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Weekly Privatization Report 11-13-2017

1) National: Is the Trump administration cutting back on non-profit residential reentry programs so the federal government can channel business, including opioid recovery programs, to big, for-profit private prison corporations? “Kim Brumber is the president of Volunteers of America Upstate New York, a chapter of the nonprofit group that manages a number of reentry programs, one of which was shut down in August. She says that she believes the administration has already or is in the process of shutting down all smaller contract, ‘minor use’ re-entry programs. ‘I think it’s the current administration’s tendency to privatize everything,’ she says. Many of the smaller programs closed were faith-based or non-profit operations.”

Will the GEO Group benefit? “While the full impact of the halfway house closures and the axing of rehabilitative services has yet to be seen, prisoner advocates are troubled by this new pattern, especially as the administration pays lip service to the opioid crisis and the private prison giant GEO Group (which has recently moved into the halfway house market) holds its annual conference at a Trump-owned resort.”

The Reading Eagle reports that a GEO-owned Pennsylvania halfway house, ADAPPT, has seen a spike in drug overdose deaths. “Six of the eight have died since April, when GEO Group purchased ADAPPT from another company. GEO is based in Florida and its stock is publicly traded. Its chairman and founder, George C. Zoley, received compensation of $5.2 million in 2016. Its Department of Corrections contract—covering many facilities in Pennsylvania, not just ADAPPT—led to state payments of more than $71 million over a recent three-year period.”

CoreCivic is also in the market. It has bought halfway houses in Georgia, North Carolina, and Colorado for a total of nearly $22 million. It told investors last week that “upon completion of these acquisitions, CoreCivic now owns 33 residential reentry facilities and across eight states representing nearly 6,300 beds including 26 that we own and manage and seven that we leased to a third party operator.”

2) National: CoreCivic is going on a government real estate buying spree. Damon T. Hininger, its president and CEO, told investors and analysts on its earnings call on Thursday that “between the real estate assets leased by the federal government through the GSA and similar real estate leased by state and local government agencies, we believe the addressable market for potential acquisitions is very substantial in the billions of dollars. As mentioned earlier, we are currently expanding our in-house staffing for the development side of CoreCivic Properties, but we are also adding staff to provide more expertise and resources on scoping, acquiring and managing these type of properties. We are building a very robust acquisition pipeline, and by the end of this year, we hope to acquire more of these type of properties. And next year, we will provide guidance to the market on how many CoreCivic properties we look to acquire each quarter.”

CoreCivic is also in the hunt for new immigration detention contracts, and Congress holds the key. ICE, Hininger says, “issued a request for information for either new or existing detention capacity of up to 3,000 beds to assist the ICE’s mission in 4 different regions: Chicago, Detroit, St. Paul, and Salt Lake City. For new contracts to be awarded, ICE will likely have to issue a formal request for proposal, but more importantly, ICE will likely also need Congress to increase their annual appropriations for detention and removal operations.” On the southwest, Hininger said “border apprehensions have returned to levels that are in line with historic trends, following the unprecedented reduction in activity across the border that we saw in the spring of this year.” [Q3 2017 CoreCivic Inc. Earnings Call transcript, November 9, 2017]

3) National/Puerto Rico: The irresponsible contracting story surrounding Montana-based Whitefish Energy continues to unfold, as the New York Times reports “The Lineman Got $63 an Hour. The Utility Was Billed $319 an Hour.” The NYT says “most of Whitefish’s subcontractors are from private companies, and officials with knowledge of the contract said that those workers were receiving more than the Florida linemen, but that there was still a significant gap between what the companies were billing Whitefish and what Whitefish was billing PREPA.”

4) National: A new report, Strong Unions, Stronger Communities shows how, in the face of vicious attacks by right wing organizations trying to destroy unions and labor legal protections, public services unions are using the collective bargaining process to press for benefits for the whole community. For example, public service workers at University of California campuses and hospitals are currently bargaining to create hire-and-training programs for low-income people of color, as well as policies that build on past nondiscrimination provisions the union had won to protect immigrant workers.

5) National: Deep pocketed right wing groups, such as the Koch brothers’ Americans for Prosperity and Freedom Partners, Grover Norquist’s Americans for Tax Reform, and Tea Party Nation (whose 2010 convention featured former Alabama Supreme Court Justice Roy Moore), are planning to “spend liberally from its $300 million to $400 million policy and politics budget” to try and privatize veterans healthcare. “Their efforts come as lawmakers on Capitol Hill are crafting legislation that could drastically reshape the Department of Veterans Affairs’ Veterans Health Administration, a multibillion-dollar health system that provides care to nearly nine million veterans each year. They are hoping to complete their work before the end of the year, when a key agency program is set to run out of money.”

