City: Let private sector do the work

Modesto's lean budget has the City Council looking at outsourcing more work to shore up its bottom line.

It's considering hiring private companies to handle the city's billing and business development divisions, both of which include white collar employees who were not mentioned in previous rounds of outsourcing discussions.

Also, the city is reviewing bids from private companies that want contracts to perform custodial work in police and parks buildings. In January, city leaders estimated that outsourcing that work could save $260,000.

The reviews follow the city's 2006 decision to hire a private company for park maintenance. Since then, the city considered outsourcing two other labor units, but determined public employees provided the best service for the lowest charge.

"It's a very healthy and important process we go through as a city in order to be sure we are being responsible with taxpayer dollars, while at the same providing quality services for the city of Modesto," Councilwoman Kristin Olsen said.

The savings for a city comes in finding a private company that can perform the work less expensively than public employees. Outsourcing also can remove long-term benefit costs from the city's payroll.

"Anything that saves the taxpayers money, I'm for it," Mayor Jim Ridenour said.

He issued a call to investigate outsourcing at his February State of the City address. Since then, Modesto's financial outlook has worsened. The council cut $10 million in spending when it adopted its budget this month for the fiscal year that starts July 1.

Public employees contend outsourcing work has a cost in the loss of control of city services.

"You're taking that out of the taxpayers' hands and putting it in the hands of a private company that may or may not recognize their obligations," said Tom McCarthy, a Modesto waste- water worker and president of the Modesto City Employees Association.

McCarthy pointed to the city's park maintenance contract as problematic because Modesto sold its equipment for that work when it hired Grover Landscape Services for the job.

Without lawn mowers and other pricey equipment, Modesto could find it too expensive to take back park maintenance if the Grover contract doesn't work, McCarthy said.

Modesto eliminated 14 positions in its parks department when it outsourced the work, but reassigned the employees. Council members generally have praised Grover Landscape's work since it got its $1.74 million annual contract two years ago.

Other valley cities do it

Outsourcing once public work is a common cost-savings method in San Joaquin Valley governments.

A private company handles Atwater's water system.

Stockton hired a firm to take over its water and sewer departments in 2003 but had to abandon the agreement this year after a judge ruled the city did not consider the environmental consequences. Stockton also uses an Omaha, Neb., company to bill city customers.

Councilwoman Olsen took the outsourcing discussion in a new direction for Modesto last month during city budget hearings when she suggested hiring a private company to work in the city's customer services division. About 27 employees work there, handling the city's bills and collections.

The way Olsen phrased her question raised eyebrows among some employees. She compared the city to private companies that have saved money by outsourcing their billing and customer services overseas.

Olsen said she didn't mean to say the city should hire a foreign company for customer service. She said local businesses could do the job.