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This Week’s Outsourcing Scan 11-7-2016

1) National: Looking forward to unfinished business after tomorrow’s elections, President Obama says it’s time to get the profit motive out of incarceration. The Obama Justice Department recently announced that the Bureau of Prisons would phase out its use of private prisons, but DHS’ ICE is moving in the wrong direction. Obama tells Bill Maher, “there is a bright line around prisons. The criminal justice system should not be infected with the profit motive. This is the awesome power of the state saying we can take somebody’s freedom away, we can lock them up because they’ve breached some part of the social contract. The notion that you might incentivize people to lock more people in or keep them there longer, or not provide the kind of rehabilitation services so that they can get out of there, I think that’s a problem. So I’m very proud of some of the work we’ve been trying to do along these lines. We’ve got more work to do.” [Video, at 4:40]

2) National/State/Local: A selection of state and local candidate positions on privatization in tomorrow’s elections:

Ronald Kossik
, a Democratic candidate for District 25 of the Wisconsin State Assembly: “The contamination and privatization of water is an enormous economic and environmental threat to our health and well being.”

George Ferriter
, a Democratic candidate for District 42 of the Wisconsin State Assembly: “As Representative for District 42, I will work tirelessly to uphold and defend our local and rural schools, through funding, supporting our teachers, and by pushing back against the encroachment of privatization.”

Melissa Ziobron
, a Republican member of the Connecticut House of Representatives, representing District 34: Sponsored a bill to privatize the Department of Motor Vehicles.

C. Olivia Irwin
, a candidate for the Position 1 seat on the Ferry/Pend Oreille/Stevens Superior Court in Washington, when asked by the media about her primary concern regarding today’s judicial system in her state, said “The “school-to-prison pipeline,” the criminalization of poverty, increased invasion of privacy and seizure of personal property; the privatization and overcrowding of facilities, the inadequacy of our system to address civil legal needs. It’s hard to choose.”

Khristy Wilkinson
, a 2016 Democratic candidate for District 10 of the Tennessee State Senate: “I will fight for compassionate criminal justice reform, against prison privatization, and against unconstitutional legislation inspired by hate, ignorance, and fear.”

John Kroschwitz
, an adjunct professor at The College of New Jersey who is running for the Hamilton, New Jersey school board, “says privatization of public school jobs ‘is just wrong’ and says he was opposed to the district’s decision in 2002 to outsource kitchen management and cafeteria food services duties to an outside contractor.”

Bob Baker
, a 2016 Democratic candidate for District 55 of the Wisconsin State Assembly: “If the disaster in Flint, MI has shown us anything, it’s that we need to protect and care for our natural resources. The current assembly is talking about privatizing and removing local control of our water supplies. Removing the people most impacted by the privatization from the process serves only the people who stand to profit from the waters sale, puts our water supplies at risk, and puts communities all over Wisconsin at risk.”

3) National: In its annual recap of the growth of the global ‘public private partnership’ industry, Public Works Financing says the past twelve months saw $9 billion of transportation P3 project financings in the U.S., including the LaGuardia Airport Center Terminal, Maryland’s Purple Line, and Texas’ SH 288 toll road. But PWF admits that the pipeline is thin, that most public officials still think in terms of traditional, taxpayer-funded infrastructure projects rather than P3s, and concedes that the “P3 infrastructure community” needs to come up with “better-justified projects that add real value to our economy.” Writing in PWF, Robert Poole of the pro-privatization, Koch-funded Reason Foundation also concedes that state governments are beginning to understand the pitfalls of building long-term subsidy payments into P3 deals (“availability payments”), and pushes mileage-based fee systems to create steady and dedicated revenue streams for developers that are not subject to legislative appropriations. [Public Works Financing, October 2016]. After years of simplistic misinformation that road privatization is inherently more efficient and less costly than all-public delivery models, the realities of sound project finance—and proposal rejections— seem to be making an impression in even the more radical quarters of the P3 industry.

4) National: The project pipeline for proposed 2017 infrastructure ‘public private partnerships’ includes the LAX Automated People Mover; the LAX Consolidated Rent-a-Car Center (CONRAC); the I-70 East Viaduct Replacement in Denver; the I-55 Managed Lanes Project in Chicago; the Hampton Roads Bridge-Tunnel Crossing in Norfolk, VA; and the California High Speed Rail project. [Public Works Financing, October 2016].

