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Cities Rent Police, Janitors to Save Cash
 Move saves cities budget-crushing costs of employee benefits like health insurance and retirement
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Los Angeles County Sheriff's deputies remove evidence and files from Maywood police headquarters. The sheriff's department has taken over policing for Maywood and many other cities across Los Angeles County.		   Cities Rent Police, Janitors to Save Cash
Move saves cities budget-crushing costs of employee benefits like health insurance and retirement

 by Tamara Audi

Wall Street Journal

July 19, 2010

Faced with a $118 million budget deficit, the city of San Jose, Calif., recently decided it could no longer afford its own janitors. So the city's budget called for dropping its custodial staff and hiring outside contractors to clean its city hall and airport, saving about $4 million.

To keep all its swimming pools open and staffed, the city is replacing some city workers with contractors.

"These are cases where the question is being asked, 'Is this a core service at the city level?' " said Michelle McGurk, senior policy adviser to the San Jose mayor.

After years of whittling staff and cutting back on services, towns and cities are now outsourcing some of the most basic functions of local government, from policing to trash collection.
 

Services that cities can no longer afford to provide are being contracted to private vendors, counties or even neighboring towns.

The move saves cities budget-crushing costs of employee benefits like health insurance and retirement. Critics say contracting means giving up local control and personalized services.

Cities say they have little choice. Municipalities across the U.S. will face a projected shortfall of $56 to $86 billion between 2010 and 2012, according to a report from the National League of Cities.

"You can do across-the-board cuts for only so long," said Andrew Belknap, Western Regional Vice President for Management Partners, a government consulting group. "It's gone from the tactical cost cutting to get through a recession, to in some cases saying we have to exit that business or service altogether."

Maywood, a tiny city southeast of Los Angeles, is taking contracting to the extreme. The city of around 40,000 is letting go of its entire staff and contracting with outsiders to perform all city services. The city is disbanding its police force and handing public safety over to the Los Angeles County Sheriff. Its neighbor, the city of Bell, will take over running Maywood's City Hall.

Like many towns, Maywood is battling a budget deficit. But city officials said they were forced into the situation when the city's insurance carrier decided to cancel coverage because of the $21 million in legal expenses and judgments against the city stemming from the conduct of its police department. Without insurance, the city is barred from hiring employees who work directly for the city.

"We're on the cutting edge here. We're the tip of the spear," said Magdalena Prado, Maywood's community-relations officer, who works for the city as a contractor. Ms. Prado said she has gotten inquiries from cities across the country "wanting to know how this is going to play out. They're facing their own financial strains and looking to us as an example."

Maywood officials insist services will continue. The city has for years used contract workers to run services such as parks and recreation.

But not every transition is smooth, and city employees losing their jobs are seldom eager to help their replacements take them over.

Cities can face expensive lawsuits or severance costs when they lay off employees, although these costs differ in every city, depending on the union contract, the number of people losing their jobs and whether the contractor is willing to hire the former employees.

Maywood city council member Felipe Aguirre said the city negotiated severance packages with civilian employees, but the former police officers have been more difficult. The police union attempted to stop the city from dismantling the department by filing a temporary restraining order. The order wasn't granted, and the police department was disbanded July 1.

Los Angeles County Sheriff's Department officials say they are getting more inquiries from cities and towns who want to pay them to take over local policing. The Los Angeles County Sheriff's Department has policing contracts with 42 out of 88 cities in the county.

Lakewood, a small city near Long Beach, is known nationally for developing a model city structure, known as the Lakewood Plan, that contracts out some major services while maintaining local control over others. The city contracts 40% of its services to outside vendors, including public safety, which is run by the Los Angeles County Sheriff's Department. Other areas it continues to handle itself, including parks and recreation, city-hall administrative services and the water department.

Outsourcing is on the rise around the country. Johns Creek, an Atlanta suburb that incorporated in 2006, contracted all of its city-hall and public-works services with CH2M Hill, a Denver company that provides everything from staff to furniture. The city maintains its own fire and police departments, and employs its own city manager and finance director.

"The county was hard-pressed to provide the services here that people wanted and expected," said Doug Nurse, the city's spokesman, and a CH2M Hill employee. "We had everything in place. We were good to go."

In California, the state's $19 billion budget deficit is putting additional pressure on local governments. The state has begun to reduce the amount of redevelopment funds cities have traditionally received; Pasadena, for instance, had to hand $10.8 million back to the state.

In Long Beach, city officials are considering a plan to help close an $18.5 million budget deficit by hiring a private contractor to manage city marinas.

"We're trying to focus on core services so that non-core services can be eliminated eventually," said David Wodynski, the assistant director of financial management for Long Beach.

A recent Nevada state law requires cities and counties to study consolidating services and provide detailed analysis to lawmakers by September.

The Los Angeles suburbs of Burbank, Glendale and Pasadena are contemplating merging services such as tree-trimming, employee training, purchasing and police helicopters. All three face deficits, and reductions in state funds. The cities have already started a joint emergency-dispatch center that has grown to include other cities.

Glendale has faced an $8 million shortfall on a $170 million annual budget for the last three years, said city manager Jim Starbird, and has already cut police and fire personnel.

"We have to find ways to reduce the costs of services we provide," he said. "We can't just keep cutting services."

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EDITOR'S NOTE: Here's a follow-up article, about the city of Maywood, CA:
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A City Outsources Everything. Sky Doesn't Fall.

By DAVID STREITFELD

Los Angeles

July 20, 2010

MAYWOOD, Calif. — Not once, not twice, but three times in the last two weeks, Andrew Quezada says, he was stopped and questioned by the authorities here.

