Why We Did It
You might wonder why, at this late stage in life, someone who has been a state representative, county auditor, county commissioner, lieutenant governor, mayor, governor, and senator would be writing a handbook on public-private partnerships (P3s). The reason is simple: I want to continue to make a difference for my country, and I truly believe that this handbook will help improve the management of cities and towns across America and enhance the quality of life of their residents.
My belief in the P3, which in general terms is an outcome-based collaboration between local government and business, has not changed over my forty-four years of government service or four years of “retirement.” As I once put it, “Successful local economic development and management of cities . . . will largely depend on a community’s ability to foster effective public private partnerships.”1 I still believe that, and I’m not the only one.
In addition, this book is a case study of Cleveland’s Operations Improvement Task Force (OITF), the P3 that helped turn the city around in the 1980s when I was mayor. It also presents an overview of the related Total Quality Management (TQM) and continuous improvement program that I implemented at the state level in the early 1990s when I was governor. It is a how-to manual that will not only explain the technical aspects of creating a P3 but also describe how the private sector can be a powerful agent in improving the operations of local government. It sets forth how the Cleveland task force was created; what motivated those who gave of their time, talent, and money; and how the partners monitored the implementation of its recommendations.
Moreover, the book will demonstrate how this joint endeavor improved city government, fostered a decades-long partnership between the city and private sector, and spawned other collaborative projects that continue to this day. It tells the story of how Cleveland was saved—and believe me, “saved” is not an overstatement.
Some might argue that the federal and state governments can and must do more to help local governments financially. Experience, however, shows that they are mistaken. The best that realistically can be hoped for is to maintain those state and federal programs that make a difference in our cities, such as community development block grants, the low-income housing tax credit, and the new markets tax credit. But the future of these programs remains in jeopardy because of our country’s unsustainable debt situation.
Trends in state government policy have exacerbated the difficulties facing local governments. I recall a speech that I gave at the National League of Cities convention in 1981, when I was mayor. I noted that a number of governors, when talking about state and local control, made the words “local government” sound almost like a slur.
In 1981, when President Ronald Reagan organized the New Federalism Task Force to affirm the primacy of the Tenth Amendment authority of the states over that of the federal government regarding local issues, I pointed out that the reason why so many cities were coming to the federal government with a tin cup was that their states gave them no ability to raise revenues on the local level. I suggested that President Reagan call a meeting of governors to urge them to provide the revenue vehicles necessary for local governments to meet their responsibilities. My belief was, and is, that dollars raised locally are the best-spent dollars—and even better, they do not include the brokerage fees collected by the federal government.
These political and economic contexts are powerful and must be addressed on multiple levels. P3s, while not the solution to every problem, can do much to help state and local governments navigate their way toward outcomes that better address citizen needs, including job creation and economic growth. This is the central subject of this handbook, and the story begins with the first formal P3 that I helped create, the OITF in Cleveland. I have always taken a pragmatic approach to problem solving, and the P3 is a powerful tool.
The need for such an approach has intensified in the intervening years. The growing public frustration with Washington, and, in some cases, with state capitals, has increased both the need and the desire for action on the local level. And even though corporations of all sizes are leaner than they were thirty-five years ago, I’m confident that they are still as ready to get into the arena with local government as were corporate leaders in Cleveland in the 1980s. In his journal article “Business Leadership Lessons from the Cleveland Turnaround,” James E. Austin captured what happened in that place and time: “A relatively small group of Cleveland business and civic leaders stepped forward after the bankruptcy to move the community in new directions. Among these were the CEOs of the city’s biggest corporations who were clearly recognized as the informal leaders of the local business community. Together, these leaders, through ‘personal selling,’ were able to convince their colleagues at other major companies of the imperative of action.”2
There’s another resource to be tapped, as well: citizen volunteers. As people live longer and, in some cases, retire earlier, many are looking for an opportunity to use their talent, time, energy, and experience to make a difference in their community. They have been joined by a generation of millennials who are interested in urban affairs and are looking for ways to contribute. And there are people like Ed Richard, my executive assistant when I was mayor, who left his successful private business to work in government because of a similar motivation. His business background and experience turned out to be indispensable to improving Cleveland during his ten years in my administration.
I’d known Ed for several years before then. He was the founder of the Council of Small Enterprises, a group of small businessmen who became part of our chamber of commerce. Ed said that he wanted to be one of my advisers, and I replied, “I don’t have advisers, but I’d be grateful if you joined my administration.” And he did. When I later asked him why, he said, “It’s rather simple. I had reached the stage in my career where I felt I was just coasting. . . . I really did not feel challenged, and making money alone was not my reason for being in business. So when this opportunity just hit me in the face, I said ‘Yes’ without thinking. It was a good decision because one can really make a difference in city government, and I felt I was doing that.”3
As Ed’s words convey, there are still people in America who believe in Abraham Lincoln’s definition of government: “The legitimate object of government is to do for a community of people whatever they need to have done, but cannot do at all, or cannot so well do, for themselves, in their separate and individual capacities. In all that the people can individually do as well for themselves, government ought not to interfere.”4 And I would add this: the community should not wait for the government but instead should join with it to achieve those goals. The government is just one thread in the fabric of the community, and I believe that a leader’s highest calling is to empower people and channel their energy and resources to help solve problems, meet challenges, and seize opportunities.
