Public-Private Partnerships for Local Governments: The Sandy Springs Model


Public-Private Partnerships for Local Governments: The Sandy Springs Model

Imagine starting a new city of over 90,000 people with only two employees. We did it.

[This article was originally featured in Innovators in Action 2009.]

In the past one hundred years there has been little change in the model for providing services by local governments. In what other area of life can we say that? In those 100 years we have seen the automobile flourish, air travel, space travel, computers and the internet. Yet, despite millions of innovations, we plod along with the same old inefficient and unresponsive model for local government services.

It is time that local leaders, at the very least, consider innovative ideas for improving a deteriorating system. Under the heading of innovative ideas, consider this.

Imagine starting a new city of over 90,000 people with only two employees. We did it. Imagine improved employee attitude, less cost, more responsive government, decreased long-term liabilities and happier citizens. We did it.

Now imagine the application of this model to your existing city. You can do it.

Four years ago, if anyone had suggested that I would be writing an article on local government, I would have laughed. The events of the past several years—which have included the implementation of a new city, providing advice to four additional new cities, writing two books on the subject of local government and becoming an advisor to local governments in Japan—have changed my view.

It might be helpful to offer a brief background on how my involvement with local government occurred.

The Sandy Springs Model

My community, Sandy Springs, Georgia, had for over twenty years been attempting to gain legislative approval to incorporate. It was clear that Fulton County was not providing services commensurate with the tax burden on the community, and incorporation seemed to be the only solution. The political party in power over that period had blocked the bills that would have authorized a referendum on cityhood, and promised to continue that position forever. In late 2004, there was a shift in control of the House (control of the Senate and Governor’s seat had shifted in 2002), that suddenly made passage of the required legislation likely.

Suddenly faced with the probability of legislative success, the leadership of the cityhood movement had to change its focus from the legislative battle to the challenge of actually implementing the new city.

The committee asked me to be responsible for the implementation and conveyed the title of Interim City Manager, an unpaid position. My first step was to form a dozen task forces to address functions and services that were considered vital to the operation of the city. Sandy Springs is blessed with an abundance of talented and dedicated volunteers who stepped up to serve their community. The initial charge to every task force was to: (1) evaluate the needs of the community, (2) determine the level of service being offered by the county and the resources being devoted to those services, and, (3) determine the resources that would be required to provide the services under the new city.

The assumption as the task forces began their work was that we would be forming the city in the traditional manner, that is, by hiring employees and purchasing or leasing materials, systems and facilities.

In March, after only two months of diligent study it became obvious that it was not possible to implement the city in the traditional manner! The legislation that was proceeding toward passage included a very specific timeline. The referendum would take place in June 2005. Election of the city officials follow in November, and the incorporation would be on effective on December 1, 2005. Under any circumstances it would be difficult to start up a city of over 90,000 citizens—at birth, the fifth largest city in the state— in that short period of time.

Sandy Springs faced even more serious obstacles. The legislation was clear that until one minute after midnight December 1, there were no funds available to start the city, and no one had the authority to hire, make contracts or any expenditure on behalf of the new city. With no funds, no staff and no authority, we could see no method by which traditional city services could be established.

At this point, it was obvious that an alternative model was required and we began to explore options. There had been a limited number of cities that had turned to private industry for the provision of some municipal services. In most cases the services were limited to such functions as road maintenance, water works, etc. There were no examples of a city as large as the future Sandy Springs that had contracted for a package of services as broad as we were seeking. Recognizing that we were taking a risk by breaking new ground, I began to formulate a plan to provide all of the city’s services—except for public safety, which is required to be provided by public bodies under Georgia’s Constitution— through a partnership with private industry.

The first step was to convince the leadership of the organizing committee to consider the public-private partnership (PPP) option. Once again, we were blessed with intelligent and determined volunteers, who having devoted years to this undertaking, were determined to make it work. After due diligence, the organizing committee agreed to allow me to begin the preparation of Requests for Proposals (RFPs) that would place the broadest possible scope of services up for bid by private industry. At this point the only commitment was to explore the PPP option while keeping open any other possible models. It was plain that many in our leadership were not sure that the PPP option could become a reality.

