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This Week’s Outsourcing Scan 8-17-2015

Update: Upcoming Outsourcing Issues. August 17, 2015

1) National: The Obama administration has appointed Andrew C. Right to be the point person at the U.S. Department of Transportation on “public private partnerships.” He is a former vice president in the infrastructure investment group in Goldman Sachs’s merchant banking division. He was part of the team that raised $6.5 billion for Goldman Sachs Infrastructure Partners I, and “worked in conjunction with the GSIP investment committee to price bids and make final investment recommendations.” [Public Works Financing, July/August 2015; sub required]. Right is married to the daughter of Stephen A. Schwarzman, the founder, chairman, and CEO of the Blackstone Group ($330 billion in assets under management).

2) National: A federal judge may rule this week on the family immigration detention practices of the federal government. Judge Dolly Gee ordered the government to show cause why the family detainees shouldn’t be released. In response, Homeland Security lawyers asked the judge to reconsider her ruling, “saying detention times have been shortened and that further limiting family detention could spark another surge in immigrants from Central America.” But in a filing last Thursday, immigration rights attorneys urged Judge Gee to stick to her release order.

3) National: In a significant victory for the public interest, the Governmental Accounting Standards Board (GASB) issues final guidance for state and local governments to report on the costs of tax-based economic development subsidies. Good Jobs First and the U.S. Public Interest Group (USPIRG), which have campaigned for transparency and control reforms for years,  praise the move. GJF says “that when states and localities start issuing new data under this Standard in 2017, it will enable massive new bodies of analysis and reform policymaking. Organizations and scholars concerned with state and local finances, tax policy, government transparency, economic development, regionalism and sprawl, public education finance, campaign finance, and contracting and privatization will all gain access to significant information heretofore unavailable.” [GASB Statement No. 77, Tax Abatement Disclosures]

4) National: David Horner of the law firm Allen & Overy (and former chief counsel of the FTA in the GW Bush administration) pushes new legislation that would recast the federal credit support program for railroads (RRIF) as a TIFIA-like tool to do project financings “including P3 delivery of commuter rail projects.” [S. 1626; Public Works Financing, July/August 2015; sub required].

5) Alabama: 54 cities and towns have or intend to terminate their contracts with Judicial Correction Services (JCS), which collects traffic fines and court debts “by charging illegal fees and threatening impoverished Alabamians with jail,” according to the Southern Poverty Law Center. WAFF reports “Decatur, Florence and Muscle Shoals use other private probation companies. SPLC officials say those cities will soon get a letter, too.”

6) Arizona/Hawaii: A 21-year old prisoner at the Corrections Corporation of America-run Eloy prison is killed. “As of Aug. 3, CCA housed more than a quarter of Hawaii’s 5,763 total inmates at a daily rate of $68.77 per inmate. (…) Schwartz said prisons in Hawaii employ a different classification system that separates inmates into maximum, medium, and minimum and community levels—as well as a “closed” classification for inmates requiring special needs.” The Honolulu Star-Advertiser says it’s time to bring the prisoners home. “The troubling slaying of 21-year-old Namauleg in an Arizona prison is a grim reminder of Hawaii’s overcrowded, disjointed prison system—one that has languished with options but very few solutions for too many years.” [Sub required]

7) Arizona: As the Sun Tran strike drags on, the company rejects a union settlement offer. Columnist Blake Morlock writes, “Sun Tran, absent Transdev, wouldn’t be fearing any sign of weakness with 200 other transit systems and the French parliament watching. The Teamsters wouldn’t be trying to win an unwinnable victory in the shadow of dwindling membership as they try to wring blood from a stone. Instead this is a proxy fight for the global showdown between the powers that be and the working man and working woman.”

8) Colorado: Olivia Friedman, a student at North High School in Denver, asks how the DPS can just ignore the wishes of students and community members when they decide on whether to co-locate a charter school: “Knowing all of this, I was utterly dismayed upon hearing the board members state their votes that day. How could these politicians, who were on a board supposedly designed to reach out to the community and listen to them, sit through an hours-long meeting, hear emotional testimony after emotional testimony and then, right in front of our eyes, vote as if none of us had ever opened our mouths?”

9) Idaho: Boise State is to enter into a “public private partnership” to build a college residence hall. “The $40 million project would be part of a partnership with Tennessee-based Education Realty Trust, aka EdR, which would build the structure on university-owned land. EdR would own the building and students would lease dorm rooms from EdR. In 50 years, the plan is to have EdR turn the ownership over to Boise State. EdR has similar arrangements across the U.S. It currently owns or manages more than 42,000 student beds across 77 communities.”

