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Local governments in the twenty-first century face challenges regarding service delivery, finance, the workforce, and citizen engagement. While privatization was a major innovation in the last decades of the twentieth century, lack of costs savings and the loss of public values in market provision are prompting reversals in privatization, increases in regulation, and new approaches to government enterprise. The twenty-first century must focus on rebuilding the capacity of local governments to finance critical infrastructure, attract and retain a skilled labor force, and engage citizen in designing innovative solutions to address public problems. Innovations in public service delivery will move beyond public private partnerships to models that more effectively balance accountability, equity, and efficiency concerns.