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Jewish World Review / June 26, 1998 / 2 Tamuz, 5758

Mona Charen

The Republican city

SAY THE WORDS "SELF-EFFACING, modest, straightforward and dedicated to principle," and who would conclude that you were describing a politician? But those are the words that first leap to mind when Mayor Stephen Goldsmith of Indianapolis is the subject.

Miracle mayor Goldsmith

In two terms as mayor, Goldsmith has produced a small urban miracle in the nation's 12th largest city. A dedicated small-government conservative whose hero and mentor is Milton Friedman, Goldsmith has put into practice ideas that Republicans never tire of discussing but almost never implement. How many Republican candidates have promised to run the city (state, country) "like a business." But once in office, many Republicans become creatures of government instead of critics, protecting their own slices of pork and providing patronage to favored friends.

Goldsmith didn't attempt to run the city like a business --he knows governments are never going to have the discipline of the market to rein them in -- but he did attempt wherever and whenever possible to introduce the element of competition.

As he explains in his surprisingly readable new book "The Twenty-First Century City: Resurrecting Urban America," it looked to most observers in the 1970s and 1980s that America's major cities were caught in an irreversible downward vortex. In order to redistribute income, cities raised taxes. Higher taxes and urban crime rates drove more city dwellers into the suburbs. Faced with the loss of revenue due to middle-class flight, cities raised taxes even more, which in turn drove more people out, and down the spiral went.

Goldsmith believed his city could avoid going down the drain. He believed that by adhering to free-market principles, the city could be run more efficiently as well as more economically -- that the city could save money and avoid raising taxes.

His first experiment in "marketization" concerning filling potholes. When word got out that the mayor intended to seek competitive bids on street maintenance, the union representing transportation workers was in an uproar. Though Goldsmith promised that they were free to bid on the work, they were certain that he was setting them up.

In a private meeting, union representatives told the mayor that it was unfair to expect them to bid competitively when they were saddled with 32 politically appointed supervisors at very comfortable salaries. Complicating matters for Goldsmith was the fact that the supervisors were all Republicans. Indianapolis has been a Republican city for some time.

But Goldsmith perceived that if he flinched on streamlining the supervisors, his credibility as a free-market reformer would be sacrificed, and so he transferred or terminated 14 of the 32 supervisors and also provided the union with a consultant to help prepare its bid.

The results were dramatic. With the spur of competition, the union devised a thousand ways to improve efficiency. They did in fact submit the low bid. And whereas the city had previously been paying $425 per ton filling potholes with asphalt, the new proposal brought the city's cost down to $307 per ton, a 25 percent reduction.

The city of Indianapolis applied this lesson over the next eight years to 70 different areas of service. Pre-Goldsmith, the city had been operating three print shops at a cost of $1.4 million annually. After the work was contracted out, Pitney-Bowes was able to do all of the tasks the city had done plus more for only $1 million per year.

From towing abandoned vehicles to waste-water treatment, Indianapolis saved money for taxpayers and improved service by turning to competitive bidding. Goldsmith got into some trouble for saying that a city could be run with "just a mayor, a police chief, a planning director, a purchasing agent and a handful of contract monitors." He was exaggerating but not by much.

By streamlining non-essential services and "marketizing" everything else, Goldsmith was able to add 100 new police officers, improve fire protection and spend $750 million on infrastructure. During each year of his mayoralty, the city's budget was reduced, and taxes declined slightly.

The city is now enjoying an unprecedented boom and has been host to 3,500 mayors, governors and councilmen from around the world seeking the key to such success.

But as Goldsmith will tell you, the key is easy -- stick to your principles.