Update: Upcoming Outsourcing Issues. February 18, 2014


1) National: Economic Policy Institute comes out against proposals for a bond-funded National Infrastructure Bank, saying the federal government would lose up to $100 billion under the proposal. “The federal government would get some money now, but would lose more over the long term. Meanwhile, multinational corporations get a nice tax break,” said Thomas Hungerford, chief economist and director of taxes and budgets at EPI. “We would be better off simply financing a bank through direct appropriation.” [Sub required; EPI briefing paper, “How Not to Fund an Infrastructure Bank”].


2) National: Corrections Corporation of America reports its fourth quarter 2013 results. Misses analysts’ consensus estimates by $.06 per share. CCA CEO and president Damon Hininger says that an improved state budget picture “will manifest itself into pricing improvement going forward, but in the near-term, we are also encouraged that this improved budget environment has led to recent actions taken by Tennessee, West Virginia, Oklahoma and other states like Arizona in moving forward and using the private sector to manage the very real challenges of growth and overcrowding.” He also points to a possible model deal with Utah “for a real estate partner like CCA to design, build, and own correctional facilities that could accommodate over 5,000 inmates.” CCA will release an investor presentation on February 28. Ratings have been volatile over the past few months, but currently analysts who regularly follow the company are evenly divided on its shares’ prospects, with two giving it a sell rating, two a hold rating, and two a buy rating. Other observers have panned the stock and CCA’s prospects. On Friday, CRT Capital raised its price target on the stock by $1 and raised CCA to a buy rating. [CCA webcast]


3) National/California: Court decision to grant California two extra years to meet Federal requirements for reducing prison overcrowding initially hammers Corrections Corporation of America stock. CCA had been hoping to gain major new contracts with the state if the court upheld an April deadline to shed 7,000 prisoners. The stock price had nearly recovered by Friday.


4) National: Report finds that for-profit prisons jail people of color even more disproportionately than publicly operated prisons. Christopher Petrella’s research finds that “the overrepresentation of people of color in private versus public prisons across the country is primarily attributable to an unlikely source: finely tailored contractual provisions that implicitly exempt private prison companies from housing certain types of individuals whose health care and staffing costs disproportionately attenuate profit margins. Health—and therefore age—tends to serve as a proxy for race without any explicit reference to it.”


5) National: As U.S. revenues of for-profit education companies slump, they look overseas for greener pastures. “Outside the U.S., it’s a wide-open area to run in without as much scrutiny,” says Michael Moe, chief executive officer of GSV Capital Corp. There is speculation that as part of a reshuffle of the Washington Post’s parent company, Warren Buffett’s Berkshire Hathaway may acquire Kaplan. Kaplan International teachers will be rallying this Thursday at Kaplan’s New York office to demand a fair contract. “A year-and-a-half after voting overwhelmingly for Guild representation, Teachers at Kaplans International Colleges are still fighting for a contract that provides basic benefits for the 90% of the workforce that is part-time. Management refuses to budge. Kaplan ESL instructors, backed by their students, say enough is enough!”


6) National/International: Investment adviser Georg Inderst throws cold water on the idea that institutional investors, such as pension funds, will bridge the infrastructure financing gap. A report prepared by Inderst for the European Investment Bank “states that project finance (at 0.4 percent of GDP), private infrastructure funds (0.3 percent) and public-private partnerships (0.1 percent) still provide relatively modest contributions to bridging the resulting gap.” [Sub required]. Major public funding will still be required to fill the gap. “Global PPP volumes were in the region of US $60-100bn in total in recent years. According to Dealogic, the 2012 total volume was US$57bn, down substantially from US$95.4bn in 2011. Thereby, the share of PPP fell to 15% of project finance, the lowest since 2001 (10%). Traditionally, that share had ranged between 20-25%. The number of PPP deals was 214 in 2011 and 191 in 2012.” [Inderst’s EIB report , p. 24]


7) National: Activists hold a conference on Veolia to “stop privatization, defend labor, human rights and the environment.” [Video (2 hrs, 16 mins.)]


