September 28, 2008, Manuabo, Puerto Rico--Destroyed vehicle and road damage on Route 759 following recent flooding. Andrea Booher/FEMA
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Weekly Privatization Report 9-25-2017

1) National/Puerto Rico: This summer, a private money manager told Rutgers professor Yarima Bonilla that she had set up her wealthy investors to protect them from Puerto Rico’s public sector financial crisis, adding, “the only thing we need now is a hurricane.” Bonilla says, “In anticipation of Hurricane Maria, Trump tweeted that help would be available to Puerto Rico. Meanwhile, the fiscal oversight board issued a statement that it would accelerate reconstruction projects as needed. Emergency funds will soon flow to the island, as the financial manager I interviewed predicted. But if history is any indication, they will do little to alleviate long-standing disparities or to remedy the conditions that put Puerto Rico at greatest risk. More likely, the expedited management of emergency money will only serve to fuel the drive for increased privatization and the gutting of public services.” Hurricanes have unleashed the forces of privatization.

One interesting twist in light of Puerto Rico’s massive debt-fueled financial crisis is that the Council of Development Finance Agencies (sponsors) is pushing a $20 billion “disaster bonds” program to “be made available for annual issuance for future disaster relief. The bonds should not be subject to state volume caps, it said.” After Hurricane Katrina, Congress authorized $14 billion in “private activity bonds.” [H.R. 3679]

2) National: Veolia is having serious problems moving into the Trump-fueled water and wastewater privatization businessbecause of its role in the ongoing Flint, Michigan, water poisoning disaster, reports Agence France Presse. The company is also mired in a similar controversy in Pittsburgh. “The French water and waste management giant has targeted five percent revenue growth in North America in 2017, with the United States expected to lead the way. In 2016, North American revenues rose just 0.6 percent. (…)Veolia issued a study of the city’s water quality before the scandal erupted but did not flag any issues with lead, an issue it says it was told to exclude from the report since city and federal authorities already were looking into it. The contamination harmed thousands of children and was seen as the cause of 12 fatalities due to Legionnaires disease. Families is the battered city were forced to use bottled water for many weeks. Veolia continues to face numerous investigations and class-action lawsuits connected to the crisis. “Water privatization leads to the jeopardizing of public health and safety,” said Lauren DeRusha Florez of the non-profit Corporate Accountability International, which plans to gather with other advocacy groups in Flint later this month. Veolia continues to face numerous investigations and class-action lawsuits connected to the crisis, but has fought charges that it was responsible.”

3) National/Texas: Public school buses and their drivers and public administrators pitched in to help communities during the recent hurricane emergencies. “Amid the devastation and heartache of Hurricane Harvey, one of the signs of hope and heroism was the yellow school bus. In the Houston area and elsewhere, as schools were shut down in late August and early September, school buses and drivers served in storm relief efforts. In some cases, they plowed through floodwaters to rescue residents, and they transported food and supplies to storm shelters. One of the southeastern Texas school bus operations that pitched in to help was New Caney Independent School District (ISD). The district’s buses and staff evacuated more than 1,000 adults and children, along with their pets.” Would private school bus companies do the same? Without a “compensation event”?

4) National: Watch the Network for Public Education’s intrepid executive director Carol Burris and board member Julian Vasquez Heilig take on the school privatizers at the Berks County Community Foundation’s “Consider It” discussion series. [Video]

5) National: Are corporate patent and copyright monopolies a form of government-licensed private taxation? Dean Baker of CEPR thinks so: “Government-granted patent and copyright monopolies are actually much more important in determining future flows of income than debt. In the case of prescription drugs alone, patent and related protections raise the price of drugs by close to $370 billion a year over the free market price, a bit less than 2.0 percent of GDP. This is considerably larger than the current interest burden of the debt, which is approximately 1.6 percent of GDP, net of money refunded from the Federal Reserve Board to the Treasury. These monopolies are effectively like privately collected taxes.”

