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This Week’s Privatization Scan 09-23-13

Update: Upcoming Privatization Issues. September 23, 2013

1) National: In the Public Interest releases a report on the use of bed occupancy guarantee clauses in public contracts with private prison companies. “The report sheds light on the for-profit private prison industry’s reliance on high prison populations, and how these occupancy guarantee provisions directly benefit its bottom line.” Occupancy clauses in the contracts reviewed by ITPI “range between 80% and 100%, with 90% as the most frequent occupancy guarantee requirement.” The report has been cited by the Washington Post, Business Insider, Mother Jones, Tulsa World, and Huffington Post, among other publications. [Criminal: How Lockup Quotas and “Low-Crime Taxes” Guarantee Profits for Private Prison Corporations]

2) National: Federal judge holds Corrections Corporation of America in contempt of court for violating the terms of an agreement over how the company operates the Idaho Correctional Facility. The judge ruled that CCA failed to meet minimum staffing requirements. “As a result of these violations, the court granted the ACLU’s request to extend the deadline of the order, which was set to expire this month, by two years; to compel CCA to hire an independent monitor to ensure full compliance in the future; and to pay a fine of $100 an hour if there are more than 12 hours of missing guards a month.” [Decision]

The law firm Faruqi & Faruqi says it is “investigating potential claims against the Board of Directors of Corrections Corporation of America concerning possible breaches of fiduciary duty and other violations of law. The investigation concerns actions by CCA’s Board of Directors in connection with the understaffing of prison guards, in violation of CCA contracts, at CCA run prisons.”

3) National: Bill Moyers interviews Dave Zirin, The Nation’s sports writer, about politics and sports. Zirin denounces the massive amount of private investment in sports stadia, many of them publically subsidized, while public infrastructure crumbles. E.g., Detroit has chosen to build a lavish new hockey arena while its public structures collapse. Zirin writes, “yes, the very week Michigan Governor Rick Snyder granted a state- appointed emergency manager’s request to declare the Motor City bankrupt, the Tea Party governor gave a big thumbs-up to a plan for a new $650 million Detroit Red Wings hockey arena. Almost half of that $650 million will be paid with public funds.”

4) National: Federal Court strikes down “Operation Streamline,” under which federal judges and magistrates took pleas from entire groups of people. “Judge Richard Paez, writing for the court, said that is necessary to ensure that each person understand his or her rights and the consequences of the plea.” Operation Streamline has increasingly “led the Bureau of Prisons in the Department of Justice to depend upon private prison corporations like Corrections Corporation of America (CCA) and GEO Group.”

5) National: The Securities and Exchange Commission has approved new registration rules for municipal advisers. “Prior to passage of the Dodd-Frank Act, municipal advisors were not required to register with the SEC like other market intermediaries. This left many municipalities relying on advice from unregulated advisors, and they were often unaware of any conflicts of interest a municipal advisor may have had.”

6) National: Private investors in infrastructure are making “increasingly loud calls” for “greater transparency, more information and an all-round better relationship with the custodians of their money.” [Sub required]

7) National: New definition of “inherently governmental” functions will affect Federal insourcing decisions. “The OFPP’s definition of an ‘inherently governmental function’ is built around the statutory definition in the Federal Activities Inventory Reform Act (FAIR Act) as one ‘so intimately related to the public interest as to require performance by federal government employees.’” Contractor roles in national security vetting have raised concerns in light of the role of USIS in screening Edward Snowden and Aaron Alexis.

8) National: Speculation emerges that the privatization of pieces of the U.S. Postal Service may spur a “partnership” between of Federal Express and the USPS. “FedEx has this same opportunity as they continue to penetrate into the ground shipping market—still dominated primarily by UPS and USPS. There has even been speculation that as the USPS downsizes, they may begin to privatize certain segments; this has led to extremely speculative, yet not out of the question, theories about a FedEx/USPS partnership.”

