San Jose overuses consultants—and the mayor says enough

San Jose leans too heavily on pricey consultants in policymaking—at times like a stumbling drunk—and Mayor Sam Liccardo says it’s time to sober up.

“We see a lot of use of consultants, and it’s not always productive,” Liccardo told San José Spotlight.

The outgoing mayor said he’s fed up with San Jose hiring consultants—often costing tens or hundreds of thousands of dollars—to produce reports that don’t reveal new information to help councilmembers build better policy.

“The problem is when we use consultants in the same way that a drunk uses a light post, which is for support rather than for illumination,” Liccardo said. He noted many large public agencies suffer from the “ailment” of over-relying on consultants, not just San Jose.

Liccardo acknowledged hiring consultants with taxpayer dollars sometimes provides decision-makers important information on topics like transportation, planning and economic development. He’s called for consultant studies himself.

Government experts say cities lean on consultants to fill gaps of knowledge or expertise on their staff, or sometimes for specialized financial topics like preparing for a tax or bond measure. Other times, consultants provide objective data about an issue to help governments decide thorny issues—or even to defend controversial decisions.

John Pelissero, a senior scholar at the Markkula Center for Applied Ethics at Santa Clara University, said hiring consultants should be judicious and require a compelling reason.

“It’s important to be as transparent as possible with the citizens,” Pelissero told San José Spotlight. “Here’s why we did this, here’s why we’re going to be able to make a better decision and here’s how we’re ensuring that we’re good stewards of public dollars.”

Liccardo, who leaves office in just two weeks, points to the city hiring consultants to study the costs of building new apartments or condos—just to defend giving downtown high-rise developers breaks on affordable housing fees and construction taxes.

Liccardo said the council ordered the reports to mollify trade groups pushing for union labor requirements on those projects, which would only further increase costs.

But the study wasn’t needed. It’s obvious building high-rise housing is costly, the mayor said, because San Jose has seen only one tower break ground over the past five years. That’s Miro Towers.

“If you were to talk to any builder, any architect, any developer anywhere in the South Bay, they would all tell you that high-rise housing is infeasible in the city of San Jose,” Liccardo said. “But now we routinely go through this ritual of having a consultant tell us what we know, which is that it’s expensive for people to build high-rises.”

The most recent residential building study, done by consultant Century Urban, was completed in August and cost the city about $235,000. The consulting firm got another one-year contract extension for the same amount, city records show.

‘Consultant industrial complex’

This past summer, the city allocated $350,000 for three consultant studies related to the controversial closure of the Berryessa Flea Market to make way for a massive housing development.

The money came from the flea market’s owners, the Bumb family, who agreed to pay $5 million into a city-managed fund to support vendors in the transition to a smaller, new market on the redeveloped site, or another possible location. The fund also included $2.5 million from the city. The city hired consultant Estolano Advisors to evaluate other sites for a new market, management models and the cultural and economic impact of the current market. It will be done in 2023.

Liccardo slammed the economic and cultural impact study as unnecessary and far too late. He said the $185,000 for that specific study could’ve been used to support displaced vendors, many of whom are people of color, and their families. He said the study won’t enable the council to make any better decisions.

“I think it’s going to produce a lot of heat and not much light,”  Liccardo said. “I think what we’re likely to learn from an economic and cultural impact study is there is enormous economic and cultural impact from this flea market.”

The study was proposed by city administrators who said it could help measure the market’s impact and attract investors or operators.

“I’m just a little concerned that the consultant industrial complex has sort of laid its grips on the city,” the mayor added. “And we rely way too much on consultants, we rely way too much on studies that I don’t see us utilizing.”

Liccardo said he believes City Manager Jennifer Maguire understands his concerns. He’s hopeful the city will quit hiring so many consultants under her leadership.

Mayor-elect Matt Mahan will take the reins from Liccardo in January. Mahan said using consultants makes sense when San Jose needs to quickly scale up services like permit reviews during economic booms.

But he agreed with Liccardo that consultant work should be closely monitored by the city, and each contract could strain city coffers without improving efficiency.

“In any scenario, what’s important is that we are clear about how we measure success,” Mahan said. “We (need to) hold contractors accountable for timely and cost-effective service, and evaluate the potential benefits of developing internal capacity. At the end of the day, we have to evaluate the appropriateness of outside contracting on a case-by-case basis.”

Pelissero said consultants are in the business of making money—and cities can fall prey without careful oversight.

“It’s important for city officials to be able to step back and say, ‘Is this something that we actually need to do in order to make this decision?'” he said. “‘Or are we just kind of continuing a relationship with a consultant that benefits the consultant?'”