6) National: U.S. Department of Education signs off on Purdue University’s purchase of Kaplan University, a for-profit, online school. Purdue is headed by privatization enthusiast Mitch Daniels. Kevin Kinser, head of Penn State’s education policy studies department and expert on for-profit education, says “The plan has been controversial, especially with Purdue faculty who felt left out of the decision. Faculty were informed of the plan just an hour before it was made public and cried foul at the university’s dismissal of a previously established relationship of shared governance. In May, the university senate passed a resolution opposing the plan. Months later, many still remain skeptical. Alberto J. Rodriguez, chair of the university senate, outlined continued concerns at the August meeting of Purdue’s trustees.”

7) NationalThe Washington Post’s Valerie Strauss points out that Secretary of Education Betsy DeVos once said that government “sucks,” but “now she’s wielding its power to push her agenda.” Strauss offers many examples, including one from Illinois: “That agenda scored a victory recently in Illinois, where this past May several dozen legislators signed a letter to Gov. Bruce Rauner (R), who had thrown his support to DeVos’s nomination as education secretary in January. It was no surprise when Rauner managed to push through a new school funding law recently in the state legislature that included a new program that uses public dollars to fund private and religious school tuition and educational expenses.”

8) National: As the Trump administration moves toward releasing the details of its $1 trillion infrastructure plan, which relies heavily on incentivized private and local financing to achieve its goals, Dallas is providing an instructive example of the kind of risky behavior infrastructure financing gimmicks can promote: a shift from traditional muni bonds, which are paid regularly by taxpayers, to “capital appreciation bonds,” which kick payments way down the road to a point where they may be unpayable.

“Upon hearing the term ‘capital appreciation bonds,’ Tracy Gordon, a senior fellow with the Urban-Brookings Tax Policy Center, responded with an ‘Oh no.’ ‘It’s a way of backloading the costs on other generations,’ Gordon said. As a cautionary tale, she pointed to the Poway Unified School District in San Diego, which borrowed $105 million in 2011. Because the district did so through capital appreciation bonds, or so-called CABs, taxpayers will end up owing nearly $1 billion in the long term, according to news reports.”

9) National: The Municipal Securities Rulemaking Board (MSRB) has published a new primer and resource for policymakers on the role of municipal securities in infrastructure finance. It’s got a useful glossary (including an explanation of what a Private Activity Bond is) and lots of good baseline information.

10) National/International: A new book examining charter school operations reportedly affiliated to Turkish religious leader Fethullah Gülen has been released. Empire of Deceit alleges “misconduct and misuse of taxpayer funds and visa program at Gülen-affiliated charter schools.” The Hill has reported on the “high-stakes lobbying and public relations battle is being waged between the government of Turkey and a single man, Fethullah Gulen.”

11) California: A former inmate at Santa Barbara County’s main jail is suing Corizon for medical malpractice. “It wasn’t until three days later that Estrada was taken to Santa Barbara Cottage Hospital. Upon arrival ‘he was unable to walk to the door or even lift his head off the bunk. His temperature was 102.4 degrees,’ the suit said.”

12) California: Community members continue to protest the privatization of Escondido library even after the private equity-owned LS&S takes it over. “Diana Fink, a Fallbrook resident and an English professor, came to support the cause to save the library. Fink started the rally with a speech and the crowd began to boo when she brought up the Escondido City Council. ‘Do you know what hubris is? The arrogance of power. Does that fit?’ Fink said. ‘Have they been in office too long? OK, what are you going to do about it? Vote them out! OK, who is going to step up and run against them?’”

13) Delaware: “Have readers wondered how much of Governor Carney’s new public private partnership for economic development will be public and how much will be private?” asks R.E. Vanella in a letter to delawareonline. “Carney recently named 13 appointees to the new nonprofit Delaware Prosperity Partnership, which will replace a Cabinet-level agency staffed by state employees. Will the new organization be required to hold public meetings? No. Will the group have a mandate to make meeting minutes public? No. Will the documents disclosing financial conflicts of interest of committee members be made available for public scrutiny? No. Orwell described political language as, ‘designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind.’”

14) District of Columbia/Metro area: Tensions are rising between WMATA and the transit workers union ATU. Last week a construction delay was created when a contractor’s equipment failed, inconveniencing morning commuters. “Metro could have avoided this morning’s delay if they had properly planned for the project and had Metro workers, who understand the work and system, complete it the first time,” the union wrote in a press release. “Here are many instances where contractors do shoddy work and Metro workers have to come back to correct their mistakes; today was one of those instances.” As Isaiah Poole of the Campaign for America’s Future has pointed out, similar privatization-related problems have plagued the bus system.

