Privatization Issues

Indianapolis Leads the Way

Probably no city in the nation has done more to privatize public facilities than Indianapolis, with the result that the city budget has tumbled by $26 million in four years.

The effort has been led by Mayor Stephen Goldsmith, a Republican who appears to be a shoo-in for reelection this year and a possible gubernatorial candidate in 1996.

The city has privatized golf courses, wastewater treatment, trash pickup, city pools and other city services.

  • Thanks to these accomplishments, city taxes have held steady for almost a decade.

  • Privatizing management of the city's airport-which occurred last October 1st-is expected to save taxpayers $100 million over the life of the 10-year contract.

  • Renaming the city's Hoosier Dome obtained $1 million a year for 10 years from RCA.

  • Privatizing the wastewater plant resulted in a dramatic downsizing of personnel from 328 to 174-at a 44 percent savings.
Coming up soon are announcements that Indianapolis will privatize a jail and a public hospital and contract out computer services.

Source: Anthony Jewell, "Indianapolis Ahead in Privatization Races," Washington Times, November 7, 1995.

Privatizing Saves Money

Late last year, privately financed toll roads -- the first in the United States in a century -- opened in Northern Virginia and the Los Angeles area. Toll roads are the latest step in a decade-long trend toward privatization.

In Indianapolis, for example, Mayor Stephen Goldsmith has shaved the city's operating budget by $26 million over the past four years, while investing more money in public safety and infrastructure improvements. City officials prefer the term competition rather than privatization, because their goal is continual competition to improve services and lower costs.

  • Many of the cost savings and service improvements in Indianapolis have come from privatization, but city employees are encouraged to bid for the contracts.

  • In 1995, for example, city workers bested three national firms to win a three-year, $16-million maintenance contract for city vehicles.

  • The winning bid combined reductions in management costs, greater worker productivity, a reduced work force and benefit concessions.

Indianapolis' approach to privatization is one of many variations.

  • The most common form is contracting out, in which the government hires a private supplier to provide a specific service, such as processing Medicaid claims or operating publicly owned recreational facilities.

  • Another form is selling public assets, such as dams, schools and hospitals.

  • Lease-back arrangements are also used, under which private parties buy or build public facilities that are then leased to government agencies.

  • Vouchers are a form of privatization, in which consumers make purchases from private firms for food, housing, education or other needs.

Some 980 privatization projects with an aggregate value of almost $700 billion are under active consideration in 95 countries, says Robert Poole of the Reason Foundation. Most efforts in the U.S. have been state and local. However, a House subcommittee recently completed hearings on a bill to allow privatization of the U.S. Postal Service. And there has been discussion regarding partial privatization of the Social Security system.

Source: Richard L. Worsnop, "Privatizing Government Services," CQ Researcher (Congressional Quarterly), August 9, 1996.

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