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Weekly Privatization Report 2-13-2017

1) National: Is prison labor for private profit about to be dramatically ramped up under the Trump administration? CoreCivic CEO Damon Hininger had this exchange with an analyst on their investor call on Thursday:

JORDAN HYMOWITZ: Super. My other question is, is there any talk at this point about — you mentioned GEDs but it wasn’t that long ago that prisons were actually workplaces as well, and is there any talk of that anymore at this point from anyone in the Trump administration? And are you suited for that and could that potentially work into something? I mean forgetting GEDs, we could teach people how to be welders or more, because the unions have stopped enabling some commercial utilizations that used to happen.

DAMON HININGER: Great question, and the short answer is there has been good conversation at the state level for several years and I suspect there’s probably going to be some conversation at the federal level. Again, we’re going through a transition where you just got the Attorney General sworn in last night and we are still waiting for the appointment of a director for the Federal Bureau of Prisons, so more to come on that front.

Regarding the new attorney general, it is worth recalling in this connection that Jeff Sessions once supported bringing back chain gangs in Alabama and said he would “aggressively defend any legal challenge against it.” Will the private prison companies soon be running these?

2) National: Suspicions that Trump’s new HHS Secretary Tom Price still supports policies that would privatize Medicare (even though he denies it) and cut Social Security are helping to drive a powerful wave of grassroots resistance that is pressuring lawmakers, including Democrats in Red States. “Heitkamp announced she would vote against Trump’s pick to lead the Department of Health and Human Services, Georgia Representative Tom Price. She cited his support for policies that would privatize Medicare and cut Social Security, among others, and said 80 percent of her constituents who called or wrote urged her to vote against him.”

3) National: Frank Shafroth of GMU’s Center for State and Local Government Leadership warns that under Trump’s Navarro/Ross tax-benefit infrastructure plan “the vast bulk of America’s critical public infrastructure—such as state and local buildings, jails, prisons, roads, bridges, public schools, colleges and universities, water and wastewater systems—would likely be left out, in sharp contrast to the nearly $260 billion invested via municipal bonds into state and local public infrastructure, according to the Census Bureau. It would also mean, were the [muni] exemption erased, states, local governments, and schools/universities would be forced to levy significant user fee increases, property tax levies, and other state and local taxes on Americans—likely leading to a decline in public infrastructure investment by state and local public governments of as much as $100 billion.” [Sub required]

4) National: Trump has moved toward privatizing the national air traffic control system, but Americans Against Air Traffic Privatization say this would destabilize the system, and have launched a petition drive to block it. “Julia Alschuler, Spokesperson for AAATP said: “A Republican-led Congress has rejected ATC privatization time and time again on the grounds of safety, feasibility, and overall concern for the American people. Privatizing Air Traffic Control is a solution in search of a problem at a time when we need to strengthen middle class workers and rural communities instead of leaving hardworking Americans vulnerable to corporate interests. We hope that Congress and the next Administration will hear the concerns of the American people and finally ground this failed proposal once and for all.”

5) National: Private equity is gearing up to make a major move into public infrastructure with “an increased appetite for higher-risk/higher-return strategies.” Blackstone head of private equity Joe Baratta is “excited about the infrastructure opportunities that a Donald Trump presidency could potentially unleash. ‘To be relevant in that end of the market, I think you need to be deploying billions of dollars at a time, not hundreds of millions. So you’re probably talking about a vehicle that’s 20, 30, 40 billion dollars of equity,’ he told Bloomberg TV. When asked if that meant aiming for the largest vehicle ever raised, he added: ‘Correct. That would be the ambition if this comes to fruition, which we certainly think it will, in terms of the public sector aligning with the private sector to invest in the fabric of this country.’”

6) NationalThe shipping industry is denouncing Trump’s plan to rely on private financing of infrastructure, saying it is risky and inefficient. “‘Improving our roads and bridges requires a rational, methodical, long-term public strategy,’ said the coalition, whose members include the American Trucking Associations, the National Council of Chain Restaurants, and the Texas Trucking Association. ‘ATFI members have serious reservations about the potential for over-reliance on private investment to fund improvements to our highway infrastructure.’ Committee chairman Rep. Bill Shuster, R-Pa., said during a hearing last week that interstate tolls “are a non-starter” for additional infrastructure funding. Shuster and many other congressional Republicans instead favor corporate tax reform as a potential major funding source. A sizeable portion of the private investments envisioned in the Trump plan could come from Japan, according to reports in Japanese news outlets.” [Sub required]

7) NationalAmerican States Water Company will release its fourth quarter 2016 and full year results after market close on February 23. The conference call will be held on Friday, February 24 at 1 pm eastern time.

