Update: Upcoming Outsourcing Issues. December 8, 2014


1) National: Despite multiple problems arising from Aramark’s outsourcing businesses, ranging from poor service in Chicago schools, to food service problems in Michigan and Ohio prisons, to eliminating jobs at Vanderbilt University, the company’s private equity shareholders have exuberantly cashed in since the company went public a year ago. “Since its IPO debut in December of 2013 at $20 per share, the stock has enjoyed a post-IPO trading range of $20.10 to $30.96—and shares were right at $30 on last look. That is a gain of 50%, so the private equity backers have serious gains that they can lock in.” John Ogg reports that “Aramark’s underwriting syndicate for this secondary was shown to include the firms Goldman Sachs and J.P. Morgan, both of which are also the parent companies of the private equity groups which still own shares and are selling in the group of selling shareholders.”


2) National: An executive order is reportedly on the President’s desk “that would direct the White House Office of Management and Budget to change the way it scores the budget impact of [public private partnerships] in order to support private development of new federal buildings.” [Public Works Financing, November 2014; sub required]


3) NationalRick Cohen of the Nonprofit Quarterly debunks Teach for America’s claims that it is not undermining public education. “The reality is that of TFA members who are still active as teachers, 40 percent are in charter schools. While TFA says it does not displace teachers in public schools, the fact that many are teaching in charters amounts to roughly the same thing, as increasing numbers of charters are opening in districts where public school teachers are being laid off as a consequence.”


4) National: The GAO has issued a report recommending the effective implementation of the Digital Accountability and Transparency Act of 2014. Says it would substantially improve federal management.


5) NationalPublic Works Financing takes a close look at “Why P3 Procurements Flop.” Public officials are skeptical of the purported value advantages of “public private partnerships” for a number of reasons. “[Value for Money] analysis is a useful but imperfect tool that is potentially subject to manipulation in valuing the risks, stimulating that skepticism,” PWF notes. Among the factors cited is the deep and liquid U.S. municipal bonds market, favoring public procurement because “muni financing does have a cost of funds advantage.” Political factors are also cited (the corporate profit motive, unpopularity of tolls, foreign participation). [November 2014; sub required] Also, Value for Money analyses, which pro-P3 interests have banked on to shift opinion, have been rejected on a number of projects in recent years due to public doubts about their reliability, accuracy and neutrality.


6) NationalPublic Works Financing, a longtime organ of the road privatization industry, branches out and runs a pro-charter schools article by John F. Cozzi of KIPP New Jersey. [November 2014; sub required]


7) National/International/Maryland: SNCF, the French national railway company, agrees to pay reparations to American survivors of the Holocaust who were deported to Nazi death camps on their trains. “The agreement also is intended to close the door on pending state and federal legislation that would ban France’s state-owned SNCF railway or its foreign subsidiaries from winning contracts in the United States. A Maryland-based subsidiary of SNCF [Keolis North America] is part of a consortium of private companies bidding to build and operate the $2.45 billion light-rail Purple Line between Montgomery and Prince George’s counties.”


8) National: The Tampa Bay Times’ political editor, Adam Smith, pushes back on the idea that Jeb Bush is some kind of political moderate. “Jeb Bush, a moderate squish? The governor who treated trial lawyers and teachers union leaders as enemies of the state? Who stripped job protections from civil servants? Who slashed taxes? Whose passion for privatization included enacting the nation’s first statewide private school voucher program and extended to privatizing health care for the poor, prisons and child protection services?” The right wing Breitbart website just ran a detailed article on Jeb Bush’s “‘Education Reform’ Empire.”


9) California: The San Jose Planning Commission will hold a public meeting this Wednesday to discuss expanding the Newby Island Landfill and Resource Recovery Park, which is operated by Republic Services. “In recent weeks, City of Milpitas officials and residents alike have renewed objections to the dump’s expansion claiming odors have become unbearable. Residents in particular have claimed health problems due to the landfill’s proximity to their homes.”


10) Georgia: The State Supreme Court puts Georgia’s private probation industry on notice that it can’t “shake down people on probation for money. The abhorrent practice is called tolling.’ (…) Thirteen misdemeanor offenders in Richmond and Columbia counties had brought a civil rights lawsuit against Sentinel Offender Services, alleging that the company had tacked on fees and requirements beyond what was imposed by the courts in those counties.” But the court upheld the constitutionality of the private probation system.


11) GeorgiaThe state child protection agency, DFCS, struggles to improve after turning back a privatization attempt last year. “[Karl Lehman, CEO of Childkind, a nonprofit,] adds that high DFCS turnover and low worker morale should concern lawmakers. Funding the program properly is critical, he says. Child protection has suffered, he says, ‘because Georgia has not invested sufficient resources.’”


