Debates about privatization can be typically summarized as a disagreement between those who argue for increased public sector productivity and those who are fighting to maintain well-paying jobs. The contracting out of public services often means fewer expenses paid by the taxpayer, but it also frequently implies the replacement of unionized, pension-funded employment with lower paying, less secure jobs.
A recent effort to privatize Florida prisons, for instance, would save the state up to $22 million, but require the firing of 4,000 correctional officers.
Yet the contracting out of public services to private enterprises can also result in less obvious, arguably undesirable changes in public policy. A new U.S. Public Interest Group study by Travis Madsen and Phineas Baxandall focuses on one significant issue: The installation of red light cameras in American cities.
In the report, the authors document the almost 700 jurisdictions that have decided to install automated cameras at some of their stoplights with the goal of ticketing the owners of automobiles that run through red lights. The concept is straightforward: By increasing enforcement of these traffic violations, drivers will be less likely to commit the offense, which accounts for 2 percent of fatal car accidents in the country, or more than 600 deaths a year.
But the deals municipalities strike with the distributors of the cameras—Redflex, American Traffic Solutions, and Affiliated Computer Services are the biggest of them—may be putting the public in danger, the study warns. The problem is that many of the contracts signed with these companies force cities to commit to standards that encourage the running of red lights. In whose interest is that?
Some of the contracts, written by the companies themselves and later signed by municipal governments, require each camera to record a certain number of red light-runners every year and for police departments to issue a minimum number of tickets. The companies, after all, have a fiscal incentive to have as many people as possible move through the intersection illegally, since they usually pocket a percentage of the ticket fee.
In other cases, democratic decision making regarding such cameras can be costly. In Houston, the termination of a red light camera program by public vote resulted in a legal action from contractor ATS demanding $25 million in early termination fees, more than the company had spent on the program's installation.
This puts cities in a bind: Their efforts to reduce traffic violations necessitates the continuation of those violations. Thus there is a disincentive, sometimes monetarily built into the contracts, to introduce programs to actually do something about reducing the occurrence of red light-running. The lengthening of the yellow light part of the cycle or the alteration of street geometries to change travel patterns, each meant to dissuade drivers from entering the intersection, are not so easily implemented when there's a contract in place requiring that a certain number of people continue to commit the offense. The public interest in reducing accidents is subverted by making efforts to do so financially infeasible.
Unfortunately, the case of the red light cameras is not isolated when it comes to privatization contracts. As Aaron Renn described last year, Chicago's 75-year lease of its parking meters to a group led by Morgan Stanley could limit the ability of the city to use its streets as effectively as possible. If the city wants to eliminate parking for the installation of sidewalk cafes or a bus rapid transit line, it will have to pay the lessee of the meters a fee. This limits the appeal of investing in street improvements, since doing so will cost the city money.
Contract language is often at fault in these situations: Legal efforts by private firms to secure their investments may be reasonable in terms of guaranteeing profits, but they can come at the expense of the public. With limited legal staff and often inadequate expertise in contract writing, municipalities can fall into a trap without even knowing it.