In government outsourcing, governments contract with private-sector firms to have them perform certain services. Outsourcing is not as big of a step as privatization, because the government still owns the asset and is responsible for the service. It just pays a private company (sometime a non-profit) to perform the service being outsourced. St. Louis County government is considering outsourcing the facilities maintenance operations of county buildings to a private company. I think that is great, and I hope the county does it.
There are many successful examples of outsourcing in local government in Missouri. A lot of my work at the Institute has focused on park and recreation outsourcing, so those are the examples I’ll give. Privatizing park services is obviously unpopular with residents, as few wish to sell their parks. But outsourcing park operations is more common than people may realize.
In 2021, the St. Louis suburb of Des Peres outsourced the management and lifeguard services for its swimming facilities to Midwest Pool Management (MPM). Des Peres estimated it would save between $60,000 and $80,000 per year by outsourcing the operations. MPM operates aquatic centers for numerous cities in the St. Louis region, as well as the Springs at Tiffany Hills in Kansas City. Other recreational facilities that are ripe for contracting and outsourcing management of include (actual examples in parenthesis): tennis centers (Shaw tennis center in Clayton), ice rinks (Steinberg rink in St. Louis City), golf courses (many locations, including Forest Park in the City of St. Louis ), and restaurant facilities within parks (Creve Coeur Lakehouse restaurant in St. Louis County).
Assets such as municipal golf courses, skating rinks, and tennis centers can be primarily funded by user fees instead of general taxes. Instead of spending tax dollars to operate these amenities, cities can enhance revenue and focus on core services by outsourcing recreational assets to companies that specialize in those areas. For example, the City of St. Louis received $402,260 in 2021 in lease payments from private operators to operate the golf courses in Forest Park (page 21 in link document). Similarly, St. Louis leased out its Forest Park ice rink for $45,000 per year to a private operator. These arrangements provide better services for customers and a better result for taxpayers. In every example I’ve given above, local government still owns and is ultimately responsible for the asset.
According to the primary survey on this subject, about 25 percent of local governments outsource their facilities management operations. So, while it may not be standard, it isn’t rare. St. Louis County has a responsibility to negotiate hard for the taxpayers and be sure the contract isn’t too long. While the article on the deal makes it seem that the county is paying more in outsourcing, the numbers in it don’t include the long-term pension and health-care costs for government employees, and that is where savings from outsourcing really come in. As one guide on this topic put it:
Outsourcing can mitigate the long-term structural challenges faced by governments with regard to health care and retirement benefits.
In this particular instance, the county is simply having trouble filling these jobs as it is, so this outsourcing example is as much out of necessity as a choice. (It is hard for the county just to give its facilities employees a raise without giving all county employees larger raises, and that would really hit taxpayers hard.)
Local governments should privatize, outsource, or share services with other governments as much as they can. Residents, taxpayers, and voters (most people are all three, of course) all benefit from it.
