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This Week’s Outsourcing Scan 2-9-2015

Update: Upcoming Outsourcing Issues. February 9, 2015

1) National: A murky deal to forgive $480 million in student debt advances the devolution of the bankrupt, for profit Corinthian Colleges. “The debt relief isn’t precisely directed to students at the campuses ECMC is buying. Instead, it covers the Genesis loans owned by a large third-party debt buyer, identified in a Securities and Exchange Commission filing as Balboa Student Loan Trust. It isn’t clear who owns Balboa, which was incorporated in October, according to a Delaware state filing.” The deal is part of an agreement between the buyer of some of Corinthian’s assets and the U.S. government. The Consumer Financial Protection Bureau sued Corinthian last year.

2) National: Susan Collet takes the Obama administration to task for “threatening the very lifeblood” of  “state and local government stakeholders“ by trying to limit federal tax exemption on municipal bonds. “State and local government groups and bankers alike estimate that limiting the tax exemption for municipal bonds will significantly raise the very infrastructure costs the Administration is trying to address. (…) By over-engineering and taxing municipal bonds, policymakers could make a quest for perfection the enemy of the public good. [Sub required]

3) National: The Obama administration still wants to privatize the Tennessee Valley Authority,according to the Chattanooga Times-Free Press, but has not included such a measure in this year’s budget. “OMB said TVA ‘has taken significant steps to improve its operating and financial performance and has committed to resolve its capital financing constraints.’ TVA has a $30 billion debt ceiling, but the agency doesn’t expect to approach that limit within its financial and power planning in the next decade.”

4) National: Maximus, Inc., the health and human services outsourcing company, reports a hefty 23.63 % rise in profits for the quarter ended December 31. The company is benefitting from Obamacare enrollments.

5) National: Geo Group announces that its quarterly earnings release and conference  call will be on February 18. The company just declared a quarterly $0.62 cash dividend per share, which was in line with expectations. Geo’s stock is up nearly 38% over the past year.

6) National: Digby ties some political threads together on right wing attacks on the public interest in Wisconsin, North Carolina and beyond. In his new budget, Gov. Scott  Walker included language to eliminate the University of Wisconsin’s public service mission and slash its budget. In North Carolina, the state government is threatening to gut the Asheville city council if it doesn’t cave in and allow privatization of its water system. “I keep saying that what we’re seeing nationally is the next phase of Defund the Left.”

7) New York: Juan Gonzales of the Daily News lays out the details of a new NYC report on a nearly $1 billion contracting oversight fiasco from a 911 overhaul project. “Multiple layers of private consultants and vendors virtually ran the overhaul with little supervision from city employees. At times, those consultants ended up marking up their bills to the city as much as 600%. During one 18-month period, City Hall kept cancelling meetings of the interagency city group that was nominally in charge of the project, leading the city’s own quality control consultant, Gartner Group, to complain: ‘The most senior members of the administration simply failed to pay attention.’” The report was ordered by the de Blasio administration, and the abuses took place under the Bloomberg administration. The project is 10 years behind schedule. [Department of Investigations report (seven recommendations in cover letter)].

8) California: Los Angeles’ proposed streetcar project draws interest from 24 companies. “To follow up on the RFI, the city reportedly plans to launch a formal Request for Proposals (RFP) in the near future. The RFP is expected to take the form of either a design, build, finance operate and maintain (DBFOM) or a design, build, operate and maintain (DBOM) agreement.” [Infrastructure Investor, February 6, 2015; Sub required]

9) Connecticut/National: Critics say a Koch-backed legal group that pushed privatization of public lands in California is backing other small non-profits to give its anti-government agenda a grassroots vibe. “One thing those cases have in common is that the legal challenges oppose policies pushed by the Obama administration: government involvement in energy markets in the cases of Fuel Cell Energy and the wind farm, strict enforcement of wildlife protections in the Monterey dispute, and robust medical-safety regulations by the Food and Drug Administration challenged by the couple.”

10) District of Columbia: More than 1,600 D.C. charter students may be left without a school if the Dorothy I. Height Community Academy Public Charter School has its charter revoked for engaging in a pattern of fiscal mismanagement. The school’s founder, Kent Amos, allegedly “funneled $13 million of public money into a private company for personal gain,” and the board failed to meet its fiduciary duties. A Superior Court judge ordered the payments to the management company to stop. The District of Columbia Public Charter School Boardwill meet this Thursday at 8 AM to decide whether to revoke the charter. [Watch live here].

11) Florida:Belleaire Beach considers privatizing its building services. “Glenn Wardell of the Pinellas County Building Department was at the meeting and heard the Causley presentation. He will have the opportunity to tout the county’s building services next month. The council plans to make a decision on the matter at that meeting.”