12) Georgia: After the passage of a ballot initiative allowing tax breaks to private companies for university dorms and parking facilities at the University System of Georgia, officials look to lease out public facilities and shift debt off their books. “Phase One, coming up in 2015, includes 6,195 existing dorm beds and 3,000 new beds across the state.” Rep. Sam Moore (R-Ball Ground) voted against the bill because “he sees it as giving preferential tax treatment” and had biased wording implying that a change would make facilities more affordable.


13) IllinoisWaste Management and Republic Services oppose Metro East’s decision to open a public landfill. Metro East comprises the eastern suburbs of St. Louis. “Proponents of the landfill say it’s an example of other waste operators using the state’s environmental laws to quash competition, and that Caseyville did everything it was legally required to do. The legal challenges come from Republic Services’ Roxana Landfill and the village of Fairmont City, a municipality heavily dependent on the waste tipping fees it receives from Waste Management’s Milam and North Milam landfills.”


14) LouisianaMedicaid costs have shot up dramatically since the system was privatized in 2012. “Included is a net increase of $600 million related to Bayou Health spending — the private health insurance program handling health care for more than 900,000 of Medicaid’s 1.4 million recipients. In addition, there has been an estimated $350 million increase in payments for care of the uninsured to private operators of LSU hospitals.”


15) Maryland: Baltimore selects the British-based PA Consulting Group to conduct an efficiency study of the city’s water and wastewater treatment plants. The contract will be presented to the Board of Estimates in the next few weeks. Despite relief in some quarters that Veolia wasn’t given the contract, PA Consulting promotes private investment in public infrastructure, and, in conjunction with Bechtel, bid on a massive contract to outsource the procurement of Britain’s military equipment. “Selected by the Cabinet Office to support the UK Government’s ambition to move one million public sector workers into employee-owned ventures, we are acknowledged as the leading advisor in this field.”


16) Maryland: The MTA postpones the deadline for bids on the Purple Line, which the state’s new Republican governor has indicated he may cancel. The date is moved from January 9 to March 12. “The timing of the bid solicitation and Hogan’s decision of whether to continue or kill the $2.45 billion transit project must jibe because the state, in an effort to increase competition, agreed to pay up to $2 million each for losing bids. That ‘stipend’—which could amount to $8 million if all four bids were rejected—would only kick in after bids are submitted.” Hogan takes office January 21.


17) Michigan: Activist warns that Veolia may be engaged in the creeping privatization of Detroit’s water system, which is in the process of being regionalized. “It’s their new attempt to get in the door and increase management and oversight over time,” says Jesse Bragg of Corporate Accountability International.


18) Michigan: As Detroit experiences a major blackout due to the failure of a cable allegedly not properly inspected by DTE Energy, the “quiet privatization of maintenance and technical work once handled by hundreds of unionized municipal employees” continues on its DTE-run street light repair program.


19) Michigan: Detroit is facing a more than $20 million bill from its bankruptcy advisor, Miller Buckfire & Co. “A renegotiated contract signed by Emergency Manager Kevyn Orr in June calls for the firm to get a flat $28 million fee and eliminated a possible bonus for securing a deal to privatize water department operations, which never materialized.”


20) New York: The new operator of the outsourced Maplewood Manor Nursing Home has proposed drastic cuts in the facility’s workforce. “The proposed cuts, 97 in all, amount to $1,819,693. Along with another $4,000,933 in wage and benefits reductions, the cost cutting measures were outlined by Zenith executives during a Wednesday meeting with Maplewood staff and CSEA union reps. Kathy Garrison, the regional vice president of the union, which has yet to make a counter offer, called the situation a ‘disgrace’ and cast blame on the County Board of Supervisors, which reached a deal with Zenith last year amidst protests from employees.”


21) North Carolina: Commerce Secretary Sharon Decker, who spearheaded efforts to privatize the state’s economic development group, is stepping down. Also stepping down is Richard Lindenmuth, who headed the development agency. Replacing him will be Christopher Chung, who has led Missouri’s privatized economic development efforts since 2007.


22) OregonThe State Land Board meets tomorrow to discuss raising revenue from the Elliott State Forest, including possible land sales under the guise of “public private partnerships.” “Environmental groups are planning a protest and march at the capitol before the meeting to urge the State Land Board not to privatize the public forest.”


