One year after his first big push to contract out city jobs, Baltimore Mayor Martin O'Malley is looking to the private sector to assume more functions of municipal government - a strategy that pleases the business community and infuriates unions.
Last year, O'Malley fought to privatize the jobs of 176 city custodians and security guards. He aims to contract out 41 more custodial positions in the next city spending plan, which could be approved as early as June 10. In addition, his administration recently asked private companies for proposals to:
Manage the fleet of city-owned vehicles, a function performed by 225 public employees with an annual budget of $34 million.
Run a health clinic that evaluates job-related injuries for city workers. The clinic employs about 20 people and accounts for $1.4 million in annual city spending.
Investigate, process and litigate workers' compensation claims. Twenty-four city employees do that with a $1.3 million budget.
"We're in a fight here to turn around a great city," O'Malley said in a recent interview. "In order to do that, we have to provide some basic services very well, and we have to do that a lot better than we have in the past, and we have to do that quickly."
That is not to say O'Malley is in the midst of a grand privatization drive like those rolled out in the 1990s in Philadelphia and Indianapolis, where dozens of city functions were contracted out. Just because Baltimore is looking into contracting out more services doesn't mean that will happen, city officials say.
"I'm on a mission to improve city services," O'Malley said. "I'm not on a mission to outsource jobs. ... I'm open to any good ideas. If we come up with opportunities for outsourcing in the future, we won't hesitate to look at them. But I don't think you'll see a whole lot more of this."
Even so, union officials are upset by the privatization that has taken place. They question whether it will save money and worry that O'Malley has only just begun.
"He acts fiscally conservative like a Republican," said Glenard S. Middleton Sr., president of the American Federation of State, County and Municipal Employees Local 44. "This is a Democratic city."
'Paying more later'
Middleton contends that by displacing public workers, most of whom live in Baltimore, the city will make its former employees dependent on expensive social services. "It's creating a lower class resident in the city," Middleton said. "[The city] will be paying more later."
City officials dispute that notion, pointing out that 86 percent of the workers whose jobs were outsourced last year found better-paying jobs or retired.
Some city business leaders would like to see O'Malley push harder to trim the city work force and cut costs - through privatization and other means, such as improved management. The city has 15,901 workers, not including school employees; that number is scheduled to fall to 15,522 in fiscal 2003.
"The city, I think, could realize considerable savings," said Karen Footner, executive director of the Baltimore Efficiency and Economy Foundation, a nonprofit organization that studies the city's government. "He [O'Malley] seems to be moving in that direction, which is good."
While it may win points with the business community, contracting out city jobs is never easy, said Ed Rendell, the Pennsylvania gubernatorial candidate who privatized more than 40 city functions as mayor of Philadelphia.
"Mayors get elected to make tough decisions," Rendell said. "Mayors get elected to run the city for one group, and that's the people of the city. And their interests have to be paramount. If we can get the same or better service by outsourcing, I think we have the obligation to do that, particularly in times when money is dear."
But even advocates concede that privatization does not always save money or improve service. Introducing the profit motive into city business can backfire, as it did in a case that local union officials often mention and city public works officials confirm:
Several years ago, Baltimore hired a private contractor to repair and supply city tires. The more new tires it put on city cars, the more money the company made - up to $3 million a year under its contract.
The city garage got the job back a few months ago, after officials discovered the contractor was replacing tires that could have been repaired for less.
Fans of privatization offer an example of their own, a case in which the threat of outsourcing injected a spirit of competition into city operations:
A few months ago, companies submitted bids to run the Bureau of Solid Waste's Northwest Regional Transfer Station. The bids came in higher than what it cost the city to run the facility. But during the bid process, the city found ways to cut costs by 33 percent, resulting in $432,000 annual savings.
"By going through the exercise of analyzing what it would take a private firm to manage the facility, the Bureau recognized steps that it could take to operate more efficiently in-house," O'Malley reported in one of his weekly e-mails to neighborhood groups and business leaders in March.
During the current fiscal year, the city eliminated 176 Public Works Department custodial and security jobs by hiring private contractors. That saves the city about $3 million a year, budget officials say.
City Comptroller Joan M. Pratt questions whether privatization saves money and recently directed city auditors to take a closer look at the numbers. The review will make a detailed comparison of the cost of contracts and city services, factoring in the cost of supplies and the start-up expenses incurred when a company takes over a city function. The review is expected to take weeks or longer.
"I'm not convinced that it's cheaper," Pratt said. "That's why I'm going to have my staff test it."
The city would contract out 41 Recreation and Parks Department custodians under the budget proposed for fiscal 2003, which begins July 1. City officials have said that would save $200,000 to $530,000 a year.
City officials decline to estimate how much they could save by privatizing fleet management, the health clinic and workers' compensation because they are waiting to open and analyze the bids.
In a May 2001 study by the Greater Baltimore Committee and Presidents' Roundtable, groups of business leaders found that the city could save $1.98 million by privatizing the clinic. The report recommended privatization of some other services, as did a July 2000 study by the same group.
Donald P. Hutchinson, president of the Greater Baltimore Committee, said the group did not consider privatization a priority. The reports were primarily focused on improving management, he said, but privatization got the attention because it involves the loss of city jobs.
That said, the business community thinks privatization is worth exploring, Hutchinson said. "We've seldom said, if at all, that they should absolutely go to private-sector vendors," he said. "We said there ought to be a fair evaluation and see if it works and is effective."