22780979819_8e486ca94f_b
SHARETweet about this on TwitterShare on FacebookEmail to someonePrint this page

Weekly Privatization Report 7-31-2017

1) National: Food & Water Watch has filed a lawsuit against the Trump administration over what they say is the administration’s failure to comply with federal law (the Federal Advisory Committee Act) governing the operation of its infrastructure advisory council. The lawsuit also names transportation Secretary Elaine Chao, and Commerce Secretary Wilbur Ross. The council exists in a situation where, FWW says, “the anticipation of such large-scale privatization has led investors and asset managers to raise billions of dollars to finance potential transactions.”

As The New York Times wrote in reporting the story, “the Trump administration has been widely criticized for trying to circumvent the norms of disclosure and transparency to shield its inner workings from public view.” The Times also reported that “during the first hundred days of his administration alone, nearly 300 private-sector leaders visited the White House, and many agreed to join advisory panels on topics ranging from manufacturing to job creation.”

The Food & Water Watch complaint says “the present Administration has adopted a pattern and practice of establishing advisory committees, largely populated by President Trump’s business associates and friends, to advise him and agency secretaries on economic and business-related matters. This practice, in effect outsourcing policymaking to private individuals who are unfettered by conflict-of-interest rules and other public accountability standards, raises a host of ethical and transparency concerns.”

FWW says “to date the Infrastructure Council has operated in private—meeting, suggesting policy proposals, and rendering advice. Taxpayers and potentially affected communities have no insight into whether and how the council is considering or is prepared to consider key aspects of infrastructure development, such as the needs of rural and agricultural communities, the needs of underserved and low-income communities, the need to refurbish dangerously aging health and safety infrastructure such as drinking water systems, and public versus private ownership of infrastructure assets.” FWW is asking the court to force compliance and transparency.

2) National: In the Public Interest’s executive director Donald Cohen asks “Is Privatization on the Way Out?” Cohen writes, “Here in the U.S., despite the Trump administration’s deep ties to Wall Street and corporate America, there are signs the tide is turning. As always, the movement is starting at the bottom. There’s Milford, Connecticut, a small city pushing to purchase its water system after learning that the corporation that owns it plans to raise rates by nearly 30 percent. There’s New York, which just brought back state workers to provide IT help desk services after concerns about rising costs in a contract with IBM. There’s Atlantic City, New Jersey, which earlier this month passed an ordinance to ensure residents get to vote on any action by the state to sell or lease the city’s water system.”

3) National: In the Public Interest’s Jeremy Mohler talks with Eugene Puryear about ‘public private partnerships,’ how much more expensive private financing of public infrastructure is, and how austerity and the chronic defunding of government is eroding public space and democratic governance. [Audio, at 19:00]

4) National: The New York Times looks into the thorny issues surrounding the Trump administration’s proposal to privatize the Bonneville Power administration’s poles and wires. “Privatization would transform a government service that requires equal standards across a vast territory—from large cities to tiny hamlets—into a private operation seeking maximum returns to investors. Wringing profits from a system that has provided electricity at cost would inevitably raise prices, critics of the idea said, while supporters envision a streamlined grid open to innovations that government managers cannot imagine.” Jaime A. Pinkham, the executive director of the Columbia River Inter-Tribal Fish Commission and a member of the Nez Percé tribe, says “’obligations are tied to the federal relationship. When you privatize, what happens to the voice of the Indian people?’”

5) National/Illinois: There’s a new full length book out on the disastrous Chicago parking meters privatization deal. Michael Condon’s The Chicago Parking Meter Concession of 2008 is a cautionary tale of what can go wrong when financial interests dangle the prize of instant cash before desperate governments willing to wave through poorly conceived privatization deals, and elected leaders willing to look the other way. “I was stunned,” says Condon. “Why did Chicago City leaders choose a private parking meter concession to fatten the City’s coffers, and, more importantly, how was it possible for such a deal to go from first major public announcement to approved in only three days?”

6) National: With doubts surrounding the idea that cash-strapped state and local governments will be able to play the large role that is envisaged for them in Trump’s $1 trillion infrastructure plan, Treasury Secretary Steve Mnuchin is floating another idea: linking the infrastructure devolution idea to state-level internet taxation. “Mnuchin revealed the Trump administration is close to announcing its policy on internet sale taxes during a Senate Appropriations Committee panel hearing on his department’s 2018 budget. ‘This is an issue that we have been looking at very carefully within the administration and we expect to come out with a position shortly,’ Mnuchin told members of the financial services and general government subcommittee. Only five states—Alaska, Delaware, Montana, New Hampshire and Oregon—don’t collect sales taxes.” [Sub required]. What will Grover say? He seems quiet so far.

7) National: Height Securities says in a note that the recent drama surrounding Attorney General Jeff Sessions, “has scared the wits out of investors in CoreCivic and The GEO Group,” but still thinks the for-profit prison sector can prosper.

8) National: The NAACP Task Force on Quality Education issues a report strongly criticizing school privatization for allowing state governments to avoid their obligation to educate children of color, especially the poor. The report, based on input the task force sought from across the country, pointed to multiple problems with charter schools, including “that having too many charter schools in some communities, while neighborhood schools are shut down, contribute[s] to a chaotic educational system for many families of color living in low income areas.” The task force made five key recommendations:

  1. Provide more equitable and adequate funding for schools serving students of color.
  2. Invest productively in low-performing schools and schools with significant opportunity and achievement gaps.
  3. Develop and enforce robust charter school accountability measures.
  4. Require fiscal transparency and equity regarding the sources of revenues and how those resources are allocated.

9) National: GTL, a contractor with “32 state departments of corrections, the District of Columbia, Puerto Rico, the Federal Bureau of Prisons, and 79 of the 100 largest city/county facilities, including 40 of the top 50, which comprise 1.8 million inmates nationwide,” announces it has developed a new version of its “Offender Management System” software.

10) National: The Bureau of Prisons, which contracts with for-profit prison companies, says it intends to propose a rule to expand the use of restraints on inmates. “Aside from the potential physical health effects, [Dr. Homer Venters, director of programming at Physicians for Human Rights] said, the desks could diminish any progress that’s hoped to be achieved through mental health services. ‘Whatever the type of treatment that’s being delivered, the first prerequisite is to engage with the patient, and patients cannot engage in a meaningful way when they are chained up like an animal,’ he said.” The Hill reports that “the effort seems linked to a move to lower the use of solitary confinement and to protect prison workers struggling with reduced staff due to funding cuts.”

11) National: Despite all the talk in Washington (or maybe because of it), private infrastructure investment funds lagged in raising capital in the first half of 2017, with one exception. “At face value, it was the best performing half-year in terms of capital raised by funds closed during the period (by a roomy 38 percent). Yet, key to this performance was the $15.8 billion close of Global Infrastructure Partners III—the largest private infrastructure fund ever raised—which we reported in January. Take it out of the total and H1 2017 was the worst half-year since a dismal H1 2012.” [Sub required]

12) National: The U.S. has the largest infrastructure gap in the world, according to a new 220-page report by the G20-backed Global Infrastructure Hub, and will likely fall trillions of dollars short of keeping up with its needs. “We estimate that under current trends the U.S. is likely to invest $8.5 trillion in infrastructure between 2016 and 2040 to accommodate expected economic and demographic growth. However, we estimate that infrastructure needs in the U.S. are around 45 percent higher at $12.4 trillion. The latter figure is equivalent to an average of $494 billion per year.” Trump’s long-delayed plan proposes $100 billion per year, as does the Democratic leadership’s plan. The Congressional Progressive Caucus has called for $200 billion a year.

