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This Week’s Outsourcing Scan 9-26-2016

1) National: Donald Cohen distills some of the key lessons we should take away from the multiple problems and failures of the Texas State Highway 130 ‘public private partnership,’ which were laid out in an excellent investigative piece by the San Antonio Express-News’ Katherine Blunt. “A consensus is growing that infrastructure across the country needs serious investment. Public financing is the least expensive way to fund a renaissance in American infrastructure. But if a P3 is the only way to get the job done, we should take Texas’s State Highway 130 as a lesson in what not to do.” Ferrovial, one of the companies involved in SH-130, won the bidding with Denver International Airport to redevelop its main terminal—a project whose details are clouded in secrecy (see below).

2) National: The Obama administration has issued what some call a “death sentence” to the Accrediting Council for Independent Colleges and Schools, move that could jeopardize the ability of hundreds of for-profit schools to access federal funding. “ACICS has been a prime target of for-profit critics and some Senate Democrats in recent years. Sen. Patty Murray (D-WA), on Thursday praised the administration’s decision in a statement, saying that ‘far too many schools have maintained their institutional accreditation, even while defrauding and misleading students.’ But Rep. John Kline (R-MN) blasted the Education Department’s decision as ‘an unprecedented action that could disrupt the education of hundreds of thousands of students, particularly low-income and minority students.’” Aaron Lacey of Thompson Coburn LLP writes, “should the Secretary uphold the Department’s decision, ACICS may contest the termination of recognition in federal court. However, unless otherwise directed by the court, the termination action would not be stayed while the matter is litigated.”

3) NationalStandard & Poor’s downgrades two private immigration detention centers to junk “after two federal agencies announced initiatives to end or reduce use of such facilities. The detention centers in Holtville, Calif., and Alvarado, Texas, are both new facilities, financed by public facilities corporations. Both were downgraded to BB from BBB; S&P retained negative outlooks on both.” [Sub required]

4) National: Evgeny Morozov punctures some myths about the public sector’s infatuation with new private technologies such as Uber and Lyft, which are being brought in to replace some public services and infrastructure. “The Silicon Valley giants have got public services in their sights. But is innovation just a euphemism for privatisation?” He concludes, “What happens once the tech firms do become the only game in town? Will they be like those drug companies that, having entered into profitable and seemingly eternal deals with the government, can charge the public sector exorbitant prices, simply because there’s not much competition around? In the end, welfare by corporations is nothing but welfare for corporations.” 

Nearly 14,000 Uber and Lyft drivers in New York have recently signed up to join the local branch of the Amalgamated Transit Union.

5) NationalSalon’s Paul Rosenberg shines a light on how “the three-ring circus this presidential campaign has become” is obscuring continuing conservative efforts to dismantle public services—beginning with Social Security. “During the current budget cycle, the attacks are getting worse, even as baby boomer retirements continue to swell the rolls. This erodes confidence in the system, thereby weakening it for even further attacks, privatization and dismantlement—the true conservative dream.”

6) National: American Water has been awarded a $10,987,704 modification to a 50-year contract for utility privatization services by the Defense Logistics Agency Energy.

7) AlabamaMadison County Jail in Huntsville, and its for-profit health contractor, Advanced Correctional Healthcare Inc. (ACH), have been hit with a federal lawsuit for deliberately ignoring the needs of Roy Lee Davis. an inmate suffering from alcohol withdrawal. Shadownproof’s Brian Sonenstein reports that “the arguments made by his attorneys echo those of many other lawsuits and investigations, which conclude ACH’s contracts are structured to incentivize profits over inmate health, limit liability for medical neglect, and empower the company to deny basic treatments and care for inmates. (…) For Madison County, ACH agreed to pay up to a $200,000 per quarter cap on inmate healthcare expenses. The county would pay for anything beyond that cap, and if ACH provided care below the cap, they were allowed to pocket the difference.” [Roy Lee Davis complaint; see also Brian Sonenstein’s 3-part series, beginning with “Advanced Correctional Healthcare’s Brutal Brand of Jailhouse Medicine”]

8) Alabama: Creating new charter schools next year under the state’s new charter law will be tricky since they must comply with federal desegregation requirements. “The act states the charter school applicant, the local board of education and the commission must review the potential impact of an application on the desegregation efforts of local school systems.”