5) National: Corrections Corporation of America/CoreCivic and the GEO Group report their Third Quarter 2016 financial results. Some highlights:

Faced with investor concern about the federal commitment to reduce its use of private prisons, CCA/CoreCivic is pointing to increased demand from Immigration and Customs Enforcement to sustain its revenue, and a strategic shift to residential re-entry and community corrections business model. CEO Damon Hininger told investors on Thursday that “during the third quarter, we experienced increasing demand trends for ICE, which has continued to persist since the conclusion of the quarter and resulted in the new contract at Cibola County facility that commenced this month. ICE officials have been vocal in recent months about growing bed capacity needs being driven by [heightened] apprehensions across the Southwest border. Maintaining adequate detention bed capacity within a limited budget is always a challenge for ICE, particularly when needed to respond to emergency situations and it is with great pride that we have been able to accommodate these developing needs and expedite it in cost effective manner for our federal partner.”

GEO Group CEO George Zoley, faced with similar questions about a possible sharp decline in federal business, also stressed GEO’s community incarceration and re-entry strategy, and its monitoring systems (“Our BI division monitors approximately a 142,000 offenders under community supervision”). Zoley was upbeat about their revenue outlook (“The diversified nature of our divisions has allowed GEO Care to achieve approximately 17% year-over-year revenue growth for the first three quarters of 2016”). He revealed that GEO had met several weeks ago with the DHS advisory panel on the use of private detention facilities, and is banking on an immigrant detention surge: “ICE is experiencing a significant and unprecedented surge and activity along the southern border. Today, ICE is detaining approximately 44,000 individuals, with internal projections forecasting a high of 47,000 during fiscal year 2017. ICE is actively procuring capacity to respond to this need. We are having ongoing discussions with ICE about our capabilities to assist during this difficult time. These discussions include several GEO facilities, which have significant capacity are immediate available and would meet ICE’s national detention standards.”

6) National/International: The Financial Times reports that the international road privatization industry is unhappy about the prospects for road privatization in the U.S., especially the influence of elected officials on decisions. “[Giovanni Castellucci of Atlantia’s] remarks illustrate how the US private road market has failed to fulfill the optimistic expectations of the previous decade’s infrastructure boom. Private investors rushed to help build new toll roads or tolled lanes in Texas, Virginia, Colorado and other states. International investors also handed over billions of dollars for the right to operate existing toll roads, including the Chicago Skyway and Indiana toll road. Sentiment started to sour in 2008 after political opposition ended the biggest project: a plan to sell the right to operate the 537-mile Pennsylvania Turnpike to private investors for 75 years for $12.8bn. A series of projects have since been forced to either seek refinancing or enter bankruptcy protection. (…) Individual states’ markets were too exposed to the whims of local politicians, he added.”

7) National: American Water President and CEO Susan Story says the private water company is looking to include storm water services in its water privatization deals with the Pentagon. “We’ve had a couple of our bases where we serve water and wastewater, who have indicated an interest. So we’re working through the Department of Defense as to whether that can fall under the preview that they got to their privatization language and legislation which, we believe it does (…), but I think they’re going through the lawyers and the Department of Defense to get comfortable with it.” [CQ FD Disclosure, Q3 2016 American Water Works Company Inc earnings call transcript, Nov. 3, 2016]

8) Florida: The developers of a private railway system that has been challenged in court for a failure to observe environmental regulations move to avoid the court challenge by separating out the two counties that filed the suit. “AAF, owned by Fortress Investment Group, said it would use $600 million of bond proceeds only to fund Phase I of its route from Miami to West Palm Beach, which has received final clearance under the National Environmental Policy Act. (…) In urging the court deny the 30-day extension, Martin and Indian River counties said that the new financing strategy could not moot their suits. Martin County’s attorney, Stephen Ryan with McDermott Will & Emery LLP, also argued in a Tuesday filing that USDOT failed to disclose a portion of the plan—the future request for $1.15 billion in PABs—in its motion for an extension of time, as did Department of Justice attorneys in an Oct. 27 letter seeking consent from the counties for the extension of time.” [Sub required]

9) California: Opponents call Measure RRR a “power grab” that would give the Los Angeles Department of Water and Power greater authority and flexibility when it comes to awarding contracts, hiring and setting rates. “The measure is backed by the Los Angeles City Council, Mayor Eric Garcetti and the DWP itself. In opposition, Jamie Court, president of the nonprofit Consumer Watchdog, said last week that the measure would strip away oversight of DWP from the City Council and the mayor’s office. ‘The mayor and the City Council seem all too happy to wash their hands of that oversight,’ he said. ‘Well, it’s their job as elected leaders to oversee DWP.’”

10) IowaGov. Branstad (R) is pumping an additional $33 million into his privatized Medicaid system. Privatization was supposed to save money, and Branstad continues to insist it will. State Sen. Amanda Ragan, D-Mason City, co-chair of the Iowa Legislature’s health care policy oversight committee, said in a statement, “so far, Medicaid privatization has been a nightmare for hundreds of thousands of elderly and disabled Iowans and their families, as well as for thousands of local health care providers.” State Senator Joe Bolkcom, D-Iowa City, said “surveys show privatized Medicaid has reduced help for Iowa families, cut the quality of services provided, and increased financial strains on health care employers. ‘In response, Governor Branstad wants Iowa taxpayers to reward the companies responsible by handing over even more tax dollars to them.’”

