Managing a government like a business: the Sunnyvale System.

• Author: Chan, Amy
• Position: Sunnyvale, California - Cover Story

Sunnyvale, California, the "Heart of Silicon Valley," has a residential population of 125,000 and a daytime population of 200,000. While other cities are struggling to survive, Sunnyvale has become well recognized as a financially sound city committed to excellence. It may look like any other city with invisible boundaries that hold homes, industry and people, but the unusual characteristic of this city is that it uses the same basic principles that apply to a well-run corporation to run its government. This philosophy of managing the city as a business has been the key to Sunnyvale's success.

As with corporations, the city has its own board of directors--the city council--and its own chief executive officer--the city manager. The council sets policies and goals, including the general plan, which is the statement of the city's long-range goals. The city manager, like the president of a company, carries out the council's policies and manages the day-to-day affairs of the city. The city's sole purpose, which is dictated by the general plan, is to provide high-quality services to the residents, industries and businesses of Sunnyvale in the most cost-effective way possible.

The City of Sunnyvale has a dynamic management philosophy. City officials manage this $149 million municipal corporation on three essential business principles: long-range planning, performance budgeting and performance auditing. While most cities are required by state law to prepare a long-range comprehensive planning document, few, if any, use it to the extent that Sunnyvale does for all of its planning and budgetary actions.

In early September 1993, President Clinton and Vice President Gore asked Sunnyvale officials for pointers on how to run a government. What attracted the presidential team's attention was something that might be called the Sunnyvale System: municipal managers get a "contract" from the council to do a specific job. Not only are managers paid based on the market rate, but they can earn a bonus or suffer a pay cut depending on their ability to meet service-level standards. The council receives a 10-year projection of impacts of its fiscal decisions; feedback and ideas are sought from every conceivable source.

Clinton and Gore learned of the civic departure through the book Reinventing Government, by David Osborne and Ted Gaebler, and played up the "reinventing government" theme while campaigning in 1992. Clinton credited Sunnyvale directly when he signed the Government Performance and Results Act of 1993, which requires federal agencies to design sets of measurable goals, much like Sunnyvale government does.

Performance Measurement

Systems for goal setting and performance measurement have been employed in Sunnyvale for a considerable period of time. They were first instituted in a limited way in the mid-1970s, when the city joined in a cooperative venture with the U.S. General Accounting Office to develop and refine what was known then as "program budgeting." Sunnyvale was one of several demonstration sites, including several state and federal agencies. A program-type budget was instituted in Sunnyvale's department of public safety, which provides police, fire and emergency services. The hallmark of the budget system was the development of certain high-level goals to direct actions in a particular fiscal year.

During the late 1970s, the city council decided that a far more sophisticated performance-based budget system should be instituted as a part of a comprehensive planning and management system. The system, which began on July 1, 1979, directs most of the critical policy-setting processes, as well as establishes the basic management framework utilized by every city department.

Planning and Management

Managing public money means far more than collecting taxes, putting money in the bank, and writing checks for goods and services. Sunnyvale officials firmly believe that managing citizens' money well requires long-term planning, focused goals and clear accountability to achieve the best results with limited resources. The success of this philosophy is evident: the city has increased productivity by more than 30 percent during the past six years; maintained extremely low taxes and fees; and delivered excellent public services with 30 to 40 percent fewer employees, compared to similar services offered by the neighboring cities in the San Francisco Bay area.

The Planning and Management System (PAMS) links fundamental long-term planning goals contained in the city's general plan with a 10-year resource allocation plan, or budget. The city council defines service levels and policies, and the 10-year plan identifies the resources needed to achieve them. Sunnyvale's program managers and staff are responsible for delivering specified services within those resources, and through PAMS, they are evaluated each year on how well they have managed the public's money to meet planned objectives. Sunnyvale's program managers are expected to be experts in their fields, but they also are expected to be strong budget managers. Members of the finance staff work as consultants to help program managers perfect their budgeting.

PAMS consists of an eight-step process. The steps are discussed in the sections that follow.

Twenty-year Strategic Plans. California cities are required by state law to prepare a general plan outlining the direction of their community. The Sunnyvale general plan helps the council set short- and long-term policy, establish annual...