatization Report 2009
» Reason Foundation's Privatization Research and Commentary

Leonard Gilroy is Director of Government Reform


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