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8844 EXTENSIONS OF REMARKS April 26, 1988 EXTENSIONS OF REMARKS PRIVATIZATION OF PUBLIC for Touche Ross and Co., an accounting bage collection, submitting its own bids for SERVICES firm. Almost 80 percent of the cities re­ contracts. It lost the bids at first, but in the sponding to a recent Touche Ross survey past two years it has won. "We went say privatization will be a primary tool used through quite a learning process in doing HON. PHILIP M. CRANE to provide local government services and fa­ that," says Ron Jensen. Phoenix's public OF ILLINOIS cilities over the next decade. works director. "Each time, we analyzed the IN THE HOUSE OF REPRESENTATIVES The reason is clear: Private firms can de­ operations or the private contractor and de­ liver public services from 20 to 75 percent termined ways to improve methods, technol­ Tuesday, April 26, 1988 more cheaply than cities, studies show. ogy, operations, whatever it might be, to Mr. CRANE. Mr. Speaker, I am a strong pro­ Caught in a fiscal full nelson, cities see pri­ where we gradually improved our oper­ ponent of privatizing public services. Indeed, vatization as one of the few ways out. ations. Then we started winning the bids." facts have proven that the free market system The squeeze is coming from all sides. The City worker morale has improved. "We federal government no longer doles out bil­ have broken the stereotype" of the patron­ is most efficient. The transfer of public serv­ lions in revenue sharing. The estimated gap ices from Government monopoly to free age-ridden sanitation departrment, says between actual and needed spending on in­ Jensen. "Our employees are not treated as market competition will stimulate economic frastructure-highways, sewage plants, mass second-class citizens by the community, be­ growth, by both reducing costs and improving transit-will reach $450 billion by 2000. cause it is recognized that we have high pro­ efficiency. Furthermore, competition will lead Bumping up against their own borrowing ca­ ductivity and are very competitive." to the creation of more productive jobs. Pri­ pacity and loath to raise local taxes, even as City department managers often face per­ vate firms are generally more flexible and in­ constituents demand more services, cities verse incentives: the bigger their budget and are running out of places to turn. the larger their staff, the higher their novative than public firms, thus public services "That's how we get into the picture," says under private management would not inherit salary and status. Phoenix, in contrast, John Turner of Rural/Metro Corp. in bases salaries on productivity. So when con­ the stagnation that characterizes the present Scottsdale, Ariz., the nation's largest fire system. Therefore, I commend the following tractors lowball bids, quoting rockbottom protection company. with revenues expected prices to get into the market, "instead of us article by Carolyn Lochhead, which points out to top $50 million this year. Operating with saying that's unfair, we say the taxayers the advantage of privatization, for the careful higher productivity and economies of scale, win," says Jensen. "That's our ultimate consideration of my colleagues: private companies are offering huge savings goal." [From Insight, Feb. 22, 1988] in fire protection, custodial work, vehicle Three years ago, when paying a crushing towing, park maintenance, garbage collec­ CITIES FINDING PUBLIC SERVICES BETTER­ tion-almost any service a city provides. $600,000 annual subsidy to its bus line RUN BY PRIVATE FIRMS Research in economics has uncovered forced South Lake Tahoe out of the busi­ Summary: Whether transit or trash col­ something called the "bureaucratic rule of ness, the California city donated the line to lection, school lunches or sewage treatment, two," according to Steve H. Hanke, profes­ its employees. Mike Dooley, a former em­ almost any service provided by local govern­ sor of applied economics at Johns Hopkins ployee and now partner in Area Transit ment can be done by private companies. University. Management, says the bus line has operated And, the record shows, for less. Competition "If you want to find the public cost of at a profit ever since, because it has to. and the quest for profits help keep costs doing something, you just find the private "We couldn't operate the system at a down and service up. As tax revenues are cost and then multiply by two, and that'll profit if we had taken it over exactly as the squeezed tighter and demands rise, privat­ get you pretty close," he says. city was operating it," he says. "They had