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Weekly Privatization Report 3-13-2017

1) National: KCRW’s To the Point program looks at the destruction of “the administrative state” promised at CPAC by Trump’s extreme right wing strategy adviser Steve Bannon. Guests included Donald Cohen of In the Public Interest and Eric Lipton of the New York TimesTo the Point asks “Does the govt have enough ppl to do its job? No biz would set ‘arbitrary head counts’ on size of staff.”

Arbitrary cuts in government staffing (“reduce it to the size where I can drag it into the bathroom and drown it in the bathtub”—Norquist in 2001) have long been an objective of the right wing. Over 20 years ago, the Cato Institute complained that modest reform efforts (Clinton’s “reinventing government” initiative) had produced an insufficient “body count” (p. 77).

2) NationalPrivately run immigration detention is so violent that prisoners “beg to be kept in solitary.” Writing in The Verge, Spencer Woodman reports that logs obtained by through a Freedom of Information Act Request “detail ICE’s use of solitary confinement in 2016 on certain detainees at three private facilities in Lumpkin, Georgia; Eloy, Arizona; and Pearsall, Texas.” The logs cover two CoreCivic facilities in Lumpkin, Georgia and Eloy, Arizona, and a third center in Pearsall, Texas, operated by the GEO Group.

3) National: The Project on Government Oversight (POGO) has geared up for National Sunshine Week, which began yesterday. Events include a discussion on “Accessing Information in the Age of Trump” at The Newseum in Washington, DC, on Wednesday. “The importance of transparency and government accountability remain front and center in America today, as secrecy, overclassification, and public officials who evade responsibility continue to be a problem. Sunshine Week is an opportunity to give these issues the attention they deserve.” On Wednesday the American Library Association will present its annual James Madison Award “to honor individuals or groups who have championed, protected and promoted public access to government information and the public’s right to know at the national level.” Find an event in your area.

4) National: In the Public Interest Executive Director Donald Cohen looks at a common denominator between Flint, Michigan and Pittsburgh, Pennsylvania, both of which are suffering from water poisoning. “The cities also share something else, involvement by the same for-profit water corporation. Pittsburgh’s layoffs happened under the watch of French corporation Veolia, who was hired to help the city’s utility save money. Veolia also oversaw a change to a cheaper chemical additive that likely caused the eventual spike in lead levels. In Flint, Veolia served a similar consulting role and failed to detect high levels of lead in the city’s water, deeming it safe.”

5) NationalMother Jones senior reporter Shane Bauer and Nation Institute Investigative Fund reporter Seth Freed Wessler win this year’s Izzy Award for investigative journalism for revealing major abuses at for-profit U.S. prisons.

6) National: As mystery continues to surround the Trump infrastructure plan, Trump himself meets in the White House with his top infrastructure advisors. A master at obtaining taxpayer-backed corporate subsidies, Trump has become a full throated partisan of ‘public private partnerships’ backed by ‘availability payments.’ Another key goal seems to be gutting environmental review rules covering infrastructure projects so that approvals, construction schedules and financing timetables can be speeded up to the maximum. 

Included in the select group were Elon Musk, head of the auto maker Tesla, and real estate tycoons Steven Roth and Richard LeFrak. Also present were two veteran privatization campaigners—Lynn Scarlett, global managing director for public policy at The Nature Conservancy, and Tyler Duvall, a partner with McKinsey & Company. Scarlett, a former president of the Koch-funded, pro-privatization Reason Foundation, was a Deputy Secretary of the Interior in the GW Bush administration and was also on the executive committee of Bush’s President’s Management Council. Duvall was a key advocate for road privatization during the Bush administration

Trump National Economic Council infrastructure point man D.J. Gribbin, a Koch-affiliated road privatization veteran, also had “a nice chat for about half an hour” with Democratic Rep. Peter DeFazio (OR). “I laid out my ideas and priorities, and he listened politely and reflected on some of them—but no commitments,” DeFazio said in an interview. DeFazio, a long-time skeptic of privatized tolling, has been battling this fraternity for a long time. A decade ago, he asked whether, by turning to private financing for public works and services, “we [are] outsourcing political will to a private entity” because political leaders are reluctant to level with the public that they cost real money.

