Firm That Runs Cities Won't Reveal Its Profits

By DOUG NURSE
The Atlanta Journal-Constitution
Sunday, March 01, 2009

How much is Johns Creek spending on code enforcement? What does Milton pay city staff to process building permits? Just how much is the private company in charge of city operations making?

Believe it or not, the cities don’t know for sure, and they want to fix that by pushing CH2M Hill-OMI, the Colorado-based firm that runs the cities, to open up its records. But the firm has been reluctant to reveal too much, citing proprietary information.

The conflicting cultures of private and public sectors are likely to collide as the firm and the cities of Johns Creek, Milton and Sandy Springs start their annual contract review and renewal negotiations this month.

CH2M Hill and the cities are in the third and fourth year of five-year, multimillion-dollar contracts. The contracts make up 25 percent to 40 percent of the cities’ annual budgets. Johns Creek is paying CH2M Hill $18.9 million this year, Sandy Springs $25.8 million and Milton $7.6 million.

Milton City Manager Chris Lagerbloom said the financial crunch has intensified the need to know in more detail where possible savings can be found.

“We may realize we could be doing it [providing services] better and find ways to save money or both,” he said. “We need a level of transparency because we’re dealing with public money.”
Herb Washington, CH2M Hill director of operations for municipal services, said the company views its relationship with the cities as a partnership that both sides value, but even so, it holds private its finances. He said some city officials seem to view the staff as city employees, and expect to have the same access to the inner workings as a traditional government model.
“Even as a partner, we are a private firm,” Washington said. “Are we obligated to reveal our profit margin? No more than any other contractor.”

The three municipalities pay lump-sum contracts to CH2M Hill to provide most day-to-day services to the public. As long as the public is happy, and satisfactory work is being done at a lower price than Fulton County or comparable municipalities could do it, the cities haven’t asked too many questions — until now.

Johns Creek City Manager John Kachmar said it’s difficult knowing what savings are possible without knowing what the company’s actual costs are. He said he’s been able to figure rough guesses, but that’s all they are. Sandy Springs Mayor Eva Galambos said she’s disinclined to probe too deeply into CH2M Hill’s city-based spreadsheets.

“I don’t feel it’s necessary to know what their profits are so long as we get good services and that I can compare and see if we have more or less employees than cities of the same size,” Galambos said.

Johns Creek Mayor Mike Bodker said when the cities were launched, the opaque arrangement was acceptable. Now it’s time for the city to take a more hands-on approach.

Other cities across the country have outsourced projects and even whole departments, but Johns Creek, Sandy Springs and Milton were among the first and the few with such broad reliance on a private company.