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This Week’s Privatization Scan 10-15-13

Update: Upcoming Privatization Issues. October 15, 2013

1) National: FitchRatings issues a report on lessons learned from past experience with “public private partnerships.” Warns of overestimation and over-leverage. Says “transactions that have significant advance planning and meaningful public involvement to identify key long-term public policy objectives and acceptable tradeoffs create a better risk reward balance, benefiting both the public and private sectors in the long run, and consequently, debt investors.” While “PPPs can provide public value,” they “need to be carefully crafted to address all stakeholder concerns. When PPPs are viewed to have failed, the issue is often inappropriate transaction design and application.” [Sub required]

2) National: Good Jobs First research director Phil Mattera reports that computer systems problems with the rollout of the Affordable Care Act are not a failure of government, but “a failure of government contracting. And the contractor at the center of the mess is CGI Group, a Canadian outsourcing corporation that is little known outside information technology circles.”

3) National: Veteran education activist Jonathan Kozol reviews Diane Ravitch’s new book on education privatization. “It isn’t likely,” Kozol writes, that the privatizers will “be sending her bouquets. Those, on the other hand, who have grown increasingly alarmed at seeing public education bartered off piece by piece, and seeing schools and teachers thrown into a state of siege, will be grateful for this cri de coeur—a fearless book, a manifesto and a call to battle.”

4) National/Michigan: Waste Management, which is bidding to take over Detroit’s solid waste and recycling services, will report its third quarter financial results in a conference call on October 29.

5) National: The privatization industry licks its wounds over the failure of the Chicago Midway Airport deal, which was blocked by Mayor Emanuel because of concerns about competitiveness and value. “The reality for the industry is this: Midway, the second-largest airfield in the Chicago metropolitan area, would have gone a way to spurring a pipeline of P3s for airports—long a mainstream infrastructure sector in Europe, but still a non-starter in the US.” [Sub required]

6) National: After a disappointing forecast for its 2014 business and a sharp drop in its stock price, private online education company K12 Inc. faces pressure from investors. Calling this an overreaction, Well Fargo upgrades its rating on K12; BofA Merrill, Baird and BMO Capital downgraded the stock. [K12 Inc. 2014 guidance call]

7) National: Rick West, the former executive vice president of Central Parking Systems, now managing member at West-FSI, looks at different models for parking privatization deals. Suggests nonprofit intermediaries. Cities should discuss how they “can implement a parking P3 that serves all stakeholders while delivering on social, service and financial benefits.” [Sub required]

8) National: PR Watch’s Nick Surgey takes a close look at efforts to outsource social services to Maximus and ACS.

9) National: Columnist Sam Pizzigati, citing Demos research, writes that “the push to privatize the public sector through contracting out is expanding our economic divide.”

10) National: American City and County magazine says “privatization [is] not always the answer.” Says “privatization of municipal services is on the rise, but, like a predatory loan, the promise of quick cash can hide underlying financial drains.”

11) Alabama: Sheila Hocutt Remington, “a 42-year veteran, award-winning government and economics teacher at Brookwood High School in Tuscaloosa County,” comments on a visit to Alabama by education privatization advocate Michelle Rhee. “The Alabama Education Association supports targeted education reform developed by education practitioners who have the best interest of Alabama’s school children as their only interest—not the corporate bottom line.”

12) California: Newport Beach officials, taking advantage of new provisions in the state’s open records law, immunize themselves against legal action for allegedly violating the Brown Act on open meetings. City Council pledges not to repeat the actions. Two officials (out of three on the finance committee) wrote a commentary promoting the outsourcing of trash pickup before a public meeting was held. “The commentary, which described the trash bids and anticipated savings from outsourcing, appeared a few days before the council met publicly and ultimately voted 4-3 to privatize the service.” [Sub required]

13) Florida: A joint meeting will be held today between the Sarasota and Manatee county commissions to decide on the merger of the Sarasota County Area Transit (SCAT) system and the Manatee County Area Transit (MCAT). The proposed merger is “part of a plan to eventually privatize the two counties’ transit services.”

14) Georgia: Paulding citizens are “appalled” at the stealth privatization of some of their airport facilities to a New York venture capital firm. “‘I’m appalled at how our county officials have chosen to hide this from us, [local resident Susan Wilkins] said. [Paulding County Commission Chairman David Austin] last year sent another commissioner and a member of the airport authority on a trip to New York and other locations to explore Propeller’s proposal. But commissioner Todd Pownall, whose district includes the airport and surrounding neighborhoods, said he was never brought into the loop. ‘I guess they think I’m too open and honest to the citizens,’ Pownall said. ‘There’s no doubt that not letting the public know absolutely prevented any opposition against it.’” [Sub required] Residents are circulating a petition and have created a Facebook page.

15) Illinois/Indiana: Despite intense political and financial pressure, the Chicago region’s main planning agency stands firm and turns thumbs-down on the $1.3 billion Illiana Corridor road “public private partnership.” CMAP says “the project is incompatible with the agency’s long-range master plan. Among other objections, it argues that the project has the potential to expose the state to ‘significant financial risk.’” Opposition to the project “came from Mayor Rahm Emanuel’s appointees from the city of Chicago, Lake County, McHenry County and four of five Cook County representatives.” Another crucial vote comes this Thursday when the Metropolitan Planning Organization Policy Committee meets.