12) Idaho: The state liquor division, which is benefitting from cross-border customers from Washington, is on its way to a record moneymaking year. Prices rose sharply in Washington after it privatized its state liquor distribution system. “Over the next decade, we forecast $725 million in distributions to our stakeholders, the people of Idaho.”

13) Illinois: As the Chicago mayoral election approaches, Mayor Rahm Emanuelcriticizes one of his opponents for supporting the city’s disastrous 2008 parking meter privatization deal. Emanuel has not backed the Privatization Transparency and Accountability Ordinance, currently stuck in the City Council’s Workforce Development and Audit Committee, despite public pressure

14) Nebraska: The state’s effort to privatize its child welfare system brought “no measurable benefits,” a new report says. State Sen. Bob Krist of Omaha, who sponsored the bill last year for the $30,000 study, said state leaders likely will take several months to discuss the study and weigh options. ‘It’s up to the Legislature and new director of HHS to work jointly and make sure that the changes we make are evidence-based and that we go in the right direction,’ Krist said.” The new director of Nebraska HHS is Courtney Phillips, who worked in Louisiana’s health department since 2003

15) Louisiana: A petition drive has begun to block the privatization of East Baton Rouge prison . “The petition suggests that the police department change its approach toward non-violent crimes, perhaps by swapping out jail times for fines. ‘This option would save the EBR money without the social cost of for profit prisons,’ the petition reads. ‘Our penal system is important for safety and rehabilitation.’” [Petition]

16) New York: Battle lines are drawn over the possible privatization of the New York City public hospital system’s dialysis units to Big Apple Dialysis. “At a public health hearing [the week before last], the dialysis proposal was opposed by the New York State Nurses Association, a union for registered nurses; Doctors Council SEIU, which represents HHC physicians; and Public Advocate Letitia James. Speaking at the hearing, Ms. James said, ‘We know for a fact this company underperforms. They put products ahead of patients.’” The Public Health and Health Planning Council is set to vote on the plan this Thursday.

17) Ohio: The financial records of the Gateway Academy Charter school in Franklin County are in such a shambles that they are “unauditable,” according to the state auditor. “State law forbids the school sponsor, Educational Resource Consultants of Ohio, from contracting with any other community school to provide services to students.”

18) Ohio: Teachers and staff move to create the first unionized startup charter school in the state, petitioning to affiliate with the Ohio Education Association. “Franklinton Prep teachers still have to file their plan with the National Labor Relations Board, which will trigger an election to certify the FPAEA as a bargaining unit. That vote would take place in coming months.”

19) Pennsylvania: Four private companies are invited to submit bids to build compressed natural gas fueling stations at public transit sites across the state. “PennDOT soon will issue a draft Request for Proposals that the selected teams will review before a final RFP is issued in the spring. PennDOT expects proposals will be required to be submitted by summer, with an award to be made in late summer or early fall. The selected private partner will design, build, finance, operate and maintain CNG filling stations at up to 37 transit facilities.” The project was approved by the state’s P3 board last September.

20) South Carolina: Columbia is considering privatizing its water and sewer system. “Sustainable Midlands’ Ryan Nevius says her organization is watching the privatization issue ‘very, very carefully,’ while Corporate Accountability International’s Erin Diaz says “there are a lot of reasons [water privatization] is a very bad idea for cities and communities.’” The cityhas issued an RFI. Expressions of interest were due last Monday.

21) Texas: The state auditor has launched a probe of the Health and Human Services Commission to see if it followed proper contracting rules in outsourcing the operations of a North Texas psychiatric facility to Correct Care Solutions. One Republican lawmaker says “recent problems with numerous high-dollar contracts make him question whether the state is capable of properly monitoring a contract for Terrell State Hospital. Staff members of the Sunset Advisory Commission, which evaluates the effectiveness of state agencies, recently told legislators that the health agency has serious trouble monitoring the billions of dollars in contracts it already has.”

22) Texas: Poor contracting oversight leads to more scandals, loss of taxpayer dollars. Despite a controversial history with the state, Accenture continues to do business with Texas, and new contracting scandals are mushrooming. “Over the past two decades, Texas has pursued a wave of privatization of public functions with the belief that corporations could save taxpayer money while improving the delivery of essential government services. But multiple contracts representing billions in public dollars have blown up in the state’s face, prompting lawsuits, ethics investigations, wasted funds and frustrated Texans. (…) An audit released Wednesday found a lack of due diligence with 46 of 53 contracts tested at the Office of Violent Sex Offender Management. Before that, 12 of 14 audits conducted between 2012 and 2014 of various programs found weaknesses in contracting oversight.”

