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Weekly Privatization Report 8-7-2017

1) National: Last week the Federal Transit Administration posted a Notice of Proposed Rulemaking and request for comments on proposed rule changes to promote “new, experimental procedures to encourage increased project management flexibility, more innovation in project funding, improved efficiency, timely project implementation, and new project revenue streams. A primary goal is to address impediments to the greater use of public-private partnerships (P3s) and private investment in public transportation capital projects (Private Investment Project Procedures or PIPP). FTA anticipates using the lessons learned from these experimental procedures to develop more effective approaches to including private participation and investment in project planning, project development, finance, design, construction, maintenance, and operations.”

The notice states that “SEP-15 permits FHWA to experiment in four major areas of project delivery—contracting, right-of-way acquisition, project finance, and compliance with the National Environmental Policy Act (NEPA).”

The rule proposals and instructions for commenting are here
. The deadline for comments is September 29, 2017. As they roll in, the comments will provide an interesting running account of the issues and key players. The fact that this proposed rulemaking was only issued last week may indicate that the rollout of the Trump administration’s infrastructure privatization scheme may be further in the future than they’re letting on, but will radically change existing public infrastructure rules if it is allowed to take effect.

2) National/MinnesotaCityPages’ Mike Mullen reports that Appleton, MN, has moved on from appealing to the state to reopen its moribund private prison and is now beseeching the federal Bureau of Prisons to award a contract to CoreCivic to help “meet the needs for housing criminal aliens.” Mullen writes, “so maybe this is Trump’s America. If the local economy’s bad, you give people jobs by hiring them to run a prison. Hell, even if it isn’t bad. Let’s just lock some people up. Who will think of the shareholders?”

3) National: White House economic adviser Gary Cohn, the former president and CEO of Goldman Sachs, tells Bloomberg Surveillance that more deregulation is on the way to boost growth [at 41:00]. Prominent economist Nouriel Roubini begs to differ. “Trump’s deregulation agenda will not boost economic growth,” he writes, “and may actually weaken it over time. If financial regulations are loosened too much, the result could be another asset and credit bubble, and even another financial crisis and recession.”

4) National: When “market incentives” are insufficient to fill a vital public interest, should the government step in, and how? PBS looks at the crisis economics of antibiotic resistance. See also Dean Baker’s case for publicly financed pharmaceutical research.

5) National: President Trump’s appointment of a retired army general, Mark S. Inch, to lead the federal Bureau of Prisons—which contracts with private, for-profit prison companies CoreCivic and Geo Group—raises concerns among prison reform advocates that prisons may be further militarized. “During the years when Inch was in Afghanistan, a UN report revealed widespread abuses. Although control of the Parwan facility had officially been turned over to the Afghan government in March 2013, the U.S. still maintained a hand in the operations. Among the almost 800 detainees interviewed by UN investigators, one-third said they had experienced mistreatment, including being beaten with pipes, electrocuted, and having their fingernails ripped out to obtain confessions. While prisons used by US-led forces in Afghanistan and Iraq have larger prison populations than Guantánamo Bay, the abuses that have taken place in them are far less publicized.”

6) NationalGovernment employment figures, despite a bump last month, have remained flat for the year, according to Friday’s jobs report. “Local government employment has increased only 0.4 percent since January. That’s roughly half the growth over the same period last year and about the same as 2015. Meanwhile, state government employment continues to remain flat, as it has been for the better part of the recovery from the Great Recession.”

7) National: Maximus, the major government services outsourcing company, held its investor call on Thursday, and its president gave a thumbs-up to Trump’s Office of Innovation, which is run by his son in law Jared Kushner. “I don’t want to comment on specific conversations, but we are well aware of the work of the Office of Innovation, and actually the way that they’re collecting information from the specific departments and agencies as it relates to the executive order to look at the functioning of those agencies and whether there are opportunities to consolidate or outsource and privatize certain functions. So that’s an element of how we are tracking, obviously, the new opportunities in the administration.”

