Tulsa: Open for Business

Tackling city's challenges requires willingness to embrace innovation, competition and market ideas

As the son of former Oklahoma Governor and U.S. Senator Dewey F. Bartlett, I was no stranger to the challenges that government leaders must face. As the first mayor since Jim Inhofe in 1978 (now a U.S. Senator) to transition directly from the private sector to become mayor, I did what came naturally to me. I used the knowledge I’d accumulated through my years as the head of a successful energy company.

A. THE REALITY

My first day in office was December 7, 2009. My finance director greeted me with the sober news that, after ten consecutive months of declining sales tax revenues, all previous measures to balance the city budget had failed to stop the real threat of deficit spending. Even though the previous administration had cut $10 million dollars in spending and had used almost $11 million of the reserve fund, my management team and I had 45 days to cut an additional $10 million from the operating budget. In total, this amounted to between 10% and 15% or $24 million of the operating budget.

Reductions by the previous mayor had included discontinuing public safety academies, turning off highway lights, grounding the police helicopters, and suspending the removal of graffiti and the mowing of public property. Even with city employees being furloughed eight days and the previous administration having spent 80% of the city’s reserve fund after just five months of the fiscal year, more and bigger pain was on the immediate horizon. Defaulting on obligations was more real than at any time in Tulsa’s history.

We quickly discerned that the city government had not prepared for times such as these. City government had grown too big, it cost too much, it was doing too much, and it had made commitments and promises to our government employee unions that could not be kept. To bring these unfunded promises into prospective, we soon learned that over 80% of the 4,000 city employees belong to a government employee union.

With unemployment hovering around 8% and having run on a “no new taxes” platform, I knew the only solution was to reduce the cost and size of government as quickly as possible.

Within 72 hours, my chief of staff and I had executives in my office from the public sector business effectiveness unit of the consulting firm KPMG for a groundbreaking meeting. Our challenge to them was this: In order for Tulsa’s government to perform as the citizens expected within our limited resources, Tulsa must have a comprehensive strategic operational plan developed around six key characteristics of a successful public organization:

1. Focus on the core functions
2. Measure customer satisfaction
3. Know the cost of government
4. Budget for performance and measure performance
5. Embrace competition
6. Restructure for success

With the financial support from a grant received from the George Kaiser Family Foundation, KPMG conducted a six-month review of the entire city organization. The company identified over 1,500 services and gave over 1,100 recommendations targeting services for elimination, consolidation, competition or public-private partnerships. Tulsa’s government had grown too large and was attempting to provide more services than cities twice its size. Since the city had decided to provide so many services, the core services of the city were not being performed well. It was truly time for a complete overhaul examining what services were necessary, how much they cost, and who should be delivering them to the citizens of Tulsa.

We clearly understood our challenge—maintain fiscal solvency while providing essential government services. My vision was equally clear—to restore, redirect and reform government services to prevent Tulsa from ever again finding itself in this vulnerable situation.

With the KPMG plan in hand, the challenge was how to implement and manage change within an entrenched and well-established bureaucracy staffed by government union employees skeptical of the consequences associated with reform. But first, we focused on accounting for every dollar that was due the city of Tulsa.


B. THE RECOVERY

Getting What Is Due

One of the first areas we addressed was the inadequate collection of sales tax revenues. Tulsa’s city sales tax is 3% which is divided between 2% for operations and 1% for capital improvements. Oklahoma is the only state in the nation where municipalities rely solely upon sales tax to fund their operations. No property taxes are received for operations. With over 10,000 businesses with a sales tax permit in Tulsa, it was critically important to know if all sales tax collected by the merchants was actually being remitted to the Oklahoma Tax Commission (OTC). The OTC would return these taxes to Tulsa after they retained 1% of the amount collected for their services. This retention fee was over $2 million annually. This fee is not based upon any cost for service formula.

We soon discovered that for many years the OTC had been doing a very poor job of auditing, collecting and accounting for all of the sales tax due Tulsa. Some estimates of uncollected delinquent sales tax were between $4 million and $8 million. We strongly believed the private sector could do a better job collecting taxes for less cost. We contacted the firm Recovery Discovery Systems (RDS) in Birmingham, Alabama which has specialized in this work for cities and states for many years. RDS projected a 4% to 6% improvement of collection for half the cost being charged by the OTC.

