Update: Upcoming Outsourcing Issues. February 10, 2014


1) National/International: The Economist hosts a debate on privatization. Columbia University’s Elliott Sclar writes “there is no readily obvious alignment between the long-term public needs of a vibrant urban society and the shorter-term private needs for investment return and protection of capital. This motivational misalignment is at the core of all the instances of failure in public-asset sales and leases. Failures are more common than is popularly understood.”


2) National: President Obama’s Council of Economic Advisors convened a meeting of executive agency heads last month to discuss possibly establishing a “public private partnership” office at the federal level. [Public Works Financing, January 2014; sub required].


3) National: A study of a budget proposal to privatize the Tennessee Valley Authority nears completion. “TVA President Bill Johnson said utility officials and outside consultants hired by TVA have submitted financial data and ‘all of the analytic work is done’ for the Office of Management and Budget.”


4) National: Booz Allen Hamilton cites as a risk factor to its business “increased insourcing by various U.S. government agencies due to changes in the definition of ‘inherently governmental’ work, including proposals to limit contractor access to sensitive or classified information and work assignments.”


5) National: Still no public word about tightening up standards for the accuracy of traffic and revenue studies that go into transportation projects that get federal loan support. The Federal Highway Administration is working on the issue and may issue formal guidance. [Public Works Financing, January 2014; sub required]. Traffic and revenue forecasts that have supported road privatizations have frequently been erroneous.


6) National: Acting Deputy Secretary of the USDOT reportedly “commented that we have not figured out completely how to advance P3s and bring the private sector to the table, and we need to keep working on it. He spoke directly to the private sector, saying that ‘your ideas are critical.’  He said that through TIFIA, successful loans have been made, but getting through the negotiations can be onerous, with every deal different, and some of them very complex.”


7) National: Skanska P3 executive says he expects the U.S. “public private partnership” market to grow. “The Elizabeth River Crossings (or Midtown Tunnel) is a $2.1 billion project and the second-largest of its type in US history. It is Skanska’s first and only—for the time being—P3 in the US. But there’s more to it than that. In 2014 alone, Skanska is actively tendering four mega-projects in the US totaling nearly $7 billion. ‘That is truly exciting and unprecedented,’ he says. (…) Before joining Skanska in 2006, [Karl] Reichelt spent 14 years in local, county and federal government.” [Sub required]


8) National: Amtrak fights big oil for rail space. “And [Ross Capon, president of the National Association of Railroad Passengers] fears the chronic delays will give Amtrak a black eye. ‘If you are running a service that looks like a sad joke for an extended period of time, you’re going to start to lose business,’ he says, ‘and then the people on Capitol Hill who don’t believe these trains should exist anyway are going to smell blood and go in for the kill.’”


9) Alaska: The Knik Arm Bridge Authority “is expected to cancel” its plans for private development of the proposed bridge at its February 18 board meeting. Gov. Parnell recently withdrew his support for a “public private partnership” project, citing lower public borrowing costs. The board is expected to restart the project on a fully public basis. [Public Works Financing, January 2014; sub required].


10) Arizona: The Arizona Commerce Authority faces questions as its non-profit support agency, Team-ACA, is dissolved. “Even with the dissolution of Team ACA, some critics say private-sector input over public resources is inherently suspect. ‘When you privatize a public function such as job creation … it is not necessarily working to the overall good of the public anymore,’ said Leigh McIlvaine, a research analyst for Good Jobs First, a national organization that monitors corporate subsidies and economic development. She pointed to problems in Ohio that she said involved millions in subsidies given to businesses with ties to the economic-development agency’s board of directors. Other problems have popped up in public-private partnerships elsewhere.”


11) Arizona: Gov. Brewer’s plan to charge schools for broadband access runs into resistance. “Many education and political leaders aren’t buying her sales pitch, saying students may be a sympathetic face for the need, but the governor’s plan would primarily benefit private companies and homeowners.”


12) Arizona: The Department of Transportation has issued a Request for Information “to design, build, and potentially finance, and/or maintain” the proposed South Mountain Freeway as a “public private partnership.” Responses are due February 25, 2014. An industry forum is scheduled for February 27. [RFI]


13) Colorado: DriveSunshine Institute warns that the signing of a fifty year deal to privatize US 36 is imminent. DSI says “the 50 year legally binding contract will be signed behind closed doors by the state highway privatization board, the HPTE. The contract will not be read or reviewed by the Colorado Senate or House prior to signing and public input is not allowed.” Says there was “a sweeping ten year effort by corporate lobbyists from the world’s largest toll road developers to create a Colorado state highway privatization board.”


14) Colorado: Transit workers’ pension plan troubles were spurred by privatization, the head of the Amalgamated Transit Union’s Denver local says. “Over the last two decades, that drain of participants has damaged the pension plan. If not for privatization, all of our members would have a pension and it would be in a much better shape.”


