Category Archives: Municipal Issues
DOUG MACDONALD, ECONOMIC POLICY ANALYST
How much privatization is good for cities in this recession-strapped century? Have any cities found it cost\beneficial or cost-efficient to load up on contracts to perform city services? A recent article in the New York Times highlights the experiences of two cities: Sandy Springs, GA and Maywood, CA that have taken privatization to high levels.
In economics we teach that “public goods” those that should be provided by government are both 1) non-rival and 2) non-excludable. Non-rival consumption occurs when one person’s consumption does not detract from another person’s consumption. Consider a national defense system or a lighthouse. One additional person using the service does not add to the marginal cost of the defense system and one more ship in the harbor doesn’t detract from the light received by other ships.[i]
The second principle of public goods, non-exclusiveness, occurs when you can’t exclude a consumer from receiving the benefits of the system. If the country is under attack by foreigners, then you protect all of the citizens; you can’t exclude people from the benefit. Similarly, it’s difficult, if not impossible to monitor a single car from using the street system in a modern urban city.[ii] If exclusion is possible, such as charging drivers for using a bridge or a toll road with a GPS transponder, then it is good to use the price system for the benefit provided.
The conclusion is that if goods or services are non-rival and non-exclusive they ought to be produced in the public sector. Alternatively, if the good or service is rival or excludable then it should be produced by the private sector. A pizza, therefore, is both rival and excludable. If you eat one piece, then I can’t eat it (rival). And if I can separate and charge you a price for your pizza the good is “excludable”. We need to consider these two qualities with each function that a city may decide to contract the service out.
A wealthy community of 94,000 in Fulton County, Georgia, Sandy Springs incorporated because its voters were generally dissatisfied with the municipal services provided by the County. In 2005, the first “interim” city manager, Oliver W. Porter did a lot of advance work to contract out most services. Currently, private vendors provide most of the services in Sandy Springs except for John McDonough, the city manager, and six other city employees (and police and fire too as it turns out later in the article):
“Applying for a business license? Speak to a woman with Severn Trent, a multinational company based in Coventry, England. Want to build a new deck on your house? Chat with an employee of the Collaborative, a consulting firm based in Boston. Need a word with people who oversee trash collection? That would be the URS Corporation, based in San Francisco.”
Porter, a retired AT&T engineer, did a lot of the original spadework and wrote contracts that specified the many tasks and duties for private contractors. For the first five years the city only used CH2M Hill, an engineering firm based in Englewood, Colorado (and an office in Salt Lake City), “to handle every service it delivered.” But last year the city “sliced the work into pieces and solicited competitive bids.”
“When the competition was over, the town had spread duties to a handful of corporations and total annual outlays dropped by $7 million. (Representatives of CH2M, which still has a call-center contract, said at the time that they were “deeply disappointed” by the results, but wished the city well, according to a local news report.)”
In the last round of bidding, Sandy Springs began awarding second and third place bidders in case the primary contractor underperforms.
On the negative side, some complain that the new city is a “white-flight suburb that has essentially seceded from Fulton County”. “Will this rich enclave become a gated community walling itself off from areas that are economically distressed?” worries Evan McKenzie, author of “Privatopia: Homeowner Associations and the Rise of Residential Private Government”.
To learn more click on the Times article or check out Oliver Porter’s book: “Creating the New City of Sandy Springs”
Revenue and Taxation Interim Committee:
Of most interest to Utah cities is the discussion over transportation funding. Provo Mayor John Curtis presented for discussion purposes a proposal to allow retiring city-issued road bond levies to be converted into a dedicated property tax levy for road maintenance. Discussion evolved from this particular proposal into a broader discussion of transportation funding – including gas tax and sales tax increases. The committee proposed meeting next month with the Transportation Interim Committee in a joint committee meeting to focus in more detail on transportation funding issues.
Political Subdivisions Interim Committee
This committee held a broader discussion on the issue of government competition with private enterprise. Representative Curt Webb, Committee Chair stated that his concern was to generally discuss the issue and no action would be taken. Representatives of Higher Education, Public Education and local government were asked to comment. Much of the discussion centered on efforts to privatize services. Roger Tew of the ULCT and Adam Troup of UAC spoke for local government. Roger pointed out many cities had undertaken serious privatization efforts and also noted that First and Second Class cities had complied with the competitive inventory legislation passed in 2008. He also emphasized that any type of bright-line test for what are appropriate governmental activities is highly problematic. He also emphasized that these policy decisions go to core of why cities and towns are governed by their own local decisions which may well differ between communities. The committee indicated that they may hold further hearings on the future but do not plan any particular legislation.
