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This Week’s Outsourcing Scan 9-28-2015

A weekly roundup of privatization news covering all of our core sectors across the country.

1. National: As the U.S. Department of Education and industry insiders decide on how to spend half a billion federal taxpayer dollars on charter schools, the Center for Media and Democracy releases a decade and a half’s worth of data on failed charter schools, including “ghost” charters that never opened. CMD provides a state-by-state interactive map and complete list of failed charter schools for reporters to analyze and citizens to point to as they make the case for public education.

2. National: Pope Francis visits the Curran-Fromhold Correction Facility in Philadelphia, which has multiple contracts with private companies such as Aramark and Corizon that have “horrible track records.” Rick Cohen of NPQ says “the test will be not how the Pope responds to the profiteering, but the message coming from the dioceses of Washington, Philadelphia, and New York City. Let’s see when ordinary citizens complain about price gouging in the housing market and when political observers challenge the Church on getting too close to prison contractors.”

3. National: The Obama administration announces a number of steps to accelerate infrastructure projects but also protect the environment. White House Office of Management and Budget Director Shaun Donovan has pledged to increase the efficiency of the Federal permitting process “in an environmentally sound way.” [OMB Memo]

4. NationalThe New York Times calls for an end to the Obama administration’s inaction on student demands for debt cancellation due to fraudulent for-profit college claims. “A recent progress report from the Education Department’s special master for this issue showed that not one of the 4,000 people seeking loan forgiveness for reasons of fraud had been granted relief. This is startling given the overwhelming evidence of fraud collected by state and federal investigators.”

5. National/Washington State: “Law and Disorder” hosts Heidi Boghosian and Michael Smith discuss the national implications of the Washington State Supreme Court ruling that charter schools are unconstitutional, and asks if we might see similar rulings spread across the nation. They interview Michelle Fein, author of Charter Schools and the Corporate Makeover of Public Education: What’s at Stake? Fein says the case begins to get at the question “are charter schools public or private?” [Law and Disorder podcast, September 21, at 28:00].

After a six day strike, Seattle teachers won a number of important victories in areas beyond raises, such as a one-year ban on out-of-school suspensions of elementary students who commit nonviolent offenses, an end to the use of standardized test scores to evaluate teachers, and a decision-making role on the amount of standardized testing.

6. National: HBO airs a Vice special program on American prisons, including video of President Obama’s visit to the El Reno Federal Correctional Institution in Oklahoma. [Fixing the System]

7. National: Moody’s says that state and local governments will increasingly turn to “public private partnerships” to finance projects outside the transportation sector. “The report notes most P3s are in the investment grade category because of the essential nature of the assets and the project’s contractual framework that allocates project risk over the life of the project. When they occur, P3 rating downgrades are largely driven by refinancing risk, tax-related risks and weakening counterparty credit quality, with lower than forecasted revenue performance also noted as a credit risk. The report, ‘Public-Private Partnerships: Frequently Asked Questions’ tackles the differences between availability-payment, demand-risk, and hybrid P3s, and the status of P3 development in other countries.” [Purchase required; $550]

8. NationalMoody’s warns municipalities of the risks of backing third-party economic development projects. “Bristol, Va., saw its GO rating drop to Baa2 from A3 in March due to its decision to double its debt to pay for infrastructure costs to attract a development of regional impact, exposing itself to both economic and construction risk, Moody’s said. The decision to support a 140-acre retail tourism destination known as The Falls raised the city’s debt burden to 9.8% in fiscal 2014 from 5.2% in 2012. The $290 million project is being built through a public-private agreement.” [Sub required]

9. National: Federal contractor employees cannot be fined for discussing their salaries at work, according to a final rule published by the Federal Contract Compliance Programs Office.

10. National: The GAO issues a report calling for more federal regulation of the private spaceflight industry, citing concerns about the safety of crews and spaceflight participants.

