Capital Gains

The District of Columbia, once the nation's poster child for managerial incompetence, is staging a comeback.
by | August 2002

In most places, local ordinances require citizens to mow their lawns regularly. But in the District of Columbia, from the late 1980s to the late 1990s, the city government itself was notorious for failing to cut the grass in public parks and playgrounds--to the point that residents in some neighborhoods paid private contractors to do the work.

Although waist-high weeds in summer and unplowed streets in winter were among the most visible signs of municipal mismanagement, they were actually the least of Washington, D.C.'s problems. During its decade of dysfunction, the city was popularly known as the "murder capital of the U.S.," it had no integrated information technology system, five major agencies were operating under court-ordered receivership and its accumulated fund balance was $518 million in the red.

The tax and revenue department was so disorganized that Julia Friedman, the current deputy chief financial officer, described paying taxes in D.C. as "a system of voluntary contributions." There was no methodical record of who had paid their taxes and who hadn't. Business and personal tax returns were simply thrown into bins in storage rooms filled with unsorted forms, some of them with checks still attached. "The motto in D.C. was, 'We will cash no check before its time,'" quips Natwar M. Gandhi, the city's current chief financial officer and a 20-year veteran of the General Accounting Office, where he spent the bulk of his years auditing the IRS.

In the past several years, however, the city has fought its way back from the administrative abyss. The transformation has been engineered by a wide spectrum of people and institutions, including elected and appointed officials and volunteers, private-sector contractors and a Congress confident that infusions of new money given to competent managers would be money well spent. If any one person deserves credit for its turnaround, though, it is Mayor Anthony A. Williams.

A career government bureaucrat who had built a solid, if unheralded, record as a deputy state comptroller for Connecticut and chief financial officer for the U.S. Department of Agriculture, Williams became the District's CFO in 1995. Williams was hired by then-Mayor Marion Barry, but only the federally appointed control board that had been set up to oversee D.C.'s finances could fire him. That arrangement gave Williams an unprecedented level of autonomy, although few expected him to take full advantage of it; many observers sized him up as a mere fiscal technician unlikely to have much success in a city famous for defying change while chewing up outsiders.

But if Williams was a bean counter, he was a bean counter with an attitude and some ambition. He went to work quickly, firing 165 people in the tax department and replacing them with his own handpicked staff to restore order to the District's revenue-collection process. At the same time, Williams fought to get control of the city's budget, publicly sparring with Barry over spending plans. Not content to rule by control board-backed fiat, Williams also started riding the community speaking circuit, explaining to anyone who would listen his plans for municipal fiscal recovery.

As it turns out, there was political method to Williams's peripatetic communications strategy. In 1998--pushed, he says, by a coalition of community groups--the CFO-from-nowhere ran for mayor and won in a landslide, replacing the flamboyant and controversial Barry, whom many people (including many members of Congress) blamed for the District's woes.

Williams took charge promising what he had promised as CFO: to focus on performance and results. He was so serious about it that he had the equivalent of municipal baseball cards made up for all his department directors. On the front were the directors' pictures; on the back were the core performance measures by which each of them would be judged. Annual contracts with his department heads spelled out expected results. He also pledged to get the city on a performance-based budget footing, in keeping with a 1994 congressional directive that the District begin to track fundamental performance measures and to link performance to spending.

Seven years since his arrival--and now almost a full term into his tenure as mayor--there is no doubt about Williams's influence when it comes to turning the city back in the right direction. Today, D.C.'s tax system is considered world-class, the city has balanced its budget five years in a row (which triggered the dissolution of the financial control board last fall), all departments also are back under local control and public parks are now carefully manicured every other week by city-employed contractors, who methodically rotate through the city's grasslands.

But as Williams looks to a second term--he seems a shoo-in for reelection, despite an embarrassing flap over thousands of fraudulent signatures on his nominating petitions--the challenges he now faces are considerably more ingrained than those he's addressed so far. The District's infamously inept Department of Motor Vehicles, for example- -which had begun to show concrete signs of getting better in recent years--is back in the headlines. Earlier this summer, the DMV's introduction of a new computer system was a disaster, creating almost immediate reversion to the days of long waits and testy employees.

