Update: Upcoming Outsourcing Issues. November 24, 2014


1) National: Streetsblog USA runs a critical three-part series of articles on private financing of roads. The first looks at “The Indiana Toll Road and the Dark Side of Privately Financed Highways,” the second at “How Macquarie Makes Money By Losing Money on Toll Roads,” and the last at “The Great Traffic Projection Swindle.” Many observers and participants weigh in in the comments section, some warning about shifting risk to the public, others about a lack of transparency. One commenter: “The new game from these giant infrastructure privatization players is to get state DOTs to agree to ‘availability payment’ financing to fund new projects that are independent of projected traffic figures. So Macquarie can build a road that sits empty the middle of a zombie apocalypse for ZombieDOT and still get paid as long as it is open and available for use. Availability payments end up swapping future DOT operating revenues for projected future toll revenue receipts as repayment.”


2) National/Indiana: In what may be the first crack in the dike supporting excessive public subsidies for privatized roads, Indiana Department of Transportation Commissioner Karl Browning says the state should stop committing to “availability payments” that support “public private partnerships.” The Indianapolis Business Journal reports that “a critic of Daniels’ toll-road lease and the I-69 project, Rep. Matt Pierce, D-Bloomington, said he’s pleased to hear a member of the Republican administration talk about P3s in frank terms. ‘Where have you been all these months?’ he asked.”


3) National: David Webber urges a rule change by the Labor Department to ensure that public pension trustees act in the interest of public employees, and not use pension fund money to promote outsourcingto private, for-profit companies that kill public jobs. “Pension funds have financed the privatization of school bus companies, water utilities and libraries. Displaced workers not only stop contributing to the funds, losses that can harm other workers and retirees, but also often must turn to public assistance to survive, undermining the argument that taxpayers benefit from these transactions.” [Webber research paper]


4) National: James Risen and Tim Shorrock discuss the role of private contractors in creating a situation whereby America “has become accustomed to a permanent state of war.” Shorrock says things have gotten worse “largely because of the vast privatization that has taken place over the past 15 years. In the past, of course, we had the revolving door, but generally high-ranking officials left the government and went back to their cushy positions in banking, corporations, etc. But now they go directly to contractors doing work they used to do in government.”


5) National/International: The outsourcing of military training to private companies is spreading across the globe. “These private-public partnerships have become the norm rather than the exception in many countries. (…) In the United States, there has been less enthusiasm for privatized training, partly because the Pentagon has had plenty of money to build and operate its own facilities. But that could change as military budgets shrink and officials rethink spending priorities.”


6) National: With criticism of the common core curriculum mounting up across the country, Jeb Bush sticks to his guns, but “seeks peace with its critics.” Last week Bush delivered a lengthy defense of common core at his Foundation for Excellence in Education.


7) National: A nonprofit organization, ECMC, is buying up some of the assets of Corinthian Colleges, the bankrupt for-profit education company. The education department, which has been looking for a rescuer for Corinthian, has yet to approve the deal. “ECMC has faced some controversy of its own. (…) At the same time, however, a chorus of consumer and student advocacy groups said they had serious concerns about the sale. They expressed concern that the campuses would be run by an organization that has not previously managed academic institutions. ‘ECMC has no experience running a college, let alone one of this scale, and is instead known for ruthless and abusive student loan operations,’ the Institute for College Access and Success, known as TICAS, said in a statement.” Matt Reed of Inside Higher Ed also has his doubts.


8) National: United Water blasts a report by public interest groups critical of water “public private partnerships.” The report, Troubled Waters: Misleading Industry PR and the Case for Public Water, says “at the state level, private water corporations have used their political influence to limit democratic oversight and accountability of private water projects. Nowhere is this clearer than in New Jersey, where Suez’s United Water is headquartered.”


9) California: Los Angeles interim schools superintendent Ramon Cortines lifts the ban on a “parent trigger” privatization law. “Cortines, 82, is now serving as LAUSD superintendent for the third time, after retiring in 2011. He has a long experience in working with private corporations.”


10) California: Hilary Hammell of Public Advocates reports that California charter schools are illegally imposing work quotas on students’ families. “Throughout California, public charter schools regularly force parents to work at the school for a set quota of hours per year in exchange for educating their child. At many schools, if parents do not perform the required work, they must pay the school in money or goods or else face the risk that their child will be un-enrolled or unable to participate in school activities.”