At the time state law did not mandate that municipalities had to contract with the OTC for their services. The state law only provided that municipalities “may” contract with the OTC for their services. Once the OTC learned that we were in contract discussion with RDS, the OTC quickly moved to have the state law amended to say that municipalities “shall” contract with the OTC. This change effectively killed competition and the free market approach.

This set up a legal show down. Tulsa brought suit against the OTC claiming the amended law was an unconstitutional infringement on the powers granted to municipalities under both the Oklahoma Constitution and the City of Tulsa Charter. Our position was that since the Constitution and the Charter allow cities to assess local sales tax then they should also be empowered to collect the tax. We also believed the legislation was an unconstitutional infringement on Tulsa’s power to contract. Tulsa was successful in this challenge and the law was ruled unconstitutional. The OTC has appealed and the matter is currently pending before the Oklahoma Supreme Court.

As a result of Tulsa bringing to light decades of inefficiencies at the OTC, the Oklahoma legislature responded by pumping more resources and funding into the OTC budget. Collections and auditing efforts have begun to show some improvement and Tulsa’s amount of delinquent sales taxes being collected has improved.

Managing Change—The Management Review Office

The task of implementing the 1,100 recommendations from the KPMG study for the city’s 22 departments is a long-term challenge. Expecting each department head to do this on his or her own was not realistic because many of them had created the processes that were now were being singled out for reform or elimination. With our cost-cutting measures having abolished 418 positions, every department was expecting fewer employees to perform multiple tasks and there simply were not the resources or the time to bring about significant reforms.

To guide the implementation of the KPMG findings, I created the Management Review Office (MRO). Though not entirely new for some cities, for Tulsa this was the first time any mayor had dedicated resources to assemble a professional staff to go into every department, examine the services they performed, and to reform the operating culture so they would embrace the efficiencies and cost-saving ideas embedded in the KPMG recommendations.

The MRO is staffed with professionals who have backgrounds in accounting, information technology, auditing, systems analysis, performance measuring and project management. Along with my chief of staff and the city auditor, the MRO held over 25 meetings with employees in every city department and began the process of addressing the fears, concerns, rumors and resistance of city employees. Some of the most important and most productive meetings were held with the union leadership of the AFSCME union.

We also established a Managing Change Steering Committee of private sector business leaders to provide oversight, direction and guidance as the MRO gained in significance. This was critically important as these leaders brought real world experience from the private sector and advice on how to apply successful business principles to government operations.

I see the MRO as my “efficiency SWAT team.” The MRO works with city organizations to recommend and design reforms and efficiencies necessary to save costs, improve and measure performance, eliminate services, find partnerships, create competition opportunities and shed assets. Once a plan of implementation is created for each organization, the MRO assists the department head and staff with managing the changes to ensure that the desired results are achieved. Then the reins are turned over to the department and the MRO moves on to other challenges. Many improvements cut across multiple departments and provide cost saving efficiencies throughout the city in areas such as purchasing, time and attendance, vehicle acquisition and customer service calls.

The Citizens Voice

Before I turned the MRO loose on tackling the recommendations and opportunities, it was important to hear from the citizens of Tulsa on what they thought of the KPMG report, the recommendations suggested and the priorities to be addressed. For the first time in Tulsa’s history the city commissioned a comprehensive citizen’s survey, conducted by one of Oklahoma’s premier survey/polling businesses. We asked over 100 questions of over 1,800 households in every city council district. The demographic, marital status, race and age of those surveyed were remarkably balanced in each district. In response to the survey more than 65% of the respondents supported the efficiency initiatives recommended.

Successes and Opportunities–Milestones since March 2011

The MRO started by identifying 18 projects. Of those, 14 have an identified savings over the next five fiscal years of almost $29 million. The remaining four are still under evaluation with the potential of additional savings in the $4 million to $10 million range. Some of these opportunities are what some would characterize as the “low hanging fruit” while others would be longer term projects. The following chart gives a summary of these projects and the MRO Projected Five Year Savings and Efficiencies Report.