16) Illinois: Union and public health representatives protest plans to privatize Chicago’s mammogram program. “Accusations of mismanagement in the city program earlier this year lead to a loss of a $296,000 grant from the Illinois Breast and Cervical Cancer Program. Several Chicago alderman, including Ald. Pat Dowell (3rd), Ald. Deborah Graham (29th), Ald. Carrie Austin (34th), Ald. Emma Mitts (37th), came forward to urge Mayor Rahm Emanuel and the Chicago Department of Public Health to maintain funding for the program.”

17) Maryland: The state Board of Public Works will meet Wednesday to decide on whether the Purple Line light rail project will be a full “public private partnership.” The Washington Post reports that “the approach, while considered innovative, is drawing scrutiny. Five U.S. transit projects have used public-private partnerships in some form, Maryland officials say. However, the Purple Line would be the only one besides the Denver [FasTracks] project to rely heavily on private financing. The plan will get its first test of political support Wednesday, when the state Board of Public Works—comprising the governor, comptroller and state treasurer—is scheduled to vote on whether to allow the Transportation Department to seek private proposals. State Sen. Richard S. Madaleno Jr. (D-Montgomery), who reviewed the plan as a member of the Senate Budget and Taxation Committee, said he considers it a ‘very risky proposition.’” 

18) Massachusetts: Labor turmoil hits privatized school bus systems in Boston, where a wildcat strike over contract compliance by Veolia disrupted public schools. “‘Come to the table. Talk with us. Assure us they will live up to this contract they signed,’ said Steve Kirschbaum of the USW Local 8751 Grievance Committee.” The drivers returned to work last WednesdayIn Brockton, a threatened strike by school bus drivers against First Student was averted through negotiations.

19) Michigan: Privatization is the main sticking point in the Euclid school board’s negotiations with the Euclid Classified Association, which represents 75 custodians, maintenance personnel, building trades workers and the grounds crew. “The union’s membership was cut in half during the summer when the school board exercised an option to turn over transportation to a private company, First Student. A majority of the 72 transportation workers obtained jobs with the company.”

20) Michigan: Kent County moves to become the first entity in the state to privatize child welfare services. May become a model for the state.

21) New York: Eight companies submit bids to privatize the Otsego Manor nursing home. “Significant research will be done to ensure that the finalists in the review process are all financially stable firms, [Otsego County Rep. Katherine Stuligross] said. ‘It wouldn’t help to get a bid from a company that couldn’t sustain the operation,’ she said, noting the bidders have all been asked to submit three years of financial statements with their proposals. ‘We want to get the best proposal out of this as possible.’” The state must also approve the winning bidder.

22) New York: Albany County Executive Dan McCoy unveils his 2014 budget, and cuts funding for the county’s public nursing home. “McCoy has been pushing to completely privatize the home, which he says loses about $1 million a month.”

23) North Carolina: Corporate lobbying begins over who is to run the state’s Medicaid program if it is privatized. The companies, including Centene Corporation, Amerigroup and UnitedHealthcare, are “aggressively making overtures to health care providers throughout the state, hiring lobbyists and setting up offices in [the state capital] Raleigh, even though the Department of Health and Human Services has not delivered to the legislature a plan for converting Medicaid, and the General Assembly has not yet given a green light to DHHS and Gov. Pat McCrory to move ahead with their proposal to privatize.” TheSun Journal has editorialized against the danger of cronyism in the privatization process

24) North Carolina: Bertie County selects FirstMed EMS to provide 911 service to the county. [Sub required]

25) Oregon: Multnomah County judge issues ballot title for measure to create an elected Portland water and sewer district. “The board would have the authority to set water and sewer rates, approve operating and capital constructions budgets, issue bonds and create city debt, and hire and fire employees. The district cannot privatize the city water system or make watershed regulations less ‘protective,’ a term that is not defined in the measure.” Petitions now begin circulating to put the measure on the ballot.

26) Pennsylvania: The Department of Transportation Office of Policy and Public Private Partnerships hasscheduled an industry forum for its Rapid Bridge Replacement Project. November 6 in Hershey. Up to 1,000 bridges could be bundled into the project, depending on state funding. The project was recently approved by DOT along with projects to lease state facilities to wireless companies for their use, and to “privatize PennDOT’s system of analyzing and permitting oversized and overweight loads on state highways.”

27) Tennessee: Taxpayers spend $500,000 a year for empty prison beds because of a state lockup quotabenefitting Corrections Corporation of America. “‘We’ve made their returns more important than our schools, our prisons, our roads, our parks, everything we desperately need. That should never happen,’ said Donald Cohen, [In the Public Interest’s] executive director. ‘That $500,000 that you described … would absolutely do good things in communities in Tennessee.’”

