CFL News
October 03, 2011

Emanuel's 'managed competition' push goes into full swing on recycling pickups

"Competition is supposed to be when you don't know what the result is going to be," said Henry Bayer, executive director of Council 31 of the American Federation of State, County and Municipal Employees, which represents many city workers.

Source: Chicago Tribune

By Kristen Mack

Starting Monday, residents in Beverly will have their curbside recycling picked up by a single Waste Management driver in an automated truck that tips glass, paper and plastic into the back.

Not far away in the West Lawn neighborhood, two-worker crews from Chicago's Streets and Sanitation Department will continue to pick up recycled goods in a similar truck — one driving and one dumping the bins.

The clatter of bottles and cans will signal what Mayor Rahm Emanuel calls a "paradigm shift" in how the city provides services — a competition pitting city employees against private contractors to see who can give taxpayers a better deal.

Emanuel has repeatedly warned that cash-strapped Chicago can no longer afford to pay top dollar to its unionized workforce, while insisting city workers "can compete and win" against the private sector.

Labor leaders aren't so sure. They see Emanuel's "managed competition" initiative as a new name for an old threat — privatizing city jobs.

Emanuel has signaled the recycling competition could lead to private companies handling city trash pickup, and he also has plans to get bids for the city's sewer repairs, concrete work and tree trimming by year's end.

The swiftness of the mayor's decrees left puzzled city and union officials scrambling to work out details. It wasn't until Thursday that union leaders and Emanuel's administration agreed on how to measure who provides the best value.

But one thing is clear — the threat of losing jobs to private contractors is a cudgel Emanuel can use in his efforts to get union concessions on costly 10-year labor deals locked in during former Mayor Richard Daley's last term. The city has already cut recycling crews from 90 people to 45 and the number could drop to 30 by late November, union officials said.

Personnel costs make up 85 percent of the city's day-to-day expenses, and worker salaries have gone up even as the economy crashed and Chicago's budget hole grew to nearly $636 million. Emanuel, who has ruled out a major tax increase in the budget proposal he will release in mid-October, has so far focused on whittling worker costs.

While Emanuel said managed competition would be a "revolutionary" change for the city, it's a tool that has been used in other cities for decades. In many cases, it took years to roll out the changes and assess the results.

Emanuel is holding out the promise of immediate change. Chicago's sanitation workers were given a little over two months to prepare, and Emanuel wants to declare who gets the city's recycling business by spring. That strikes some managed-competition experts as too fast.

City workers aren't taught to compete for their jobs or bid for work and they need time to adjust, said Elliott Sclar, a professor at Columbia University's School of International and Public Affairs.

"There's a learning curve. You can't say, 'We'll let you bid on saving your life before we cut your throat,'" Sclar said. "If the mayor's really serious about changing things … it might not move as fast as he wants, but it would move in a better direction for him."

Former Indianapolis Mayor Stephen Goldsmith, a conservative Republican, is credited for successfully introducing competition in the 1990s when he ran the city, where some workers were given years to prepare.

"I think it's ambitiously realistic," Goldsmith said about the Democratic mayor's timeline. "The longer he waits, the less likely it is to occur."

City unions say they are game to compete against the private sector to hold on to their jobs. But they need resources to develop in-house bids and want some established ground rules, such as standards that can be measured to determine whether there are true savings associated with outsourcing city services.

"We're looking for real competition. I can tell you what (managed competition) is not. It's not chasing the lowest price you can get a workforce for," said Jorge Ramirez, president of the Chicago Federation of Labor, which includes more than 40 unions representing city workers. "It's not fair when folks use the term as subterfuge for something else, which is to privatize things."

In fact, Daley proposed handing over the city's oft-criticized recycling program to private companies last year. Laborers Union Local 1001 took the issue to arbitration, but the administration was given the go-ahead.

The reason Emanuel was able to quickly announce a recycling competition was because the Daley administration had already sought bids to privatize the business. The new mayor tapped two of those bidders, Waste Management and Metal Management Midwest, to receive seven-year contracts, subject to the competition.

