Competition works for
Greater Saint John municipalities and taxpayers
The municipalities in the Saint John region have made considerable progress toward increasing the level of competitive local government services delivery but they could do more says AIMS’ latest Urban Futures paper.
Dr. Robert Bish, author of “Organization and Opportunities: local government services production in Greater Saint John” says that, “…the key is competition, which, through smarter thinking and more careful management, leads to higher productivity.”
AIMS’ Urban Futures initiative is exploring how municipalities of all sizes can become more efficient and provide better service. Using the Greater Saint John region of New Brunswick as an illustration, this paper reflects on how small and medium size municipalities can improve the quality of services for residents and value for money for taxpayers.
The local governments in Greater Saint John outsource many activities, often through competitive tendering, although Saint John, like most central cities, undertakes more in-house (it has its own police and fire services, for example) than do its suburbs. Because of the market for municipal services in the area, local governments can compare options and choose the most efficient way to provide needed services.
Says Bish, “Rothesay and Quispamsis, in particular, outsource many of their activities, and Quispamsis has moved far toward activity-based costing in its general budget. Saint John has also moved toward competitive outsourcing, but it could do more.”
Since the 1950s, local governments have been moving away from producing services exclusively in-house. Modern municipalities use a complex array of competitive options to ensure efficient and cost-effective service delivery. These options include contracting out to private companies, other municipalities, and other levels of government, as well as greater inter-municipal cooperation via collective regional delivery.
With these advances has come the growth of market-like structures for the provision of government services. As a consequence, the need to know, and budget for, the cost of specific activities has grown greatly in importance. Local governments have learned to distinguish between “functions” (such as policing) and the specific “activities” (police patrols, homicide investigations, laboratory testing) that make up a function.
“Given the growing importance of the need to know and budget for the cost of specific activities,” says Bish, “…it is unfortunate that Quispamsis is the only local government in the Saint John region that employs activity-based costing in its financial reporting.”
The budgets of the other municipalities retain a traditional line item format, but Quispamsis combines its line items to produce activity-based costing figures for a large number of activities. This approach allows immediate and meaningful comparison of service delivery options by incorporating all underlying costs, including shares of utilities, telephone, maintenance, fuel, and vehicle insurance. In addition, Quispamsis nests expenditures on contracting out in the respective department and activity budget so it is possible to see what in-house expenditures are associated with contract expenditures — ensuring that all costs are considered and that there is no unfair bias against in-house services provision. The paper concludes that the other municipalities should follow the lead of Quispamsis in this area.
Other issues highlighted in the report include: