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Weekly Privatization Report 7-17-2017

1) National: Shar Habibi, In the Public Interest’s Research and Policy Director, and Kevin DeGood, director of infrastructure policy at the Center for American Progress, debate the issue of infrastructure asset recycling at ARTBA’s 29th Annual P3s in Transportation Conference. “Habibi of In the Public Interest said that asset recycling can create higher barriers to access everything from roads to drinking water. DeGood of the Center for American Progress worried about local governments selling or leasing the assets too cheaply, or getting burned by unforeseeable outcomes of multi-decade deals.”

Last Wednesday, the Senate Committee on Environment and Public Works held a hearing on “The Use of TIFIA and Innovative Financing in Improving Infrastructure to Enhance Safety, Mobility, and Economic Opportunity.”Transurban weighed in with testimony supporting federal TIFIA loans, Private Activity Bonds, and asset recycling.

2) National: Inside Higher Ed’s Rick Seltzer reports on the proliferation of the ‘public private partnership’ infrastructure model at colleges and universities, and about the risks accompanying it. Several sessions of the Society for College and University Planning’s annual conference in Washington last week focused on P3s. “‘They kind of always start with the premise or this notion of ‘let’s keep it off our balance sheet,’ said Jeff Turner, executive vice president at the program management firm Brailsford & Dunlavey. ‘But when you dig a little deeper, that’s a little bit of a fallacy.’ Turner spoke at a session Wednesday examining the different models and best practices for P3s. It was one of several sessions addressing the P3 model, who is using it, how it is being used and how it is developing.”

At the conference, “Starving the Beast,” a full length film on the marketization of higher education, was shown. It “examines the on-going power struggle on college campuses across the nation as political and market-oriented forces push to disrupt and reform America’s public universities. The film documents a philosophical shift that seeks to reframe public higher education as a ‘value proposition’ to be borne by the beneficiary of a college degree rather than as a ‘public good’ for society. Financial winners and losers emerge in a struggle poised to profoundly change public higher education. The film focuses on dramas playing out at the University of Wisconsin, University of Virginia, University of North Carolina, Louisiana State University, University of Texas and Texas A&M.”

3) National/International: The Trump administration is exploring ways of privatizing the war in Afghanistan. “Erik D. Prince, a founder of the private security firm Blackwater Worldwide, and Stephen A. Feinberg, a billionaire financier who owns the giant military contractor DynCorp International, have developed proposals to rely on contractors instead of American troops in Afghanistan at the behest of Stephen K. Bannon, Mr. Trump’s chief strategist, and Jared Kushner, his senior adviser and son-in-law, according to people briefed on the conversations.” Sean McFate, a professor at Georgetown University who wrote a book about the growth of private armies, “The Modern Mercenary,” said “most of these contractors are not even American, so there is also a lot of moral hazard.”

For Tim Shorrock, the problem goes well beyond non-American contractors
: “[Stephen] Feinberg’s expertise is much broader: He helps provide the capital that feeds the military-contracting industry. Through Cerberus Capital Management LP , the $30 billion private-equity firm he co-founded in 1992, Feinberg has acquired dozens of companies engaged in military and intelligence operations. As Bloomberg News reported in a detailed profile last February, ‘Feinberg has bought companies that refuel spy planes, train Green Berets, make sniper rifles and watch America’s foes from space. He’s handed out jobs, lobbying contracts and campaign cash to some of the most powerful people in the nation’s capital.’

Unlike Prince, however, he, is virtually unknown to the American public, and likes to keep it that way.”

4) National: Maureen Finnerty, chair of the Coalition to Protect America’s National Parks, writes an open letter to Interior Secretary Ryan Zinke opposing plans to contract out services in the National Parks. The Coalition is composed of over 1,300 members who are current and former employees of the National Park Service. “We are especially concerned about the reported focus on potential outsourcing of campground management. Your rationale for considering this approach apparently arises from two predicted outcomes – cost savings and service improvement. As you potentially consider an initiative on this issue, we ask you to look at the facts relative to these proposals and consider our views. Most importantly, we urge examination of the basic math.”