Democrats are promising to fight back. Sen. Jon Tester (D-MT) says, “in our quest to deliver on our promises, we cannot let those who want to privatize the VA prevail. Privatization is not just expensive. It’s a shirking of our responsibility as a nation. It’s a breaking of a promise to our veterans. And it’s a disservice to veterans who live in rural places like my home—the great state of Montana. That’s why we will put politics aside and work together to make sure that all veterans receive the very best care and assistance that they have earned.”

6) National/California: At least 20 women held at the CoreCivic-run Otay Mesa immigrant detention center in San Diego “fainted or vomited after a floor-stripping chemical overwhelmed a unit, forcing an evacuation Friday night.” “I don’t know why CoreCivic would have someone who is not trained using such a strong chemical. Also, why were they having them clean at midnight?” said Luis Guerra, a legal representative with the United Farm Workers Foundation. “Detainees are only paid $1 a day by private contractors like CoreCivic to perform labor, like cleaning, at detention facilities, and Guerra said that sometimes the women complain they are not paid.”

7) California: The South Coast Water District will be holding the next in a series of workshops about a proposed desalination plant on Wednesday. “Two options are a district-owned facility or a public-private partnership. In the latter scenario, a private company would design, build, finance and operate a facility while the district would pay for water once it was delivered.”

8) Kansas: Air traffic control privatization is called a threat to Newton airport. “You look at the businesses that have located there over the years, and many of them want their own private plane to fly in and out with. It is one of the gems in our community,” Pam Stevens, director of the Newton Area Chamber of Commerce, says. “We need to take care of it.”

9) Kentucky: State officials are asking the public to comment on proposed regulations for charter schools that will soon open in Kentucky. The deadline is November 30; comment here. A public meeting will be held on November 21 in Frankfort. The state’s first charter schools are expected to open in the 2018-2019 school year.

10) Louisiana: An appeals court is hearing a lawsuit claiming that the privatization of charity hospitals around the state violated transparency rules. “I have to admit that you may be within the rule, but it sure does smell,” Judge John T. Pettigrew, of Houma, told lawyers for the Senate and LSU.

11) Missouri: A plan to privatize the sidewalks in Westport is met by vocal opposition from Kansas City citizen groups. “BikeWalkKC were vocal with their opposition. ‘This proposal is not what people of this city need or deserve,’ Michael Kelly, a member of the group, said. Kelly and other opponents lamented the fact that other options, like closing bars earlier, have not been exhausted.  Clinton Adams, a prominent Kansas City attorney, said the ordinance would ‘trample people’s rights’ to protect Westport businesses. Both Lucas and Barnes also raised concerns about civil liberty issues.” The proposed ordinance will be discussed again at the next Planning, Zoning and Economic Development Committee meeting on November 29.

12) New York: Macquarie has been selected by just-defeated County Executive Robert P. Astorino (R) to operate the Westchester County Airport in a $1.1 billion ‘public private partnership’ deal. “The [county Board of Legislators’] Democratic chairman, however, said any decision on an airport deal with a private partner should be delayed until the incoming administration of Democrat George Latimer, who defeated the two-term Republican incumbent Astorino in Tuesday’s election, has researched the competing proposals. (…) The county and the company will negotiate final terms and county legislators will vote on the deal. At least 12 of the 17 lawmakers must approve the lease. However, Michael Kaplowitz, chairman of the county Board of Legislators, said, ‘I believe that it is appropriate to take in consideration the opinions of County Executive-elect George Latimer during our budget deliberations. I also believe that any decision regarding the privatization of the Westchester County Airport should not be undertaken until the new administration has an opportunity to fully research the RFP respondents’ proposals.’”  

13) Oregon: A task force suggests that the state look at privatization of public universities as a way of dealing with its pension shortfall. The Daily Astorian calls that idea a “nonstarter.”

14) Pennsylvania: GEO Group settles for $7 million in a lawsuit by the family of a person who committed suicide after spending 52 days in solitary confinementbefore her death. “As Wallace’s condition deteriorated, a guard at the prison allegedly taunted the Upper Darby woman and encouraged her to kill herself. On May 26, Wallace hanged herself with a bra she tied to an air vent in her cell.”

