Use the Yellow Pages If You Want the Job Done Right
The private sector is more efficient…
[by Jon Coupal] 12/6/05

The plight of the city of Gardena should be a lesson to public officials everywhere. The six-square-mile community of 60,000 residents is poised on the verge of bankruptcy. The deadline to pay off $26 million in debt has come and the city, whose annual budget is $36 million, does not have the money. While city officials and creditors try to hash out a deal to refinance the debt, even under the best case scenario the result will be that millions more in interest payments will be diverted from essential city services.

While other communities are also facing potential bankruptcy, the most prominent of which is San Diego, the tragedy of Gardena is that this situation was so clearly avoidable.

The origin of Gardena's financial problem goes back a dozen years to 1993 when, due to a combination of hubris and naiveté, city officials formed a for-profit insurance company. Believing that under their management, a home grown company, Municipal Mutual, could compete with the likes of State Farm and Allstate, officials issued city bonds to provide startup capital.

Encouraged by highly paid consultants, a city manager who later went to prison for the embezzlement of funds unrelated to the insurance company, and rosy estimates of profits in excess of $1 million annually, Gardena officials pressed forward.

Municipal Mutual lost money from Day One, creating an ever-deepening financial hole for which the city was responsible. Municipal Mutual continues to fail and is under state supervision.

Former Mayor Donald Dear has told the Associated Press that if he had been "more sophisticated in the ways of business" he might have seen red flags along the way. But as it turned out, the Mayor -- quite literally -- found himself in a "Dear in the headlights" situation.

Belatedly, Dear realized the crux of the problem. He and the members of the City Council were fish out of water when it comes to establishing and managing a profitable insurance company. And chances are he and his colleagues would have been equally inept at automobile manufacturing, dry cleaning, or gift shop operation.

Unfortunately, this effort to run a "business" for which government officials have no expertise, and which has led to significant taxpayer expense, are not unique to the city of Gardena.

For years, the Los Angeles Community College Board of Trustees has been operating a food service program at a loss. Of course the impact of subsidizing food service has been that less money has been available for programs for students, whose fees have been rising dramatically.

Although few students take advantage of the food service operations, in order to comply with union agreements made years ago when the campuses were run by the Los Angeles Unified School District, the College Board has kept union workers fully employed at a rate of as much as $15 per hour, more than twice minimum wage. The result has been that the program has been losing money, nearly half a million dollars last year alone.

While the district is now attempting remedial action, many students and taxpayers are asking: What took so long?

Most citizens recognize the importance of government to provide, at a minimum, for public safety and important facilities like sewers, roads, lighting and sidewalks. Some want much more, from recreational facilities to beautification projects. However, regardless of how one views the role of government, few see government qualified to provide services that are freely available from the private sector.

Former New York Governor Mario Cuomo, hardly an advocate for reducing the role of government, summed it up well when he said, "It is not government's obligation to provide services, but see that they're provided."

In the cases of Gardena and the Los Angeles Community College District, as well as hundreds of other government entities, the job can be done more efficiently by using the Yellow Pages rule of thumb: If you can find the service offered in the Yellow Pages, then make the call, because, chances are, someone in the private sector can do the job better and cheaper. CRO

copyright 2005 Howard Jarvis Taxpayers association

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