As of September 2011, particularly noteworthy projects have included:

  • Animal Welfare: The city of Tulsa reached a conceptual agreement with the Humane Society of Tulsa to assume dog and cat adoptions from the Tulsa Animal Welfare Department. The shifting of this service into a public-private partnership will decrease the euthanasia rate by over 50% and allow the city to reallocate up to $600,000 toward animal control efforts and other city priorities.
  • Public-Private Partnership with the Tulsa Zoo: Between 2007 and 2009 the operating budget of the Tulsa Zoo had been cut by almost 50%. The effect on the zoo was particularly hard on capital investments and routine maintenance. This put the accreditation of the zoo by the American Zoo Association (AZA) in serious jeopardy. Private citizens formed the nonprofit Tulsa Zoo Management Inc. (TZMI) to raise private dollars and to partner with the city to operate the zoo. In the last fiscal year, TZMI raised $550,000 for capital investment and deferred maintenance projects. In this fiscal year, TZMI will spend $638,000 on zoo improvements. This public-private partnership has seen the zoo’s attendance increase by 5,000 from September 2010 to September 2011. TZMI has played a key role in addressing many of the deferred maintenance and capital concerns noted by AZA. As a result of the partnership, the zoo has been able to meet the AZA standards for governance, operations and providing quality animal care.
  • Emergency Medical Services Authority (EMSA): The emergency management system—which provides ambulance and first responder services to Tulsa—is a good model of public and private cooperation, but we demanded more cost saving efficiencies in its operations. In this year’s contract negotiations involving the MRO, EMSA committed to at least $1 million annually in additional operational efficiencies and agreed to a formula for a disbursement back to the city of any excess funds received by EMSA above their operational needs.
  • Health Care Dependent Audit: The city competitively selected a firm to review all of the health insurance enrollment documentation of our city employees to confirm that city employee dependents covered under the city’s policy are indeed eligible for such coverage. The expected savings is at least $300,000 annually.
  • Utility Audit: The city competitively selected a firm to audit the prior three years of electricity, thermal energy and natural gas bills totaling about $13.5 million annually to look for overcharges. The expected savings are at least $250,000 annually.
  • Fleet Maintenance: Working with a fleet management consultant, the MRO identified over 550 unneeded vehicles that will be sold. As a result, two maintenance garages are targeted for closure and second shifts are being added to the remaining garages. Between the asset sales, the avoidance of capital purchases and the closure of facilities, the savings are expected to exceed $6 million over five years.
  • Building Maintenance: City employees bid against private contractors to continue to provide mechanical, electrical, plumbing and carpentry services at City Hall. The city employees won the managed competition process, saving the city over $900,000 over five years and enabling these innovative and competitive employees to retain their positions.
  • Police Civilianization: The police department has identified 17 positions filled by uniformed officers that could be held by civilians. Savings will be realized by redeploying at least eight of these officers into the field. Savings over the next five years are expected to be $2 million.
  • Workers Compensation: The city’s worker compensation expenses continue to rise, topping $10 million last fiscal year. An RFP has been issued to engage an experienced firm that can provide a plan to enable the city to reduce the number of injuries and amount of expense. The projected savings are $250,000 this fiscal year and $1 million annually in subsequent fiscal years.
  • Water/Wastewater Study: As a result of the KPMG recommendations, the local public utility authority issued an RFP and engaged Infrastructure Management Group, a nationally recognized team of public infrastructure efficiency experts, to review the governance, operations, finances and strategy of Tulsa’s entire utility operations. Current costs of utility services are over $200 million dollars annually. The review team estimates that savings in the 10% to 20% range can realistically be found. Their final report will be released in the spring of 2012.
  • Real Property Inventory & Divestiture: Shortly after my term begin, I asked my Economic Development Director to prepare an inventory of all city owned real estate, especially those pieces of land within the downtown area, which was on the verge of a rebuilding renaissance. We identified numerous parcels of city real estate—including the old City Hall, which sat vacant for years—that should either be sold for private development or transfered to the Tulsa Development Authority. After 22 months, we had sold or transfered over 40 parcels of land, including the sale of the old City Hall for $1 million to a successful private developer now refurbishing it into a convention hotel. The net result is the city is no longer paying tens of thousands of dollars to maintain the building that, now in private hands, has the potential to generate additional property, hotel, and sales taxes for the city.

Selected projects include an employee gain-sharing option that motivates employees to find savings and to reward them when they do so.

Other projects in development include reorganizing the 911 operations, comparing the advantages of a public-private parking meter system, implementing a state-of-the-art time and attendance system, and developing a comprehensive customer care center to handle all calls regarding city business.

The MRO continues to evaluate over 150 services identified in the KPMG report that are also provided in the private sector as would-be candidates for a managed competition process and the MRO is moving forward with developing the parameters of the bidding requirements for these services.