15) Kansas: Robert Choromanski, executive director of the Kansas Organization of State Employees, says Gov. Brownback’s (R) decision to move staff out of a state office building to a strip mall under his privatization plan has endangered their security. “I think this is ridiculous that we’re allowing guns on college campuses but we’re requiring them and other city buildings to have metal detectors, but then we privatize and we’re allowing just an open house (at the Department of Revenue office),” said Sen. Oletha Faust-Goudeau, a Wichita Democrat. “It’s a madhouse.”

16) Maryland: Gov. Larry Hogan (R) proposes a massive new managed lanes ‘public private partnership’ project for the Capital Beltway and I-270. “The proposal immediately drew criticism from some Democrats and from environmentalists and smart-growth advocates, who would prefer to invest more in public transit. They said bigger roads would ultimately lead to suburban sprawl and an increased number of drivers, in turn worsening congestion.” Stewart Schwartz, executive director of the Coalition for Smarter Growth, said “it’s not a lasting solution to transportation problems. Prospective gubernatorial challengers also weighed in. Sen. Richard S. Madaleno Jr. (D-Montgomery) said “this will cost drivers of our state enormous amounts of money. I don’t know how you fit four more lanes from Silver Spring to Bethesda without an enormous dislocation of homes and parks.” Former NAACP president Ben Jealous said Hogan’s idea “fails to move Maryland into 21st-century transit.”

17) Michigan: The state is switching to a ‘public private partnership’ model for its est. $1 billion Oakland County I-75 improvement project. “The funding approach leverages upfront private invest­­­ment to complete the project that would be paid back by the state over 25 years with money from gas taxes and other sources. The state still maintains control and ownership of the freeway and MDOT said that there won’t be any tolling installed to pay back the financing. MDOT said that the P3 financing was selected because of its ability to accomplish all the necessary w­­ork while also transferring more risk to the private sector for long-term maintenance once the project is completed.” [Sub required]

18) Michigan: Former governor John Engler (R) suggests Detroit’s schools should be turned over to the mayor to control. “Engler suggested Duggan could manage the costs of maintaining the school district’s sprawling properties by having the city parks department oversee them. With Duggan’s track record of efficient management, the 68-year-old former governor said the Detroit district would have a better chance of getting Detroit students to flee charter schools and come back from districts like Southfield.”

19) Missouri: Voters will decide on November 7 whether to proceed with a $1 billion Kansas City airport renovation ‘public private partnership’ (DBF). “The campaign to win voter support now begins in earnest. The ballot question asks whether the existing three terminals should be demolished and a new terminal built ‘with all costs paid solely from the revenues derived by the city from the operation of its airports and related facilities, and without the issuance of general airport revenue bonds unless such general airport revenue bonds have received prior voter approval?’ The measure approved by the city council directs the city to begin negotiating a formal contract with the Maryland-based Edgemoor team. Initial design plans are expected next month.” [Sub required]

20) Missouri: St. Louis is looking for an advisory firm to work with it on the possible privatization of St. Louis Lambert International Airport. “The city wants to explore whether a privatization could generate upfront payments and payments over time that can be used for non-airport city purposes. The airport is also looking to improve operating revenues through a private partner. Under the program, the city could lease the airport and its operations but would retain ownership rights. If the city moves forward, the FAA and a majority of airlines serving Lambert would need to approve as well as the city’s Board of Aldermen and the Board of Estimate and Apportionment.” [Sub required]

21) New Mexico: Torrance County gets a 30-day reprieve from the closure of its prison. “After giving county officials a 60-day notice of closure that many days ago, Sanchez said officials with CoreCivic have agreed to stay open for one more month. That means the city of Estancia and Torrance County have four more weeks to prepare for the looming devastation that will come with the facility’s closure.”

22) Puerto Rico: The federal oversight board has hired a law firm to investigate how the island’s debt grew so enormous and unsustainable, provoking a crisis and driving privatization and a degradation of public services. “Arguably, large banks were thinking more about the fees they could earn than the feasibility of the island’s capital structure when investors couldn’t buy enough high-yield triple tax-free securities. That said, Puerto Rico and its local financial institutions aren’t innocent bystanders.”

