Media Scans
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This Week’s Outsourcing Scan 11-9-2015

1. National: Some of last week’s election and initiative results related to privatization and outsourcing issues:

Colorado: Conservative school ‘reformers’ backed by outside big money were routed in school board elections and recall votes in Jefferson County. “I think it came across that these people fundamentally do not believe in public education—and taking a hostile attitude toward the system and the teachers is a terrible mistake. How can you run a system like that? They’re missing the point that the American public school system has been an enormous success.”

Louisiana: Citizens for Tax Justice reports “voters approved Amendment 2, a proposal that gives the state treasurer the option of investing funds in the state infrastructure bank, by a slim margin. The infrastructure bank allows local governments to borrow money at favorable rates for infrastructure projects.”

Maine: Voters approved the issuance of $100 million in bonds to support the construction of homes for the elderly and transportation projects (the transportation measure passed 73%-27%).

Mississippi: Voters narrowly rejected an initiative that would have required the state government or legislature to provide for the support of an adequate and efficient system of free public schools.

Texas: Voters approved seven constitutional amendments, including one that authorizes $3 billion a year for the state highway fund using public bond issues rather than tolls (Prop 7), and another to increase the population size for counties allowed to perform private road construction and maintenance from 5,000 to 7,500. (Prop 5).

Washington: The passage of serial referendum proponent Tim Eyman’s anti-tax measure I-1366 will complicate school funding efforts just at the time the state legislature must resolve the issue of charter school funding in its next session. The state’s highest court ruled that public funding of charter school is unconstitutional.

Washington: Voters rejected an increase in the gas tax by 67% to 33%, but will have to pay the tax anyway since the vote was an advisory measure.

San Francisco: Voters approve $310 million in general obligation bonds to finance affordable housing.

2. National: The five largest DBFOM ‘public private partnership’ projects currently in the pipeline in the U.S. (procurements underway or expected in 2016) are:
 
Airport: LAX Landside Access Modernization ($3 billion)
Toll Road: I-70 East ph. 1, Denver ($1.2 billion)
Transit: Purple Line LRT, Baltimore ($2.45 billion)
Toll Road: SH 288 Toll Lanes, Houston ($800 million)
Toll Road: I-66 HOT Express Lanes, Virginia ($2.1 billion) 

[Public Works Financing, October 2015; sub required]

3. National: The American Postal Workers Union asks the Democratic candidates for president for their positions on privatization. Hillary Clinton responds “I do not believe that we should be contracting, outsourcing, or privatizing work that is inherently governmental in nature, including letter delivery services, school services, and state and local government services.” Bernie Sanders says “there are very powerful and wealthy special interests who want to privatize or dismember virtually every function that government now performs, whether it is Social Security, Medicare, public education or the Postal Service.” Martin O’Malley replies “I strongly oppose efforts to privatize Medicare. This is a dangerous idea that would increase costs and deliver less and lower quality care to America’s seniors.”

4. National/Virginia: Plaintiffs alleging that Transurban and its debt collection agencies are trying to gouge them with huge penalty fees for alleged I-495 HOT Lanes violations win the first round as federal judge James Cacheris denies Transurban’s motion to throw their case out of court. “In denying the Motion to Dismiss, Judge Cacheris concluded that the Plaintiffs had adequately alleged that Transurban’s administrative fees and civil penalties violated their Eighth Amendment right against excessive fines; that Transurban’s actions had denied them their constitutionally guaranteed right to procedural due process; that Faneuil and LES had violated the federal Fair Debt Collection Practices Act; that Transurban violated Maryland and Virginia’s consumer protection statutes; and that Transurban illegally interfered with their E-ZPass contracts in violation of Virginia law.” Plaintiffs are represented by Hausfeld. A trial is expected in March 2016.

5. National: Immigrant detainees launch hunger strikes in Texas and California to demand justice. “27 immigrant women detained at the for-profit T. Don Hutto facility in Austin began refusing meals, demanding an end to mistreatment and their immediate release. (…) Hutto is run by the country’s largest private prison firm, Corrections Corporation of America.” In Adelanto’s detention center, which is run for profit by the GEO Group, hundreds of immigrant detainees are reportedly on hunger strike. The center was recently expanded by 650 beds “despite protests from more than two dozen members of Congress over alleged medical neglect at the facility.”

6. National: Political talk show host Sam Seder takes an in-depth look at charter schools, discussing New York charter operator Eva Moskowitz, charter school efforts to screen out low income students, and other disadvantages faced by low income students trying to attend good schools. [begins at 32:39]

7. National: Outsourcing of code writing for U.S. military communications systems leads to security breach. The Center for Public Integrity reports that “greed drove the contractor to employ the Russian programmers [whistleblower John C. Kingsley] said in his March 2011 complaint, which was sealed until late last week. He said they worked for one-third the rate that American programmers with the requisite security clearances could command. His accusations were denied by the firms that oversaw the programming work.”

