Explaining the Privatization of Government Services

Over at Indy's Painfully Objective Political Analysis comments' section, I shared my thoughts on privatization of public parking meters and lots in Indianapolis. You can read about what the current city plan over at this WTHR story. I'd like to expand on what I posted over at IPOPA, and my thoughts on privatization as a whole.

First is to identify the goal of privatization of government services. The goal is to instill market value levels of cost in the service. The government doesn't have that incentive since most services are paid by taxes. Handing the service over to private companies, who have the goal of making a profit, have a built-in incentive to keep costs down. And the way you instill market values in a service is by competition. So not only does privatization mean private companies take over government services, but the government gets out of the service and opens up a level field for all interested in providing said service.

The last part is most important. When a government service is handed to a private contractor and they get a 10 year, 20 year, or 75 year contract, that is NOT privatizing the service, because it fails at both goals. With an extended decade plus long contract, the company has no incentive to keep it's costs low. They can raise rates regardless of market value because they have little to no fear of losing the government contract. Finally, government is still involved in the service, because all they're doing is handing their control of a service over to a private company, thus giving the company a government approved monopoly of said service. This shuts out any other company for the length of the contract who might be able to provide it at a cheaper price.

One really has to think hard before attempting to privatize something like the Family and Social Services Administration, because not a lot of private companies are in the business of providing welfare, probably because a lot of government services aren't meant to make a profit. And you have to wonder, when a private company is running a welfare service or running a jail and making a profit, are they doing it on the backs of the people they're supposed to serve?

So, working on my theory that many government services can't be privatized because there's just no profit to be made, there are a few left where a private company could make a profit. Trash pickup, road maintenance, and in the example I'll be talking about, public parking meters and parking lots.

Let's just work, with the theory, that government runs this service inefficiently and for too much money. I personally find that claim complete bull. 75 cents to park downtown for an hour with a two hour limit sounds reasonable to me (iPOPA says a lot of meters have changed to a one hour limit, but I'll save that for another time). The only problem with public parking is the lack of it, especially around government centers people might need to use.

Now, how to privatize parking in Indianapolis? As established, giving one company a 10, 20, or 75 year contract as happened in Chicago is just asking for the rates to be jacked up right away. Let's get that idea out of our heads.

First, we need to evaluate how much each parking meter or public lot is worth. Let's be honest: A parking meter right on Massachusetts Avenue or in the main strip of Broad Ripple is going to be worth more than a meter in the middle of Delaware, New York St, or Vermont St. Even more so if a big event is happening in Broad Ripple, Mass Ave, or places such as Conseco Fieldhouse or Lucas Oil Stadium.

So before any bid is even submitted, the city of Indianapolis needs to go out and evaluate how each meter (or really, neighborhood of meters) and public parking lots are worth. After that is done, we open up the bidding.

But instead of only letting Dennison Parking and it's competitors bid, let anyone who can afford it put in an offer. If a group of businesses that line Mass Ave want to manage some spots that are located in front of their businesses, and they make the best offer for that area, let them do that. If a church wants to use a lot near their church for their members, take them up on the offer. And if Dennson wants to get the city owned garage, then they get that. Any "neighborhood"/street of meters that don't get sold in the initial bidding can be retained by the city government. I would imagine these areas would probably be the meters that aren't right in the middle of downtown or in other areas of commerce in Marion County.

And then after these bids are put in, let them BUY (not lease, not rent, BUY) these meters and let them do what they want with them. This means no more law enforcement writing parking tickets, no more contracts for Dennison Parking, no more Parking "Court", and so on. If any area jacks up their rates beyond market value, then someone who is a block or two away can lower their prices.

There is a concern that various rates could be confusing, especially to tourists, but I don't think there's much to worry about. The several parking lots rented out in Broad Ripple all charge pretty much the same. They know that if they charge too much, they'll lose business.

If anyone from the City-County Council or the 25th floor wants to have a talk so this privatized parking can be a true form of privatization, and not just a government approved monopoly, I'm happy to sit down and have a chat.