9) California: Public school district hires private company to monitor students’ social media posts. Geo Listening “is scanning posts across Twitter, Facebook, Instagram, and other online services, searching for certain keywords and location information that would tie a person to the school community. Relevant data is then presented in a daily report to school officials.” Lee Tien, a staff attorney for the Electronic Frontier Foundation, says “if they’re acting on behalf of the government, [there’s a] serious possibility that their action is ‘state action’ subject to the federal and state constitutions”

10) California: Shortlist of potential bidders announced for Caltrans and LA Metro’s est. $750 million Accelerated Regional Transportation Improvements (ARTI) “public private partnership” highways improvement project. Teams led by Hochtief, Macquarie Capital, Meridiam Infrastructure, and Fluor Enterprises were selected to participate in the Request for Proposals process.

11) California/National: East Bay Express publishes excerpts from investigative journalist Peter Byrne’s new book, raising allegations about insider dealing in the privatization of U.S. Postal Service properties. “The ugly truth of the matter, say informed critics such as New York University professor Steve Hutkins, is that the Postal Service is being privatized in the interests of scores of corporations that not only compete with it, but are also its largest contractors, including FedEx and United Parcel Service (package routing); Parsons Corporation (management services); Accenture (financial consulting); and Pitney Bowes (direct mail).” Byrne’s book, Going Postal, is available online in its entirety. [June 2013USPS Inspector General’s report; Save the Post Office website]

12) California: Judge rejects Costa Mesa employee union’s amended complaint about planned outsourcing of municipal services, but gives the Costa Mesa City Employees Association another chance to revise it. “The week’s events mark a ‘new phase of the ongoing litigation, as the court decides how to address the outsourcing issues in the wake of the city rescinding pink slips for more than half of its employees,’ according to the news release from the Orange County Employees Association, which represents the CMCEA.” Mayor Jim Righeimer is still determined to proceed with the outsourcing plan.

13) Connecticut: Opponents of education privatization are encouraged by the defeat of three Bridgeport school board members who supported pro-charter schools superintendent Paul Vallas. “The results in Bridgeport, Vallas’s opponents claim, are proof that communities are mobilizing to defeat the reformers.” The new board members “are determined to oust Vallas.” 

14) District of Columbia: The Request for Qualifications for the DC Streetcar “public private partnership” project “is currently being finalized, with an anticipated release date in the 4th quarter of 2013.” [DC Streetcar newsletter, p. 4]

15) Illinois/Indiana: Debate intensifies over whether to build the billion dollar Illiana Expressway linking Chicago’s far southern suburbs to southern Lake County. “Please stop misleading readers by referring to this roadway as an expressway. It will be a P3 (Public-Private Partnership) tollway,” Lowell resident Donna Slikas tells The Times of Northwest Indiana. “P3’s often include compensation provisions requiring the state, or more precisely, the taxpayers, to compensate the private operator if toll revenues are not met,” Slikas writes. “So although it may be true that private investors will pay to build the tollway, the taxpayers will unknowingly be subsidizing it for years to come. Over the past four years, I’ve attended numerous Illiana meetings and have researched its value and need. The negative impacts (finance-related, ownership-related, environmental-related and study-related) associated with the proposed Illiana far outweigh any positives, especially for Indiana.” Chicago’s Metropolitan Planning Council has also come out against the project, which has been vigorously defended by the governors of both states. The Illiana Corridor study group (including IDOT, INDOT, FHWA and the construction company Parsons Brinckerhoff) has also defended the project. [MPC Report]

16) Indiana: Weak bids for the privatization of Gary/Chicago airport don’t include any upfront payments. Also, “neither finalist has offered to pay the up to $800,000 in bills the airport has run up for advisers on the privatization deal. The joint city/airport committee has made it known it wants the winning bidder to pay that tab.”

17) Michigan: Rochester Hills City Council president defends no-bid trash hauling contract with Republic Services. “The no-bid attitude is surprising in this era of lean public spending, according to Citizens for Accountable Government, a nonprofit watchdog group in Canton Township. ‘We’ve had plenty of models of government spending gone awry,’ the group’s executive director Deborah Whyman said. When it comes to municipal contracts, ‘the biggies are trash pickup, engineering services and legal services,’ Whyman said last week. Each deal should be decided by competitive bidding, she said.” The issue is up for discussion at a September 30 council meeting.

18) Michigan: Lawmaker tells Civil Service Commission that a flawed bidding process led to Aramark’s receiving a food service contract with the state’s prisons. Sen. Tom Casperson (R-Escanaba) “was among about a dozen speakers—including lawmakers and union and business representatives—who urged the commission to kill the $50 million-a-year contract, which is awaiting final approval. A decision is not expected for several weeks.” 

