Evolving the Public-Private Partnership Model in Johns Creek, Georgia

Commentary

Evolving the Public-Private Partnership Model in Johns Creek, Georgia

Interview with Mike Bodker, Mayor, Johns Creek, Georgia

On December 1, 2006, Johns Creek, Georgia officially launched as the second new city incorporated in Georgia since the early 20th century. Like its predecessor, Sandy Springs-whose incorporation occurred the previous year-Johns Creek started up not as a traditional city, but one that relied on a large-scale public-private partnership that saw most municipal services outside of public safety delivered by private sector service providers, as opposed to municipal employees. Also, like Sandy Springs, the quest for incorporation for Johns Creek was largely spawned by a desire for greater local control and widespread dissatisfaction with the governance of Fulton County when it controlled the formerly unincorporated area of over 65,000 citizens.

The public-private partnership (PPP) model adopted by Johns Creek allowed it to launch successfully mere months after area citizens approved the incorporation in a referendum in the summer of 2006, and it gained national recognition after receiving a Public/Private Partnership Award from the U.S. Conference of Mayors in 2008. In the eight years since incorporation, the PPP model has evolved several times, but the city still fundamentally relies on PPPs to deliver many of its municipal services.

Local businessman Mike Bodker led the original efforts to incorporate Johns Creek and subsequently became the city’s first-and to this day, only-mayor, having been reelected twice since his first term. Earlier this month, Reason Foundation Director of Government Reform Leonard Gilroy interviewed Mayor Bodker on the startup of Johns Creek, its evolving use of public-private partnerships, what’s next for the city, and more.


Leonard Gilroy, Reason Foundation: Can you describe the factors that led to the incorporation of Johns Creek in 2006?

Mayor Mike Bodker, Johns Creek, Georgia: When Sandy Springs was created as the first new city in Georgia in some 80 years, their argument to citizens on why they should vote yes was that $21 million of locally generated taxes were being exported and used to supplement other parts of the county. Yet in theory, those taxes should have been used locally to offset the impact of growth in that area.

So when I started hearing this argument before they became a city-and they eventually got a “yes” vote-I realized that we were the last of the “donor” communities in Fulton County. And if $21 million was about to be taken away from Fulton County, my expectation was that Fulton County would simply hold its hand out to Johns Creek to make up the $21 million that they were going to lose from Sandy Springs. That meant that we would have higher taxes and still not get any better services.

So defensively, the first thing that I did was go to our neighboring cities, and I talked to their mayors in an attempt to get them to annex what would be the entire area that eventually became Johns Creek. And they rejected us because we were too big to absorb.

The next thing that we did was to study whether cityhood was a viable option for us. The conclusion, of course, was yes, and in July of 2006 we had a referendum vote and, by an over 80% margin, we were overwhelmingly created as a city at that moment. We had until December 1st to stand ourselves up, and-much like Sandy Springs, Dunwoody, Milton, Chattahoochee Hill Country, Peachtree Corners and other new Georgia cities-we found that a public-private partnership was really the only viable option to get ourselves going as a city.

That’s where our paths all started to diverge. What would then happen would be various evolutions of the model. Some of the new cities became more traditional and dropped most of their privatization, and in some cases they remained mostly privatized. Johns Creek is on the mostly privatized end of the spectrum.

Gilroy: You followed a similar model to Sandy Springs in terms of hiring an outside contractor to provide the bulk of general municipal services-outside of police and fire services-at the outset, a partnership that received an award from the U.S. Conference of Mayors in 2008. Can you comment on the effectiveness of that partnership and how it performed?

Bodker: Like Sandy Springs, when we started we had a single contractor-a single throat to choke, if you will. It was CH2M HILL, and they had a fixed-fee contract where they were responsible for subcontracting out the various functional areas that they did not take on themselves.