Transportation Interim Committee
The Transportation Interim committee discussed the Unified Transportation Bill, the recent federal transportation appropriation legislation (MAP 21), and corridor preservation. Leaders of Utah’s Metropolitan Planning Organizations (MPOs; Andrew Gruber of Wasatch Front Regional Council and Andrew Jackson of Mountainland Association of Governments) testified to the committee about the financial demands for Utah’s transportation infrastructure, how the MPOs bring local leaders together to draft comprehensive transportation plans on a 4 year basis, and distributed the current Unified Transportation Plan to the committee. They pledged that Unified Transportation Plan would strengthen the economy, benefit the entire state Utah, maximize scarce resources, and demonstrate good stewardship over the land, money, and resources involved in the transportation system. Afterwards, Linda Hull of the Utah Department of Transportation briefed the committee about MAP-21 and its impact in Utah. The four-fold purpose of MAP-21 is to provide funding, consolidate programs, become performance based, and accelerate project delivery. Utah will receive $312 million in Fiscal Year 2012 and 2013 and $314 in Fiscal Year 2014. The bill also extended transportation-related taxes and fees through 2016. Finally, the committee reviewed Representative Brad Last’s proposal on corridor preservation options. Currently, if a city or town is located in a county that also is home to a metropolitan planning organization, but the city or town does not belong to the MPO, then that city or town cannot use corridor preservation fund money to set aside future transportation corridors. Currently, only the cities and towns that belong to the MPO can access the corridor preservation fund. Representative Last’s proposal would allow such cities and towns outside the MPO to use fund money for corridor preservation and utilize such resources for planning. The committee unanimously adopted the proposal as a committee bill and expect continued support from MPOs and quick passage during the 2013 session.
More than 40 mayors, council members, and fire marshals from Duchesne to Logan and Eagle Mountain to Layton met with Governor Herbert today to discuss fireworks use and the potential fire danger in Utah. The leaders and Governor also held a joint news conference.
Governor Herbert announced that he has banned fireworks in all unincorporated areas of Utah. He then called on cities and towns to appropriately regulate firework use in their communities. He declared that he trusted local government leaders to balance allowing the use of fireworks in safe areas and banning the use fireworks in more hazardous areas. He suggested that cities could restrict fireworks to a particular park or parking lot within city limits but must keep an area available for fireworks use. Otherwise, he warned, if people don’t have a legal outlet to discharge fireworks, then they would discharge anywhere. Finally, he called on Utahns to exercise common sense when using fireworks.
On behalf of local governments, ULCT 1st Vice President and Salt Lake City Council Member Carlton Christensen then addressed the media. He explained that cities had the discretion to regulate fireworks in certain hazardous areas and that cities would also designate other areas as safe. He encouraged residents to check with their cities for individual restrictions. He also emphasized that cities would have a zero tolerance policy when enforcing firework law and that people who cause fires due to their fireworks or other discharges will be held liable.
After the press conference, Governor Herbert then met with the city officials and took questions. City officials asked about financial resources for fires, how to publicize both the “safe” areas and restricted areas, and whether cities had the authority to extensively ban fireworks. He again repeated that cities do not have the legal authority to ban all fireworks use and urged cities to provide a safe spot in the city where people could light their fireworks. He also repeated that he did not want to dictate to local government how to regulate fireworks. He urged city leaders to publicize their restrictions, work with the local retailers in their community, and enforce the law.
ULCT is actively monitoring the firework issue and will keep you posted on any new developments. We strongly recommend that, if your city is adopting a partial or comprehensive ban on firework use, you provide a list of reasons that demonstrate that environmentally hazardous conditions currently exist in your community. ULCT wants to ensure that local government retains the authority to regulate fireworks and wants the Governor or the Legislature to have evidence that cities and towns acted diligently and judiciously.