23) Texas: Two more counties get burned by jail bonds they issued in deals with private prison corporations. Two private detention facilities, Maverick County Public Facility Corp. and the Burnet County Public Facility Corp., have missed their bond payments. “Maverick County has been operating the jail since the GEO Group ended its operating agreement on Nov. 1, 2013. (…) In March 2014 Burnet County took over operation of the jail after Southwestern Correctional ended its contract. The private company has operated the 586-bed facility since 2008, when it first opened.” [Sub required]

24) Texas: The Kochs have been forced to fund green public transit. An environmental fine levied against a private Koch Industries subsidiary is cut in half as the company agrees to donate $143,000 to a nonprofit organization to turn Harrison County’s public school buses green. “The fine arose from an excessive emission of thousands of pounds of pollutants in 2011, documents show.”

25) Virginia: Norfolk school board members are considering demolishing one of the city’s public high schools and replacing it with a charter school operated “in partnership with the business community.”

26) International: Voters in Australia’s Queensland state turn back a massive public assets leasing scheme. “We went to the people of Queensland seeking a mandate for asset leases and we didn’t get that mandate. So the question is gone completely,” the Liberal National Party’s Jeff Seeney said.

27) Think Tanks: Economist John Quiggin criticizes the argument that public asset sales reduce interest rates on government bonds. “To sum up, the surprise abandonment of one of the largest proposed asset sales in Australian history caused only a momentary blip in interest rates on Queensland government debt, immediately wiped out by a modest adjustment in monetary policy at the national level.”

 
Legislative Issues:

1) National: Congress is moving toward consideration of multiple pieces of legislation that will shape and define the public vs. private roles in infrastructure development. “The Senate Committee on Environment and Public Works held a hearing on January 28th to discuss the future of the Highway Trust Fund.  Separately, the House Committee on Transportation and Infrastructure will undertake efforts this year, following up on its report released in September 2014 about the role of P3 structures in infrastructure development. Finally, Representative John Delaney (D-MD) and Senator Bernard Sanders (I-VT) have put forth separate proposals regarding infrastructure investment and the need for solvency of the Highway Trust Fund going forward, and Senators Barbara Boxer (D-CA) and Rand Paul (R-KY) also have issued a joint proposal on these matters.” In addition, the future of tax exempt municipal bonds will be considered in tax reform proposals. [Sub required]

2) National: Privatization industry lawyer John Schmidt of Mayer Brown urges Congress to back the Obama administration’s proposal to expand tax exempt financing to “public private partnerships.” He says, “to fully realize the potential of these partnerships, public entities need a mechanism to privatize existing infrastructure through sale or lease and then reinvest the proceeds in other infrastructure while maintaining the advantages of tax-exempt financing.” 

3) National: Transportation Secretary Foxx announces a $6 billion increase in Transportation Infrastructure Finance and Innovation Act (TIFIA) loans to encourage private investment in public infrastructure. The DOT estimates this will produce $60 billion of loans. “Among the priorities Foxx listed in his proposed FY 2016 DOT budget, he included the need to foster public-private partnerships through the DOT’s Build America Transportation Investment Center. To encourage such partnerships, the FY 2016 budget proposes creation a new Office of the Assistant Secretary for Innovative Finance to manage credit programs and encourage development of plans that utilize innovative financing options.” [Infrastructure Investor, February 5, 2015; Sub required]

4) Arizona: A provision in the state budget will strip publically-initiated charter schools of millions of charter school money, and they will revert to traditional public schools. The Koch-funded, ALEC-tied Goldwater Institute “called the practice of converting district schools to charters a ‘money grab,’ but school administrators contend the extra funding was used to maintain high-achieving schools.”

5) Kentucky: The state senate has passed a bill that would allow up to five charter schools in both Jefferson and Fayette counties over a five-year period. “Senate Minority Floor Leader Ray Jones II said charter schools would siphon money from existing schools. House Speaker Greg Stumbo predicted the bill won’t go far in the House.”

6) Kentucky: The legislature is considering a bill that would establish a privately-run retirement system for employees in the private sector. The trade association of the financial industry, the Securities Industry and Financial Markets Association, told the Bond Buyer it opposes the plan. [Sub required]

7) Michigan: Republican lawmakers will introduce legislation to create an accrediting process for charter school authorizers in the state. “Rep. Sarah Roberts, D-St. Clair Shores, said she believes the idea of charter school authorizers going through an accreditation process is a good start but there needs to be more oversight and accountability.”

8) Virginia: The House of Delegates unanimously passes the “public private partnership” reform act , tightening up public oversight of P3s and introducing taxpayer protections. Two interesting aspects of the legislation are that it requires certification of projects as being in the public interest, and requires private partners in projects over $50 million to pay for an audit of a project’s traffic projections and cost estimates. The state senate is expected to pass the bill easily this week. [Sub required]