11) Maine: Donald Cohen, executive director of In the Public Interest, says “Before there was Donald Trump there was Maine Governor Paul LePage.” LePage now wants to privatize Maine’s welfare system “by handing it over to a nonprofit, Fedcap, which has faced a dozen lawsuits since 2013 alleging workplace discrimination and wage, disability, and personal injury disputes. (…) In the Public Interest’s latest report, How privatization increases inequality, describes how, in recent years, a number of states have outsourced important functions related to assisting families at or below the poverty line. Too often, the impact has been tragic.”

12) MassachusettsBoth sides make a final push over the widely-followed state ballot initiative on expanding the number of charter schools. “Those speaking against the proposal Saturday included Democratic former governor Michael Dukakis, who said great schools are driven by strong principals, dedicated teachers, and supportive communities. ‘It’s all part of a kind of movement to break up, to privatize, to essentially, I think, badly harm what is a very important relationship between people and their schools,’ said Dukakis. (…) Dukakis said schools can implement proven improvements, such as longer days of study, without establishing a new system alongside existing districts. ‘I just do not understand the theory behind creating a whole new set of schools which are unconnected, in most cases, to their communities,’ he said.” 

The New York Times
 reports that the initiative to expand charter schools is behind in the polls 52-39, and quotes Maurice Cunningham of Boston University, who declares “if you can’t stop the hidden billionaire money in Massachusetts, then you can’t stop it anywhere.”

Diane Ravitch comments, “What is so thrilling about the battle over Question 2 is that everything we have discussed on this blog is coming out into the open: the NAACP, with its call for a moratorium, has stripped away phony claims about school choice being the ‘civil rights issue’ of ourtime. The billionaires’ privatization agenda is debated daily by parents and civic activists. The fact that school choice is being pushed by Republicans and opposed by many Democrats is explicit. If the people of Massachusetts vote ‘NO’ on Question 2, it will be a resounding defeat for the billionaires and their Dark Money groups, and it will echo around the nation.” [BPS parents’ video on why they are opposing Question 2]

13) Massachusetts: A private company, Bridj, proposes to MBTA to create an on-demand shuttle service to fill in when extended hours end in March. “The fiscal board asked MBTA officials to gather more information about the proposal. Other efforts to privatize aspects of the public transit agency, including the outsourcing of the MBTA’s cash collection operations, have drawn significant resistance from union officials and others.”

14) Michigan: As Flint continues to suffer the effects of water poisoning, Nestlé plans a dramatic expansion of water privatization in Michigan. “‘The issue is the privatization of a critical resource. How much is too much?’ said Jeff Ostahowski, vice president of the Michigan Citizens for Water Conservation, which for years fought against Nestlé’s expansion in the state.”

15) Michigan: Jessica Cummings, a candidate for an at-large seat on the Farmington Public School District, takes on the issue of how outsourcing is affecting the financial health of benefit programs. “The state of Michigan determines, without negotiation, what school districts must pay for employee retirement. Those costs on districts have nearly doubled in the last eight years. This is due to fewer workers paying into the fund because of districts across the state being financially forced to outsource jobs such as custodians, nutrition services and bus drivers. (…) Outsourcing is one reason why legacy costs are out of control. We should not outsource our workforce. With that said, if the lawmakers in Lansing continue to cut funding, we must make sure to keep those cuts as far from the classroom and extra district programming as we can. With cuts to funding, all options for cost savings must be considered.”

16) New Jersey: Atlantic City’s recovery plan has been rejected by the Christie administration, opening the door to a privatization of the city’s water system. “The decision gives Trenton unprecedented powers over the city’s government, finances, union contracts and assets. Under the terms of a legislative deal worked out in the spring, state officials now can move to dissolve local government departments and boards, sell or lease the city’s water utility and even veto the City Council’s meeting minutes. ‘It would be the single-most involved takeover that the state has ever made of a municipality,’ said Marc Pfeiffer, senior policy fellow and assistant director for Rutgers University’s Bloustein Local Government Research Center. ‘You will likely see litigation that will attempt to block it.’” Pfeiffer “said Atlantic City officials’ announcement that they would resubmit their plan addressing the state’s concerns likely lays the groundwork for court action.”

