Privatization Saves City from Bankruptcy

Click for audio Privatization Saves City from Bankruptcy

Many cities throughout Michigan are saving money by privatizing—or contracting out to private firms—government services such as garbage collection, street cleaning, and snow removal. Thirteen years after going bankrupt, the Detroit suburb of Ecorse has literally saved itself by privatizing almost every government service.

The Wayne County Circuit Court in 1986 appointed Lou Schimmel to manage the bankrupt government of 12,000 city residents. Schimmel went to work, erasing Ecorse's $6 million deficit in four years by slashing the city's bureaucracy, selling unnecessary property, and privatizing most services including the entire department of public works.

Schimmel estimates that privatizing the department has saved Ecorse over one million dollars each year. As a private service provider, the department now generates revenue for the city's tax rolls, and the city no longer has to buy or maintain expensive equipment including street sweepers, snow plows, and maintenance trucks.

City services have improved as a result of privatization, and this month Ecorse was able to pay off the last of its debt and end its years as a ward of the courts.

Ecorse's story shows that privatization not only saves money, it can save entire cities.

For the Mackinac Center, this is Catherine Martin.