15) Florida: Operators of a failed charter school in Milwaukee reportedly plan to open a new one in Florida. “There is little supervision of these schools, little regulation, and they have become big business in choice-loving Florida. Actually, Florida voters turned down an effort by the Jeb Bush team to change the Constitution in 2012 to permit vouchers. So, paradoxes abound. The voters don’t like vouchers, but the legislature does.” A Milwaukee clergyman said “they left without letting anyone know. Just one day we woke up and they weren’t there.”


16) Florida: Lawsuits against Corizon healthcare mount up. “Here in Volusia County, roughly nine years after the local jail first switched from a public to private medical contractor, officials say they’re going to consider their options all over again. At the same time, lawsuits like Knichel’s are stoking a long-running national debate over the very concept of for-profit correctional medical contracts. ‘Some things just don’t belong in the private sector, and jails are one of them, in my opinion,’ Volusia County Councilman Josh Wagner said recently.”


17) New Jersey: Camden community faces a forced dilemma: “Parents and residents must chose between crumbling district schools and shiny charter schools.” Prof. Stephen Danley of Rutgers writes, “now, I understand a pragmatist saying—this is where the money is, we need to repair these schools. But let’s not give the State too much credit. Starving a community of funds to adequately maintain their school buildings, then tying such funding to an ideological movement towards charters, is not helping communities. It’s exploiting them.”


18) New Jersey: Bergenfield resident John Person writes in to comment on Gov. Christie’s taxpayer-funded legal expenses. “According to the newly hired Randy Mastro, he is charging us ‘only’ $650 per hour, which is a 40 percent discount from his usual rate. What a deal. The governor needs to take a long, hard look in the mirror the next time he wants to privatize $28,000-a-year file clerks in Trenton or $12-per-hour toll collectors. He seems to be intent on devolving New Jersey’s middle class into poverty with his rehashed and discredited supply-side trickle-down economic theories.” [Bergen Record, February 3, 2014]


19) New York: Broome County residents rally to protect public services from outsourcing to private, for profit companies. “Employees, patrons and community members voiced their concerns about privatizing Broome County Transit, Willow Point Nursing Home and mental health outpatient services. (…) Penny Davis, of the town of Union, said she disagreed with County Executive Debbie Preston trying to turn human services into business. ‘The more you try to privatize it, the more people are trying to make money and the object of what we’re doing isn’t the idea to make money, it’s the idea to help people,’ Davis said.”


20) Ohio: Gov. Kasich talks about “deregulating” schools. This might mean “removing state rules for class sizes and personnel and leaving those to the discretion of local boards. He could seek to ease licensing requirements for teachers to make it easier for business professionals to come into classrooms and teach, or establish some sort of formal tie between the state Board of Education and the business community so that business leaders could have a more-direct influence on curriculum.”


21) Pennsylvania: Sources believe two bids have been received for the privatization of the Philadelphia Gas Works. “A city council vote is likely to take as long as six months, and there is no assurance of a positive outcome from that 17-member body, says a source.” [Public Works Financing, January 2014; sub required]. Councilman James F. Kenney “said there was no appetite among his colleagues to sell, especially given the natural gas boom in Pennsylvania in recent years. ‘There’s no reason we should be turning this over to a private concern for their benefit,’ he said. ‘The time to sell a gas works is not when natural gas is becoming the celebrity energy resource in the country.’”


22) Pennsylvania: Philadelphia Mayor Nutter and City Council President Darrell L. Clarke are at odds over a plan for a combined parking garage and park privatization. The plan would be “to sell the city-owned garage beneath John F. Kennedy Plaza and refurbish LOVE Park. (…) Clarke objected to using city money to fund the park’s rehab, and proposed selling concession rights to raise the cash. Critics said Clarke’s plan, which includes restaurants on the plaza, threatened to turn the park into a food court. Until Nutter and Clarke can agree, a deal to sell the garage to a Chicago company for nearly $30 million remains on hold.”


23) Pennsylvania/National: As the feature length documentary “Kids for Cash” opens, Democracy Now interviews victims of the scandal and attorney Robert Schwartz, executive director of the Juvenile Law Center.


24) Pennsylvania: Seven candidates vying for the Democratic nomination to run for governor oppose Gov. Corbett’s proposal to privatize Pennsylvania’s publicly-run liquor stores.


25) Puerto Rico: Spanish company increases its stake in the toll road operator Metropistas. Abertis has paid $43.6 million to Goldman Sachs for the stake. It is now the majority shareholder. [Sub required]


26) Texas: Infrastructure Investor looks at the troubled history of road privatization in Texas. “Political and public opposition, ranging from the enormous price tag of [the Trans Texas Corridor] to its use of tolling to the expected loss of farmland and wildlife, stung the industry, which in turn shifted its stance on the US: blame replaced bullishness.”


