Ppps For Local Governments The Sandy Springs Model Construction Essay

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Private Public Partnerships ("P3s") are used with increasing frequency throughout the world. Generally considered in the context of large, long-term infrastructure projects such as roads, bridges and hospitals, P3s are being utilized in ever evolving and creative ways. The discussion below will examine P3s in the context of local government service provision in the United States, using details from Sandy Springs and Johns Creek, Georgia to illustrate the benefits and challenges of the P3 model in the local government context. (Please extend to obtain an executive summary, main findings, and excerpts of the conclusion, etc.)

Introduction

Public-private partnerships have been defined in a multitude of ways in the literature and have been described by those who have gained experience with the model. For the purposes of this discussion, P3s in the local government context shall be defined as the provision of human resources and capital by a private sector company engaged in a contractual relationship with a local government partner in order to provide municipal operations and services. .

Bradbury and Waechter describe four models of local government operations and service provision .

The first is the approach that many associate with governments: all service provision is managed in-house.

The second model utilizes contracting out of some services. Many citizens are now familiar and comfortable with this model; waste management for example, is a service that is often undertaken by private contractors.

In the third model, which is based on the P3 concept. all government services and staff are contracted out to the private sector, leaving only the most senior staff as employees of the city. This example is characterized by the cities of Sandy Springs and John's Creek, Georgia.

In the fourth model, which is also based on the P3 concept but is the converse of this approach, most senior staff positions are contracted out. However, in this model the majority of employees and services are provided by the city itself. A number of cities in North Carolina follow this model .

The discussion below will focus on the former approach, referred to as the "Sandy Springs model."

P3s and Local Government

Burgeoning budgets, citizen dissatisfaction with service delivery and pressure from elected officials to reduce expenses are just a few of the reasons why local governments have turned to P3s as a service provision model. As noted above, contracting out of city services is not new; in fact California led the trend to privatize the majority of city services in the 1950s . Cities like Weston, Florida, Centennial, Colorado and many cities in Georgia have taken this approach even further . The impetus for doing so is clear: Governments are not incentivized to reduce expenses; quite the opposite. Ending the year under budget will mean a reduction in budget the following year. The private sector, on the other hand, operates best when it can innovate to reduce expenses and increase revenues. [???????]

Newly incorporated cities such as Sandy Springs, John's Creek, Milton and others in Georgia provided officials with an opportunity to do things differently and to demonstrate value for money to their constituents (taxpayers and voters). The private sector provided the start-up capital and human resources to facilitate the incorporation and provided the required efficiency to meet a required schedule of implementation. There was no fast-track and publicly financed alternative model available to finance the transition from a county dependency to municipal independence. "New Public Management" readily adopts market based principles and approaches to service delivery, staffing and performance based management . While seemingly easier to implement a P3 approach to city management from the "clean slate" or newly incorporated perspective, many well established cities are also looking to the P3 model to provide better services at a lower cost for its citizens .

On its face, there is no reason why these cities should not engage in this approach. Virtually any local government service can be provided by the private sector and usually for considerably less expense. P3s also introduce competition into a monopolistic system of public service provision, resulting in efficiencies and incentives for delivering better services at reduced cost. Ideally, the contractual relationship has management provisions and performance metrics that enable city managers to hold the contractor to mutually agreed upon standards, and allow for financial and legal remedy should the contractor fail to deliver services that meet or exceed those standards .

Structure

There is a misconception that P3 models for local government mean that the contractor "owns" or runs the city. This is not the case. Democratically elected Mayor and Council fulfill the same role as in traditional city management :

Set policies

Pass ordinances (bylaws)

Set priorities for the city

Approve/decline zoning and permitting

Adopt long-range plans

Set budget

Deal with public policy issues

The P3 City Manager, as in a traditional model, is a key player to the successful operation of the city. Typically, the role is filled by an experienced local government administrator who is responsible for ensuring that city policies are carried through and that the day to day operations of the city are delivered at the level outlined in the contract. This person directly supervises the contractor and acts like a senior executive in a private company .

