Management

The Public Startup Charting Bold New Waters

Water utilities are struggling to lower their operation costs and simultaneously meet stricter environmental rules. Blue Drop, the brainchild of DC Water’s former leader, wants to help.
BY  | MARCH 2018
Blue Drop hopes to turn wastewater into a revenue stream. (David Kidd)

Most startups fail. Within the first four years, anywhere from 50 to 90 percent of firms go belly up. Investing in them is risky. It’s easy for things to go wrong.

But Blue Drop LLC isn’t a typical startup. To begin with, there isn’t a hoodie or open-loft office to be found in its modest headquarters in downtown Washington, D.C. And the company’s lone investor, the public utility DC Water, hails from an extremely risk-averse sector.

There’s something else unique about Blue Drop: A healthy portion of its revenue plan relies on selling truckloads of what used to be human poop.

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The City Managers on a Constant Quest for New Places to Fix

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BY  | MAY 2017

 

In the early 2000s, Mark Scott had been working for the city of Beverly Hills for 20 years -- 14 of them as city manager. Thanks to the opulence of the town, it was the kind of place where a budding manager could learn the business minus the typical “city” problems. But eventually the absence of serious issues started to get to Scott. During his tenure, he had watched neighboring Los Angeles endure dramatic civil and social unrest. Meanwhile, in Beverly Hills, luxury merchants and developers were bending over backward to do business. In 2003, the town’s Rodeo Drive Committee announced that the glassware company Baccarat was displaying $1 million worth of crystal chandeliers along the famous road’s median. It all triggered something in Scott, and he decided he needed a change. Or, really, a challenge.

He couldn’t have picked a more opposite place for his next chapter. Scott landed in Spartanburg, S.C., a former mill town divided almost evenly between white and black residents. About one-quarter of the town lived in poverty.

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John Arnold: The Most Hated Man in Pensionland

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The billionaire philanthropist has vowed to secure retirement for public employees. So why do so many public employees despise him?
BY  | APRIL 2017
(Photos by Brent Humphreys)

John Arnold wasn’t a pension guy.

The billionaire financier, who made a fortune in the stock market before retiring at 38, hadn’t ever really been interested in public retirement plans. But in early 2009, just months into the global financial crisis, Arnold began seeing a flurry of news articles about public pension funds collectively losing billions in the stock market crash. Assets had plummeted, causing unfunded liabilities to shoot up. Cash-strapped governments couldn’t afford to fix the shortfall, and the longer they delayed putting more money in their pensions, the worse the problem would get. In short, it was a policy nightmare.

Arnold became intrigued. “The fact that you could go in one year from having a system that was well-funded to having a major gap -- that affected me,” he says. He started digging and found a book called Plunder: How Public Employee Unions Are Raiding Treasuries, Controlling Our Lives and Bankrupting the Nation, by conservative writer Steven Greenhut. As the title suggests, the book is an anti-union take on public pensions that details the misdeeds of the system’s bad actors -- public employees who game the system and wind up with pensions that are equal to or better than what their working salaries had been. Reading that book, says the now-43-year-old Arnold, “just made me mad.”

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The Myth vs. the Truth About Regulating Payday Lenders

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When state laws drive so-called "debt traps" to shut down, the industry moves its business online. Do their low-income customers follow?
BY  | MARCH 2017

In 2010, Montana voters overwhelmingly approved a 36 percent rate cap on payday loans. The industry -- the folks who run the storefronts where borrowers are charged high interest rates on small loans -- predicted a doomsday of shuttered stores and lost jobs. A little over a year later, the 100 or so payday stores in towns scattered across the state were indeed gone, as were the jobs. But the story doesn’t end there.

The immediate fallout from the cap on payday loans had a disheartening twist. While brick-and-mortar payday lenders, most of whom had been charging interest upward of 300 percent on their loans, were rendered obsolete, online payday lenders, some of whom were charging rates in excess of 600 percent, saw a big uptick in business. Eventually, complaints began to flood the Attorney General’s office. Where there was one complaint against payday lenders the year before Montana put its cap in place in 2011, by 2013 there were 101. All of these new complaints were against online lenders and many of them could be attributed to borrowers who had taken out multiple loans.

That is precisely what the payday loan industry had warned Montana officials about. The interest rates they charge are high, the lenders say, because small-dollar, short-term loans -- loans of $100 or $200 -- aren’t profitable otherwise. When these loans are capped or other limits are imposed, store-based lenders shut down and unscrupulous online lenders swoop in.

Purchase Power: A Special Report on State Procurement

Procurement is at the heart of almost everything a government does. But states vary widely when it comes to how well they manage the things they buy.
BY  | FEBRUARY 17, 2016

Governments buy a lot of stuff. Every year, one out of every three dollars governments spend goes toward purchasing something -- from photo copier ink to new vehicle fleets -- to help provide services. This very large chunk of the budget would seem to make procurement the most obvious area to look for new ways to save taxpayer money. Yet for the billions spent every year in state procurement, many central offices have long remained mired in old techniques. They’ve been unable to take a big-picture view when it comes to spending, and they’ve only dabbled in using data and new technology for more efficient purchasing.

The examples of what can go wrong are many. Take Mississippi, which has a high reliance on no-bid contracts. In 2014, the commissioner of the Department of Corrections (DOC) resigned and became the subject of a federal investigation for allegedly taking $2 million in bribes in exchange for steering prison contracts to a former lawmaker. In Colorado, an audit last year found poor oversight of more than one-third of the contracts surveyed in the state’s health exchange. The lack of follow-through to make sure vendors were complying with contract requirements was partially responsible for more than $400,000 in questionable costs.

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The Evolving Job Description (and Requirements) of a CFO

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Chief financial officers used to be concerned with just balancing the books. But today’s CFOs have taken on a higher role.
BY  | FEBRUARY 2016

Kenneth Rust is a key player in redeveloping an old post office in downtown Portland, Ore. Denise Olson is pushing new technology to save Phoenix money on procurement. Jim Beard figured out how to update and expand Atlanta’s water and sewer systems while avoiding a scheduled rate hike.

These tasks require different kinds of know-how, but Rust, Olson and Beard all have the same job title: chief financial officer. It’s a position that has morphed in recent decades. Where CFOs were once primarily in charge of numbers -- making sure the books were balanced, bills paid and audits clean -- they now are called on to be strategists with an eye to developing the city’s economy. And where CFOs came to the job touting experience in a local or state finance department (and perhaps a stint as city controller as well), they now hail from more varied backgrounds. Just as in the private sector, many public enterprises are looking for CFOs with talents that include creative thinking, communication skills and long-range planning -- and for good reason. Today, just about everything a municipality does is either under the CFO’s purview or at least under his or her watchful eye. “Almost every major decision the city makes,” Beard says, “I get to be in the room.”