Private lessons: Central ousts CH2M Hill and hires a nonprofit organization to provide city services amid a 20% budget surplus.
In an era when headlines are rife with government entities across the country slashing services just to break even, one of the nation’s newest cities is turning more than a million-dollar surplus.
And it’s right here in East Baton Rouge Parish.
The city of Central—an experiment in government privatization—has managed to maintain a 20% budget surplus, which currently amounts to $1.2 million. Not bad for an entity that this year will serve nearly 27,000 citizens with just $6.3 million.
“I’ll say right off the bat that privatization is the wave of the future,” Central City Council member Louis DeJohn says. “It has saved us dollars. We have a solid 20% surplus in our budget, and the only taxes we receive are sales taxes. That’s unheard of anywhere in these economic times.”
Central, which ventured out on its own in 2005, is one of the few municipalities in the country that has hired a private company to provide nearly all of its city services. Aside from a mayor and administrative assistants, Central does not provide its own departments of public works, planning and zoning, finance, inspections or permitting.
That means the city isn’t subject to massive uncontrollable expenses, such as pension plans, employee health benefits and fluctuations in fuel prices, that have affected other government agencies. And the mayor, freed from the demands of managing a workforce, says he can instead focus his attention on economic development.
But these apparent successes haven’t come easy.
After Central was incorporated, East Baton Rouge’s city-parish government handled public services, keeping a whopping 90% of the community’s sales taxes to pay for them. The cost was about $4.5 million.
In 2008, Central signed a three-year contract with Colorado-based CH2M Hill, which at the time was the only firm that expressed an interest in providing services. Its fees were $4.3 million in the first year and $3.6 million in each of the remaining years.
Without the benefit of experience in running independent government operations in Central, city leaders looked to other municipalities with privatized services to form the basis of their own contract with CH2M Hill. And while the mayor and council speak highly of the company, they acknowledge that over time, shortcomings in the contract emerged.
Residents and developers began complaining that permit fees charged by CH2M Hill were too high and not in line with comparably sized communities. Nor could permits be obtained online. The issue of the fees became particularly heated during the last election.
The contract also was structured in such a way that the firm was required to provide crews to work a certain number of days per year, rather than complete specified projects like grass cutting, ditch maintenance and road repairs, regardless of how many man-hours were needed.
Top executives with the ability to make critical decisions were based in Colorado or Atlanta, and sometimes they took a day or two to reach. The city engineer and the grant writer also were based out of town.
And last spring, the Central City News sued CH2M Hill over the release of public records. A district judge decided in favor of CH2M Hill, but the case is on appeal and the newspaper won the coveted Freedom of Information Award from the Louisiana Press Association for its fight.
“Nobody can fault the contractor,” DeJohn says. “We had some growing pains.”
Even so, the city last month ousted CH2M Hill and hired the nonprofit Institute for Building Technology & Safety to provide city services.
Months after winning a tough reelection fight last year, Mayor Shelton “Mac” Watts assembled a committee of 21 councilmen, business leaders and residents to decide what Central needed in a new city services contract. Subcommittees focused on key areas: general services, public works, planning and zoning, permitting, and code enforcement.
Then a nine-member committee representing the larger group acted as a selection committee to review qualifications and proposals of the four companies that competed for the contract.
“They spent hours and hours breaking the contract down, figuring out what sort of things we needed to continue, things we didn’t need, things we needed to add,” Watts says. “I can’t say enough about the work they did.”
Central signed a five-year, $3 million contract with the Virginia-based nonprofit, which will save the fledgling city nearly $500,000 annually. The entity also promised to return any profit it makes under the contract or use it to provide additional services.
IBTS isn’t new to Louisiana. The organization has been working with local governments since 2006, when it was chosen to help implement the first statewide building code in the aftermath of hurricanes Katrina and Rita. Today, IBTS provides a range of public services in 15 parishes and 30 municipalities in Louisiana.
Its work is guided by a board of directors composed of state and local officials appointed by the Council of State Governments, International City/County Management Association, the National Association of Counties, the National Governors Association Center for Best Practices and the National League of Cities.
“We intend to provide a model for public-private collaboration at its best in our partnership with the city of Central,” IBTS Chief Operating Officer Shyam Choudhary says. “We will be visible, accessible and engaged in the community.”
The new contract improves upon several aspects of Central government, adding a local engineer and grant writer and online permitting. IBTS also is required to perform a specified range of work, regardless of the number of crewmen or hours it takes to get it done.
IBTS Program Director David Ratcliff of Baton Rouge will oversee day-to-day operations at Central’s new Municipal Services Center. But the group has hired many of the same employees who worked for CH2M Hill, which city leaders say will work to their advantage.
“It’s making the transition easier,” Watts says. “And David Ratcliff is getting a lot of rave reviews. He’s working extremely hard and calls me at every turn.”
Whether the organization will conduct its business openly enough to please both journalists and concerned citizens remains to be seen.
During the mayoral election, CH2M Hill came under fire for running an advertisement in The Advocate under the name “City of Central,” defending permit fee rates.
When Central City News submitted a public records request seeking internal documents indicating who authorized the advertisement, CH2M Hill refused to disclose them, insisting that it was a private business exempted from doing so. District Judge Kay Bates dismissed the lawsuit before it ever went to trial, a decision that is being reviewed on appeal.
At the heart of the issue is whether privatization, which government entities increasingly are considering as a cost-cutting measure, results in less public access to how tax dollars are spent. Private companies can claim some of their work product is proprietary information. Central could prove to be a test case in that regard.
“The company, although private, is providing governmental services and receiving taxpayer dollars,” says Central City News Publisher Woody Jenkins, a former state legislator who insists privatization in Central has great potential. “For that reason, a number of things they do should be disclosed. If it’s available to a citizen of Baton Rouge or any other community, it should be available to a citizen of Central. You can’t have a private company making all these decisions and zero accountability.”
Jenkins’ lawsuit has put a rift between him and some public officials. Supporters of Watts have started a competing newspaper, centralspeaks.com, and businesses with ties to the mayor are spending their advertising dollars there. In awarding Central City News its Freedom of Information Award, the Louisiana Press Association in May said the court fight and boycott have financially imperiled the newspaper.
For its part, IBTS promises to provide regular reports to the mayor, city council and public about the services it is delivering and upcoming plans to ensure accountability and transparency. Says CEO Ashok Goswami: “Our goal is to provide the best possible services to the citizens at the best value over the next five years.”
But DeJohn says some people mistakenly believe that because IBTS is a nonprofit, the public will be entitled to more of its records.
“There are certain business records they have to turn over, and certain records they will turn over on a regular basis,” he says. “But there are certain business records they can’t turn over. Even though they are a nonprofit, they are still a private organization, and they have to have some sort of confidentiality because they do have to compete. I don’t see anything in the contract that would change that.”