Sam Katz Is Right: It’s Time for Philly to Get Creative and Privatize
Sam Katz is right.
In a recent Philadelphia Inquirer opinion piece, he urged “creative solutions” to the city’s funding crises. Among his recommendations were the passing of an additional sales tax and completing the sale of the Philadelphia Gas Works (PGW) so that the proceeds could be used to partially fund the city’s pension liabilities and school district budget gaps. “In approving the sale of PGW and dedicating the first $120 million of the sales tax to our schools, the city can tackle both problems and send a powerful message to the skeptical state leaders that Philadelphia is innovatively addressing challenges with smart policy choices,” he wrote.
By why stop there? Katz, a former mayoral candidate and a business man, is only proposing what any other rational business person would do when faced with too much debt and not enough cash flow: Sell assets and pay down liabilities. He wants the city to be more creative, more innovative. And he’s on to something.
Maybe, in 2014, American cities like Philadelphia need to embrace a drastic change in approach to city finances. Maybe our political leaders should start thinking more like our business leaders. Maybe the model of urban government is due for a disruptive shakeup. Are we ready to take a top-down look at our city’s operations and make some hard decisions as to which departments really need to be operated by government and which departments can, like PGW, be sold off and continue to provide their services with little or partial future government oversight?
Of course, some departments should never privatized. A government should be in command of its police, its streets, its parks. In Philadelphia, certain city services and efforts should only be run by the city, such as the numerous Mayor’s Offices for things like neighborhood services, sustainability, and housing, and commissions on important initiatives like literacy, aging, and disabilities. You could argue how much should be appropriated to such things, but this isn’t what Katz is alluding to. Katz is opening up the door to spinning off entire parts of a city’s government that can be shed. And that should get us all thinking.
For example, can our traffic courts be privatized, running on revenues from fines, sponsorships and services to other city departments? Can the library system be sold off with the stipulation that anyone under the age of 18 can still rent a book for free but everyone else must pay a fee and companies in the publishing industry can advertise? Does SEPTA still require city funding or can it operate as a private service like the rail system in England? Can other services like the Register of Wills, Records, L&I and even the city’s water be auctioned off and run privately?
We live in a pay-to-play world. You want faster Internet, then you pay for it. You want better seats at an Eagles game, then you pay for them. It’s your choice. So if I need to use certain city services, like the courts, licensing, libraries then shouldn’t I pay for them too? Sure, there are already fees charged but they should simply be higher (with only subsidies for the needy). Sure, some of these services can’t operate on just higher fees alone but I bet there are companies who have some innovative ideas for making this profitably work for both the public and their own profit. Sure, some services need to be affordable and fair for the needy and that’s why some quasi-government oversight (think Pennsylvania’s Public Utility Commission) may still be needed to keep a level playing field.
Yes, this will cost more to the individuals using these services. But will it reduce taxes, offer a better service and forego the inevitable tax assessment when all of these liabilities ultimately come due? I don’t have the specific answers to these issues, but I bet I can come up with a few on a case-by-case basis. And I know for sure that there are many entrepreneurs much smarter than me who can also come up with better (and profitable) solutions. So let them profit.
We’ve tried everything else. The state has no money. The city has no money. Our annual operations have become too costly. Our liabilities have become too large. So isn’t it time to question what city governments should and shouldn’t be responsible for in the 21st century and what can be spun off to private companies? I’m not suggesting anarchy — in many cases some government oversight will be needed. I’m not suggesting job cuts or replacing unions, just another employer with more efficient management.
I’m only suggesting that cities like Philadelphia accept reality. They are too big. They have too many debts. They don’t need to provide all the services they’re currently providing. They can downsize, shed assets, take the proceeds, invest the proceeds, pay down their liabilities and operate more efficiently.
What Katz is suggesting is just the tip of the iceberg. But he’s right.
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