Philadelphia Mayor Sets New Tone in City Hall

Rendell is turning city into a lab for latest ideas in urban management - and winning converts

CALL it the modern ``Philadelphia Story.''

In only two years, Democratic Mayor Edward Rendell has changed the city's budget from a $208 million deficit to a $3 million surplus. However, it is the way that Mr. Rendell has done it that makes the story seem more like ``Miracle on 34th Street.''

Rendell has swung the budget into the black without layoffs and without substantial cuts in services. Instead, he has taken some of the most successful ideas in urban management - developed by other mayors and governors - and put them together all at once.

``We studied literally every cost-saving initiative, every study, every task force we could get our hands on at the state or local level,'' says Rendell in an interview. The mayor likes to compare his budget battle to President Kennedy's answer to the question of how he became a war hero: ``Simple,'' he said, ``they sank my boat.'' ``Well,'' Rendell says, ``I came in and this boat -

four-fifths of it - was underwater, so I had to try everything all at once.''

His success is attracting national attention. Los Angeles Mayor Richard Riordan recently spent three hours with Rendell. The day after he was elected, Rudolph Giuliani, New York's mayor-elect, asked for a copy of Philadelphia's five-year plan. And, Vice President Al Gore Jr., at a fund-raiser, recently unveiled a ``Gore-Rendell 2000'' poster.

Rendell's efforts have led him to privatize 15 city functions, saving the city $14.5 million per year. In 1992, he renegotiated the city's labor contracts, saving $400 million over a four-year period. This included a 33-month wage freeze and reductions in paid holidays and sick leave. Under the old contract, city workers could take off as much as 67 days per year. The new contract makes it harder to use sick leave and reduces paid holidays. David Cohen, Rendell's chief of staff, estimates that the city saves $1.8 million by eliminating four paid holidays, such as Flag Day.

However, the bulk of the savings - $658 million over four years - comes from management and productivity improvements. One example of a Rendell effort: The mayor discovered that past mayors had awarded the insurance contract for the city's parking garages to their favorite insurance broker. Rendell asked three brokers to bid for the business. The winning bid was $1 million less than the city had been paying.

Rendell also looked for savings in the city's health- care programs for its workers. In their new contract, workers accepted the concept of managed competition, going to health-maintenance organizations and holding price increases to the average rate of inflation at three of the city's largest HMOs.