10) Illinois: A Better Government Association study finds that while Chicago neighborhood schools are suffering cutbacks, charter schools are being spared. “Neighborhood and magnet schools are set to receive significant cuts in areas such as special education and busing, while charter schools are virtually untouched by these reductions, the BGA analysis found. ‘We don’t want anyone to suffer budget cuts,’ said Wendy Katten, director of Chicago public education advocacy group Raise Your Hand. ‘But if there needs to be cuts why aren’t they distributed amongst all types of schools?’”

11) Illinois: Gov. Rauner announces that he wants to appoint John Baldwin, Iowa’s former head of corrections, as s the next director of the Illinois Department of Corrections. The labor union representing prison guards in Iowa “had ‘poor relations’ with Baldwin, who sought to privatize some prison programs to save money.” The nomination is subject to Senate confirmation.

12) Illinois: DuPage County says it wants to save, not privatize the county nursing and rehabilitation facility. “DuPage officials say they want to identify operational and revenue changes that ‘support a financially sustainable model that can continue to meet the needs of an underserved population.’ So the county board agreed to hire the Center for Governmental Research to perform an in-depth assessment of the convalescent center.” The study is to be completed by March 31 of next year. But “some are concerned the study could resurrect talk of selling or privatizing the facility [because] there have been instances when the Center for Governmental Research recommended other counties sell their nursing homes..”

13) Indiana/National: In a post mortem on the failed Indianapolis Justice Complex “public private partnership,” Public Works Financing criticizes conservative Republican mayor Greg Ballard’s inflexibility toward community demands, especially on alternatives to incarceration. “It might have been more effective for the Mayor’s office to focus on the accommodations made to win support from community groups, including a key, faith-based group that favors criminal justice reforms and alternatives to building more jail cells for minorities. For instance, the existing county jail has five special-purpose cells to separate nonviolent offenders from criminals; the revised design by WMB called for 125.” An anonymous “Industry Commenter” is given space and blames “the Council’s CFO and Democratic Majority” for the deal falling through, continuing a pattern of refusing to face the fact that the numbers didn’t add up for these guardians of the public interest. [Public Works Financing, July/August 2015; sub required]. The City Council continues to believe that Ballard is behaving inappropriately on fiscal matters.

14) Indiana: A joint board composed of the city of West Lafayette and Purdue University issues draft requests for proposals to three teams of bidders on the State Street redevelopment project, which aims to transform a highway running through the city into a regular pedestrian and business-friendly thoroughfare. It is to be a DBFOM project, and the final RFP is expected to be released next month.

15) Indiana: Investors who purchased the distressed debt of the privatized Indiana Toll Road last year for 60 cents on the dollar received 95 cents on the dollar from IFM, which bought out the lease of the toll road then refinanced the debt.[Public Works Financing, July/August 2015; sub required].

16) Indiana/Illinois/Virginia: Cintra and Macquarie are reportedly seeking bidders for their toll concession on the Chicago Skyway. Traffic is down but revenue is up because of a toll increase. Macquarie Atlas also may be seeking a buyer for its 50% stake in the Dulles Greenway. [Public Works Financing, July/August 2015; sub required].

17) Massachusetts: The Fiscal and Management Control Board of MBTA will hold its fourth meeting on Friday. The board is chaired by Meridiam Infrastructure partner Joseph Aiello. Also, on Friday Gov. Baker named a labor representative to the MassDOT board of directors, Russell Gittlen, who is the New England Area director of the International Association of Machinists and Aerospace Workers and assistant business manager for Local 447.

18) Michigan: Charter school advocates recommend ways to improve charter schools in the state, “creating a statewide A-F report card for all schools,” and “ensuring charter school authorizers are held to high-quality standards for authorizing. Authorizers failing to meet these standards or who consistently authorize poor-performing schools should have their authorizing authority suspended or revoked.”

19) Michigan: Clawson’s school board votes to privatize custodial services to GCA Services without a competitive bid process. “[Trustee Kim] Carlesimo said privatizing custodial services may or may not be the right move for Clawson Public Schools, but she doesn’t know because the board didn’t receive needed information.” GCA Services is owned by the Blackstone Group, which is reportedly looking to auction off the company, said to be worth more than $1 billion.

20) New Jersey: Bergen Record columnist Mike Kelly directs some pointed questions to those who want to privatize Amtrak. “Amtrak has become the favorite whipping boy of conservative Republicans. (…) But the key question conservatives avoid is this: Who builds the tunnels and bridges in this privatized rail system and maintains them? To put it another way, if Amtrak is broken up, with pieces sold to various investors, who oversees the entire system, maintaining bridges and tunnels that link different parts? The answer inevitably comes down to the federal government. Indeed, it is generally the feds who provide for the nation’s common good by building bridges and tunnels that link that various pieces of the rail system.”