11. California: Gov. Brown signs three bills that bring back redevelopment in a limited form. “‘We have the trifecta,’ said Larry Kosmont, president and chief executive officer of Kosmont Companies, a Los Angeles-based government and development consulting firm. ‘It is going to be a wild and exciting time in California for public private financing.’”

12. District of ColumbiaPublic sector union members evacuate Metro riders seamlessly after a third rail problem knocks out service. “The passengers in my car stayed in good spirits while waiting nearly an hour and a half in that spot. Train operators kept us in the know with announcements, and WMATA employees, members of the Amalgamated Transit Union (ATU) Local 689, periodically came through the trains to check on us and make sure no one had an emergency. Eventually, we were told the evacuation plan was beginning and there were other trains and people ahead of us to be helped out of the tunnels first. After about an hour and a half, the lights went out in the train, but nearly instantly firefighters and EMS personnel, from Fire Fighters (IAFF) Local 36, jumped into action, opening our car door and directing us out of the train and the quarter of a mile on foot to the Georgia Avenue station.”

13. Florida: At an industry-sponsored conference promoting “public private partnerships,” Miami-Dade Mayor Carlos Gimenez declares his support for privatizing the transit system in Miami, including a light rail system he wants to connect Miami and Miami Beach. Plans include giving “private transit developers access to property taxes from land along new routes, with new revenues dedicated to payments for the project.” County Commissioner Dennis Moss, a supporter of public sector operation of transit, says he is open to the idea. “At the P3 Pipeline event, Gimenez and some of his top aides laid out an extensive menu of possible private-public projects for Miami-Dade. Those include turning over the downtown Miami library branch campus, which includes the History Miami complex, to high-rise developers to create a project that could house both institutions, the South Florida Business Journal reported.” The conference was organized by the P3 Institute, LLC, which describes itself as having been founded by an elite team of construction industry professionals.”

14. GeorgiaThe pro-charter schools Walton Foundation is bankrolling a study by the Boston Consulting Group on how to “reform” Atlanta’s school system, half of whose schools may face state takeover if voters approve a state school district plan by Gov. Deal next year. “The idea of bringing in nonprofit charter school operators doesn’t sit well with some. ‘It would give the appearance of privatization of a public school,’ Raynard Johnson, a member of a committee advising the district on school improvement plans, said. Boston Consulting Group’s fee is being paid by the Walton Family Foundation, founded by the owners of Walmart, and by family foundations with ties to Atlanta business leaders: the Arthur M. Blank Family Foundation, Wilbur and Hilda Glenn Family Foundation, Nonami Foundation, Kendeda Fund and the Sartain Lanier Family Foundation.”

15. Illinois: As the hunger strike for community control of Chicago’s Dyett High School ends, the Network for Public Education’s Robin Hiller interviews Jitu Brown, an NPE board member and national director of the Journey for Justice Alliance, on privatization, power and the future of technology in education.

16. Illinois/Indiana: The controversial $1.5 billion Illiana Expressway “public private partnership” project is dealt a possibly fatal blow after the federal government decides against appealing a federal court ruling. “Alonso’s June ruling found that the government’s approval of the project was ‘arbitrary and capricious’ and violated federal environmental law. A coalition of environmental groups in Illinois had sued to halt the project. (…) A report in Crain’s Chicago Business said the Illinois Department of Transportation, which could appeal the ruling, has said it would follow the federal government’s decision and that the project ‘remains on indefinite hold.’” [Sub required]

17. MichiganThe underfunded Flint water supply system is leaching lead into its water and endangering the health of children and others, according to Dr. Mona Hanna-Attisha, director of the Pediatric Residency Program Hurley Medical Center. “Flint officials, including Mayor Dayne Walling, did not return calls seeking comment. Others, however, were quick to speak out. Flint resident Lee-Anne Walters, the mother of a child diagnosed with lead poisoning and one of the leaders of the grassroots Coalition for Clean Water, said the study’s findings were sad but not shocking.”

