Silicon Valley ‘Civic-Tech’ Companies Driving Transparency In Local Government

By Heather Somerville
San Jose Mercury News.

Cities from San Francisco to Palo Alto and Dublin — even down to the financially troubled city of Bell in Southern California — are using Silicon Valley startup technology to open a window into government spending at an unprecedented level of detail.

From how much a community spends on police equipment to the amount of a check written to a contractor building the new fire station, more details of a city’s budget are moving from paper or clunky software to sophisticated Web applications — marking an information revolution that could lead to better government.

“This is something that people have wanted for a long time: the idea that we have a right to know how our government is spending our money,” said Emily Shaw, deputy policy director at the Sunlight Foundation, a nonprofit that advocates for open government. “The idea is that if you have that kind of transparency, and you have concerned citizens, then you have oversight that otherwise wouldn’t exist.”

The undertaking is only beginning and is an immense task. It requires that governments using software systems built decades ago adopt more modern cloud-based technology from startups such as Redwood City-based OpenGov, and that city leaders adjust to a new paradigm where constituents can track every nickel of spending. Water and sanitation districts, universities, county governments and the State Lands Commission are also using the software.

“The government is expert in lots of things but when it comes to tech, they’re the ones playing catch up,” said Ben Balter, government evangelist at GitHub, a San Francisco open-source and data-sharing company that has partnered with the White House to support President Barack Obama’s federal open-data efforts.

Notoriously outdated IT systems have kept what should be public information — a city’s budget — difficult to access for both interested citizens and inquiring journalists. Municipalities have traditionally posted a PDF on the city website with a sparse collection of budgetary information; that data, much of it incomprehensible to the average reader, can’t be searched, sorted or parsed to analyze. To respond to open-records requests, city financial officers often have to dig into old software systems, leading to a lengthy delay and big price tag for the information.

In an age where cab rides and grocery deliveries are available at the swipe of an app, the closeting of city financial data behind archaic technology has presented entrepreneurs with a business opportunity.

Launched in 2012, OpenGov is a Web-based accounting tool that allows governments to track their financial data and put it online in visualizations people can easily understand, such as line graphs or pie charts. The software, used by more than 350 governments, including 27 Bay Area cities, counties and organizations, allows citizens to search expenditures or revenues and track year-over-year trends, such as how much city council members are getting paid or whether library funding is being cut.

A big reason for the sudden urge to offer up financial data is that constituent distrust in both federal and local governments is rampant, according to a survey from the Pew Research Center and a recent Gallup poll. And after the recession revealed how frivolously some municipalities were spending, citizens grew more vigilant about keeping tabs on their hard-earned tax dollars, according to policy experts.

“I think trust and engagement is a major concern for governments at all levels, federal, state and local,” said Zac Bookman, OpenGov co-founder and CEO. “Trust is so low that finally governments are really waking up and saying ‘We need to establish new bonds'” with constituents.

Financial transparency can also help governments better track their own spending and weed out corruption, say open data advocates. The yearslong misappropriation of public funds in Bell — seven city officials ended up in jail — is one example of the malfeasance that can result from financial obscurity. Bell now uses OpenGov as part of a larger initiative to rebuild trust between the city and residents.

“At some point there becomes no excuse for not doing open data unless you have something to hide,” said Daniel Castro, vice president of the Information Technology and Innovation Foundation, a Washington, D.C., nonpartisan think tank. “It’s good for transparency, and it’s good for government.”

Despite the challenges of selling to city governments, which often have constrained budgets and are slow to make decisions, OpenGov is growing — its revenue for 2014 was nine times what it earned in 2013, Bookman said. The company is just one in a growing crop of so-called civic-tech companies — San Ramon-based Accela, which partners with OpenGov; Seattle-based Socrata and Tableau; and even tech titan IBM are all selling products that push governments to be more transparent with their data.

With venture capitalists more interested in the space, many more companies are expected to emerge.

“If you were a venture capitalist in the valley, it used to be you wouldn’t take a call from anyone who was trying to service governments,” Bookman said. “That’s changed.”

OpenGov has raised $27 million from investors, including Joe Lonsdale’s Formation 8 — Lonsdale is also a founder of OpenGov — Andreessen Horowitz and Tim Draper. Collectively, venture investments into U.S.-based civic-tech companies nearly quadrupled from 2010 to 2014, reaching $112 million, and already top $186 million through the first six months of this year, according to
Pitchbook, a research firm for private equity and VC.

Draper announced last week his nonprofit Innovate Your State will spend up to $500,000 to give California’s counties one free year of OpenGov and governments already using the software the opportunity to upgrade.

Palo Alto was the first to city use the software. It made an initial investment of $15,000 for OpenGov, said Lalo Perez, the city’s chief financial officer, and pays about $4,000 per year to license the software.

“One of the challenges I’ve had over the years is we produced the budget and it was a PDF to put online. (But) you could only go so deep,” Perez said. “And some of the active citizens were saying, ‘Well, that’s not enough. We need to see trends, and how salaries and benefits are changing, and we’re concerned about pensions … Now, instead of asking questions, you can do it yourself.”

Still, many cities remain resistant to changing decades-old systems or coughing up the funds for software like OpenGov. Vallejo, for instance, continues to use antiquated budgetary systems, even though questions have been raised repeatedly over that city’s financial management — it filed for bankruptcy in 2008 and its city manager is one of the highest paid in the region, making $428,000, according to research by this newspaper. Open-data advocates say too many cities suffer from inertia, and true transparency is a long way off.

“The fact is what we are talking about is tens of thousands of governments making a sea change,” said Shaw of the Sunlight Foundation. “It doesn’t happen overnight.”

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