Additionally, we strongly recommend that you utilize your city website or social media to publicize the firework restrictions in your community. Please also forward the restrictions and ordinance to Janet at the State Fire Marshal’s office at email@example.com.
If you have questions or concerns about the state fireworks law or your city’s ability to regulate fireworks, please contact Cameron Diehl
at ULCT at 801-328-1601 or
With last week’s abbreviated holiday week (thanks to the Tom Turkey) we have few meetings to report on for the week of Nov. 21st. We did, however, spend the week deep in preparations for eating turkey, watching Utah pretend it was Easter by laying an egg, and honing our skiing skills with some early-season skiing thanks to our wonderful communities of Park City and Alta…thanks Tom, thanks Kate.
We hope all of you had plenty to be thankful for, and spent ample money on Black Friday to keep those sales tax dollars rolling in to your communities. If, however, you were not willing to get pepper-sprayed at Walmart to get your favorite Christmas item this weekend, don’t beat yourself up too badly fore today is Cyber-Monday, where you can have a pepper-spray free shopping experience (and I am sure all of you will submit your online purchase record and applicable taxes to the Tax Commission this April to ensure that sales tax money keeps flowing).
While last week was pretty quiet, this week will be fairly busy. We will have a land-use/Property Rights Coalition on Monday, hosting the SL County Conference of Mayors on Tuesday to discuss township/municipal service delivery issues and both the American Legislative Exchange Council (ALEC) and National Conference of State Legislatures (NCSL) will be meeting this week with ALEC in Phoenix and NCSL in Tampa Bay.
We hope this finds you well and please immediately leave this posting and move-on to your Cyber-Monday festivities. A more detailed and pertinent weekly report will be provided for next week.
Your ULCT Lobby Team
Wednesday, November 16 was the last interim day for 2011. While it is nice that the 2011 interims are finished, it means the 2012 legislature will soon be upon us! ULCT attended several committee hearings to track key legislation.
The Governmental Operations Interim Committee reviewed the local government referendum process, the Utah Procurement Code, and the use of municipal and county transfers of development rights.
In the 2011 session, the legislature enhanced the requirements for putting a local government referendum on the ballot regarding a “local obligation law” (issuance a bond, note, lease, finance agreement, etc.). The 2011 changes now require a person seeking to submit a local obligation law (or a “land use law”) to meet the following threshold: in a city of the first or second class, 20% of all votes cast in the city for president in the most recent presidential election; and in a city of a third, fourth, or fifth class or a town, then 35% of all the votes cast in the city/town in the most recent presidential election.
Senator Jenkins, however, opined that the higher threshold has made it excessively difficult for residents to use the referendum process on local obligation laws and instead has forced residents to sue the city. He cited the debate in North Ogden over the general obligation bond as an example. He is working on legislation to revert a “local obligation law” back to the lower standard threshold for referendums, ranging from 10% of all votes in the city in the last presidential election if the total number of votes exceeds 25,000 to 30% of all votes in the town in the last presidential election if the total number of votes does not exceed 250. (See Utah Code §20A-7-601(1) Senator Jenkins is also working on legislation to extend the number of days that citizens have to collect signatures to put a local government referendum on the ballot. Finally, Senator Jenkins’ legislation will also address the definitions of “binding” after a controversy regarding some attempted ballot petitions in Kaysville that were invalidated because of binding discrepancies. The committee bill passed unanimously.
Next, an outside consulting group (HayGroup) presented the results of a state compensation study that the Bangerter commission recommended in order to compare private industry in Utah to the public sector and surrounding states. The report determined that the average age of state workers is 44 which is much higher than the private sector. Total state compensation is generally lower than the private sector (on average 10.5%), and the consulting group recommended that the state increase the compensation before the legislature adopts a “pay-for-performance” model. For a “pay-for-performance” model, the consultants warned that it is difficult to develop a good performance evaluation program.
Senator Niederhauser then approached the committee with two bills. First, he will run a nearly 300 page bill revising the Utah Procurement Code. He warned that while the 2011 bill only focuses on the state process, he expected municipalities to review their own policies and he would later address municipal procurement.
