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In the City of Warren, for example, the Mayor recently attempted to privatize the garbage and rubbish disposal services. By his estimates, privatization would have saved Warren taxpayers $2 million annually. However, the union mounted a campaign which included having over 300 garbage disposal representatives, their families and others present at a Council meeting. The Warren Council voted unanimously against privatization.
While it is likely that the Warren Council recognized that privatization would benefit their taxpayers, they did not have the political will to resist those who opposed change. Several individuals cited problems in the delivery of services by a contractor hired over 15 years ago as the reason for retaining these services. Presently, approximately six municipalities in the Metro area perform garbage and rubbish disposal internally.
The union did agree to concessions in the existing contract. It is likely, however, that the concessions will not approach the $2 million savings cited by the Warren Mayor had this service been privatized. The Mayor had wanted to provide these services in a cost-efficient manner, but was denied this opportunity by a Council which did not have the political will to tell 300 individuals that the costs incurred to provide this service internally were greater than the market would bear. Effectively, the Council indirectly voted an increase in taxes on Warren residents by failing to obtain these services in the most cost-effective manner possible.
The City of Detroit is experiencing substantial fiscal distress. Facing increasing losses and accumulating deficits, Detroit's Mayor issued an order that reduced the compensation of non-unionized personnel by 10%. After ordering these reductions, the Mayor pursued similar reductions from the Detroit's unions. Before receiving the benefits of the reductions from the non-unionized personnel or receiving any significant union reductions, the Council reduced the concessions of the non-unionized personnel to 2% and challenged the Mayor in court. The court sustained the Council's position, with comments that the entire matter could have been resolved if the Mayor and Council worked together for a common solution, rather than at odds with one another.
The Detroit AFSCME union reacted to the reduced concessions of non-unionized personnel by not agreeing to accept the reductions proposed by the Mayor. Instead, the Mayor laid-off approximately 100 AFSCME employees, which at approximately $40,000 in compensation and fringe benefits each, would save the City approximately $4 million over the next year. As the City is facing over $100 million or more in operating losses over the next year, these lay-offs will address approximately 4 days of the fiscal distress. Only now are there discussions coming from city hall for the need to seriously consider privatization.
In a second example of Detroit's inability to improve services to their fullest, the mayor received concessions from the garbage and rubbish union of 10%. Presently, the City has estimated that the monthly garbage and rubbish pick-up cost per household to be $6.85. If the full 10% savings is realized, the cost per household will decline to approximately $6.17 per month. A Detroit-based company has prepared an informal proposal to provide these services for $4.92 per month. As there are approximately 347,000 households in Detroit, the failure to privatize these services may have resulted in an annual indirect tax increase of $5.2 million. Again, the political will is not present to change. The current services have been justified by the Mayor's administration declaring that the services are 'already efficient'.
