- The Benefits of Competition -
A few years ago former New York Governor Cuomo said that his state was so financially strapped that it "had" to privatize some services. That is often the attitude of cities and states to opening up government services to competition: wait until the last possible moment and use it only as a last resort.

Nothing could be more wrong. Competition may be necessary to stave off impending doom. But competition is also a good way to avoid ever getting close to that situation.

Let's take a quick look at what competition has allowed us to do in Indianapolis. Since 1992, the year our competition program began, we have saved over $240 million, spent more on infrastructure and public safety than ever before, held the line on taxes, and trimmed our non-public safety workforce by 45 percent. The interesting thing is that no crisis made us take this course. It was just common sense.

Fast-food restaurants illustrate what I'm talking about. They're always competing in terms of price, food quality, and service. No one says they're perfect. But imagine what they would be like if there were only one fast food chain. If people had no choice, if there were no competition, if fast food were a monopoly, two things would definitely happen. Prices would go up, and quality would go down.

Most of government is run that way. We are monopolistic providers of certain services. Over time it is inevitable that our costs and budgets would balloon, taxes would be raised to make up the difference, and the quality of our services would decline. Then to avoid our tax increases, wealthy individuals and businesses would move across the city line leaving behind a bigger proportion of poorer people. The problem escalates until a point of desperation is finally reached.

That's what is happening in many cities across the nation.

Now imagine that the government opens up some of its services to competition from the private sector. Suppose that it said, for example, let's have private firms compete against government workers to patch streets.

This is what we have done in Indianapolis. And here are some of the lessons we've learned over the last few years.

Competition in services means improvements and cost savings.
Whenever we have opened up city services to competition, the costs of providing those services have gone down anywhere from 20 to 60 percent. The services have also gotten better — usually much better. We recently competed out our public transportation system. The savings generated from competition paid for three new routes that we could not have otherwise afforded.

Government workers should be included in the competitive process.
The way to get efficiencies is not necessarily through privatization, but through competition. Private monopolies are only marginally better than government ones. The most robust competition involves government workers competing against private vendors.

In Indianapolis, street maintenance, vehicle repair, and trash collection were all opened to public-private competition. In each of these cases, city workers won by finding cheaper and better ways to do their jobs. Too often people outside of government view our workers as incompetent. That's nonsense. Almost always, their inefficiencies are due to bureaucratic limits on their ability to change their jobs in ways that make sense. They should be included in the equation. Competition leads to innovation.
Four years ago a minority-business owner approached us about opening our internal mail delivery to competition. We acted on his suggestion, and his firm submitted a proposal. They won hands down because they thought of ways to deliver interoffice mail that had never occurred to us and of doing it far more cheaply. Whatever is touched with competition is always touched with innovations that no one person could have imagined but that come out in the competitive process.

Indianapolis has submitted its budget for next year. It calls for spending cuts, no tax increases, and the lowest municipal workforce in over 20 years. None of these would have been possible without competition. But competition was not the only thing that led to these achievements.

- Strategic Tools -
It became clear on the first day of my administration that if the city was going to be successful in creating a more efficient and responsive government, a whole new set of financial and management tools would be necessary. City employees would need new financial tools in order to compete, and the administration would need to be able to make "apples to apples" comparisons of public versus private sector provisions costs.

Five new practices formed what came to be known as the City's Strategic Tools Initiative. These strategic tools are: activity-based costing; performance measures; popular budgets; infrastructure balance sheets; and customer surveys. These tools have served us well in our battle for efficiency and accountability in government. We would not be where we are without them.

Activity-Based Costing
One of the most important strategic tools Indianapolis uses is activity-based costing (ABC). ABC gives the costs of city services and activities on the basis of outputs. ABC determines the costs of all inputs that go into producing an activity.

Unlike other cost-estimating methods, activity-based costing focuses attention away from inputs (e.g., the number of labor hours used, the amount of budgeted dollars, or the number of vehicles bought) to give costs on the basis of outcomes (e.g., the number of street miles repaired or plowed or the number of acres of grass cut).

Activity-based costing has had its widest and most significant application in developing cost information that city managers and front-line workers can use for competing successfully against private sector vendors for the provision of government services.

Union president Steve Quick observed that because of activity-based costing, "We're a better educated workforce now."

The Popular Budget
Indianapolis reformed its budget in 1994 in order to create a document that citizens could understand.

Government budgets normally are enormous, cumbersome documents describing sub-funds and using terminology that makes them incomprehensible to most employees and citizens. Traditional city government budgets do not define outcomes and performance measures.

The Popular Budget describes: the for goal of each department and how it fits in with the City's vision; "external outcomes" (what accomplishments are expected — example, smooth streets); "performance activities" (what is done to accomplish those outcomes — for example, crack sealing); the cost of each performance activity; and performance measures.