18. New Jersey/National: WNYC’s Brian Lehrer looks into “Facebook Money and School Reform in Newark” and interviews Dale Russakoff, journalist and author of The Prize: Who’s In Charge of America’s Schools? Russakoff will be participating this evening in a panel discussion about Newark’s schools with guests including Newark Mayor Ras Baraka and new schools superintendent Chris Cerf.

19.  New Mexico/National: The postal service inspector general finds “deplorable” working conditions at an unnamed U.S. Postal Service office in New Mexico. “Although management recently replaced one of two heating, ventilating, and air conditioning (HVAC) systems; heating and air at this facility have been inadequate for 6 years. Additionally, we found issues with lighting, electrical wiring, plumbing, and bathroom fixtures; cracked windows; water damage; and a cockroach infestation.” The report was prompted by complaints to Sen. Tom Udall’s (D-NM) office.

20. New York: A whistleblower tells Newsday he gave documents to the Nassau County district attorney’s office in 2013 “suggesting that politically connected restaurateur Harendra Singh secured illegal loan guarantees from Oyster Bay officials and arranged and paid for vacations for Nassau County Executive Edward Mangano, but district attorney investigators never followed up on the information.” Singh “has landed several lucrative contracts from Nassau County and Oyster Bay.”

21. New YorkCritics denounce a charter school ad as racist. “Manhattan Borough President Gale Brewer accused [Families for Excellent Schools] in a statement of helping to ‘divert money, resources and space from our public schools … into increasingly unaccountable private empires. The rhetoric of this ad, and the people and money behind it, are part of the problem.’” [More on FES]

22. Pennsylvania: State auditor Eugene DePasquale tells The Bond Buyer that when Gov. Wolf (D) took office in January, Wolf asked him to find a way to expand Allentown’s water-wastewater “public private partnership” model—designed to deal with a pension funding gap—all across the state. But DePasquale found that the model only applied to seven out of 1,300 municipal pension plans statewide. “‘Now I’m in the position of auditing PennDOT and other agencies. We have to call it down the middle,’ DePasquale said.” [Sub required]

23. TexasThe state attorney general refuses to weigh in on whether “public private partnerships” are tax exempt. “’This office has consistently concluded that such questions are outside the purview of the opinion process,’ said Virginia K. Hoelscher, chairwoman of the attorney general’s opinions subcommittee, in a letter to Brazos County Attorney Rodney Anderson that was released Tuesday.” Brazos County had sought an opinion on a student housing project. [Sub required]

24. Texas/National: A Texas jail bond issuer, IAH Public Facility Corp., reaches agreement with the IRS on $49 million of tax exempt bonds it issued to finance a jail in Polk County. The IRS had claimed the bonds were taxable. “Under the agreement, the trustee, U.S. Bank National Association, would pay the IRS nearly $980,000 on behalf of the issuer. Also, interest on the bonds accrued and paid on or before Nov. 2, 2015 would remain federally tax-exempt, but interest accrued and paid after that date would be federally taxable.” There are still 355 inmates in the facility, which is underoccupied. [Sub required]

25. VirginiaA Virginia Beach charter school has failed to get tax exempt status, and it is cutting deeper into public school funding as a result. “And the school’s Governing Board has been hit with turnover, including the resignation of one member who accused his colleagues of using trickery to undermine the school’s independence. The difficulties are partly the result of a continuing debate over how much autonomy a charter school should have within a public school division.”

26. Virginia: VDOT issues a Request for Qualifications to potential bidders on the I-66 expansion and improvement project. Response to the first part (on bidder-proposed delivery methods—DBFOMDBOM and DB-ATC) are due October 1; to the second part (the financial proposals on the proposed methods) November 30, 2015.

