Privatization saves library from itself
My View • Why wouldn't Multnomah County want to save money on service?
Sometime in the next three months, the Multnomah County commissioners will decide whether to place on the May ballot a measure creating a new taxing district for the county library system. If approved, this would become the chief source of tax support for the district, replacing the five-year operating levies that have been the norm since 1990.
However, before commissioners spend too much time debating the measure, they should back up and ask how much money the library system really needs. There are several indications that the costs of operation are too high.
The most troubling sign is the comparison with other medium-sized urban libraries. The Multnomah County system includes 18 branches, and we spent $62 million to operate it in fiscal year 2010-11. Denver has 22 branches and spent only $30.9 million. How does Denver operate more branches at half the cost?
Seattle has 27 branches that the city operates on a $50 million budget, while Minneapolis has 40 branches with a $69 million budget.
Not only are Multnomah County costs high in comparison, they are rising at a rate much faster than inflation. For example, in 1993-94 the annual library operating budget was $19.5 million, which supported 325 full-time equivalent (FTE) positions (roughly $60,000 per FTE). In today's dollars, that would equate to $92,000 per FTE, all else being equal. Yet in 2010-11 we spent $127,000 per FTE.
There has to be some fiscal restraint even for services we love. But in traditional public sector collective bargaining, restraint is virtually impossible. Management represents a government monopoly, and across the table is a labor cartel (otherwise known as a union). A monopoly negotiating with a cartel is unlikely to result in a low-cost outcome.
The solution is to shop around and take multiple bids. Jackson County, Oregon, shut down its library system in 2006 due to financial strain. As soon as officials were in a position to consider re-opening, the county took competitive bids for operations. A private firm in Maryland, Library Systems and Services, offered a bid several million dollars lower than the public employee union. That bid was accepted and allowed the county to open the library system again.
LSSI operates library systems in 17 locations around the United States. By specializing, it is able to offer a better user experience at a lower cost.
Library purists may be hesitant to embrace this model, but it's commonplace in other sectors of the economy. Timberline Lodge, Crater Lake Lodge and the Oregon Garden are all operated by private concessionaires. Central Park in New York and Portland's Pioneer Courthouse Square are both managed by private non-profits.
As part of its due diligence, Multnomah County's Board of Commissioners should compare the cost of our library system with the cost of libraries in other similar cities, then seek competitive bids for operation. The bidding process will provide valuable information that can never be gained by mere study. That information is essential for sound management decisions.
John A. Charles Jr. is president and CEO of Cascade Policy Institute.