BusinessReport.com

Tommy Higgs’ first day on the job running the city of Central’s operations, and Central’s first day providing its own services, went remarkably well. Every department was reasonably busy, so the new workers got their feet wet, but nobody was overrun.

“If you tried to script a day, you probably couldn’t do any better than how it played out,” Higgs says of March 3.

Higgs was the city administrator for Barnwell, S.C., for eight years. Before that, he was CFO for Augusta Fiberglass Coating in Blackville, S.C., and has 15 years of experience in banking, he says. Today, he’s a program manager for CH2M HILL, the vast Colorado-based corporation Central officials hired to run virtually all of their municipal services.

About 17 of Central’s “city” workers are actually CH2M employees, while the town itself employs only a mayor, an executive assistant, a secretary/administrative assistant, a police chief [no officers to serve under him yet] and a finance director who’s contracted by the hour.

Lots of local governments contract out a few functions, like garbage collection. But Central, incorporated in 2005, is the only municipality in Loui-si-ana, and one of only a handful in the nation, that outsources virtually everything. Public safety, trash collection, sewage and water will be managed as before, but CH2M HILL has taken over public works, building permits and inspections, code enforcement, planning and zoning, and general administration from the East Baton Rouge city-parish government. It will be up to Central’s elected officials to hold the firm accountable.

“We still control what they do,” Central Mayor Shelton “Mac” Watts says. “They work for us.”

Watts says hiring a private firm takes the politics out of hiring and firing city workers and says his own research shows hiring a private firm was a more efficient and budget-friendly way to go. There really was no Plan B. Central is starting from scratch, and their service agreement with the city-parish expired March 1.

CH2M was the only firm to bid for the job. Watts was hoping for more offers, but says they’re the only company he knows of that could provide the broad range of services for which Central was looking. City Attorney Sheri Morris says Central did have a bit of leverage in the negotiations; it could have extended their deal with the parish until July 1, and it always had the option of going the traditional route and hiring its own employees.

The three-year agreement pays CH2M $3.5 million per year, plus $800,000 in startup costs for the first year and the ability to negotiate up to an extra 3% in subsequent years to account for inflation. Watts says the firm’s initial offer was $4.5 million a year.

So is $3.5 million a good deal? It’s hard to say, but city officials say they’re pleased. East Baton Rouge Parish had been keeping 90% of the sales tax revenue collected within Central under the temporary service agreement, which David Barrow, executive assistant to Watts, says came out to roughly $4.6 million a year. The parish was also keeping all the permit fees collected from Central. No one has been able to quantify exactly how much the parish was spending to provide services in Central, because the parish doesn’t break down the numbers that way, but Morris says the parish gave a pre-incorporation estimate of about $3.8 million.

Russell Starns, Central’s school board president and a member of the team that negotiated the contract, says Central will end up getting more for less.

“We feel guaranteed we’re going to have better services and more frequency of services than what we had before,” Starns says.

As part of his research, Watts visited the northern Atlanta suburbs of Sandy Springs, Milton and Johns Creek, Ga., recently incorporated Fulton County municipalities managed by CH2M. Those towns are still new to the process, but officials and citizens alike seemed pleased with the results so far, Watts says.

In Sandy Springs, a June 2007 review of CH2M’s first 18 months found the company hit its performance goals in some areas while falling short in others, according to The Atlanta Journal-Constitution. For example, the traffic management division completed work order requests within 10 days 97.6% of the time during the quarter ending March 31, beating its goal of 85%. During that same quarter, the company was only able to clean 1.2% of the city’s storm water system, falling short of its goal of 15%.

Sandy Springs Mayor Eva Galambos reported “excellent results” from CH2M as the town enters the third year of its relationship with the firm.

“They are responsive to problems as they come up, which of course they do,” Galambos says, “but our service delivery is highly successful, people are happy with the services and, after all, that’s what local government is all about.”

Morris says all documents produced by CH2M in its work with Central will be considered public record, although the company’s corporate information obviously won’t be. The company is required to provide weekly reports of its work to the mayor and city council. Central doesn’t have the right to hire and fire employees, but it can pay a penalty and terminate the contract with cause with 60 days notice, or without cause with a 120-day notice. The penalty is $800,000 before Dec. 31, 2009, but drops significantly thereafter, Morris says.

Through the first two weeks, Morris says residents are already reporting a higher level of service than under parish administration. After an initial 180-day assessment, she says, the company and Central officials will meet to come up with concrete performance goals.