13) California/Think Tanks: The R Street Institute has taken aim at legislative efforts to introduce some standards into the outsourcing of personal services by California counties. The services regulated would include “financial, economic, accounting, engineering, legal, and other specified services.” [AB 1250]. R Street staff, who worked at the right wing Heartland Institute’s Center on Finance, Insurance and Real Estate, reportedly split off from Heartland in 2012 because insurance company donors objected to Heartland’s climate denialism [SNL Insurance Mergers and Acquisitions, May 22, 2012]. Steven Greenhut, R Street Institute’s western region director, has just published an article through the California Policy Center and Reason Foundation attacking the legislation.

14) California: Escondido Indivisible posts some impressive materials and video covering their fight against privatization of their library. The privatization has a “milestone date” of January 2018. See their presentation on saving the Escondido public library. They say Library Systems and Services “made claims that savings come from bulk buying of materials, eliminating low-circulating materials, reducing overhead costs, and increasing efficiency (Library Board of Trustees meeting, 7/11/17); [but] Actual savings come from employee pay that is much lower than the industry average, poor employee benefits, and insufficient expenditures to meet community needs (Martin, R.S., ALA Report on Outsourcing, 2000); Savings are not returned to the local community—this is a for-profit company.” [Slide 12]

15) Colorado: Grassroots leaders, elected officials and public interest groups push back against efforts to marginalize the role of democratically-elected public structures in deciding how public works should be solicited, approved, supervised and paid for. Denver Mayor Michael Hancock, who joined Transportation Secretary Elaine Chao in May for an event at the U.S. Chamber of Commerce kicking off the Trump administration’s National Infrastructure Week, supports the creation of a special office for ‘public private partnerships.’

But Denver City Councilwoman Debbie Ortega says “she’s very concerned about the possibility of not seeing final contracts. ‘They want us to approve this P3 office, but is it going to be more of what we’ve seen with this (Denver International Airport) [P3] deal?’” where, she said, “transparency has been visibly absent.”

Shar Habibi, In the Public Interest’s research and policy director, “said she considers oversight by elected officials important, even though it’s understandable that companies want to limit what they call ‘political risk.’ ‘There is already a lot of power that is proposed to be vested in this office,’ she said. ‘These are really long-term contracts that have a lot of implications for the community, and we have to make sure these deals are not hurting the public. Having that additional layer of oversight is a necessary thing.’”

16) Florida/National: Opponents of the proposed private All Aboard Florida passenger railroad warn transportation secretary Elaine Chao that the project could default on a federal loan currently under discussion with the AAF’s parent company, Florida East Coast Industries. “The 6-page letter raises questions about AAF’s ridership studies and its consultants. The letter also cites an economic analysis commissioned by CARE that concluded AAF would generate annual losses of more than $100 million and would be unable to service its debt burden.” The company accused critics of “misrepresentations, mischaracterizations and fear mongering.” [Sub required]

17) Florida: The state auditor has raised questions about four charter schools. “In its audit, Whispering Winds Charter School did not properly withhold retirement contributions from employees’ wages, paid unnecessary taxes on a copier lease and on its phone services and did not post its current budget on its website. Micanopy Area Cooperative School paid a vendor twice for one invoice, losing $42,000, its audit shows. Auditors questioned whether the school’s controls over disbursements were sufficient or risky.”

18) Kansas: The Shawnee County Commission will meet today to consider authorizing the issuance of bonds to pay for improvements at St. Francis Health in Topeka, which is being converted into a for-profit entity by a joint venture between the non-profit University of Kansas Health System and Ardent Health, a for-profit entity. The commission will also “consider authorizing corrections director Brian Cole to negotiate a contract with Corizon Health to provide medical and mental health services for the county’s adult and juvenile detention centers.”

