In response to the fiscal crisis in cities and states across the country, governments are entering into long-term lease agreements with private investors and companies to operate, maintain and develop major public structures and facilities. The investors offer a large up-front payment to local and state governments starved for cash, in exchange for decades (from 20 to 75 years) of control and steady return on investments.
Local and state governments have signed contracts to “sell off” many types of facilities and infrastructure, including government office buildings, landfills, transit systems, roads, parking structures, zoos, convention centers, and other assets that could generate substantial capital. These new owners typically get to keep all or part of the associated revenue (such as advertising or concession revenue), increase fees or rents charged, and are responsible for maintaining the asset.
In many of these asset sale agreements, the public has been on the losing side – loss of control, increased user fees, loss of jobs, lower quality infrastructure, and future budget woes are just a few problems that communities have experienced following asset privatization.
In any proposed asset privatization deal, there are key questions that should be asked by those who want to ensure that the public interest is protected and advanced. This guide seeks to give some basic information about asset privatization deals, and provide examples of important questions that should be asked and explored when faced with a proposed privatization effort. While this is not a complete and exhaustive list, it provides a framework for examining these agreements.