II. Comprehensive Privatization Programs

A Solution for City Governments

There is a better way to balance budgets and put a stop to continually escalating city government spending. The solution: generate new non-tax revenue and cut the costs of government by implementing a comprehensive city-wide program to privatize selected government services, operations, facilities, and assets.[21]

Comprehensive privatization programs involve systematically applying a variety of privatization techniques across an entire range of government services, facility operations, and assets. Privatization techniques can also be applied to a city government's organizational structure, cash management and debt, facilities and infrastructure which need to be renovated or expanded, and new facilities and infrastructure. Applying different privatization methods to these government activities can generate 100 to 200 privatization opportunities in an average city.

Objectives of a Comprehensive Privatization Program. There are many reasons for policymakers to explore the possibilities of privatization. Studies have demonstrated that carefully implemented privatization efforts can lead to significant cost savings, efficiency gains, and greater flexibility, while allowing city officials more time to determine policy, rather than manage personnel.[22] City-wide privatization programs have ten main objectives, These are to:

1. Improve the quality, responsiveness, and efficiency of public services.

2. Finance and build needed new facilities and infrastructure, not defer construction.

3. Reduce or eliminate government equity, and/or debt for needed rehabilitation and construction of facilities and infrastructure, rather than increasing cash outlays or municipal bond financing, or deferring maintenance.

4. Proactively manage all hard and soft government-owned assets to generate additional revenue from prior and current government investments.

5. Maintain, and possibly increase, employment opportunities in the local and regional economy.

6. Enhance the economic performance of facilities and infrastructure to generate additional revenue rather than continuing operational deficits.

7. Dispose of government-owned companies, pulling governments out of businesses that the private-sector can provide.

8. Improve government organizations and management, rather than duplicate efforts and fostering inefficiency.

9. Dispose of government-owned facilities and infrastructure, rather than continuing to be fully responsible for operational deficits and owner risks.

10. Reduce, and possibly eliminate, income lost from ineffective management of cash and/or debt.

In addition to the benefits listed above, privatization, if structured well, can reduce most of the problems and risks associated with owning and operating businesses and facilities that compete in the commercial industry.

Why a "Comprehensive" Approach to Privatization? City-wide privatization programs provide government officials with a much wider array of financially feasible privatization projects than do piecemeal approaches to privatization. Comprehensive privatization programs enable governments to enhance the effectiveness and quality of government services, facilities and infrastructure, while requiring less, not more, tax-based funds. The cumulative total of additional non-tax revenue and cost savings from the anticipated 100 to 200 privatization opportunities will also have a profound effect on the financial condition of a government. There are other advantages:

  • Flexibility. Governments can select from a menu of different privatization opportunities and have great flexibility about when to implement the chosen opportunities.

  • Short and Long-Term Results. If a government is facing a budget shortfall and wants to focus on short-ten-n results, privatization opportunities can be selected which produce an economic return and/or cost savings in as little time as three months.

  • Greater Impact. The cumulative impact on the quality of services and the financial impact of privatization is much greater under a comprehensive approach.