7) National: The American Society of Civil Engineers (ASCE) releases its much-anticipated 2017 Infrastructure Report Card, again showing the urgent need for investment in public infrastructure. The report cards are issued every four years. In summary, ASCE says “we have made some incremental progress toward restoring our nation’s infrastructure. But it has not been enough. As in 2013, America’s cumulative GPA is once again a D+. The 2017 grades range from a B for Rail to a D- for Transit, illustrating the clear impact of investment—or lack thereof—on the grades. Three categories—Parks, Solid Waste, and Transit—received a decline in grade this year, while seven—Hazardous Waste, Inland Waterways, Levees, Ports, Rail, Schools, and Wastewater—saw slight improvements. Six categories’ grades remain unchanged from 2013—Aviation, Bridges, Dams, Drinking Water, Energy, and Roads. The areas of infrastructure that improved benefited from vocal leadership, thoughtful policymaking, and investments that garnered results. These improvements demonstrate what can be accomplished when solutions that move projects forward are approved and implemented.” [See also the acknowledgments and the public sector organizations’ letter to Congress]

But the bottom line was encapsulated by Norma Jean Mattei, ASCE’s president and an engineering professor at Louisiana State University: “There is no magic wand. There is no infrastructure money tree or private sector angel.” [Sub required]

8) National: Are infrastructure investors getting cold feet on some of the ‘public private partnership’ hype and inadvertently making the case for public procurement or at least more public money? “The classic fear about aggressive bidding is that managers are packing unrealistic expectations to justify the multiples they are prepared to pay in relation to the returns those assets are then expected to generate. This is particularly true for core infrastructure assets. A typical worst-case scenario is one where managers are backing an overly optimistic business case that is then found to be fairly dependent on factors outside of a manager’s control, like robust economic growth or a favorable exit environment.” [Sub required]

9) National: Guess who’s interested in more closely following their coverage in the media? Immigration and Customs Enforcement (ICE) is bidding out a contract (one year with four more optional) for daily monitoring of the English and Spanish language media to keep its top brass informed of “news coverage relating directly or indirectly to the mission and operations of ICE as it relates to major important news, legislative activity and operations involving the agency.” And “relevant stories from radio and television news should be included.”

10) National: Bloomberg’s Matthew Winkler, Tom Keene and David Gura discuss AECOM, “the engineering giant that that’s become a stock market favorite since Donald Trump called for a $1 trillion infrastructure plan” (article plus embedded video). Who’s hoping to cash in on infrastructure? Nobody really knows: “AECOM raised $1 billion last month in the market that allows borrowers to privately sell bonds without registering them with the Securities and Exchange Commission.”

11) NationalThe U.S. Marshals Service has put out a request for information from possible bidders to run a 250-bed facility in New York City. It is currently being run by GEO Group and the contract expires in December.

12) NationalFredric Rolando of the National Association of Letter Carriers writes in to USA Today to correct one of its articles painting a dire picture of the USPS, which some Republican lawmakers want to privatize. “In fact, for more than three years the Postal Service has been operating at a profit, to the tune of $3.7 billion overall. Revenues have steadily risen as the economy improves and as online shopping boosts package revenues. On Feb. 9, USPS announced a $522 million operating profit for fiscal year 2017’s first quarter. This is earned revenue; the Postal Service receives no taxpayer money. Consensus legislation supported by a broad coalition of key lawmakers, industry groups, and postal management and labor addresses the onerous pre-funding burden while strengthening the invaluable—and profitable—postal networks.”

13) NationalComerica Bank increased its stake in CoreCivic, the private, for-profit prison company, by 6.9% during the fourth quarter.

