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A list of burdens imposed by inefficient regulatory rules and bureaucratic structures.
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Since Detroit declared bankruptcy on
July 18, the city's crippling problems with corruption, unfunded benefits and
pension liabilities have gotten the bulk of airtime. But equally at fault for
its fiscal demise are the city's management structure and union and
civil-service rules that hamstring efforts to make municipal services more
efficient. I would know: I had a front-row seat for this dysfunction.
Last year, I served as chief operating officer of the
Detroit Department of Transportation. I was hired as a contractor for the
position, and in my eight months on the job I got a vivid sense of the city's
dysfunction. Almost every day, a problem would arise, a solution would be
found—but implementing the fix would prove impossible.
We began staff meetings each morning by learning which vendors had cut us off for lack of payment, including suppliers of essential items like motor oil or brake pads. Bus engines that the transportation department had sent out to be overhauled were sidelined for months when vendors refused to ship them back because the city hadn't paid for the repair. There were days when 20% of our scheduled runs did not go out because of a lack of road-ready buses.
The obvious solution for a
cash-tight operation is to triage vendor payments to ensure that absolutely
essential items are always there. But in Detroit, no one inside the
transportation department could direct payments to the most important vendors.
A bureaucrat working miles away in City Hall, not responsible to the
transportation department (and, frankly, not responsible to anyone we could
identify), decided who got paid and who didn't. That meant vendors supplying
noncritical items were often paid even as public buses were sidelined.
A major expense for Detroit is the cost of lawsuits filed
against the city for various alleged injuries on municipal property. At the
transportation department, there were hundreds of claims arising from bus
accidents alone. How many of those claims were fraudulent? How many were
settled (with the cost of settlement and legal fees posted against DDOT's
budget) at unnecessarily high cost?
It was impossible to know, since the city's law department
handled all litigation and settled cases without consulting the DDOT staff. It
was the law department's policy to settle virtually all claims—which meant that
the transportation department became easy prey for personal-injury lawyers
bringing cases with little or no merit, costing the city millions.
In the DDOT we tried to hire our own lawyers to fight these
claims. But we were blocked by city charter provisions prohibiting any city
department from hiring outside counsel without the approval of the Detroit City
Council. When we inquired with the mayor's office we were told that the union
representing the law department—in Detroit, even the lawyers are
unionized—would block any such approval.
Disability and workers' comp claims were routinely paid with
no investigation into their validity. More than 80% of the transportation
department's 1,400 employees were certified for family medical-leave
absences—meaning they could call in for a day off without prior notice, often
leaving buses without drivers or mechanics. Management's only recourse to get
the work done was to pay the remaining employees overtime, at time-and-a-half
rates. DDOT's overtime costs were running over $20 million a year.
Then there was the obstructionism of
the City Council. While I was at the DDOT, roughly 10% of bus-fare collection
boxes were broken. In another city, getting a contract to buy spare parts to
repair these boxes would be routine. The City Council publicly expressed
outrage that we didn't fix the fare boxes, since the city was losing an
estimated $5 million a year in uncollected fares.
But the reason we couldn't fix the fare boxes was that the
contract for the necessary spare parts had been sitting, untouched, in the City
Council's offices for nine months. Due to past corruption, virtually every
contract had to be approved by the council, resulting in months-long delays.
Micromanagement by the council was endemic; I once sat for five hours waiting
to discuss a minor transportation matter while City Council members debated
whether to authorize the demolition of individual vacant and vandalized houses,
one by one. There are over 40,000 vacant houses in Detroit.
Union and civil-service rules made it virtually impossible
to fire anyone. A six-step disciplinary process provided job protection to
anyone with a pulse, regardless of poor performance or bad behavior. Even the
time-honored management technique of moving someone up or sideways where he
would do less harm didn't work in Detroit: Job descriptions and qualification
requirements were so strict it was impossible for management to rearrange the
organization chart. I was a manager with virtually no authority over personnel.
When the federal government got
involved, it only made things worse. A federal lawsuit charging that the DDOT
did not fully comply with the law in accommodating disabled riders had dragged
on for years because of idealistic but painfully naïve Justice Department
attorneys seeking regulatory perfection. I felt like a guy in the boiler room
of the Titanic, desperately bailing to keep the ship afloat for a few more
hours while the DOJ attorneys complained from their first-class cabin that
their champagne wasn't properly chilled.
Detroit's other municipal departments had similar
challenges. I would often compare notes with managers trying to run the city's
street lights, recreation programs, police departments and smaller offices. All
of us faced similar gridlock.
The last thing Detroit needs is a bailout. What it needs is to sweep away a city charter that protects only bureaucrats, civil-service rules that straightjacket municipal departments, and obsolete union contracts. A bailout would just keep the dysfunction in place. Time to start over.
Mr. Nojay, a Republican, is a member of the New York State
Assembly, representing the 133rd District in upstate New York.
Source: Bll Nojay, “Lessons From a Front-Row Seat for Detroit's Dysfunction,” The Wall Street Journal, July 30, 2013, p. A15
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