9) Arkansas: The state is looking at its first interstate highway tolling ‘public private partnership.’ “If the project were found to be viable as a tolled P3, the private entity would build and maintain the highway until it is paid for and reverts to a free road, Bennett told the highway commissioners. The study will compare the costs and benefits of operations and maintenance by a private partner rather than the Arkansas Highway and Transportation Department, [state highway director Scott Bennett] said.” [Sub required]

10) CaliforniaThe issue of private prisons has entered the race to replace outgoing Rep. Loretta Sanchez, D-Orange. “While Nguyen has emphasized his opposition to the use of private prisons, Correa points out that Nguyen voted to renew the contract of a private prison firm, the GEO Group, to run the city’s jail. Nguyen responded that there were no problems with the group’s previous work running the three-cell jail, that city staff recommended continuing the contract and that the jail is ‘essentially a booking facility’ because suspects are simply held there until they are cited and released or transferred to the Orange County Central Jail.”

11) Colorado: The Denver City Council recently decided to proceed with final negotiations for the refurbishment of Denver International Airport’s main terminal, despite questions about Ferrovial, one of the contractors. The council has given DIA officials six months to work out a contract. “The resolution authorizes airport officials to talk to the project team—led by the airports division of Spain’s Ferrovial SA—under a predevelopment contract that has a $9 million cap.” Any final development deal would have to be approved by the council and Denver’s mayor. The public will get no input until next year. The city is being advised by Nossaman under a $600,000 contract. At a council hearing, Ferrovial’s project director defended the Spanish company against allegations of labor abuses and corruption charges. Ferrovial is involved in the controversial, bankrupt Texas SH 130 ‘public private partnership’ (see above).

The project’s numbers and details are clouded in secrecy, however. On Thursday, the Denver Business Journal reported that “Denver International Airport has released 141 pages of documents—but very little new information—in response to a Denver Business Journal request on its proposed massive overhaul of DIA’s main terminal. Documents related to the winning proposal for the Jeppesen Terminal remodel by a team of companies led by Spain’s Ferrovial SA were released Wednesday in three parts totaling 141 pages. Of those, 118 pages, or 84 percent, were either partially or fully blacked out.”

The DBJ reported that “with the details of the proposal still unknown to the public, it’s impossible to ascertain why the review panel made the selection it did. (…) But the documents redacted notes from the panel members outlining what they liked and didn’t like about the proposals. And Ferrovial’s proposal itself submitted was equally blank—redacted—when it came to specifics about how Ferrovial will change the terminal. The names of the ‘key personnel’ charged with oversight of the design and construction of the project were similarly blacked out. So was phasing—including the number of phases Ferrovial proposed in order to do the project with the minimum amount of disruption to the airport. Ferrovial’s team looked at the potential shops and restaurants that might be part of the revitalized terminal’s Great Hall. The results of their analysis were also blacked out. (…) The financial portion of the proposal also was blacked out.”

12) Georgia: The Marietta Daily Journal says that the Opportunity School District plan, a November ballot initiative to expand privately-operated charter schools in the state, is a “sham” and a “cash grab.” The MDJ says “there is more than $15 billion a year on the table funding public education in Georgia and there are consultants all over the country licking their chops trying to figure out how to get their hands on that tax money.”

13) Kansas: A state audit finds that the troubled Department of Children and Families “fell short on two-thirds of foster care benchmarks.” DCF Secretary Phyllis Gilmore said “the most immediate and urgent change needed is that foster care contractors should no longer be allowed to inspect their own homes. Gilmore indicated DCF is studying the steps needed to assume that responsibility.” Another audit report focusing on privatization is due early next year.