In order to critically evaluate the effectiveness and attractiveness of a P3 model of city management, as well as to understand the future implications of such models for local government, Sandy Springs, Georgia was selected as a case study by the authors of this paper.

The Sandy Springs Model

History and Background

Sandy Springs was incorporated as a city in 2005 and is located 20 kilometres north of Atlanta, Georgia in Fulton County. It has a population of around 100,000 people and a median household income of $106,000.[?????} The estimated capital budget of Sandy Springs is $240 million and the estimated operating budget is $97.5 million based on Sandy Springs budget letter for the fiscal year of 2009 .

In the state of Georgia, the bicameral legislature has the power to incorporate cities and all local government powers flow from the state. Residents of Sandy Springs had been advocating for incorporation since the 1970s and had become more vocal in the last decade, as services provided to the community by Fulton County deteriorated , . Citizens felt that there was significant disparity between the taxes they paid and the services they received. However, efforts to hold a referendum on incorporation were blocked by Democrats in the state General Assembly and by Fulton County itself, worried about a loss in tax revenue. In 2004, the Republicans gained control of both the House and Senate and a Bill to hold a referendum on incorporating Sandy Springs was passed . On June 21, 2005, 94 percent of Sandy Springs residents voted in favour of incorporation The inaugural Mayor and Council were elected in November 2005 . What happened next helped pave the way for an entirely new model of local government.

Incorporation

The legislation passed by the General Assembly appointed a Committee to get the new city up and running, and contained specified timelines and details regarding the incorporation of Sandy Springs. These timelines were incredibly short and also stated that the city would not receive any tax revenues until midnight on December 1, 2005 . With no start up cash, newly elected officials and no authority to enter into contracts or hire staff, the Committee faced significant challenges. Not only that, but its residents were expecting the city to deliver immediate improvements in four key areas:

Public Safety;

Parks and Recreation;

Transportation;

and Infrastructure.

These expectations were warranted. Studies conducted after incorporation found 70 percent of the city's traffic lights had deficiencies .A lack of law enforcement meant that 80 percent of (liquor) licensed premises had significant deficiencies and that illegal brothels were operating in the area .

Addressing these concerns through the traditional approach to city management would have taken years, and what Sandy Springs needed was an immediate, "off the shelf" solution. As such, the city turned to the private sector for assistance.

The P3 Model

Sandy Springs created a P3 model, which had a limited number of senior staff employed by the city, and in which virtually all services were contracted out. The exceptions were emergency services (police, ambulance, fire) as well as water and sewage treatment services, which Fulton County continued to provide . Sandy Springs issued a Request for Proposal (RFP), to which several companies responded. CH2M Hill OMI was selected to provide personnel and services to the new city. Broadly, the city retained ownership of primary assets (e.g. water treatment plants, but not the phones or computers used by employees); exercised budgetary control; and retained ownership of capital planning and expenditures . CH2M Hill OMI was responsible for staffing and all service costs; the repair, replacement and maintenance of all equipment and facilities; and employees/personnel . A more detailed list of CH2M Hill OMI's responsibilities is contained in Appendix One.

After CH2M Hill OMI was selected, and prior to the contract being negotiated and signed, CH2M Hill OMI and Sandy Springs signed a Memorandum of Understanding to provide CH2M Hill OMI with Limited Notice to Proceed. This enabled CH2M Hill OMI to immediately begin putting people and resources in place to begin delivering services for Sandy Springs residents.

P3 Contractual Contents for the Sandy Springs Model

The contract with CH2M Hill OMI has been signed for four to five years with an automatic renewal every subsequent year. In case the City is not satisfied with any of the provided services, it is able to exercise an option to terminate the contract prior to the annual renewal with 30 day notice

During the initial contract negotiations, the City decided for a "Fixed Cost" Agreement with CH2M Hill OMI . As a consequence, CH2M Hill OMI has to operate under a fixed revenue stream for the duration of the contract to provide all services and is not able to charge additional services to the City .