By spelling out the goals, external outcomes and activities that are expected to be accomplished, the Popular Budget invites and facilitates debate over whether these outcomes and activities are appropriate actions for city government to pursue. Furthermore, by indicating the cost of each activity performed and the specific measurements by which each activity is judged, the Popular Budget increases the accountability of everyone in city government. In addition, by concentrating on goals, outcomes and activities, traditional organizational boundaries are crossed, allowing you to see the overall impact of a program.

The Popular Budget also provides a vehicle for public debate on city operations. Taxpayers have the ability to influence the process and specify what activities they feel should be prioritized. My office and the City-County Council are also able to assess city operations because a more defined outline of activities is presented in the Popular Budget. This is important when evaluating the impact of budget cuts or revenue changes.

In 1996 the regular and Popular Budgets were combined into a single document.

Performance Measures
Every time the City enters into a contract, it identifies standards for evaluating whether a contractor is fulfilling the terms of the contract. The City uses performance standards internally, too, so that the effectiveness of City employees and their departments can be evaluated. The standards are compared to actual results to see whether the standards are being met.

The performance measures correlate to individual and departmental goals and let management take action based on actual work performance. Pay increases are based on attaining individual goals and on the unit's attaining its performance goals.

There are several kinds of performance measures. They measure quantity, efficiency, productivity, and quality of work produced.

Output measures identify how much of an activity is produced or performed (for example, the number of acres mowed, applications processed, vehicles serviced, lane miles plowed, or feet of sidewalk repaired). Efficiency is measured by the cost per unit of an activity performed (for example, cost per ton of garbage collected, or the cost of snowplowing a lane mile). Efficiency measurements enable comparisons with industry or with other divisions in government. Efficiency measures also serve as a benchmark for evaluating the performance of the same group over time. Productivity measures indicate the output produced or performed relative to time (for example, the number of lane miles crack-sealed per week or the number of feet of sidewalk repaired per month). Outcome measures describe the effectiveness of service delivery (for example, the percentage of critical indicators met or customer satisfaction).

These measurements help assure a high level of service by the City to its citizens and by contractors to the City.

Infrastructure Balance Sheets
The City of Indianapolis is responsible for managing such assets as streets, the sewer system, curbs, sidewalks, and traffic control devices. The Infrastructure Balance Sheet (IBS) is being developed to ensure that the best use is made of City resources.

The IBS will provide better information about the investment needed to maintain the value of the City's assets, what the value of those assets are, and the framework for making informed decisions about when those assets need to be maintained, rehabilitated, or replaced.

The IBS will produce tools to provide information for long-term strategies for investment and management.

Currently the City is preparing life-cycle analyses of its most important assets so that it can determine their expected rate of deterioration. The assets will then be examined to estimate their monetary value as well as their value according to how well they perform their intended functions.

Customer Service Surveys
Customer service surveys are conducted several times a year to explore issues and concerns with the citizens of Indianapolis. They help gauge the public's perception about the amount and quality of service delivery. The City performs surveys on specific services (e.g. median mowing) and on the maintenance of public amenities (e.g. golf courses). Although designed for the city as a whole, these surveys also reflect attitudes of service by township so that the City can assess whether services are being equitably distributed.

We were not surprised to learn that citizens are concerned about infrastructure issues and public safety on our streets. But the level of concern about safety in City parks provided the impetus to the development of the Park Ranger Program, which is working to provide citizens with the peace of mind they deserve.

Customer service surveys provide valuable information to the citizens and, likewise, to city hall. They show, for instance, that the Park Ranger Program is having some effect. In 1995, for the first time, most people in every Indianapolis township rated park safety as "good" to "excellent." The surveys also demonstrated that Indianapolis citizens are generally pleased with the city, the local economy, and police protection. An impressive 80 percent rated the quality of life in the city as "good," or "excellent," and 63 percent rated the value of the city services they receive as "good" to "excellent" for the city taxes they pay.

In the fall of 1992 I created the Existing Industry Task Force to help identify the critical issues and needs of existing businesses in Indianapolis as well as ways the City could provide better support to the local business community. Members of the task force developed an industry survey to determine how local businesses perceive the impact of various factors on business operations, to rate the performance of city and county services, and to gather statistics about local businesses.

Surveys were sent to over 1,600 businesses, and about 25 percent responded. The survey revealed strong optimism about the future of the city economy and great confidence in many city amenities and services. The survey, however, also showed significant concern about the burden of regulations and taxes. This survey has played a key role in our efforts to resist tax increases, downsize government, and lessen the regulatory burden on businesses.

Survey results are distributed to all departments for use in developing new — or revamping ongoing — projects or procedures that address public needs.

- Infrastructure Improvements -
Part of the savings from our competition program have gone into infrastructure.

One of the greatest challenges that governments at all levels face is keeping up with the demands on infrastructure. Infrastructure upkeep requires a tremendous investment, but any city, state, or county that wants to leave its capital assets in good condition for its future citizens must make the necessary commitments. Otherwise it will find itself, as Indianapolis did a few years ago, facing an accumulation of infrastructure projects that are difficult to complete and even more difficult to pay for.

