Creating a Civic Return on Investment Calculator – How to Deliver Better Services Without Endless Cuts

By: Phil Ting

San Francisco Civic Return on Investment

With ever-growing state and federal cutbacks now virtually guaranteed to strike the most vulnerable San Franciscans, our city government has a duty to address the key question head on: how do we propose to protect the seniors, children, jobless and homeless who are being left behind by a faltering economy and failing political policies?

One way is certainly to “backfill” the state and federal cuts with local revenues. However, there is hardly an endless supply of new local revenue and any new revenues need to be approved by voters who are increasingly skeptical of government and under economic pressure themselves. 

Candidates frequently offer platitudes about cutting “waste, fraud and abuse” to fill budget gaps. While that is always good start, I can say – as someone who has helped generate over $300 million in new revenue in the past six years by closing loopholes, reducing backlogs and fighting fraud – that such efforts will only take us so far.

Every election year candidates also make the promise that they can “run government more like a business.” Having been both a business consultant, the executive director of a non-profit and now citywide elected official put in charge of reforming a once troubled agency – I can say with certainty that these candidates don’t really know what they are talking about. Government is not a business. It does not have a profit motive and it can’t effectively employ the number one tool of successful businesses – rewarding workers for generating “profits.”

Time to Make Government Dramatically More Effective with Gov 2.0 Tools Like Civic ROI.

While government is not a business, we can learn from one of the simple and most effective business tools – the Return on Investment or ROI calculator. For my government friends, this is the pervasive tool that tells business leaders what anticipated return they expect to get on every investment. It is a foundational first step to every business decision.

For my business friends, believe it or not there is no real equivalent in government, at least not San Francisco city government. Most decisions seem to be made based on aspirations and needs, not on hard data and anticipated returns. 

While the return a business seeks is different than the return a government requires, the tool is still a powerful one. By figuring out what result we get for every government dollar invested, we will spend our dollars more wisely and San Franciscans will receive a much greater return on every tax dollar they invest with us (which would encourage them to invest more if they see and understand the value they are receiving).

What do I mean by Civic ROI? Let me start by giving you just one example.

One of San Francisco’s best department heads, facing ongoing budget cuts, decided to analyze what return he was getting for services delivered by providers. He found that all of his vendors working in a certain area were achieving the same excellent results – but some of the providers were achieving the results at dramatically lower costs.

In fact, he found that the most cost effective service provider was delivering results at less than 25% of the cost of the most expensive provider. Since the results were the same – the department head could actually deliver more services for fewer dollars by moving more work to the most efficient provider and asking other vendors to adopt the models of their most effective competitor.

It is important to remember government does not – and should not – have a pure “profit” motive. 

There are many parts of a Civic Return on Investment, and cost is just one of them. Where we spend the dollars is important, with a priority on local companies and non-profits that employ San Franciscans. How we spend the dollars is important, with an understanding that when we invest in minority owned businesses and women owned business we are helping to empower those communities in the long run, in addition to delivering the immediate service.

But by merely making this calculation – we can start to become more effective. And as the example I gave above shows – dramatically more effective.

Putting Civic Return on Investment to Work

Solar Panels - One Example of Civic Return on Investment

As founding co-chair of the City’s Solar Task Force, I can give you another example of Civic ROI. Along with our talented task force, we created GoSolarSF, the nation’s first local incentive for rooftop solar. The results have been dramatic – hundreds of jobs created, hundreds of tons of carbon emissions eliminated and a four-fold increase in the number of solar roofs.

When the city’s Public Utilities Commission proposed drastic cuts to this program we applied some Civic ROI calculations. While we were investing $5 million per year up front, the data shows we will get all of that back and more over time – because homes with solar rooftops have higher selling prices and that means the property tax generated for a solar home goes up when those homes are sold. While homes with solar can only be reassessed after they are sold (to eliminate discouraging the solar investment) the average home is sold every seven years.

So, a Civic ROI calculation shows we get all of the investment back – and we get the dividends of more jobs, cleaner air, a healthier environment and more money in the pockets of consumers, which generates even more tax revenue as it flows through our economy. Sound too good to be true? Run the Civic ROI!

This is not a one-off example. If we start to think about what return we get on our civic investments – we start to make better investments. Like – I kid you not – that hidden gem of investments, buffered bike lanes.

We have been in a giant ideological tussle over creating a safe and modern bicycle infrastructure. If we stopped arguing over the ideological issues and took a look at how much money we would make and save by helping more San Franciscans to commute safely by bicycle, then the debate would be over quickly and we would be investing in buffered bike lanes.

Civic Return on Investment Through Bike Safety

Why?

Let’s start this time by looking at the costs. When bicyclists are injured, that puts a burden on a city that already invests more than $1 billion per year in healthcare. The start of a Civic ROI calculation is already being done on the cost of pedestrian injuries. Bike accidents will almost certainly show a similar result – it is cheaper to protect people from injury than it is to treat their injuries.

But the calculation goes far beyond costs – it includes benefits. We continue to quote the work of one of our favorite publications, Grist, which shows that the average American could save nearly $8,000 per year by ditching the car and riding a bike on most trips. That’s $8,000 that gets largely reinvested in local economies – from home repairs to dinners out. And that money – which now flows largely to German and Japanese carmakers and overseas oil producers – could be sloshing around San Francisco, putting people to work and generating tax revenue.

In other words – you make money when someone else rides a bike. 

And you make a whole lot of money when you bike yourself. There would be much less argument if we could all see the calculations on the tremendous return on the civic investment in safe bike lanes (without even starting to calculate the health benefits, the environmental benefits and the benefit of faster public transit when there are fewer cars on the road).

I could go on and on. (Some of you might think I’ve already gone on and on!)

But when it comes to making our government work better at a price we can afford – this is a topic that requires a small investment of our time and attention.

Resetting government? It starts with better tools like a Civic Return on Investment Calculator that can help guide us to smarter decisions. 

 

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Paid for by Phil Ting for Assembly 2012. FPPC ID# 1343137