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Weekly Privatization Report 5-30-2017

1) National: The Trump administration rolls out its budget proposal, which calls for “spending $200 billion over 10 years to ‘incentivize’ private, state and local spending on infrastructure.” But “critics said Trump and his advisers are putting ideology ahead of the national interest and oversimplifying how the process works. Public stewards should not be ‘trying to figure out how to extract maximum value’ by selling off government assets or ‘making huge, multibillion-dollar wagers’ that span decades, said Kevin DeGood, director of infrastructure policy at the Center for American Progress, a liberal advocacy group. ‘Building infrastructure faster and without adequate study or time for community input may be good for developers, but it’s lousy for everyone else.’”

Donald Cohen of In the Public Interest has taken aim at the Trump administration’s proposal to use an “asset recycling” model
 to push cities, counties, and states to sell off their assets (supposedly) in exchange for new infrastructure built as ‘public private partnerships.’

Recalling a previous, disastrous, asset privatization scheme, Cohen bids us to “remember the Chicago parking meter deal, where the city lost nearly a billion dollars leasing its downtown meters to Wall Street for 75 years…Asset recycling would produce deals like that but on steroids. (…) We still don’t know what Trump’s actual infrastructure plan will look like—Transportation Secretary Elaine Chao says a legislative package will be released later this year. But what we know so far drives home the fundamental truth of privatization. As an executive of a financial firm that invests in public-private partnerships said during the Great Recession, ‘Desperate government is our best customer.’ By cutting federal spending on infrastructure—which has already dropped by half over the past three decades—Trump’s budget sets the stage for local governments to feel as though they’ve got nowhere else to turn but the private sector. Meanwhile, Wall Street and multinational investment firms are knocking down the door.”

At the time of the Chicago parking meters deal, politicians also assured us it was a wonderful idea. Mayor Daley said “the funds for this historic parking meter agreement will strengthen our city finances for the long term, give us the ability to continue investing in people’s needs, and most importantly protect our city and taxpayers from a very worsening and difficult economy.” Instead, the city was taken to the cleaners.

In a letter to the Washington Post, Marilyn Goodwin also reminds us of the deterioration of the Indiana Toll Road after it was privatized at the height of the credit boom, then went bankrupt. “In 2006, the Indiana Turnpike was privatized in a lease agreement that was predicted to solve all the state’s highway problems. When we traveled the entire width of the state in 2015, we learned that the prediction was wrong. The condition of the road itself was deplorable, and the service plazas were even worse.”

2) National: The airline industry is pushing hard to get Congress to adopt President Trump’s budget proposal to privatize the public air traffic control system. “The President’s leadership on air traffic control reform will ultimately reduce federal spending, shrink the size of the federal government and reduce taxes for passengers,” Airlines for America President, CEO and lobbyist Nicholas E. Calio said. Calio used to be Citigoup’s head lobbyist (pp. 8-9)

But the Alliance for Aviation Across America (AAAA) “argued that under a privatized air traffic control system, industry and other stakeholders would be able to direct investments and resources, and set taxes and fees to benefit stakeholders’ bottom lines, rather than in a way that maximizes the public good. Consequently, this would threaten access to rural areas around the United States that depend on the nation’s public air transportation system, AAAA said. Under the budget proposal, privatizing air-traffic control would increase the deficit by $46 billion over the next decade.” Ron Consalvo, president of AFGE Local 200, which represents more than 340 federal employees at the William J. Hughes Technical Center outside Atlantic City, N.J., says “FAA employees have decades of specialized experience maintaining the National Airspace System that cannot be replaced without great costs to American taxpayers and great risks to the flying public,” said.”

[See also last year’s hearings on the issue in the House Transportation and Infrastructure Committee, which includes materials opposing air traffic control privatization by, e.g., Scott Frey of AFSCME, the Air Line Pilots Association, Elliott Sclar of Columbia University, Americans Against Air Traffic Privatization, J. David Cox, Sr., National President of the American Federation of Government Employees, and others.]

