Petaluma is outsourcing its entire planning department, civil grand jury report finds

A Sonoma County Civil Grand Jury report found the city of Petaluma has outsourced its planning department functions to a private firm for the past 14 years while failing to conduct any formal performance review or determine whether the arrangement is cost-effective.

The annual watchdog report, released last week, also says the city has not been transparent about its ongoing arrangement with Metropolitan Group, also known as M-Group, and that the city’s website fails to identify city planners as M-Group employees.

The outsourcing of planning services is so thorough in Petaluma that “M-Group employees functionally have become the planning department,” the report states.

According to the report, the city’s contract with M-Group began in 2009 as a cost-saving measure, as Petaluma’s city government found itself strapped for cash following the global economic downtown of the previous year.

Outsourcing planning services meant Petaluma could save on salaries, recruitment, overhead costs and other expenses, and “The city decided to let its entire planning staff of 17 full-time equivalent positions go,” the report states.

Other cities in Sonoma County, such as Cotati, Sebastopol and Rohnert Park, have outsourced planning functions as a cost-saving measure, the report states. “In those cities, however, the functions outsourced have been for specific projects or time-limited projects. Petaluma is the only city that has used contract employees to staff an entire planning division for such a long time.”

As the economy improved and city projects grew in scope and number, M-Group ramped up to meet the demand – and the city extended its contract several times, without properly assessing whether it was still cost-effective to do so, the report states.

The current contract, signed in 2018, is set to expire July 31 with the possibility of a three-year extension.

Currently, 15 of the city planning department’s 16 staff members are M-Group employees, although they are not labeled that way on the city’s website – one reason the Grand Jury wrote of a “lack of transparency about outsourcing with the citizens of Petaluma.”

City Manager Peggy Flynn confirmed that all of Petaluma’s planners except Brian Oh, the city’s recently hired community development director, are outsourced from M-Group, and that three of the 15 are full-time employees.

“We are appreciative of the Civil Grand Jury’s role and work on behalf of the community and we look forward to responding to (the report), which will include a plan for implementation and clarification where needed,” Flynn told the Argus-Courier.

Flynn said a formal city response to the Grand Jury report would need to be determined by the City Council, and is expected to be released in August.

Flynn also said the city’s M-Group employees “currently wear badges and have business cards on the counter that identify them as such. ... As an extension of this practice, we will also be adding that designation to our employee contact list.”

She added that many of the M-Group employees are local: “Half live in Petaluma, and three-quarters live in Sonoma County.”

‘Potential conflict’

Along with cost and transparency concerns, the Grand Jury report also voiced concern that an outsourced city planning department may not always serve the people of Petaluma.

“A planning department that is entirely staffed by contracted employees might create a potential for conflict of interest,” the report stated.

A complainant to the Grand Jury reported that “some citizens of Petaluma are frustrated with the planning process and feel that their issues are not being addressed,” according to the report.

“It is understandable that citizens might have this impression. The city manager and City Council are responsible for citizens’ concerns. However, it is M-Group employees who prepare the staff reports that decisions are based upon.”

The Grand Jury said it did not find any evidence of a direct conflict of interest with M-Group. However, “the perception of a potential conflict could still exist among members of the public. M-Group is in the business of urban planning and design, which has been conflated with being pro-development.”

Some comments from local residents did seem to indicate a perceived potential conflict. Petaluma resident Mollie McWilliams wrote the Argus-Courier to point out that the M-Group’s website includes images of the Appellation Petaluma hotel proposed for downtown Petaluma – a controversial proposal that has not yet been approved.

“If the M-Group stands to benefit from the approval of this project, can they really be seen as neutral?“ McWilliams asked. ”Or in the true interest of the city?“

Flynn said M-Group colleagues had “taken a lead staff role in reviewing private development applications that have been submitted to the city and brought those applications forward to the appropriate discretionary body for decision consistent with the city's adopted policies and regulations.”

The production of city staff reports, she said, "is an interdisciplinary process that involves staff from a variety of different departments.”

She added, “M-Group has supported the city in a wide range of additional projects and initiatives, especially in more recent years, including adoption of new legislation such as the ban on fossil fuel gas stations, adoption of the city's all-electric ordinance, development of a visitability and universal design code, and reduction in development impact fees for affordable housing projects.”

Jury recommendations

In its report, the Grand Jury provided several recommendations for responding to the issues raised, including greater transparency, bringing more city staffers into the planning department, and completion of a cost-benefit analysis by the end of this year.

It also recommended that the city conduct a formal survey of the Petaluma community “to better understand their awareness and understanding of the outsourcing of the planning department and their experiences interacting with M-Group employees.”

In a letter posted to the city’s website, Darren Racusen, a member of the city’s Planning Commission, agreed with the report, stating that “This is a great time for the thorough analysis and transparency called for in the Grand Jury recommendations.”

“M-Group is now consistently raised as a specter on all projects in the city, often stagnating real analysis of the merits of a project,” Racusen wrote. “Transparency is probably the only way to move forward confidently with our planning team and reassure those that can be reassured that we are making the best choices.”