When cities compete, citizens win

If Atlanta’s financial woes continue to consume the mayoral debate, it would serve candidates better to quit finger-pointing over the ineffective status quo and embrace the kinds of reforms that have proven successful elsewhere.

Atlanta ended fiscal year 2008 with a $71 million budget deficit. Local politicians, pundits and residents blame this deficit on a number of things, including underestimating cash surpluses, overspending and general lack of accountability. Each of these factors have indeed contributed to the current financial disaster. It is now time to move on, correct the problem and adjust the scope of local government.

In March, the Reason Foundation’s Leonard Gilroy recommended a managed competition strategy for Atlanta that would allow existing city agencies that provide certain services, such as fleet vehicle maintenance and payroll services, to compete with private service providers for government contracts.

Contrary to the knee-jerk reaction opposing privatization of certain public services, in this type of system services are not completely overhauled and privatized but are put in a quasi-free-market scenario where each party has an incentive to deliver higher-quality services more efficiently.

Managed competition models exist at the state level in Alaska, Colorado, Kansas, Kentucky, Montana, Utah and Massachusetts. Charlotte and Indianapolis have also used managed competition for years in areas such as fleet vehicle maintenance, information technology, strategic planning and procurement, saving taxpayers millions of dollars.

Atlanta’s mayoral candidates should pledge to set up a managed competition task force — as Charlotte did in 1993 — that would determine which services were offered by private companies, under the “Yellow Pages test” advocated by former Indianapolis Mayor Stephen Goldsmith. According to this model, if there are more than three private companies offering a certain service, a competitive market exists and government should not hold a monopoly on public provision of that service.

The only public goods and services government should provide are those that are not adequately represented in the free market. Currently, 27 private companies offer waste management services in Atlanta. Mayoral candidates should begin to look at these types of services as options to implement managed competition. To be successful, local government must be committed to competition. This commitment requires monitoring and follow-up, emphasizing the necessity of a task force.

Under a bidding process, public employees will either have to amp up their game or be outbid by private companies. In Peel, Ontario, Canada, public employees win most of the bids in its competitive process, reducing prices and improving efficiency in order to win.

Managed competition is a win-win for all parties. Atlanta could cut inflated salary costs and the price of services. This, in turn, enables taxpayers to avoid tax hikes while enjoying better levels of service.

Local businesses have the opportunity to compete with public entities for lucrative contracts. With lower prices and better service for residents and new opportunities for businesses, who can complain?

Several Georgia cities have made significant changes in operating expenditures by outsourcing. Sandy Springs, for example, has effectively incorporated private contracting services into its current structure. A private contractor provides all the city’s operational and administrative services excluding police and fire services (emergency 911 services are currently provided by Fulton County).

In 2007, Sandy Springs collected $852 in tax revenue per capita compared to Atlanta’s $1,078. Sandy Springs spent about $300 less per capita on total operating costs for the police department and about $115 less per capita on total operating expenses for the fire department.

These data suggest that even services that are effectively provided by government can be more efficiently provided. Sandy Springs also added just one new job this year: a civilian crime analyst. Given Atlanta’s public safety issues and the police department’s own mismanaged budget, Sandy Springs could serve as an example: Bringing transparency and competition to a stumbling agency is one way to encourage improvement.

For any candidate, it is clear that there are viable models that should be seriously considered. Simply asserting that Atlanta is “different” or that the next mayor will better manage money is laughable. Such rhetoric dismisses valid concerns and rearranges the deck chairs on the Titanic. Atlanta’s next mayor needs to turn the ship around, avoid sinking citizens in higher tax burdens and try the proven course of managed competition.

Danielle A. Hudson is a law student at Georgia State University and a summer intern at the Georgia Public Policy Foundation.