However, a provision in the partnership agreement allows a "re-basing" of the contract after the second year to consider changes in the service-levels and even permits the possibility to shiftto a "Cost Plus basis". A cost plus contract would enable CH2M Hill OMI to bill the City beyond the previously agreed upon 'fixed' compensation for specified services and/or projects and potentially provide additional value to Sandy Spring's tax payers

From time to time, the parties may identify new services that are currently not included in the base scope. In this case, one party is to notify the other part. If agreed by both parties, CH2M Hill OMI is to provide a price and scope within a reasonable time frame. Once the City agrees in writing, CH2M Hill OMI will start the tasks.

General Benefits - P3 Cities

As with all P3s, one of the benefits for government is the transfer of risk to the contractor. In the local government context, this includes shifting risk regarding:

Service expectations (finance and accounting; community development; and public works);

Contractual obligations;

Customer responsiveness;

Costs in excess of budget;

Non-compliance with environmental regulations;

Asset management; and

Asset repair and replacement.

In the case of Sandy Springs and other newly incorporated cities, which followed, an immediate benefit was that the resources required to develop and operate a new city were provided by the contractor; the city did not have to invest immediately in administrative infrastructure .In addition, the contractor absorbed the initial expense for establishing operating processes and procedures .. In case of Sandy Springs the Private Sector even carried a significant contractual and political risk, since a contract was not signed before incorporation (true?).

Cost reduction in city operations through private sector innovations and efficiencies is a clear benefit of this model. Studies suggest that the provision of city services by the private sector saves between 5 and 20 percent of city budgets annually . Closely related to that is the ability for cities to accrue these cost savings and build contingency funds, something unheard of in traditional city governance. The commonly accepted motivation for traditional governments to "use it or lose it" with respect to budget savings ceases to exist in this model .

Employee engagement is another benefit of the model:

First, employees are typically paid more in this model than in traditional public service, a recognition of the skills and expertise that they bring to their positions .

Second, high performance is encouraged through the use of bonuses and incentives, resulting in improved productivity .

Third, while debatable as a benefit, the fear of job loss in a non-unionized environment also serves as an employee motivator .

Fourth, the "it's not my job" attitude that so often characterizes traditional public employees disappears in this model, and with it, employee frustration regarding complacency in their colleagues .

Fifth, employees with extensive experience and diverse backgrounds are hired to fulfill key roles within the city structure. This results in a smaller, but more productive workforce. As the mandate of city officials is to provide good governance, not jobs, this model enables Mayor and Council to focus on public policy and citizen concerns .

In traditional city management, large groups of employees work on RFPs (Requests for Proposal), purchasing functions, partner negotiations and other aspects of contracting out. In this model, improved contract management happens immediately, as all functions related to services are handled by the private sector operator, or are sub-contracted out. The resources required in traditional city management can be redeployed elsewhere, or eliminated altogether.

Decision making in the Sandy Springs model is also streamlined. Fewer employees in the decision-making pyramid, reduced departmentalization and the introduction of the profit motive, "time is money", means that decisions are made much more efficiently .

The P3 model can also help cities reduce their long-term liabilities, such as employee pension and benefit plans . In most cases, city employees are the responsibility of the private sector provider; the city only has to provide for such benefits to public safety employees and the few in-house employees that are paid by the city.

Shared asset models can also help drive efficiencies and cost savings. For example, if the contractor has other similar commercial ventures, assets can be shared among projects when not required by the city. Road paving is one such example. Rather than have the equipment sit idle, the contractor can utilize it on nearby projects or in other P3 cities, thus reducing the need for all cities to own the same equipment.

Finally, economies of scale are often realized by the contractor when several local governments within a geographic area all engaged in P3s . This was the case with Sandy Springs and neighbouring jurisdictions, discussed in greater detail below.