Likewise, agencies such as children and family services and mental health still have a long way to go before they're operating at the same level of simpler-to-fix departments such as parks or public works. The city's chronically under-performing schools, meanwhile, have undergone nothing like the kind of turnaround engineered in taxation and information technology. On the internal management side, the city's personnel department still operates on a paper basis, although a rollover to computers is expected next year.

And scrutiny of Williams's performance is likely to be much tougher than during his first term. "Because city service delivery was pretty much in the toilet for so long, we applaud mere competence," says Kevin Chavous, a nine-year veteran of the D.C. City Council, who ran against Williams in the 1998 Democratic primary. "We think it's an achievement because the trash is being picked up. I think we need to go beyond those things and look at rebuilding depressed communities, instituting fundamental change in public education and developing up- to-date approaches in public safety. We're not there yet in terms of those things."

In particular, Williams will be judged on his neighborhood economic development efforts. Critics charge that he has been a "downtown" mayor, neglecting the city's outlying areas in favor of the center city. Williams counters that the city has invested in its neighborhoods, most notably in the long-neglected Far East Side, cordoned off from the rest of the District by the Anacostia River. "We have invested a billion dollars east of the river" for projects ranging from housing to retail, he notes.

"Things have gotten better," says John Frye, a member of the Deanwood Advisory Neighborhood Commission in the city's notoriously impoverished Ward 7. He credits Williams for improved streets and sidewalks and for agreeing to shut down some of the trash transfer stations that had been scattered throughout low-income neighborhoods. But lots of work still needs to be done on things such as towing abandoned cars and dealing with derelict houses. "It's a slow process," says Frye, "but you can see improvements."

Williams doesn't deny that there are areas of the city that still need lots of help. He says he's using a strategy of placing city offices in key sectors around the District as a way to stimulate economic activity in those neighborhoods. Chavous thinks Williams needs to more aggressively strong-arm developers who've made money downtown and force them to begin investing in tougher areas.

The downtown-versus-neighborhood investment debate certainly is not unique to D.C. And sorting out the political economics of local community development corporations is a job that could stymie even the General Accounting Office. But what frustrates Williams is that he frequently doesn't get credit for what he has done--with a few highly visible exceptions such as rat eradication. A recent Washington Post article, for example, notes that the District wound up leading the greater Washington region in job creation in 2001, beating out the economic powerhouses of Montgomery County, Maryland, to the north and Fairfax County, Virginia, to the south.

It turned out to be a one-day story that didn't seem to stick to the mayor. Nor, it seems, have some of the more fundamental social improvements that have occurred on Williams's watch. Homicides, for example, are down by more than a third (although on a per capita basis, the homicide rate is still high, and clearance rates are uneven). The District's deplorable infant mortality rate, which had approached third-world proportions, has been cut almost in half.

By contrast, Williams's decision last summer to close down inpatient services at the city's ailing D.C. General Hospital--and to lay off 1,400 people in the process--stuck to him like hot tar. When he closed down D.C. General, which served mostly the African-American neighborhoods in the northeast and southeast quadrants of the city, he was vilified--even though the hospital was best known for its bad care and was spending twice as much as it was taking in, and even though he put in its place a system of community health centers and contracts with other hospitals to cover residents.

Indeed, the battle over D.C. General was a defining moment in the mayor's political standing in the District, and it highlights the city's thorny and deep-rooted racial politics. The city is divided-- almost literally--between white and black, with most of the District's 190,000 white residents living in the affluent northwest quadrant and most of the city's 300,000 black residents living in the poorer northeast and southeast quadrants.

To whites, closing the hospital was an example of the mayor making a difficult policy decision crucial to the city's long-range fiscal health. To many black residents, it was powerful evidence of indifference on the part of the mayor--who is African American--toward the city's black population and neighborhoods.

According to a recent Washington Post poll, Williams' approval rating among African Americans fell from 72 to 54 percent in the past two years. His standing among white residents over the same span remained at an astronomical 83 percent. At the same time, and somewhat paradoxically, the approval rating of city services among blacks and whites was the highest recorded in the seven-year history of the poll question, at 69 percent.

Another possible explanation for the mayor's unpopularity among blacks is his attitude toward District government hiring. Marion Barry had honed patronage to a bad art, building the District's payroll to nearly 50,000 people by the end of his second term in 1990, or almost one employee for every 11 residents--a ratio completely out of line with other big cities. Since then, the employment rolls have been pared back to about 33,000.