14) Louisiana: The private contractor that runs LSU’s Shreveport and Monroe hospitals refuses to sign a reworked contract submitted by Gov. John Bel Edwards (D). Because of this, Edwards “is moving to oust the operator” and end the contract. The “two sides have 45 days to continue conversations under the contract, once the state seeks the hospital manager’s ouster.”

15) MassachusettsBoston janitors vote to strike if a new contract is not agreed. “If agreement on a new contract cannot be reached by Friday, the members of Service Employees International Union Local 32BJ may halt work, leaving most of the towering high-rise buildings above them and the subway system below without custodial staff.” The strike would affect 13,000 janitors, most of them immigrants, who clean 2,000 buildings, including MBTA buildings.

16) MassachusettsMercedes Scheidner tracks out-of-state money pouring into the fight over raising the charter school cap. “But it is Q2, on the expanding of charter schools, which has been the real money draw. As of the September 09, 2016, filing, four committees in support of Q2 had raised a combined $11 million (taking into account that two of these committees shuffled $1 million to the two other committees), and one committee in opposition had raised $6.8 million. On September 20,2016, one committee in support of Q2, Great Schools MA, has added another $1,029,193—with most of it–$1 million– coming from the largest funder by far of Massachusetts’ ballot measure for charter expansion: New York-based lobbying nonprofit, Families for Excellent Schools Advocacy. (…) Also, as of September 20, 2016, the total amount of unique, non-overlapping money spent in support of Q2 is $12.1 million. New York-based Families for Excellent Schools Advocacy has provided 56 percent of that total.”

17) Michigan: Wayne State, a public research university, is to privatize management of on-campus housing to Corvias.

18) New Hampshire: A case pitting the Nashua school board against custodians over privatization may move to the state Supreme Court after the Public Employee Labor Relations Board unanimously rejected the school district’s call for a rehearing on its effort to privatize custodial jobs. The PELRB cited a provision saying “any motion for rehearing shall set out a clear and concise statement of the grounds for the motion.”

19) New Jersey: The city of Hackensack rejects privatization of its sanitation services after determining that all the private bids it received would provide minimal savings. “The idea of privatizing the sanitation department initially was conceived as a cost-cutting measure. It was floated to help offset a cost of more than $2 million to replace aging garbage trucks, City Manager David Troast said. But the proposal eventually encountered vehement opposition from residents and employees who feared they would lose their jobs.”

20) New YorkNew Yorkers for Parks, which has fought to maintain open public space and resisted privatization, gets a new leader. “Parks and open space are essential urban infrastructure, and we have to start talking about this issue through that lens, including health, economic development, and social justice,” Lynn B. Kelly says.

21) Oregon: The state’s road user fee task force recommended an expansion of the vehicle mileage tracking system. “The state wants to transition its functional VMT system into a viable program that could help bridge the growing gap between fuel tax revenues and infrastructure needs, [Oregon DOT assistant director Travis Brouwer] said. Private partners collect the mileage data and report it to the state, protecting the privacy of motorists in the program, he said. ‘We’ve learned how to run a road usage charge system using private sector partners, which no other state has done before,’ Brouwer said.” [Sub required]

22) Pennsylvania: Last Thursday, Auditor General Eugene A. DePasquale reiterated his call for tighter legislation to govern the state’s charter schools after an audit of three of them. “The state’s largest cyber charter school paid millions of taxpayer dollars to a management company, an arts center and other entities tied to the school’s founder, according to Pennsylvania’s fiscal watchdog, who called again for an overhaul of what he called the nation’s worst charter law.” In a tough and comprehensive 91-page report, DePasquale said “because of the inordinate number of related party transactions [at PA Cyber], the board and the administration had an even greater duty to govern all aspects of the cyber charter school’s management, but it failed to do so.” The audit has been picked up on by candidates charging incumbent lawmakers with dropping the ball on charter regulation.

