Sunday, August 30, 2009

It's Time To Sell Detroit To The Highest Bidder by Akindele Akinyemi

The City of Detroit is in a $300 million deficit and Mayor Dave Bing is trying to move our city forward. I often tell young people that the best leaders in the world are those who make the unpopular decision. They are the leaders that never go along with the rest of the population and these leaders are independent thinkers.

Last week, I had the pleasure of attending a few bus town hall meeting that were sponsored by the Detroit Department of Transportation (DDOT). Between the unions and the citizens who were whining about losing their bus service on Saturday after 6pm and all day Sunday I can clearly tell you why Detroit will never move into the 21st century.

This community is paralyzed with too much fear and intimidation. Racism also plays a huge role in preventing Detroit from coming into the 21st century. I have never thought to see the day that the old guard of leadership is preventing young people from taking the mantle of leadership because the old guard are afraid of change.

It's not just Detroit but in other urban areas across Michigan such as Southfield and Pontiac. How can you change the direction of our urban communities if we keep recycling the same people over and over again?

For example, Mayor Bing hired Warren Evans to be the Detroit Police Department Chief. Meanwhile, Wayne County hired FORMER Detroit Police Chief Benny Napoleon. So between these two men what FRESH ideas are we going to see here in Detroit and Wayne County?

Look at the leadership on the Detroit City Council. The incumbents are in support of the same union network that is killing job growth in the City of Detroit. Yet, they claim we want to see Detroit in the 21st century. They are not telling the truth.

Our city has been ran so poorly over the years that we need radical and revolutionary changes just to even make the Black Enterprise top 10 cities to live in.

Bing has warned that the city could run out of cash by October and that at least 1,000 workers must be laid off if bankruptcy or an emergency financial manager is to be avoided. Yet, the unions are fighting this.

The city spends most of its money in four departments, according to the 2009-10 budget: Police, Fire, Transportation and the Department of Public Works. This year's price tag for all four: nearly $950 million.

Detroit subsidizes about $80 million alone annually to run the Detroit Department of Transportation -- something no other major city does. This is a waste of money. The best plan for this is to consolidate both DDOT and SMART into a regional transit authority similar to the Regional Transportation Authority in Illinois. However, I also think we need to look out the box and begin discussing privatizing.

(1) Detroit may need to privatize DDOT and lay off union workers.

The city could competitively franchise the entire bus system to one of a number of large bus companies, for a period of up to 20 years. Under such an arrangement, the private company would provide a basic level of service specified by the city of Detroit, charge fares within a broad range authorized by the city, and renew the bus fleet and facilities. Like D-DOT today, the private company would have an exclusive right to operate service along the city's routes.

Another option would be to have competitive contracting. In England, London Transport, which is twice the size of New York City's public transit system and 15 times the size of D-DOT, competitively bids out to private contractors all of its bus services. Competitive contracting has reduced operating costs 45 percent, inflation adjusted. In addition, service quality and the number of passengers using the system are both higher than before. London Transport maintains its right to establish routes, fares, and service standards. It even tells the private contractors how to paint their buses.

London is not the only major urban area to competitively contract its transit services. Other cities that have competitively contracted transit services, or are in the process of doing so, include Stockholm, Sweden; Copenhagen, Denmark; Adelaide and Perth, Australia; and Helsinki, Finland. The European Union is issuing regulations that will require most public transit systems to be subject to competition. In America, the cities of Denver and San Diego have saved 35 percent and 40 percent, respectively, thanks to competitive contracting for transit services.

Detroit could reduce the cost of its operations by at least 40 percent using competitive franchising or competitive contracting. This estimate is based on hourly operating costs. Detroit spends more than $75 per service-hour per vehicle, whereas competitively contracted buses cost approximately $45 per hour, a 40-percent difference. Savings of this magnitude could exceed $60 million annually.

Detroit outlaws the use of "jitney" services by private vendors. A jitney may be a taxicab, van, or minibus that charges a flat fee while operating along established routes. In New York, jitneys are providing low-cost, flexible service to low-income residents that is less costly than transit service and more convenient for many riders. Many will provide door-to-door service for repeat customers. If legalized, they could supplement current transit service, reduce subsidy requirements, and provide a new source of income for city residents who could become jitney entrepreneurs. All of this would benefit the community by increasing employment and providing higher levels of service to people who do not have ready access to automobiles.

Some other things we need to look at.

(2) Privatize the Department of Public Works.

