Needed: a campaign against privatization

EDITORIAL It’s time for San Francisco to declare war on privatization.

The local threat is very real: as we reported in last week’s special anniversary issue, Mayor Gavin Newsom’s administration has moved to turn over a long list of city services — from housing for the mentally ill to the operation of the public golf courses — to the private sector. Should this happen, if history is any guide, the city would wind up losing millions, the quality of services would decline, and the economy would suffer as hundreds of well-paid, unionized employees lost their jobs.

Equally important, the public would lose control over the institutions that were and are created and run for its benefit.

Privatization is a recipe for corruption. There always has been and always will be some level of graft, corruption, and incompetence in government operations; there will always be the occasional city employee who sleeps on the job, fudges time cards, doesn’t do the job right, and somehow manages to avoid being fired. But that sort of small-time problem amounts to peanuts in comparison to what happens when large amounts of public money are turned over to the private sector.

Private companies are out to make profits — and for the most part they keep their finances secret. Many of the worst scandals in American history have involved kickbacks, backroom deals, and bribery aimed at sending taxpayer dollars into the coffers of big contractors, and these continue today. And the argument that the private sector is more efficient often turns out to be utterly false; the absolute worst waste of money in the nation’s health care system, for example, is the phenomenal overhead involved in private insurance plans. As much as 30¢ of every dollar spent on private-sector health care goes to administrative overhead and profit. The public Medicare system operates on about 5 percent overhead.

Of course, the public has no way of keeping track of where most of the private health care money goes; the insurance companies keep that information to themselves. So do most other private contractors that take public money. And even if you don’t like the way the system is managed, you don’t have much choice — insurance executives aren’t elected by anyone and aren’t accountable to the community.

San Francisco has a history of allowing private operators to take over public resources, and the results have been almost universally bad. One of the reasons the 1906 earthquake caused such devastation was that the private Spring Valley Water Co. — looking only for quick profits and not at long-term maintenance or service — failed to keep its pipes in good repair. When the city really needed water, to put out the postquake fires, it wasn’t available. That fiasco led city officials to develop a municipal water system, which now delivers some of the best, cleanest, and cheapest water in the country.

Of course, Congress gave San Francisco the right to build that water system, which uses a dam in Yosemite National Park, only on the condition that it also develop public electric power. Instead, in the greatest privatization scandal in the history of urban America, Pacific Gas and Electric Co. wound up initially controlling much of the output of the dam, and it still controls the city’s electric grid. The result: some of the highest electric rates in the nation and terrible, unreliable service.

San Francisco officials led the way to the privatization of the Presidio, turning over a national park to an unaccountable quasi-private board that operates as a real estate developer. The results: A giant commercial office complex, built with a $60 million tax break. Plans for high-end condos. Traffic problems, neighborhood problems — and a stiff bill to the city’s taxpayers, who have to subsidize private businesses that operate in a federal enclave without paying local taxes.

And if Newsom has his way, the pattern will continue: the mayor’s signature project this past year, for example, has been an attempt to let a private company control the city’s broadband communications infrastructure. Tens of millions in city contracts go every year to private nonprofits that fight like hell to avoid sunshine and accountability.

Enough is enough — San Franciscans of every political stripe need to organize to fight back. This city needs a new political coalition, a campaign against privatization.

There are all sorts of specific policies and legislation that ought to be on the agenda. For starters, privatization expert Elliott Sclar, a Columbia University economist, argues that any private business that takes city money to provide public services ought to be required to abide by open-government laws. That means every scrap of information related to that contract — including financial projections, executive salaries, profit and loss statements, and operating overhead figures — would be public record. All meetings of boards, panels, or other policy-making entities involved in managing the contract would be open to the public. If a private business doesn’t want to abide by those rules, fine; it can stick to private-sector work and stop bidding on government contracts.

Beyond that, the city needs to set up a task force to look at every private contract San Francisco hands out and determine why the city isn’t doing the work itself. If selling electricity is so profitable (and it clearly is, or PG&E wouldn’t be fighting so hard to keep its illegal monopoly), why can’t the city take over the job and bring in some revenue? If there’s money to be made building bus shelters and selling ads on them — and clearly there is, since Clear Channel Communications, a giant private company, went out of its way to get a contract with the city to do so — why can’t San Francisco make that money for the General Fund? If a private company can make money running the golf courses, why can’t the city?

Sure, there are times when it makes sense to bring in an outside contractor. We’d argue, for example, that the Board of Supervisors needs an independent budget analyst, not tied to City Hall, to monitor budgets and spending. But there are millions of dollars going out City Hall’s door every year to private outfits that aren’t accountable to the public. And there are millions of dollars that ought to be available for badly needed public services that the city is losing because some private operator is making a profit on public resources.

Organized labor has every reason to oppose privatization and ought to play a lead role in creating a new coalition. So should the public-power coalition and the folks who have been demanding sunshine for the nonprofits. But everyone who uses public services and pays taxes in San Francisco is affected when city money gets stolen, wasted, or diverted. It ought to be a broad-based coalition.

There’s an opportunity to turn things around here and make San Francisco the model city that it ought to be. There’s no time to waste.