A Germantown firm is slated to assume management of the three public libraries in Santa Clarita, Calif., in July, a move that has ignited a passionate debate over whether some municipal functions should be off-limits to for-profit operators.
Opponents of the deal call public libraries, like fire or police protection, the epitome of local government service. And even in these shaky financial times, they shudder at the idea of libraries being run by a firm looking to make money.
“Nobody was complaining about the libraries here. Nobody,” said Lynne Plambeck, a Santa Clarita resident who opposes the contract with Maryland-based Library Systems and Services. “I don’t know why they are doing this. I worry about a private corporation having control over our libraries.”
Santa Clarita officials say the deal would give taxpayers better service for less money — which proved to be a clinching argument at a time when many state and local governments are grappling with record budget gaps.
Similar outsourcing debates are echoing across the country as cash-strapped governments look for new ways to raise money, pare operating costs and shed workers along with their burdensome pension and health-care costs.
In Arizona, officials sold the state capitol building that the government now leases back. Wisconsin Gov. Scott Walker’s (R) controversial push to curtail the collective bargaining rights of public workers in the state also made it easier to privatize state-owned power plants at prisons and university campuses.
In Ohio, Gov. John Kasich (R) — who also has signed legislation severely restricting collective bargaining rights for public workers — has announced plans to privatize five prisons. Kasich also wants to find a private firm to lease the lucrative state-run liquor distribution operation.
Outgoing Chicago Mayor Richard M. Daley (D) championed privatization of the city’s parking meters in a much-maligned deal that was followed by a similar deal in Indianapolis. Officials in Harrisburg, Pa., which has flirted with bankruptcy, have considered privatizing the city’s parking garages and meters to raise a one-time shot of money. Other cities are examining having private firms operate their water and waste water systems.
Locally, Gov. Robert F. McDonnell (R) is moving to privatize Virginia’s state-run liquor stores.
“We are seeing a significant uptick in governments that are looking at this,” said D.J. Gribbin, managing director of Macquarie Capital, a global investment firm that has interests in a wide range of public infrastructure projects, including the Chicago Skyway and the Indiana Toll Road. “This is being driven by the fact that states and counties and cities have to look at better ways of doing business.”
When governments sell or lease public assets, they often reap a huge windfall, while shedding increasingly onerous employee costs. Meanwhile, proponents say, private operators often bring new technology and the ability to make rapid management changes that often elude government managers.
But those gains sometimes often come at the cost of ceding control of services seen as crucial by many taxpayers. Privatizing assets also means forgoing reliable revenue sources long into the future, and any miscalculations can cost governments for years.
Chicago’s 2009 deal to lease the city’s 36,000 parking meters to a private firm for 75 years netted nearly $1.2 billion. But the move has been followed by sharp increases in parking rates, leaving many residents incensed at city government.
Overall, the Morgan Stanley-led group that leased the parking franchise managed to raise annual meter revenue from about $20 million to $100 million a year, according to Alderman Scott Waguespack, an outspoken opponent of the deal. The private operator keeps the extra revenue.
“Privatization often sticks the community with the risk while privatizing the profits,” said Lee Saunders, secretary-treasurer of the American Federation of State County and Municipal Employees. “Private contractors can — and too often do — shortchange the public by cutting corners, hiring less qualified staff and paying lower wages,”
Not everyone agrees. Santa Clarita officials say they turned to Germantown-based LSSI to take over their public libraries in an effort to stay ahead of any fiscal problems.
LSSI was launched in the 1980s and originally limited itself to handling support services for federal libraries, including the Library of Congress. But since branching into managing entire public libraries in 1997, it has grown to run 65 libraries and two bookmobiles in 15 municipalities, making it larger than all but four library systems in the country.
In recent years, the firm, which has no major competitors, has been hired to run libraries elsewhere in California, as well as cities in Texas, Tennessee, Kansas and Oregon.
LSSI says it saves money by centralizing many of its financial, clerical and administrative functions, and by cross-training employees so they can perform multiple tasks.
The company says that it offers wages comparable to what employees make in public libraries. Though LSSI offers health and medical benefits, it does not offer a defined pension plan, which most government employees receive. Instead, the firm offers workers a 401(k) with a 10 percent match — which reduces the firm’s long-term obligations.
The firm says it attracts well-qualified employees. “We currently employ more than 100 MLS-degreed librarians and we actively encourage our employees to further their education with tuition support from LSSI,” said the firm’s founder and chief executive, Frank A. Pezzanite.
Still, the impending change has left many people in Santa Clarita worried about the future of their libraries. Opponents have flooded city officials with thousands of petitions. Lawsuits have been filed (and dismissed), and the Service Employees International Union, which represents workers in Santa Clarita’s libraries, has mounted a national campaign against what the union calls the “privatization beast.”
“No private company is going to take on management of the libraries without doing it for a profit,” said Bob Schoonover, a union leader in Los Angeles. “Public libraries are a resource for people.”
Fears about the unknown consequences of private library management — reduced service down the road, space being leased to food and other vendors — led the Stockton City Council and San Joaquin Board of Supervisors to vote down an effort to have LSSI run libraries there.
Nonetheless, plans to put Santa Clarita’s under private management march ahead.
“Much of the alarm comes from misinformation fomented by our critics,” Pezzanite said, adding: “All library policies, including those about fines and fees, are created by the communities we serve. LSSI does not set policies or own any library assets. . . . It is difficult to sit on the sidelines while our company is being attacked and not be able to respond to false and misleading information.”