8) Arizona: The state’s schools chief is under fire for urging parents to send their children to private schools using tax dollars. “Andrew Morrill, president of the Arizona Education Association, called it ‘appalling’ that Huppenthal, whose formal title is ‘superintendent of public instruction,’ would advocate parents removing their children from public schools.”


9) California: The state leads the nation in opening new charter schools, adding 104 campuses and 48,000 students, according to a report by the National Alliance for Public Charter Schools.


10) Colorado: Outraged citizens pack a second meeting to discuss the 50-year privatization of U.S. 36. Under pressure, the state department of transportation finallyreleased the privatization contract, which even lawmakers had not seen, this past week. An online petition has gathered at least 19,000 signatures demanding that lawmakers be given 60 days to review the contract, but the CDOT has refused. Thesecretive deal, which is expected to close by the end of this month, “has generated rancor as well as claims that their 600-page contract hides trouble for taxpayers.” The Drive Sunshine Institute is organizing a rally to stop the signing of the contract this Wednesday outside the offices of the CDOT. [Contract]


11) Colorado: Parsons Transportation Group is reportedly pitching a $3.5 billion “public private partnership” plan to introduce toll lanes and improve regular lanes on I-70. The Denver Post endorses the deal despite current public outrage over the U.S. 36 P3 deal.


12) Florida: Fort Lauderdale airport workers fight for better wages and working conditions. “SEIU has filed a complaint against Bags Inc., G2 Secure Staff, Eulen America, Direct Airline Services and Menzies, all airport contractors.”


13) Florida: Four top “public private partnership” firms submit technical proposals to compete for the $2.4 billion I-4 Ultimate Project. Financial proposals are due March 13. [Sub required]


14) Idaho: Corrections Corporation of America contests Idaho audit that “found the private prison company understaffed an Idaho prison by more than 26,000 hours.” The audit was prepared for the state by KPMG. CCA has hired an attorney to deal directly with KPMG to try and get the audit declared inconclusive. “The report could impact the Tennessee company’s other government relationships. Idaho corrections officials say prison leaders in several states and the U.S. Department of Justice have asked for copies of the audit.”


15) Illinois: Chicago’s snow removal woes bring back memories of a previous outsourcing effort. Two private companies, including Plote, are hauling salt in from Iowa. “Five years ago, Plote was one of only a handful of bidders to respond to then-Mayor Richard M. Daley’s bid to privatize one of Chicago’s most politically slippery tasks—side-street snow removal—and the only company willing to perform the service citywide. The poor showing—and almost universal opposition from aldermen fearful of losing control over a service that can make or break a Chicago alderman—prompted Daley to drop the idea like the political hot potato that it was.”


16) Indiana: Court rules that the state owes IBM nearly $50 million in fees despite the fact that “in the most basic aspect of this contract—providing timely services to the poor—IBM failed.” But the ruling “means Indiana can go back to court and try again to collect more than $175 million in damages from IBM.”


17) Iowa: Deloitte consulting has been hired by the Board of Regents to “review everything from demand for academic programs, to administration of athletics departments, to whether advertising dollars are well spent. Changes to staffing levels, cuts to inefficient programs, sharing services across universities and boosting revenue are all on the table.” Deloitte will be looking at the state’s three public universities. The state will “spend $2.5 million for Deloitte’s services through 2014, and will decide later whether to retain the company while plans are implemented.”


18) Iowa: Writing in The Clinton Herald, resident Charles Smith criticizes the Clinton City Council’s plan to privatize its solid waste department. “If the city does move to a private vender we could be forced into an eight-year contract. We have seen before. This could start at a low rate then increase very quickly once they have all the equipment and the city has none. We have seen what has happened to our water rates with Iowa American in charge of our water.”


19) Kentucky: The Department of Transportation launches its new transportation transparency tool, DataMart.


20) Louisiana: Veolia Transportation takes control of New Orleans’ Mississippi ferriesfrom the Regional Transit Authority. The company already runs the city’s streetcars and buses.