Mr. Quezada, a high school student who does volunteer work for the city, pronounced himself delighted.

“I'm walking along at night carrying an overstuffed bag,” he said, describing two of the incidents. “I look suspicious. This shows the sheriff's department is doing its job.”

Chalk up another Maywood resident who approves of this city's unusual experience in municipal governing. City officials last month fired all of Maywood's employees and outsourced their jobs.

While many communities are fearfully contemplating extensive cuts, Maywood says it is the first city in the nation in the current downturn to take an ax to everyone.

The school crossing guards were let go. Parking enforcement was contracted out, City Hall workers dismissed, street maintenance workers made redundant. The public safety duties of the Police Department were handed over to the Los Angeles County Sheriff's Department.

At first, people in this poor, long-troubled and heavily Hispanic city southeast of Los Angeles braced for anarchy.

Senior citizens were afraid they would be assaulted as they walked down the street. Parents worried the parks would be shut and their children would have nowhere to safely play. Landlords said their tenants had begun suggesting that without city-run services they would no longer feel obliged to pay rent.

The apocalypse never arrived. In fact, it seems this city was so bad at being a city that outsourcing — so far, at least — is being viewed as an act of municipal genius.

“We don't want to be the model for other cities to lay off their employees,” said Magdalena Prado, a spokeswoman for the city who works on contract. “But our residents have been somewhat pleased.”

That includes Mayor Ana Rosa Rizo, who was gratified to see her husband get a parking ticket on July 1, hours after the Police Department had been disbanded. The ticket was issued by enforcement clerks for the neighboring city of Bell, which is being paid about $50,000 a month by Maywood to perform various services.

The reaction is all the more remarkable because this is not a feel-good city. City Council hearings run hot, council members face repeated recall efforts and city officials fight in public. “You single-handedly destroyed the city,” the city treasurer told the City Council at its most recent meeting.

Four years ago, in what was probably the high-water mark of acrimony in Maywood, a deputy city clerk was arrested and accused of soliciting a hit man to kill a city councilman. The deputy clerk, Hector Duarte, was concerned that his salary might be reduced or his job eliminated during a previous round of bad fiscal times; he was sentenced to a year in jail and six months of anger management counseling.

This time, the councilman, Felipe Aguirre, has received no threats and has seen remarkably little anger. “This is a very bad economy,” said Mr. Aguirre, who like the mayor and fellow council members receives a stipend from the city of $347 every two weeks. Even if city employees lose their benefits, he said, “very good workers are still going to hang around.”

Jose B. Garcia, an assistant city planner, will now be working on contract. “I still have a job,” he said. “In that sense, I can't complain too much.”

Maywood, which covers slightly more than one square mile, is one of the most densely populated cities in the country. The official population of 30,000 is believed to considerably understate the actual total of about 50,000.

It has some of the ills that plague other cities. Property taxes, a primary source of revenue, have declined to $900,000 from $1.2 million in 2007. Sales taxes have also dropped. But Maywood's biggest problem by far has been its police department.

A report by the state attorney general last year concluded the culture of the department “is one permeated with sexual innuendo, harassment, vulgarity, discourtesy to members of the public as well as among officers, and a lack of cultural, racial and ethnic sensitivity and respect.”

There are $19 million in claims pending against the police, which made it effectively impossible for the city to get insurance for any of its employees. If Maywood did not dismiss the municipal work force, officials said, bankruptcy would have been the only option. The total number of laid-off employees, including those in the Police Department, was about 60, city officials said.

“Just like the driver who has three and then four and then five accidents, things were starting to look ugly,” said Angela Spaccia, the acting city manager who is on loan from the city of Bell.

The budget for the Police Department last year was nearly $8 million, more than half of Maywood's revenues. The contract with the Los Angeles County Sheriff's Department will cost about half of that. Insurance premiums for the city have fallen to $200,000 from $1 million.

The deputies have already engendered good will, Councilman Aguirre said, by cracking down on a local hotel that was a haven for prostitution.

And others said they have seen an increased police presence in the last few weeks. “The deputies are there right away,” said Maria Mendez, who has lived in Maywood for most of her 73 years. “Before you used to wait and wait for the police.”

One reason for the general enthusiasm might lie in the fact that many of the nonpolice workers have been rehired on contract, so in some cases the faces encountered by the public remain the same. In other words, no one has noticed much going wrong because there was not much to notice in the first place.

The five crossing guards, for instance, are doing the same work but are paid by a security company.

And it is possible the bad news is just slow in arriving. Maywood has dabbled in contracting before, and it has run awry in some instances. Skeptics cited the example of two handball courts in a Maywood park. City officials said it cost an outsized sum — hundreds of thousands of dollars — for a contractor to build three concrete walls.

A few people, extrapolating from personal experience, are convinced that the city is still on a downward path.

Jerald Bennett was on his way to the $2 seniors' lunch at the bustling Maywood recreational center when another car made an illegal turn and almost rammed him. “It seems like that sort of thing is happening more and more,” he said. “They're not patrolling the streets.”

For others, however, the celebration here is practically palpable. Freed from its employees, Maywood has nowhere to go but up, they say.

“Remember the Soviet Union?” said Hector Alvarado, who heads a civic advocacy group. “They had a lot of bureaucracy, and they lost. Maywood was like that. Now people know if they don't work, they will be laid off. Much better this way.”

http://www.nytimes.com/2010/07/20/business/20maywood.html?_r=1&hp=&pagewanted=print