Atlanta is scheduled to accept bids Wednesday from companies that want to run the city's parking ticket and meter collection operation, now done by the Public Works Department.

As the city grapples with a $140 million projected shortfall for the fiscal year that starts July 1, some officials say Atlanta should privatize some services.

Leonard Gilroy, director of government reform for the Reason Foundation, a California-based nonprofit group that supports free markets, believes privatization is cost-effective.

He thinks Atlanta should invite companies to compete against city departments to run services such as trash collection and maintaining city-owned vehicles. Other cities, such as Charlotte, Indianapolis, Phoenix and San Diego, outsource some services under a concept called "managed competition."

"If managed competition were applied in a comprehensive, enterprisewide manner, Atlanta would likely be able to completely close its current budget gap," argued Gilroy, adjunct scholar at the Georgia Public Policy Foundation, an Atlanta-based think tank.

Nancy Lenk, a leader of one of the city's largest unions, disagrees. She says union leaders in other cities have seen businesses frequently make low bids to provide government services and later increase their rates well past how much it cost government workers to do the job.

"Over time, [privatizing] is a bad idea," said Lenk, assistant director of the American Federation of State, County and Municipal Employees, Local 1644, which says it represents about 2,000 Atlanta employees.

City officials say Atlanta spends about $1.3 million a year on parking enforcement and collects about $3 million annually from fines and the meters. Public Works spokeswoman Tenee Hawkins said the city expects to collect more money from privatizing the service and will consider any ideas the winning company may have to expand the parking program. The city has not decided how long the contract would be for or any revenue-sharing agreement with the company it hires. The City Council must approve the contract.

Twenty-six city employees work in parking enforcement. A draft of proposed policy changes, purportedly from City Hall, said those positions will be eliminated in the city budget for the new fiscal year. Mayor Shirley Franklin is scheduled to release the proposed budget to City Council members Thursday. The mayor has declined to discuss most details, such as how many jobs she wants to cut.

Some city officials are trying to forget Atlanta's last foray into privatization.

In 1999, the city hired United Water to run its water system. By 2003, Franklin and the City Council severed Atlanta's contract with the company largely because United Water collected less money than the city expected. City leaders also complained United Water was slow to repair leaks and water main breaks. The company said it could not keep up because the city's system was crumbling and the workload was overwhelming.

"That was an apocalyptic example of a good idea gone bad," said Councilman Howard Shook, chairman of the council's finance/executive committee.

Councilwoman Cleta Winslow said the United Water experience "left a bad taste in my mouth" and suggests Atlanta should proceed cautiously before privatizing again.

"You've got to find the right answer and not just an answer to a problem, so I think it's something you have to look [carefully] at," said Winslow, who visited Paris, Versailles and Great Britain in the late 1990s to see first-hand how privatization works.

Councilwoman Anne Fauver said the United Water contract failed because it didn't impose penalties for delays on doing such work as repairing water mains.

"I don't think it is a good comparison of how [privatization] could be," she said.

Other cities say they've fared much better privatizing some services. San Diego Mayor Jerry Sanders thinks his city is saving $50 million a year through managed competition for services such as waste disposal and maintenance of storm drains, traffic signals, streets and sidewalks, according to the San Diego Union Tribune. However, that city council's budget analyst released a report in September saying managed competition there was moving too slowly.

Privatization proponents say governments don't have to spend as much money on pensions. Critics argue managed competition can lead to corruption by companies "paying to play" with elected officials through campaign contributions or back-room deals.

Despite the potential pitfalls, Gilroy thinks Atlanta should consider the idea.

"The sooner that city leaders realize that business as usual is not going to work, the better," he said. "This is one of those moments you need to step back and look at how the city does business."