21) Michigan: The state is seeking contractors to work on Belle Island, the park that it acquired in a 30 year lease from Detroit. This Friday, February 21, a seminar will be held in the casino “on how to contract with the state.” Critics warned that the lease was a first step toward privatization.


22) Michigan: Former corrections officials call for parole reforms for prisoners serving life sentences. The Citizens Alliance on Prisons and Public Spending released the statement and two reports.


23) Minnesota/National: Minneapolis is to insource bus shelters maintained by a private, for profit company following numerous complaints about poor maintenance. “Council Member Kevin Reich, who chairs the transportation committee, said the Metro Transit shelters are simply run better.” Writing in Common Dreams, David Morris says“when it comes to public services, government knows best (…) One city shifting 180 bus shelters back into public hands is a minor development with a one-day news life. But it reflects a much larger story, the growing reevaluation by governments of the efficacy of privatizing public services.”


24) New Jersey: Red Bank to consider outsourcing solid waste collection and disposal services. Issues solicitation. “Spinning off solid waste collection services and sewer and water would put a significant dent in Red Bank’s Department of Public Works, which employs 38 people.” The lone Republican on the council also suggested “this is the time to look at selling our water and sewer system.”


25) New York: State Comptroller Tom DiNapoli questions the relationship between the nonprofit Brighter Choice Foundation and two charter schools. “As it has in each previous case, DiNapoli’s office contends that the schools, which are funded with tax money, don’t have adequate documentation to tell whether they are getting their money’s worth.”


26) New York: The state finishes the last bridge in its publically-funded accelerated bridge repair and replacement program.


27) New York/New Jersey: Port Authority issues a request for proposals for indefinite quantity contracts for the “performance of expert professional audit and integrity monitoring services” on an “as needed” basis. Proposals due March 5, 2014. [RFP]


28) New Jersey: Advisory Committee presents Warren Haven freeholders with an “aggressive” March 31 time frame to either wring concessions from the nursing home’s union or privatize the facility. “Former committee member Cheryl Van Gieson, an Independence Township resident, resigned in November. She suggested in her letter of resignation that other members of the committee began with a ‘preconceived notion’ to sell or privatize Warren Haven.” The advisory committee “researched” the idea of separating the nursing home’s employees from their AFSCME councils. [Committee Report]


29) New Jersey: Gloucester County freeholders and Monroe Township Council adopt resolutions opposing the privatization of toll collection. The Turnpike Authority “is expected to hear presentations and make a decision by the end of April.”


30) Ohio: State auditor launches investigation of three charter school operators. “‘All we know is there have been an unusually high number of failures this year,’ he said. ‘We don’t know why and we don’t know that anyone is necessarily doing anything wrong. It’s possible that these failures are the result of a poorly constructed system. It’s possible they are coincidences, though I tend not to think that.’” 17 Ohio charter schools closed in 2013.


31) Oregon: Investigation will look into the role played by Oracle in Cover Oregon’s website launch failure. Gov. Kitzhaber “hired an independent firm called First Data in January to conduct its own review of what went wrong.”


32) Pennsylvania: Five potential bidding groups respond to the Request for Qualifications for Pennsylvania’s multiple bridges replacement “public private partnership.” Various bidding teams include Plenary Group, HNTB, John Laing, Fluor, Macquarie, Meridiam, AECOM and others. A shortlist of preferred bidders will be issued this spring.


33) Texas: San Antonio Water System rejects the idea of contracting with private companies to pipe in water from as far away as 150 miles. “The private proposals would have required annual payments of up to $85 million for 30 years, and a rate increase of approximately 9% to 12% in 2019, not including infrastructure integration costs.” But the companies were not willing to take sufficient risk off the public. One company “was unable to guarantee that water would be available throughout the life of the project while still requiring payments from SAWS.” [Sub required]


34) Washington: Federal government drops requirement that the state give private companies a chance to enter the public mental health delivery system. “[Gov.] Inslee, a Democrat, had recommended the privatization but encountered heavy resistance from lawmakers from both parties. A second Inslee proposal, to integrate the delivery of mental-health and drug-dependency services, has gotten more support.”


