Update: Upcoming Outsourcing Issues. April 7, 2014

1) National: Public Works Financing estimates that total water utilities outsourcing revenue for 2013 was $1.9 billion (outsourcing defined as government and industrial contract operations and maintenance plus design-build-operate fees). [March 2014; sub required]


2) National: The Washington Post’s Valerie Strauss looks at the Walton Foundation’s support for “education reform,” including support for privatized education. “While the Bill & Melinda Gates Foundation is the biggest player in the education philanthropy world, the Walton Family Foundation spends an enormous sum to push school choice, vouchers and the privatization of public education. The 2013 grantee amount was higher than the $158 million it gave out in 2012, when Michelle Rhee’s StudentsFirst got $8 million.”

3) National/DC: The District of Columbia government is criticized for its failure to properly oversee the operations of a nonprofit corporation, the Community Partnership for the Prevention of Homelessness (TCP), which received $13 million last year to operate the District’s main homeless shelter. “The hearing was held as police authorities continued to search for Relisha Rudd, who authorities say was taken by a shelter janitor and has not been seen since March 1.”


4) National/International: American Public Media’s “Marketplace” had a feature segment on the private security company G4S last Thursday. For more on G4S see Cody Mason, “International Growth Trends in Prison Privatization,” The Sentencing Project.


5) National: The White House is expected to put a streamlined process for environmental approvals of infrastructure projects into an expanded permitting “dashboard.” This would be included in its new White House Infrastructure Center, expected to be announced within weeks. [Public Works Financing, March 2014; sub required]. Approval processes under NEPA are among the few existing opportunities for public comment and intervention in federal transportation project approval processes.


6) National/International: Controversy is generated by the U.S. government’s plan to privatize internet oversight. “Some critics argue, however, that Washington is ‘giving away’ the Internet, posing long-term threats to online freedom and commerce.”


7) National: Governors from Maryland, Illinois, Colorado, and North Carolina attended a “dedicated policy retreat” on “public private partnerships” last year, and “all four have P3 procurements underway now.” [Public Works Financing, March 2014; sub required]


8) National: The Alliance for Toll Free Interstates, which includes the American Trucking Associations, UPS, FedEx, McDonald’s, Dunkin Donuts and others, says “tolling existing interstate lanes is the least efficient, least effective mechanism to fund transportation in the long term.” HNTB’s Jim Ely will convene a “think forum” this summer on the possible efficiency impact of road improvements funded by tolls. [Public Works Financing, March 2014; sub required]. On Friday, The New York Timesdid a story on the anti-tolling groups and their opponents—the toll companies and their vendors.


9) Arizona: After public outrage erupted over a $900,000 legislative earmark won by GEO Group lobbyists, the funding was dropped from the state budget. “Private prison critics quickly sprang into action. The American Friends Service Committee and Human Rights Center helped lead a strong coalition that included the American Civil Liberties Union, Arizona Justice Alliance, NAACP of Maricopa County, Samaritans, the Unitarian Universalist Justice Arizona Network and In the Public Interest. After a weekend of action alerts, media appearances and public information requests, the Arizona senate stripped the budget of Kavanagh’s GEO giveaway.”


10) California: GEO Group signs contract with the Department of Corrections and Rehabilitation for the reactivation of the GEO-owned McFarland Female Community Reentry Facility. The facility has 250 beds. The contract goes through June 30, 2018.


11) California: LA Metro’s first “public private partnership,” the $750 million ARTI bundle, is “on life support” after new leaders at the agency revive questions about “the value of P3 delivery of highways.” [Public Works Financing, March 2014; sub required]


12) Connecticut: LAZ Parking gets a four year contract extension with Norwalk for four parking garages encompassing 4,000 spaces.


13) Florida: Hillsborough County school district to consider privatizing its school buses. “According to Corie Holmes, one of the transportation workers who has been the most vocal, a driver was handed this flyer, and there were stacks of them at the union hall. It asks drivers to turn out en masse at the next school board meeting on April 29 to speak out against privatization.”