14) FloridaA south Florida jail has defaulted on its bonds ahead of an IRS-mandated bond exchange. “Robert DeMann, chief deputy for corrections with the Glades County Sheriff’s Office, said Tuesday that the full debt service payment was not made because the funds were not available. Last month, the [Glades Correctional Development Corp.] told bondholders in a notice that the Internal Revenue Service had determined that its bonds violated the private activity use test of the IRS code because more than 85% of the jail’s inmates were federal detainees. The IRS said the bonds must be exchanged for taxable debt.” [Sub required]

15) MassachusettsPrivate consultants continue to push for further privatization in MBTA, this time of garages performing bus work. Three companies—MV, First Transit, and Transdev—have already submitted unsolicited proposals. “Massachusetts Bay Transportation Authority officials said [last] Monday they want to solicit bids to privatize several of their nine bus garages to save about $26 million annually, a prospect that prompted dozens of union supporters to pack the agency’s weekly board meeting. (…) Craig Hughes, who represents the MBTA’s machinists union, said it was a mistake to assume that cutting workers is the only way to save money. “We deserve to be seen as part of the solution, rather than a cost to be cut,” he said to the board on Monday. Union officials say MBTA buses are able to travel much farther between breakdowns, a key metric of success, than those at other large transit agencies. If approved, the outsourcing would mark one of the largest privatization efforts under Governor Charlie Baker’s administration, which had pushed for more flexibility in outsourcing public jobs. The MBTA is already privatizing its cash collection and warehousing departments.”

16) Missouri: The state has been hit with a class action lawsuit because of its “shockingly inadequate” funding of public defenders. In St. Louis County in 2014, one public defender was assigned nearly 400 juvenile cases. But when they complained to the legislature about inadequate funding, “‘the then-head of [Missouri State Public Defender Commission] was told that if local offices continued to turn away cases, the Legislature would pass a bill to privatize the entire system,’ the petition reads. Since then, public defenders haven’t turned away clients for fear of reprisal, including additional budget cuts, lawyers in the suit argue. But that means poor defendants are left with inadequate representation, often unable to talk with their attorneys about evidence, witnesses, trial strategies or plea negotiations.” The case has been brought by the ACLU of Missouri and the Roderick & Solange MacArthur Justice Center at St. Louis. “Enough is enough with appointing commissions and committees to ‘study’ the issue,” said Mae Quinn, director of the MacArthur Center.

17) New York/National: Some New Yorkers are boosting the idea of building a tram system between Brooklyn and Queens, hoping that somehow Trump infrastructure money will float the project. Similar ideas are popping up around the country as projects with questionable income streams are taken off the shelf and dusted off in hope of federal support. “State and municipal issuers are awaiting more information from the new administration. Trump, while campaigning last year, called for $1 trillion to improve infrastructure nationwide, but has not announced specifics since taking office.” Analysts are dubious. “Any action remains to be seen and we believe that infrastructure and regional economic financing is expected to be left to state and local governments,” said Bank of America Merrill Lynch. “According to Loop Capital Markets, results of the tax credit approach Trump has hinted at could be ineffective from a macroeconomic perspective. While some projects will get done, there is too much money chasing too few projects that meet the needs of P3 investors. While the tax credits may prove to be an enticing feature, the problem the market is facing is one of too much capital chasing too few projects. Enticing more capital via tax credits will not correct that problem.”

18) North Carolina/National: Private healthcare corporations are looking to clean up from Medicaid privatization, which would be spurred by block grants to the states under the Trump/Ryan plan. In a conference call last week, Centene Senior Vice President of Finance and Investor Relations Ed Kroll laid some of it out. “Silver Summit is in Nevada, that one takes effect July 1 of this year, that’s a new state for us and then Peach State we want a reprocurement there that will take effect, a new contract will take effect, July 1. And this is something we announced recently; a joint venture in North Carolina, that’s a state we currently don’t have any contracts in, no one does, there really are no managed Medicaid contracts but the state has passed enabling legislation so they can now get an RFP out there and hire vendors to privatize their Medicaid program. And we chose to establish a joint venture with the physician, the main physician group, the North Carolina Medical Society. We own 80% of the joint venture, the doctors own 20% and that joint venture, known as Carolina Complete Health will—when the RFP comes out for the Medicaid privatization, this joint venture will respond to that RFP on our behalf.” [Transcript, Centene Corporation at the Cowen and Company Healthcare Conference, CQ FD Disclosure, March 6, 2017; sub required]

19) OhioThe CFO of Ohio State is recusing himself from the decision on privatizing the university’s energy system in order to address questions about his objectivity. “The CFO won’t have a say in who will run the university’s energy operations for 50 years because of a choice he made in 2015 when he accepted a job at the parent company of CampusParc, which in 2012 had negotiated a deal with university officials, including Chatas, to privatize OSU’s parking operations. The move raised questions of quid pro quo, which Chatas vehemently denied, but he soon reversed course and stayed at the university.” A decision on the privatization is expected next month.

