Designing a Comprehensive Privatization Program for Cities

Executive Summary

Mayors, city council members, and city managers across the nation continue to confront unprecedented fiscal constraints as the cost of operating government continues to outpace revenues. City officials need a solution to the fiscal crisis that is practical, responsive, entrepreneurial, and comprehensive, yet provides flexibility as to project scope and the timing of implementation.

Comprehensive, city-wide privatization programs meet these criteria. Comprehensive privatization programs apply nine types of privatization on a city-wide basis to government-owned assets, services, facility operations, debt and needed new facilities or infrastructure. Typically, two to three types of privatization apply to each government activity. Such privatization programs can generate at least 100 to 200 privatization opportunities for a city.

Governments should view comprehensive privatization programs as a means to reinforce and enhance their ability to govern and increase the level and quality of services for their constituents. Government officials actively participate in designing the program. They select the criteria that determine whether privatization opportunities proceed beyond the first phase. They determine the number, type, and scope of privatization opportunities that are fully developed. Moreover, they set the ground rules because they identify: 1) the level of control they want; 2) the level of risk they are willing to incur; and 3) which assets are in play. Tradeoffs and compromises will be necessary in order to implement a comprehensive privatization program, and changes and flexibility are required of government.

However, the benefits are likely to outweigh any risks that city officials may have to take. If properly structured and implemented, comprehensive privatization plans can generate non-tax revenue, reduce government costs, and assist in the finance and development of needed new facilities and infrastructure.