15) Puerto Rico/NationalThe Intercept’s Aída Chávez and Rachel M. Cohen report on school privatization in the aftermath of Hurricane Maria. “The guerrilla campaign to open schools is running headlong into a separate effort from the top, to use the storm to accomplish the long-standing goal of privatizing Puerto Rico’s public schools, using New Orleans post-Katrina as a model. Last month, Puerto Rico’s Public-Private Partnerships Authority director spoke optimisticallyabout leveraging federal money with companies interested in privatizing public infrastructure.” See also Cyndi Suarez’s report in the Nonprofit Quarterly on the privatization battle over Puerto Rico’s education system.

16) Texas/National: Grassroots Leadership has launched an online petition drive to demand an investigation into the alleged sexual assaults at the T. Don Hutto detention center in Taylor, Texas. The facility is operated for profit by CoreCivic. “When the abuse began, L.M. had an open asylum case and was afraid that filing a complaint would have a negative impact on her immigration case. Casini also said L.M. was afraid of facing retaliation from guards, a common practice in detention facilities, according to advocates. L.M. had twice before been put in “medical confinement,” which is what advocates say ICE and private prison companies like CoreCivic use as a form of solitary confinement. CoreCivic, formerly named the Corrections Corporation of America (CCA), contracts with ICE to run Hutto.”

17) Virginia: Cintra announces that its team has reached financial close for the construction and operations of the Transform I-66 Outside the Beltway ‘public private partnership’ project. The financing is underpinned by a $1.229 billion federal TIFIA loan and $737 million in Private Activity Bonds (PABs).

18) Wyoming: The Green River City Council has voted to privatize the town’s solid waste services. Workers will be offered a “voluntary” severance program. “Full-time employees will receive a lump sum payment equal to the amount of 28 weeks of pay at the employee’s base hourly rate (calculated on 40 hours per week). Part-time employees will receive a lump sum payment equal to one-third of the employee’s actual wages earned in the Solid Waste Division from November 1, 2016, through October 31, 2017. (…) Employees taking advantage of the offer will need to sign a waiver and release agreement with the City of Green River.”

19) Revolving Door News/Nebraska: The state prison system has hired the deputy warden at Management and Training Corporation’s North Central Correctional Complex in Marion, Ohio, to run two facilities in Lincoln. Taggart Boyd begins his duties on December 29. In May of this year the NCCC was sued by the Human Rights Defense Center for censoring inmates’ reading materials. “The rejected books included ‘The Habeas Citebook: Ineffective Assistance of Counsel,’ which describes the procedural and substantive complexities of federal habeas corpus litigation, ‘Protecting Your Health and Safety,’ which describes the rights, protections and legal remedies available to prisoners, and ‘Prisoner Diabetes Handbook,’ which provides guidance on treating and managing diabetes while incarcerated.”

20) Think Tanks: The Koch-backed American City and County Exchange (ACCE) is playing a key role in the battle between two industries—plastics and iron—to control water infrastructure repair and development. The New York Times says ACCE “gives corporations extraordinary capacity to influence public policy at the city and county levels. The group operates under the auspices of the American Legislative Exchange Council, a wider effort funded by the petrochemicals billionaires Charles G. and David H. Koch that has drawn scrutiny for helping corporations and local politicians write legislation behind closed doors.”

21) International: A mass demonstration of 70,000 workers from around India gathers in Delhi to protest the Modi government’s austerity policies and for “a stop to government policies of privatization.” With “India’s new dispensation with Delhi and Modi as the center of the universe, especially for the media, there was need for a show of anger and strength in the Capital. Also, it weaves together and unifies diverse strands of protests that have been going on for the past few years, including those by scheme workers, govt. employees, banks and insurance employees, public sector employees, etc. It goes beyond the usual dharnas and even single day mass rallies because the 3-day long event is designed specifically to give the stage to diverse sections of workers and show the resilience of their resolve.”

Legislative Issues

1) National: The Senate released its version of the tax reform bill on Thursday, leaving some relieved by its restoration of tax exemption for interest on Private Activity Bonds, but others worried about the potentially devastating effects of its ending deducibility of state and local taxes and elimination of advance refundings. “In any given year,” said Jamison Feheley, JPMorgan’s head of public finance banking, “advance refundings make up roughly one-third of total issuance so the prohibition on advance refundings could clearly impact supply going forward. Whether that supply gap gets absorbed with new money remains to be seen.” [Sub required]. Public borrowers are apprehensive. Emily Swenson Brock, director of the Government Finance Officers Association’s (GFOA) Federal Liaison Center, warned that amendments to the Senate bill are expected and that the status of PABs will not be absolutely clear until the final legislation is released. Municipal market groups, including mayors, are gearing up to lobby the Senate Finance Committee for changes. [Sub required]

