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Friday, September 17, 1999
Copyright © Las Vegas Review-Journal
The right move
City privatizes a recreation center.
This week's decision by the Las Vegas City Council to contract with the YMCA to run the city's new Northwest Leisure Services Center does not mark the complete privatization of those services, of course.
The building was erected with tax funds. Since program fees are not expected to fully amortize that construction, they still will not reflect real costs, many of which will be born by taxpayers who will never set foot in the place. Furthermore, the city will have final responsibility for programs there, and will even retain a veto over any proposed fee hikes.
Still, contracting with the YMCA to run the new facility (at Cheyenne Avenue and Durango Drive) marks a first step in the right direction -- and one bravely taken over the strenuous objections of both the city Leisure Services Department and the city employees' union.
Other municipalities, most notably Indianapolis, have had great success in recent years "farming out" services once performed in-house. The numbers -- even in this limited experiment -- begin to show why.
At first glance, the bid presented by the YMCA (the only competitor to the city's own Leisure Services Department for the contract to operate the center) appears nearly identical to the proposed budget, had city employees remained in charge. The YMCA projects first-year revenues of $1.12 million and expenses of $1.11 million, running 96 hours of programming per week, while the city estimated it would break even with a budget of $1.15 million, offering 110 hours per week of recreational programs.
But look again. While the city department would have allocated $812,000 to salaries and benefits, the YMCA allocates only $658,000 in that category -- a potential savings of 19 percent.
And far more significantly, should the YMCA's revenues fall short of their expenses, they will have to swallow the loss, according to Deputy City Manager Steve Houchens. This is in sharp contrast to government operations, where there can actually be a perverse incentive to go over budget, the better to justify a bigger budget next year (even with no promise of added revenues.)
"Traditionally, our program revenues (at recreational centers) have not covered our expenses," Mr. Houchens says. "Government employees are more expensive than private employees."
The reason sinecured bureaucrats worry about such an experiment should be obvious: Shortly after the YMCA opens the new Northwest Center in November, a parallel $7 million recreation center is due to open in December next to Palo Verde High School, at Alta and Town Center drives, under traditional city management. This will allow the City Council to use the government-run center as a "benchmark," to see which approach can really offer better service at lower cost.
What, competition?
"We are 100 percent against the idea" of expanding even this limited experiment, opines Mikey Gluskin, president of the City Employees Association. "All city facilities should be staffed by city employees. There is more incentive for them to do a better job because it's their career."
So far.
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