Spending Money to Save

Baltimore, Maryland

Why did Baltimore need to pay outside consultants

half a million dollars for a report that says

the city's financial future is grim?

Some city residents wondered as much after Mayor Stephanie Rawlings-Blake called for a new trash collection fee, a smaller city workforce and cuts to employee benefits as a way to deal with the projected $750 million, 10-year budget shortfall the consultants projected. For a city as financially strapped as Baltimore, couldn't that work have been done in house?

The answer, according to city budget director Andrew Kleine, is no.

Though the city's finance department makes three-year projections, it lacked both the manpower and the skill set to make long-term actuarial projections and propose reforms, Kleine said. Many of the more than 100 proposed reforms will be detailed Wednesday when Rawlings-Blake releases the full report, officials said.

"We just didn't have the staff or the expertise to do this," Kleine said. "Our core function is to formulate the budget and monitor the budget."

As for the cost, Public Financial Management Inc. of Philadelphia won the contract in 2011 with a proposal to charge the city $460,000, beating two other finalists whose work would have cost taxpayers $500,000 and $507,000, respectively.

But the scope of the needed work grew over the past year, Kleine said, and city officials added another $125,000 to the deal — meaning the consultants were paid $585,000 in all.

Even so, Kleine said, it was money well spent.

Public Financial Management assigned 20 employees to the project, with two workers logging more than 750 hours, he said. The company and its subcontractors did in-depth research on the "best practices" of other jurisdictions, conducted interviews, made actuarial predictions and suggested reforms.

On Wednesday, costs associated with the plan grew as the Board of Estimates approved spending $100,000 to hire a city employee to serve as project manager for implementing the plan.

Kleine said the city is already seeing savings. Prior to releasing the report, officials adopted the consultant's recommendations for overhauling municipal health care and, on Jan. 1, switched to a system that charges lower up-front premiums but higher out-of-pocket costs.

As a result, the city expects to save $10 million in health care costs this fiscal year and $20 million next year, Kleine said.

"Without the consultants, I don't see how we could have pulled off health care reform," he said.

In her State of the City address Monday, Rawlings-Blake used the consultants' findings to call for requiring more city workers to contribute to their retirement fund, charging residents for trash collection, asking firefighters to work longer hours and cutting the city workforce by 10 percent over time. In return, she said, the city could use the savings to raise employee salaries and cut property taxes by 22 percent — 50 cents per $100 of assessed value — over the next decade.