November 9, 2011

Click here to view and here to listen to Dr. Michael Sanera discussing this Regional Brief.

RALEIGH — County governments across North Carolina should have an easier time sharing information about their privatization efforts, thanks to a first-of-its-kind survey from the John Locke Foundation.

“Privatizing county services is just one way county elected and administrative leaders are working with residents to investigate innovative solutions to the fiscal crisis,” said Dr. Michael Sanera, JLF Director of Research and Local Government Studies. “In an effort to assist in the exchange of information about privatization, we asked county governments to highlight both success stories and information about any problems linked to privatization in the past.”

Forty-four of the state’s 100 counties responded. Sanera and JLF research intern Kevin Munger compiled the results in a Regional Brief that includes 10 pages of data on privatized North Carolina county services. The report also lists county-by-county contact information for taxpayers and government officials seeking additional details.

“Privatization increases competition in the public sector,” Sanera said. “Private-sector entrepreneurs must constantly find ways to cut costs and lower prices or risk a competitive disadvantage. In contrast, governments often serve as monopoly providers, or they engage in unfair competition with the private sector because of government access to taxpayer funds.”

“Governments often increase their budgets, not by satisfying customers, but by satisfying special-interest groups who lobby for budget increases,” Sanera added. “Taxpayers and citizens alike benefit from the consideration of privatization techniques because increased competition often lowers costs and improves the quality of service.”

Sanera and Munger focused on four particular types of privatization. “Competitive sourcing uses a bidding process for service contracts, which allows private-sector service providers to compete with public-sector agencies to provide a particular service,” Sanera said. “A second type of privatization is the public-private partnership, a joint venture between a government department and private firm to provide a service or perform some function.”

The third form of privatization involves “contracting out,” Sanera said. “In this option, the public sector contracts with a private or nonprofit firm to deliver a service that previously had been provided by government personnel,” he said. “Taxpayers can benefit because the contracts are open to competitive bidding. The government also maintains control through the contract terms.”

A fourth option involves sales of government-owned assets, Sanera said. “Asset sales offer a way for governments to increase revenues and cut maintenance costs by shedding nonessential property or commercial-type enterprises,” he said. “In some cases, governments have sold buildings, then leased back needed space.”

Counties’ survey responses reveal a wide range of approaches to privatization, Sanera said. “Some counties offered detailed descriptions of their privatization efforts,” he explained. “Gaston County listed about 20 different services the county government has contracted out, some of them going back nearly 35 years.”

“On the other end of the spectrum, Transylvania County listed no services privatized today,” Sanera added. “But that county government has investigated privatization and continues to look into privatized options for services such as landfill operations.”

The John Locke Foundation is sending the survey report to all 100 county managers and to elected county commissioners. “We hope this first-of-its-kind report will stimulate more discussion of privatization,” Sanera said. “We also hope the information contained in this report will inspire both more survey responses next year and more evidence of the benefits of privatization.”

Dr. Michael Sanera and Kevin Munger’s Regional Brief, “First Annual North Carolina County Privatization Survey,” is available at the JLF website. For more information, please contact Sanera at (919) 828-3876 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].