ization will be a major factor in government Labor costs are often why, Gary Jensen, service that we, I'm sure, for the conven­ servcies. president of American Emergency Services ience of the public, but there were routes A bridge is rising over the Red River at Corp. in Elk Grove, Ill., says in city fire de­ that were losers.'' Fargo, N.D., on the promise of a 25-cent toll. partment fire fighters work 40 to 53 hours a The city had discounted its $1 fare. Built, owned and operated by the Bridge Co. week, which includes time spent sleeping on "Hardly anyone actually paid $1," says and the Municipal Development Corp., it 24-hour shifts, while private fire companies Dooley. "Seniors paid 25 cents, juniors paid will be the first privately built major U.S. run on 60 or 72 hours a week. "The cities 50 cents. Now they pay $1. We feel every­ bridge in more than 40 years. just give away the store," Jensen says. As a body pays their fair share." A private fire company fights fires in Elk result, private costs are 20 to 50 percent All employees took cuts in paid vacation Grove, Ill. A private organization mediates lower. and wages, although Dooley says wages civil disputes in San Francisco. A $1 billion Rural/Metro's equipment costs are gener­ remain competitive in the local market. The privately built highway may soon encircle ally lower, too. "To quote the founder of the city is now saving itself the $600,000 and it Denver. Private schools teach dropouts company," says Turner, "'Chrome doesn't gets bus service. under state contract in Tacoma, Wash. And put out a fire.' You see these great chrome­ "The city, being a government body, has real estate developer Donald J. Trump decked chariots going down the street­ certain handicaps in running the business, became something of a folk hero among they're very pretty -but you don't need all even at break-even," Dooley says. It could New Yorkers in 1986 when he renovated the the excess cost that's built onto those not make quick purchase decisions, for ex­ Wollman Memorial Skating Rink in Central things." ample. "Nobody would say that private en­ Park ahead of schedule and $750,000 under City monopolies on garbage collection or terprise can't do it more efficiently than the his $3 million budget. This after the city street paving, for example, pose the same city did, and even the city will agree with had spent $12 million and six years trying to problems private monopolies do, economists that.'' get the rink operating, to no avail. say. Service declines and prices rise. A mo­ Volunteer groups, such as Community Private firms are now delivering city serv­ nopoly provider does not have to be pleas­ Board Program, have privatized even jus­ cies from school lunches and garbage collec­ ant to customers. Departments become po­ tice. Based in San Francisco and funded by tion to wastewater treatment and mass tran­ liticized and patronage-prone. Among pri­ corporate and foundation grants, the orga­ sit. Virtually all the country's large engi­ vate companies, the profit motive tends to nization operates in some 40 cities around neering firms have expanded into municipal drive costs down and to enforce discipline. the country. Citizens volunteer to be trained work. New firms, such as Graffiti Removal The more competitive the industry, the in mediation, after which they donate time Inc. in Los Angeles, are springing up. By more this applies. each month to hear disputes. Users pay some estimates, spending on privately pro­ Phoenix has been dubbed the "petric dish nothing. Individuals and groups-say, home­ vided government services is running as of privatization" for its long-running experi­ owners vs. teenagers using a local park-go high as $100 billion a year. mentation with contracting out services. before the board to talk through their con­ "I don't think we've reached a quarter of Since 1978, the city's own sanitation depart­ flict, says founder Raymond Shanholtz. the potential" market, says Irwin T. David, ment has competed against private contrac­ "Tensions are reduced dramatically. People national director of public sector services tors for half of Phoenix's residential gar- get tQ disgorge their hostile emotions in a