There are many different types of privatization. One of the most common is "contracting out," or "outsourcing," a process whereby a unit of government contracts with a private firm to provide some service. Another common form of privatization is when a government gets out of providing a service entirely.

Refuse collection provides good examples of both of these types of privatization. In Traverse City, for example, citizens privately contract with any one of four private, for-profit companies for their garbage collection. In fact, municipalities throughout Michigan and more than 50 percent of U.S. cities contract out some or all of their refuse services.

So how come Detroit cannot do the same?

Even the threat of outsourcing garbage collection can force city services to do better. A great example of this took place in Flint, where bulk pick-up — garbage consisting of large and odd-sized items such as mattresses and refrigerators — used to cost the city an additional $400,000 annually.

Why? Because city public works employees would pick up only small and regular sized trash during normal working hours and return on overtime to collect bulk items. In 1994, to end this practice and to save money for the city, Former Mayor and current State Representative Woodrow Stanley solicited bids to collect and dispose of refuse from five private companies. The bids Stanley received confirmed his suspicion: Privatization could cut the city's total garbage collection cost by about $2 million.

Flint's city employee unions knew the mayor was serious and worked with him to develop a plan that would shave about $1.4 million from the budget. In addition to agreeing to collect bulk items during regular working hours, city employees agreed to increase the number of stops on each route, reduce the number of shifts from two to one, cut the sanitation staff, and require workers to work a full eight-hour day instead of going home early as they often had done in the past. The result: better service for less money. Total spending on waste collection dropped 31 percent the first year after the concessions took place.

Now if FLINT can do this what is Detroit waiting for? Get rid of the union workers and privatize the trash to save money. It's not rocket science.

(3) Privatize EMS

This is a BIG one for me. I never understood why the Detroit Fire Department utilize EMS services. No need for a regional authority on this one. We need to privatize EMS. Period.

How many times have we called EMS only for them NOT to show up or it took so long that we just drove ourselves to the hospital? There is solid evidence to support the argument that we go through here in Detroit would not have happened in a similar event in Chicago, Los Angeles, San Diego, or several other large American cities. These cities, and a number of other large cities in America as well, have much faster EMS response times than seems to be the case in Detroit.

Chicago, with a population of 2.8 million, reports EMS response times average 4 to 6 minutes. Los Angeles, now the second largest city in America with a population of 3.8 million, reports EMS response times average 5 to 8 minutes.

Yet, unlike Detroit, these cities have completely restructured their EMS systems to make use of private EMS providers working in concert with traditional public fire departments to assure maximum efficiency. There can be do doubt that this restructuring has not only contributed to more rapid EMS response, but to lower per-capita EMS costs as well.

Grand Rapids, the most populated of the Michigan cities listed relies on private providers. Flint used private providers working in concert with the public fire department. Other Michigan cities were Sterling Heights and Ann Arbor. More recently, smaller cities, such as Traverse City, Kalamazoo, Grand Ledge, Portage, and Jackson, as well as Wexford County, have moved to full private provision. Cost savings have been reported as high as 50 percent. Saving 25 percent from Detroit's EMS bill would knock $5.3 million annually from the cost of providing this service.

(4) Sell Belle Isle to a private entity.

How much might Belle Isle sell for? I'm not sure but since the island is in decline I cannot see why we cannot change this island into another Mackinac Island in Southeast Michigan. There are assets on Belle Isle including the two golf courses, a driving range, and several buildings that are not included in the estimated valuation. Belle Isle would generate an estimated $14 million in property taxes per year according to some sources.

The island could be sold to a builder or group of builders under a guarantee that the city of Detroit would exempt all commercial activity on the island from past or future city regulation.

The owner(s) could then prominently advertise to interested businesses and the general public the island's freedom from city regulation. Patrons coming to the island would do so with the knowledge that they were voluntarily entering upon unregulated territory. The attraction: bargain basement prices for virtually all goods and services.

The owner or owners also could draw up zoning ordinances and island speed and noise limits, and hire a private security force, possibly through Wackenhut Corporation, a private, for-profit security firm already under contract with the federal government. A Belle Isle private police force could be armed, make arrests, and book suspects where necessary, just as city law enforcement does now. Serious crimes, such as homicide, could be handed over for adjudication by city police.

Other parks such as Rouge Park and Eliza Howell Park could also be privatized or turned over to Wayne County Parks or Metroparks.