23) Pennsylvania: After months of due diligence by the Philadelphia City Council and its opposition to selling off the city’s gas works, UIL Holdings pulls its bid for the facility. Mayor Nutter expresses frustration. “Council leaders objected that Nutter had discounted options for operating PGW under city ownership. [City Council President Darrell L. Clarke] and other Council members say they are more interested in pursuing a public-private partnership to run or sell part of PGW while retaining city ownership. But Clarke would not disclose plans for alternative deals Thursday.” Clarke criticized Nutter’s bidding process, saying the Request for Proposals “was limited in scope and issued with no input from City Council.”


24) TexasRepublic Services refunds a decade’s worth of improperly collected trash fees in San Angelo, but “higher rates take the pleasure out of checks.” This year the city put its trash contract out to bid for the first time. “[Grocery owner Bob Murray] said he has generally been satisfied with Republic’s service, but was more indignant about the execution of the trash bidding process, which many residents said was not transparent. ‘I don’t know whether they vetted the process or on what conditions,’ he said. ‘They should have let the public know more about the bid.’”


25) Virginia: Transurban’s I-95 electronically-tolled express lanes are only weeks away from opening. “The express lane tolls will range between 20 cents and 80 cents a mile. If the lanes are heavily congested, a one-way trip could cost nearly $24.”


26) Wisconsin: The Capital Times congratulates public service workers in the AFT and AFSCME for winning their recertification battles required under Gov. Walker’s draconian anti-labor legislation, despite the fact that “Walker’s extremism has been supported extensively by out-of-state special interests that want to privatize public services and public education.”


27) Wyoming: Conservationists Luther Propst and Susan Culp make the case against transferring federal land to states such as Wyoming, debunking claims that states won’t privatize public lands. “Western states routinely sell and lease large acreages of state land, with leases often prohibiting public access.  In the last several decades, several Western states have sold more than 1 million acres each. Utah has sold more than 3 million acres of its original conveyance. Nevada has disposed of more than 2.7 million acres. (…) These and countless other examples are the stuff of Western legend: grazing leases issued below market value; land, minerals or rights-of-ways privatized in non-competitive auctions.”


28) International: Balfour Beatty, the troubled construction company, rejects a bid for its U.K.-based “public private partnership” assets by John Laing, saying the bid is too low.


29) Save the DateNational Sunshine Week, March 15-21, 2015.



Legislative Issues:


1) National:  The American Institute of Architects has published a 52-page “Legislative Resource Guide on Public-Private Partnerships for Public Facilities.” It includes model legislation. Recommends: the creation of explicit statutory authority; creation of an oversight or advisory entity; provision for infrastructure planning; requiring an objective analysis of whether a proposed project is suitable; ensuring an adequate public capacity to manage “public private partnership” contracts; provision for a quality-based procurement process; allowance for unsolicited ideas and concepts, but not unsolicited proposals; stipends for unsuccessful bidders; and provision of critical elements of good PPP contracts. Includes a glossary of PPP-related terms.


2) National: Peter DeFazio, the ranking member of the Transportation and Infrastructure Committee, selects Kathy Dedrick as his chief of staff.


3) Arizona/National: After a decade of bitter fighting, “a controversial bill to privatize national forest land in Arizona has been tucked into the national defense spending bill, to the dismay of those fighting a mining company’s efforts to buy the land. If approved, the legislation would open the door for a massive copper mine 100 miles north of Tucson.”


4) FloridaLawmakers introduce a bill to overhaul the state Public Service Commission following a series of controversial PSC decisions. “The PSC voted 3-2 last week to gut the state’s energy-efficiency goals and to end rebates for solar power programs at the close of 2015. That followed a series of decisions by the commission in favor of Florida’s investor-owned utilities, in particular in regard to Duke Energy Florida. (…) The state’s largest investor-owned utility, Florida Power & Light, wants the commission to approve a proposal to charge its Florida customers for fracking exploration in Oklahoma, an idea Duke also is considering.” Recent PSC decisions have forged an alliance between environmentalists and Tea Party activists.


5) New Jersey: Last week Democratic State Senate President Stephen Sweeney released a plan to stabilize Atlantic City that does not provide for an emergency manager. The plan may be voted on in committee today.


6) New YorkA major showdown is looming in the state legislature over charter schools. “Democratic Gov. Andrew Cuomo and the Republicans who lead the state Senate support more charter schools. But teachers unions and many of the Democrats in the state Assembly say they weaken public schools. The conflict is expected to be one of the top issues facing lawmakers when they begin their 2015 session next month.” Zephyr Teachout, who ran against Cuomo in the November elections, “vowed to fight what she says is an effort to take control of state education policy. She identified a list of several wealthy hedge fund managers who spent heavily in the campaign to support Cuomo and Senate Republicans.”

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