The two private firms will serve roughly half of the 241,000 Chicago households in the recycling program and the city will handle the rest. Amid budget problems, the city has never been able to bring curbside recycling to the rest of Chicago's 359,000 households or to multiunit buildings.

Waste Management will be paid about $3 million a year and Metal Management Midwest, which will handle much less of the load, will receive $695,000 annually under contracts Emanuel did not have to submit for City Council approval.

While it costs the city roughly $5 to pick up each blue cart, private companies do the same job at an average cost of $2.75, according to the mayor's office.

Waste Management can do it cheaper for a number of reasons. The biggest difference is labor costs.

Although both the private and public drivers are members of the Teamsters union, the private drivers are paid $8 an hour less than their city counterparts.

Teamsters drivers for Waste Management make $25.56 an hour compared with $33.85 an hour for the city Teamster drivers. They operate similar vehicles that require rolling the recycling bin to an automated "tipper" at the back of the truck.

Waste Management drivers do the job solo. But the city uses a second worker to dump the bins — a member of the Laborers union, making $34.37 an hour.

The company established routes with a mapping system to minimize the number of turns their trucks make and requires employees to complete a daily route.

City workers have not been required to complete a set route every day. What's more, under long-standing practice, the city driver picks up the other worker at another location, spending up to 30 minutes of the crew's eight-hour shift without emptying a single bin.

Now that they know what they're up against, Teamsters and Laborers leaders agreed with department officials to make some changes. The two workers will meet at a location near their route for the start of their shift. Pickup routes and schedules were redrawn to be more efficient. The city is also considering using larger trucks in their fleet to reduce the number of trips to transfer stations.

But the biggest labor compromise was a commitment to reduce the number of recycling crews from 45 to 15 in order to bring costs more in line with the private contractors. The former recycling workers will fill open jobs elsewhere in the department.

None of the changes guarantee that Streets and Sanitation will keep its share of the work or win any back when the Emanuel administration judges the results in early 2012.

Chicago's unions have been resistant to concessions on work practices, and until now there has been little incentive for city workers to modify their stance.

Emanuel has targeted union contract provisions since taking office in May and offered to do away with much-despised unpaid furlough days in exchange for the unions adopting work rule changes.

Among the mayor's proposals: cutting overtime rates from double-time to time-and-a-half; requiring 40-hour workweeks instead of 35 hours for some workers; eliminating special overtime given to some workers for "prepping" their city vehicles at the start of a shift; and tying pay rates to the kind of machine a worker operates, rather than guaranteeing certain unions a high rate regardless of how difficult the equipment is.

"We have asked the city taxpayers to pay a public employment premium for too long," Emanuel said after announcing the recycling competition.

Labor leaders answered Emanuel's call to cut costs with a report that said private vendors should be required to pay comparable wages and benefits, so city workers are not "undercut by. . . vendors who want to profit by underpaying their workforce." The report also said many city departments were burdened with middle managers who owed their jobs to politics.

The Department of General Services has 422 front-line workers but 55 bosses, the labor report said, suggesting a ratio of 10 workers to 1 manager would be sufficient.

Targeting midlevel bureaucrats was a key to the cost-savings in Indianapolis, which shrunk its budget by 7 percent and its workforce by one-third, not including public safety positions.

"They didn't need layers of managers telling them how to turn the wrench," Goldsmith said of city workers.

In Indianapolis and elsewhere, private bidders haven't always won the business. City departments have kept work or won it back by cutting costs.

But Chicago union officials say Emanuel's actions strongly suggest he plans to slash city jobs.

"Competition is supposed to be when you don't know what the result is going to be," said Henry Bayer, executive director of Council 31 of the American Federation of State, County and Municipal Employees, which represents many city workers. "With these efforts you already know the outcome."

Emanuel's administration says it will work with the unions on how to measure each city service as it invites new competition.

"It's not going to be one-size-fits-all. Every service will have its own process," said Lisa Schrader, the city's chief operating officer.

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