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This Week’s Outsourcing Scan 3-7-2016

1) National/Arkansas: Adding further support to In the Public Interest executive director Donald Cohen’s point that charter schools are accountable “to neither the public who pay the bills nor the parents of children who deserve to have their voices heard,” a scandal has raised questions about who audits charter schools in Arkansas. 
 
The Arkansas Times finds that “charter school accountability is non-existent” in the state. Citing a 2012 legislative audit of a school that closed in 2012, the Arkansas Democrat-Gazette reports that Dreamland Academy of Performing and Communication Arts in Little Rock was paid $459,000 in violation of state law. But the audit only came to light last week. “The matter kicked off a discussion among lawmakers about how schools are audited and the role of Arkansas Legislative Audit. ‘My concern with a number of charter schools is who is ultimately responsible for the auditing,’ said Sen. Linda Chesterfield, D-Little Rock. Kendra Clay, general counsel for the Arkansas Department of Education, said charter schools are public schools and audits are required. However, schools can choose whether to use Legislative Audit, at no cost to them, or pay a private firm to check their books. Dreamland was most recently audited by a private firm.”
 
2) National/Wisconsin: Multiple activities across the country will be held during Sunshine Week next week. For example, building on their victory against a determined attack on Wisconsin’s open government law last year, transparency activists will “be offering a 90-minute tutorial and presentation on the state’s open records law in eight Wisconsin cities. The goal is to help Wisconsin residents understand how the law can be used and why it is important.”
 
3) National: CNBC reports on proposals to shut down the for-profit prison industry, which have been advanced by Democratic presidential candidates Bernie Sanders and Hillary Clinton. “A Sanders campaign spokesman said private prisons and detention quotas create an incentive for corporations and law enforcement to put people behind bars, and Sanders believes that eliminating this perverse incentive by ending private prisons is the first step toward reducing the U.S. prison population.” Democratic strategist Julian Epstein says, “it can certainly be accomplished, but given the large number of people involved, it would be logistically complex in early phases. Clinton would probably have to phase in the plan over three to five years.”
 
4) National: A bitter dispute continues over a private company’s assertion of property rights over the names and attractions of Yosemite Park. “‘Obviously at some point down the road, when and if the government prevails in the litigation, we certainly want to retain the original names,’ said Scott Gediman, the spokesman for Yosemite National Park. ‘We feel strongly that the names belong to the American people.’” Two weeks ago the National Park Service filed a petition with the United States Patent and Trademark Office to cancel the trademarks claimed by Delaware North; and a lawsuit is under way but has yet to be scheduled at the DC-based Court of Federal Claims. The PTO case could extend into next year.
 
5) National: Road privatization companies are again raking it in, after taking a battering during the financial crisis and recession. Cintra has realized a return of $265 million for the sale of its equity stake in the Chicago Skyway concession. Macquarie Atlas Roads will bag $95 million from the deal, and traffic and revenue is up on its U.S. roads. Transurban’s half-year global toll revenues are up 19.3%, and toll revenue on its U.S. operations grew 216.8%. [Public Works Financing, February 2016; sub required]
 
6) National: The Private Corrections Institute, a non-profit citizen watchdog organization, announces its 2015 awardees for individual activism, organizational advocacy and excellence in news reporting related to the private prison industry. In the Public Interest won the award for “outstanding advocacy against the privatization of correctional services,” including for its widely covered report “Criminal: How Lockup Quotas and ‘Low-Crime Taxes’ Guarantee Profits for Private Prison Corporations.” In welcoming the award, ITPI Executive Director Donald Cohen said “we have big plans for 2016, and this award will inspire our work to oppose privatization in the criminal justice system. Ryann Greenberg received PCI’s award for individual activism for leading the opposition to a privately-operated immigration detention center that CCA planned to build just outside Pembroke Pines, Florida. The Clarion-Ledger’s Jerry Mitchell received the media coverage award “for multiple articles regarding conditions, violence and abuses at private prisons in Mississippi.”
 
