Something dramatic is happening in Indianapolis, Indiana. The quality of public services is rising. Taxpayers have saved over $550 million since 1991, and the government’s coffers are overflowing. Taxes are falling and $800 million of new investment is improving the city.
So what’s going on in America’s 12th largest city? And more importantly, what can Michiganians learn from it?
The pro-competition philosophy of Indianapolis’s cutting-edge mayor, Stephen Goldsmith, is attracting nationwide attention. Mayor Goldsmith, also referred to as the "CEO of Indianapolis," has brought free-market theory to bear on the city’s once-sluggish public sector.
Competition is the cornerstone of Indianapolis’s current prosperity. Goldsmith uses what he calls the "Yellow Pages Test" to weed out waste and inefficiency in government-provided services. That test holds that if the phone book lists three or four private companies that offer a service the government provides, that service will then be opened to bidding.
Both private and governmental service providers are encouraged to compete for city contracts. "Each time services are competed out," Goldsmith says, "the aim is to make them more efficient and less costly, whether or not they are privatized."
Since 1992, Indianapolis has opened up over 75 government services to competition, including road maintenance, garbage collection, welfare-to-work assistance, and the city’s recycling program. "Everything can be sold or subjected to competition," Goldsmith says, "except police and fire services."
When Goldsmith solicited bids for the repair of city vehicles, government employees were allowed to compete with private mechanics. To avoid being underbid, the government employees reorganized, made their operation more efficient, and won the contract. This competition has caused repair costs to drop 29 percent and customer complaints to plummet more than 90 percent.
The new attitude of these government employees marks a strong divergence from the attitude that prevailed before they were subjected to market forces. As the leader of one repair crew remarked in the days before competitive bidding, "We didn’t give a hoot what anything cost."
Below are just a few examples of city services that Indianapolis has subjected to competition to save tax dollars and improve quality:
The municipal printing and copying business, yielding a 30 percent savings per year;
The issuing of permits, producing an annual savings of 40 percent. The turnaround time on permits went from an average of four weeks down to four days;
The management of Indianapolis International Airport, with the expected result being a savings to the city of $100 million over 10 years;
The operation and construction of Indianapolis’s new jail, saving $20 million in construction and $1.4 million in operation expenses annually;
The management of the city’s golf courses, turning a $180,000 cash drain into a $571,000 moneymaker for the city. A whopping 96 percent of regular golfers polled in Indianapolis said the city’s courses had improved as a result;
The wastewater treatment facility, saving the city $189 million over the 10 year life of its contract.
Indianapolis made history in 1996 when it became the first city in the nation to fully privatize a national defense facility. The city contracted with Hughes Technical Services to operate its Naval Air Warfare Center, saving the federal government an astounding $1 billion over the next ten years. As Goldsmith pointed out, this accomplishment is "emblematic of a new vision of government that looks to the marketplace to give citizens the best value for their tax dollars."
What can Michigan learn from Indianapolis’s success?
Competition works. Michigan should apply the same "Yellow Pages Test" at every level of government, soliciting bids for those services where private sector competition is strong. Let private and public sector firms compete against one another to provide needed services at the least cost and best quality.
"There’s a great opportunity for competition to improve Michigan," says Goldsmith. "Competing out has worked all around the world and has a definite application in Michigan. Any government that starts bidding out its services will see immediate improvement if it does it right. While Michigan is a state known for its professionally run government operations, it too could produce better results under competition," he says.
Subjecting government services to the rigors of a competitive marketplace is becoming a hallmark of an enlightened administration, with that of Indianapolis being among the very best examples. Speaking from experience, Mayor Goldsmith says, "Don’t study it, just do it."