Update: Upcoming Outsourcing Issues. September 8, 2014
1) National: The Texas Observer reports that the federal government is planning to build a “massive” family detention center in South Texas that would double the existing federal capacity for immigrant families. “The property is part of Sendero Ranch, a ‘workforce housing community,’ better known in the oil patch as a ‘man camp’ for oilfield workers. Sendero Ranch is owned by Koontz McCombs, a commercial real estate firm connected to San Antonio mogul Red McCombs. Loren Gulley, vice president for Koontz McCombs, said the company is still negotiating the deal but Corrections Corporation of America—the world’s largest for-private prison company—is expected to run the detention center, and Koontz McCombs would lease the existing ‘man camp’ to ICE.” Red McCombs is chairman of the board of Academi, formerly Xe, formerly Blackwater.
2) National: Unions warn about potential problems with referrals to private entities outside the Veterans Administration system. “The referral boom could set a risky precedent, sending veterans away from familiar doctors and nurses in what union executives see as a potential shift toward privatization.” Irma Westmoreland, chairperson of Veterans Affairs for the 9,000-member National Nurses United, “said department leaders could avoid backlogs and weeks-long delays in care ‘if they would just hire enough nurses and doctors.’” Former member of Congress Barney Frank weighs in on why even conservatives shied away from privatizing the VA.
3) National: Organized labor targets Walmart’s efforts to privatize public education. “The concern of the AFL-CIO and many progressive groups is that the Walton family is investing heavily in creating charter schools, promoting voucher systems that transfer taxpayer dollars to private schools, pushing policies drafted through the American Legislative Exchange Council and funding campaigns for conservative candidates from local school boards to the governor’s mansion.”
4) National: A yearlong investigation over 28 states by McClatchy’s Mandy Locke and Franco Ordoñez finds that companies gamed the government’s stimulus plan and cheated workers by declaring them independent contractors. “The federal government, while cracking down on the practice in private industry, let it happen in stimulus projects in the rush to pump money into the economy at a time of crisis.”
5) National: Liliana Segura wins the 2014 Media for a Just Society Award for magazines for her October 2013 Nation articleon the private prison industry.
6) National: David Sirota investigates the “pay to play” relationship between private finance and public pension and development funds, focusing on New Jersey and North Carolina. Sirota discussed the issue last week on Sam Seder’s “Majority Report.”
7) National: Due to competition, states and localities are paying the lowest fees in a decade to Wall Street firms to structure municipal bond deals. This should lower the cost of publically-financed infrastructure and services.
8) National: The Treasury Department’s Priority Guidance for 2014-2015 includes a new project to update guidance onmanagement contracts that impact private activity bonds. [Sub required; PABs]
9) National: The Military Services Group, a unit of American Water, receives a 50-year defense department contract to “own, operate and maintain the potable and service water and wastewater systems” at Picatinny Arsenal, NJ. “American Water has a longstanding business alliance with the DOD.”
10) National: Orrick, a large law firm involved in “public private partnerships,” hires Kenneth Schuhmacher as a partner in its infrastructure and energy group. “He has represented developers, borrowers, lenders, multilaterals, export credit agencies, issuers, off-takers, governments and national utilities in all phases of development, financing and acquisition of US and international projects. (…) ‘Ken is widely respected as one of the leading practitioners in the PPP and infrastructure market,’ said Dan Mathews, co-head of Orrick’s Energy & Infrastructure Group.” He has 20 years of experience in “project finance, privatization and acquisitions.” [Sub required]
11) National: Rutgers Law School Professor Paul Trachtenberg writes that the ideologically-driven movement toward all-charter school districts is a bad idea. “I suppose the ultimate question is whether we care enough to educate ourselves about the evidence of what works and what doesn’t in education reform and to make our informed voices heard. Or are we content to keep accepting at face value the self-serving claims of the ideologues?”
12) Florida: Doctors warn about the negative impact of privatization on the state’s Medicaid patients. “Florida health officials are declaring victory after transitioning the state’s 3 million Medicaid recipients into private insurance plans, but some doctors and health advocates are warning their offices are filled with confused patients who say they have been cut off from their regular physician.” One mother of a sickle cell disease patient now has to drive six hours to Gainesville to get treatment.
13) Florida: The death of two children stirs outrage. The “caseworkers—now charged with crimes of neglect—both worked for private agencies contracted by the state. And that’s worth talking about. Because for the past decade or so, ‘privatization’ and ‘outsourcing’ have become all the rage in Florida—the supposed solution to all government problems. From running jails to protecting children, the talking point has always been: Government is inefficient. Private companies always do it better. Well, not always. And there’s a growing list of dead children and criminal charges to prove it.” [Sub required]
14) Florida: Skanska reaches a financial agreement with the Florida Department Of Transportation on the $2.3 billion I-4 Ultimate Project, a DBFOM “public private partnership.” The project will improve Interstate 4 in the Orlando area. [Sub required]
15) Georgia: After 16 years of experience with privatized school busing, “it’s time to re-examine whether the public is getting its money’s worth,” an editorial in the Savannah Morning News says. The paper says “it’s obvious that the district isn’t pleased with the quality of services it has been getting from its private contractor, First Student. (…) Worse, taxpayers are paying twice as much for the privilege.” The district “has been here before”—it fired Laidlaw in 2006. “As far as we can tell, the district has not done a comprehensive study about how much money—if any—it has saved through privatization.”