Specific Benefits of the Sandy Springs Model

As noted above, there were four key areas that were specified for improvements in Sandy Springs: public safety; transportation, infrastructure; and parks and recreation .One of the major benefits to residents of Sandy Springs following incorporation was improved customer service, which also focussed on the four areas above. This was made possible through the establishment of a 24/7 citizen call centre to address requests and concerns . While not all requests were actually handled by CH2M Hill OMI, citizens were at least responded to in a timely manner. This contrasts significantly with customer service prior to incorporation. Citizens were frequently frustrated that requests made and concerns expressed to Fulton County officials were often ignored or placed at the bottom of the priority list, as officials had to respond to urgent concerns elsewhere in the county .

A number of improvements related to transportation and infrastructure occurred in Sandy Springs. First, the timeline for permit approval prior to incorporation was eight weeks.[????] CH2M Hill OMI is now able to provide permit approvals for residents within two weeks.[????]

Commuter traffic was improved along the primary transportation corridor by developing an innovative signalling system by synchronizing 21 traffic control signals on Roswell Road, the main corridor of the city, and installing an override system that remotely controls the traffic lights This improvement helped to maintain traffic flow and was estimated to have saved $11M per year . Additionally, signs, debris and obstacles on city roads are now cleared immediately ensuring a free flow of traffic and a safe travel route for commuters.

Bylaw, zoning and code enforcement takes place regularly in the new model, which has had a positive impact on the aesthetic appeal and safety of the city. CH2M Hill OMI has increased citizen compliance with these requirements by levying significant fines and aggressively collecting them . Revenue generated from these fines is shared between CH2M Hill OMI and Sandy Springs. The aggressive approach to bylaw enforcement has been a source of concern for citizens, discussed later in the Specific Challenges section.

Following incorporation by Sandy Springs, the nearby jurisdictions of John's Creek, Milton, Dunwoody and Chattahoochee Hill Country also incorporated and contracted with CH2M Hill OMI for city services . This enables CH2M Hill OMI to realize significant cost savings through economies of scale or resource sharing. One such example is that of a shared workforce. The human capital available to CH2M Hill OMI consists of highly skilled employees. As needs arise at each city, CH2M Hill OMI is able to deploy critical resources on short notice to address those needs, which is considered invaluable by both CH2M Hill OMI and its clients.

Shared services models help smaller communities in the region. Chattahoochee Hill Country for example, does not require full-time employees to undertake backroom operations such as record-keeping, accounting or data processing . CH2M Hill OMI ensures that employees at other cities also undertake these services for Chattahoochee Hill Country. Another example of shared service is that of cross-sworn code enforcement officers . Being able to serve in multiple cities reduces the overall number of enforcement officers required, as well as costs associated with training.

Intergovernmental Agreements (IGAs) were implemented between Sandy Springs and nearby jurisdictions to facilitate the shared service models. Most notable is the IGA with Fulton County that provides for emergency services to Sandy Springs and a number of neighbouring cities . Additionally, water and sewage services are delivered to both residential and commercial properties in Sandy Springs by the City of Atlanta and Fulton County. [????]

The fixed cost contract that Sandy Springs negotiated with CH2M Hill OMI meant that only 10 percent of its first budget was spent on non-contract related items . This consistency in expenditures helps to streamline the budget process and allows city officials to focus time and resources on strategic issues of importance to residents.

Sandy Springs realized several general and specific benefits by adopting a P3 model and selecting CH2M Hill OMI to deliver its services. However, both the model and the choice of partner posed significant challenges for the city.

Challenges

General Challenges - P3 Cities

While not a concern for new cities, existing municipalities considering implementing a full P3 service model will likely face issues with its existing unionized employee base. Union concerns that P3s result in job losses for its membership are well documented and not without merit. One of the "benefits" to P3 service delivery noted above is that job security (or lack thereof) functions as an employee motivator in P3 cities. Union opposition to a wholesale P3 model may result in legal challenges, and will certainly result in political challenges to the city's Mayor and Council.[????] It is also likely that union communications on the issue will result in negative public relations for the city, which could impact tourism, investment and discourage potential residents from relocating there.