19) Michigan: Teachers at a recently closed Detroit charter school get the bad news: bond holders will get paid, not them. “‘Last Friday, Matchbook Learning became aware that the holders of MTA’s outstanding bond debt are refusing to allow use of funds for any summer payroll and instead, are requiring that any available funds be used toward payment of the bond debt,’ Matchbook’s CEO Sajan George told teachers in the email. ‘We are disappointed and deeply saddened by this development because this means funds will not be there for July or August payroll.’” But Maeve Rochon, a kindergarten teacher who said she’s owed around $5,000, said “that’s money that we’ve all worked for. That’s for time we spent in those kids’ lives, doing our jobs. We all stuck it out to the end and now you’re telling us the money we worked for, we’re not going to get?”

20) New Mexico/National: CoreCivic, the private, for profit prison company threatens to close Torrance County Detention Facility unless state or federal officials fill up 300 more beds. Torrance County Manager Belinda Garland “said she was told the prison needs about 700 beds filled to stay open. The company told the county it has been holding fewer federal detainees for Immigration and Customs Enforcement.”

21) New York: Gov. Andrew Cuomo (D) floats the idea of allowing corporate sponsorship of subway stations, and announced a list of the first sponsors:

  • BlackRock, Inc.

  • Blackstone

  • The Estée Lauder Companies

  • MasterCard

  • Hearst

  • Partnership for New York City

  • Rudin Management Company, Inc.

“It is ‘very possible’ that companies could earn naming rights for stations, MTA Chairman Joe Lhota told reporters after the speech, though details are still being hammered out,” The Gothamist reported. “If you rely on private companies to make these improvements, you then run the risk of having improvements only made in specific areas,” predicted Andrew Albert, a nonvoting member of the MTA Board. “You are only as good as your weakest link, so you really want system-wide improvements. I could name far-flung stations throughout the system that would be a hard sell.”

Last week the Manhattan Institute published an issue brief by Nicole Gelinas on the financial crisis facing the MTA, which stressed challenges over escalating costs of debt, pensions, health care and other post-employment benefits. TWU Local 100 has called on Mayor de Blasio to kick in more funding. “He can’t just throw his hands in the air and walk away,” said Tony Utano, vice president of the union’s maintenance of way division. [Sub required]

22) New York: Residents protest plans to privatize Westchester County Airport at a heavily attended meeting. The only previous input by the public into the master plan came in 2013 at the start of the process. “With signs proclaiming ‘No Airport Expansion’ and ‘Airport Master Plan = Disaster Plan’ they criticized the document as a ‘deeply flawed’ effort that ignored legislated protections and failed to adequately address potential environmental impacts. (…) ‘You should be ashamed of your document and we will not stop fighting until your plan goes into the garbage where it belongs,’ said Jonathan Wang, a Purchase resident who lives near the airport and keeps his plane there. Wang was one of several speakers in the Little Theater at the Westchester County Center who ridiculed the document prepared by DY Consultants.”

23) International: A battle over water privatization has returned Greece to the front lines of confrontation with the European Union’s austerity regime. But while Greece has been forced to privatize its water sources, “other countries like Germany were undergoing the opposite: a phase of de-privatization. In Berlin, after 12 years of poor management and exorbitant price hikes, the local government several years ago reclaimed its water resources. This turn of events caused a series of similar de-privatization initiatives across the country, revealing that the projected economic outcomes via privatization weren’t viable in the long term. In fact, the re-established state-run services were proven to be far more efficient, better organized and capable of providing higher-quality services than their privatized counterparts.”

24) Revolving Door News: David Horner, an important legal figure in the privatization industry, has revolved again, this time onto the DC transit board. Horner, a former US DOT deputy assistant secretary for policy and chief counsel of the Federal Transit Administration, went to the law firm Hunton & Williams last year as a partner in the firm’s infrastructure ‘public private partnerships’ practice. Now he has been  appointed to Washington Metropolitan Area Transit Authority (WMATA) by Transportation Secretary Elaine Chao. “An article co-authored by Horner recently urged the administration to focus on drawing private capital into the infrastructure sector either through an asset recycling initiative, by making private activity bonds available for all classes of infrastructure, or by expanding federal credit programs like TIFIA.” [Sub required]. Horner says “we need to shake things up.” Chao also appointed Steve McMillin of USA Policy Metrics to WMATA. USA Policy Metrics is a  boutique advisory firm for hedge funds and asset management firms. McMillan is a former senior advisor to House Speaker Paul Ryan.