16) Louisiana: Jefferson Parish Council approves a ballot initiative to earmark proceeds from the leases of two its hospitals for healthcare expenses. “Councilman Chris Roberts asserted Wednesday that, when proceeding with plans to privatize West Jefferson Medical Center and East Jefferson General Hospital, parish officials always intended to reserve the interest income for health care. That way, he said, future council members will have recourse should they find the private entities operating the hospitals aren’t doing a good job.”
17) Massachusetts: The city of Quincy is to decide whether to privatize its garbage and recycling services or buy new equipment. The city council meets tonight.
18) Massachusetts: State Rep. Tom Conroy, one of three Democratic candidates running for state treasurer, says the failure of the state’s health exchange launch raises a red flag about privatization. “Privatization or outsourcing should not be used solely to save taxpayer costs at the expense of workers; we have seen this occur too often with janitorial services and other basic services that the state must perform consistently and over the long-term,” he said.
19) Michigan: As Detroit’s bankruptcy exit trial begins, three surrounding counties warn that the proposed restructuring plan would wreck the city’s water and sewer system, which provides water to 40% of the state’s population. “Even before the city filed for bankruptcy in July 2013, it began talks to privatize the system by creating a new regional authority with the three adjacent counties. But talks stalled and, despite court-ordered mediation, a deal has not yet been reached. Already faced with aging infrastructure and chronic unpaid bills, the DWSD would be subject to ‘capital breakdown’ under the confirmation plan, argued Wayne County’s attorney, Max Newman from Butzel Long.” Protests against water privatization have continued.
20) Michigan: After a troubling experience with privatized school busing last year, all eyes are on the performance of the company (METS) in the Jackson school district this year. In June the board voted to implement the second phase of privatization, covering management. “After last year, I’m a little skeptical, but I’m willing to give them a chance,” one parent said. “We’ve just got to have something stable. It’s just got to get better.”
21) Missouri: Kansas City’s City Manager Troy Schulte signs a contract with Advanced Data Processing, a subsidiary of Intermedix Corporation, to “assist city employees” with the ambulance billing system. “The move follows local labor’s successful challenge to the Kansas City Council’s decision to completely privatize the city’s emergency medical billing.”
22) New York: New York State Comptroller Thomas P. DiNapoli reports that a special education contractor has been convicted of a $2 million fraud. Diane Ravitch writes “DiNapoli has identified fraud and improper use of taxpayer funds in a recent series of audits and investigations of special education providers, resulting in multiple criminal convictions and the recovery of over $3 million. His office has completed 23 audits of preschool special education providers, finding nearly $23 million in unsupported or inappropriate charges. There are currently 18 additional audits of preschool special education providers in progress.”
23) New York: The Auburn city council rejects privatization of the city’s water system.
24) New York: Zephyr Teachout, who is challenging Gov. Cuomo in the Democratic gubernatorial primary, targets the privatization of the Long Island Power Authority. “Ms. Teachout said ‘Long Island should have been put first’ by ‘the fixing of what was wrong’ with the state-created LIPA and ‘not privatize’ the utility system. Lost now is ‘accountability’ and ‘the long-term costs of this privatization are not known.’”
25) North Carolina: The board of transportation has adopted a private sponsor program for roads and highways. “Sponsors can sign up to pay for a private litter company to maintain certain areas. Other sponsorship opportunities will be available for assistance patrols, ferries and ferry system support facilities, traveler information services such as 511, rest areas and welcome centers, highway beautification, smartphone applications, weigh stations, and print and electronic publications.” [Sub required]
26) North Carolina: The state’s newly privatized job recruitment and marketing unit, the Economic Development Partnership of North Carolina, has set an October 6 start date. “EDPNC board chair John Lassiter noted also that the group still needs to raise a minimum $250,000 in private funds, per state statute, to qualify for state funds, and that a new board of 17 members must be appointed by the governor and state lawmakers.”
27) Puerto Rico: The Puerto Rico government is seeking a private developer to repurpose the Roosevelt Roads former Navy base. It has selected a shortlist of four firms, who must submit proposals by November 21.
28) Puerto Rico: The Ponce Port Authority is seeking a private port operator. “The Ponce Port Authority says it wants to partially privatize the port through an agreement to give exclusive management control to a private-sector terminal operator. The RFI includes a questionnaire to gauge the potential interest of developers, terminal operators and equity investors in operating and expanding the facility, as well as developing a logistics park.”