(5) Privatize Public Lighting

Detroit runs its own electric power company. Because the city's Public Lighting Department operates with far less efficiency than private, investor-owned utilities, it must of necessity feed on the economic lifeblood of the city. This drains funds away from other city services that might otherwise improve. Private utility companies — of which there are many — can do the job far better for less money.

Detroit has appropriated over $70 million to fund Public Lighting operations and capital improvements which includes a $12.7 million subsidy to cover the shortfall in expected revenues. In other words, far from operating at a profit like a private company must in order to survive, the city currently is operating its power grid at a nearly 19-percent annual loss. This perpetually hemorrhaging arrangement is what generates the more than 318 million kilowatt-hours of electricity that 1,578 public entities and private businesses are forced to use because it is their only choice. Detroit's energy customers include city departments, public schools, police stations, fire houses, libraries, the Joe Louis Arena, the Michigan Department of Transportation, Wayne State University, Cobo Center, City Airport, and the People Mover.

Selling Detroit's electrical power system to an investor-owned utility such as Detroit Edison would benefit the city in several ways. First, sale of the Public Lighting Department to a private company would generate a huge, one-time influx of much-needed cash. One Detroit utility expert says electric utilities commonly sell for 1.5 to 2.5 times their equity (which could place the private sale of Detroit's Public Lighting at between and estimated $300 million to $500 million.

Another benefit of selling the utility would be the steady flow of new revenue into city coffers through property taxes paid by the utility. But perhaps most important of all is that the sale would result in better service to customers, who could rest in the knowledge that those providing their power are doing so on the understanding that failure is not an option, as it unfortunately can be in a public-sector operation, which continues to receive funding regardless of how efficient or inefficient it is.

Mayor Bing was correct when he said he wanted to privatize the Public Lighting Department. We need to get behind and support this effort. Either we have lights on in the streets or our people will fall victim to crime. Ask the union workers, who most do not live in Detroit and enjoy the benefits of living in areas like Redford where the lights are on, if safety is a major concern of theirs?

In a silver rights era we need to become self-sufficient not dependent on government. Our city is broke. The civil rights/black power leaders are still pitting Detroit against white people and the suburbs. Therefore, we need leaders who are going to handle the pressures of creating a new silver rights reality here in Detroit. It's time to bust up the unions once and for all. It's time for new leadership that will work for us.

If Detroit was to get an emergency financial manager he/she would do exactly what I have recommended. So we might as well come into the 21st century and support a mayor who has the best interest for Detroit.


AL said...

Alot of liberal democrats and so called black leaders love to race bait because they really can't win an argument, if god came down to earth and said i am going to wipe out racism they would beg god not to because they make a living on racism and pitting people against each other " barrack obama". As a black american and also a descendent of a black american revolutionary war soldier i am ashamed to say i used to be a democrat and live in detroit. I agree that that detroit needs to go to private companies, to many black people expect the government to give them something, most of the union workers live outside of the city anyway and wonder why the city does not have money to pay its workers or its bills. Tax base comes from home owners,if you do what you are supposed to do on a job you never need unions, all they do is get idiots there jobs back.

Tig3rzhark said...

I would like to know, what would it take to consolidate DDOT and SMART.

Both systems, use union workers and the city is spending a lot by itself on DDOT.

Consolidating the services together would truly save a lot of money, yet it is difficult to get both of them to sit at the same table.

Anonymous said...

While I agree some services need to be privatized, so of your arguments on on why are not quite on point. The bus system actually provides revenue for the city which is allocated elsewhere, 100% of the revenue is put into the general fund. The proceed leaves me baffled. By correctly running Detroit and it's departments as a corporation with many subsidiaries, only a percentage of each department's revenue should be put into the general fund and the rest should stay "in house" to run each department. The general fund should be used to fund not profit generating departments. As it stands now, you can get a true measure of how the bus system is faring. Maintainance is currently being funded via Federal dollars allocated from the Federal Dept of Transportation and State funds as well, not by rider fares and Detroit tax dollars. Privatizing the service won't solve any of the deficit problems now or in the future. What's needed is a true forensic audit of the city's budget to really track where all the money is going and to who's pockets. The city isn't spending more than it's bringing in via taxes, state and federal assistance.

Anonymous said...

I must say what an ass this guy is. Im assuming this Uncle Tom doesnt realize what his ideas would do to our communities. With your ideas for Detroit, I would like to give you my ideas for your website...delete it! Your talk is anti-Detroit and Anti-Minority!