Privatization

I accidentally stumbled on a great example of government privatization yesterday. I was coming back from a trip to Columbus around lunchtime. I missed the exit where Arby’s is, but the next exit showed a Hardees, Waffle House, Wendy’s, and Chik-Fil-A. So I pulled off. When I got on to the ramp they had a sign saying which way each place was. The two I might want (Wendy’s and Chik-Fil-A) were 2.8 miles to the right. That wasn’t much less than if I had turned around and gone back to the previous exit to go to Arby’s. I ended up going down that road anyway and it seemed like I was out in the country. After what seemed a very long way I came across some restaurants, though I didn’t see a sign pointing out which way the places I wanted to go. I ended up giving up and went to Taco Bell.

I have a friend that manages the guide sign program for the state. It used to be that the state would order the signs, install them, keep up with the restaurants, etc. Part of the agreement with the restaurants was they wouldn’t advertise on billboards within a certain number of miles of their blue signs, so the state had people that had to drive around and make sure nobody was cheating. I think the fee at the time was about $1,000 per year to participate in the program and the restaurants had to pay separately for the signs when they were needed (a few hundred dollars every few years). This covered all the state’s costs to run the program. There was a big push to eliminate state positions and privatize the program. A 5-year contract was awarded to a private firm that ran the service in other states (and had lobbied lawmakers for the privatization). I believe the price for the restaurants went up to about $10,000 per year, most of which went into the pocket of the company that ran the program, plus they gave some back to the state to cover the state’s administrative costs.

Anyway, I called the guy and said how crazy it was in a fairly developed area about 30 miles from a major city that the state would be telling people there was a restaurant at the next exit that was really 5.6 miles out of the way (round trip). It seemed to me to be a disservice to hungry travelers. He said there wasn’t much that could be done, but maybe he could come up with some kind of new rules in the next 5-year contract. The restaurants had paid their money and wouldn’t stand for having their signs taken down. And further, the company with the contract was counting on getting the money from that restaurant, so to take the signs down would take money out of their pocket and they would demand the state reimburse them for that.

So what did privatization do? The restaurants are paying a lot more for the service and the public is literally being siphoned off the beaten path after being misled about there being a nearby restaurant. Instead of serving the travelers, the state is accommodating business owners. And that is what privatization is all about.