e This "bullet" symbol identifies statements or insertions which are not spoken by a Member of the Senate on the floor. Matter set in this typeface indicates words inserted or appended, rather than spoken, by a Member of the House on the floor. April 26, 1988 EXTENSIONS OF REMARKS 8845 neutral and safe setting, rather than on the also breeds corruption. AFSCME runs na­ waiter where the pay phone is. Back on street, where it may escalate." tional ads that Phoenix calls "erroneous." April 6, 1986, she had lots to be excited Shonholtz says the program has proved Proponents agree that abuses will arise if about. A star on Broadway for three dec­ successful. "It's very clear that it's quite a city trades its own monopoly for a private ades, since West Side Story, she was back possible to set up a whole other justice monopoly. Safeguards, such as open bidding again in the musical Jerry's Girls. She felt system at a fraction of the cost" of city and sealed bids, are essential, particularly in festive, so she went out to dinner in New courts. Early resolution of disputes reduces cities where corruption has been the rule. York's theater district with some friends, police intervention and cuts the number of Contracts must be carefully monitored. then offered one of them a ride home. It court cases filed. If it does not work, dispu­ They say that union concerns over layoffs was while making aU-turn on a Manhattan tants are free to turn to the formal legal can be addressed and that privatization street that night that Chita Rivera encoun­ system. hardly relieves politicians of accountability. tered what would be the greatest test-and In exchange for limited ownership rights In fact, economists maintain that most the greatest triumph-of her life. and either user or service fees, private com­ problems with privatization can be over­ "I'm a very careful driver," Rivera says in panies are also financing, building and oper­ come either through the contract procedure the sharp, rapid-fire word rush of an unself­ ating dozens of wastewater treatment or by introducing competition at various conscious actress. "I turned on my blinkers, plants, cogeneration plants and even major stages in the provision of a service. I looked in the mirror, I saw another car a highways, without government funds. Competition tends to spread. "Some cities block and a half behind, and I started to By offering a share of profits, cities draw are going to have to privatize whether they turn." Rivera had not spotted a taxicab private capital into public projects and like it or not," says Hanke at Johns Hop­ coming up fast on her left side. "It must spread risks to the private firms. A firm can kins, because as more cities cut costs and im­ have been in a blind spot," she says. The own the facility under a franchise arrange­ prove service through privatization, they cars collided. Within seconds, Rivera-ac­ ment. For example, a city will put a begin attracting people and businesses away tress, singer, but most of all dancer-was in wastewater treatment plant up for bid. Pri­ from other cities. The business potential, ev­ clinical shock. Her lower left leg had been vate companies then bid on the fee they will eryone seems to agree, is huge.-Carolyn ripped open and shattered. She was 53. She accept in return for providing wastewater Lochhead would not return to her Broadway show, treatment. On the basis of that fee, the and most people assumed that she would company can then finance the facility. The CHITA RIVERA OVERCOMES never return to dancing. Most people were city can also sign a long-term contract for wrong. the service without giving up ownership. ADVERSITY "We'll take the risk of construction, we'll "It never entered my mind that I wouldn't take the risk on operation, we'll find the HON. ROBERT GARCIA dance again," she says, the quizzical smile technology, we'll guarantee that we'll treat on her wide-open face suggesting that I was all of your city's sludge for that amount of OF slightly crazy for even asking. "I guess it's time," says Ralph Stanley, vice chairman of IN THE HOUSE OF REPRESENTATIVES connected to a whole way of thinking-my training, my faith. The only thing that I Municipal Development Corp. "The city Tuesday, April26, 1988 doesn't have to raise a bond issue to do it, saw as a possibility was recovery." and the city keeps policy control." Mr. GARCIA. Mr. Speaker, as a Member of Pehaps only God knows where Chita Parsons Municipal Services Inc. is helping this body and as a member of the Congres­ Rivera got the idea that she could recover. to design and construct a major beltway sional Hispanic Caucus. I rise today in tribute Although her foot-long surgical scar has around Denver, using no state or federal to one of the great shining stars of Broadway, healed well, the damage is evident when she invites you to feel her leg; the 12 metal money, says Robert M. Davidson, executive Chita Rivera. Ms. Rivera has proven herself as vice president. Tolls will contribute more screws that hold it together are evident to an exceptional actress. singer, and dancer the