3) National/Oregon: In his budget proposal, Trump also proposes selling off the Bonneville Power Administration’s transmission grid, which would enable private equity to grab these lucrative, revenue-producing public assets. “Sen. Ron Wyden on Tuesday blasted the budget summary in general, calling it ‘Madoff Math’ and ‘a cynical assault on the fundamental idea that Americans should be there for one another when it counts.’ The Oregon Democrat also noted the proposal to sell Bonneville assets, saying it would increase costs for tens of thousands of homes and businesses in the state. ‘I successfully fought Republicans’ efforts more than a decade ago to privatize Bonneville Power, and I will fight this misguided attempt,’ Wyden said in a news release. ‘Public power customers in the Pacific Northwest have paid for the system and their investment should not be put up for sale. I’m putting this budget where it belongs—in the trash can.’ The Public Power Council, which represents many of the BPA’s public utility customers, said it was opposed to the proposal for several reasons, including the loss of regional control and value; the risk of increased costs to consumers; the potential for remote areas of the system to be neglected, harming rural communities; and, impacts to reliability.” [PPC media release]

4) National: Boosting potential profits for the private prison and immigration detention industry, the Trump administration is asking for “$1.5 billion to expand its efforts to detain and deport undocumented immigrants, as well as $300 million to recruit, hire, and train 1,500 new immigration agents, a step toward Trump’s call to add 10,000 Immigration and Customs Enforcement (ICE) agents and 5,000 Customs and Border Protection agents. (According to CBP estimates, it would likely take as long as a decade to pull off hiring as many people as Trump wants, and it would have to ease the hiring standards to do so).”

5) National: The GEO Group receives two 10-year federal contracts worth $664 million from the Bureau of Prisons. The contracts, for 3,532 existing beds in Big Spring, Texas, were under the Criminal Alien Requirement 16 procurement.

6) National/New Jersey: Gov. Chris Christie (R), an ardent supporter of Donald Trump in the presidential campaign, urges Trump not to slash $200 million in funding for mapping flood-prone areas. He also calls on Trump to privatize the federal flood insurance program.

7) Arizona: Red Rock, a privately-operated prison run for profit by CoreCivic, was put on lockdown after a “racially motivated” melee broke out. “The company struck a deal this week with city officials in Mesa to jail people arrested on misdemeanor charges at [CoreCivic’s location in Florence]. A nearby CoreCivic facility in Eloy that houses immigrants has been a frequent target of activists over jail conditions that they say has led to a high number of deaths and health issues, including a measles outbreak last year. Arizona severed ties with a Utah-based private prison operator in 2015 after a string of troubling security and training lapses led to violent riots at a Kingman prison.” Donna Leone Hamm, the director of Middle Ground Prison Reform, “said the Department of Corrections typically lists disturbances as racially motivated despite other underlying reasons. (…) ‘Often underlying those things are the same kinds of things that caused the Kingman riots—inmates being treated unfairly in the disciplinary system and visitation being tampered with or denied for arbitrary reasons,’ Hamm said. She said denying telephone calls with family or general confinement conditions can also be relevant in sparking disturbances.”

8) Georgia: Concern grows that Atlanta’s school charterization effort, backed by the Walton Family Foundation and KIPP, and led by Superintendent Meria Carstarphen, could turn into a mess. The scheme “could leave Atlanta with empty schools, hundreds of students stranded in low-performing schools, and yet another set of promises unkept. If the makeup of the school board changes with this fall’s election, Carstarphen could leave or be forced out and promises of a better future could fizzle. Carstarphen left her last superintendent’s post in Austin, Texas, for Atlanta after voters angry over similar plans to outsource schools to a charter school organization helped elect new school board members.”

9) Kentucky: In a new report, the Kentucky Chamber of Commerce is moving aggressively to promote ‘public private partnerships’ under a law signed last year. When asked for comment about the P3 law, Bentley Patrick, the vice president of Friends of Labor, an advocacy group for workers in the state, said “the true measure of success is not the mere fact a building or a bridge is built, but that everyone who participates in the project is paid fairly, has safe working conditions and also provide the citizens of the Commonwealth with a quality-built project. At this time we think it’s too early to tell if these qualifications are being met through these partnerships. We also feel strong oversight is necessary to ensure workers as well as the citizens who ultimately pay for these projects are protected.”

10) Massachusetts: The MBTA pension fund, which has been hurt by “layoffs, privatization, and early-retirement incentives since 2015,” still has no head after nearly a year.