8) NationalThe East Hampton Star reports that protestors denounced Trump’s infrastructure privatization plan by showing up at the home of Blackstone private equity magnate Stephen Schwartzman, who chairs the Strategic and Policy Forum, a group of advisers to the president. “In a speech, Pete Sikora of New York Communities for Change denounced the Saudi government’s $20 billion investment in Blackstone, announced when the president was in Saudi Arabia. ‘Trump’s infrastructure plan is a giant giveaway to Blackstone and Wall Street and Stephen Schwarzman, in order to give away public assets and jack up profits on our backs,’ Mr. Sikora said.” A group of nearby landscape workers also chanted “Schwarzman, escucha, estamos en la lucha.”

9) National: Blackstone announced on Friday that it is hiring a 25-year veteran of General Electric, Steve Bolze, to a senior management position in its new infrastructure business—which is being fueled by that promised $20 billion Saudi investment. “He has spent 11 years as the chief executive of GE Power, a $28 billion business and GE’s largest division. During his tenure, Bolze oversaw some of the company’s largest deals, including the $14 billion acquisition of Alstom SA’s power business in 2015. He will report to Sean Klimczak, who has worked on Blackstone’s energy investments since 2005 and was recently chosen to lead the infrastructure business. Klimczak referred to Bolze in a statement as a ‘world-class operator in the infrastructure sector.’ The two make up what is known so far of Blackstone’s senior leadership for its targeted $40 billion infrastructure fund. Blackstone co-founder Stephen Schwarzman said the firm will make a few key hires, with internal staff making up the rest of the team.” [Sub required].

The fact that Blackstone is hiring someone with experience in the energy infrastructure sector may indicate that pipelines and grids may be the main target of its infrastructure plans, rather than the (less profitable?) road, water, transit, and rail infrastructure that ACSE says is so desperately in need of investment, though only time will tell.

10) National: The Carlyle Group’s president and CEO Glenn Youngkin discusses “How Private Capital Can Help America’s Crumbling Infrastructure.” Airports around the U.S. are a “big prospect” [Audio, 26 minutes]. Four teams have expressed an interest in bidding for a contract to build and finance a $1 billion terminal at Kansas City International Airport. They have until this Thursday to submit plans for how they would finance the ‘public private partnership’ project [Sub required]. In the Public Interest’s Donald Cohen has explained how billionaire Rex Sinquefield’s plan to privatize St. Louis Lambert International Airport is “a lesson in Trumponomics.” And, he says “it has a lot to do with cutting taxes for the rich.”

11) National: Mergers and acquisitions seem to be picking up in the “community corrections” industry. “GTL, an innovation leader in correctional technology, education solutions that assist in rehabilitating inmates, and payment services solutions for government, today announced the acquisition of Telmate, a leading provider of secure corrections and community corrections solutions including inmate telephone service, tablets, visitation, messaging, education and entertainment content, corrections applications, investigative tools, and GPS monitoring.”

12) NationalIs privatization out of control? Donald Cohen of In the Public Interest discusses the cases of charter schools, public infrastructure, and for-profit prisons with Jordan Cooper of Public Interest podcasts.

13) National: As the debate over inadequate privatized prison health care continues, the New York Times reports that “Opioid Users Are Filling Jails. Why Don’t Jails Treat Them?”

14) NationalFitch Ratings sees more ‘public private partnerships’ in student housing. “Facing budget shortfalls, PPPs allow schools to shift development risks to a third party and avoid taking on debt. The private sector also offers construction and long-term management expertise. ‘The reason this is appealing to the universities is it gives them the opportunity to bring in the private sector, to take risk that is ordinarily or traditionally born by the university and the university balance sheet,’ Scott Zuchorski, the report’s author, said.” [Sub required]

15) National: Fitch has also updated its rating criteria for availability payment (publically subsidized) infrastructure projects. Its broad criteria (stronger, midrange, weaker) rest on rating drivers including completion risk, revenue risk, cost risk, debt structure, and financial profile. One takeaway is that public sector rigor in contract drafting is essential: “Availability payments are largely insulated from volume and price risks, and the focus of our analysis is on the contract terms setting out the revenue framework and risks related to completion, performance, operation and maintenance.” [Fitch Ratings, “Availability-Based Projects Rating Criteria Sector-Specific Criteria,” July 20, 2017; sub required]

16) Colorado: The Douglas County school board races could be among the hottest in the country as big right wing money pours in to back pro-voucher candidates. “If conservatives hold their slim majority, the legal battle likely would continue. And if opponents to the voucher program take just one of the four seats, the board would likely drop the voucher program altogether, rendering the legal case moot. For that reason, former Lt. Gov. Gail Schoettler, who lives in Douglas County, called this year’s election ‘the most important school board election in the country.’”