Early research into P3s providing municipal services suggests that profit motivation may result in contractors adhering to clauses in the contract if the contractor's commitment is on a short term basis. In this case, a contractor would not invest in a long-term commitment to the sustainability of the city and its taxpayers. As noted above, while environmental compliance risk is transferred to contractors in the Sandy Springs model, operators may be tempted to push the limits of this compliance in order to maximize short-term gain. Whereas traditional city management could result in costlier, but more sustainable long-term initiatives, it is not clear that the P3 model results in better long-term decision making.

By relying on a private sector partner to provide the majority of city services, municipalities deal with capacity issues. First, cities do not build a body of institutional knowledge about process, decisions and history with the Sandy Springs model . The employees belong to the contractor and will take all of their knowledge and expertise with them when they leave. Second, the city may have issues with knowledge transfer if it begins to partner with another contractor. This reliance on private sector expertise puts the city and its residents in a highly vulnerable position.

Transparency is a major concern with respect to P3 cities. While most governments, including municipal, state/provincial, regional and national have freedom of information legislation that grants citizens the right to request and review any government document, private companies are not typically subject to such legislation. As a contractor in a competitive industry, companies are not incentivized to make their records and operational details available to the public. This poses a real problem with respect to transparency and citizen rights, especially given that the revenues to pay the contractors in P3 cities are generated from residents through property taxes.

Despite contract provisions, there is still a risk that the contractor may deliver unreliable service. While remediation for the city exists in the form of withholding payment or terminating the contract, significant costs will be incurred by the city .These costs include the recruitment, selection and transition to a new partner, and operational costs if service provision reverts to the city itself .

Specific Challenges with the Sandy Springs Model

The contract signed between Sandy Springs and CH2M Hill OMI outlined very specific responsibilities and performance metrics with respect to maintenance. Some examples include tree trimming, grass cutting, adherence to city ordinances and more. Citizens contend that not only was CH2M Hill OMI's constant maintenance "too much of a good thing" but it was also unnecessary . For its part, CH2M Hill OMI contends that it is contractually obliged to deliver those services, and its financial compensation is dependent on meeting performance benchmarks. Until such time as the contracts are amended, the company will not risk non-compliance fees and will continue to follow the contract as it is written.

As noted above, strict enforcement of code and ordinance violations angered some citizens. Previous enforcement officers had considerably more discretion and flexibility with respect to writing tickets and certain infractions tended to get overlooked. For example, one city ordinance prohibits the posting of promotional materials, celebratory signs and other material on public property . CH2M Hill OMI is contractually obliged to keep city property clean and free of such materials and is liberal in handing out fines to residents and businesses that violate the law. As a private company motivated by profit, many residents have complained that the fines are a CH2M Hill OMI "cash grab" and are "for senseless stuff that has nothing to do with running the city." Appendix Two illustrates the revenue sharing model for bylaw and enforcement fines.

A major criticism of the Sandy Springs model is the lack of transparency with respect to both the financial model and city records. As a private company, CH2M Hill OMI is not obliged to disclose information on its operational activities and does not make this information public. Services such as Finance and IT are the contractual responsibility of CH2M Hill OMI, which means CH2M Hill OMI owns the assets used to deliver those services. However, detail with respect to the costs and processes for these two areas are not known. In addition to concerns with respect to transparency, this lack of detail makes it difficult to valuate assumed efficiencies and cost savings, particularly as there were no previous benchmarks to compare to . Further, if Sandy Springs ends its relationship with CH2M Hill OMI and transitions to another contractor, this lack of information would surface as a major risk in contract negotiations and the valuation of service provision. The lump-sum provisions (what was lump-sum and what was fixed-cost contract?) in the Sandy Springs contract do not allow for detailed analysis regarding the money that the city is spending. In order to maximize value for its residents, city officials should know what the service provision is costing CH2M Hill OMI relative to what Sandy Springs is spending.

Related to the issue of transparency is that of oversight. Currently, no separate entity exists to oversee the partnership between Sandy Springs and CH2M Hill OMI, to ensure that the partnership is delivering cost savings and efficiencies. P3 oversight agencies are recommended by observers and practitioners as a key best practice (please see discussion below for others). Without oversight, the citizens of Sandy Springs cannot evaluate whether they are getting true value for money, nor whether the contractor is engaging in ethical practices.