The effectiveness of that partnership speaks for itself. On December 1, 2006, we launched as a city flawlessly, and I think that when you look at the surveys that we have subsequently done with our citizens, there has been an overwhelming positive feeling about Johns Creek and its ability to deliver good services. I don’t think that would have been possible without our public-private partnerships.

Gilroy: Can you comment on how the city’s use of the PPP model for service delivery has evolved over time? In 2012, the city decided to continue using CH2M HILL to provide public works and community development services, but dialed down the scope of the contract and shifted some functions initially contracted out to in-house delivery.

Bodker: The evolution was somewhat forced because the high water mark for Johns Creek from a revenue perspective was the first full year after incorporation. After that, we were in the middle of the Great Recession and started declining in revenue.

The first evolution that we went through would be a cost savings measure to ensure that we would live within our means as a government and not ask for any more revenue than was coming in. We’ve never changed our millage rate-it has remained flat since the day we incorporated. And we are, to our knowledge, the only new city in Fulton County to operate below our millage rate cap. And we’ve continued to operate below our millage cap, at the same millage rate, for all eight years of our existence.

But to do that in those years when our revenues were declining, we had to cut expenses. And part of our cost savings that got our budget balanced-because we’ve never used reserves-was to renegotiate our agreements with either CH2M HILL early on, or with multiple vendors later on after we broke the contracts up into smaller parts. The services that CH2M HILL is providing for us today aren’t actually that different than what we started with. If you look at what CH2M HILL was doing themselves versus what they were subcontracting out, the public works and community development services were the same functional areas they were doing themselves. But today, in addition to CH2M HILL, we have a number of other contracts both large and small with other organizations like SafeBuilt and iXP that cover other functional areas like 9-1-1 services, geographic information systems, parks maintenance, stormwater maintenance and building inspections.

The other thing we did in terms of evolution was that we changed from a fixed-fee methodology to a cost-plus methodology, and we realized another series of savings when we switched to that model. With our original contract, we agreed on a scope and a price, and whatever profit margin was inherently built in for the company we weren’t aware of, but we paid it. All the risk was on the company.

We now pay for individuals and the amount of time they work on behalf of the city of Johns Creek, and the calculation is the rate per individual times a multiplier plus an administrative fee for general overhead. The advantage of this model at the time was that it gave us another layer of cost savings because we realized that we could control how much we were buying and how much we were utilizing. If we needed less, then we asked for less; if we needed more, then we asked for more. And the risk to the organization was in making sure they had the availability of resources when we needed them. We could also make easy shifts between departments. So if all of a sudden we needed more community development people and less public works people, or vice versa, we could simply ask for that to occur.

That’s a huge advantage over a government that is hiring these people as employees that cannot easily be shifted around. The only way to do that would be to either let someone go and hire someone else, or to move someone from one area to another where they may not have the expertise. For us, having that flexibility was critical. At a time when everything was unpredictable over the last few years, we were able to coast right through it, while other governments have really suffered by having to let people go that they might eventually need again, or by not letting them go and expending money that they couldn’t afford.

The final evolution came between the previous two, when we decided that certain positions were not value-added enough to really justify being outsourced. So we brought those positions in-house. Those were largely administrative positions. When you look at the value of outsourcing, it’s really the value added beyond just a single individual and what they bring to the table. Quite honestly, if it’s just about an individual and what they bring to the table, you can just hire them. There’s no intrinsic value to you in paying the profit margin that the company rightfully deserves that you’re outsourcing from. In this case with the largely administrative positions, there was nothing the company was really providing except for being a body shop. So over the course of a few years, we brought those particular positions in-house.

And then we focused our dollars in areas where we knew there was a value-add-like the outsourcing that we do in public works and planning and community development-where we rely on more than just a single individual, and not only tapping their collective ability, but also the deeper ability of bandwidth that’s available from the corporation itself.

Gilroy: You also entered into an interesting public-private partnership with Sandy Springs in which you hired a private company to provide a joint 9-1-1 call center. Can you describe this partnership and the results thus far in terms of response times, call processing and the like?

