The Cost of Privatization

Earlier this year, I wrote about the city of Maywood, California. Maywood has several important characteristics in common with North Bay Village. From June 23, "Maywood is a small, overlooked city (~28,000) in the middle of the Los Angeles urban sprawl. North Bay Village is the most densely populated municipality in Florida. Maywood is the most densely populated municipality in California. The demographics are similar in that both are younger, predominantly Latino cities. Both have a fairly high number of recently developed properties that remain unsold."

Maywood went broke. Years of poor administration, corruption, lack of open government resulted in the city shutting down all its services and outsourcing to private companies and other municipalities. The news was surprising to most, but there were some who thought that privatizing city services is an inherently good idea and the solution was obvious and beneficial.

But it turned out not to be. Maywood is now facing a situation where the town to which they had contracted their police services has dropped them without notice. The private companies have jacked up rates and the residents are facing even deeper cuts and more expensive services.

Privatizing is not a magic bullet. The belief that private enterprise can always provide better, more efficient and cheaper services is naive at best. There are times when it makes sense but at all times it needs to be carefully and most importantly professionally monitored.

Our garbage is a classic example of privatization done wrong. Our City Manager provide the commission with false information by saying that the savings of privatizing would be at least $500,000 per year, when he should have reported that the best case is around $80,000. The commission approved the contract without even knowing what the savings might be.

It continues. At the December 14, 2010 meeting, Connie Kreps introduced a resolution to waive the protest bond for companies who believe the contract was unfairly awarded. The Vice Mayor did not seem to understand the resolution and voted for it while explaining that she did not want to waive the protest bond.

We are in a delicate situation. Our City Manager lacks financial acumen during the worst financial crisis in our history. Our police department never made any cuts and is promoting and increasing salaries like there was no crisis. At least one commissioner, and more likely two, have no idea what they are proposing and voting on. It goes on.

Welcome to Maywood. For more information on how it's working out for them, check this article.

Kevin Vericker
December 30, 2010