17) New YorkWestchester County announces plans to privatize White Plains Airport. “The deal calls for Westchester County to receive a $111 million upfront payment from Oaktree, structured to have proceeds applied to the county’s operating budget over the course of the 40-year lease. The structure works like an annuity, a county press release said. [County Executive Rob Astorino (R)] said net revenue would amount to $15 million in the first year and $5 million annually over the following five years. ‘The driving force behind this proposal is simple – unlock millions of dollars of value that have been created at the airport and put this idle money to work,’ said [Astorino] in a statement. “We are creating a reliable, long-term source of funding.’” The P3 deal comes under the FAA’s Privatization Pilot Program. [Sub required]

18) OhioThe Dayton Public Schools are laying off 77 teachers and school services staff. “Dale Herzog of the Building Trades union said six of his members got layoff notices from DPS, and he said there are plans to close the glazier and sheet metal shops, which handle things like replacing windows and replacing thousands of lockers. Herzog said if the district tries to outsource that work while the current contract is in force, it could lead to an unfair labor practice complaint.”

19) Oregon/National: Philomath resident John F. Borowski pours cold water on the idea that the “armed insurrectionists, subsidized welfare ranchers and poster children for white-privileged domestic terrorists” who were acquitted after taking over the Malheur National Wildlife Refuge, are patriots. “They are pawns for the privatization movement of public lands in this nation. Fracking interests, grazing interests, timber interests, mining interests and other corporate powers want these publicly held jewels to be sold off and liquidated.”

20) Rhode IslandThe state DOT receives four proposals for transit ‘public private partnerships.’ “The transit center project will combine a bus service center with the Providence train station currently located a quarter mile away. The project also includes building a new transit hub that will improve ridership and provide commercial, retail, office and residential development. RIDOT director Peter Alviti Jr. said in a statement the project will ‘engage’ the private sector to work on a public project, ‘spurring economic development opportunities in which private industry shares the cost.’” [Sub required]

21) TexasThe City of Killeen has taken the next step toward outsourcing trash collection, and will draft a Request for Proposals. “Councilman Juan Rivera said he hasn’t finished doing all his homework on the matter. He has mixed emotions about the whole thing, but if the move were to cost the city and its residents more money down the road, he wants nothing to do with it. During Tuesday’s session, Mayor Pro Tem Brockley Moore questioned whether the city could exit the contract if privatization didn’t work and what doing so would cost. Locke said the capital needed to reinvest in waste removal services would exceed $20 million, and the city also would need to restaff the entire department. Because of the massive capital investment, privatization would be a difficult task.”

22) Virginia: A Meridiam-led consortium has won a 50-year contract to build and operate the $2.1 billion I-66 Outside the Beltway tolled express lanes ‘public private partnership’ project. “The P3 agreement could save Virginia taxpayers more than $2.5 billion, [Gov. McAuliffe (D)] said. McAuliffe said when he took office in January 2014 that the state’s contribution to the project was estimated at $900 million to $1 billion. Revisions to the state’s P3 procurement process and an announcement that Virginia was considering the use of conventional debt financing for the I-66 toll lane project resulted in more favorable proposals from the private sector, McAuliffe said. Two groups of investors submitted financial proposals to the state in October that complied with the stipulation that the state’s contribution be limited to no more than $600 million, he said. (…) ‘P3’s are a powerful tool for procuring new projects, but they only work if taxpayers’ interests are protected,’ he said. ‘Tolling revenue is very important. It is also very lucrative,’ McAuliffe added. ‘If we are going to give tolling revenue away, we’re going to negotiate a very, very tough deal.’” [Sub required]

23) International/NationalThe anti-privatization movement in Ireland has come out in strong support of the Native American ‘Standing Rock’ protests. “We know what it means to fight for our water in Ireland. The Right 2 Water campaign has fought against water charges that are just another regressive tax that discriminates against working people and the unemployed. (…) Rather than continuing to provide water as a public good funded through general taxation, the establishment would try to privatize our water. However, we have fought back against this move by taking to the streets to say that water is a human right. People Before Profit stands with the Standing Rock Sioux Tribe in their fight for self-determination and the planet. Water is a human right—water is life.”

24) Think Tanks: The Independent Media Institute publishes a wide-ranging report on the privatization of American education. Co-authored by Don Hazen (the founder of Alternet), Steven Rosenfeld and Stan Salett, the report looks at how the “school privatization industry” hijacked the concept of education reform; how billionaires funded the effort; how the myth of failing schools was used; how a lack of transparency fostered privatization; how locally elected school boards were destroyed to pave the way for privatization; how a legal framework to lock in privatization was developed; how charter schools create “self-enrichment scheme and crony capitalism,” and much more. [Who Controls Our Schools: The Privatization of American Education]

Legislative Issues

1) NationalA shift in power in the Senate would be good news for munis, say infrastructure players. John Godfrey, the senior government relations director for the American Public Power Association,  says he’s “heartened” by the Democratic platform, which supports the exclusion of interest for tax-exempt munis. “I think that was significant,” Godfrey said. “One of the problems has been that for a long time there’s been an assumption that the tax exemption of munis was a given and there was not a whole lot of advocacy in support. Suddenly that’s not a given.”

 

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