Privatization and Private Sector Initiatives

By Gil M. Olguin, Sr., J.D.


Privatization - the transfer of public assets, infrastructure, and traditional-government-services to the private sector - is a modern approach to public policy. Although privatization is the centerpiece of national policy in the United Kingdom of Great Britain and Northern Ireland, it has made a rather inconspicuous appearance on the public-policy agenda in the United States.

State and local governments have made considerable progress in privatizing public assets and government-service functions. Many local government officials are beginning to realize that privatization provides an opportunity to deliver the same goods and services at less cost, raise revenues for current operating budgets, reduce future budgets, put unused and under-utilized public assets in the hands of private industry and also on the tax rolls.

Faced with reduced loans, grants and other forms of financial assistance from the Federal government, voter rejection of new general-obligation bond issues, high debt costs, growing hostilities toward increased taxes, and demands for improvements of the public infrastructure and government services,  state- and local- governments are being forced to turn away from government-owned and -operated enterprises and more toward the private alternatives.

When private enterprises produce goods and services that consumers demand, at costs below the market-rates, profits are then generated. As a result, property owners' wealth is increased. On the other hand, if losses are realized, the value of private assets declines and their owners' wealth diminishes. Hence, the owners of private companies not only appropriate the gains but also bear the costs that result from the way in which private assets are utilized. In other words, private enterprise owners must eventually face the "bottom line."

The National Alliance of Business, established by the Lyndon Johnson administration, was charged with the task of increasing private-sector involvement in government efforts for the purpose of reducing unemployment. It was also responsible for promoting private-sector leadership in solving public needs, and for recommending ways of fostering greater public-private partnership participation.

The Federal government has been examining existing government-programs and -services to determine which ones could be more productively carried out by private enterprise. With the termination of most Federally funded community-assistance programs - HUD/UDAG, General Revenue Sharing, etc. - state- and local-governments are having to look seriously at privatization of the many government-service functions.

American communities are the focal point of most American lives-  even if we don't live in a community, we work and play in it. Public programs for communities are mixed. Some government programs are aimed at community growth, planning and development, while others deal entirely with deteriorating conditions and the increasing number of poor. The legacy of four postwar decades of urban studies is that Federal, state and local government agencies are still attempting to find what's wrong, what should be done, and what level of government should do it.

This is one of many reasons why communities are turning over the "trash-collection" and "fire-fighting" tasks to the private -sector. The city-government of Scottsdale, Arizona has contracted out its fire department and rescue squad to Rural-Metro Fire Services, Inc., a privately owned and -operated company. The Phoenix municipal government has been out of the "solid-waste refuse collection" business for a few years.

In their origin and development, incorporated communities and counties are corporate enterprises. a local government's economic health is driven by capital investments, jobs, territorial expansion, and image enhancement. Therefore, growth planning and development is vital to a local government. Residential, commercial and industrial developments provide employment, capital accumulation, and generate revenues for governmental services. This is one reason why the community's leadership is motivated by the chamber of commerce attitude that growth is the community's lifeblood.