Bodker: Johns Creek has formed a partnership with Sandy Springs, Dunwoody and now Brookhaven that goes under the name ChatComm that is a privatized 9-1-1 model. For Johns Creek this partnership has been phenomenal.

You have to put this into context. Two weeks before we launched this, a citizen in Johns Creek literally died at the hands of what would later be determined to be an incompetent 9-1-1 operator that was employed by Fulton County, which was formally providing our 9-1-1 service at that time. She was literally on the phone with the person having dispatched the ambulance miles away from Johns Creek instead of here to Johns Creek. Even though her screen said the call was coming from north Fulton, she dispatched the ambulance to inside the limits of the city of Atlanta. Ultimately, because the ambulance was never on its way, by the time help arrived, the person had expired while on the phone with the operator.

So we knew we needed to do something. And that something was that we formed a partnership with Sandy Springs at first where we capitalized a privatized 9-1-1 center and hired a company called iXP, which had formerly done similar things for other cities throughout the U.S. iXP had a very rigorous process for hiring, and they truly understood what it took to stand up an appropriate 9-1-1 center.

They changed the whole methodology of how we were doing dispatching. For example, under Fulton County, when someone would call into 9-1-1, everything would start rolling after they determined what the problem was. With our new ChatComm model, we started rolling vehicles within one minute on the call, and if we have to, we’ll call them back, as opposed to waiting and delaying the response time until we know enough information. That, combined with better handling of the calls, has actually diminished our response time dramatically-we’re talking as measured in minutes.

Through that, almost every benchmark you’d want to measure has improved since cityhood. Our save rates have gone up, our response times have gone down, our satisfaction levels have gone up, the amount of turnover has been next to nothing in public safety.

When we started, the weak link for all of the cities was that you cannot roll a fire department or a police department if they don’t know they need to be rolling, so without a good 9-1-1 system, they’re not going anywhere.

Since we stood up the 9-1-1 system, Dunwoody has signed on and the new city of Brookhaven has signed on. So now there are four partners in the process.

Gilroy: How would you compare the services provided after incorporation to what was being provided by Fulton County beforehand? Do you have a sense of the citizens’ satisfaction with the course of Johns Creek as a standalone municipality?

Bodker: We’ve done two comprehensive citizen surveys since we incorporated where we benchmarked all sorts of things. What we found largely in our first survey-and this was the most important thing that stood out to me-was that when asked the question, “Did you realize that we were privatized?,” over two-thirds of the citizens responded that they didn’t even know we were privatized. Because the people that these citizens were having their contact with were part of the privatized model, this told us that we were successful in that the whole goal was for privatization to be a behind-the-scenes sort of thing.

And today, the evidence of that would be that if you were to walk through City Hall and shake hands with as many people as you could meet there, more than half of the people that you would have shook hands with were not actual W-2 employees of the city of Johns Creek, and you would not have known the difference because they look and act and feel like they are part of the city, even though their paycheck doesn’t come from Johns Creek. To me, that is a success, because they’ve integrated in, and you’ve got multiple companies working together every day to deliver excellent customer service for us.

Gilroy: How has it been for the city from an administrative standpoint? To achieve that result, it would seem to require significant expertise in contract administration.

Bodker: When we broke up the contracts and went through our first evolution where we got away from the fixed-fee model with a single provider and broke it up into its individual components, we brought on a full-time position that was a contract manager. His job was to negotiate and manage the agreements. Formerly, there was a CH2M HILL position under the fixed-fee model where they were responsible for managing subcontractors. So this ended up being an in-house move to allow us to break up the contracts and control them more directly and granularly, and we’ve kept that position since then.

Gilroy: In starting up a new city under a public-private partnership model, it would seem that you also had an opportunity to avoid some of the challenges that other jurisdictions have had with defined-benefit pensions and retiree benefits.