11) Montana: Bryce Oates, writing for Common Dreams, calls for protecting public land in Montana and beyond from privatization. “This treasury of public lands is something that requires consistent defense and protection. In the Age of Trump, the forces of privatization, fossil-fuel development, mining and other extractive industries are in control.”

12) New Mexico: Randi Weingarten, head of the American Federation of Teachers, denounces Gov. Martinez (R) for following the same playbook as Donald Trump and Betsy DeVos in trying to destabilize and privatize New Mexico’s schools. “The state chapter of the American Federation of Teachers and another union, the National Education Association of New Mexico, often clash with [Public Education Secretary Hanna Skandera] and Martinez on education policies, such as teacher evaluations, standardized testing and the state’s A-F grading system for public schools.”

13) New York: The proposed sale of public library land to private developers in an attempt to make up for years of egregious underfunding of their capital budgets has generated controversy, the American Prospect reports. “What has happened historically is that public land changes hands into private hands and then whoever becomes the new owner can eventually change what’s on the site. When we found out about the eventual sale of the land from public ownership to private ownership, that was already a deal-breaker,” said Nova Lucero from Metropolitan Council on Housing, a member of the Northern Manhattan Is Not for Sale coalition. Unlike Bowles, she does not see the trade-off as worthwhile: ‘The fear is that we’re losing control as a community.’”

14) Ohio: A Columbus charter school that was shut down by its sponsor still owes the state $340,770. “‘Poor management ran this charter school aground,’ Auditor Yost said. ‘The financial losses to taxpayers are significant, but the biggest victims here are the students and parents who had the rug pulled out from under their feet at the start of the school year.’ The audit also determined the academy failed to repay $16,076 in overfunding that ODE identified in its full-time equivalency (FTE) adjustment for fiscal year 2015, which was finalized on March 3, 2017. Auditors issued $340,770 in findings for recovery against the academy in favor of ODE. As of Feb. 29, 2017, the academy had a bank balance of $86,110 and outstanding liabilities totaling $632,339, including the amount owed to ODE.”

15) Pennsylvania: The Pennsylvania Legislative Budget and Finance Committee releases a useful report: “Public Charter School Fiscal Impact on School Districts.” The Times Leader has a concise rundown of the report’s recommendations.

16) Pennsylvania: The bidding process for an ex-offender check-in center contract with Lycoming County is clouded by an apparent conflict of interest. “Commissioner Rick Mirabito denies that his connection with Firetree Limited, one of the bidding companies, provides a conflict of interest in the deliberation process or the final vote. Mirabito serves on the board of Firetree Place, a separate nonprofit from Firetree Limited but founded by the Firetree organization and its leadership.” GEO Group holds the current contract, which expires in July.

17) Tennessee: Charter school bond deals, including one for Rocketship, attract concern in Nashville. “Two Nashville charter schools used an obscure Metro board to issue tax-exempt debt for school projects in deals that went unnoticed for months, but now are drawing intense scrutiny. (…)The deals approved by the Metro Health and Educational Facilities Board for Rocketship and Purpose Prep charter schools do not use local taxpayer money and contain no provisions that would put taxpayers on the hook. But critics on the Metro Council and the Nashville school board say the charters should go to banks for private financing and not use the facilities board, which can issue tax-free bonds for nonprofit groups. They directed particularly sharp criticism at a $7.74 million in bonds for Rocketship, which is part of a national charter school network.”

18) West Virginia: West Virginia University, a public land grant university, buys land from a private developer for $3 million per acre in Morgantown. The purchase will be funded from student tuition and fees. The new complex will “not pay a penny in property tax. That’s because it is owned by West Virginia University. The university leased the property to a developer to build the project. Now, the developer is leasing it back to WVU to run the apartment complex. It’s called a public-private partnership.”

19) Wisconsin: Criticism of the state’s job creation ‘public-private partnership’ mounts up after the Legislative Audit Bureau finds numerous problems in WEDC regarding job creation, uncollectable loan balance, a failure to verify job-creation information submitted by tax credit recipients, and delays in repaying tax credits to authorities. Madison resident Dory Christensen writes “How is it possible that this agency ‘cannot be certain about the number of jobs it has created or retained’? Our governor is so eager to privatize as many government services as possible, but not when it comes to handing taxpayer funds to his cronies via these completely inefficient mechanisms. Let private businesses go to the private banks for the loans they need.”

