Phoenix Rising in Calgary?

Commentary, Municipal Government, Frontier Centre

As Calgary passes the population mark of one million, its citizens are feeling the impact of rising taxes as the city races to expand its infrastructure and extend local services to recently developed areas. What should Calgary do?

How about copying a similar city facing the unique pressures of hypergrowth, one that has an international reputation for high-performance government? WestJet flies many of Calgary’s snowbirds there. It’s Phoenix, Arizona.

Calgarians can expect mounting tax bills for mainly these structural or organizational reasons:

  • Managerial incentives are tied to expanding budgets, not delivering efficient service operations. If managers spend more and have more employees, they are paid more.
  • The city’s budget focuses on spending inputs, not outputs produced, and contains no information about what services cost. It instead describes broad categories of costs, chief among them salaries, with nothing broken down to the service level, like how much it costs to cut an acre of grass or pave a mile of road. Without that information, cost comparisons between in-house production and outside suppliers are impossible. When all the overheads, red tape and associated costs of the traditional multi-layered government department are included, citizens end up paying about twice the cost of market prices for services.
  • City services are predominantly delivered by poorly measured monopolies that face little pressure to sharpen their game.
  • Politicians interfere in complicated operations where they have little competence but real incentives to pander to interest groups that donate money to their election campaigns.
  • Unsurprisingly, this mix of wrong incentives, a lack of transparency, a culture of inefficiency and meddling councillors adds up to a lethal recipe for unnecessarily expensive city government.

    Much like Calgary, Phoenix has been on a roll for decades. Thanks to air-conditioning, it’s become one of the fastest-growing cities in the United States, sprawling vigorously across the sweltering Sonora Desert. In 1950, it had 107,000 people and occupied 17 square miles. Today it spreads over 470 miles with a population over 1.4 million.

    Affordable air conditioners do not alone explain the emergence of this dynamic metropolis in a hostile and barren place in the middle of nowhere. Like Alberta, Arizona has used a comparatively light-handed approach to labour-market regulation and taxation to attract investment. But Phoenix specifically has managed to provide an excellent range of services for a comparatively low cost thanks to its strategy of pursuing excellence throughout its municipal operations. In 1994, it won the prestigious Bertelsmann Foundation award as the best-managed big city in the world. The award recognized the innovative nature of Phoenix City government and its constant commitment to improving the cost-performance of city services.

    In the folklore of high-performance government, a defining event was California’s historic tax revolt in 1978, which led to a successful citizen initiative that clamped strict limits on property taxes. That event spooked Phoenix’s city council into agreeing to the privatization of a wide range of services. Ron Jensen, Public Works Director at the time, proposed that city services be re-organized into business units that would compete for the work against private contractors. The rest was history, and the term “Phoenix Model” entered the lexicon of high-performance government. The model shifted the incentives of managers and employees from maximizing spending to maximizing results.

    Moving from the traditionally sleepy, low-performance government environment into a competitive, results-oriented framework transformed the workplace. The city split its operations into separate districts and bid the work out on a rotating basis. Private companies won the first contracts for solid waste collection. However, as city workers moved along the learning curve—figuring out how to do things faster and cheaper, measuring their services in terms of cost per house, simplifying procedures and eliminating overheads where possible—city crews began to win back contracts from big companies like Laidlaw and BFI. The mix has since shifted back and forth, but the result was sharply falling costs for taxpayers. The real cost of trash disposal fell by over 50% per house between 1978 and the mid-90s, with savings passed on to citizens in the form of lower taxes.

    The clear lesson for Calgary is to split the city into regions and then bid out the work on rotating basis. In Phoenix, job losses for city staff were minimal and it managed the transition phase with a no-layoff policy. Since rapid growth will allow dislocated employees to be placed elsewhere in its operations, Calgary is well-positioned to do the same thing

    Another lesson for Calgary is found in Phoenix’s city charter, a form of constitution that governs its operations. Section 4 states clearly that elected officials must have no direct involvement in the administration of the city. If they do, they are to be removed from office. They act, instead, as a board of directors defining the vision and direction of the city, the “what” of the organization. The “how” is left to a city manager with considerable freedom to deliver the vision in the most efficient way possible. If it’s not delivered, the manager is replaced. More contentiously, the charter also bans all city staff from participating in bond and city council elections, with notices sent out every time to all employees reminding them that they cannot put up signs, work on campaign committees and so on. The reason? If a group of managers or a union supports a particular politician who can influence wage negotiations, that creates a conflict of interest.

    Section 4 ensures clear definitions of roles, to reduce confusion and avoid the unfocussed city governments that have evolved across Canada. It deals with Calgary’s specific problem of councillors who needlessly raise costs and taxes by dabbling ineffectively in administrative areas where they have little expertise.

    Calgary can learn from Phoenix that competitive service delivery, a focus on performance and clearly defined roles for elected officials and management are at the heart of a thriving, high-performance city.