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The Maywood Experiment

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The presidential election has, at least for a few days, moved away from the issue of outsourcing. Is outsourcing a good or bad thing for the economy? Is Obama for outsourcing? Did Romney create this wave of outsourcing when he headed Bain? The questions have gone on and on. And on. After a while, the jokes sound more interesting than the serious discussions. Sooner or later the comedians start saying, “Forget outsourcing the little guy… why don’t we outsource the president and the Congress!"

The punch lines vary, but it seems that everybody can think of at least a few politicians that should be outsourced. Would you be surprised to learn that at least one City has taken this beyond a joke, and turned it into a plan? Today we’re going to spend a little time looking at how cities are getting creative and outsourcing… themselves!

Municipal governments in California are getting very creative. They have to. More than ever before, municipal governments are going bankrupt. The biggest recent bankruptcy is Stockton, California. This town of 300,000 had a housing boom a few years ago and decided to fund a wide variety of new and enhanced benefits for city workers, and when the boom ended and then a half billion dollar debt, they filed for bankruptcy.

Stockton is a sizable town, and able to afford competent financial advisors, yet they failed to properly estimate future revenues to pay for these services. San Bernadino, another city in California of slightly smaller size, went bankrupt from a similar combination of falling revenues and new benefits for city workers. Moody’s, the bond rating firm, expects many more cities and towns will go bankrupt in the next few years.

That’s the same fate that little Maywood California was facing. This town of less than 30,000 decided to try something different. While larger cities are trying to get out of their fiscal crisis by changing the bankruptcy lays or finding new ways to restructure their bond debts, the government of Maywood decided to completely outsource the local government.

On July 1st, 2010, Maywood outsourced everything other than the City Manager, City Attorney, and elected officials. Many functions were outsourced to private corporations and some functions were outsourced to better functioning municipalities. The sheriff’s office, as one example, was outsourced to the Los Angeles Police Department. It’s important to note that Maywood wasn't just a bankrupt municipality, it was (by it's own admission) a horrible service provider. Their police department provided sub-standard services, which in turn resulted in millions of dollars in lawsuits for wrongful arrest, sexual harassment and similar issues. If Maywood can lower the cost for police services (including lawsuits) OR improve the service, it's a win for the town.

What happened? The New York Times summed it up best, “A City Outsources Everything. Sky Doesn’t Fall.” His isn’t the sort of experiment that will tell us if outsourcing was right or wrong. Instead, it will provide information on whether small cities can operate if they don’t own their services.

There’s another experiment going on in Sandy Springs Georgia. Since they incorporated the town in 2005, they never had a traditional city government. From the start, all the city services were outsourced. Come to think of it, when you go to even smaller “communities” think about gated communities in many of the planned communities around the country today, they take most of the community services (parks, pools, street cleaning, local security, etc.) and use private service providers rather than government workers.

This is a fascinating experiment, not just for older towns with financial problems but also for new towns when they incorporate. The traditional city structure made sense for larger municipalities a century ago, but with home schooling and remote computer education, does it still make sense to set up services that might be performed more effectively under a different model and with a different provider? We know that big and small cities not only have financial difficulties, but they also have difficulties in providing quality services, especially police and education services. It’s going to take a while to get some answers, but this is definitely an experiment worth following!

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