23) Tennessee: CoreCivic has been fined $44,000 for failing to count how many inmates it had in Trousdale Turner Correctional Center. “According to state reports, officers weren’t counting correctly; inmates weren’t in the correct cells; and, in most cases, only one worker was counting inmates without another standing watch. The reports also said it was taking too long for officers to count and inmates were allowed to move around during count time.”

24) Tennessee: An upcoming Oct. 4 University of Memphis trustees meeting will be crucial for determining whether the school opts into Gov. Haslam’s facilities outsourcing program. The Memphis City Council has asked the trustees not to do so, though it seems they plan “to opt into the state’s property management contract.”

25) Washington: Last week the state attorney general filed suit against the GEO Group, which is classified as a real estate company, for violating the right of prisoners to be paid the minimum wage in a for-profit facility. “State law exempts government facilities, including city, county, and state jails from paying the minimum wage. In a complaint filed today, the Attorney General’s office argues that because the NWDC is a private facility, it is not covered by those exemptions. Those exemptions are ‘narrow and certainly don’t apply to a for-profit corporation,’ [State Attorney General Bob Ferguson (D)] said. ‘Let’s be honest about what’s going on,’ Ferguson said. ‘GEO has a captive population of vulnerable individuals who cannot easily advocate for themselves. This corporation is exploiting those workers for their own profits.’” [Complaint] Mike Ludwig of Truthout explains that “this is not the first lawsuit against GEO Group for paying immigrant defendants slave wages to work in its jails. Earlier this year, a federal court granted class-action status to a lawsuit filed on behalf of thousands of defendants incarcerated at an immigration jail in Colorado, alleging violations of minimum wage and anti-labor trafficking laws.”

26) International: Despite UBS’s rosy claim that security outsourcer Serco’s markets are “underpenetrated,” investors have returned to “near maximum pessimism” about the company’s prospects, the Financial Times reports. “As part of the same research, UBS cut G4S from ‘buy’ to ‘neutral’ on valuation grounds.” On Friday, the head of a G4S immigration center resigned after BBC Panorama unearthed an abuse scandal.

27) Think Tanks: The Open Markets Institute’s Matt Stoller discusses why it’s so important for the public interest to break up high tech monopolies. [Audio, NPR’s On the Media; 10 mins]

Legislative Issues

1) National: As the battle over right wing efforts to repeal the Affordable Care Act reaches its conclusion, Senator Maria Cantwell (D-WA) warns of Medicaid privatization. “[Graham Cassidy] is just one more sneak attack by our colleagues at kicking people off of Medicaid,” said Cantwell in her remarks. ‘Our job here has to be about affordability, it has to be about driving down costs, it has to be about driving down costs in the individual market and in the system overall. There is nothing good about kicking 15 million people off of Medicaid and sunsetting it in this bill. My colleagues are advocating the privatization of Medicaid.’”

2) Idaho: A legislative committee is considering a major change to the state’s public school funding formula. “During a daylong meeting Friday in Boise, the committee began narrowing proposals for the 2018 legislative session. Topping the list is the shift to student-based funding, which would distribute state dollars according to which entity—a traditional school, charter school or online academy—actually serves a child. Idaho’s current funding model is based largely on staffing. Districts receive the bulk of their state appropriation according to the size and experience level of their teaching and administrative staff.”

3) Massachusetts: On October 4 a State Senate committee will be holding a hearing on MBTA privatization, where Quincy officials will speak. “State Sen. John Keenan and state Rep. Tackey Chan will speak Oct. 4 before a hearing of the Senate Committee on Post Audit and Oversight, letting their concerns about privatizing the operations of Quincy’s and similar garages. The T’s request for proposals for contractors to take over up to three garage’s operations are due on Wednesday. If the T wishes, the contractors could begin operations around the start of the new year, according to the request for proposals the agency issued in July.” Machinists Union Local 264 has launched a “Don’t Give Away the MBTA” campaign. This morning the Mass Senior Action Council will be having a rally against MBTA privatization at the Transportation Building. Follow Craig Hughes for updates.

 

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