I also believe that it is a leader’s role to reach deep into every individual, draw out the goodness that’s inside, and inspire them to use it to help their families, their neighbors, and their communities.
So I have decided that with the time I have left, I want to do all I can to promote P3s, which, as this handbook will show, are among the most practical, efficient, and effective ways to improve the quality of life for our citizens, whether they live in large cities, suburban enclaves, or small towns.
When local governments have a new executive or new council members, it’s a good time to revisit city operations, just as a company would review its corporate operations under new leadership to determine whether it is doing its efficient best for its shareholders.
So how do you start? A successful P3 begins with the recognition of a need by both public and private sectors. Businesses, nonprofits, and foundations must be ready to respond to a call for help from the public sector, or they may take the initiative and express their willingness to help by providing human capital and, possibly, financial resources. Similarly, when need arises, public officials must reach out for help or respond positively when an offer from the private sector presents itself. I have observed that too often, public leaders do not understand what a fantastic resource they have in the private sector, and that on the private side, businesses can be reluctant to get involved in the politics of city governance. Citizens may believe that corporate action is about only corporate interests, as opposed to the public interest. These potential causes of misunderstanding underscore the need for openness and transparency from both public and private actors.
The Genesis of the Cleveland Public-Private Partnerships
Let’s recall what Cleveland was like in 1979. The comedian Rich Little made Cleveland the butt of jokes in his stand-up routine. Johnny Carson, host of The Tonight Show, took a poke at our city by saying, “Will the last person leaving Cleveland please turn off the lights?” That was when Cleveland was known as the town where the river burned and the mayor’s hair caught fire.
But joking aside, Cleveland did have severe problems. In 1978, Cleveland became the first city since the Great Depression to go into fiscal default after declaring that it could not pay off $15 million in short-term notes held by local banks.5 Later, the State of Ohio declared that the city’s finances were unauditable.
How did it come to that?
As is usually the case, it wasn’t any one thing but a combination of many that had created this dire situation. Years of financial mismanagement were followed by the use of one-time revenues, such as the proceeds from the sale of the sewer system to the regional sewer district for $32 million in 1972 and the sale of the municipal transit system to a regional transit authority for $8.9 million two years later. A paper contracted through the Brookings Institution concluded that Cleveland was a virtual ward of the federal government because it received $100 million annually, almost as much as the city collected in property and income taxes.6
The city’s infrastructure had deteriorated, as roads, bridges, sewers, and water lines buckled and crumbled. Some suburbs were suing to take control of the city’s water system and incorporate it into a regional system. Unemployment was high, and litter lay strewn about the streets.
On top of that, the city was unable to obtain credit, in part because it had not been paying its bills to vendors. As Ed Richard described it, “We entered City Hall, and it was a mess. . . . I was in my new office with the door closed. There was a banging on my door. I yelled through the door, ‘Who is it?’ The response was ‘I’m Tom Whelan of Ohio Bell. You owe us $300,000 for phone service, and we’ll be shutting off your phones next week unless you pay.’ It seems the prior administration had not paid many bills, including telephone for several months. We later found bills stuffed into filing cabinets, along with checks that had never been deposited.”7
Cleveland also had a bloated thirty-three-member city council, one of the largest in the nation. The mayor and council members served terms of only two years, so divisive elections were ongoing. There was more of a focus on running for or staying in office than on effectively serving in that office.
Mayor Dennis Kucinich and the Cleveland City Council were at war with one another. The mayor spent a good deal of time announcing what he was against rather than what he was for, and the result was constant strife. In fact, the division was so pronounced that a recall election was held, which the mayor survived by only 236 votes out of a total of 120,300 cast.
After I became mayor, with the help of such organizations as the Citizens League and the League of Women Voters, we made two crucial changes in the structure of city government. The citizens of Cleveland voted to reduce the size of city council from thirty-three to twenty-one members, and they extended the term of office for both the mayor and the council to four years, beginning with the next election. The changes were significant, but they addressed only a few of the many ills that afflicted the community.
Minority residents were angry with the police department, both for the slow response to their calls for help and for what they (often correctly) perceived as the use of excessive force by police officers. This lack of trust between the city’s police department and its citizens lingered long after the race riots of 1968. The constantly changing leadership of the police force also reflected the turmoil in city law enforcement: Cleveland had thirteen police chiefs in the seventeen years leading up to 1979. Police officers had their own justified complaints about resources—they pointed out, for example, that 80 percent of the city’s police cars had more than one hundred thousand miles on them. The fire department was little better off, as the Vanguards Organization, which represented African American firefighters, was suing the city for racial discrimination within the department.