19) Michigan: The Bond Buyer reports that Detroit “cannot be forced” to “sell or privatize” the Detroit Institute of Art’s collection under a municipal bankruptcy. “Michigan Attorney General Bill Schuette has issued an opinion that, under the terms of the public trust that governs the museum, its art cannot be used as collateral and any money from a sale can only be used to buy new art.”

20) New York: Clinical psychologist Richard DePass raises concerns over the fragmentation of care since the Dutchess County Department of Mental Hygiene (DCDMH) was privatized into different segments. “Agencies argue about who should treat the most difficult patients (‘it should be you and not us’), communication between agencies is often conflictual, agencies have different admission criteria and treatment philosophies and there has been a some de-professionalization of treatment staff.”

21) New York: Local 1145 of the Amalgamated Transit Union gears up to resist privatization of Broome County’s transit system. ATU “warns outsourcing could mean cuts in bus routes, longer waiting times for buses, increased fares and profits lining a private company’s pockets.” Binghamton City Council President Teri Rennia says “we’re hearing from a large number of constituents who are horribly concerned about the potential privatization.” The decision will be made by the county legislature, and a request for proposals is due out soon. The county has yet to discuss the measure with Binghamton’s elected officials

22) Ohio: Department of Transportation awards the Inner Belt Bridge project to a team consisting of Trumbull, Great Lakes Construction, Ruhlin and URS. It is a design-build-finance project, Ohio’s first major infrastructure “public private partnership.” ODOT did not disclose the amount of each bid. [Sub required]

23) Oklahoma: School voucher program spends $1.6 million in state funds to send special needs students to private schools. “Forty-nine private schools in the state have been approved to accept scholarship students, state figures show. Of those, 43 are religious schools. Only six specifically cater to students with special needs.”

24) Oregon/National: Port of Portland draws criticism for blocking an ad denouncing clearcutting of forests around Oregon and opposing federal legislation to expand the practice. The ad campaign, launched by Oregon Wild, Portland Audubon Society, Sierra Club, and the Center for Biological Diversity, opposes legislation that Oregon Wild says would privatize 1.6 million acres of forestland. [clearcutoregon.com] Last week protestors scaled the Capitol Dome to protest the move to privatize part of Elliott State Forest. President Obama has come out against the legislation.

25) Pennsylvania: JP Morgan, the lead broker in the sale of the Philadelphia Gas Works to private interests, says the city has received multiple potential bids. The list includes Macquarie Group, KKR, Global Infrastructure Partners, Xcel Energy, and Carlyle/Riverstone Energy. “The city will select a group of finalists from the initial bids to participate in the final phase of the sale process, including the submission of binding proposals to acquire PGW. The city expects to negotiate final terms with the winning bidder in December or January.” Last Tuesday, the Philadelphia Gas Commission rejected Mayor Nutter’s proposal to spend an additional $130,000 for professional advisers on the deal.

26) Pennsylvania: Judge approves Harrisburg’s financial recovery plan including a 40 year lease of the city’s parking assets. The city council approved the parking plan last week. 

27) Texas: Burleson Independent School District bus drivers ask the district to terminate Durham School Services’ bus contract when it comes up in February. The drivers may strike in October. “Michael Blood, a Durham bus driver and member of the team attempting to negotiate a contract between the union and the company, said that negotiations failed because Durham refused to allow union members the option of having their union dues withheld from their paychecks. (…) ‘We agreed to [all of Durham’s terms]. But in an effort to stop a contract, they refused us the dues check-off,’ Blood said.”

28) Texas: Under proposed IRS rules, charter school bonds may receive backing from the state’s Permanent School Fund, making them eligible for triple-A coverage. “The federal rules proposed by the IRS will allow the Texas Education Agency and the State Board of Education to develop regulations to implement state laws, education commissioner Michael Williams said.” [Sub required]

29) Texas: The $1.5 billion North Tarrant Express Extension “public private partnership” (DBFOM) reaches financial close. The state and a group led by Ferrovial concluded the agreement. The project “will be financed with a combination of public and private funds: $531 million from a federal TIFIA loan; $127 million from the Texas Department of Transportation; $274 million in Private Activity Bonds (PABs), maturing in 25 and 30 years (which were 2.5 and 4 times oversubscribed respectively); and $430 million in equity.”