35) West Virginia: Corrections Corporation of America expects a decision “in the next few weeks“ from West Virginia on whether the state will house some of its prisoners in CCA’s Kentucky facility.


36) West Virginia: The Public Service Commission’s consumer advocate wants more information from West Virginia American Water. The PSC has required reports on WVAW’s staffing levels.  “The division would like the reports to include the status of the crediting process through the first quarter (if it’s not completed by the end of March), the total amount of money reimbursed by customer class and the percentage of each customer class that’s received the credit by the report date. It also wants more data on potential changes in water usage following the chemical spill.”


37) Wisconsin: Aaron Loudenslager writes that funding Wisconsin’s public roads for the next 30 years “would certainly be easier if the government were actually using government funds to invest in vital infrastructure instead of giving out those funds in the form of tax breaks. Nonetheless, the important point is that it is entirely plausible that Wisconsin’s public roads can be funded without resorting to their conversion into toll roads.”


38) International: Facing budget pressures and after IMF warnings, Australia’s conservative government moves to sell as much as $130 billion of state assets.


39) Think Tanks: The World Economic Forum and Oliver Wyman produce a “blueprint“ for infrastructure investment policy. The report asserts that “the most critical policies to interest private finance also tend to benefit society.” Others, such as Elliott Sclar, have pointed to a “misalignment” of public and private interests, and “fundamental endemic problems in the way that the political economy of privatization operates.”


40) Think Tanks: The Center for American Progress issues policy recommendations for the reauthorization of the federal transportation bill. The Senate may begin working on the bill as soon as April.



Legislative Issues:


1) National: Stateline.org puts together a useful list of state legislative initiatives on liquor, beer and wine sales. “Tax Policy Center figures show states and localities took in a total of $6.2 billion from alcohol taxes in 2011, compared to $17.6 billion from tobacco.”


2) Alaska: A proposed constitutional amendment to allow school vouchers stalls. “The amendment would allow public funds in the form of vouchers to be spent by parents at private and religious schools. One of the themes cited by critics at public hearings last week concerned the notion that the amendment wasn’t about education.” HJR 1 now goes to the House Judiciary Committee.


3) Arizona: Republican legislators advance a bill to require that state corrections and detention officers be citizens. “Rep. Ruben Gallego, a Democrat, said the bill will send a message that Arizona is not an inclusive state. ‘We’re a better country than trying to pit one class of people against another, and legal permanent residents are type of people,’ Gallego said.” The bill is opposed by the Arizona Peace Officer Standards and Training Board.


4) California: A package of bills has been introduced to rein in the abuse of government outsourcing. “Crystal Strait, chief of staff to Assemblyman Richard Pan, a Sacramento Democrat, said the lawmaker’s bill package attempts to stop ongoing “abuse by state agencies” due to over-reliance on contractors and lax oversight of their performance.”


5) Colorado: Lawmakers have “hinted they may introduce a bill this session thatforces more public input on future public-private highway ventures. (…) ‘We have a private company that will now be dictating what’s going to happen on that highway,’ Sen. Matt Jones, D-Louisville, said Thursday during a joint session of the state transportation committee. ‘Is this the type of thing that we want to happen in a representative democracy?’”


6) Iowa: A bipartisan plan emerges to establish a state-run juvenile home to replace the troubled the Iowa Juvenile Home in Toledo. “[Sen. Joe Bolkcom, D-Iowa City] thinks there is consensus that the state needs a secure facility for a small population of delinquent girls, ‘more of a correctional function than a group home.’”


7) Maine: Legislators back a moratorium on the approval of virtual charter schools. The bill “creates a conflict for the Maine Charter School Commission, which earlier this month gave initial approval to two virtual charter school applications. A final vote on those schools is scheduled for March 3, which would be followed by a weeks-long process of the commission developing contracts with the groups that have applied to run those schools.”

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