5) National: Water industry lobbyist Brent Fewell pens a letter of protest to the Washington Post about an article they ran reporting on the drawbacks of privatizing municipal water systems.  The Post reported on July 10 that “selling the [Lake Station] water system would erase $11 million in utility debt and leave the city with a $9 million windfall. But the deal does not fund any of the water system’s $4 million in overdue repairs, costs that will be passed along through higher rates. Customers usually pay more for water after private companies take over. ‘You’re in bad shape financially to where you’re talking about laying off police, so you’re going to have to do something,’ said Lake Station Mayor Christopher Anderson (D). ‘The biggest issue with privatizing is we’re losing control of the operations.’”

6) National: It is an accepted article of faith in the privatization industry that private contracting and competition promote, if not guarantee, more efficient delivery and lower prices. But a new USC study finds that it “turns out, government is better at controlling some health costs.”

7) National: The construction of a new FBI headquarters in the DC area, which was supposed to be partially financed by an asset recycling deal involving the sale of valuable property near the White House and other official buildings, has fallen through. “The Trump administration’s budget proposal for fiscal 2018 did not include any funding for the new FBI facility. ‘Moving forward without full funding puts the government at risk for cost escalations and the potential reduction in value of the … property that developers were to receive as part of this procurement,’ the General Services Administration and the FBI said in a joint statement.” [Sub required]

8) National: The first episode of Nima Shirazi and Adam Johnson’s podcast, Citations Needed, tackles media hype surrounding the privatization of education. They interview freelance journalist and public education advocate Jennifer Berkshire, who hosts the Have You Heard podcast with Jack Schneider, which explores “education in the time of Trump, one hot-button topic at a time.”

9) National: Writing in The Nation, Bryce Covert warns against Trump’s infrastructure privatization plan. “While privatization promises to relieve taxpayers, it would actually raise costs and then shift them onto the backs of Americans in the form of fees and tolls. (…) Privatization, with its reliance on fees as a source of profit, also means that Trump’s infrastructure plan would ignore important projects. Those in remote or low-income areas, where there aren’t enough people to squeeze money from, won’t attract private investors. But there is still social and economic utility in maintaining rural roads or replacing the water pipes in places like Flint, Michigan. Other projects, like building better school facilities, levees, or railroad tracks, just don’t come with a source of short-term profit.”

10) National: Transportation secretary Elaine Chao is going to dole out the last of the popular TIGER grants money, and says applications will be accepted in late July or August for the 2017 money. The Trump administration has refused to refund the program, moving toward private financing and vehicle miles traveled tolling models instead, the details of which have yet to materialize. [Sub required]

11) National: Hunton & Williams beefs up its P3s practice by hiring G. Scott Rafshoon as a partner in its Atlanta office. “Rafshoon’s practice will focus on public-private partnerships, infrastructure and privatization projects, in addition to mergers and acquisitions and other corporate matters.” [Sub required]. Hunton & Williams adds that “a native of Atlanta, his clients have included several local, state and federal political candidates and officeholders, as well as political action committees.”

12) California: The Voice of OC reports that sparks flew between Anaheim Mayor Tom Tait and Councilwoman Anaheim City Councilwoman Kris Murray “over a phone call he had with Orange County Fire Authority Chief Jeff Bowman exploring the possibility of outsourcing the city’s fire department.” The city is currently in the middle of negotiations with its fire union. Orange County Fire Authority Chief Jeff Bowman told Tait in a text surfaced under a public records request that “Union board voted 7-0 to do the study but after negotiations conclude. They will contact you when ready so a formal request may be made. I asked Eva to schedule a mtg for u and Rick Cheatham. So far, all talks were informal to determine interests only.”

13) Colorado: Boulder is approaching a critical point in its legal battle with Xcel Energy to create a municipal electrical utility. “In hearings scheduled July 26 through Aug. 4, the Colorado Public Utilities Commission will consider the city’s plan to separate from Xcel and purchase the electrical infrastructure through a potential bond issue.” If the effort succeeds, it will be the state’s first municipal utility conversion in 70 years. [Sub required]

14) Connecticut: The West Milford Board of Education is considering outsourcing its transportation department. But trustee Greg Bailey “was livid about the idea,” which “will not save the money that you think you will with outsourcing.” He said, “I would never vote for this. It was suggested 15 years ago and people then found it would not work. It did not make sense then and it does not make sense now. I never advocated removing anyone from a job.”