I knew that unless we dealt with the racial tensions, the chance of bringing the community together to build P3s was nonexistent. So we created the Cleveland Roundtable, which brought together leaders from every group in the city, including neighborhood and religious organizations. It took on the jobs of dealing with racism; discrimination in housing, employment, and education; and public anger over the issue of federal court-ordered school busing.
We were fortunate that the business community understood, as I did, that the infrastructure of human relations was more important than our physical infrastructure.
I knew that the community had great assets and was a national leader in the arts, education, health care, community involvement, and philanthropy. I also was aware of the number of large corporations headquartered in the city—TRW, British Petroleum, and Eaton, for example—along with two large philanthropic organizations, the Cleveland Foundation and the George Gund Foundation. Having served in elected office at both the state and the local levels, I knew many of these corporate and foundation leaders personally, and I was convinced that if I could get them involved in improving how the city was managed, we would have the talent and other resources to be successful.
As a former county auditor, I was familiar with management audits. In fact, the first management audit of a county office had taken place on my watch and had resulted in a dramatic change in its operations. The result was a marked improvement in the delivery of services to the public. There was no question in my mind that the city also needed a massive management audit to bring about the same sort of changes that we had made in the county auditor’s office. In addition, I knew that the management audit conducted by Warren King & Associates in 1963 for the Ohio state government had produced such good results that then-governor Ronald Reagan hired them to do the same in California.
I also understood the need to recruit outstanding talent to run the city’s departments. I was confident that those participating in the OITF would work with me to attract the finest talent and identify outstanding people already in city government.
The morning after I won the election, I was on the phone with the Cleveland and Gund Foundations. Both had been briefed on the proposed OITF and had agreed to help finance it, but only on the condition that the private sector would match their funding, dollar for dollar. I met that same day with E. Mandell “Del” de Windt, the chairman of Eaton and de facto spokesman for the business community. He told me that the private sector would match the $250,000 provided by the two foundations. In fact, they even exceeded that goal: more than $550,000 was raised from three hundred contributors, including eight labor unions and a cross section of the community that I never anticipated would help. Morton Mandel, then the CEO of Premier Industrial, was a leader in the fund-raising. He later said, “Five or six of us took 30 names, and divided them up among us. . . . It was the easiest fundraising of this importance I had ever done.”8
The OITF was a giant success; it helped get Cleveland’s finances on solid ground and improved the efficiency of city government. The Department of Community Development reorganized its operations to take better advantage of Housing and Urban Development grants, and that change resulted in a 100 percent increase in grants directly supporting Cleveland’s neighborhoods.
By 1982, the OITF recommendations had saved $4 million by streamlining operations in the fire department and waste collection department alone. The city established an Office of Internal Audit, and Cleveland’s bond rating increased from an abysmal Ca1 in 1978 to Aaa in 1996. Just two years after the OITF’s creation, 94 percent of the recommendations had been implemented or were in progress, and they had resulted in $30 million in savings each year.
The Genesis of This Book
And that is how I come to this handbook, a how-to manual and leadership guide that outlines the philosophy and the technical aspects of creating an effective P3. It will explain how to persuade the private sector to get involved and will show how I worked with business leaders to motivate others to provide the people and money that we needed for the task force and to implement its recommendations. It also will examine the impact of the recommendations in improving government operations.
My first goal is to inspire readers to consider creating a P3 in their own communities. My second goal is to provide a playbook that can be used to implement the systemic managerial changes that can and will improve how local government performs and delivers. The lessons conveyed through this work will underscore the symbiotic relationship between the public and private sectors of nearly every town in America.
As former Cleveland City Council president Jay Westbrook has said, “Most of us realize that very little of what we can do lies in legislation. There are very few laws that you can pass at a municipal level to hold families together, get people jobs, or maintain a quality of life in the neighborhoods. This has really compelled us to develop alliances and build bridges with other organizations.”9
Those who are moved to learn more after reading this handbook will be happy to know that original materials documenting the OITF that are not included in this handbook can be found within the vast written materials, correspondence, and official papers of the Voinovich Collections, open and available to all. The archives comprise four collections, which Cleveland State University, Ohio University, and the Western Reserve Historical Society are digitizing thanks to a grant from the Cleveland Foundation.
Why is all this important now? As I said earlier, little or no help will be forthcoming from the federal or state government, and I believe that the situation of local governments will only get worse. As I look around the country, I am extremely concerned that many of the fiscal, operational, and human relations challenges that I worked through in the 1980s as mayor and in the 1990s as governor are the same challenges facing cities and states today. Municipal bankruptcy, fiscal emergencies, and race relations are but a few examples. It is, as Yogi Berra said, “déjà vu all over again.”
Here’s a silver lining though: today, there are tools and templates for elected officials, businesses, labor organizations, organized philanthropies, and nonprofits to make use of their limited financial and human capital to meet challenges, solve problems, and take advantage of undiscovered opportunities. These tools were used effectively in Cleveland, and they exist in every community in America.
My slogan when I ran in the mayoral election in 1979 was “Together We Can Do It.” But it was more than that. It was a statement of what I truly believed.
And I know it works, because we did it.