7) National/CaliforniaThe New York Times publishes an in-depth piece on charter school advocate Eli Broad’s Broad Center, which trains school administrators to drive his model of private charter schools into public school systems nationally. Oakland has become a flashpoint: “At one point, the anger at Mr. Wilson boiled over and police officers helped quell the unrest. Yvette Felarca, a local activist, denounced Mr. Wilson, saying he was undermining special education ‘to make the charter schools more competitive with a degraded public school system.’ ‘When Eli Broad trained Antwan Wilson,’ she shouted, ‘he trained him to come in here and privatize the schools!’”
 
8) National: The Association for the Improvement of American Infrastructure (AIAI) has set up a networking group, P3Direct, to link industry and government officials on infrastructure privatization. “Public officials can bring to the table the challenges that they face in promoting P3s as a successful delivery method for the entire gamut of infrastructure demands. AIAI can help tackle the problem of community misunderstanding and unwillingness to be open to new ideas.” [AIAI press release, February 26, 2016]. AIAI is run by Lisa Buglione, the VP of Marketing and Business Development for Star America Infrastructure Partners, LLC, a private equity group. Star America has a 15% stake in the equity of Maryland’s Purple Line light rail project, [Public Works Financing, February 2016; sub required] and has recently raised more than half of what it hopes will be a $300 million infrastructure investment fund, and is active in four other P3 deals. [Sub required]
 
AIAI tracks P3 legislation across the U.S
. They lobbied Congress on the transportation bill to increase TIFIA loans, promote private activity bonds, and on “general issues related to increasing transportation and infrastructure public-private partnerships.” AIAI hired Marshall Macomber of ThinkP3 LLC, the former chief of staff to Alabama congress member Mike Rogers (R), to lobby for them on these issues. ThinkP3 LLC has also lobbied for the National Association of Surety Bond Producers.
 
9) NationalFitch sees capital markets opportunity in Flint and Chicago water contamination-related lawsuits. “Reprioritizing and accelerating lead pipe replacement would add significant additional capital needs to the sector and could compete with other critical infrastructure projects.” [Sub required]
 
10) District of Columbia: The proposed merger between for-profit Exelon and DC’s public power utility, Pepco, “appears dead” as key supporters back off. “Go Away Exelon,” say DC citizens. “There’s only so much lipstick that you can put on a pig. That’s how most Washingtonians now think of the proposed $6.8 billion merger between Chicago-based Exelon and our local electrical utility, Pepco. The D.C. Public Service Commission first rejected the plan in August, saying Exelon had a ‘conflict of interest’ with the city’s commitment to clean, locally generated electricity. In October, the mayor ordered up more lipstick from Exelon in the form of minor green-energy investments, temporary ratepayer protections and other features. Separately, Pepco gave the mayor’s office $25 million in a highly unusual naming rights deal for a new soccer stadium.”
 
11) Florida: The state department of education is withholding capital expense payments to two Pinellas charter schools. Corrective action plans are due to the state on April 5. “The schools are operated by Newpoint Education Partners, a management company with a history of school closures and financial red flags.”
 
12) Illinois: After receiving legislative approval, Gov. Rauner floats the idea of a revenue risk ‘public private partnership’ to expand a 25-mile stretch of I-55 serving Chicago by adding tolled median lanes. The DOT will decide on a delivery model this summer. [Public Works Financing, February 2016; sub required]
 
13) Indiana: Problems at Indianapolis’ Tindley charter schools continued even after Chancellor Marcus Robinson resigned. Despite heavy borrowing from state and private charter school backers, “Tindley ended the year with a $187,119 negative cash balance. Projections prepared by the school board show the network’s cash balances swelled to $1.57 million in mid-February, but they are expected to drop to a mere $3,697 by the end of June.” Tindley leaders “have in the past criticized the legislature for providing charter schools only perating funds. They do not receive property tax revenue or state money for transportation costs, building construction and equipment as public schools do.”
 