20) International: As national elections approach, the Labour Party Manifesto takes aim at privatisation, saying “many basic goods and services have been taken out of democratic control through privatisation.” The party pledges to bring private rail companies back into public ownership as their franchises expire; transition to a publicly owned, decentralised energy system; replace “our dysfunctional water system with a network of regional publicly-owned water companies”; and reverse the privatisation of Royal Mail at the earliest opportunity.

21) International: Germany bans road privatizations and prohibits new highway ‘public private partnerships’ longer than 100 km. The government will set up set up a federal road infrastructure company free from private capital and impose additional limits on PPPs. The company’s “formation had generated a huge furore in German politics after initial plans unveiled last year by Finance Minister Wolfgang Schäuble involved 49 percent of the company managing Germany’s 13,000km network being owned by private investors. Schäuble, a member of Angela Merkel’s CDU party, drew strong hostility from coalition partners SPD and opposition parties Linke and the Greens for his plans, as well as from wider bodies such as Germany’s Federal Court of Audit. Schäuble was supported by Transport Minister Alexander Dobrindt. As a result, the new law promoting the formation of the new company from 2021 specifically outlines the exclusion of third parties, either directly or indirectly.” [Sub required]

22) International: Some experts are saying that outsourcing jobs to a private Indian company lies at the root of the disastrous global IT outage that has paralyzed British Airways over the past few days. Mick Rix, head of the GMB union’s transportation section, says “that five members of the equipment and facilities team based in the centre near Heathrow that houses the mainframes had been made redundant. ‘We believe that the redundancies that have already taken place have led to a brain drain… [this] has led to issues like this taking place that cannot be resolved quickly.’”

Legislative Issues

1) National: In a challenge to Trump’s privatization-based infrastructure proposal, Progressive Democrats unveil a 10-year, $2 trillion plan for direct federal infrastructure funding that would be paid for by closing corporate tax loopholes and enacting other tax reforms. The “21st Century New Deal for Jobs” would “make badly needed repairs to the nation’s transportation, water, energy and information systems. It contains several progressive priorities, including the use of Davis-Bacon prevailing wage standards, maintenance of racial and gender equity in hiring, focus on low-income communities and carbon-free energy production.” The CPC says “in reality, President Trump and Congressional Republicans are pushing a trillion-dollar corporate giveaway that would create tax incentives for Wall Street to privatize our roads, bridges, sanitation systems, and utilities, while raising tolls, fees, and bills—all through taxpayer subsidies. Even worse, their approach will leave the infrastructure that we depend on in utter disrepair unless it generates a profit for private investors.”

2) National: Sens. Ron Wyden (D-OR) and John Hoeven (R-ND) introduce legislation to ease ‘public-private partnership’ financing. The senators say their Move America Act (S. 1229) “would enable states, localities and their private sector partners in infrastructure projects to leverage $8 billion of federal investment into $226 billion of bond authority over the next 10 years or up to $56 billion in tax credits over the same period. The legislation introduced on May 25 could provide an avenue to accomplish the reliance on private investments in President Trump’s infrastructure renewal program, Hoeven said. (…) Qualified facilities for Move America Bonds include highways and freight transfer facilities, airports, passenger and freight rail, coastal and inland waterways, and water systems.” [Sub required]

3) National: Two finance industry specialists are working on a legislative proposal to refinance agency debt assets. They claim that the proposal to leverage agency debt could raise $2 trillion for infrastructure. Grover Norquist is backing the idea. [Sub required]

4) Louisiana: In the middle of a hearing, the CEO of a privatized hospital pulls out a $6 million check and hands it to lawmakers “as stunned senators watched in disbelief at the public presentation and the committee chairman called it ‘pathetic.’ The bizarre exchange, which upended the typical drone of legislative financial hearings, is the latest twist in a continuing quarrel between LSU and the operator of the Shreveport and Monroe hospitals where university doctors and students practice under a state contract. (…) The Biomedical Research Foundation is operating the Monroe and Shreveport hospitals under a 2013 contract struck by former Gov. Bobby Jindal. The privatization deal in north Louisiana has been contentious since it began. University Health has repeatedly clashed with LSU and state officials over payment amounts and contract terms.”

 

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