Should Sandy Springs decide that it requires additional services from CH2M Hill OMI, it is not a simple process of adding those services. Rather, they must be added to the contract during the annual renewal process, which could result in a delay of up to one year before services commence.

Finally, the cost to contract out the majority of city services comes at a price. In Sandy Springs, CH2M Hill OMI's fees represent 40 percent of the city's budget.[?????] John Kachmar, the City Manager in John's Creek notes that the cost of the contract is a major sticking point in his city's current contract renewal negotiations with CH2M Hill OMI and is the primary reason with the City of Milton chose to terminate its contract with CH2M Hill OMI . The main reason for this is the workforce costs that CH2M Hill OMI builds into its budgets .

Despite the challenges faced by Sandy Springs, the contract has already provided value for money for both the city and its residents. CH2M Hill OMI has also realized unforeseen benefits beyond financial compensation.

Value for Money

Sandy Springs

Sandy Springs, as a start-up city, faced considerable challenges imposed by the General Assembly's timelines and revenue restrictions, as well as from the expectations of its citizens. As a result of the contract with CH2M Hill OMI, Sandy Springs is able to demonstrate significant value for money to its citizens.

First, CH2M Hill OMI took on the risk associated with the start-up, including:

Preliminary funding of equipment and personnel prior to the collection of tax revenue; and

Creation of the infrastructure and processes required to support the personnel and the service delivery model, prior to signing the contract with the city.[???]

Residents of Sandy Springs wanted to incorporate primarily due to a lack of service and responsiveness from Fulton County . The partnership with CH2M Hill OMI enabled Sandy Springs to build the infrastructure required to meet citizen needs, which would have been extremely challenging, if not impossible with the traditional city governance model. Significantly improved service levels have been achieved and are being maintained in Sandy Springs. A smaller, more efficient city workforce is delivering value to residents at a reduced cost. The contract is for six years, renewable each year, but the city can terminate at any time with 30 days notice.[???] The contract was also structured as a "Fixed Cost" agreement, so the annual fee that Sandy Springs pays to CH2M Hill OMI will not change for the duration of the term, providing officials and residents with cost certainty. In the event of an emergency or major disaster, CH2M Hill OMI is still required to provide services to ensure the normal functioning of the city. If Sandy Springs terminates its contract with CH2M Hill OMI, it can hire CH2M Hill OMI employees without having to seek the consent of CH2M Hill OMI. Finally, CH2M Hill OMI monitors the IGAs with other county and city governments on behalf of Sandy Springs, which also helps to ensure high service levels for its residents.

CH2M Hill OMI

For CH2M Hill OMI, the value in the Sandy Springs contract is generated from the financials it receives as well as the brand profile created through the contract. The budgets it sets use a very generous multiplier for its workforce charge out rate. This multiplier is 2.38, which means that for every $1 it spends on personnel costs (including benefits, salaries, bonuses) it is compensated $2.38.[????] CH2M Hill OMI uses this approach to cover its costs, including overhead and compensate for its risk.

From a brand perspective, winning the Sandy Springs contract not only created a new line of business for the company, but increased its profile in the local government sector. Several municipalities followed Sandy Springs's example and also incorporated. Facing the same start up challenges, many of these cities turned to CH2M Hill OMI for support and service delivery.

Key Lessons/Best Practices

The model has been in use for a number of years and for a number of very different scenarios within the Georgia area providing insight into the successes achieved and areas for improvement.

With respect to the contract, flexibility is important. While conventional wisdom states that contracts should be detailed, P3 cities should enter into contracts that outline performance metrics, but that details about service delivery are kept to a minimum. [17] This will allow for the greatest amount of innovation and flexibility.

Not everything should be procured; each city may have a different idea on the services that they want to procure but the need to maintain a reasonable sized public workforce can not be overlooked.