28) Texas: Shortlist of bidders for SH 288 released. The project is an unusual all-revenue-risk toll road project. Teams on the list include Cintra Infraestructuras, Macquarie Capital Group Limited, and ACS Servicios y Concesiones. The teams will be invited to submit a detailed proposal.

29) Virginia: Charlottesville Redevelopment and Housing Authority faces heated opposition to its plans to privatize public housing and convert it to a voucher program. “Public housing will be converted to project-based housing. It may have some of the same flavor of public housing but will no longer be under the same regulations and guidelines from HUD and that’s a major concern,” said Brandon Collins, a member of Charlottesville’s Public Housing Association of Residents.

30) International: The South African government has taken over management of a maximum security prison that has been run by G4S, one of the largest private security contractors in the world. They took the step because of a “worrying deterioration of safety and security at the center.”

31) International: Chris Nelder takes on media coverage of Germany’s energy policy, including the buying up of public electricity grids by private companies. “Cities that have chosen to not privatize—like Frankfurt and Munich—are now showing that it’s worth keeping energy supply in municipal hands. Both major German cities have a 100 percent renewable energy target.”

32) Think Tanks: Think Twice, a project to review and critique the findings of think tanks, issues a reportcasting doubt on the accuracy and rigor of two pro-school voucher presentations made to members of the Metropolitan Milwaukee Association of Commerce in August. Milwaukee Board of School Directors member Jeff Spence commends the Think Twice report, saying “many of us involved in creating/changing educational policy don’t have issues with innovative change to create better educational outcomes, we however are opposed to change that is rooted in salesmanship or partisanship rather than sustained bona fide results.”

33) Upcoming Meeting: The Canadian Council for Public Private Partnerships will hold its annual National Conference on Public Private Partnerships in Toronto from November 7-8. Included will be a panel on “U.S. P3s Taking Flight,” with Michael Cheroutes, director of the Colorado High Performance Transportation Enterprise; Tony Kinn, director of the Virginia Office of Transportation Public-Private Partnerships; and Kendra York, public finance director of the Indiana Finance Authority. The panel will be moderated by David Caplan, the former Ontario minister of Public Infrastructure Renewal. Caplan, who is now vice chairman of Canada’s largest privately owned PR firm, recently published a paper on “public private partnerships” in Canada, “Public-Private Partnerships: Learning from the Past, Building for the Future.” [Other papers from the Canada Institute forum in DC on P3s].

Legislative Issues:

1) National: Controversial “bed mandate” congressional directive drives up immigration detention, boosts private prison profits, The Washington Post reports. “Congress’s expanding detention goals have been a boon to the contractors, especially Florida-based GEO Group and Tennessee-based Corrections Corp. of America. The two companies have won hundreds of millions of dollars’ worth of ICE contracts in recent years while lobbying Congress on immigration enforcement issues. Former ICE director Julie Myers Wood, who led the agency from 2006 to 2008 under President George W. Bush, said a congressional mandate for ICE to maintain a minimum number of detainees was a reasonable guideline at the outset of her tenure, when the Border Patrol was making more than a million arrests per year. But today, she said, ‘it doesn’t make sense.’”

2) National: California Republican member of Congress says Fannie Mae and Freddie Mac should be overhauled, but remain public. “‘Some people believe that government should not be involved in anything,’ [Rep. Gary Miller, R-Rancho Cucamonga] told a forum at the California Association of Realtors conference in Long Beach. ‘But we need opportunity in this country. And if we don’t have opportunity for homeownership, our economy is not going to come back.’ Miller, who formerly represented a portion of Orange County, now represents a district stretching across San Bernardino County. He is vice chairman of the House Committee on Financial Services, which oversees the U.S. banking system, housing and insurance.”

3) California: Gov. Brown vetoes bill restricting the outsourcing of court jobs to private contractors.Writing this week in the Huffington Post, In the Public Interest executive director Donald Cohen said that lobbying was intense. “As in most debates over outsourcing of public services, opponents’ central claim is that privatizing essential courtroom services such as court reporting, processing cases, probate investigations, and interpretive services, saves dollars. Yet the track record on privatization of public services and assets is decidedly mixed. Public agencies that hire private companies without strong mechanisms of accountability, transparency, rigorous evaluations of contracting costs and standards have learned the hard way.”

4) Oklahoma: State Rep. Mike Brown, D-Tahlequah, says privatization of the state’s pension plan would destroy it. “‘To say the sky is falling without privatization [and we don’t have the funds for retirement] is ridiculous,’ said Brown. ‘If we leave the current system alone and allow it to travel the path it’s already on, in 22 years it will be paid out, and that’s the worst-case scenario. To scare everyone [into thinking the funds are dwindling immediately] is ludicrous.’ Brown said during the upcoming session, Oklahomans will see a heavy push by legislators to privatize the system, resulting in much higher fees to be paid by employees.”

5) Virginia: Legislation to permit state subsidies for “public private partnerships” is in the pipeline for 2014. The legislation “would enable Virginia to devise new funding structures for infrastructure projects and tap new sources of private investment capital not now available in the United States. The use of so-called ‘availability payments’ would apply to situations in which the state has insufficient cash to build a project right now but the economic benefits are tangible and immediate.”