Possibly my own optimism was the by-product of many years in the corporate world and a familiarity with the capabilities and resources that major companies could offer. So I dived into the unfamiliar task of writing the voluminous RFPs to cover the wide array of functions and services that would be required. Included were the functions of administration, accounting, finance, purchasing, information technology, human resources, and the backroom support for the police, fire and municipal courts. The services to be provided were community development (planning, zoning, permitting and code enforce—ment), parks and recreation, and public works (road maintenance, traffic design and waste water).

The cityhood bill was passed by the legisla—ture and signed by Governor Sonny Perdue in late April.

The bill authorized a referendum of Sandy Springs citizens in June 2005 on the question of incorporation, which passed with a 94 percent positive vote. The people of Sandy Springs were ready for a new city, but few had a good understanding of the complexity associated with the implementation of a full-scale municipal government.

The Governor, in accordance with the bill, appointed a Commission on Sandy Springs to advise and assist in the formation of the city. Unfortunately the Governor’s Commission was also without funds, staff or authority. I was appointed to the five-person Commission and elected to be chairman at the initial meeting on June 29. At that meeting I presented the massive RFPs and asked approval to issue the requests under the sponsorship of the Commission. Showing an enormous amount of trust, the Commission voted to issue the RFPs with a response date from bidders of August 24.

In addition to the broad scope of services that companies were being asked to bid on in a very short response time, there was also a major financial risk that the firms were being asked to accept. Remember that no one had the authority to approve a contract until the elected officials were seated on December 1, 2005. The RFP clearly stated that the company that was selected would be required to spend millions of dollars to hire staff and provide materials and facilities months before a contract could be approved. In fact, there was no guarantee that the contract would ever be signed. This was the first link in the chain of trust that would be required to make the PPP work.

Companies did step up to the challenge and a thorough bid and selection process took place. A selection committee appointed by the Governor’s Commission did a very effective job of analyzing and rating the bids. The company that this committee recommended was CH2MHill—OMI. The next phase—contract negotiation—was also carried out by a committee of the Commission. During the negotiations, the CH2M had already begun assembling the required workforce and selecting sub-contractors to perform a major portion of the work of providing the city’s services.

To provide an idea of the tight time frame for starting the city, it should be recognized that there were only nine weeks between the recom—mendation to select CH2M and the December 1 start date for the city of Sandy Springs. Anyone who has ever been involved with the start up of a major operation can appreciate the difficult and complex problems that had to be overcome to create city operations to serve over 90,000 citizens in such a short period of time. Suffice it to say, the job got done and it was done very successfully.

At one minute past midnight on December 1, 2005, the newly elected Mayor and City Council were seated with a full agenda of statutes, codes, contracts and other critical matters to act upon.

Sandy Springs has been a success story. Within the first year, a large police force and fire department were established in addition to the wide scope of services provided under the public-private partnership. The city has now been efficiently running for three and a half years. The citizen response has been overwhelmingly favorable. Up to this point the city has experienced a surplus of revenues over expenses in every year of operations.

While surrounding traditional cities have experienced severe budget problems during the current recession, Sandy Springs has enjoyed a $14 million surplus, in addition to funding a $21 million reserve.

During the three and a half years of operations, Sandy Springs has paved more roads in the community than the county had in the past 20 years, created new parks, established a 125—person police force, and 89 firemen with all new equipment. The new city has vastly improved EMS capability, and has established a state-of—the art, joint electronic 911 service with another of the new cities. Cost sharing in many areas between the PPP cities has aided in keeping costs down. A much needed modern traffic control system has been installed. Local control over zoning, planning, permitting and code enforcement has been gained. The list of improvements is very extensive, and all of these changes have been introduced without tax increases. In fact, the city’s taxes are lower than the taxes on the unincorporated areas of the county.