27) Virginia: Industry waxes enthusiastic about Virginia’s new “P3 Czar,” J. Douglas Koulemay. “Koulemay says the P3 model will be the preferred delivery model for large transportation infrastructure projects in Virginia and the [Gov.] McAuliffe will be an effective political advocate: ‘He has a strong, disciplined businessman’s mind.’” [Public Works Financing, January 2014; sub required]


28) West Virginia: Nearly 20 lawsuits have been filed against West Virginia American Water Company since the January 9 chemical leak in Charleston. WVAWC is a subsidiary of American Water, one of the leading water privatization companies in the U.S. “They seek compensatory damages for physical injury, medical bills, cost and expense of replacing the water and the waste of water, the cost of sewer, emotional distress, humiliation, embarrassment, fear, loss of enjoyment of life, loss of income past and present, medical monitoring, annoyance and inconvenience, expenses for replacing water supply and other related living expenses as well as other damages. They also seek punitive damages, pre- and post-judgment interest, equitable and injunctive relief.” (Contains case numbers).


29) Revolving Door News: The Montgomery Advertiser looks at how revolving door legislation is formulated. “Republicans in a conference committee significantly expanded a bill allowing waivers from education laws to include tax credits for private school education.”



Legislative Issues:


1) National: Led by California, Georgia, and Oklahoma, momentum builds toward a nationwide movement in state legislatures to rein in the reckless outsourcing of public services to for-profit corporations and private entities. In the Public Interest’seducational campaign on taxpayer empowerment is focusing on increasing transparency and accountability standards for outsourcing deals.


2) National: Municipal finance analyst Cate Long comments on proposed federal legislation to fund infrastructure. “Like Warner’s bill, Bennet’s legislation includes an emphasis on public private partnership (P3). Bennet’s bill requires that 25 percent of projects financed through the AIF must be P3s. There has never been economic validation for passing public assets to private investors via P3s. Hopefully Bennet’s bill won’t accelerate the transfer of public assets from the 99 percent to the 1 percent of America’s wealthy without doing a complete economic analysis on this approach.”


3) Florida: A plan to advance private flood insurance for coastal residents goes back to square one in the Senate. “Real-estate and business leaders have claimed there could be a potentially cataclysmic hit to the state’s real-estate market as rates go up because of changes approved in the federal 2012 Biggert-Waters Flood Insurance Reform Act.”


4) Georgia: Controversial bill to privatize childcare advances out of a key senate subcommittee. “Foster homes recruited, trained and supported by the state are paid an average of $19.15 daily per child, according to the Georgia Department of Human Services, while foster homes run by private agencies are paid an average of $86.91 daily.” [Sub required]


5) Georgia: House committee approves plan to extend tax exemptions to encourage privatization of university dorms. “The bill overwhelmingly passed out of the Ways and Means Committee despite concerns by some lawmakers about the length of the contracts with selected companies and potential cost increases for students.”


6) Indiana: If a bill to block privatization state employees’ annuity savings accounts does not pass, agency officials are planning to be ready for privatization by October 1. [HB 1075]


7) Iowa: Legislation to bring traffic cameras under state regulation passes House transportation panel. The bill would “establish a uniform fine system for red-light and speeding violations caught on camera.” But the DOT director says it doesn’t go far enough. “What they have written there is a free-for-all. It’s basically what exists today. There’s no process involved at all. You can just put up a camera, so I’m disappointed.” [HF 2016]


8) Kansas: Public universities urge lawmakers to streamline their ability to offer online courses out of state. “State public universities estimate annual cost savings of $529,000 if Kansas participates in SARA. Several members of the House Appropriations Committee questioned whether joining such a group would allow fly-by-night universities to offer courses in Kansas.”


9) Missouri: Moves to put a transportation sales and use tax on the ballot in November are put on hold while supporters wait to see if the legislature will pass the tax.


10) Oregon: Lawmakers move to beef up the capacity of the state’s investment division instead of outsourcing it. “We worked hard to ensure the revised bill maintains our bottom line goals of saving millions of dollars from the fees Oregon pays every year, and insourcing back-office functions we are currently paying top dollar for, from out of state.”


11) Oregon: Legislative witnesses take aim at Oregon’s “hybrid” liquor privatization bill. “Steve Brown, the owner of two liquor stores in Salem and Lincoln City, said he believes that SB 1559 would push about half the liquor store owners out of business because of increased competition. If the state wants to reform the system, he said, it should invest some of the revenues it receives from liquor sales into modernizing existing stores.” A witness from Washington state, where liquor distribution was privatized, tells lawmakers that business there was “absolutely crushed.” The secretary of state received a ballot initiative promoting liquor privatization last Thursday. Written comments may be submitted to irrlistnotifier.sos@state.or.us. [Initiative text]


12) Virginia: Since the state attorney general ruled recently that public subsidies for “public private partnerships” are a form of state debt, P3s will continue to be funded by a mixture of public grants and private financing, “unless the General Assembly gives express legislative authority” for subsidies. [Public Works Financing, January 2014; sub required]


13) Wisconsin: Writing in the Badger-Herald, Aaron Loudenslager calls on lawmakers to end Wisconsin’s school voucher program. The legislature is currently considering a bill to toughen oversight standards, but Loudenslager writes that “the school accountability bill circulating in the Wisconsin Senate does not improve public accountability of our primary and secondary schools. Instead, much like the new statewide school voucher program, its purpose is to slowly undermine public schools and privatize basic education.” The Capital Times reports that academics are increasingly weighing into the “education reform” debate.

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