8) National/Arizona: As widespread reports come in that the Trump immigration raids have started, The Daily Wildcat gives us a look at Operation Streamline proceedings in U.S. District Court in Tucson. “Matthew Lowen, Associate Program Director of the American Friends Service Committee’s Arizona office, described this mechanized process, stating, ‘It is a consequence delivery system.’ Lowen works to change policy on a variety of issues from prison privatization to immigrant criminalization. He sees the new administrations building upon this program to make it more prevalent.” For-profit private prison companies such as the GEO Group and CoreCivic stand to gain.

9) CaliforniaClimate change is increasing pressure on elected leaders and planners over how to fix Highway 37—and how to build public support. “Initial studies conducted by Caltrans and UC Davis provide preliminary analysis about how sea level rise will impact the corridor. It is dramatic information that shows complete inundation by the end of this century.” This will involve “decisions on if and how a proposal to privatize a portion of the roadway—from Sears Point to Mare Island—fits into the solution.”

10) District of Columbia: The IRS has ruled that PILOT revenue bonds issued by the District as part of a much lauded ‘public-private partnership’ to build a new elementary school are taxable. “Mark Scott, the former head of the [IRS tax exempt bond office], who examined the financing for a client under the IRS’ whistleblower program, tweeted last year that the transaction was a ‘PPP disaster’ and ‘a tax scam … that cost the district residents millions in tax dollars.’ D.C. officials had touted the financing as one that should possibly be replicated by a P3 office launched by Mayor Muriel Bowser in 2015.”

11) Illinois: Mayor Rahm Emanuel is pushing for an express rail service from downtown Chicago to O’Hare Airport. “Emanuel set a three-year goal to begin the project and announced the city has hired Bob Rivkin, former general counsel at the U.S. Department of Transportation, to ‘provide legal expertise in identifying a clear path forward and working with potential partners.’ Engineering firm WSP Parsons Brinckerhoff has been examining routes for the service that has long been a goal of Emanuel and his predecessor Richard M. Daley, though neither made much headway. The city did not offer any details on how the project would be financed, such as whether it would receive public funds or involve a public-private partnership.” [Sub required]

12) Indiana: Lake Station, whose water system is struggling under massive debt, is considering privatizing the facility to Indiana American Water. “Lake Station`s $12 million water plant, at 2898 Union St., opened in 2015. Anderson said the city is struggling to pay down the $750,000 annual mortgage on the plant that was built under former mayor Keith Soderquist who`s serving a four-year term in federal prison for using campaign money and money from the city`s food pantry for gambling at area casinos.”

13) Massachusetts: An expert says that private security guards are not licensed in the state, and that regulations need to be tightened up. Nationally, standards are a patchwork of local regulations. “Massachusetts’ lack of licensing and training requirements for guards stands in sharp contrast to most of the rest of the country. The vast majority of states require individual licensing and training of private armed and unarmed security guards, said Charles Nemeth, a professor at John Jay College of Criminal Justice who chairs its Security, Fire and Emergency Management Department and has studied private security for 40 years. (…) Without state regulation, private security companies can also face little public accountability. For firms that work in and around busy public areas, such as North Station, that can be dangerous, said Lisa Thurau, an advocate who has studied law enforcement policies in Massachusetts. ‘We have no assurances of what would happen in a situation with a security guard,’ said Thurau. ‘As we increasingly move toward privatization of public obligations, the question of how to properly regulate these people who fit in both worlds keeps looming.’”

14) MassachusettsWorcester’s Mayor says he is opposed to privatizing the city’s historic Union Station, and wants to explore options to transfer ownership to the city. “Union Station is owned by the Worcester Redevelopment Authority, which is technically a separate legal entity from the city. The WRA has owned the station since it was restored and reopened in 2000.”

15) OhioOhio State University is considering privatizing its campus power system. “Ohio State administrators will determine by the end of the current semester whether to ask trustees to pull the trigger on it. The university is weighing whether to hire private contractors to take control of critical assets: the utility system that heats, cools and powers more than 400 buildings on main campus. OSU would receive an undetermined amount of upfront cash and then agree to buy its energy from the vendor. The contractor would be responsible for making energy-efficiency upgrades to cut OSU consumption by 25 percent within a decade.”

16) Oklahoma: Gov. Mary Fallin (R) calls for $186 million of bonds for prison expansion. “My budget includes new money for corrections and treatment, which includes a $50 million bond issue to build wings on a men’s and a women’s prison for substance abuse offenders and rehabilitation,” Fallin told lawmakers.

17) Pennsylvania: Crystal Fortwangler, a scholar in residence at the Thomas Merton Center, says don’t privatize the Pittsburgh Water and Sewer Authority (PWSA). “Pittsburgh simply needs proper leadership to fix a public water system that shouldn’t have been broken in the first place,” she says, and advocates creation of a “a research and technical advisory council of community leaders; professionals and scholars from the sciences (in addition to engineering); and experts who specialize in equitable public water systems. PWSA collaborates in areas such as green infrastructure, but it has not benefited from the range of possible scientific advising, monitoring and community partnerships. We also need a stronger environmental justice focus, ensuring that low-income communities and communities of color are not experiencing any disproportionate impacts of city water policies.”