23) Tennessee: Nashville is moving towards a $5.97 billion transit program aimed at relieving congestion in its greater metro area. How to pay for it? “Potential sources include an increase in the local sales tax or in the local government share of the state sales tax. Another option is a public-private partnership to build and operate the transit lines, like the Purple Line light rail project in Maryland, which is enabled by a Tennessee law passed in 2015.”

24) Washington: The Yakima Herald reports on the high stakes electoral race for the state Supreme Court, into which charter school proponents have poured big money to try and defeat Chief Justice Barbara Madsen, who was part of a decision declaring the state’s charter schools funding practices nconstitutional. The challengers face an uphill battle.

25) International: Jeremy Corbyn, a strong opponent of public services privatization, is elected leader of the British Labour Party for the second time in a year with a even bigger majority. “After a generation of forced privatization and outsourcing of public services, the evidence has built up that handing services over to private companies routinely delivers poorer quality, higher cost, worse terms and conditions for the workforce, less transparency and less say for the public,” Corbyn says. “We will give councils greater freedoms to roll back the tide of forced privatization. It locks people out of decision-making, makes services less accountable, too often means a bad deal for taxpayers, a bad deal for communities and a bad deal for workers too.”

26) International: As Australia debates privatization, Lenore Taylor, the Guardian’s Australia editor, says “the question isn’t which services to privatize but whether to privatize.” She reports, “the union movement, through Public Services International, is conducting a ‘people’s inquiry into privatization.’ chaired by the executive director of the progressive think tank Per Capita, David Hetherington, to ‘start a national conversation about the impacts of privatization, and talk directly with communities about the services they need.’ Its other members are the former Western Australian Labor politician Yvonne Henderson and Archie Law, executive director of ActionAid.” The inquiry will hold public hearings around the country on privatization.

27) Think Tanks: The municipal finance center of the University of Chicago Harris School of Public Policy “is offering grants for academic research projects on topics that range from public sector pensions and bond financing to infrastructure, taxation, and the politics of public finance. (…) The center intends to put together a comprehensive database with city and state financial and pension data and default and privatization information that will allow for in-depth research and direct comparisons among governments. It would be available for use by academics and local government officials and by industry professionals working on financing ideas.” [Sub required]

Legislative Issues

1) National: ICE director Sarah Saldaña pushes back against the idea of ending the use of for-profit corporations in immigration detention, saying it would turn the system “upside down.” Her comments “fly in the face of Department of Homeland Security Secretary Jeh Johnson’s recent decision to review whether ICE should continue relying on private prison contractors to run its detention centers,” The Huffington Post reports. Civil rights group called the hearings “just another anti-immigrant sideshow.” An advisory panel is to report back to Johnson in November with its recommendations on whether to scrap the use of private companies by ICE.

2) National: Congresswoman Bonnie Watson Coleman (D-NJ) introduces legislation to ban federal use of for-profit prisons. “While President Obama’s administration recently announced plans to phase out the use of for-profit prisons, the End For-Profit Prisons Act would codify that decision and ensure we never waste taxpayer dollars on for-profit prisons again.” The bill would “restrict the authority of the Attorney General to enter into contracts for Federal correctional facilities and community confinement facilities.”

3) National: The Congressional Research Service has issued a guide on “How a National Infrastructure Bank Might Work,” including a comparison of several House and Senate bills.

4) Michigan: A series of town hall meetings called to discuss Gov. Snyder’s possible effort to privatize mental healthcare kicked off last week. “Gov. Rick Snyder’s budget proposal earlier this year included language that was interpreted to allow for privatizing the administration of Medicaid spending on mental health. It later was withdrawn, but some patient advocates fear it will return in January when the Michigan Department of Health and Human Services is expected to report to the Legislature on proposals to reform the state’s mental health system. ‘We wanted to get out in front of that,’ said Fred Cummins, president of the Alliance for the Mentally Ill of Oakland County, an advocacy group made up of hundreds of patient families. ‘We want people to be fully aware of the privatization and the ramifications of that.’”


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