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If a car manufacturer doesn’t know how much it costs to build one of its automobiles that company will eventually go out of business. This market discipline is a familiar part of the private sector and encourages businesses to more efficiently produce goods and services. It is something that we as consumers all benefit from. Unfortunately, a similar discipline usually isn’t found in government, and if our city leaders feel they’re in a financial pinch they usually just compel more money from us the taxpayer.
 

We must find a better way. I propose that the city implement activity-based costing so we can discover how much it costs to provision city services. In order to better allocate our municipal dollars city managers need to know how much it costs to fill in a pothole, pave a street, or pick up the garbage. With this ABC or outcome accounting our managers will be able to identify gross examples of wasteful spending and better direct the expenditure of municipal dollars. Where appropriate, activity-based costing would also help city leaders identify municipal services that might be put out to competitive bid. By marketizing certain services we will force city departments to compete with private entities. The city of Indianapolis has done this very same thing since the early 1990s and has saved hundreds of millions of dollars We need to do similarly.