8. National: Corrections Corporation of America (CCA) and the GEO Group issue their profit reports. CCA CFO David Garfinkle says that occupancy of the newly-acquired Avalon’s facilities “was currently at about 75%, providing the opportunity to further enhance the revenues and profitability. Although the portfolio average per diem is lower than the average per diem in our owned and managed portfolio, margins are very similar.” He also says that CCA’s Trousdale County, Tennessee facility “will probably start generating profits as soon as it hits around the 75%, 80% occupancy, but I’d expect the run rate to really be in place by the third quarter of 2016.”

The GEO Group senior VP John Hurley says “with respect to future growth opportunities, we currently have approximately 3,000 beds in idle facility and have several active efforts to redeploy this available capacity. There are number of publicly known opportunities in the U.S. and overseas. We are currently pursuing totaling several thousand beds and we are also exploring the number of non-public opportunities that relate to both new project development and potential asset purchase.” Hurley also notes that “the CAR-16 procurement involves the rebid of several contract facilities, totaling more than 10,000 beds with contracts that expire during 2017.” These include the GEO-owned Big Spring Correctional Center (TX) and the 3,600-bed Reeves County Detention Complex, for which GEO provides management services.

Hurley also mentions that “in states where we currently operate, the average age of state prisons ranges from approximately 30 to 60 years old. In Arizona, the Department of Corrections has a pending procurement for up to 2,000 correctional beds. Additionally, there are several states, including Oklahoma, Ohio, and others which are considering public/private partnership for the housing amendments, as well as the development in operation of new and replacement correctional facilities.”

GEO Group stock was down almost 5% on Friday, off its 52 week high of 45.25 down to 31.76.

9. National/Vermont: Corrections Corporation of America (CCA) reaches a settlement with ACLU of Vermont and Prison Legal News over legal costs in a case over public access to CCA’s records as a public contractor. In 2014, a judge ruled in the public’s favor. The judge said in his ruling that “CCA holds Vermonters in captivity; disciplines them; pervasively regulates their liberty, and carries out the punishment imposed by the sovereign. These are uniquely governmental acts. CCA could have no lawful basis for such an undertaking except on authority of a government. The governmental function factor clearly elevates CCA, to the extent of its involvement in the imprisonment of Vermonters, to the status of a public agency under the Act.” Allen Gilbert, executive director of the Vermont chapter of the ACLU, “said the court ruling could open up other private companies that contract with the state to increased scrutiny.”

10. National: The Bond Buyer reports that the Republican presidential candidates’ tax proposals would harm municipal bonds “because the plans would lower or eliminate individual and corporate income tax rates, congressional observers said.”

11. National: K12 Inc., the national for-profit virtual charter school chain, is losing a lot of money. “K12 Inc (LRN) saw its loss widen to $12.79 million, or $0.34 a share for the quarter ended Sep. 30, 2015. In the previous year period, the company reported a loss of $6.78 million, or $0.18 a share. Revenue during the quarter dropped 6.54 percent to $221.23 million from $236.71 million in the previous year period. Gross margin for the quarter contracted 80 basis points over the previous year period to 37.17 percent. Operating margin for the quarter stood at negative 9.25 percent as compared to a negative 5.56 percent for the previous year period. Operating loss for the quarter was $20.46 million, compared with an operating loss of $13.16 million in the previous year period.”

12. California: P3 proponents urge the University of California board of regents to approve a ‘public private partnership’ model to expand UC Merced, the system’s newest campus, from 6,600 to 10,000 students. The Regents will decide whether to accept the form of the RFP this month.

13. Indiana: The GEO Group is seeking a zoning variance to locate an immigrant detention center near Gary International Airport. Mayor Karen Freeman-Wilson supports the proposal, but “Some council members, including Council President Kyle Allen Sr. and Vice President Ron Brewer Sr., said they want more information before rendering an opinion about the proposal. Rebecca ‘Becky’ Wyatt, the incoming District 1 councilwoman, also said she didn’t know enough about the project to comment.” NWI Times reports “the facility that could be constructed in Gary would be constructed in response to a request for proposals expected to be issued by ICE, an arm of the Department of Homeland Security.”

14. Iowa: A Des Moines Register investigation finds that “some of the claims made by the for-profit corporations chosen to manage Iowa’s $4.2 billion annual Medicaid program contain unverifiable data, misleading statements or half-truths.” Poor due diligence on the part of state overseers may be to blame for waving the companies through. The Register “could find nothing to suggest that the Iowa Department of Human Services, the agency that oversaw the selection process, did its own fact-checking of claims included in the winning bids.”

15. MarylandPublic feedback and input is invited on a new transit master plan to give metro Baltimore residents better access to good jobs. “Connecting to job markets is an integral part of the plan and will be accomplished through the addition of five new Express BusLink services in June 2016 to improve suburb-to-suburb job connections.” Public workshops begin this month.

16. New Jersey: Chicago public education activist Jitu Brown speaks to Camden Save Our Schools and the Camden Parents Union, who are fighting for local control and resisting the privatization of their schools, on building up the base and how to make a local campaign national. [Video]

17. New YorkA federal lawsuit has been filed on behalf of five special education students claiming they did not receive mandated services from a Brooklyn charter school. “In addition to the charter network and the school, the suit also named the New York City Department of Education and the New York State Education Department, asserting they failed to make Achievement First, a network with schools in Connecticut and Rhode Island as well as in New York City, live up to its responsibilities.”