15) Florida: Brevard County is scrambling for solutions after the company that runs its three golf courses backs out of its deal with only two weeks’ notice. “I’m disappointed that we’re having to go through this, but this is what you get when you contract out,” Viera resident Pam LaSalle said.

16) Illinois: Veteran Park Forest fire chief Bruce Ziegle, who is retiring after more than 40 years of public service, talks about the importance of local hire and downsides of contracting out. “eNews Park Forest: One of the things that I have always wondered and I think it is since I moved out here, but the private companies doing ambulance calls, and I think there is a benefit to having public service employees perform that task. Fire Chief Bruce Ziegle: Well, there is the multiskilled though, now that they can do whatever task comes up on them. They can do EMS they can fire they can do rescue. If you are using a private ambulance service — right now a lot of the communities around here that have no ambulance service and contract out, they have a private company run their service not from their fire station, but you just contract your service. Sauk Village, Ford Heights, those folks, they are lucky if the private ambulance company that is protecting [them] has one or two ambulances in their area.”

17) Maryland: The Federal Transit Administration has joined Maryland in its appeal of a federal judge’s ruling that blocks the Purple Line light rail ‘public private partnership’ until the project sponsors answer questions on its projected revenue. State officials have warned that the project could be scrapped because of the delays. Meanwhile, the federal financing for the project does not appear in the 2018 transportation draft appropriations bill,which is being marked up in the House. “The measure would provide no additional grant funding for transit projects that could have been in line to complete an agreement in fiscal 2018, including Maryland’s $5.6 billion Purple Line light rail project being financed as a public-private partnership.” [Sub required]

18) New Hampshire: The opioid epidemic, underfunding of state public attorneys, and vacuum created by the Trump administration’s failure to replace a highly qualified U.S. Attorney that it fired, has led to a crisis and spurred outsourcing. “This new reality comes in the midst of renewed reports that the New Hampshire Attorney General has had to contract out core investigative functions involving consumer protection in the opioid crisis.”

19) New York: This afternoon at 5:30 there will be a rally to oppose privatization of the Westchester County Airport sponsored by Citizens for a Responsible County Airport, Federated Conservationists of Westchester County, Sierra Club, Purchase Environmental Protective Association, Food & Water Watch, Grassroots Environmental Education, Westchester for Change, WESPAC, and WePersist. “The bids from private companies to take over the airport are due shortly before the rally. Speakers include: Legislator Catherine Parker (Dist.-7), George Fuss, Jonathan Wang, and a Public Health expert. Our county legislators, state representatives, and local officials are encouraged to attend. After the rally, we will go up to the Board of Legislators regular meeting on the 8th floor of the building. The rally has a permit and is rain or shine.”

20) Tennessee: Nashville Mayor Megan Barry has backed off, for now, on plans to privatize Nashville International Airport. “Rich Riebeling, Metro’s chief operating officer, told the Nashville Business Journal the mayor’s office is choosing to stick with the funding options already available instead of going down a path that is relatively untested in the United States. ‘I don’t see us moving forward [with privatization] in the near future,’ Riebeling said from his downtown office. ‘We decided not to cloud the water and to focus solely on the referendum and the options the [Legislature’s] IMPROVE Act gave us.’”

21) Tennessee: Tom Foster, an executive vice president for Jones Lang LaSalle, touts his company’s “celebrated” record on outsourcing public services in the state. For some reason he left out the part about state auditor reports finding problems with JLL’s Tennessee outsourcing deals. [Audit].

22) Texas: Public interest advocate Phineas Baxandall passes on the news that citizen activists have won a long battle to block the construction of a nine-mile, six-lane toll road in Dallas next to the downtown-adjacent Trinity River. “Kudos to the volunteers and advocates, including Patrick Kennedy, who annihilated the region’s case for the highway and built a political coalition around smarter ways to plan for growth. If Dallas can recognize the futility of adding highway lanes, other cities have no excuse for letting these boondoggles move forward.”

