The city of San Diego is facing a projected budget deficit exceeding $120 million in the fiscal year beginning July 1. The city’s multiyear outlook shows continuing deficits beyond fiscal year 2027.
Although city leaders seem determined to increase taxes and fees and cut services to residents, there is one tool that has been left off the table: outsourcing.
It should not be.
Although not the end-all solution to the city’s fiscal crisis, outsourcing is an effective tool that can help reduce costs without new taxes or fees and without service reductions.
In 2006, San Diego voters adopted Proposition C with over 60% approval, which amended the City Charter (the city’s constitution) by adding Charter section 117c. That section allows the city to use private contractors for any city service (except those provided by police, firefighters and lifeguards) if found to be cheaper and more efficient while maintaining service quality.
At the time of its passage, section 117c was viewed as a way for San Diego to climb out of a deep financial hole caused by the city overpromising and underfunding pension benefits. The Reason Foundation went so far as to conclude in 2006, based upon experiences in other localities, that San Diego could save an average of 10% to 25% — up to $200 million annually — by using a competitive bidding process.
Section 117c permits outsourcing under “managed competition” where requests for proposals are issued and private contractors are invited to submit bids. City employee teams can submit competing bids that might include ideas to lower city costs while continuing to provide services using city employees.
The mayor is required to appoint a managed competition independent review board. The board is a key to managed competition’s success as it oversees the process and advises the mayor and City Council regarding the bids. Board members are under ethics rules that include avoiding conflicts of interest.
Since 2006, the city has put four relatively small service functions through the managed competition bidding process — street sweeping, landfill operations, fleet maintenance operations and publishing services. All competitions were won by city employee teams. According to the city, the winning bids saved a combined total of $9.2 million annually.
Following the four competitions, some participants criticized the process for such things as unclear requests for proposals, poor management and bias favoring city employee teams.
Facing such criticism and city labor union opposition, managed competition has been left to wither on the vine ever since the last bidding process in 2012.
Over the years, city leaders have done everything they could to avoid managed competition. Outsourcing has not been part of budget deliberations. Even if it were to be considered, there have been no appointments to the managed competition independent review board as required by the City Charter. Absent a working board, there is no process.
And, most recently, City Attorney Heather Ferbert falsely claimed the city could not legally use private trash haulers to reduce resident fees despite longstanding projections of substantial savings, the fact that surrounding cities have done so and that City Charter section 117c allows it.
The idea behind managed competition is a good one. Competition can bring efficiency and innovation. Whether city employee teams or private contractors win competitions, the city can save millions of dollars while maintaining quality services.
Neither criticism of the process in 2012 nor city labor unions’ opposition should deter the city from using managed competition as it faces another fiscal crisis. The process should be reviewed and adjustments made to ensure fairness and thoroughness. Vacancies in the managed competition independent review board should be filled with board members who are unbiased and skilled.
Opposition from city labor unions did not defeat managed competition in the 2006 vote and it should not today. Union leaders represent the interests of their members, which sometimes conflict with the general public’s interests. City leaders should never forget they represent the general public.
However, it is important to note that the city’s fiscal health impacts all San Diegans, including city employees. What’s more, city employee teams have done well in prior managed competitions and there is no reason to believe they won’t in future competitions. After all, those working on the front lines are often best equipped to identify improvements.
Voters were right in 2006 when they overwhelmingly approved managed competition. Facing another fiscal crisis today, the city should use the managed competition tool as envisioned by voters.
Goldsmith is an award-winning Union-Tribune contributing columnist and former Superior Court judge, San Diego city attorney, Poway mayor and state legislator.