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As Long as We Remember...

July 14, 2011

Privatization: Programs that are working Part 1

Blaine R. Young

Most of us already have public-private partnerships right under our noses. In Frederick County we have private businesses and contractors that provide many services to the citizens.


From our recycling pick-up program, snow removal assistance, certain engineering and project construction programs, and assistance in information technology services, many, many partnerships are already in place in Frederick County and the State of Maryland.


These are services that could be provided by public sector employees, but by using a public private partnership we are saving taxpayers not only salaries, but also health care, and other benefits on an annual recurring basis. Through these partnerships, not only are there annual financial savings, but also long term savings in which the taxpayers do not have OPEB obligations (retiree health care).


However, the government always retains significant control, management and oversight of the end product or service. In forming a partnership, governments must determine a detailed set of performance standards and benchmarks in order to quantifiably monitor the progress of a program.


Right now in America, we have many taxpayer operations that are in the process of public private partnerships. Here are a few of them that I mentioned previously in a column on column.


In the state of New York, Nassau County Executive Edward Mangano has said the Long Island Bus will be converted into a public private partnership by the end of this year. A private sector transportation company submitted the winning bid to take over the New York Metropolitan Transportation Authority’s 48 bus lines, which carry an average of 100,000 daily riders. Long Island Bus is one of the country’s largest suburban bus lines; it connects suburban Nassau County with the New York City Borough of Queens. The county executive said he expects the private company to run all of the bus line’s current routes for $106 million. This is $8 million less per year than the New York Metropolitan Transit Authority is currently paying. The company will only be allowed to cut routes as a last resort.


The transit authority told county officials last year it needed to pitch in $17 million more per year for the bus operation, raising the yearly contribution by Nassau County to $26 million. That would have put the county in line with nearby Suffolk and Westchester counties, which respectively pay $24 million and $30 million per year for similar services from the MTA. Nassau County officials said they couldn’t afford it. It will now continue through a partnership and save tax dollars!


The Ohio legislature just passed a budget that will have the private and public sectors partner in regard to the state lottery and five prisons. It has estimated that selling and allowing the private sector to assume operations of the five prisons would generate $200 million, and will save tax dollars every year!


You may be surprised that according to the United States General Accounting Office, there are currently 92 privately owned and operated adult correctional facilities in America.


Last year the Florida Division of Environmental Protection which runs the state parks was recommending closing 53 state parks and campgrounds. However, in working with public private partnerships, Florida is planning on partnering with local businesses on the operation of 56 state parks. That’s 56 state parks that would have been closed due to budget problems that will now be open!


And in Georgia, the Augusta-Richmond County Commission finalized plans to turn over management of Augusta Public Transit to a private company, marking the end of city employment for about 70 bus drivers and other transit personnel. Under the terms of the agreement, most transit employees must be kept on with the company for the first two years of a five-year contract. The plan will save the city $400,000 a year from the $5 million cost of the service, which is only partially subsidized by bus fares. Again, this will save tax dollars!


There are so many more examples of public private partnerships.  And these examples are but a few. Governments in America and throughout the world have successfully formed public private partnerships on a whole host of programs.  Here are some successful programs that have been privatized:


Airports and air traffic control, according to a report by the Auditor General of Canada, airports subject to capital market discipline are much more efficient, and experience an overall savings rate of 40% of traditional government run and operated services.


Alcoholic beverages, the state of Utah is currently in the process of getting out of liquor sales, which is expected to save $21.6 million annually for the state.


Animal shelter operations and management, in Kansas City, after forming a partnership to assume control and operations of their animal control shelter, perhaps nothing shows the transformation more starkly than this: The gas costs for the crematoriums have plummeted. Kansas City used to spend more than $100,000 each year euthanizing and disposing of as many as 5,000 homeless cats and dogs. Now, the shelter spends less than half that amount. In December, the shelter euthanized only 11 adoptable dogs. From the facility’s appearance to the staff’s passion for putting animals in adoptive homes, almost everything has changed since a private veterinarian took over the shelter’s management from the city.


Assessments, the state of Ohio found private assessments provided 50% cost savings and were found to be more accurate.


Bridge repair and maintenance, the Missouri Department of Transportation’s Safe and Sound Bridge program, which is now being undertaken at a smaller scale as a public sector project, originally started as an innovative public private partnership project in which a private sector team would finance, design, build/upgrade, and maintain 802 of the worst state bridges over a 30 year period. The private team would finance the half-billion dollar project upfront and then maintain these bridges over a 25-year term. The state would have paid nothing during the five years of construction work, followed by 25 years or more of annual payments (essentially a non-toll availability payment) that the state would have treated as an operating expense using a portion of its federal bridge funds.


Building operations and maintenance, the federal General Services Administration found private window cleaning costs were 47% lower than government staff, and private operations costs for facilities was 38% lower than traditional government operations. The General Accounting Office (GAO) found a 50% savings when they contracted for janitorial services versus in-house services.


Correctional facilities, Arizona has contracted to house certain inmates in privately operated correctional facilities and have realized a 16.7% savings in tax dollars.


Daycare facilities, private day care was found to be 45% less costly by the GAO as opposed to government operated centers.


Golf courses: Utah recently eliminated publicly funded golf courses, and turned them over to privately run businesses. This not only eliminated an annual $1.96 million subsidy, but the state has increased revenues from this endeavor to the amount of $2.32 million!


To be continued tomorrow with more examples of public private partnerships that are succeeding.


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