A national model for America\u2019s Decaying, Bankrupt Cities
\nBy Phil Kent<\/p>\n
\nThe front-page July 19 Wall Street Journal headline jarringly declared: \u201cRecord bankruptcy for Detroit: Motor City is \u2018broke,\u2019 governor says, as it seeks to restructure $18 billion in debt.\u201d Then came a similar headline from the August 6 Breitbart News: \u201cRahm\u2019s Chicago: $1 billion financial shortfall forecast by 2015.\u201d
\nDetroit and Chicago, of course, are not the only big cities in dire financial straits. An August 5 CNBC report studied the nation\u2019s troubled big cities and found a common denominator: Too much debt and too generous public pensions. The next day the Journal\u2019s Stephen Moore specified 20 major decaying cities facing financial ruin and how Chapter 11 bankruptcy appears to be the only option to press the reset button and wipe the slate clean.
\nHow can this municipal mess be addressed? Oliver Porter\u2014 a lecturer\/consultant with an engineering background, an apostle of free market economics and the first interim city manager for Sandy Springs, Georgia\u2014 cites a national model and solutions for cities and their taxpayers.
\nFirst, some history. Sandy Springs became a city in 2005 through a popular voter referendum. New Mayor (and retired economist) Eva Galambos and the City Council quickly launched what Porter calls the first American city that \u201coutsourced almost everything.\u201d Eight years later, the city of 100,000 people boasts of new roads, more neighborhood sidewalks, a state-of-the-art traffic system and award-winning parks. All this has occurred with no tax increases\u2014 even though major capital improvements have been funded.
\nBefore cityhood, Sandy Springs was part of unincorporated Fulton County and residents were poorly policed while paying high taxes for few services. \u201cIn June 2005 we had to find vendors for public services, and we had to have them in place when the city began on December 1,\u201d Porter remembers. \u201cI don\u2019t know what you would do if you had to have public services in six months, but (shopping around with private vendors) is what I did.\u201d
\nHe bid out 12 main services to companies that often outsourced to smaller vendors. When certain guarantees couldn\u2019t be met, the city chose someone else. \u201cIn the contracts,\u201d he says, \u201cthe companies providing the services had to pledge to have a live person answer phone calls and emails 24 hours a day, seven days a week, They also had to commit to responding to a problem within 48 hours\u2014 and the appropriate elected Council member is kept in the loop with the progress of the work order or issue.\u201d
\nPorter further explains this public\/private model:
\n\u201cThe key is writing the contracts well. But there is incentive for the companies because if they screw up, we can use someone else. That doesn\u2019t happen in government. It is also essential that a cost-benefit analysis be done with each contract. Sandy Springs outsources everything with the exception of public safety, mainly because of liability issues. However, police officers and firefighters are on 401(k), defined contribution plans, not pension programs. The city owns no buildings \u2013 not even city hall\u2014 and little equipment, which means it doesn\u2019t have to worry about depreciation on property or assets. So the city has no long-term liabilities.\u201d
\n\u201cThe Sandy Springs example is catching on in Georgia,\u201d he proudly notes, \u201cwith five other cities now following the model and others, including counties, considering or opting for more privatization of services. The model is also capturing national attention. \u201cIn recent years,\u201d he says, \u201cI\u2019ve been increasingly asked to give advice and lectures around the country, especially in regard to Detroit\u2019s problems. Bloated government and pension obligations have pushed many cities to the brink and more politicians are being forced to look at what Sandy Springs has done.\u201d
\nPorter also looks at larger vistas: \u201cThis is also an international model.\u201d In this vein, he tells of his travels to meet city officials and government ministers of countries ranging from Great Britain, Iceland and Japan to Latin American nations and even the former Soviet bloc country of Georgia. \u201cThe big cities in trouble need to be looking at this model,\u201d he says, \u201cbut the big obstacle is politics because local officials all too often aren\u2019t willing to consider alternatives because they were elected under one system and they are afraid to look at other models even if they are more efficient and cost-effective.\u201d
\n\u201cI tell every city official I meet: \u201cYour main job is not to supply jobs\u2014 it is to serve taxpayers.\u201d
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