touch. moments after Rivera was than 70 percent of the cost of the highway; with appearances on the screen, on television, seed money will come from landowners, de­ brought to New York's Lenox Hill Hospital, velopers and residents who stand to benefit and most notably on the stage. Beginning with a nurse looked at her injuries and said bale­ from the road. A similar project is proposed her Broadway debut in "Guys and Dolls" in fully, "You really did a job on yourself." near Washington Dulles International Air­ 1953, she has starred in some of Broadway's Surgery was complex and difficult, and her port outside the nation's capital. greatest musicals including "West Side leg remained swollen and discolored. "I User fees such as tolls make those who use Story," "Bye Bye Birdie," "Sweet Charity," didn't realize how bad it was until I saw peo­ government services pay for them. Funding "Bajour," and her 1984 Tony Award-winning ple's faces when they looked at it," she says projects with general tax revenues, by con­ with a laugh. "Later, my doctor told me performance in "The Rink." I have known Ms. that I could have lost my leg-but he didn't trast, forces everyone to pay the same Rivera for many years, and like her many fans amount regardless of how much a service is tell me that until it was time to tell me. I used. The further removed the source of and theater critics, I continue to be in awe of appreciated that." money is from the user, the greater the po­ her talents, her energy and her shownman­ Rivera is generous in her praise for all the tential for waste. "Instead of [Washington] ship. people who helped her over the next hard saying City A or City B should receive this But most of all, I admire her courage. And it year: her doctor, John Carmody; her thera­ or that kind of plant," says Davidson, "the is in response to a tragic event in the life of pists, Armando Zettina and Debbie Baker; cities themselves determine what their Ms. Rivera that I am moved to bring the story her two brothers, and two sisters; and her needs are, and only the real needy ones are of her personal triumph to your attention. Two daughter, Lisa. All were constantly at her going to spend their own money." years ago almost to the day, the worst thing side, urging her on. But the biggest factor in Cities can avoid granting private monopo­ her recovery was Rivera herself. "There lies even on large projects by setting fees that could happen to a dancer happened to were just too many songs to sing, too many and performance standards. If the firm fails Ms. Rivera. In a serious car accident her left dances to dance," she says. "I didn't want to to perform or otherwise violates the con­ leg was shattered and many believed she die until I die." tract, the city can pull its franchise. would never dance again. Yet after 2 years of She was determined, during the recovery Likewise in city services. Phoenix con­ hospitalization and rehabilitation, and hours process, to put the best face on her prob­ tracts out for no more than half of its trash upon hours of hard work and willpower, she is lems. "I don't like to let people see me look­ collection and other essential services and scheduled to star in a recently revived musi­ ing down or angry," she says. When she so maintains the option to step in if a con­ cal, "Can-Can." asked Dr. Carmody how far back she could tractor fails to perform. Many Rural/Metro come, he said, "It's up to you." That was all clients maintain full or part ownership of For those of us from New York who have Chita Rivera needed to get her through. their fire stations and equipment. "There is had the opportunity to see her perform in so The road back was long and painful. As no need to disband the department," says many of these wonderful Broadway plays, and feeling returned to the injured leg, the daily Turner. But in 40 years of operation, tie for myself, not only as a New Yorker, but also physical therapy became excruciating. "I says, Rural/Metro has never been fired as a New Yorker of Puerto Rican ancestry, I would feel like I was going to hit the ceil­ from a contract and has lost contracts only take this opportunity to share with my col­ ing," she remembers. "I would almost to other private firms. leagues this magnificent article on Chita scream, 'Get me down from here!' " As her Unions, particularly the American Federa­ Rivera. recovery progressed, Rivera had to fight a tion of State, County and Municipal Em­ battle with herself. "My exercise bicycle is ployees and the International Association of THE SPIRIT OF CHITA RIVERA four feet away from my bed. My Nautilus Fire Fighters, hotly oppose privatization, ar­