20) VirginiaThe state has reached an agreement with Transurban to build, maintain and operate a 13km extension of I-395’s express lanes. “Transurban will collect tolls on the roadway, with the charge varying based on real-time traffic conditions. In addition to building, maintaining and operating the extension, Transurban will provide a $15 million annual transit investment, which will grow by 2.5 percent annually, to the state for further enhancements. Other components of the project include several road improvements and lane additions, the rehabilitation of five bridges and the construction of new sound walls.” [Sub required]

21) West Virginia: Katie Hicks, associate director of Clean Water for North Carolina, tells Petersburg Mayor Samuel Parham, the city council and its residents about the pitfalls of privatizing water and wastewater. “Private water companies such as Aqua America and American Water claim to provide a solution to municipal-owned water and wastewater utilities facing financial and operational struggles. We understand the appeal of selling systems to provide an injection of capital which temporarily improves the local budget. However, there are many examples showing that the privatization of these services is often to the detriment of water service, affordability, and public accountability. We encourage you to explore all other options for the future of your water and wastewater systems before rushing into a deal to sell these valuable assets which provide your constituents with safe drinking water and sanitation.”

22) InternationalStaff shortages and outsourcing are contributing to a crisis in mental healthcare in British prisons. “Another cited factor was the ‘churn’ of private healthcare providers following the decision to contract services in prisons to external providers. One psychiatrist, who works in a prison housing more than 300 women, said healthcare provisions had been ‘impacted significantly’ by moving from the [National Health Service] to a private provider. They said that there had been ‘several self-inflicted deaths’ of prisoners identified as high risk.”

23) InternationalPrivatised Sydney Airport parking spaces are making an extraordinary 73% profit margin by shutting out competitors. The airport “made $97.8 million in profit from car parking in the last financial year, the largest since privatisation in 2002.” Flyers are now paying up to $1.6 billion in extra fees due to privatisation. “[Australian Competition and Consumer Commission chair Rod Sims] said such poorly handled privatisations, where governments seek to maximize the sale price by allowing monopolies to operate without regulatory oversight, are a key factor behind community opposition to public asset sales. ‘They privatized them and simultaneously took the regulations off,’ he said.”

24) Revolving Door News: ProPublica releases a report on hundreds of officials Trump has quietly installed across the government. The information comes from documents received through public-records requests. “While President Trump has not moved to fill many jobs that require Senate confirmation, he has quietly installed hundreds of officials to serve as his eyes and ears at every major federal agency, from the Pentagon to the Department of Interior. Unlike appointees exposed to the scrutiny of the Senate, members of these so-called “beachhead teams” have operated largely in the shadows, with the White House declining to publicly reveal their identities.”

25) Think Tanks: The Human Rights Defense Center’s latest issue of Prison Legal News is well worth checking out. It includes articles on “The Financial Firm that Cornered the Market on Jails,” “PCI Announces 2016 Awards for Private Prison Activism, Advocacy and News Reporting,” “Delaware Prisoners Demand Education, Rehabilitation,” “Escape is Latest Problem at Troubled Privately-run Texas Jail,” and more.