Bodker: I don’t know that the public-private partnership model is the reason for that as much as other factors. We’re a right-to-work state, so we don’t have union issues. We got created at a time when it was pretty obvious that a traditional pension system was failing in most cities, so when we started we took advantage of the fact that we really had no baggage and created what would be roughly equivalent in the corporate world to a 401(k) system. Our employees make contributions to their retirement, and we match those contributions and make an additional contribution as a city. That system applies to our workers across the board, and while there are some nuances in how you provide benefits for public safety workers, by and large they are on the same program as everyone else in the city. We do not have any pension programs at all.

We have not had a problem attracting people to work here. From a recruitment and retention standpoint, our turnover has been next to nil. We’ve had an over 90% retention rate across the board, which is somewhat unheard of. I think a lot of the reason that we have been able to attract folks is that there’s a lot of caché with the city of Johns Creek. One of our greatest advantages in recruiting employees is the same advantage that allows us to recruit residents, which is that we arguably have the best schools in Georgia located within our city. Whether people want to work for us or whether they just want to live in Johns Creek, they want their kids to get the best education. And while the city is not directly responsible for the schools, we benefit from the fact that these great schools are located within our borders.

The other reason is that we pay very competitively, and we try-to the extent that we can control it-to get our partners to pay competitive wages as well so that we can attract the best and the brightest.

In my view, another benchmark of success that I often talk about is the ratio of full time equivalents, which most people would call employees, but in Johns Creek is different because we have to count people that are spending full time effort working on behalf of Johns Creek even though they may not be getting a paycheck from Johns Creek. When I look at the number of full time equivalent employees per thousand citizens-recognizing that by and large we are offering the same complement of services as our competitors-we have a significantly lower ratio than anyone around us. According to the Georgia Municipal Association, we have 3.03 employees-staff and contract combined-per thousand residents, while cities of 50,000 people or more typically have 10.5 staff members per 1,000 residents.

So even though we might be paying slightly more than the average person gets paid in another city, we’re doing it with so many less people overall that we’re getting more done for less total funds expended. That to me is a strong sign of success that absolutely would not be possible without the public-private partnership model.

Gilroy: What did you learn from Sandy Springs along the way, both in the startup of Johns Creek and then in the intervening years since incorporation?

Bodker: I was once quoted in an article as saying that in my mind I was following behind [first Sandy Springs] Mayor Eva Galambos, watching everywhere she stumbled and looking to make sure that we didn’t follow suit. And everywhere she succeeded, we tried to one-up her. Part of that was competitiveness, and part of that was just being smart and recognizing that we had an older sibling to look up to.

The other thing that I personally did was to get invested in cityhood. So beyond becoming the initial mayor of Johns Creek, I would work to put the six cities of north Fulton County in the same room together, which had never occurred. We formed an organization called the North Fulton Municipal Association, for which I eventually became its first chairman. From that, I started working with the Georgia Municipal Association, and because I was recognized as being a thought leader for cities in Georgia, I would then go on to become involved in an organization called the Metro Atlanta Mayors Association, which today includes the almost 70 cities of metro Atlanta, and served as its chair. In addition, I’m slated to become the president of the Georgia Municipal Association-our statewide league of cities-in June of 2015, becoming the first president from north Fulton in its 83-year history.

Going beyond that, I’ve also served on the board of the Atlanta Regional Commission, which is our metropolitan planning organization, and I served on its executive board as its treasurer. And because we won a public-private partnership award from the U.S. Conference of Mayors within our first couple of years of cityhood, there are only two mayors from Georgia that serve in leadership there, and I vice chair one of their committees.

I did all of this because I love to spread the positives that happened as a result of becoming a city and following this public-private partnership model. And I also like to absorb as much as I can learn from others about their best practices and try to copy what makes sense. I view this as a success because most of the folks who’ve been involved in these new cities never held elected office, and because they didn’t-whether they knew it or not-they’ve all become the “un-government” of the governments. We don’t know how to do it the traditional way. We do it a new and unique way, mostly because we don’t want to be like everyone else. We want to do it different. We want to do it better, leaner, more cost effective and responsive. Our goal truly is to be the “un-government” of governments.