In mid-1991 the Indianapolis Chamber of Commerce released its report Getting Indianapolis Fit for Tomorrow. The study declared that Indianapolis had developed a $1.1 billion infrastructure deficit. Some of the city's streets, bridges, sewers, parks, and other assets had deteriorated to a critical point and needed immediate attention.

For example, the report observed that sewer lines beneath the downtown area were 75 years old with some in advanced stages of decay. In some cases, this decay led to street and sewer collapses.

In 1992, after meeting with elected representatives, concerned neighborhood groups, and businesses from across Indianapolis, I announced the structure of Indianapolis.

One of the key aspects of the program was making these hundreds of improvements without raising tax rates. Like most cities, Indianapolis has suffered the flight of wealth to the suburbs. Any tax increase to pay for infrastructure improvements would drive more people across the city line into lower-tax suburban districts.

To avoid funding capital improvements through higher taxes, money for the program came from two sources. First, some funding came from municipal bonds that received considerable public support. Second, Indianapolis embarked upon a wide-ranging effort to cut municipal government costs. Unneeded city assets were sold. And most important, the city subjected the provision of municipal services to competition.

Opening the provision of city services to competition has generated over $240 million in savings. Plowing much of these savings into infrastructure improvements has allowed the fBuilding Better Neighborhoods program to be funded without a tax increase.

General Infrastructure Improvements
The BBN program spanned every city department and included rebuilding curbs and sidewalks, repairing sewer lines, resurfacing streets, improving parks, rehabilitating bridges and public housing facilities, and upgrading police stations.

Infrastructure spending tripled under the Building Better Neighborhoods program.

The progress made on sewers is a good example of what the City accomplished. Before 1992 the city spent $4 million a year in sewer improvements and averaged five sanitary sewer projects a year. In 1994 alone Indianapolis spent $32 million in such projects, an eight-fold increase and more than at any time in the city's history. Under BBN the City spent $76 million on 85 sewer projects.

Other capital improvements speak to the enormous impact of this program. All Indianapolis fire stations were improved or replaced. A new south district police headquarters was built. Public safety infrastructure improvements totalled $11.1 million. The City resurfaced 440 miles of streets. In 1994 alone, more streets were resurfaced, bridges repaired or replaced, drainage projects started, and sewers cleaned than at any other time in city history. Curb and sidewalk repair and replacement and street resurfacing all quadrupled under the program.

A comparison with Philadelphia might be helpful. The BBN program invested more than $500 million in infrastructure over three years. Philadelphia, with a population double that of Indianapolis, spent $150 million over the same period.

New Park Facilities
In 1992, most park facilities were over 30 years old and had never been renovated. We realized that it would be necessary to improve parks in order to make them a more vibrant element of the neighborhoods they serve. Under BBN, $41.2 million was invested in more than 80 projects to upgrade park facilities and add attractions. Six aquatic centers were built, whose attendance within one year was 200 to 400 percent that of previously-existing City pools.

One of the most outstanding of these facilities involves a novel partnership between the parks department and a new school. The City gave 18 acres to Warren Township to build Raymond Park Middle School on condition that certain of its facilities would be open to the public when the school was not using them. The result is a park that is a central part of the surrounding neighborhood and the City's east side.

On the southeast side the City is teaming up with the local Boys and Girls Club to build a $1.4 million recreation area. The City provided the land, and the Boys and Girls Club will manage the facility, which includes a gym and several multi-purpose rooms. Individuals from the neighborhood came together to help raise funds for the project.

The largest recreational project is the transformation of the 976-acre Riverside Park into a regional park. The park will include pedestrian and bike paths on both sides of White River, docks for boat rental, a golf academy, softball and basketball complexes, renovations to existing facilities, and a new park ranger system. Private sources are contributing $10 million of the $18 million investment.

In addition, the City has been adding to park lands. Since 1992, city parks have grown by 159 acres. Nearly 175 miles of greenways are also being developed that will serve as fitness and recreational trails throughout the city. They will link more than 125 destinations, including schools, neighborhoods, and retail areas. Bikers and joggers are already using the several asphalt and crushed gravel trails that have been completed. Since they will stretch around the city, they will be especially accessible.

A Continuation
The Building Better Neighborhoods program has been so successful that it is being continued. In 1996 Indianapolis invested an additional $27 million in more than 60 park improvements. From 1997 through 2000 the City will spend $326 million on 119 parks projects and 342 bridge, drainage, road, and sewer projects.

The Building Better Neighborhoods program has changed the face of Indianapolis from run down and worn out to new and vibrant. It has been a huge undertaking, but one that will benefit our residents well into the next century.

- Conclusion -
Indianapolis has come a long way since 1992. Although taxes have not been raised in eight straight years, we brought about the largest infrastructure rebuilding program in city history. We have realigned our priorities so that we now devote over half of our entire budget to public safety. In addition, each of the past four years has set a new record in private sector job creation.

Competition and the use of strategic tools can help every city and every state lower costs and improve services. It is never too early to start.

Stephen Goldsmith is Mayor of Indianapolis, Indiana.