Legislative Issues

1) National: In the midst of Trump’s declared federal hiring freeze, Sens. John McCain (R-AZ), Floyd Flake (R-AZ) and Ron Johnson (R-WI) have introduced a bill to ease the hiring process at Customs and Border Protection. “In a January executive order, Trump called on CBP to hire 5,500 new employees to strengthen border security.” The Boots on the Border Act would ease that process by eliminating some vetting procedures. It would also spur the recruitment of ex-military, possibly contributing to militarization of the service. “Former federal employees who served in law enforcement for at least three years; had the authority to make arrests, conduct investigations and carry firearms; and previously passed background checks would qualify to skip the polygraph exam. Also authorized for polygraph exemption would be military personnel transitioning into civilian jobs.” [Bill text]

2) NationalThe legislative battle over fixing the flood insurance program is coming to a head. “House Financial Services Committee Chairman Jeb Hensarling (R-TX) has said he wanted to privatize the program, but this time may back more bipartisan efforts to stabilize the rates, improve the flood maps and encourage the private market back in. The panel’s top Democrat, California Rep. Maxine Waters, favors having the Treasury forgive the program’s debt, an idea Republicans don’t support. Other ideas include updating the maps and technology used to assess flood zones and factoring in a homeowner’s ability to pay a certain rate, a Democratic aide said.” [Sub required]

3) NationalTrump’s budget cuts are imperiling an actual, up-and-functioning federal infrastructure funding program that helps states and cities—the TIGER program. “Trump has vowed to invest $1 trillion in the nation’s infrastructure through a combination of public and private financing. But the president is also looking to boost defense spending by $54 billion.”

4) NationalPolitico looks at “the coming GOP assault on regulations.” Their bottom line: “There is a flurry of anti-regulatory legislation floating around Capitol Hill, but it is becoming clear that the key Republican vehicle to rein in rulemaking will be Ohio Senator Rob Portman’s Regulatory Accountability Act. A 16-page draft of the legislation obtained by Politico was significantly less radical than several aggressive bills recently passed by the House of Representatives, but industry groups have pinned their hopes on this one attracting support from enough moderate Democrats to overcome a Senate filibuster and make it to Trump’s desk. And even if the Portman bill won’t automatically ensure ‘the deconstruction of the administrative state’ promised by White House adviser Steve Bannon, it could still dramatically curtail the power of government regulators in the long run.”

5) National: Two leading U.S. Senators and a group of Pacific Northwest lawmakers are voicing bipartisan opposition to privatizing the nation’s air traffic control system. “Senate Appropriations Committee Chairman Thad Cochran, a Mississippi Republican, and Vice Chairman Patrick Leahy, a Vermont Democrat, oppose plans to privatize the nation’s air traffic control system because it would put the system’s assets beyond congressional oversight. ‘The public would not be well-served by exempting any part of the FAA from annual congressional oversight,’ Senators Cochran and Leahy said in a letter to leaders of the Senate Committee on Commerce, Science and Transportation. ‘A privatized system would provide consumers with no recourse for complaints or mistreatment, as it currently does through the Department of Transportation or their member of Congress.’ Senate oversight ensures the focus remains on safety, the senators added.”

6) National: At a Congressional hearing on infrastructure, the executive director for transportation infrastructure at the U.S. Chamber of Commerce, Ed Mortimer, tells lawmakers that “the public private partnerships favored in the Trump proposal are important and would bring needed investments to infrastructure but they are not a panacea. Although using P3’s and other private financing instruments can free up pay-as-you go funding sources for projects that are not amenable to private investment, they are no replacement for fixing the revenue problem facing the Highway Trust Fund.” [Sub required]

7) Florida: In her response to Republican Gov. Rick Scott’s State of the State message, House Democratic Leader Janet Cruz defends public education. “Rather than the Republican idea of diverting hundreds of millions of taxpayer dollars into private, for-profit charter school corporations, House Democrats believe we should instead be focused on ensuring that every neighborhood has a public school it can be proud of.”

8) FloridaThe Republican House has killed off Enterprise Florida, “the public-private agency that has for many years doled out publicly funded business incentives.” Gov. Scott (R) has denounced the move. “Enterprise Florida was developed as a public-private agency years ago, with lawmakers expecting contributions from the private sector that did not materialize.” [Sub required]

9) Massachusetts: Republican Gov. Charlie Baker says he won’t seek an extension of the law that overrode state rules and allowed for the outsourcing of key functions of the Massachusetts Bay Transportation Authority. “Several top Democrats had indicated they were unlikely to approve an extension even if one was requested.”

 

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