Peter Montgomery, a senior fellow at People For the American Way, reported last week that “on vouchers, the evidence is in, and it’s not good.”

17) Illinois: The chronically troubled Illinois Lottery is looking for a new for-profit management company to run it. “The state endeavors to select a new private manager that shares the Lottery’s goals of increasing profits to the state, responsibly broadening its player base, introducing new technology and innovation, ensuring responsiveness to public needs and concerns, and eliminating conflicts of interest.” The state is looking at Camelot, which operates the poorly performing Arkansas lottery, to take it over from Northstar Lottery Group.

18) Massachusetts: Yesterday “nearly 40 Massachusetts Bay Transportation Authority mechanics and members of Invest Now Massachusetts protested officials’ proposals to privatize several of their nine bus garages.”

19) MassachusettsConcern is growing as “developers are pouring into the Boston Harbor waterfront.” Bradley Campbell and Deanna Moran of the Conservation Law Foundation write, “Much of this land belongs to the public, on ‘loan’ or licensed to private developers so long as they are serving public purposes. And this land is only valuable because Massachusetts residents paid billions to clean the water, and pay hundreds of millions annually to keep it clean.” But there is “a high-profile role model to look to. General Electric’s plans for a 12-story South Boston Seaport world headquarters may be the template for balancing public and private interests on the waterfront.”

20) New York/NationalProtestors confront JP Morgan Chase over its investment and funding of private prisons and for-profit immigrant detention centers. “‘JPMorgan’s commitment under these agreements is in the hundreds of millions of dollars,’ Make the Road New York and the Center for Popular Democracy alleges on their website. Perla Lopez, 18, who immigrated from Mexico, said she was held in an immigration detention center in New Mexico after being detained by Border Patrol. ‘People shouldn’t make money off the pain of our families,’ she said at the rally.”

21) North CarolinaEthical concerns are plaguing the state’s charter school system. “The proposal to save Aristotle that came before the Board of Education this week was so tangled that the board delayed voting until it can get an opinion from North Carolina’s Ethics Commission. It centers around Tony Helton, who is a Charter School Advisory Board member and CEO of Team CFA, a foundation that has provided advice and financial support to Aristotle from the beginning. He’s also CEO of the newly formed Achievement for All Children, which is seeking a contract to run Aristotle in exchange for 5 percent to 10 percent of its revenue. That group has no track record to examine, nor was any other company invited to bid for the job.”

22) Ohio: The forced outsourcing of job services for people who care for the developmentally disabled leaves Warren County officials hoping the private sector will fill the gap. “More than 30 companies will be participating in hopes of finding candidates to fill many jobs that are currently going unfulfilled, according to the WCBDD. Changes in the federal government are requiring that Ohio’s county boards of developmental disabilities remove themselves as providers to those with developmental disabilities. ‘As we move from providing services, we look to community partners who can step in and provide these needed services,’ said Rob Goddard, Provider Development Coordinator with the WCBDD, in a statement. ‘The provider agencies are in critical need right now of employees to provide these services, so we are hosting this hiring event,’ he said.” 

23) South CarolinaCharter school authorizer standards are raising concerns among scholars and charter school advocates. “Weaknesses in South Carolina’s public charter school authorization law could make the state a breeding ground for failing schools, according to charter scholars and advocates. Almost any college or university in South Carolina has the authority to approve public funds for charter schools, serving as a conduit for money from the state—and taking a 2 percent cut off the top of the payouts. (…) Among the first two schools to express an interest in the Charter Institute at Erskine are S.C. Virtual Charter School and Cyber Academy of South Carolina, a pair of online schools that received a warning this spring that their current sponsor might revoke their charters due to years of poor performance that lagged far behind state averages. (…) Both schools have contracts with K12 Inc., a nationwide for-profit education management company.”

24) TexasCounties are seeking to escape from bad prison bond deals by cashing in from Trump’s immigration crackdown. “There has been much publicity about sanctuary cities in recent months. These are locations that won’t cooperate with federal agents who want them to detail people thought to be illegal immigrants. However, some Texas counties want to cash in on immigrant jails to help their coffers. A report on CBS stated several counties in Texas are struggling with debt because their jails have few or no prisoners. They hope to fill up those empty cells with immigrants who entered the country illegally.”