21) New York: Nassau County’s sewer privatization deal with United Water is not achieving the promised cost savings. “New Jersey-based United Water began running the county’s three major wastewater treatment plants, 53 pumping stations and 3,000 miles of sewers on Jan. 2. About 300 county workers were budgeted to staff the system in the year before the changeover, and according to the union that represents them, only four or five have taken jobs with United Water.” The county has hired KPMG to advise it on whether to consider a long term lease.

22) Oklahoma: Three homicides have occurred at Davis Correctional Facility in Holdenville, which is owned by Corrections Corporation of America, over the past year. “A contract between the DOC and CCA states the prison is separated by housing areas. CCA charges the DOC $57.96 per day per inmate in the maximum security branch and $44.03 per day per inmate in the medium security branch of the prison. The DOC also agreed to keep the prison supplied with inmates or face penalties. Watkins said that isn’t an issue because the DOC overall is currently at 114 percent capacity.”

23) Tennessee: Former inmates at a Nashville jail run by Corrections Corporation of America say they worked without pay for jail officials. “The former inmates said Hill and Binkley also took orders from guards and higher-ups throughout the jail for the products they produced. The Tennessee Bureau of Investigation is probing allegations of misuse of inmate labor at the facility, at the request of Davidson County District Attorney General Glenn Funk.”

24) Texas: As the 85 miles per hour speed limit on the financially troubled SH 130 private toll road attracts more motorists, critics ask if this is really helping the road’s solvency, or if it is relying on gimmicks to stay afloat. “Hall said the $100 million payment also came in consideration for the state lowering the speed limit from 65 mph to 55 mph on an adjacent highway. ‘It’s more than “increasing the value for the asset”; it’s manipulation of speed limits on public roads for private profits.’”

25) Texas: El Paso’s engineering department may be dissolved after coming under criticism for not effectively accessing state and federal infrastructure financing. “The department might be changed to the Capital Improvement Department. Some of its duties already have been outsourced.” But city rep Lily Limon says “she is concerned that outsourcing is undermining the work the engineering department has done and that the department has been stretched thin with the quality of life bond projects. ‘If anything, we need more engineers,’ she said.”

26) Vermont: The death of a Vermont inmate at a Kentucky Corrections Corporation of America for-profit prison raises questions. “Gordon Bock, who heads the Vermont chapter of the national prisoners’ rights group CURE, testified that the months-long wait for clear conclusions about the cause of Nicholson’s death illustrates challenges with the out-of-state prison program. ‘To us, the Nicholson death demonstrates one of the sundry reasons not to send our prisoners out of state,’ Bock said.” Vermont Defender General Matt Valerio has said “that if there was any blame to be attributed to the staff of the Beattyville prison run by the Corrections Corporation of America it is that they should have known about ongoing tensions between the two inmates, one of whom, James Nicholson, died six weeks after the April 2 altercation.”

27) Wisconsin: Gov. Walker’s plan to provide $250 million of public financing for a new arena for the Milwaukee Bucks while cutting the same amount from the University of Wisconsin’s budget draws criticism. A local teacher union representative, Mike Rosen, tells The Nation’s Dave Zirin “The arena and related real estate deals do not address Milwaukee’s good jobs crisis and will do nothing for the unemployed and underemployed in the areas near the north side and south side neighborhoods.

28) Think Tanks: The Pioneer Institute, funded by the right wing dark money Donors Capital Fund, releases a study claiming that Massachusetts’ Pacheco Law, which requires transparency and accountability in state privatization deals, has cost Massachusetts “at least $450 million” since 1997.”

Legislative Issues:

1) National: The House Ways and Means Committee releases a discussion draft on reauthorization the TANF federal family assistance program that contains language permitting “social impact demonstration projects” and “social impact partnerships” (after p. 37). A Federal Interagency Council on Social Impact Partnerships would be established to report back on the one year “experiment.” The Social Impact Partnership Act was referred to the House  Financial Services Committee in March (HR 1336), and a Senate companion bill sponsored by Orrin Hatch (R-UT) has been read twice and referred to the Senate Finance Committee (S 1089). The Senate bill is being supported by the American Sustainable Business Council, ReadyNation, and the America Forward Coalition, and does not yet have any registered organizational opposition.

Prof. Jennifer Zelnick of Touro College and Donald Cohen of In the Public Interest have warned that “there are far too many questions remaining to conclude that SIBs are an effective vehicle for funding social programs.”

2) Oregon: The Oregonian editorial board looks ahead to a key educational issue in the 2016 legislative session—the student transfer process—“Oregon’s looming school-choice battle.”

3) Virginia: Lawmakers want details on the proposed I-66 improvement project, which VDOT is currently mulling over. “Among the questions posed by the legislators: Does the government have legal authority to make the changes it proposes; why are tolls planned for both directions in both morning and evening rush hour; how will the funds generated by the tolls be used; and what measures will be taken to mitigate spillover traffic on Routes 29 and 50 and neighborhood streets in McLean, Falls Church and Arlington?”