The PPP that looked so risky at first has been an outstanding success.

Additional New Cities Adopt the PPP Model

Taking note of this success, two additional cities in Georgia (Milton and John’s Creek) were incorporated in December, 2006. I was asked to advise the organizing committees of both of these cities. In both cases the cities chose to adopt the PPP model. These cities serve smaller populations and have significantly smaller revenue streams than Sandy Springs, so it was imperative that services be provided as efficiently as possible. Once again, the firm of CH2M Hill emerged as the winning bidder from the selection process, and once again the cities were started on schedule and within their budgets.

In December 2007, a fourth Georgia city (Chattahoochee Hill Country) was incorporated, and it too followed the Sandy Springs model. Here again, I was involved in advising the Committee—this city was very small, only 2,500 citizens—so the PPP model had to be tailored to fit the restricted budget of the new city. The flexibility inherent in the PPP model to handle such diverse sets of resources was indeed remarkable. However, in spite of the great start that city acknowledges that the PPP facilitated, severe revenue shortfalls have forced the city to cut back on the contract to make ends meet.

Finally, just over a year prior to this article, on December 1, 2008, the fifth new city in Georgia (Dunwoody) was incorporated. It probably is no surprise that this city has also adopted the PPP concept as its service model. A variation on the theme occurred when the elected officials chose to bid the services in three separate packages, but essentially the concept is the same.

Adapting the PPP Model for Existing Cities

The results are clear. The PPP is a successful method for implementing new cities. I am firmly convinced that the same level of success can be achieved by the conversion of existing cities to the model.

Certainly the success of Sandy Springs and the other new cities sh ould be enough to create interest among existing cities. Five new cities, ranging in size from 2,500 to almost 100,000, are evidence of the effectiveness of the model.

This initial success of the PPP model has caused me to consider the advantages and obstacles that would be found in conversion of existing cities. We acquired a great deal of knowledge and experience with the model in a short period of time. In 2006, I decided to attempt to write a book on the creation of the city of Sandy Springs and the PPP model. My intent was to capture the information in writing, so that ensuing cities would have a blueprint for action. The title of the book was long, but descriptive: Creating the New City of Sandy Springs (subtitled: The 21st Century Paradigm: Private Industry).

The organizers of the new cities have read and expressed appreciation for the guidelines that the book provided. Leaders of many other communities across the nation have also indicated that they have benefitted from the description of a working, broad scale, PPP.

The interest expressed by existing cities led me to consider a second book that dealt with the conversion of “traditional” cities to the PPP model. Actually, when I speak of cities, the reader may also think counties, or other forms of local government. The PPP model is well suited for all local governments.

The fundamental question that was being asked was whether I thought that the PPP model could be applied to their situations. The answer was always: yes, the economic and service benefits are there for the taking, but the political challenges will be difficult.

In the case of the new cities we started with a clean sheet of paper and there were no embedded self-interest groups to overcome. Existing cities face several such elements, the most obvious being the existing work force. Unions, civil service rules, and sometimes state laws can reduce the flexibility of cities to affect any form of change. If the PPP model is to maximize efficiency and responsiveness, there must be an inevitable change in the work force. However, there are ways to mitigate the impact on employees, and these must be a vital component of introducing the PPP model.

While considering both the opportunities and challenges of converting cities to the PPP model, I began to realize that a second book was needed. The new book should address the benefits and problems that would be inherent in such a conversion.

As I formulated the framework for this new book, it became clear that to provide evidence of the superiority of the PPP model, an objective study of the costs associated with PPP cities versus comparable traditional cites would be helpful. Since Georgia Tech, an institute of excellent reputation, is located in my area, I opened discussion with representatives of that institution on the possibility of conducting such a study. There was significant interest from a research arm of the school, however funding was required, so I raised funds from a number of private sources interested in good government. All the sponsors shared the belief that an objective comparison of the two cost models would be very beneficial.