14) Georgia: Two prominent pro-privatization figures were left off a panel Gov. Deal formed to look into reform of the state’s child welfare system. “The governor has hinted he could roll out a pilot program by executive order. The panel is led by Stephanie Blank, a children’s advocate and ex-wife of Atlanta Falcons owner Arthur Blank. Panelists include two juvenile court judges, six state legislators and several academics and nonprofit workers.” [Sub required]


15) Georgia: As a referendum to permit the privatization of public school dorms heads for the ballot in November, debate begins on the issue. “Among those opposing it was Sen. Mike Crane, R-Newnan. A Georgia Tech graduate who runs his own general contracting firm, Crane has experience building in two states. “‘The proposed wording for the ballot referendum includes wording that I believe would be misleading,’ he said. “To insinuate a ‘yes’ vote will ‘keep costs affordable’ is an exaggeration at best and certainly a promise the (Board of Regents) cannot keep.’ He also expressed a bigger, financial worry. ‘This may encourage further development of financially questionable projects for an already overbuilt University System,’ he said.”


16) Georgia: After terminating an EMS employee for refusing mutual aid to Seminole County, Decatur County looks into privatizing the system. The county board will provide an update on the situation tomorrow morning.


17) Illinois: North Lawndale residents oppose privatization of Dvorak Elementary to the Academy for Urban School Leadership. “‘At least give us one school in the community where AUSL don’t have to take over,’ Candace Stigler shouted in the school’s gym.


In the first year of a school ‘turnaround’ all staff—from principals to janitors—are fired and a new staff, curriculum and rules are put into place. AUSL has been doing school turnarounds for the district since 2006. The turnaround strategy was initially billed as a temporary strategy to change the trajectory of low-performing schools. But CPS has renewed all of AUSL’s five-year contracts, effectively leaving them under private management.”


18) Indiana: Prof. emerita Ruth Needleman reads the fine print of the contract for the Gary/Chicago International Airport “public private partnership” development agreement and finds multiple shortcomings and a lack of public protections. Finds that “there is no accountability, oversight or transparency”; that the city and Redevelopment Commission have transferred all their authority to the unelected Airport Board; no mention of any minimum number of jobs to be created; no set asides for unemployed workers in poor communities; that businesses hired by the airport “are not required to hire minority, disabled, women or veteran workers”; and no clear statement on who will be left holding the bag if the project goes bust. “How would the city sustain the airport or handle its debts? More of your tax dollars at work!”


19) Indiana/National: The Indiana DOT is seeking bids from companies interested in operating Amtrak’s train service between Chicago and Indianapolis. “INDOT is seeking a three-year contract for a permanent provider, extendable for an additional three years by mutual agreement. Bids are due April 29. The winning bidder could take over operation of all or part of the serv­ice when INDOT’s current agreement with Amtrak expires Sept. 30. If additional time is required, that agreement could be extended through Jan. 31.”


20) Indiana/National: Phyllis A. Bush, Terry Springer and Arne Duff, members of the Northeast Indiana Friends of Public Education and the Network for Public Education,see momentum building for the movement to reclaim public schools. “Momentum is building, and it feels as though we are approaching a tipping point. (…) Parents and teachers are protesting the vast amount of instructional time devoted to preparing kids to take tests whose only real value appears to be to label students, teachers schools, and communities as failing.”


21) Indiana/Illinois: As the May 30 date for federal approval or disapproval of the Illiana Expressway “public private partnership” approaches, the Illinois DOT nevertheless sends out letters to landowners saying their property will be appraised in the next 30 days. “‘Over my dead body,’ said [Virginia] Hamann, who’s leading the No Illiana 4 Us group in opposition to the tollway.” Leading bidders on the project recently met with prospective contractors about “how they can get their own piece” of the $1.5 billion project.