A multi-year contract is desirable for both parties as it allows for testing of new methodology and a proper evaluation of the partnership. To be able to justify the use of a P3, the termination clauses must be written in a way as to not favour the private entity and take into consideration business continuity and transition risks.

To ensure consistency from a customer service perspective the managing partner should be the only visible entity to the city. All sub-contractors are to be managed through the managing partner also ensuring a more efficient management of various relationships.

Another key lesson is to really assess the needs of the contract and to choose the best payment option. The best option will depend on each city's unique circumstances, political environment and tolerance for risk and may be different for each case.

The asset ownership and income generated by the city should be maintained by the city and the Managing Partner should not be entitled to share in the city's revenues, but earns its fees from the provision of services.

Understanding the efficiency and performance of the services being provided is crucial to know where improvements can be made. The most successful metrics will be established and agreed upon by both the city and the contractor. Metrics set too low may result in poor performance and metrics set too high discourage employees. Additionally, detailed metrics should not be included in the first year, but established in the second year in order to be most relevant and useful.

The Sandy Springs model has been invaluable for managing the significant capital start-up costs and well as human capital required for new cities. With less than one-half of the employees the workforce is much leaner.

Communication to the customers and within "city hall" is key to making the partnership a success. A great deal of effort and emphasis has been placed on maintaining a healthy relationship with the private partner all the while the private entity remains transparent from the view of the customer.

The Future: P3s and Local Government

Spurred in large part by residents who were frustrated and dissatisfied with service provision at the county level, Sandy Springs and other jurisdictions decided to pursue incorporation. Should this trend continue, it will have a deleterious effect on county governments, potentially rendering them redundant. Given that smaller communities can utilize shared service and asset models, county governments will need to change the way they operate to deliver services more equitably and more efficiently.

The economics of P3 cities suggest that newly incorporated cities will continue with the model. In one preliminary study that compared five traditionally managed cities with five P3 studies, every P3 city had significantly lower per capita operating costs than the traditional models . Traditionally managed cities cost 128 percent more to run that the P3 versions .

The relative success of Sandy Springs, John's Creek and others P3 cities has generated international interest. Philosophically and economically, good city governance should result in a model whereby revenues equal costs and assets equal liabilities. In Japan, cities are burdened with significant debt - on average, 25 percent of cities' operating budgets are used for interest payments, reducing the resources available to serve its citizens . The culture of service in Japan, combined with the efficiencies and economics of the P3 model, seem to predict a successful P3 implementation. Currently, a pilot city of 50,000 people is using a P3 model to test its effectiveness .

Unique culture and jurisdictional issues will certainly determine how many countries look to P3 models for local government service delivery. It is assumed that the countries in which P3s are already being used to deliver major infrastructure works will be the first to look at P3 models for local government.

As local governments are challenged to meet the needs of their citizens, who are increasingly knowledgeable and who demand accountability and responsiveness city officials, they are going to have to become more creative, innovative and flexible. If the traditional model will not meet the needs, then alternative service delivery models will need to be considered. It is likely that P3 cities will become more, not less common in the future.

Conclusion

Sandy Springs was incorporated as a result of citizen demands for more accountability and responsiveness from local government and better service delivery. Based on the legislative requirements established during incorporation, and in order to meet these needs, Sandy Springs turned to the private sector for assistance.

The city's contract with CH2M Hill OMI means that most city services, with the exception of water, sewage and emergency services, are provided by a private sector contractor. This has resulted in increased service levels and citizen responsiveness, but has also come at a price. The contract with CH2M Hill OMI represents 40 percent of the annual budget and the workforce costs are exceptionally high. Citizens have been overwhelmed by the constant maintenance and service provision of CH2M Hill OMI and bylaw and ordinance fines have been aggressively levied.

Despite the challenges, the contract with CH2M Hill OMI has, on balance, provided significant value for money for Sandy Springs residents and taxpayers, and also encouraged a number of other jurisdictions to follow suit. While there are elements of the model that need to be addressed (transparency, workforce costs), overall the Sandy Springs approach provides a workable blueprint for local governments to meet the needs of its citizens in the most economically efficient manner.

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