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Friday, Jan 27, 2023
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Privatization Would Improve Services, Help Deficit

This is the Valley Industry & Commerce Association’s (VICA) monthly column for the Business Journal. VICA is a business advocacy group representing the San Fernando Valley and surrounding areas. As news about the city’s budget deficit dominates headlines much of the buzz surrounds layoffs and cuts to city services. But savvy business leaders know that when times are tough creativity is needed to help overcome financial difficulties. The City of Los Angeles faces a budget gap of more than $200 million and that number is anticipated to double in the following fiscal year. Unless city leaders make sustainable and systemic changes to the way the city operates, the budget crisis will remain chronic. Significant cuts and layoffs are unavoidable at this point, but there are other ways the city can leverage its assets to help ease the budget shortfall. Over the next several weeks the Los Angeles City Council will consider public-private partnerships as one of the methods to help close the city’s budget deficit. Public-private partnerships are beneficial to both the city and businesses. There are several types of services currently provided by the city that could be better offered by private companies or even nonprofits. The services would be improved and the city would reduce risks, contain its costs and be allowed to focus on its core functions. The city is currently looking at two models for incorporating the private sector into city operations, according to reports from the city’s chief administrative officer (CAO). The CAO has identified several areas where the city could enter into public-private partnerships for the operation of parking garages, golf courses and parking meters. There have also been suggestions to privatize the management of the Convention Center, Zoo, El Pueblo de Los Angeles historical monument and Ontario Airport. The other approach to privatization the CAO has proposed is managed competition. This strategy would create even more opportunities for improved service delivery and efficiency, because businesses would provide the city with competition that it currently lacks being the sole service provider. Services currently under consideration for managed competition include: landscaping, publishing, street and fleet repair, ambulance billings, multi-family trash pick-up, the animal services canvassing function, and operations of cultural affairs theaters and centers. Under these public-private agreements the city is forced to give up some control, but the benefits far outweigh the costs. The cost savings of privatization alone are too significant to ignore in the midst of this budget crisis. Under the partnerships proposed by the CAO the city would decrease expenses for operations, maintenance and pension obligations. There are also several cases where privatization would eliminate the city’s debt obligations. City revenues would be increased by leasing facilities to private entities to operate, and in several instances the revenue would be sustainable. In addition to direct income, handing over control of certain city services transfers the city’s risk to private companies. For example, typical liabilities for parking structure operators, such as injuries to patrons of the lot, would no longer be the city’s responsibility. The concepts of public-private partnerships and managed competition offer the city effective and long-term solutions for fixing the city budget. Under these agreements the city has the opportunity for significant savings and increased revenues, and businesses are presented with new entrepreneurial ventures. City officials must face the reality that now is the time for tough decisions and strong leadership. There will always be opposition to innovation, but they must remember that they were elected to make the decisions that are best for all Angelenos. Should the city privatize some of its services? What do you feel are the benefits and costs of privatization? Email your responses or thoughts about the column to angela@vica.com.

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