11) Colorado/National: The U.S. Bureau of Land Management has rejected opposition to its plan to turn some federal lands over to private interests in exchange for private land. “The exchange, which has been debated for the last five years, would trade 1,460 acres of public BLM land for 661 acres of private land held by Leslie and Abigail Wexner, the billionaire owners of the retail conglomerate Limited Brands.” Groups have 30 days to appeal, and are considering whether to do so.


12) Florida: Florida State University’s Project on Accountable Justice says the Florida Department of Corrections needs to be rebuilt from the bottom up. Its “deficiencies have facilitated an environment that is dangerous, brutal and in some cases, deadly.” PAJ recommends four steps for improvement: create a public safety oversight commission; delink the DOC secretary’s term from the governor’s term; develop “a comprehensive strategic plan to support and advance the professionalism and culture of Florida correctional officers”; and expedite the implementation of performance measurement and management. [Report]


13) Florida: A plan to rehabilitate the Miami Marine Stadium with private money is turned down by city commissioners after “questions about rosy financial projections and ‘self-dealing’” arise.


14) Georgia: The University System of Georgia’s half billion dollar project for college housing is being closely watched by the privatization industry. Jason Taylor, vice president for advisory services at The Scion Group LLC, says “having the backing of the state university system could tip the balance among debt capacity, student demand, and operational control to make it work, but whether the arrangement successfully delivers on its ambitious goals will be heavily scrutinized by the higher education, real estate development and investment communities in the coming years.” [Sub required]


15) Indiana: Fitch Ratings says “the bankruptcy of the Indiana Toll Road won’t remove the long-term value from the project nor diminish the importance of public-private partnerships (PPP) to U.S. project finance.” The rating agency says, “in our view, in addition to optimistic traffic forecasts, the project was troubled by factors that are specific to its timing and implementation. The project built in a large and aggressive refinancing and was exposed by the depth, timing and slow recovery from the Great Recession. In 2010, traffic on the highway was approximately half the originally projected level, due in part to the high original forecast and significant toll increases. Meanwhile the project also had to contend with rising debt costs. The highway has several strengths that will benefit it in the future.”


16) Kansas: The University of Kansas has issued a request for qualifications for a “public private partnership” for facilities at its Lawrence campus. The project consists of academic science facilities, student union space, two housing facilities, a power plant, and parking and other infrastructure.Responses due December 30, 2014.


17) Maryland: Prince George’s County signs a 30 year agreement with Corvias to manage stormwater runoff. “The P3 agreement is the first of its kind to address stormwater systems and will serve as a model for future endeavors by local governments in Maryland and beyond,” the managing director of Corvias says. [Sub required]


18) Mississippi: Former corrections commissioner Chris Epps, who was recently charged with 49 counts of corruption, says “he couldn’t get rid of Mississippi’s private companies running prisons ‘because of all the money they spread around Jackson,’” according to the Clarion-Ledger.


19) New Jersey: Outsourcing of toll takers’ jobs is off the table after a long battle. “Turnpike toll plaza supervisors earning the maximum salary of $80,290 would make $69,958 under the new contract. Maximum salaries for parkway toll plaza supervisors would drop from $82,118 to $69,000.”


20) North Carolina: Charter school chain ends a month of wrangling with regulators and discloses its executive salaries. “Millions of public dollars have flowed through the nonprofit schools to Mitchell’s for-profit charter-management firm and another company he owns. A believer in the power of the free market to drive education reform, Mitchell makes no apologies about the arrangement. He has also fought to keep the financial details of his management firm secret.” [List]


21) Ohio: The Ohio Association of Public School Employees is asking the Madison School District to consider insourcing its bus operations, which were privatized six years ago. “Attached with its qualifications questionnaire, the union included a proposal outlining the costs associated with rehiring a fleet of 31 unionized drivers, four assistants, a secretary and a supervisor. The proposal also stated that bringing busing service back in-house next school year will cost the district $1,342,822, or 15.1 percent cheaper than what the district is spending this school year on Youngstown-based firm Community Bus Service.” [OAPSE proposal]


22) Ohio: Opponents rally against the proposed outsourcing the Brook Park EMS service. “The city itself still has to explain how the private EMS would work if it is enacted. The Brook Park Firefighters’ union will try to counter by stating that system that is in place works best and the city can afford to pay the extra $500,000 to keep emergency service as it currently is. The situation itself will likely become a hot button issue for fire department unions across the region as they have to be fearful of privatization spreading to other cities if it is established in Brook Park”


23) Pennsylvania: SEIU is victorious in a case it brought to the state supreme court to block closings of public rural clinics. “Kevin Hefty, an SEIU Healthcare PA vice president, said in a statement, ‘At a time when the need for public health nurses couldn’t be greater, we fully expect the Corbett administration to undo the damage they did and reopen closed health centers, reinstate nurse positions and restore the level of services required by law.’”