18) South CarolinaThe governor is seeking $5 billion from Trump’s infrastructure program. “South Carolina’s gasoline tax of 16 cents per gallon is the third lowest in the nation, according to the American Petroleum Institute.” [Sub Required]

19) InternationalA violent protest against the privatization of the water supply company paralyzes Brazil’s Rio de Janeiro. “Protesters who reject the possible privatization of the Regional Water and Sewer Company (CEDAE) clashed with the police in the streets near the headquarters of the Legislative Assembly of the State of Rio de Janeiro, where the project was to be debated. (…) Faced with pressure from protesters, lawmakers have so far rejected about a third of the measures proposed by the Rio de Janeiro governorate to reduce spending and address a historic deficit.”

Legislative Issues

1) National: The road privatization industry has lined up with Trump, and is pushing hard for tax exemptions to be extended to private financing of infrastructure projects. “Tax-exempt revenue bonds should be allowed for all P3 public purpose projects,” says Robert Poole of the Koch-funded Reason Foundation. “That could be in the form of the qualified public infrastructure bonds as proposed by President Obama or for allowing the use of private activity bonds for the upgrades of existing infrastructure,” he said. “Right now PABs are not available for upgrades of projects built with municipal bonds unless the outstanding debt is retired.” Poole also sees the political lineup under Trump as favorable. “President Trump has stocked his cabinet with P3 advocates such as Transportation Secretary Elaine Chao and Commerce Secretary-designate Wilbur Ross, who co-authored Trump’s 10-year, $1 trillion infrastructure proposal. But the most important pick may be the selection of former Transportation Department general counsel DJ Gribbin as the president’s special assistant for infrastructure, Poole said. ‘DJ Gribbin is a strong advocate for P3s and for tolling,’ he said.” [Sub required]

2) National: Companion bills introduced in the House and Senate “would allow state and local governments to issue up to $5 billion of private activity bonds to finance the repair or construction of public buildings under public-private partnership arrangements.” The Bond Buyer reports, “The ‘Public Buildings Renewal Act’ was introduced in the House on Feb. 7 as H.R. 960 by Rep. Mike Kelly, R-Pa., and eight cosponsors, five of whom besides Kelly are members of the House Ways and Means Committee. The measure in the Senate, which has not been assigned a number yet, is being introduced by Sens. Dean Heller, R-Nev., and Bill Nelson, D-Fla., both of whom sit on the Senate Finance Committee.” [Sub required]

3) NationalA bill has been introduced to bar tax-exempt municipal bonds from being used to finance sports stadiums. “Under the tax law, bonds are PABs if more than 10% of the bond proceeds are used by private parties and if debt service on more than more than 10% of the bond proceeds is secured by, or derived from, private parties. Once the two-part test has been met, PABs are only tax-exempt if they fall within one of several specified categories, none of which cover professional sports facilities.” [Sub required]

4) National: Transportation officials from rural states tell the Senate Environment and Public Works Committee that ‘public-private partnerships’ won’t work for them. “[Bill Panos, the director and CEO of the Wyoming Department of Transportation], who was also speaking on behalf of the transportation departments in Idaho, Montana, North Dakota, and South Dakota, some of which issued [Build American Bonds], told committee members that P3s and other approaches to infrastructure investment that depend on positive revenue streams from projects ‘are not a surface transportation infrastructure solution for rural states.’ P3s would be unlikely to attract investors even with tax credits, he said. Part of the problem is that roads in rural states tend to have relatively low traffic volumes, he said. Panos said Congress must strengthen the Highway Trust Fund, which will no longer be able to support surface transportation programs after 2020, when funding from the Fixing America’s Surface Transportation Act (FAST) ends.”

5) Arizona: Republican lawmakers fast-track legislation on school vouchers and move to privatize oversight of the public money given to parents to pay private-school tuition and other expenses. “Dozens of parents and teachers from across the state showed up in support of the proposal, while public-school teachers and others came out to oppose it. The House Education Committee will hear its expansion legislation at 2 p.m. [today]. Senate Republicans have also introduced another bill that would privatize oversight of the program and force the state Department of Education to deposit money into ESA accounts as soon as the parent agrees to the terms of the program.”

6) Maryland: House Speaker Michael E. Busch, D-Annapolis, Maryland State Education Association President Betty Weller, and dozens of General Assembly Democrats vow to fight school privatization proposals from Gov. Larry Hogan (R). “Weller likened Hogan’s measures to those championed by DeVos, an advocate for charter schools who was narrowly confirmed as education secretary Tuesday. ‘Educators must work with the General Assembly to protect our schools from this joint Trump-DeVos-Hogan privatization agenda,’ she said.”

 

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