Residents of Sandy Springs, a suburb of Atlanta, recently decided to incorporate. With 90,000 residents, their brand-new city is already Georgia's seventh largest. But it won't have the seventh-largest government. In fact, it will hardly have a government at all. Except for police and fire, all public functions will be privatized. It's a bold stroke, but it isn't the first one of its kind. Centennial, Colorado, chose to do something similar when it came into existence five years ago.

Centennial came into being because local residents were worried that commercial land would be annexed by a neighboring municipality, leaving them exposed to increased tax rates to make up for lost revenue. After more than 100 town meetings on the subject, the inhabitants of Centennial voted overwhelmingly in favor of incorporation. The community, which is about 15 miles southeast of Denver, became the largest city-from-scratch in U.S. history.

Some 104,000 people live there, but there's virtually no public payroll. Fewer than 30 full-time employees oversee Centennial's services, just about all of which are contracted out. "We're a pretty small crew for a city of 100,000," says Nancy Reubert, Centennial's spokeswoman. "That is the whole point."

But with a $47 million budget, Centennial is not the low-tax paradise its founders may have envisioned. When sales and use taxes were raised in 2003 to make up for some inaccurate fiscal projections, the Rocky Mountain News editorialized that it marked the end of Centennial's "Grand Experiment" and threatened "to turn their city into just another suburb." The tax increase, though, was approved by a popular vote.

The city now is scrambling to salvage a major revenue source. Southglenn Mall accounts for fully 15 percent of Centennial's retail tax base, and like many other malls, it has fallen out of fashion. Demolition will start this spring, with a mixed-use development set to rise out of Southglenn's ashes. The city will have to do without its revenue, though, for several years.

In addition, it's become clear that contracting out government on a massive scale presents some administrative problems unforeseen in the beginning. This year, Centennial will hire full-time contract managers to ride herd over relations with myriad vendors the city deals with.

For all the difficulties, though, Centennial hasn't gone back on its commitment to the idea of outsourcing as a philosophy of government. And some experts give the five-year experiment positive reviews. "You don't just go out and create a city of 100,000 and call it good," says Sam Mamet, of the Colorado Municipal League. "You can't go to the Ace Hardware store and get parts. But I've just been tremendously impressed with where they've gotten to."