14) MarylandGov. Hogan green lights the $5.6 billion Purple Line light rail ‘public private partnership,’ selects a team of companies to build, operate and maintain the line, and reveals the 900-page draft contract, which may be approved by the Board of Public Works next month. The Fluor-led team will begin construction late this year and completion is targeted for 2022. In addition to prevailing wage provisions, “there are penalties built into the contract for train delays or disruptions. A single day of dismal service would lead to a $25,000 fine. And there are other performance measures built into the contract as well. During the first three months of service, any deductions would be doubled, and a point system will track problems over the course of the contract. The contract includes incentives and penalties for Purple Line Transit Partners tied to traffic disruptions and community goals like noise control, communication, odors and cleaning.”
 
15) New Jersey: Food & Water Watch’s New Jersey state director, Jim Walsh, calls out Gov. Christie (R) and Senate President Steve Sweeney (D) for risking the safety of Atlantic City’s water supply. “The hard-learned lesson from Flint, Michigan is that a municipal water system must never be snatched up in the name of a financial crisis and run like a business, putting cost savings before public health. Families pay a horrible price for such short–term thinking.” Walsh asks, “might Sweeney be bowing to pressure from the unelected South Jersey power broker George E. Norcross III, whose brother Philip conveniently represents New Jersey American Water and has been involved in at least one meeting related to the Atlantic City takeover?”
 
16) New York: Eva Moskowitz, the politically aggressive head of the Success Academy charter school chain, has been put on the defensive by bad publicity and by public officials fighting for accountable school standards. WNYC’s Beth Fertig reports that “lately, she’s been calling on the Department of Education and the Times to ‘shine a spotlight’ on abuse in the city’s public schools,” but denied “she was trying to divert attention from her own problems with this strategy.”
 
17) New York: La Guardia Airport’s ‘public private partnership’ project is threatening the Port Authority’s capital budget. “Scope creep and changes made in the past six months to satisfy Gov. Andrew Cuomo’s redesign of the central terminal building have added hundreds of millions to the $3.56 billion all-in estimate made in 2014.” [Public Works Financing, February 2016; sub required]
 
18) Texas: As the Spanish renewable energy group Abengoa teeters on the edge of insolvency [sub required], its equity stake in San Antonio’s $3.4 billion water pipeline “public private partnership” project is becoming a local political football. The San Antonio Express-News reports that Abengoa wants to sell 80% of its stake in the DBFOM PPP, “but technically, Abengoa was only supposed to be able to sell no more than 49 percent of its equity stake in the project, not 80 percent. That’s a significant difference.” But the fact that it is a stakeholder in “the most important water project in San Antonio’s modern history” means “a change this big has to go back to San Antonio City Council for approval. It would be a dereliction of duty for council to say the SAWS board [the water board—ed.] has this one.”
 
19) Texas: The private operator of a $1.35 billion sector of State Highway 130 declares bankruptcy. Taxpayers may be on the hook: “After the bankruptcy filing, Moody’s lowered its final rating on the TIFIA loan to Ca from Caa3 and said it would withdraw the rating with a stable outlook.” [Sub required]
 
20) Texas: With the closure of the state department of transportation’s specialized design-build/P3 office, the outlook for ‘public private partnerships’ looks dim, though some in the P3 industry hope that declining revenues because of low gas tax revenue will open the door for tolling. But  “political support has evaporated. Sen. Robert Nichols will no longer advocate for P3s. Gov. Greg Abbott and the legislature have banned new funding for toll roads and ordered TxDOT to count the costs of the state buying existing [Regional Mobility Authority] projects and all of TxDOT’s concessions, including Cintra’s in Dallas.” [Public Works Financing, February 2016; sub required]
 
21) Wisconsin/National: Dennis Boyer of the Interactivity Foundation writes that water crises are failures of democratic governance. “That we should arrive in such straits should surprise no one,” he says. “We have experienced decades of deferred maintenance of infrastructure, deregulation, privatization, staffing cuts in public health and environmental protection agencies, and efforts to discredit the concepts that underlie science. The interests that find it inconvenient to keep water clean find it cheaper to buy politicians who push the costs off on the rest of us.” The foundation has produced a guide for citizens to discuss water issues and contribute solutions, Freshwater for the Future.
 