29) Puerto Rico: The restructuring officer of Puerto Rico’s power authority says it is “too early to say if job cuts or a privatization would be part of the overhaul.”
30) Texas: The Dallas City Council is moving toward privatizing a 277-acre public park. But, “some council members complained about the task force’s secrecy and relative lack of community involvement. Some pointed out that the suggested financial infusions—Fair Park’s capital needs are pegged at $478 million—must be weighed against other demands. Several council members made a point to note that the park department has done a pretty good job of running Fair Park, all things considered.”
31) Virginia: GCA Services has a rocky start to its new custodial outsourcing contract with the Chesterfield County schools. Superintendent Marcus Newsome “has cautioned that while outsourcing school custodians ‘may be less expensive, the quality and level of service may also be lower.’ A Google search turned up several news stories that chronicled school systems’ dissatisfaction with GCA’s work.”
32) Wisconsin: The Milwaukee County Zoo has received six proposals to privatize its food service operations, and has narrowed the field down to two companies. “Supervisor Gerry Broderick, the chairman of the County Board’s Parks, Energy and Environment Committee, said he was taken by surprise by the news that a request for proposals had been issued and the results of the RFP have not been shared. ‘I’ve never liked privatization,” he said. ‘What’s best fiscally in the short term may sound like a good idea, but what about the long-term consequences. Privatization, to me, cuts jobs, decreases benefits for workers. The negatives pile up down the line.’” If a decision is made to privatize, the deal would have to be approved by the county board.
33) International: The Asian Development Bank has opened a new office “to provide governments with independent advice on shaping public-private partnerships.” [Sub required]
34) International: Thousands turn out in London to demonstrate against privatization in the National Health Service. “Privatization and cuts, they say, now pose the biggest threat to the NHS in its 66-year history.” Increased privatization of the NHS has reportedly driven up support for Scotland to secede from the United Kingdom in a referendum to be held in two weeks.
35) Revolving Door News: Macquarie Infrastructure hires David Agnew, former White House director of intergovernmental affairs and deputy assistant to President Obama, as managing director of its government affairs unit. Agnew “will act as the division’s liaison with federal, state and local governments, exploring new investment opportunities.”
36) New Book: Charter Schools, Race, and Urban Space: Where the Market Meets Grassroots Resistance, by Kristen L. Buras.
Legislative Issues:
1) National: The House Ways and Means Human Resources Subcommittee will hold hearings on federally-subsidized social impact bonds tomorrow. The deadline for comments to be submitted for the hearing record is September 23. [HR 4885]. Social impact bonds have been introduced in Great Britain, where the experience is mixed. In Australia, one SIB hasreturned a 7.5% dividend to investors. The Nonprofit Quarterly’s Rick Cohen has laid out “some enthusiasm-tempering considerations that SIB/PFS advocates and critics might reflect upon.”
2) National: In a letter to Congressional leaders, the transportation industry has weighed in against new Federal Reserve regulations intended to shore up bank safety and stability, arguing that the new liquidity rules would undercut investment in infrastructure. “Banks have been major buyers of municipal bonds over the past five years, market statistics show, so the inability of banks to use munis to satisfy the new rule’s requirements could hurt bond-financed projects, including public-private partnerships.” [Sub required]
3) National: Decades after the privatization of energy markets, the Federal Energy Regulatory Commission “will evaluate making changes to competitive markets in cases over the next several months,” says FERC chair Cheryl LaFleur. LaFleur says Congress does not “have the faculties to handle the complexities of energy market overhaul,” and that its engagement on the issue “would not be productive.”
4) California: The legislature has passed a bill that would amend the state’s 25-year-old infrastructure financing law. The bill establishes Enhanced Infrastructure Financing Districts, and is expected to be signed by Gov. Brown. [SB 628]
5) Montana: The Billings Gazette says public lands should remain in public hands. “The latest iteration of this recurring desire to privatize public land has sprouted under the guise of states’ rights. The Montana Republic Party has joined the campaign to ‘transfer’ federal land to the state. Over the past year, Montana’s Environmental Quality Council studied federal land issues at the direction of the Montana Legislature. Last week, The Montana Standard, The Billings Gazette, Helena Independent Record and The Missoulian published a three-day series on public land, which is certain to be a hot topic when the Legislature convenes in January.”
6) Ohio: State Sen. Shirley Smith, the Democratic chair of the Correctional Institution Inspection Committee, opposes terminating Aramark’s food services contract with Ohio’s prisons. “Two other state representatives on the committee, Democrats Robert Hagan and Nicholas Celebrezze, want the contract returned to union workers.” The state has fined Aramark $272,000 for violations, including food and staffing shortages and sanitation issues.