25) International: 25,000 Australians petition the New South Wales parliament to stop privatization of their bus service in the Inner West region of Sydney. “This demonstrates the depth of support and love that our local bus drivers have,” said one supporter. [Video]

26) International: In Australia, people are resisting a radical move to privatize government group homes for people with disabilities in New South Wales ahead of the introduction of the National Disability Insurance Scheme. The Public Service Association of New South Wales has produced a podcast segment on the issue.

27) Think Tanks: A refresher: here is a guide to the corporations, right-wing funders, advocacy groups, and think tanks backing the education reform movement, courtesy of Media Matters.

28) Upcoming Meeting: An industry meeting on ‘public private partnerships,’ P3 Connect, will be held in Miami Beach from October 12-13. Speakers will include Dale Bonner of Plenary, Jonathan Truitt of the West Coast Infrastructure Exchange, John Tull of Amtrak, Brent Diemer of CH2M, Wayne Griffith of Veolia, and Christopher Lloyd of McGuireWoods Consulting. It is sponsored by NCPPP.

Legislative Issues

1) NationalAs the Trump/Sessions immigration crackdown deepens, criticism of the “mindless” policy of lockup quotas continues. But Reps Bill Foster (D-IL) “says the fight to end the bed quota has morphed largely into a political one. ‘On the one hand, they’re voting for something that, objectively looking at it, wastes government money, which is not something that they’re big fans of,’ he says. ‘On the other hand, if they vote to get rid of the detention bed mandate, it opens you up to the attack of being soft on immigration, which, unfortunately, has a lot more teeth in a Republican primary than it does in the rest of the general electorate.’” See also In the Public Interest’s report on lockup quotas.

2) National: Three lawmakers have asked the USDOT inspector general to investigate whether Trump political appointees violated federal lobbying laws by advocating for the privatization of the U.S. air traffic control network. “It has come to our attention that at least four DOT political appointees have contacted members of Congress, nonfederal stakeholders such as aviation association representatives and airport sponsors or both to gain support for H.R.2997, the 21st Century AIRR Act, which includes a controversial plan to privatize our nation’s ATC system.”

3) Kansas: An uproar has been created by an email a Department of Corrections communication staffer sent to the media opposing a pay raise for corrections officers in the state system. There is a 30 percent employee turnover rate in the state prison system and mandatory 16-hour shifts at El Dorado. Kansas Organization of State Employees executive director Robert Choromanski said “he thought the administration wasn’t working to resolve the situation at El Dorado to drive the state to privatize the prison system. ‘The state is trying to set up for failure, so we have to contract it out to a private contractor,’ he said. House Minority Leader Jim Ward, a Wichita Democrat, said the gap between comments Caprio thought should be shared internally and externally demonstrated the preference among some members of the Brownback administration to thwart solutions to the state’s prison problems in an effort to bolster Colyer’s likely candidacy for governor.” KDOC declared the shortage an emergency last Tuesday after a union representing corrections officers filed a grievance over forced overtime shifts.

4) Utah: Lawmakers have passed a bill they hope positions them to receive millions of acres of federal public land. “The provision aims to deflect ‘erroneous’ criticism that Utah officials intend to privatize public lands if they gain control of them. Sales of land over 100 acres, [Rep. Mike Noel, R-Kanab] said, would require approval from two-thirds of state lawmakers, following extensive hearings. Any money raised would be placed in an account devoted to buying other public lands ‘valuable for hunting, for range and for other recreational opportunities,’ he said. Land-transfer critics, however, believe Utah would have little choice but to limit public access and to sell unprofitable lands to finance the massive cost of administering all the deserts, forests, archaeological sites, mountains, canyons, mesas, river corridors, rangelands and other areas within the 31-million-acre inventory the state seeks” [HB 407].

Environmentally destructive land use in the West has led to poverty and private misappropriation for generations. “The libertarian economist John Baden used to quip that ‘even God wouldn’t try to grow trees in Utah.’ The same maxim can be applied to the rest of the Southwest. You can cut down the primary forest, but you’ll have a helluva time getting it to ever come back.”

 

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