Out of Control Policy Blog

Atlanta Should Embrace Privatization, Competition to Cure Fiscal Woes

Our friends at the Georgia Public Policy Foundation are backing up my call for more privatization and competition in Atlanta city government as it struggles to restore itself to fiscal health. GPPF's Danielle Hudson writes today in the Atlanta Journal-Constitution:

In March, the Reason Foundation’s Leonard Gilroy recommended a managed competition strategy for Atlanta that would allow existing city agencies that provide certain services, such as fleet vehicle maintenance and payroll services, to compete with private service providers for government contracts.

Contrary to the knee-jerk reaction opposing privatization of certain public services, in this type of system services are not completely overhauled and privatized but are put in a quasi-free-market scenario where each party has an incentive to deliver higher-quality services more efficiently.

Managed competition models exist at the state level in Alaska, Colorado, Kansas, Kentucky, Montana, Utah and Massachusetts. Charlotte and Indianapolis have also used managed competition for years in areas such as fleet vehicle maintenance, information technology, strategic planning and procurement, saving taxpayers millions of dollars. [...]

Atlanta’s mayoral candidates should pledge to set up a managed competition task force — as Charlotte did in 1993 — that would determine which services were offered by private companies, under the “Yellow Pages test” advocated by former Indianapolis Mayor Stephen Goldsmith. According to this model, if there are more than three private companies offering a certain service, a competitive market exists and government should not hold a monopoly on public provision of that service. [...]

Several Georgia cities have made significant changes in operating expenditures by outsourcing. Sandy Springs, for example, has effectively incorporated private contracting services into its current structure. A private contractor provides all the city’s operational and administrative services excluding police and fire services (emergency 911 services are currently provided by Fulton County).

In 2007, Sandy Springs collected $852 in tax revenue per capita compared to Atlanta’s $1,078. Sandy Springs spent about $300 less per capita on total operating costs for the police department and about $115 less per capita on total operating expenses for the fire department.

These data suggest that even services that are effectively provided by government can be more efficiently provided. Sandy Springs also added just one new job this year: a civilian crime analyst. Given Atlanta’s public safety issues and the police department’s own mismanaged budget, Sandy Springs could serve as an example: Bringing transparency and competition to a stumbling agency is one way to encourage improvement.

For any candidate, it is clear that there are viable models that should be seriously considered. Simply asserting that Atlanta is “different” or that the next mayor will better manage money is laughable. Such rhetoric dismisses valid concerns and rearranges the deck chairs on the Titanic. Atlanta’s next mayor needs to turn the ship around, avoid sinking citizens in higher tax burdens and try the proven course of managed competition.

I must say that the political resistance to privatization in Atlanta is somewhat puzzling, given that you have over 200,000 people living under essentially privatized city governments in Atlanta's backyard right now, after the incorporation of Sandy Springs, Dunwoody and two other contract cities over the last several years. These cities have proven that you can save tax dollars and improve service delivery by bundling city services for outsourcing. There's no reason Atlanta shouldn't be thinking big and looking at potentially outsourcing, say, the public works department.

See my recent thoughts on how to address Atlanta's fiscal challenges in my recent AJC column, as well as here.

» Reason's Privatization Research and Commentary

Leonard Gilroy is Director of Government Reform


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