25) Revolving Door News: Hot Air reports on the dubious objectivity of a pro-ATC-privatization memo produced by Chris Brown from within FAA itself. “Now let’s take a quick glance at Chris Brown’s resume, as listed on his Linkedin profile. He’s been employed with either the FAA or the House Transportation Committee since December of 2014. But prior to that his job title from March of 2011 through December 2014 was Vice President, Legislative and Regulatory Policy working for… can you guess? If you said Airlines for America you win a cookie. And for the two years prior to that stint he was Senior Advisor for Government Affairs working for… United Airlines. So we have a former lobbyist for not only one of the country’s biggest airlines but the biggest lobbying group for the industry and their unions pushing this ATC ‘privatization’ scheme from inside the FAA. Add to that the previously disclosed fact that the long time girlfriend of the bill’s sponsor, Bill Shuster, is Shelley Rubino, who also happens to be a lobbyist for (yep) Airlines for America and you’ve got a situation which, well… come on, man.”

Legislative Issues

1) National/Think Tanks: The Congressional Budget Office, which is in hot water with the far right because of its objective scoring of health care legislation, among other things, is in the crosshairs of the House Freedom Caucus, which is proposing that CBO should be downsized and its work outsourced to (presumably conservative, Koch-funded) think tanks. But even “scholars at the conservative think tank R Street Institute are advising against Rep. Meadows’ idea, arguing, among others things, that think tanks ‘may not even have the manpower or desire to generate scores for the hundreds of pieces of legislation that are produced each year.’”

2) National: The Senate appropriations committee has approved a budget for the U.S. Marshals Service and Bureau of Prisons as part of the DOJ budget. “Federal law enforcement agencies within the DOJ including the Federal Bureau of Investigation, U.S. Marshals Service, Drug Enforcement Administration, Bureau of Alcohol, Tobacco, Firearms, and Explosives and Bureau of Prisons are funded at a total of $20.9 billion, $221 million more than fiscal year 2017 and $73 million more than the President’s request.”

3) National: After veterans protest, Congressional Republicans and Democrats reach agreement on a $3.9 billion emergency spending package to fill a shortfall in the VA program of private-sector care. “The deal includes additional money for core VA health programs, as well. Veterans’ groups insisted this money be included. (…)  Major veterans’ groups had opposed the original House plan as an unacceptable step toward privatization, leading Democrats to block that bill on Monday. That plan would have trimmed VA benefits to pay for Choice without additional investments in VA infrastructure.”

4) National: The Securities Industry and Financial Markets Association (SIFMA) and Bond Dealers of America are lobbying lawmakers to maintain the tax exemption of municipal securities, reinstate Build America Bonds-type programs, and expand the use of private activity bonds. Also, “a coalition of 26 national organizations led by the National Governors Association and the U.S. Conference of Mayors submitted a joint letter advocating retaining both tax-exemption and the SALT deduction. (…) ‘Tax-exempt municipal bonds have financed more than $2 trillion in new infrastructure investments over the past 10 years and are on a path to finance another $2 trillion in the next ten years,’ the groups wrote. ‘They are the best way to implement the infrastructure needs of each community effectively.’” [Sub required]

5) Wisconsin: A bill has been introduced in the Assembly to eliminate the state prevailing wage law and the highway prevailing wage law, to promote “alternative delivery methods” for road constriction, and open an audit of the state Department of Transportation. It has been referred to the Transportation Committee. [AB 456]

 

Want this weekly privatization report in your inbox every Monday? Sign up here.