Municipal bond issuers and underwriters have stepped up their attacks on the House bill. Ben Watkins, director of Florida’s Division of Bond Finance, said the House proposal was “like a lightning bolt coming from a clear blue sky. You would think that there would be some thought process involved in the making of this bill but clearly there wasn’t. We have to prepare for the worst and hope for the best.” Kevin Dunphy, managing director and head of public finance for Mitsubishi UFJ Financial Group said “the administration has been saying it is pro-infrastructure and public spending up to $1 trillion, and then this comes out and it contradicts its public position. This proposed bill dramatically increases the financing expense for infrastructure spending, not-for-profits, affordable housing and other government projects.” [Sub required]

Muni investors are also issuing warnings. “When you start excluding hospitals, when you start excluding university bonds, when you start excluding special purpose bonds or anything else that may or may not fit under that criterion, it’s going to change our investment portfolio and strategy going forward,” Chairman and CEO Gregory E. Murphy told attendees at Selective Insurance Group’s 2017 Investor Day last Thursday. [Transcript, CQ FD Disclosure 9 November 2017].

2) National: The House tax reform bill is already having a negative impact on public infrastructure finance across the country, including setting off a mini panic about whether there should be a rush to issue debt before PAB and advance refunding exemptions may be done away with, and the logistics of doing this. “Kenton Tsoodle, assistant finance director with Oklahoma City and a member of GFOA’s debt committee, said that process of speeding up deals isn’t easy with all the state mandated approvals needed. ‘Maybe most concerning, is the speed at which they want to move on this. Overall, we are very concerned, with the biggest impact being with our airport. We have a current project to expand the terminal and provide more gates for our airlines as our city keeps growing. It’s a roughly $90 million project and if we were to do the deal in the taxable market as opposed to tax-exempt, it could cost over $6 million of additional interest cost, present value that is about $3 million.’ He also said that the city has three upcoming advance refunding opportunities and if those went away, it would lose about $6 million of savings.” [Sub required].

The St. Louis Business Journal reports that the House bill would be “devastating” for St. Louis developers and damage redevelopment efforts “Without the credits, many rehabilitation projects don’t financially make sense and I think you’d see developers turn away from those types of projects,” said Shaw Sprague, policy director for the DC-based nonprofit National Trust for Historic Preservation. [Sub required]

Officials are also warning about the Republican tax reform proposals “putting a bull’s eye” on New York City. “Budget Director Dean Fuleihan said the city has used advance refundings for nearly half the $850 million of debt it saved through refinancings over the past four years, de Blasio’s first term in office. De Blasio won re-election Tuesday. (…) Housing and Economic Development Deputy Mayor Alicia Glen said the elimination of private activity bonds would cost New York and other cities ‘one of the principal building blocks of affordable housing.’” [Sub required].

Officials are also saying the bill would have a devastating effect on California’s efforts to fight its housing shortage.

“We cannot overstate the vital role these programs play in building and preserving affordable housing throughout the nation, but especially in California as we struggle with a housing crisis that is quickly metastasizing into a humanitarian and public health catastrophe,” State Treasurer John Chiang wrote in a letter to the U.S. House leadership.

3) Montana: CoreCivic, the private prison company, is in the middle of the state legislature’s budget battle. “Republicans want to consider tapping about $30 million the state has set aside for the possible purchase of the private prison in Shelby. The money is controlled by CoreCivic under its contract to run the prison. Lawmakers say CoreCivic wants its management contract extended for 10 years in exchange for allowing the state to access the money.” The Montana Post, a progressive blog, says “if CoreCivic’s offer is accepted, not only will Montana’s only private prison remain private and get an extension, but big tobacco will dodge a tax increase, as well. It’s a win-win-win for CoreCivic, big tobacco, and [lobbyist Mark] Baker. Baker will get a pat on the back from CoreCivic (in addition to a big check) and will use the $30 million as leverage with legislators in the House and Senate to kill a tax on tobacco during the special session.”

Democrats have called the contract a “sweetheart deal.” House Minority Leader Jenny Eck said CoreCivic is “trying to take advantage of a budget crisis to basically bribe the state into taking our money back … and lock us into another 10-year contract. This corporation is trying to take advantage of the situation to basically force us to accept a contract that is probably not in our best interest and we won’t have time to thoroughly vet.”

 

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