Detroit’s elected officials should consider every possible
alternative to cut costs, especially with a $63 million deficit. Unfortunately
for Detroit’s taxpayers, Mayor Kwame Kilpatrick is closing the door on a proven
tool: applying competitive pressures to government services.
In March, Kilpatrick suggested he would seriously consider
spinning off services to other providers. But in April he told The Detroit News
that privatization does not generate substantial savings. Kilpatrick said
Detroit’s peer cities aren’t privatizing either — opting, instead, to beef up
Unfortunately for the mayor, history and facts don’t seem to
agree with his statement. Countless cities of all sizes, with mayors of either
political party, have used competition and privatization to save millions of
Why? Because competition makes people work harder and more
The Philadelphia story
When Democrat Ed Rendell, the governor of Pennsylvania, was
mayor of Philadelphia, he privatized 49 city services, saving $275 million. The
list of services privatized included golf courses and print shops to parking
garages and prison services. By privatizing one nursing home, for instance, the
city saved nearly $27 million — a 54 percent reduction.
Indianapolis is often considered the leader in competition
and privatization. As mayor, Stephen Goldsmith, a Republican, solicited
competitive bids on dozens of services. Public employees managed to keep some
services — but at huge savings to city taxpayers.
Indianapolis saves $15 million annually by privatizing trash
collection — which Kilpatrick has declared off limits to privatization until
2009. Privatizing the city’s sewer plant saved an additional $68 million — a 44
Chicago’s Daley an advocate
Chicago’s Democratic Mayor Richard Daley has privatized more
than 40 services. In fact, he was so satisfied after the privatization of
Skyway, one of Chicago’s major highways, that he is lobbying for similar deals
for city-owned parking lots and the Midway airport.
Former Cleveland Mayor Michael White, a Democrat, launched
"Cleveland Competes" to allow private vendors to bid on contracts, including
pothole repair, downtown trash collection and payroll services, resulting in
millions of dollars in savings. Milwaukee, Jersey City, N.J., and Atlanta have
posted similar results.
Nearly every service, short of police and fire, has been
successfully privatized by a government. For the time being, Kilpatrick has
dismissed privatized trash collection. But fewer than half of all local
governments provide waste services to their residents through a
government-operated solid waste department.
Private trash collectors are often more productive than their
public counterparts because they use larger, more automated trucks that cut
personnel, operating and capital costs. Keeping the service in city hands would
mean a larger-than-necessary labor force that resists cost-saving technologies.
Privatization would allow Detroit to shrink its bloated
bureaucracy. In the last year for which there are comparative statistics,
Detroit had 18,600 employees, a resident-per-city-employee ratio of more than
48-1. Indianapolis, which has aggressively privatized, has a ratio of about
203-1. Although Detroit’s work force is now down to about 15,500 workers, its
ratio of residents to employees remains worse than that of Indianapolis.
Detroit contracts out services
Privatization isn’t new to Detroit. The city privatized
several golf courses in the 1990s and has historically contracted for some
services, including oil changes in police cars and parking meter collection.
However, some contracts have been brought back in-house.
And who can forget Ecorse and Hamtramck, which under a court
receiver and an emergency financial manager, respectively, aggressively used
privatization, including of nearly all "public works," to rescue themselves from insolvency.
But the biggest advantage of privatization is that it
generates new ideas for getting things done. In 1994, the mere threat of
privatization by then Flint Mayor Woodrow Stanley led to a 31 percent reduction
in trash collection costs — all the more reason not to take privatization off
The mayor owes it to Detroit’s taxpayers to force government
services to compete.
Geoffrey F. Segal is the director of government reform at Reason Foundation in Los Angeles.
This is an edited version of a commentary that originally appeared on April 20, 2006 in The Detroit News. Reprinted with permission.