23) International: The Civil Society Reflection Group on the 2030 Agenda for Sustainable Development publishes its 2017 report, “Spotlight on Sustainable Development 2017: Reclaiming Policies for the Public—Privatization, Partnerships, Corporate Capture, and Their Impact on Sustainability and Inequality—Assessments And Alternatives.” The report says, “The proponents of privatization and public-private partnerships (PPPs) use these trends to present the private sector as the most efficient way to provide the necessary means for implementing the SDGs. But many studies and experiences by affected communities have shown that privatization and PPPs involve disproportionate risks and costs for the public sector and can even exacerbate inequalities, decrease equitable access to essential services and jeopardize the fulfilment of human rights. Therefore, it is high time to counter these trends, reclaim public policy space and take bold measures to strengthen public finance, rethink PPPs and weaken the grip of corporate power on people’s lives.”

24) International: The New South Wales government in Australia is to send in a public overseer to review “all major decisions” made by the GEO Group’s staff at Parklea Correctional Centre after an inmate video was discovered. He will report back in four weeks. Corrective Services Commissioner Peter Severin says “‘I have asked Corrective Services NSW to review the contract to see what penalties could be imposed if there has been a failure by the operator.’ The NSW opposition said an explosion in the number of prisoners has not been matched by resources, with potentially deadly consequences. The number of people in the state’s prisons has increased from 25,968 a decade ago to an unprecedented average of 40,577 this year.” [Sub required]

25) International: The German government has moved to tighten up control over foreign investment in its critical infrastructure, citing security concerns. “The new measures will allow the German government to scrutinize acquisitions from outside the European Union for up to four months, up from the previous two, when buying at least 25 percent of a company. The law will also clamp down on those foreign investors seeking to avoid such inspection through indirect acquisitions by establishing companies inside the EU.” [Sub required]

26) Revolving Door News: The director of public affairs and communications for Purple Line Transit Partners, Miti Figueredo, is leaving for a new position with Montgomery County’s Planning Board.

Legislative Issues

1) National: The idea of tax repatriation to help finance infrastructure is not dead. Politico reports that “Sen. Ron Wyden (D-Ore.) told the American Road and Transportation Builders Association on Thursday that senior Republicans and the Trump administration are ‘ruminating’ on the idea of including a repatriation component in a tax overhaul package expected to be introduced this fall. The plan could build on a bipartisan plan previously discussed by Sens. Chuck Schumer (D-N.Y.) and Rob Portman (R-Ohio), Wyden said.”

2) NationalThis Thursday, the Senate Environment and Public Works Committee will hold a hearing on “Innovative Financing and Funding: Addressing America’s Crumbling Water Infrastructure.”

3) California: In a report released last week, the state auditor noted that the state spent $44 billion on noncompetitive contracts worth $1 million or more between 2011 and 2016. Yet the battle over AB 1250, which would require annual audits and cost analyses to determine if outsourced public services will save money and not result in job losses for county workers, is heating up. “‘(AB 1250) is all about transparency, reporting costs and holding these contractors accountable—something I don’t think is restrictive,” Jones-Sawyer told the Acorn this week. ‘Taxpayers want us (as elected officials) to be good stewards of their money, and this bill is one way to do that by ensuring what we contract for is very transparent.’ Hugh Riley, executive director of the Ventura Council of Governments—the joint powers authority representing the county and its 10 cities—said the council ‘vehemently’ opposes AB 1250. He argues that, by imposing transparency requirements that are already in place under existing legislation, the bill interferes with the ability of counties to contract for vital services.”

The Davis Enterprise reports supporters of AB 1250 “also note that under the bill, counties simply would have to abide by the same contracting rules in place for state agencies, school districts and libraries. ‘That’s why we are perplexed by why the counties are fighting so hard to be exempted from these same standards,’ one the bill’s sponsors, Service Employees International Union, said in a statement.”

See also this detailed justification of the legislation by Riko Mendez, the chief elected officer of SEIU Local 521 in Santa Clara County.

 

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