The size of the District's workforce and the cost of government, generally, have long been dicey issues. D.C. has more employees and spends more per capita than any other city in the country. For example, its per capita spending on fire protection is $200, compared with the U.S. average of $78. Police protection spending is $604 per capita, compared with the U.S. average of $196.

One good reason for the District's high per capita spending is that it provides services that in other cities would be handled by a county or state. Nevertheless, both close and casual observers of District government report a still-too-bloated workforce, still too-generously sprinkled with employees for whom performance and results don't seem to be a high priority.

While Williams has had some trouble filling some top spots in D.C. government, virtually everybody agrees that the mayor has put together a stellar upper-management team, consisting of outsiders--such as John Koskinen, a former deputy director of the U.S. Office of Management and Budget, as city administrator; Suzanne Peck, formerly head of IT for Sallie Mae, as CIO and Neil Albert, a New Yorker with experience in both financial management and parks administration, as director of the parks department--and long-time insiders--such as Leslie Hotaling, a 14-year veteran, who now runs public works.

What's worrisome is what's going on below those top managers. When city and state governments were going through the serious and painful budget and personnel contractions of the late 1980s and early '90s, D.C. was still staffing up. The studies of span-of-control ratios and clerical-to-professional-staff ratios that drove personnel management in other places over that time period still haven't hit the District. In spite of having cut its employee rolls by an impressive 30 percent, those working in and around the District government report an overabundance of clerical staff--a group that seems to spend more time and energy fighting over who won't do some job or another than they do concentrating on transforming the District into a model of efficiency, critics say.

When fingers are pointed, they all seem to swing back to Marion Barry. But Chavous, for one, doesn't buy the criticism. "The administration has come to paint all these people with the same brush," he says. "Yes, some of the people need to go, but with a lot of them, their talents are being ignored. It's assumed that if you were hired under the Barry administration then you're a bum, and that's not fair."

But even some of the District's department heads who have tried to tap such talents and instill a performance ethic in their workforce admit to some discouragement. When asked about the relative commitment of his parks workforce, Neil Albert says, "It hasn't changed as much as I'd like."

Williams bristles a bit when asked about the attitude of the city workforce. It's management's job to either motivate employees to get with the program or move them out, he says. On that score, one of his early personnel initiatives was to create an entirely at-will "management supervisory service" for all mid-level managers and higher. Those managers, Williams says, need to be held accountable by department directors for the performance of employees below them.

As for the bloated payroll, Williams--and others--point out that besides having to provide services normally performed by a county or state, Washington experiences both chronic and acute special demands. Those range from large political demonstrations that drain policing, transportation and public works resources, to dealing with the impact of the huge daily infusion of Maryland and Virginia residents who work in the city.

But the issue of the D.C. workforce can't be so easily dismissed. While more visible issues such as finance, community development, public safety--and even potholes--may be briskly debated citywide, ultimately the question of whether D.C.'s still-nascent turnaround will be sustained depends on how committed city employees are to making the place work efficiently.

It's a question that D.C. Council Chairman Pro Tem Jack Evans says he's been wrestling with for years. "Something like 72 percent of the District's workforce lives outside the city," says Evans, one of the longest-serving of the city's 13-member council. "And so it's a workforce that sort of flies below the radar. I don't want to say this about all employees, because we have some good ones, but you have so many who if the job doesn't get done, it doesn't hurt them because they don't live here."

Evans has additional concerns about the District's efficiency. "The city doesn't regularly benchmark against other places," he says. "And to the extent that it does, the information always comes back that we spend more dollars to perform a like service than any other jurisdiction in the country."

While Williams might not be overjoyed about those kinds of questions around city performance, he is quick to argue that they mark huge progress. Getting D.C. from a point where it couldn't do anything right to one where the discussion is now focused on things such as performance measurement, benchmarking and efficiency means, he says, that "the city and its expectations have fundamentally changed and changed for the better."

For Williams, that's not a bad first-term legacy, particularly for an outsider in a place such as the District of Columbia. "It's one thing to achieve change in Sunnyvale, California," he says. "It's quite another to do it in the complicated, brutal, Byzantine political environment of Washington, D.C."