RDS In The Media
Try running government like a business
Randy Godeke, RDS
March 18, 2007
The March 5 edition of The Birmingham News featured an Associated Press story entitled “Lawmakers push IRS to increase tax collection.” The IRS claims that a $300 billion deficit exists between what taxpayers owe and what they actually pay – enough to cover the federal deficit for a year.
The tax deficit at the federal level is simply a reflection of the problems on the local level. In the Opinions section that same day, a concerned citizen and former librarian opined that the library at Birmingham’s W.J. Christian School was in serious need of renovation. More often than not, we read about needs like these that cannot be filled due to budgetary restraints, often leading to proposals for tax increases.
Progressive local governments see the need to bridge the tax gap and many are already achieving results. They have turned to the private sector to maximize their collection rates.
A perfect example is the City of Bessemer, who has uncovered over $500,000 in unpaid business license fees over the past three years. This may not seem like much, but $500,000 is enough to build a new fire station, or cover nearly ten teacher’s annual salaries based on current average pay in the state.
Doing business with the public sector is not a new concept by any means. Trash collection, road and facility design and construction, and other public services have been outsourced to companies that are better suited to handle those tasks.
In recent years, progressive governments have found new ways to build partnerships with the private sector to provide more efficient services to its constituents. In fact, the city of Sandy Springs, Ga. outsources all government services except for police, fire and 911. The city turned to a prominent engineering firm to contract with firms to provide for everything from human resources to parks and recreation.
Turning over certain core services to the private sector has several advantages. Tax collection is yet another avenue through which government benefits from privatizing.
Private sector entities have years of experience in their specialty field. For instance, tax collection agencies have years of experience in accounting and debt collection, and are better-equipped to analyze revenue streams and find uncollected or underpaid fees for business licenses, sales tax and other revenues.
The resources available to a private company far outweigh what most municipal and county concerns can spend on software and other systems necessary to conduct revenue collection tasks. Instead of pouring thousands of dollars into capital expenses, governments can focus their budget on other areas.
Most importantly, businesses are results-oriented and motivated to make money. For instance, typical debt collection contracts do not require upfront costs – the collection firm charges a collection fee to the debtor.
A great example of this results-oriented approach is Brasfield & Gorrie’s swift rebuilding of the I-65 bridge in 2002 and the I-20/59 overpass in 2004. The contract terms for these projects included incentives for early completion as well as penalties for missing the completion deadline. Each emergency replacement was completed in under six weeks.
In the end, citizens and businesses in the municipality or county benefit from improved service. Perhaps the federal government needs to look at what the local governments are doing. The locals may have smaller bites to chew, but the process is still the same -- so are the results.
Randy Godeke is a consultant for RDS and former Director of Revenue for Jefferson County.