Privatization of Municipal Services: Sustainability Issues of Production and Provision

Abstract

Privatization is an accepted strategy to improve the economic efficiency and quality of services provided by municipal infrastructure. However, the impact of using the private market to allocate public resources has not been adequately researched. In this paper, the effects of the privatization of municipal services as public policy are assessed. The assessment is based on a detailed review of the privatization literature across disciplines and a more focused analysis of efforts in two cities. The supporting literature emphasizes that municipal infrastructure decisions play a big role shaping a community; therefore local government needs to maintain accountability to its citizens. Maintaining accountability for essential municipal services while having flexible financing options may require the separation of the production of a service from the provision of that service. The examples from the two cities agree with these conclusions and demonstrate that concessions are the preferred privatization strategy for essential municipal services. The examples also provide a variety of creative strategies to enhance the competitive environment for concessions.