New Deputy Mayor's Privatization Push Still Has Critics

Civic Center — When Mayor Bloomberg tapped former Indianapolis mayor Stephen Goldsmith in April to replace longtime aide Ed Skyler as the city's new deputy mayor for operations, all the talk was about the new hire's credentials as an innovator at remaking government through privatization. The Times called Goldsmith, a former two-term mayor of Indianapolis who officially started work at City Hall on June 1, "a national leader in the movement to introduce corporate-style accountability and cost-cutting into government bureaucracy." Bloomberg enthused about his new hire, "Lots of people talk about reinventing government; I think it's fair to say Steve has actually done that."

According to some of those who saw Goldsmith's work firsthand in Indianapolis, however, his record is mixed. The Indianapolis miracle, say many community and labor leaders, was less an indicator of the magic of privatization than of its limits.

Goldsmith was elected mayor in 1991 on a platform of privatizing city services, and immediately set out to put his plan into action. Goldsmith appointed a "Service, Efficiency, and Lower Taxes for Indianapolis Commission" (SELTIC), led by private business leaders, to examine every facet of city government for possible privatization. The core of his philosophy was what in his 1997 book "The 21st Century City" Goldsmith called the "Yellow Pages test": "If the phone book lists three companies that provide a certain service," he wrote, "the city probably should not be in that business."

Despite declaring that "my goal is not to lay off city workers," Goldsmith immediately announced a series of layoffs, as a part of a massive reorganization of city departments, particularly those overseeing construction and public works. Agencies involved in regulatory oversight were a favorite Goldsmith target. The city's Equal Opportunity Division lost 14 of its 21 employees; the department responsible for buildings code inspections dropped from more than 400 workers to 341. At one point, Goldsmith directed the city's Health and Hospital Corporation to use health and safety regulations "only after other alternative measures, including market-based environmental protection, are sufficiently explored." His predecessor as mayor, William Hudnut, later reported that Goldsmith's deputy mayor declared the new administration's motto to be: "If it ain't broke, break it and then fix it."

An all-out war

The response of the municipal unions "was predictable," recalls Steve Fantauzzo, an American Federation of State, County, and Municipal Employees official who was head of the AFSCME district council in Indianapolis during Goldsmith's time as mayor. "The first eight to ten months of his administration was an all-out war."

When Goldsmith moved from layoffs to actually privatizing services, his initiatives featured a common theme: City services would be farmed out to a private firm, which would then hike fees. If this raised issues of fairness for low-income residents who couldn't afford the new rates, the fiscal results weren't much more promising. After Goldsmith contracted out operations at three public swimming pools, for example, fees soared (more than quadrupling at one especially popular pool), while attendance fell by 30 percent; after three years, the city ended the experiment and returned the pools to city control.