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Thoughts on the Chelsea receivership.

It is clear that municipalities across the nation face many of the problems that brought the City of Chelsea, Massachusetts, into the condition where receivership was necessary. To respond to the pressing needs of those communities it is necessary to recognize the true nature of those problems and develop the tools to accomplish reform.

In Chelsea, we have succeeded in the first phase of the recovery--balancing the operating budget. As we move into the second phase--placing the community on a footing sound enough to sustain itself unassisted--we must face up to the structural impediments to this reform and the significant capital deficiencies. This will not be easy.

A difficulty we will have to overcome involves a failure on the part of the public to allow those who manage the public's business the tools that private-sector managers take for granted. Government, often the focus of derision and even ridicule, is in fact operating in a context that the public has established for it. If we are dissatisfied with the results we must examine their causes--these operating assumptions--and strive to reform them.

To those who say government should be more businesslike, we respond, "The rules of the game, established by law and tradition, make that impossible today." The definition of our mission, our budgeting practices, our hiring policies, contracts and procurement practices all weigh in against a businesslike approach. We are living with 50-year-old systems, born in response to problems long since put to rest, systems that reflect a profound and ongoing ambivalence that we Americans have about investing trust in government officials.

Americans have a love-hate relationship with governance. They want it to do everything but trust it to do almost nothing. They tie its hands whenever possible and then want officials to respond with the nimbleness of private-sector entrepreneurs. The Chelsea Receivership, with its unique freedom from local political constraints and its expanded management options, has provided a unique laboratory to test management assumptions.

A Management Stalemate

One lesson of Chelsea is that the obstacles standing in the way of local government make it almost impossible for even the best managers to stay focused on the primary mission--providing basic services to their citizens. Instead, politicians and managers are caught up in a complex web of competing interests, laws and traditions which have created a dangerous political stalemate.

Managers, mayors, city councilors and citizens all are frustrated by their inability to focus municipal resources on the problems at hand. They see crumbling infrastructure, deteriorating public facilities, streets growing increasingly dangerous and social problems growing increasingly complex. Each problem calls for new and innovative solutions but even the best of local administrators are stuck with tools and means of operating that are themselves increasingly the problem. The documented Carlin-Chelsea firefighters' battle shows this clearly.

For years the Chelsea mayor and Board of Aldermen were unable to make decisions about the fire department budget, structure or leadership because all of their decisions were subject to the terms of a collective bargaining agreement and/or civil service laws. With the ability of small groups of interested individuals to impact local elections, politicians had no incentive to change things. So much so that the city was willing to face bankruptcy without demanding change.

Flaws in this relationship were numerous. The contract included a minimum staffing provision which established the number of firefighters for each shift. It also included an unlimited sick leave provision and a generous vacation plan. This level of benefits was not based on any objective standard but rather on a "past practices" philosophy/contract clause that set it in stone. The mayor, in effect, had no options and, as the situation had played itself out over the years--weakening line managers' ability to manage, he had no allies.

The new firefighters contract, which expires on June 30, 1995, is fair to the city, the citizens and the firefighters, but it was only possible because the receiver did not have to run for re-election and face the wrath of an organized, focused opposition.

Municipal managers across the country are struggling with issues such as these, and we must find ways to strengthen their hands. The underlying problem is one that many communities are grappling with and points to an imbalance that makes effective management difficult. This problem is not unique to the firefighters in Chelsea or to Chelsea in particular.

A Place to Turn

When a mayor wakes up to the reality of a fiscal crisis facing the community he or she has nowhere to turn for help. As we have learned that many of the problems facing this city grew from inadequate management and financial controls, it has become apparent that states, and perhaps even the financial community, must expand their capacity to roll up their sleeves and properly diagnose problems and propose solutions. Until that was done in Chelsea, with aggressive and competent people sitting in the municipal auditor's chair and behind the treasurer's desk, we had no real understanding of the magnitude of the problem. States must develop systems that hold cities and towns more accountable but which also offer the technical support necessary for managers who are trying to solve complex management problems.

Unfortunately, one lesson that should not be lost on anyone is that we cannot depend on outside auditing firms to provide such information or support, or even to adequately flag problems.


A great deal already has been written about privatization, but our experience is that a lot of work remains to be done if it is to become a reality in most communities. The Chelsea Receivership has taken the discussion in new directions and in the process has unearthed new concerns. If we are to move into this area, which I strongly believe we should, then we must develop near-perfect bidding, contracting and monitoring capacities, practices that are currently lacking in many communities. It is easy to say, for example, that we want to contract out water and sewer maintenance, but it is quite another to design the specifications for the request for proposals or bids, write the contract and oversee the performance of an outside contractor.

The ability of local managers to get the best service for their community is limited by their capacity to navigate arcane bidding and contracting rules which, instead of guaranteeing the best product for the lowest price, have the potential to do the opposite. We must make the system, laws, rules and regulations work for, not against us.


It is obvious that cities must develop regional responses to service delivery when it is most cost effective to do so. Under the current system, the size of a fire department, school or police department is determined by an accident of history: when or where the town borders were drawn. That is not good enough. We can get better, more cost-effective services by combining service-delivery systems across municipal borders, and we should. The state should do everything in its power to encourage it and perhaps even force it. For many of the reasons listed above, it is clear that only with such state encouragement will local managers be able to mount the efforts necessary to bring about such reforms.

Civil Service and Labor Relations Reforms

The civil service system as practiced in many jurisdictions is a significant impediment to reform. In Chelsea, department heads not only received civil service protections but, in several instances (public safety), were actually hired based solely on success in civil service tests. In these instances, civil service in effect grants lifetime tenure to managers. Senior managers therefore are not responsive to the chief executive officer and are not judged on their performance.

More fundamentally, the combination of contract history and civil service law have established an adversarial relationship between managers and those employees under their charge. Our best-run companies have moved in the direction of a cooperative set of relationships that aim to meet customer needs and exceed expectations in order to maximize the success of the entire enterprise. Government has barriers to such an approach that are substantial, and they must be removed.


While there is a great deal of talk about "re-inventing government" or "entrepreneurial government," we have concluded that, without a thorough reexamination of the rules that govern governmental practice, no substantial or sustainable progress is possible. Finding a balance between the need to assure accountability, guard against larceny and provide cost-effective services is an incredible challenge. That it must be accomplished in the highly politicized environs of the town or city hall increases that challenge.

ED CYR is assistant receiver for administration and finance, City of Chelsea, Massachusetts.
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Title Annotation:city in Massachusetts
Author:Cyr, Ed
Publication:Government Finance Review
Date:Aug 1, 1993
Previous Article:Lessons of receivership: the legacy of Chelsea.
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