Monday, April 04, 2011

Don't Be Fooled By Goldsmith's Views On Privatization

Star State House reporter Mary Beth Schneider expressed her shock on a Twitter post this afternoon concerning former Indianapolis Mayor Steve Goldsmith's "conversion" on privatization. "Former Indy Mayor Goldsmith, now dep mayor of NYC, said it's time to get rid of costly private contracts and have city workers do more. WOW," she wrote.  "Goldsmith was Mr. Privatization in Indy, so pretty bizarre to see this conversion." Presumably, Schneider's comments were made in regards to Goldsmith's recent announcement the City of New York would bring back some IT work inside that it had outsourced to private contractors. As Crain's New York reported:

The Bloomberg administration, in something of an about-face, will reduce spending on outside contractors and reassign some work to city employees.

Deputy Mayor Stephen Goldsmith announced Thursday—first in a Daily News op-ed and later in a press briefing—that a “project management office” would be expanded to oversee outsourced information technology projects. The city office will essentially replace a larger, more expensive layer of supervision that private contractors had been providing.

“I think the eventual savings will be in the hundreds of millions of dollars,” Mr. Goldsmith told reporters at City Hall. No formal estimate of the savings has been calculated, but “there are some folks we're paying contractors' [higher] rates to that we could easily get done on our side.”

In many cases, a city employee qualified to oversee a complex, technical project does not exist and will have to be hired. The administration also plans to train city workers to work on the kinds of projects that in recent years have been outsourced. The training will not be outsourced, according to Jason Post, a spokesman for Mayor Michael Bloomberg.

The deputy mayor, who joined the administration for the mayor's third term, said the change promises not just to save money but to reduce fraud. “Whenever you have a vendor, you have to have a high-quality city employee supervising the vendor,” Mr. Goldsmith said. “This level has caused us not only to pay more, but has caused us to lose too much control.”
The key to this change of heart at least on Goldsmith's part lies in reducing fraud, as well as costs. Last year, city subcontractors on a project known as CityTime to automate payroll and timekeeping for city employees were accused of stealing at least $80 million from the city. "What began as a $68 million effort will end up costing more than $700 million," Crain's reported. But even as Goldsmith was making this announcement, his boss was on the radio defending the city's practice of outsourcing much of the city's services. As the New York Daily News reported:

Perhaps Mayor Bloomberg didn't get the memo. Literally.

On his Friday radio show, he was asked about a new shift in city policy that had been in the newspaper for two days running - and didn't seem to know it had happened.

It's a shift on something that had been a sore point for Bloomberg's critics - outside contractors paid six-figure salaries for tech projects that blow deadlines and budgets, like the scandal-ridden CityTime system.

The mayor has long defended his administration's contracting policies, even though municipal unions and Controller John Liu say city workers could do the job for less.

So it was news last week when one of Bloomberg's deputy mayors, Stephen Goldsmith, agreed with critics and said New York will save tens of millions of dollars by bringing the work in-house.

On the radio, WOR-AM host John Gambling tossed Bloomberg a softball about it. But instead of explaining the new company line on insourcing, the mayor defended outsourcing.

"People say, 'Oh, you're spending too much money on outsiders.' If you didn't do that one contract outside, you'd have to have those people permanently on your staff," the mayor said.

"The consultants, they say, 'Oh, they charge a lot more.' Well, because that's the business," he continued. "They don't work all the time, so they have to get paid more. And sometimes they have expertise you don't have in-house."

If the Bloomberg administration has a new message on contracts, why did Bloomberg himself go off-message?

You would be mistaken, however, to think Goldsmith is turning away from privatization, even if his boss hasn't. He's now working on a new public-private partnership for which city service? You knew it. Parking meters. Here's what the Daily News is reporting on that front:

Now, Mayor Bloomberg is eying a "public-private" partnership for parking meters.

On Monday, the city's Economic Development Corp. got 12 from financial firms seeking to advise Bloomberg on the best way of "unlocking value in existing assets to save money and improve service delivery," says mayoral spokesman Jason Post.

High on the list of such assets are parking meters, along with city-owned garages.

The mayor and his aides say they have no intention of doing what Chicago did a few years ago - getting a big upfront payment to plug an immediate deficit by giving away city parking revenues for 75 years.

City Hall is already using more meters, higher rates and bigger fines to squeeze record payments from motorists.
The Daily News story notes the controversy that has plagued past privatization efforts pertaining to New York's parking meter assets. Back in the 1980s during the administration of Ed Koch, several city officials were caught up in a bribery scandal involving the awarding of a contract with a private company to provide hand-held computers for parking enforcement officers. "By the time the Parking Violations Bureau scandal was over, Stanley Friedman, Koch's close ally and head of the Bronx Democratic Party, was in jail, along with his sidekick, Bronx Borough President Stanley Simon, and a handful of others," the Daily News noted. "Queens Borough President Donald Manes committed suicide before he could be indicted, and their chief prosecutor, Rudy Giuliani, became a hero." Koch's successor, David Dinkins, similarly had a scandal involving parking meters. His administration was forced to cancel a contract it had entered into with Lockheed after an investigation revealed the company had colluded with other bidders and a city hall staffer had solicited a job during the bidding process. The Daily News doesn't fail to pick up on Goldsmith's ties to ACS, which was recently awarded the 50-year parking meter lease deal with the City of Indianapolis.

Deputy Mayor Stephen Goldsmith became a Republican Party star for privatizing government services when he was mayor of Indianapolis.

From 2001 to 2005, Goldsmith was senior vice president of Dallas-based Affiliated Computer Services Inc. Last year, his old firm landed a 50-year contract from Indianapolis to manage all parking meters for that city.

Under the contract, Affiliated even gets the money from tickets written by Indianapolis police. The contract barely passed the Indianapolis City Council by a 15-14 vote.

Given New York's checkered history with parking meters, we need to watch this process very carefully.
At least someone in the media in New York is keeping an eye on Goldsmith and his ties to ACS. The Indianapolis news media turned a blind eye to the ties a whole cast of key players in Indianapolis' parking meter deal had to ACS. Goldsmith, a former ACS executive, has admitted he has advised Ballard on a regular basis in an unpaid role since Ballard became mayor in 2008. Although he has represented interests lobbying the city for business as well, he never registered as a lobbyist. His former deputy mayor, Joe Loftus, is engaged to lobby the City of Indianapolis on behalf of ACS. One of the attorneys Loftus supervises at Barnes & Thornburg is City-County Council President Ryan Vaughn, who twisted arms of his fellow councilors to ram the 50-year deal through the council despite his obvious conflict of interest. Mayor Ballard's Deputy Mayor for economic development, Michael Huber, formerly worked for Skipp Stitt, another ACS executive who worked in Goldsmith's administration, prior to his work for Ballard. Of course they all insist their ties to ACS had nothing to do with the awarding of the lucrative 50-year lease to the company.

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