Frontier Centre: The Phoenix Model of municipal service delivery has been noted for its innovative approach to public policy. What are its essential elements?
Ron Jensen: Its primary element is competition, or managed competition, in which the city workforce competes with the private sector to deliver municipal services.
FC: What were the circumstances in Phoenix that led to its adoption?
RJ: The City Council wanted to experiment with privatization and we recommended that the city be allowed to compete for its contracts for garbage collection. It was our response to the threat of privatization that came from the taxpayers' revolt of Proposition 13 in California which profoundly influenced the City Council in Phoenix.
FC: In what respects was it successful? Did productivity improve? Did it save the taxpayers of Phoenix money?
RJ: It was very successful. For example, over a ten-year period – in garbage collection it reduced the cost of waste collection an average of 4-½ % per year for a total savings of $25 million over 10 years.
FC: The idea that public sector had to compete with private vendors can be frightening to their Union leaders. How much opposition did they mount in Phoenix and how did the City deal with it?
RJ: Initially, the unions objected to the competition but soon discovered that we able to compete when we started winning contracts back. They were also not as concerned because we have a no-layoff policy.
FC: What was the no-layoff policy about?
RJ: We agreed that we would not layoff an employee who would lose their job because of the contract with the private firm – we guaranteed that we would transfer them to other positions in the City. We didn't create any jobs but through growth and attrition we were able to cover everybody displaced. One of the reasons Phoenix was able to cover all of its employees was that it is in a high-growth environment and we had opportunities to place employees in other positions. This may not be an option in a low-growth situation like Winnipeg's.
FC: You have suggested that management is the biggest obstacle to a competitive model – not the unions. Why is that?
RJ: Managers are threatened as far as their future pay because traditionally in the past, generally managers are paid on the size of budget and numbers of employees under their control. These compensation criteria have the potential for being impacted if they lose a contract to a private firm which would then reflect on the manager's future pay. They have a fear of the unknown.
FC: In your own case, you had a larger staff when you started this process than when you ended it.
RJ: That's right – at one time my department had 1,500 employees and when I left the City it was in the 700 range. That was due to reorganizations, re-engineering, downsizing and a number of things – but we laid off no employees during that downsizing. As a result of all that change, my salary actually increased because I was paid on performance and my value to the organization.
FC: What is activity-based costing and its role in the competitive process?
RJ: Activity-based costing really relates to the need to accurately develop a cost for the product or services that are provided. Examples would be cost- per- house- per- month for garbage collection or cost- per- curb- mile for street sweeping. These are costs that have to be developed in order to make a valid comparison with bids from the private sector.
FC: The Phoenix Competition Model has been imitated in other cities, notably, Indianapolis. Were there differences between the application of managed-competition in the two cities?
RJ: In Indianapolis, the mayor initially started out with pure privatization and outsourcing and he met with a lot of resistance from the employees and also the unions. They then adopted the Phoenix model and successfully tried managed-competition in sanitation, street maintenance, vehicle maintenance. After that they then shifted their primary focus into managed-competition.
FC: In what other cities has the competitive model been attempted and is it a wise thing simply to clone the Phoenix Model as you have it now?
RJ: Other cities have been Indianapolis, Charlotte and Philadelphia.
FC: Charlotte, North Carolina?
RJ: Charlotte, North Carolina developed their own approach and used some of the City of Phoenix ideas for managed-competition. I don't think it is a wise idea to try to clone Phoenix because Phoenix is a high-growth city. There are a lot of ideas and concepts that can be used as guidelines but each city is different.
FC: It has been said that Winnipeg suffers from an overly politicized and confused system of governance at city hall. We would like to briefly explore how Phoenix's governance model differs from the City of Winnipeg's. Let's start with one of the basics of good corporate governance and high performance government – the principle of separation. Can you explain why Phoenix mandates separation between elected officials and the administrators?
RJ: Phoenix has a charter that was approved by the taxpayers that restricts the City Council to policy decisions and the administration led by the City Manager who actually runs the city as a business. Phoenix City Council operates as a Board of Directors in that it sets policies and the city is actually managed by the City Manager who operates as Chief Administrative Officer with Department Heads operating as Vice Presidents. It is just like a private corporation — the city runs like a business.