18. New York: Security clearances are revoked for 25 Corizon workers at Rikers Island, but in some cases for convictions that are decades old. “Corizon has since lost its city contract. Come January 1, the city’s Health and Hospitals Corporation is taking over. Officials at the Health and Hospitals Corporation told us that they are in the process of evaluating every Corizon employee to determine whether they are staying on. As for getting back on the island now, the city says these employees have 10 days to appeal.”

19. Utah: Attorneys Brett Tolman and Janelle Eurick Bauer write in an op-ed in the Salt Lake Tribune that the Utah Department of Alcoholic Beverage Control should be fixed, not privatized. “Yes, the DABC is broken, but with some simple management and regulatory changes, the agency is capable of functioning efficiently and to the benefit of Utah’s citizens.”

20. Texas: A crucial vote will take place Nov. 19 in San Antonio over approval of an $844 million ‘public private partnership’ deal with the Spanish company Abengoa to build a 142-mile water pipeline. Opposition is building because ratepayers will face a “50 percent higher total bill for water and sewer service by 2020, which is as far as SAWS will project for now.” The city council approved the project a year ago. “A group of Burleson County landowners will join with San Antonio environmental and social justice groups to protest the project at noon Tuesday on the steps of City Hall.”

21. TennesseeKnoxville News Sentinel columnist John G. Stewart says “if you are looking for a case study of how to brand government as the enemy, you need only check out” Gov. Haslam’s whole scale privatization scheme for public assets. “But there is one more fundamental reason to be distressed: Government is not a business and should not be run like one. In business, the bottom line is easy to find — either you make a profit or you don’t. (…) In government, the bottom line is not whether or not you make a profit. It is whether or not you help citizens lead rewarding and productive lives, in relative safety and comfort, however that is defined. This bottom line is elusive and far harder to determine but, at the end of the day, far more important.”

22. Texas: Dallas County commissioners delay a vote on approving the transfer of a halfway house for released inmates to Corrections Corporation of America (CCA). The hope is that the delay will “give them time to set conditions how CCA runs the facility.”

23. International: As Canada’s new Liberal Prime Minister Justin Trudeau, who was elected on a platform of making major new investments in infrastructure, begins to put meat on the bones of his proposals, Mark Hancock of the Canadian Union of Public Employees (CUPE) urges Trudeau not to continue “the ongoing waste of tax dollars on so-called ‘Public Private Partnerships.’ Last year B.C.’s Auditor General said it cost the government twice as much to have private partners borrow money for P3 projects as it would have had the projects been publicly financed. Now, information newly released under Freedom of Information (yes, that law does sometimes work in [British Columbia]) shows the situation is getting worse. While public services are being starved and public employees get ‘zero’ wage mandates, the corporate partners in P3s are getting guaranteed increases.” But the P3 industry is also hankering after the new money.

24. Think Tanks: Many interesting papers and PowerPoint presentations have been put online from the recent 4th Annual International Symposium on Public Private Partnerships, hosted by the Cornell Program in Infrastructure Policy. Includes “Public-Private Partnerships as Drivers of Innovation? Lessons from Ontario, Canada,” by Matti Siemiatycki; and “Identifying the Influence of Public Involvement in Public-Private Partnerships” by Erik Boyer and David Van Slyke.

25. Upcoming Webinar: The Partnership for Working Families, Gamaliel, and PolicyLink will host ‘Getting Local Hire Right’, a webinar on implementing local hire provisions featuring Jackie Cornejo, Campaign Director, Los Angeles Alliance for a New Economy (LAANE), and representatives from L.A. Metro and the U.S. Department of Transportation. It goes down this Friday at 11AM PT. [Registration]

26. Upcoming Webinar: This Thursday, the P3 Division of ARTBA, the transportation industry’s trade association, will be hosting a webinar on P3s, which will include an update from the Build America Transportation Investment Center (BATIC) at the U.S. Department of Transportation, and an ‘Owner’s Pipeline Update’ with Mark Linsenmayer, director of the Public-Private Partnership Program at L.A. Metro. Tony Elkins of Cintra will moderate the one-hour session.

27. Upcoming Conference: The DOD/Federal Energy & Water Forum will consider, among other issues, “the evolution of utilities privatization and its role in energy security” and “the role of public-private partnerships in advancing federal energy and water goals.” December 16, 2015.

Legislative Issues:

1. National: After weeks of wrangling and dealmaking, both chambers of Congress have approved six-year surface transportation reauthorizations. Lawmakers have until November 20 to reconcile the bills and vote on a final measure before current short-term money runs out. Staff will start meeting today and all week, even though the House is not is session. Funding, freight and safety issues are key. [Bloomberg BNA; sub required] The New York Times reports “the banking industry scored a surprise victory on Thursday when the House voted to pay for part of a new highway bill by draining a rainy-day fund at the Federal Reserve rather than cutting federal payments to some of the nation’s largest banks.”

2. Pennsylvania: The state budget impasse has forced Schuylkill county to slow payments to charter schools.

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