Gilroy: What are some of the other results you’ve achieved as an incorporated city that you’re proud of that might not have been possible before cityhood?

Bodker: There are a couple of things we’re working on now that we’re very excited about. If there’s a negative about Johns Creek, we have a double-edged sword in the fact that we have great schools, and these great schools have led to a largely residential community. We’re about 81% residential and 19% commercial, in terms of value of tax digest. That really makes us very dependent on the individual taxpayer’s wallet. Individuals struggle with the value of making long-term investments, in general, and specifically when we’re talking about taxpayer dollars. The more we diversify our digest, the more we spread the burden and lower each individual’s portion of the investment.

So ever since cityhood, I have been after the diversification of our tax digest to carefully bring in more commercial revenue without destroying the residential quality of life. And we have just embarked on what we call our central business planning district, where we’re looking at a 728-acre area within our city that was mostly developed in the 1980s and is a very sparsely populated two-story technology park or commercial center. And our goal is to re-envision that and completely innovate around creating a city within our city-a walkable urban community that will allow us to bring in significantly more commercial revenue but also create a completely self-contained area of our city where folks can truly live, work and play.

We’re very excited about this and just put a request for proposal out on the street. We’re truly inviting and urging innovation. We don’t want to do it like it’s ever been done before. We want to do it in a completely new and unique way, stealing the best practices from anyone who’s had success with these kinds of urban communities around the country and one-up what’s been done in the past.

The second thing is that we have more needs than we have money for, and need is the ultimate inventor of everything. So we are actively looking for every innovative technique we can find to do more with less around our transportation system, whether that be better ways to pave our roads to finding new and innovative ways of managing traffic flow. We have been the first in Georgia on many, many things, and we continue to be happy to be the guinea pig for new ideas to see if we can find better ways to get more throughput through a system that just has way more in it than it can handle.

One example of that is that we were the first in Georgia to deploy something called the flashing yellow arrow, where when you were making an unprotected left hand turn, we installed flashing yellow arrows in certain intersections to remind folks that they should take caution when making those left hand turns-while also reminding them that they should take the left hand turn as a way to ease traffic from the intersections. We are also rolling out a very sophisticated intelligent traffic system that is going to self-correct the timing of lights and change them on an ongoing basis without human intervention-24 hours a day, seven days a week-to keep traffic flowing. And now we’re looking for an innovative way to take intersections that might cost tens of millions of dollars to improve, and find ways to improve them with less than that while still getting the same results.

So we are actively looking for anything that we can find that’s innovative and different, even if it’s not tried and true, and give it a shot. Not that we are going to squander money-we just want to try new things because the same old, same old doesn’t always work.

Gilroy: What do you see moving forward in terms of how Johns Creek evolves?

Bodker: In Johns Creek, as mayor I serve as one of seven city council members, and we had a sea change in the city last year with the election of four new council members out of the seven. That has led to no institutional memory as an organization as far as the council is concerned, and now everything is being questioned like it was brand new again. That’s been challenging for the public-private partnership model, because all of the new council members are fundamentally asking questions that we answered ages ago as it relates to the justification for the model.

But that’s not necessarily bad, because what it’s leading to is a fresh look at the situation. And I think what’s going to come as a result of that is that we won’t break away from the model, but I think that the companies that are involved with us will be forced to re-justify themselves, to innovate again, to potentially look at a new model for how we pay for the services and manage them-and maybe even which services we privatize and which we don’t. In fact, some folks have indicated that they’d like to do more privatization, not less.

So I don’t know that we won’t do more privatization in the coming years. But I do know that cost is something that we always have to look at because we have limited resources. People constantly want to invest in additional infrastructure, and to the extent that you’re paying for services, then a dollar saved in services is a dollar more you can invest in infrastructure. And since a good majority of the folks we spend money on in Johns Creek are outsourced, there’s a good likelihood that the model will continue to evolve.