22) Massachusetts: The DOT is expected to announce the selection of “public private partnership” advisors for three projects by May 21. The selection is being guided by Dana Levenson, the current CFO of MassDOT. The three projects include HOT lanes on Route 3 between Cambridge and Cape Cod; twinning the Sagamore bridge over the Cape Cod Canal; and leasing rest areas on state roads. [Public Works Financing, March 2014; sub required]. Dana Levenson is a former Managing Director and Head of Infrastructure Banking, Americas for The Royal Bank of Scotland (RBS) and also served as the City of Chicago’s chief financial officer.


23) Michigan: Criticism mounts over Detroit Emergency Manager Kevyn Orr’s rushed scheme to privatize the water system. “The ambitious timetable has stunned analysts and experts throughout the water and sewer industry, raising concerns that rushing things could lead to a hastily cobbled together contract. Experts point to examples of other cities and counties, and their residents, suffering the costs of broken agreements.” Initial proposals are due this week and binding proposals in June. Some say “it should take a year or more for any serious operator to study all the angles of Detroit’s water and sewerage system. Bids and potential contracts have to be pored over, torn apart and then pored over again to protect ratepayers from unreasonable future increases and workers from layoffs in the name of profit and at the cost of customer service.”


24) Nebraska: Private water company puts garbage bags over fire hydrants, prompting outrage from firefighters and residents. “The fire board will figure out a plan to communicate with the water board” for its meeting this week.


25) New Jersey: The Moorestown Council is to brief the public tonight on its plans to outsource trash collection. The Council has also signed an agreement with the Communications Workers of America “that avoids layoffs by allowing sanitation workers to fill open positions in other divisions of Public Works.”


26) New York: The Orange County legislature is to vote this Wednesday, April 9, on forming a Local Development Corporation to privatize the Valley View Nursing Center. The county executive says the move is “a vehicle to get concessions” from the Civil Service Employees Association.


27) New York/National: Federal Bureau of Prisons awards a $1.6 million contract to the GEO Group to provide residential reentry center services in the Bronx.


28) North Carolina: An appeals court has maintained a freeze on the state’s school voucher plan. “The N.C. School Boards Association and state residents, backed by the N.C. Justice Center and the N.C. Association of Educators, are suing to stop vouchers. Among their claims is the program violates the state constitution. The legislature set aside $10 million for the program, enough to give about 2,400 students who leave public school ‘opportunity scholarships.’”


29) Pennsylvania: The Philadelphia City Council, which has the power to approve or disapprove the sale of the Philadelphia Gas Works, hires a consulting company to advise it on the issue. “Council President Darrell L. Clarke said [last] Monday that Council would pay Concentric Energy Advisors Inc. $225,000 to review details of the proposed sale, as well as $200,000 for a second contract exploring alternatives to a sale.” UIL, which would buy the facility if the city council and state PUC approves the deal, can pull out on July 15 if the sale is not approved by then.


30) Tennessee: Commercial Appeal columnist David Waters takes aim at “a pro-voucher campaign led by the American Federation for Children—a right-wing PAC run by Amway billionaires who refer to public schools as ‘government schools.’ AFC and several other anti-public school outfits are pumping thousands of dollars into the Tennessee school voucher campaign, as well as the campaign coffers of pro-voucher Tennessee legislators. In their effort to privatize education, they’re playing politics with poor kids. Shame on us if we listen.” [Sub required]


31) Virginia: The Justice Policy Institute has issued a report on “racial disparities, skewed fiscal priorities, and missed opportunities for improvements through proposed legislation” in Virginia’s correctional system. “These trends are the result of changes to Virginia’s sentencing and criminal justice system. While the drivers of prison population growth interlock and weave into each other, to understand how Virginia got to where it is today, the Justice Policy Institute has summarized the trends under three major themes: more people serving longer sentences, more people coming into the system and fewer people leaving the system.”


According to In the Public Interest, Virginia is one of four states that are “locked in contracts with the highest occupancy guarantee requirements” with private prison companies, “with all quotas requiring between 95% and 100% occupancy.”