22) Think Tanks: The right wing Property and Environmental Research Center (PERC), which has deep roots in the extreme Wise Use movement and has been funded by the dark money DonorsTrust group, proposes using ‘public private partnerships’ to fix the National Park Service’s crumbling infrastructure. Privatization activist Leonard Gilroy of the Koch-funded Reason Foundation, a co-author of the PERC report, weighs in to support the proposal in The Bond Buyer, which didn’t bother to contact privatization critics for comment. [Sub required]
 
23) Think Tanks: Johns Hopkins University’s School of Advanced International Studies has a new area of focus in its international economics program: infrastructure finance and policy. Includes courses on “developing hard and social infrastructure through PPPs,” “Public-Private Partnerships: Aligning Resources and Interests,” and “Public-Private Partnerships: Energy & Environmental Case Studies.”
 
Legislative Issues
 
1) National: In an apparent victory for public interest groups and bipartisan opponents in Congress, privatization of air traffic control seems to have bit the dust. Politico reports that a draft of the Senate Commerce FAA bill is in the final stages of being ironed out. “What we’re hearing: a three-year authorization that stays far away from privatization—no nonprofit corporation, no feasibility study, no nothing—but increases the passenger facility charge by $2 in certain conditions, from the current $4.50 cap.”
 
2) National: A bipartisan effort to protect public municipal bonds has been launched in the House. Reps. Randy Hultgren (R-IL) and Dutch Ruppersberger (D-MD) have announced the formation of the Municipal Finance Caucus. “The group will consider issues including maintaining the tax exemption for municipal bonds—debt state and local governments issue to finance the construction and maintenance of infrastructure.”
 
Last week over 600 state and local officials weighed in to protect tax exemption for munis. “Proposals to change this commitment to tax-free municipal bonds would not only be costly for state and local taxpayers, but also result in fewer projects, fewer jobs and further deterioration of our infrastructure.” Lawmakers are trying to force federal prudential regulators to define municipal bonds as “high quality liquid assets” that can be sold quickly by banks in a financial crisis. [Sub required].
 
3) California: Jockeying begins over extension of the state’s ‘public private partnership’ law, which is due to be renewed next year. Gov. Brown and LA Metro favor maintaining the legislation as it is. The Professional Engineers in California Government want to amend the legislation to give Caltrans engineers “control over design checking, inspection, and other typically public functions.” Transportation California, an alliance of unions and construction companies, is dead set against PECG’s proposals. [Public Works Financing, February 2016; sub required]
 
4) UtahLawmakers boost funding for charter schools while traditional public school needs go unmet or underfunded. “The latest budget awards $15 million to a classroom technology program, down from $100 million requested by the state school board, while directing an additional $5 million to private companies that contract with the state for early learning software. And several bills supported by the education community were left off the latest budget, such as a $10 million expansion of full-day kindergarten and $30 million for teacher training grants. ‘We can not afford this price tag,’ Rep. Derrin Owens, R-Fountain Green, said of the charter school bill.” The bill now heads to the Senate.
 
5) Virginia: The state senate transportation committee has approved a bill on tolling highways, but stripped a provision that would have given the General Assembly a stronger role in overseeing tolling policy. The bill “now focuses on only two provisions: protecting consumers from high toll violation fees and fines and partnering with other states to recoup unpaid tolls from out-of-staters.” The Virginian-Pilot reports, “Sen. Bill DeSteph, R-Virginia Beach, said he thought all tolling decisions should go through the legislature. Secretary of Transportation Aubrey Layne said that plan would’ve essentially killed any public-private partnerships since concessionaires would not want to work on a project for months only to have to clear the hurdle of 140 legislators, too.” [HB 1069]

 

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