MEMORANDUM
TO: City Council of Atlanta
Mayor of Atlanta
FROM: Peter Aman, Partner, Bain & Company
DATE: November 6, 2003
SUBJECT: Turn Around Plan status update
Text of Peter Aman of Bain & Company's Letter to Mayor Franklin and City Council on the Status of the Turn Around Plan The purpose of this memo is to address several questions that have recently been raised about the ongoing implementation of the Turn Around Plan for Atlanta. It will only address these questions in summary form; the Office of the Mayor will provide a more detailed update on the status of various elements of the Turn Around Plan later this year.
What is the status of the implementation of the Turn Around Plan? Has anything been accomplished?
There are too many specific actions and accomplishments to describe in detail here, however, a list of highlights would include the following. First, the City has returned from the brink of insolvency to fiscal stability. Specifically, the City closed an $82 million budget gap and recovered from a negative surplus level of $7 million in early 2002, closed a $35 million budget gap in late 2002, and operated with a surplus (and with spending under budgeted levels) in 2002 and likely will again in 2003.
Second, a substantial number of actions have been taken to increase efficiency and reduce costs. Overall, the City has reduced the number of positions substantially and has moved from a position of having ~37% more employees per capita than comparable cities to about 5% more (PowerPoint slide available upon request). Specific major cost reductions, beyond the increases in productivity made in a number of departments, have included the consolidation of jail services with Fulton County and the proposed consolidation of the Traffic and Municipal courts. More over, many operational process and productivity reviews are under way or in implementation stages (e.g., permitting, fleet management).
Third, the City has pressed ahead across all of the initial 29 priorities from the Version 0 Turn Around Plan of July 9, 2002. An extensive updated version of the plan (Version 1) was created by the Office of the Mayor and released in November of 2002. A brief review of the priorities (as revised by Version 1) shows 6 (of the now 24 priorities after regrouping and consolidation of categories) complete with the rest in progress (see summary chart below). Certainly the progress on some of these priorities (e.g., solid waste disposal) has not met the original dates set forth in the plan and corrective actions will be required-a full review of the status in more detail will be provided later this year by the Office of the Mayor.
Why hasn't the City privatized functions to save money?
In fact, the City has privatized or outsourced a number of specific functions and more are under consideration. Specific examples of functions already in the process of being outsourced include; 1) sanitation fee collections, 2) Parks Department equipment, 3) payroll processing, 4) workers compensation, and 5) time and attendance processing. Additionally, the marketization or outsourcing of several other functions is actively being considered-RFPs are now being created for sanitation services, parks maintenance, and several areas of the IT department (e.g., data operations, applications development, and telecommunications). Obviously, the actual outsourcing of these functions is dependent upon a) it being better and/or cheaper, and b) Administration and Council approval.
While significant actions on this front are occurring, it is important to note that benchmarks of other cities have shown substantial limitations to outsourcing. Indeed, for the value of outsourcing to exceed the cost of paying a private corporation a profit, one or more sources of value to outsourcing must exist. For example, the private firm must have substantial greater economies of scale, or lower wage rates, or management expertise a city cannot acquire. For a large-scale city such as Atlanta with relatively low existing wage rates, the probability of saving huge amounts across many departments appears low.
Can the city save $150 million or more on general fund operations to help pay for sewer costs?
Absolutely not. The current general fund budget is approximately $450 million with a majority of this funding public safety departments. Even including the $45 million sanitation fund, to believe the City could cut literally thousands of additional jobs is not credible. This is especially true given the already aggressive movement from 37% above benchmark level of employees per capita to 5% above benchmark.
Analysis done by some groups to demonstrate high levels of savings from privatization rely upon using the very high "upper bound" estimates of savings from the Version 0 Turn Around Plan across many departments. This approach is generally unsound, and certainly unsound in the specific case of a large-scale city with low existing wage rates. For example, while a small town with high wage rates might conceivably save 60% on its sanitation costs by outsourcing to the company which provides services to a neighboring large city, it is highly unlikely that Atlanta will be able to generate this type of savings in any one department, let along across many simultaneously.
There are obviously many more questions to be answered and more actions that can be discussed, but hopefully this brief memo serves to answer some in advance of the next briefing by the Office of the Mayor on the Turn Around Plan status. Please call me with any questions.
Turn Around Plan Implementation: Draft Status Update November 6, 2003
Priorities as described in TAP version 1
Priority Status comments
|
Financial Stability |
|
|
Budget process |
Complete |
|
In-year financial management |
Complete |
|
Sanitary services finances |
In process |
|
Real property management and asset sales |
In process |
|
Revenue initiatives |
In process |
|
Revenue optimization |
In process |
|
Collections |
In process |
|
|
|
|
Efficiency and Effectiveness |
|
|
Team Atlanta (talent acquisition and retention) |
In process |
|
Process reviews (IT, Procurement, HR) |
Complete |
|
Customer service strategy and implementation |
In process |
|
Management dashboard |
Complete |
|
Operations improvement |
In process |
|
(including service consolidation, marketization) |
|
|
Annual strategic planning |
Complete |
|
|
|
|
Infrastructure |
|
|
Clean Water Atlanta |
In process, funding issues |
|
Hartsfield expansion |
In process |
|
Solid waste disposal |
In process |
|
Multi modal development |
On hold, funding issues |
|
Economic development |
In process |
|
Housing |
In process |
|
Quality of life bonds |
In process |
|
Roads and traffic systems |
On hold, funding issues |
|
Parks and greenspace |
In process |
|
|
|
|
Public safety |
|
|
Consolidated homeland security plan |
Complete |
|
Public safety turnaround |
In process |
|
|
|
|
|
|
Note: All 29 priorities from Version 0 are represented above; they were condensed into 24 categories in Version 1.
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