32) Virginia: Congestion and cargo delays at state ports has the port authority scrambling to find a solution. “One maritime executive, who didn’t want to be identified because of ties to the port, said some of the current problems could be because port managers were distracted by the political turmoil and internal transformation during the past few years, including an effort to privatize the port.” [Sub required]


33) International: Public outcry follows news that big banks cashed in on the privatization of Britain’s Royal Mail, costing taxpayers £1bn ($1.4 billion) and leaving small investors in the lurch. “A Communications and General Workers Union spokesman said: ‘These institutions should be named. They have profited greatly at the expense of the taxpayer and we should be told who they are and why they were selected for preferential treatment. We are told there was a gentleman’s agreement—but for the Government to believe that would stick when there was profit to be made is just foolish.’”


34) International: The World Economic Forum has called on governments to rethink their priorities on infrastructure investment and give priority to existing infrastructure. “In a report published in collaboration with the Boston Consulting Group, the Geneva-based organization warns that while building new assets ranks high on the global agenda, leaders in both the developed and developing world often neglect existing ones–often leading to ‘increasing congestion, unnecessary operational costs and inadequate maintenance.’” [Sub required; WEF/BCG report]. Says this emphasis should hold “whether a public-private partnership or not.”


35) International: New report  by Public Services International surveys anti-privatization campaigns around the world and looks at alternatives such as insourcing and remunicipalization. “There is widespread criticism of privatization. It is now leading to an increasing number of decisions, mainly at a local level, to bring services back under public control.”


36) Think Tanks: Third Way proposes the creation of a national “minimum pension.” Says “this is not what President George W. Bush proposed when he sought to privatize Social Security in 2005. Under our plan, Social Security remains as is, but every worker would also have his or her own private Individual Retirement Account, the way many white-collar workers do now.”


37) Upcoming Meeting: The annual ARTBA Public-Private Partnerships in Transportation Conference, July 16-18, in Washington, DC. The agenda includes “market opportunities from state DOTs” and a “unique, interactive ‘town hall’ session on the future of P3s.”



Legislative Issues:


1) National: The House Committee on Transportation & Infrastructure P3 Panel will hold a hearing tomorrow at 10 am eastern on “The International Experience with Public-Private Partnerships.” Will hear testimony from Cherian George, Managing Director—Americas, Global Infrastructure & Project Finance, Fitch Ratings; and Matti Siemiatycki, Associate Professor, Geography and Program in Planning, University of Toronto. [Livestream]


2) National: As Congress considers how much and for how long to expand the federal TIFIA transportation loan program, which is a key component of “public private partnership” projects,  a key factor will be whether or not there can be “a major increase in the flow of well-structured, creditworthy projects” over the long term. TIFIA has $1 billion to commit this year. Other key factors include how quickly the existing authorization of Private Activity Bonds ($4-$5 billion) will be used up, and how much Highway Trust Fund money will be available to the states. Without PABs, most “public private partnerships” would be killed “in the planning stage,” when governments do their “value for money” analyses or “simple capital cost comparisons.” [Public Works Financing, March 2014; sub required]


3) California: State Assembly passes HR 29, a bill to rein in irresponsible outsourcingof public services to private contractors. “[Assemblyman Jimmy] Gomez said his resolution responds to government entities relying too much on private contractors during years of budget cuts and not considering whether public employees could do the work better. (…) Several bills by Assemblyman Richard Pan, D-Sacramento, would require state contracts to include performance benchmarks and would create a database of payments to contractors and their wages.”


4) Tennessee: An organization backed by oil billionaires David and Charles Koch moved to block a mass transit project in Nashville. “StopAmp.org Inc., the leading opposition group, thanked AFP in a news release Thursday, and Andrew Ogles, AFP’s state director, said that the group didn’t back the effort financially but that the bill grew out of a conversation he had had with Sen. Jim Tracy, the sponsor.”

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