Planning for the Future

Coming from an energy background, I know all too well the importance of all sources of energy and how essential it is to control the cost of energy. With the city’s energy costs over $13 million annually, I knew that a strategic plan focused on the energy usage, energy management and energy cost was necessary. To that end, I authorized the development of the city’s first comprehensive energy conservation/sustainability plan. Using a portion of the city’s energy block grant funds, we hired URS in January 2011 to conduct the evaluation. In October 2011 my management team and I were presented with a comprehensive plan that includes recommendations for energy cost savings opportunities and alternative energy applications on city facilities, and we purchased new energy management software to monitor and control cost and energy usage across 238 public facilities.

We also saw the value of cooperation and collaboration with the elected officials of Tulsa County. For the first time in recent history, city and county leaders formed the Collaborative Government Advisory Committee. After meeting for six months, they identified numerous opportunities to share costs, reduce costs, share equipment and enter into joint purchasing agreements. They also discovered joint venture opportunities with the respective Parks Departments and Human Resources Department that will be developed for the benefit of both the city and the county.

My team and I know that Tulsa’s future financial security rests on the vitality and strength of the local economy. Supporting local business and attracting new industry is at the heart of Tulsa creating and retaining jobs and further improving every citizen’s quality of life. With my private sector perspective and the assistance of my chief of staff and economic development director, we created the Vision 2020 Economic Development Plan, which outlined ten key initiatives aimed at giving businesses more of the “red carpet” treatment and less of the “red tape.” For example, we have rewritten our purchasing code and are contracting out for a rewriting of our zoning codes. Our planning department has been streamlined and we created the Mayor’s Small Business Advisory group to keep us focused on how we can support the small businesses in Tulsa.

In this plan, we created the Development Ombudsman who now troubleshoots when government regulations slow down and impede commercial development. The goal is to replace the red tape with a red carpet. We understand that government regulations and delays can add cost and waste private investment. We’ve also established the Retail Services Coordinator who calls on retail establishments every day to find ways that local government can either help, or get out of the way of, businesses doing business in Tulsa.

To stay in touch with local businesses each month, the Tulsa Metro Chamber and I hold the Mayor’s Retention Breakfast where I meet with business leaders from a different sector each month to hear their concerns and business plans for Tulsa and what we can do to help them with their businesses.

Finally, it’s important for us to know what Tulsa’s competitive advantages and disadvantages are within the region for attracting new industry. To assess Tulsa’s position, we have partnered with the University Of Tulsa College Of Business to conduct a business attraction comparison of Tulsa with 10 peer cities within a 1,000-mile radius. Using 17 indicators that businesses consider when evaluating relocation or expansion decisions, the report will provide us with the comparison data needed to develop a strategic and focused plan on where public and private resources and policies should be directed to strengthen Tulsa’s competitive advantages.


C. CONCLUSION

With the help and guidance of my chief of staff and management team we have accomplished major changes after only two years. Over that time Tulsa has resumed both police and fire academies, the police helicopters are flying again, the highway lights are back on and the efforts toward mowing public property and removing graffiti have doubled. All of the employee furlough days have been eliminated, and for the first time in several years, the employees received a stipend increase in June. The reserve fund balance has been restored to almost $13 million and we continue to control our overhead cost by maintaining a 3% vacancy rate across all city departments. And, for the first time in memory, the city has reached collective bargaining agreements with all five of its bargaining units at the beginning of the fiscal year.

The secret of our success really is no secret. It takes applying conservative business and financial principles to government, the courage and political will to tackle the toughest of challenges, willingness to embrace innovation, competition and private market ideas. And, of utmost importance, having a management team who believes that, together, there is nothing that can stop Tulsa from being one of the best-managed cities in America.

Dewey F. Bartlett, Jr. is the Mayor of Tulsa, Oklahoma. Prior to his election in December of 2009, Mayor Bartlett has been the President and CEO of Keener Oil and Gas Company. He served on the Tulsa City Council from 1990 to 1994 and is a past member of the Tulsa Airport Authority, the Oklahoma Turnpike Authority, the Grand River Dam Authority, and past President of the American Red Cross chapter in Tulsa. He has served as President of the Oklahoma Independent Petroleum Association. He and his wife Victoria have three grown children.

This article will be featured in a forthcoming edition of Reason Foundation's Innovators in Action report.

Dewey Bartlett, Jr.
Mayor of Tulsa, Oklahoma is Mayor





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