27. InternationalThe Financial Times reports that G4S and Serco have been referred to the Serious Fraud Office in the United Kingdom for tagging offenders who had either died or were back in prison. “But the contract to supply the new generation of GPS satellite tags was run separately and has so far failed to deliver, forcing the government to rely on tags supplied by G4S and Serco anyway.” [Sub required]. The conservative think tank Reform is arguing in a new 78-page paper that the whole procurement should be rebid, and that the monitoring system should be expanded “to police bail, domestic violence related orders and serious offenders leaving prison on early release.” It is also urging “greater creativity in the use of curfews” The Tory Justice Secretary Michael Gove is looking to widely expand the system, but has come under attack for the government’s broken procurement and oversight process. [Reform report]

28. Revolving Door News: David Plouffe, the former top political aide to President Obama, joins the advisory board of Rubicon Global, a waste management company that is trying to become the Uber of trash haulage by riding the privatization wave. Plouffe is also a senior vice president of Uber, which has been widely criticized for skirting public interest regulations on the taxi industry.

29. Think Tanks: Noted privatization expert Dexter Whitfield of the European Services Strategy Unit publishes an in-depth, 105-page report on social impact bonds and other “pay for success” instruments. He writes, “the model is built on claims of public expenditure savings similar to those made for outsourcing and privatization. They are frequently exaggerated and often fail to meet targets. (…) Democratic accountability and transparency is absent from the case studies and documents promoting social impact bonds.”

30. Upcoming meeting: The privatization industry will be holding a conference on “public private partnerships” and public buildings, including representatives of construction companies, the financial sector, the public sector, and pro-P3 law firms. Sponsors include Nossaman, K&L Gates, Plenary Group, KeyBanc Capital Markets, Aecom, and Bostonia Partners. Washington, DC, October 22, 2015.

Legislative Issues:

1. National: All eyes on Capitol Hill are on the battle to succeed House Speaker John Boehner, who says he will resign on October 30, though an election could take place sooner. One early favorite to win the contest, Rep. Kevin McCarthy (R-CA), has proposed privatizing Amtrak “so that government can eventually get out of the rail business and leave it to the private sector.” He’s also called for expanding private options for veterans care. Some are hoping Boehner and the Democrats will pass the transportation funding bill before he leaves office.

2. NationalThe House shakeup has complicated efforts to replace No Child Left Behind, a key concern of opponents of education privatization. The House Freedom Caucus opposes the House GOP bill, “because they don’t want any federal role in public education at all. They say they believe schools to be a strictly state and local function.”

3. Maryland: Sen. Barbara Mikulski (D-MD) warns that the Purple Line light rail “public private partnership” will be in jeopardy unless Congress lifts its spending caps. Gov. Hogan (R-MD) has asked the federal government to contribute $900 million to the project. But maintaining the caps is a core demand of right wing Republican lawmakers who drove John Boehner out of the House speakership last week. Some are hoping a transportation bill can be passed with bipartisan support before Boehner leaves.

4. MassachusettsCharter school advocates are to rally today in Springfield, urging lawmakers to lift the cap on the number of schools permitted. Gov. Baker (R) “has said he also plans to file a bill to increase access to charter schools, although he has not yet provided details. Teachers’ unions are opposed to expansion; they assert charter schools drain resources from public schools.” The education committee is gearing up to hear testimony on charter school legislation.

5. Ohio: The charter school corruption scandal leads to demands for legislative action. State Rep. Teresa Fedor (D-Toledo), the ranking member of the Ohio House Education Committee, says “Ohioans can’t tolerate corruption in charter school oversight.” The Toledo Blade declares “what lawmakers choose to do, or not to do, to reform Ohio’s
corrupt system of charter school regulation will provide an early test of their intentions. The state’s ludicrously lax oversight of the nearly 400 charter schools, many of them run by for-profit private companies, that compete with Ohio’s traditional public schools for students and tax dollars is a nationally known disgrace. Some charter schools, also called community schools, are among the best in the state. But too many others waste huge sums of money, provide inferior education, and disdain public accountability.”

6. Pennsylvania: School bond ratings are scraping bottom. “Increasing pension and charter school payments, along with a dwindling tax base, have caused a trio of financial woes for districts in former steel mill towns, said [state auditor] DePasquale, who has called for pension and charter school funding reform from the state Legislature. ‘It pushed them farther off the cliff,’ DePasquale said.”