A preliminary draft of the study which compared five PPP cities with five comparable traditional cities showed that in every case the PPP city had a lower cost per capita than the comparable traditional city. The average cost per capita of the traditional cities was 128% higher than the cost for PPP cities!

This cost advantage alone should prompt the officials of existing cities to initiate feasibility studies of the PPP model in their cities.

International Interest

As I began to give thought to writing my second book, encouragement came from a very unexpected source. Representatives from Toyo University in Tokyo, Japan, visited Sandy Springs. My interview with them, scheduled for an hour, stretched into a half day, and at the conclusion they extended an invitation to lead major symposia in Tokyo and Osaka.

In February 2008, with more than 700 government, business and academic leaders in attendance, we kicked off the campaign to introduce the PPP model to Japanese cities. Later in the year I returned to Japan to address a conference of mayors, and will speak again to a symposium in Tokyo this Fall.

Japanese cities are burdened with an extraordinary level of debt. On average one-fourth of their operating budgets are required to pay interest alone. To effect positive change, a combina—tion of improved operating efficiencies through the adoption of a PPP, and debt reduction through privatization is needed.

My second book, published in 2008, is aimed at existing cities and is titled, Public Private Partnerships for Local Governments. This book addresses the benefits and hurdles involved with the conversion of traditional cities to the PPP model. Both books have been published in a combined version in Japan.

To date we have identified a pilot city in Japan with a population of approximately 50,000 to introduce the Sandy Springs PPP model. I am honored to serve on the PPP committee to recommend the process for introducing the new model.

The Future of PPPs in Local Governments

In the U.S, governments at all levels are bloated and have become increasingly less efficient. Federal and state governments are growing at an alarming rate and are daily becoming more intrusive into business and the private lives of citizens. Since the beginning of this year, the nation has made a head-long plunge into socialism. Under the cover of the current dismal economic picture, socialist-leaning politicians have taken the opportunity to introduce programs that would never have been acceptable in the past history of our nation. Many state governments have also succumbed to the siren call of federal funding and more government.

There is nothing that I, as an individual, can do about this horrible movement, but I have found the opportunity to address the direction of local government.

My work to date on behalf of cities has been offered without compensation. I am so convinced that something must be done about the growing cost of government that I have been willing to give freely of my time. It has become evident that a “voice in the wilderness” is not sufficient, so we have formed a small consulting firm—PPP Associates—to assist existing cities in America and Japan as they seek more efficient and effective government.

Every city and county official should give serious consideration to converting to a PPP.

The economics support the superiority of the PPP model. The taxpayers deserve to be provided the most efficient and effective services that can be obtained. The success of cities that have adopted the PPP model should be sufficient evidence to compel leaders of traditional cities to, at a minimum, explore the opportunity.

The academic data and real life experiences are readily available. All that is required is the political will to consider alternatives. We need local leaders—heroes—who have the courage to investigate the PPP model.

When they do investigate, they will be convinced that local government services can be provided at a lower cost and with more responsiveness. I guarantee it!

Oliver Porter is a leading proponent of public/private partnerships (PPP’s) for local government. In his role steering the start-up of the City of Sandy Springs, Georgia, he served as chairman of the Charter Commission, volunteer Interim City Manager, and Chairman of the Governor’s Commission. Subsequently, Mr. Porter has served as the principal advisor to four new contract cities in Georgia, and to communities in a number of other states. His two books—Creating the New City of Sandy Springs and Public/Private Partnerships for Local Governments (AuthorHouse: 2006 and 2008) have been used as blueprints by many communities. Currently, Mr. Porter is advising communities in Japan on conversion to the PPP model.

Oliver Porter is a retired corporate executive (Sales V.P. – AT&T) and a Registered Professional Engineer. An active volunteer at the national, state and local levels (past national chairman of the National Kidney Foundation, the Combined Health Appeal of America, and founder of a number of state and local charities), he has a lifetime of community service.