30) Utah: President of the American Federation of Teachers Utah calls for a recommitment to public education and warns that “the promise of public education is under attack by those who think the answer to providing a high-quality education is to starve our schools, by those who see public education as the last frontier to privatize, and by those who emphasize testing over teaching, ideology over evidence, and sanctions instead of supports.”

31) Virginia: The Washington Post reports that a wealthy group of University of Virginia alumni, “mostly New York financiers, is lobbying candidates for Virginia governor to change how the U-Va. Board of Visitors is selected.” A controversy over whether the university should be privatized has recently heated up.

32) Wisconsin: Rally held to push back against privatization of public schools in Milwaukee. NEA President John Stocks says “our beloved public education system is in jeopardy. They are going to try in fact to create in this particular city the dismantling of the public school system.” The Metropolitan Milwaukee Association of Commerce held on conference last month on introducing “recovery schools” to replace “low performing” public schools. The policy “would remove certain schools from oversight of the locally elected Milwaukee School Board and could place them under charter operators.”

33) International: Consulting industry think tank urges the British government to provide more financial support for private investment in infrastructure. The Management Consultancies Association (MCA) stresses its role in “informing and influencing public debate.” [MCA report]

34) International: Food and Water Watch and CISPES report on resistance to water privatization in El Salvador. “As the right-wing pushes to include privatizing mechanisms in the Ministry of the Environment’s legislation, those same forces are lobbying to reform the US-backed Public-Private Partnership (P3) Law to include water administration among the public industries open for private contracts.”

35) Think Tanks: The right wing State Policy Network begins its annual meeting tomorrow in Oklahoma City. SPN will hold panels on digital classrooms, “public sector union reform,” litigation strategy, and the “future of school choice“ (13 speakers). SPN member think tanks have supported the privatization of state supported living centers, workers comp, schools’ “non-core functions,” and fire departments. SPN’s vice president, Jennifer Butler, has lobbied on prison privatization.

36) Think Tanks: The European PPP Expertise Centre (EPEC) has published a paper on termination and force majeure provisions in “public private partnership” contracts. “Termination provisions (TPs) consist of specific PPP contract terms (or, at times, terms derived from applicable law) that regulate proceedings if either the public contracting authority (Authority) or the private sector partner (Private Partner) fails to comply with one of its major obligations or if the partnership is terminated voluntarily. Typical examples of this would be a material failure by the Private Partner to supply the services agreed in the PPP contract or an extended failure by the Authority to meet payment obligations.”

37) Report: GAO issues report on transparency and oversight of interstate tolling. “Because internal auditors are generally not required under internal audit standards to report to outside audiences, the public may lack knowledge of their efforts to ensure accountability for the use of toll revenues.”

Legislative Issues:

1) National: Senate passes legislation delaying the privatization of the national helium reserve, which was scheduled to be shut down on October 7. A shutdown would have caused price spikes and a worldwide helium shortage. The House passed similar legislation in April. The Council for Citizens Against Government Waste, the c(4) arm of Citizens Against Government Waste, is opposing the Senate bill.

2) National: House Transportation and Infrastructure Committee marks up and passes the Water Resources Reform and Development Act. The legislation establishes a Water Infrastructure Public Private Partnership Program. The bill now moves to the full House.

3) Illinois: Despite the “support of a strong majority of the [Chicago] city council,” the Privatization Transparency and Accountability Ordinance remains bottled up in the Rules Committee. “Absent a committee chairperson and a majority of council members willing to vote to move the bill from committee and buck the mayor, who has issued no public statements on the bill and likely wants to continue passing privatization deals with no oversight, the bill will remain undebated—and privatization deals will continue unchecked.”

4) Pennsylvania: As the state legislature reconvenes today, among the items on its agenda are the possible privatization of the state’s liquor stores, how to pay for road repairs, and an update to its open records law. “The Senate State Government Committee has a hearing planned for Oct. 21 to take testimony on whether [the open records] law’s disclosure requirements on Penn State, Pitt, Temple and Lincoln universities should be expanded.”