July 1, 1996
To fend off a privatization policy that would eliminate their jobs Indianapolis city workers engaged the new mayor's concept of "managed competition" in which they would compete with private vendors. They ended up with the highest municipal pay raises in America.
At a recent conference on local government reform I met Stephan Fantauzzo, the union leader of Council 62, American Federation of State, Country and Municipal Employees, AFL-CIO, representing municipal workers in the City of Indianapolis. A soft-spoken, confident man, Mr. Fantauzzo provided a union perspective on the tidal wave of reform now under way in local government around the world. His story was one of practical realism in changing times.
Indianapolis, with a population of 700,000, is a little bigger than Winnipeg. On its payroll, however, are less than half Winnipeg's number of employees - about 4,500 personnel. Indianapolis is also a place where the union and the mayor work closely together to ensure that services are provided as cost-efficiently as possible.
As expected, Mr. Fantauzzo opposed strict privatization of city services. "We have been pretty aggressive in pointing out the disasters of privatization," he told me. The present mayor, Steve Goldsmith, ran on a privatization platform during the last election campaign, while the opposition campaign operated out of union hall. The union's efforts were for naught, however; the pro-privatization candidate won handily.
The first four months were very difficult, but things changed when both sides looked for common ground. "We didn't want to lay in for a four-year siege," Fantauzzo said. The compromise lay in the "competitive model."
In this model, services are identified and fully costed. They then are "competed" out in the marketplace. City work units get involved in the process by putting together a competitive bid. The best price wins, of course. To the surprise of some, union involvement in preparing an in-house bid leads to a respectable 80 percent success rate in keeping the work in house. Where the union is not involved in the bid process, the city and public managers only win three out of 10 bids.
Today, privatization is a non-issue in Indianapolis. Mayor Goldsmith no longer talks about privatization - he favours competition. In fact, according to Fantauzzo, he wants the city union to win because it gives his administration more flexibility. "We can throw a blade onto garbage trucks during snowstorms, for example," Fantauzzo says. "The private sector doesn't have the same versatility we do."
To compete, the union removed narrow, old-style, task descriptions that had the effect of raising costs and pricing its members out of work. Today, the union staff have broad-banded job descriptions so staffing is more flexible. "In Indianapolis," Fantauzzo says, "the union has cross-trained and upgraded employees to many different tasks. It has meant wages of employees rising to the level paid the highest skill. The mayor doesn't care what the city pays for the service as long as it is cheaper than elsewhere."
Fantauzzo exhibits none of the rhetoric and posturing that bogs down municipal services in Canada, and is an avid proponent of the flexible, competitive model. "We've gone far in the competitive model: wages are up, and we've done well with a gain sharing bonus system." Competition has forced the union to transform and redesign the workplace.
So, if wages are not down, where are the savings coming from? They come from reduced bureaucratic overhead. "We have less management and fewer bosses," Fantauzzo continues. "We've always said that if we don't make profit, pay no taxes, pay less for gas ($.80 versus $1.20 a gallon) . . . and you can't win in the competitive model, then you better look at the system. It means you have too many guys watching other guys pick up the trash."
Indeed, the Indianapolis model suggests that the biggest cost raiser in civic services is over-administration. "We have eliminated front-line managers, foreman, and supervisors. In the new system, one employee is now designated the lead worker and gets two bucks an hour more for doing supervisory tasks. We brought managers back down into line services, we have more crews working the roads, and fewer paper pushers."
"The bargaining unit is about the same size - 1,000 workers. But management has gone down dramatically, about 40 percent over 4 years. Steve [Goldsmith] has eliminated those fake positions that all governments use to pad the payroll and make them look good at budget time [when these positions are "eliminated" without anyone actually being cut from the payroll]." In terms of real positions, Fantauzzo suggests, about 400 people are gone. "If you include the waste water plant it's about 700."
"We opposed the privatization of the waste water treatment plant because our concerns were not addressed. We had to sue the city, then negotiate the issues." Again, the city and the union moved along the learning curve. "We've standardized the bidding process to automatically address our concerns. We now have a successorship clause; employees have to make similar wages and benefits. Others affected get jobs somewhere else at the city."
In Indianapolis, union participation in the competition model has meant more communication with the administration. The adversarial and reactive tone that pollutes the old-style, top-down structures elsewhere is gone. Fantauzzo says that the union used to file about 300 grievances a year. In the new system it's down to 20, because the union is involved up front in issues before they become problems.
He meets monthly with the mayor, and talks weekly with the deputy mayor. "There is a lot of communication because we are breaking new ground." Fantauzzo points to trust and credibility as ingredients missing in many jurisdictions. He respects a CEO who is committed and has the guts to do the job. He refers to Mayor Goldsmith's courage in taking on his party people. He gained the union's trust by laying off dozens of supervisors who were Republican party patronage appointments. The union couldn't compete when saddled with all that cost-raising overhead.
Fantauzzo, not surprisingly, is still seen as a maverick by fellow unionists, but less so today than he was 2 or 3 years ago. He admits that at one time "our traditional allies would look at us and say what the hell are you doing?" Movers within the Democratic party, church groups, and environmental groups have all asked him why he is working with the mayor. He bluntly answers, "My mission is not some altruistic goal. It is to protect our members, and if I can do that by working with the mayor to develop an employee-friendly system that allows those employees not only to survive, but thrive, I am going to do that."
Beleaguered municipal taxpayers in Canada can look with some hope to the Indianapolis model and the example set by union leader Mr. Fantauzzo: "We win four out of five contracts that the union bids. When we do the work, we do it for 25 percent less than it was done for in the past because of competition and because you start asking people to bring their brains to work instead of parking them at the door."
In Indianapolis, where competition has generated millions in savings, taxes are not going up. Not hydro, not gas, not any kind of taxes.
is the founding President of the Frontier Centre for Public Policy, an award-winning western Canadian based public policy think tank. Since its founding in 1997, Frontier has brought a distinctive and influential Prairie voice to regional and national debates over public policy in areas such as core public sector reform, housing, poverty, aboriginals, consumer-focused health care performance, equalization, rural policy and much more. Of the nearly 100 recognized think tanks in Canada, Frontier is one of only 5 to make the 2008 global "Go-To Think Tanks" list published by the Think Tanks and Civil Societies Program of the Foreign Policy Research Institute in Philadelphia. Mr. Holle has worked extensively with public sector reform and has provided advisory services to various governments across Canada and the United States. His publications have appeared in various newspapers and journals including dozens of newspapers, the National Post and the Wall Street Journal. He has a Masters of Business Administration from the University of Wisconsin at Madison. He is a member of various organizations including the Mont Pelerin Society, an international organization of classical liberals.