FC: So, this would suggest a more limited role for City Councilors – are they full-time or part-time?
RJ: City Councilors are part-time. The Mayor is probably full time but it is their option. They have two meetings a week and they schedule meetings on their own but they are generally part-time citizen council members. There are nine members.
FC: You have talked about how the city required voter approval of large expenditures. Can you talk about that?
RJ: Yes, the infrastructure projects for the city such as major water lines, water treatment plants, police facilities and so forth are large capital projects and are financed by bonds. If it is a revenue-producing operation such as water then they are revenue bonds. The other bonds are general obligations bonds. Bonds proposals are put together by a series of citizen committees and then referred on to the City Council who then puts it on a ballot measure to be approved by the citizens.
FC: When 13 smaller cities were amalgamated into Winnipeg Unicity the government of the day chose to eliminate money bylaws or votes on large capital expenditures which essentially are what you have in Phoenix. Some have suggested that without this safety valve on spending capital expenditures in Winnipeg shot up through the roof leaving citizens here with a lot of debt-service costs today. Is there any chance in Phoenix that people would want to get rid of the equivalent of these money bylaws?
RJ: Absolutely not. The city has strong involvement in citizens committees and they recommend these expenditures with strong support from the electorate.
FC: It seems you folks have a more sober view of the role of politicians in civic governance. For example, we understand that there are term limits for City Councilors in Phoenix?
RJ: Yes, the present situation is that each council member has a four-year term and they are staggered so you don't have a complete change in the city council at every election. They may run for a second term but two terms is the limit for each council member.
FC: Are there any restrictions on political activity for city workers and staff?
RJ: Yes, city employees are restricted from participating in any local issue whether it is bond elections or any city council election. They simply are prohibited by the City's Charter.
FC: You mean they could lose their job if they support particular candidates, work the phones etc?
RJ: Yes, it's a serious offense and at every election time there is a notice sent out to all city employees stipulating that they cannot put up signs, work on campaign committees, etc.
FC: Here in Winnipeg, there is a tradition of significant labour involvement in elections so, for example, we see unions endorsing particular mayoral candidates. That simply would not be allowed in Phoenix?
RJ: I think if you asked the leadership they would tell you who they supported but politically in ad campaigns or financing or whatever, it is traditionally not done and is seen as a conflict of interest.
FC: Why is it a conflict of interest?
RJ: I think it is generally perceived that the elected officials that have authority over setting wages and benefits should not be supported by the employees. They feel like they have an obligation to the employees.
FC: The growth of Winnipeg's population has been anemic for many years – held down by extremely high property taxes and a consequent erosion of its tax base. How quickly could the kind of reforms you advocate change that?
RJ: Well I don't know enough so I couldn't tell you. It is an evolutionary process and I think that Winnipeg could implement a competitive model that would move in that direction. How long that would take, I am not sure but it would certainly be a move in the right direction.
FC: Phoenix has roughly one city employee for every hundred citizens or 13,000 staff in a city with 1.3 million people and your population is growing so you are constantly hiring more people. Winnipeg has roughly 50% more city employees per capita without any growth. As a neutral, outside observer what needs to be done here?
RJ: I think Winnipeg needs to look at their operations and how many people they really need and reassess their role as an effective business. Are they utilizing their resources or are they simply creating jobs to provide jobs for the community?
FC: In other words to become a competitive, high performance city it needs to do what?
RJ: To be competitive they would have to be "lean and mean", so to speak. In other words, like any other business the city has to compete with the right number of employees doing an effective job. It cannot be carrying "deadwood ". I think any city that has good people and internal resources can be more effective than they are – it needs to work smarter, it needs to use new technology and new methods and ideas from some place else and create a competitive environment. Look at new ways, new methods and how can we compete and observe others and come up with a much better utilization of the workforce and not get numbers but quality.
FC: How can you stand 120 degrees in the summertime?
RJ: I go to Flagstaff where it is cool up in the mountains. Now we have become acclimated to air-conditioning, everything is air conditioned even the new baseball stadium.
FC: So, let's ignore your high performance city government model which has produced such strong growth. There is an old saying that without air-conditioning Phoenix would not be a big bustling city.
RJ: It would probably have 100,000 rather than 1.3 million people.