Second, Senator Niederhauser and an Audit Supervisor from the Office of the Legislative Auditor General examined a state audit of transfers of development rights. The audit revealed several issues that must be addressed in statute, including the need for a local ordinance, public process, and transparency of where the density credits originated and to where they were transferred. Senator Niederhauser emphasized that he was working with ULCT and other stakeholders, and that he didn’t want to bind local governments into doing TDRs in one specific way. He does, however, want to ensure that the TDR process is open, defined, and transparent. The TDR legislation was not distributed to the interim committee but it will be ready for the 2012 session.
Judiciary Interim Committee:
The upcoming sweepstakes bill should resolve problems created by a previous bill that may have inadvertently legalized gambling. Cyber cafes claiming that they operate as a legal sweepstakes (comparable to the McDonald’s “Monopoly” promotion) have sprouted in many Utah cities so ULCT and many city attorneys’ offices have cooperated in drafting legislation to eliminate the perceived loophole and halt the spread of cyber cafes. The legislature agreed to resolve the problem and passed the ULCT-supported bill unanimously.
Public Services Interim Committee:
Spencer Jenkins from ARGC gave a quick report on what they are doing and what they have done with mapping in the state. The Broadband side was the more important one for cities. They have provided a map of 48 providers and the broadband they are providing throughout the state.
Revenue and Taxation:
The big story of Rev and Tax is what did not happen there. The two issues of most concern to our cities were either removed from the agenda or the committee chose not to address it. First, the on-line travel taxation issue was removed from the agenda shortly before the meeting. Sen. Bramble stated this action was taken because of new information that he had received regarding on-line travel companies’ reporting of taxes. He indicated that these matters needed to be clarified before he would proceed with any legislation. The second issue was a discussion of the sales tax distribution formula. Although not originally included, the agenda was later modified to include a discussion of this item. However, given the length of the meeting, ultimately the committee chose not to deal with the issue. Lastly, the committee did approve legislation that would grant a $25,000 business personal property tax exemption (the current exemption is $3800). The legislation would not result in revenue loss to taxing entities but would result in a tax shift from business personal property to all real property (approximately $7 on a $200,000 home). This legislation will be the subject of considerable discussion during the session.
Salt Lake Valley Conference of Mayors:
ULCT joined the “big dogs” of COM on Thursday at the West Valley City/Taylorsville Animal Shelter. Governor Herbert addressed COM about the growing economy, praised the enthusiasm and enterprise of Utahns, and said that Utah’s economy and quality of life is the envy of fellow states. Sandy Mayor Tom Dolan and Governor Herbert discussed current legislative attempts to change the sales tax distribution formula and the Governor expressed interest to discussing how to improve the efficiency of the municipal tax structure with mayors, ULCT, UAC, and other parties. After the governor departed, the mayors raised concerns with the UDOT administration of federal grants to cities and ULCT will follow up with UDOT. Finally, the mayors discussed the vision of wall-to-wall services and governance for all Salt Lake County residents.
Billboards Task Force:
The Billboards Task Force convened in the Senate Caucus Room during interims on Wednesday under the watchful supervision of Senators Urquhart and Stevenson. In an unusual turn of events, municipal representatives were actually outnumbered by industry representatives (by quite a margin). Not to be overshadowed, the Home Team presented its perspective on conversion of billboards from traditional media to electronic media. Stunned by our pragmatic approach, and unable to unleash epithets about our outrageous behavior, the outdoor advertising industry countered with a self-deprecating request to repeal certain reciprocity provisions with on premises advertising that the industry had lobbied for last year. No contest from the Home Team.
The industry also raised what appears to be a readily resolvable concern about cities that have adopted a practice to directly compete with the Outdoor Advertising industry by opening inexpensive, public forum banner space for off premises commercial advertising. Finally, the industry (well, Reagan Outdoor Advertising) appeared to suggest that it would like to use the process developed in the Ombudsman’s office to resolve valuation issues in cases of eminent domain. The devil is in the details. However, we have had generally favorable results with the Ombudsman process in the past and are open to discussing ways for all parties to reduce transaction costs (i.e. litigation costs) in determining the value of a particular billboard.
The only true confrontation came from a single member of the Outdoor Advertising industry who expressed hesitancy to accept a win-win solution before the session has even begun. As such, the meeting concluded with an additional wish list of legislation directed squarely at a single dispute that is currently in litigation with Salt Lake City. With any luck, this dispute can be resolved on its merits, away from the legislative process.