Outsourcing City Hall

A leaner, more efficient way to push people around.


At the beginning of 2005, Sandy Springs was an unincorporated Georgia suburb with a history of grousing that its taxes were subsidizing the rest of Fulton County rather than funding needed services at home. At the beginning of 2006, it is the seventh largest independent city in the state, population circa 85,000, and has mostly succeeded in crawling out from under the Fulton authorities' rule. The wealthy town's new government consists of a mayor, a city council, and a skeleton crew of public employees. Nearly everything else, from public works to urban planning, will be provided by the private sector, with a reluctant county continuing to cover police, fire, and 911 services in the immediate future.

At first glance, that might look like a radical libertarian utopia. My friend Geoff Segal—director of government reform at the Reason Foundation, the institute that publishes this Web site—has written happily that "they privatized virtually every city function" and has joked about how that might affect the Free State Project. Mayor Eva Galambos certainly sounded like a libertarian as she opened her inaugural address last month, declaring that her town had "harnessed the energy of the private sector to organize the major functions of city government instead of assembling our own bureaucracy." But there's a fly or two in the ointment, problems not just in Sandy Springs but with the way local officials across the country have come to think about privatization and property rights.

Most of Sandy Springs' services are nominally provided by private industry, just as Galambos says. But the consumer is the government of Sandy Springs. For the individual citizen, there will be no competing companies with competing qualities, competing prices, competing anything. Different enterprises will contend for the city's business, but the average resident will still face a municipal monopoly; it's just that the government is negotiating its contracts with companies rather than its own employees.

When city leaders talk about privatization, that is almost invariably what they mean: a government contract, not an open marketplace. If you aren't satisfied with the way the local trash collection agency does its job—or if you are reasonably satisfied, but still think you could get a better deal from someone else; or if you have no plans to switch yourself, but would like the company to face the spine-tickling prospect that you might—then you have no more recourse than you would if your garbagemen worked directly for the city.

Now, sometimes such semi-public services are an improvement, especially when the bidding process is competitive and transparent. Sometimes they're worse, especially when the process is closed or corrupt, or when there isn't a bidding process at all. They're most likely to work well when the favored firm gets most of its profits in a real marketplace, where it has to learn customer-friendly habits to survive. A corporation like Edison Schools, whose business model depends overwhelmingly on government contracts, hasn't done a great job of operating entire schools. There are private restaurants, on the other hand, that have done very well when asked to run a school cafeteria on the side.

In the case of Sandy Springs, the city has outsourced all of its activities, aside from the aforementioned emergency services, to a team of businesses led by Operations Management International (OMI), an employee-owned company based in Englewood, Colorado. (With city hall still under construction, even the government itself is temporarily housed at the firm's local headquarters.) Roughly 80 percent of OMI's revenues come from municipal contracts, not private clients.

The second problem arrives when the city offers a "service" that the citizen would rather forego altogether. If the primary function of government is busybodyism, then Sandy Springs has proven itself adept at statecraft: On December 27, before the new government was even a month old, the Associated Press reported that "the city's code officers have issued 51 written warnings for infractions such as not keeping up with property or having junk cars in full view of neighbors." Councilman Tibby DeJulio explained to The Atlanta Journal-Constitution that "People have property rights, but neighbors have property rights and we need to protect property values." (Rare indeed is the local pol who understands that "property rights" and "property values" refer to two different ideas.) The movement to incorporate Sandy Springs was driven not merely by the benefits of spending tax dollars closer to home, but by the desire to spend that money enforcing a distinct vision of how the neighbors should behave. The result is not merely an increase in code enforcement, but new restrictions on strip clubs and porno shops.

Interestingly, the twin crackdowns are largely aimed at the same place: Roswell Road. In the same inaugural address that invoked "the energy of the private sector," Mayor Galambos declared that the avenue "begs for a higher class of businesses than spas and adult book stores."

Given all that, is there any possible libertarian defense of Sandy Springs? There is, but it's a peculiar one, because it requires you to imagine that the city is a firm itself. Let's suppose, for the sake of argument, that the town was formed by the unanimous consent of its citizens. (In the real world, it came close: When incorporation went up for a vote last year, 94 percent of the electorate endorsed it.) Let's also note that the cost of moving from one town to another, while hardly minimal, is low enough that there's real competition between local governments when it comes to how much they charge to live within their borders, what they offer you in return, and what local rules you have to accept to join the community. Recall also that the distinction between municipal and business corporations didn't really emerge until well into the 19th century, and that even after those formerly semi-private cities became full-fledged arms of the state, there has been a boom in entirely private condos, subdivisions, and, occasionally, full-sized towns. (The latter include Reston, Virginia, population 56,000, and Columbia, Maryland, population 88,000.)

Such contractual communities provide some services themselves, negotiate with other entities to provide other services, and impose rules that are easily as oppressive as the ordinances in Sandy Springs. In general—there are exceptions—libertarians don't complain about this, except perhaps to declare that they would never want to live under such self-imposed regulations themselves. Is it really such a stretch to extend the same tolerance to ordinary local governments? Especially since, while not everyone consented to be ruled by the City of Sandy Springs and Operations Management International, Inc., that's clearly more popular than the previous arrangement?

I don't really buy that argument myself—I'm too attached to the freedoms of that obstructionist 6 percent, not to mention the folks who never voted at all. But it's interesting that the best defense of this town is a federalist one, involving the virtues of competing jurisdictions and local autonomy rather than the fact that it's buying its services from formally private vendors. The best thing about Sandy Springs might not be the fact that you'd want to live there, but the fact that you don't have to.