Privatization in Phoenix

July 7, 2008 - 8:02 PM

In 1993, the City of Phoenix was awarded the Carl Bertelsmann Prize for being "The Best-Run City in the World." The good thing about winning such an award is it gives the Best-Run City in the World something to use on road signs, web sites, letterhead, speeches and promotional materials, and anywhere else it can be squeezed in.

The downside is that it's tempting to just rest on one's laurels, print more road signs and letterhead, but let the fundamental policies and managerial actions that earned the award in the first place slip by the wayside.

The City Council gave in to this very temptation last week when it decided to send to the voters a ballot proposition busting expenditure limitations for fiscal years 2000 through 2004.

By way of background, in 1980 Arizona citizens approved a constitutional amendment imposing an expenditure limitation on all local governments in Arizona in an effort to curtail spending growth. Forced by the voters to innovate, Phoenix pioneered the use of privatization to cut costs and improve service - an innovation that was largely responsible for the City being honored as the best-run in the world.

In particular, Phoenix's use of "public/private competition" in residential solid waste collection has saved taxpayers upwards of $30 million since its inception. This process is far from perfect since the City has imposed needless stipulations which limit potential benefits and drive up the costs of private sector bidders; however, Phoenix's version of public private competition is still better than doing nothing.

Now the City is facing a constitutional limitation on expenditures. One would expect the "The Best-Run City in the World" to mobilize task forces to determine improved methods to deliver high quality services to the public in a more efficient manner and to find innovative ways to increase the value provided to taxpayers. Of course this is hard and demanding work. It requires discipline, vision, and courage to make difficult decisions, but no one should expect managing the "The Best-Run City in the World" to be all that easy. Unfortunately, the City Council is seeking the easy route. Instead of focusing on competition, innovation, and efficiency - and living within the expenditure limitation - the City Council has placed all of its energies and creative efforts on getting around it.

A recent report issued by a City-appointed "Spending Limit Task Force" makes it clear that innovation was never even on the agenda. In their own words, they "studied the provisions of the Arizona Expenditure Limitation law, reviewed forecasted expenditures for all funds for the City of Phoenix, analyzed reasons for expenditure increases exceeding the state limit, and discussed alternatives to the spending limit." Not surprisingly, they did not recommend staying within the expenditure limitation.

What they did recommend is that the City Council be allowed to "set the expenditure limit at the annual budget amount." Translation: we are raising more money than we can legally spend, we want to spend it, and this will let us spend every penny we can get our hands on.

If that's not clear enough, the Task Force's proposed election publicity pamphlet (which, strangely enough, appears to have been drafted two weeks before they made their unsurprising "final decision") explains that if approved the ballot proposition will allow Phoenix to spend from $2,087,634,000 in 2000-1, to $2,222,085,000 in 2003-4: dollar for dollar the total estimated revenue for those years.

To add insult to injury, the City Council last week approved two additional measures to further discourage innovation and competition, with only Councilman Sal DiCiccio dissenting. The first will prevent the privatization of fire-fighting or ambulance operations within the City, except after approval by voters. The other confirmed the City's policy that no more than 50 percent of solid waste services may be provided by private contractors. Thus, even if the City Council was interested in expanding the proven model of public/private competition and saving taxpayers money, they have purposefully sabotaged their best possibilities for doing it.

The award for "Best-Run City in the World" made for nice signs, but it was granted over six years ago; in a few short months, it will have been from the previous century. It's time for the Phoenix City Council to get off their collective "laurels" and put some real effort into living up to their letterhead.


Tim Day is serves on the Goldwater Institute's board of directors.