More than 80 percent of the big cost savings projected by the city of San Diego’s financial reform ballot measure comes from two reforms long discussed at City Hall: competitive bidding and retiree health care.
As city Chief Operating Officer Jay Goldstone noted in the city’s official fiscal analysis of the measure, reform conditions would be met if the city squeezed just $1 in savings from both items. That would trigger a five-year, half-cent sales tax increase if the measure, Proposition D, is passed by voters. But Goldstone believes the city can go much further — $69 million annually — without breaking a sweat.
“These are estimates based what I believe is some conservative approaches to this,” Goldstone said.
For competitive bidding, Goldstone said the Mayor’s Office had six to eight city departments ready to go through “managed competition” once the city met the condition outlined in the ballot measure and ratified the process. Those departments include city’s fleet maintenance and print shop. Managed competition allows the city to bid out city functions and outsource them if private sector bids are a certain percentage below those offered by city departments.
Goldstone then took estimates from a widely cited 2007 study that showed the city could save 10 percent to 25 percent per contract using managed competition. Applying 25 percent savings to the departments he selected, Goldstone reached $27 million.
One of the study’s authors, Erik Bruvold, approved Goldstone’s methodology.
“I think a $27 million number is a plausible way of drilling down from our study’s conclusion assuming that the cumulative cost of the six to eight functions Jay has identified total a bit north of $100 million and that we are talking about functions like print shop or fleet maintenance,” said Bruvold, head of the National University System Institute for Policy Research.
Goldstone’s estimates on reducing the city’s $1.3 billion retiree health care liability come from a soon-to-be released study from by the city and its labor unions.
One of the options presented in the study — freezing the city’s benefit at current rates for current employees — would knock $300 million off the liability and result in $42 million of annual savings, Goldstone said.
He stressed that any changes to retiree health care must come through labor negotiations and the benefit freeze wasn’t necessarily the city’s position.
“I think the city could do better than that,” Goldstone said.
– LIAM DILLON