24) Pennsylvania: Sixteen firms express an interest in developing Philadelphia’s Southport Terminal Complex, a “public private partnership.” The Philadelphia Regional Port Authority “solicited proposals from about 200 potential investors for possible public-private partnership in part or all of the property along the Delaware River. The agency said it will evaluate the responses before its board acts. No schedule has been set for the evaluations.”


25) Virginia: Aubrey Layne, the new state transportation secretary, says that new tighter rules on road “public private partnerships” will spur competition and remove the mystery from the selection process. “The biggest factor in picking the right projects is an accurate assessment and understanding of the risks involved and how those risks are managed and allocated between the public and private partners, he said.” Layne also wants to expand the state’s P3 program to cover buildings and other “applications,” and will bring this idea to Gov. McAuliffe. [Sub required]


26) Wisconsin: Gov. Walker’s transportation secretary, Mark Gottlieb, wants to borrow $800 million, divert money from education and health care, increase tolling, and introduce vehicle mileage based fees to pay for highway and transit improvements. “Gottlieb’s plans have garnered headlines for the new fees and taxes he is proposing. Gottlieb and others have been looking for new ways to fund transportation because gas tax collections have been stagnant in recent years as vehicles have become more fuel efficient.”


27) Revolving Door News: Stephen Dowd, a former infrastructure investment executive at the Ontario Teachers’ Pension Plan (OTPP), joins Caledon Capital Management as a partner in its infrastructure team. “Caledon was founded in 2006 by David Rogers, the former head of the private equity group of the Ontario Municipal Employees Retirement System (‘OMERS’) pension plan and a member of the Board of Directors of the parent company for OMERS’ direct infrastructure investment arm—Borealis Infrastructure.”


28) Revolving Door News: The New York Times reports on the revolving door between private Wall Street banks and the New York Federal Reserve Bank (once led by Timothy Geithner), and on how a former NY Fed employee fed confidential information to Goldman Sachs after he was hired there.


29) Think Tanks: The New York Times runs an in-depth profile of the Los Angeles Alliance for a New Economy. “LAANE increasingly describes itself as a labor-environmental organization. It pushed for an overhaul of the city’s waste-hauling industry, to take effect in 2017: To win contracts, haulers must pledge to increase the amount that is recycled, use low-pollution trucks, pay a living wage and improve safety.”


30) Transparency: Michael Morisy, co-founder of the MuckRock, discusses “How to appeal a FOIA rejection.”



Legislative Issues:


1) National: A battle begins to shape up in Congress over education policy. Sen. Lamar Alexander (R-TN), who will chair the Senate education committee, wants to devolve decisions on No Child Left Behind to the states. Alexander also wants “more vouchers for childcare.” Distinguished civil rights attorney Ted Shaw says it’s “privatize, privatize, privatize. That’s an old agenda.” Shaw says “we’ve left and we continue to leave millions and millions of children behind and I don’t think privatizing is the answer.”


2) National: Activists urge lawmakers to use the Congressional lame duck session to protect the U.S. Postal Service from privatization before the Republican majority takes over the Senate next year. “If Congress were actually serious about saving the Post Office, it would take action right now to stop requiring the Postal Service to put over $5 billion a year into a savings account for the retirement health benefits of people who haven’t yet even been born. (…) Time really is running out.”


3) National: President Obama wants Congress to pass his $300 billion transportation package before the Highway Trust Fund expires in May 2015. The proposal also includes $4 billion in federal TIFIA loans. “Private investments are necessary to bring in the funding needed to build large projects, [Deputy Transportation Secretary Victor Mendez] said.”


4) National: The Congressional Budget Office says that eliminating the tax exemption for new Private Activity Bonds, which are frequently used in “public private partnerships,” would save the government $30 billion. “Doing away with the exemption for new PABs is one of the provisions in House Ways and Means Committee Chairman Dave Camp’s tax reform draft legislation that was released earlier this year. (…) Eliminating the Capital Investment Grants program, which gives funds to public transit systems, would produce savings of $14.7 billion from fiscal years 2015 to 2024, CBO said.” [Sub required; CBO Report]


5) Ohio: The state senate overwhelmingly passed a bill to all but eliminate traffic cameras. “Opponents of traffic cameras say they’re unconstitutional money grabs that ignore due process of law. They point to small towns such as Elmwood Place and New Miami, where judges have ordered officials to shut off cameras that have levied millions of dollars in fines.” The bill now heads to the House, which passed an even tougher bill last year.

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