Gilroy: What lessons have you learned thus far that you would share with peers in other jurisdictions that might be contemplating either incorporation or ramping up their use of public-private partnerships?

Bodker: They’re actually two different questions, and that’s something that Reason Foundation taught us. When we worked with Reason Foundation early on, I learned that it’s a very different scenario to start up a city and use privatization where you’re not displacing an existing employee versus bringing privatization into a functional area that already exists.

So in terms of new cities, I would argue that they probably want to make a very rational decision as to what should be outsourced and what shouldn’t-don’t do it just to do it. You need to clearly understand the value added through outsourcing and bring it only to those areas where it truly brings the most value or leverage relative to having an employee in-house.

For a city or government that exists and is looking to fix a problem and do better, then they shouldn’t introduce that problem into the mix by forcing an outside vendor to just assume their employees. If they’re not fundamentally willing to be bold and innovative-and recognize that there’s a reason why things aren’t working-then they really shouldn’t bother to go through the exercise, fooling themselves into thinking that they’re going to privatize. They really need to take the handcuffs off the future privatization company and truly allow them to deliver the most value for the funds. That may mean keeping on some of the employees that are involved, but they should at least be given the opportunity to evaluate them, and if the employees cannot justify themselves, then quite honestly they’re probably part of the reason you had a problem in the first place.

I find that when folks look at privatization, what they really try to do is just offload the people, but they’re not willing to really let the people go to the off-site company, and then fundamentally nothing changes. That’s not really an anti-employee statement; it’s an anti-bad-employee statement. The bottom line is that when you look at underperforming departments within a government, because departments succeed or fail by the people, it usually means you’ve got a people problem. The question is what people are the problem?

I would also say that privatization has more advantages than simply giving you an excuse to let go of bad employees. It also provides you flexibility on terms you otherwise wouldn’t enjoy. And that works whether or not you’re a new city or an existing city.


Michael Bodker was elected the first mayor of Johns Creek, Ga., on Nov. 7, 2006. His term began on Dec. 1 of that year. In January 2014 he was sworn in to his third term in office.

Bodker earned a BBA in Accounting from the University of Georgia. He is currently a partner in Johns Creek-based nexDimension Technology Solutions. Shortly after moving to the North Fulton area in 1998, Bodker became involved in community affairs, first as president of his homeowners association, The Communities of Wellington, and later as a board member of the Johns Creek Community Association (JCCA).

Through his work with the JCCA, he was appointed chair of the Northeast Fulton Study Committee (NEFSCO) and subsequently also served as chairman of the Committee for Johns Creek. Those organizations helped study and eventually promote the referendum vote for cityhood. On July 18, 2006 the citizens of Johns Creek voted to create the city, and Bodker was elected its first mayor on November 7, 2006.

Since his election, Mayor Bodker has spearheaded the formation of the North Fulton Municipal Association and served as its inaugural chairman. He also served as the chairman of the Metro Atlanta Mayors Association, as well as on the board of directors and treasurer of the Atlanta Regional Commission.

He currently serves as the First Vice President of the Georgia Municipal Association and will be inaugurated as the organization’s 83rd president in June 2015. Mayor Bodker also serves in leadership of the U.S. Conference of Mayors as Vice Chair of the Tourism, Arts, Parks, and Entertainment & Sports Standing Committee, and on the boards of the Greater North Fulton Chamber of Commerce, the Johns Creek Chamber of Commerce and the North Fulton Municipal Association.

Other articles in Reason Foundation’s Innovators in Action 2014 series are available online here.

Leonard Gilroy is Senior Managing Director of the Pension Integrity Project at Reason Foundation, a nonprofit think tank advancing free minds and free markets. The Pension Integrity Project assists policymakers and other stakeholders in designing, analyzing and implementing public sector pension reforms.