Occupational Licensing Reduces Consumer Benefits from Online Platforms 

“The share of U.S. workers required to hold an occupational license has exploded from around 5% in 1950 to 25% in 2020,” writes Reason Foundation’s Vittorio Nastasi. Occupational licensing has a documented history of limiting competition and stifling innovation while making certain classes of professionals into protected classes. Nastasi reviews recent literature pointing to yet another negative impact of occupational licensing: making it harder to use the online platforms that rate home improvement contractors. Using data from the popular home improvement site Angi’s HomeAdvisor, a Harvard researcher estimated that a recent New Jersey pool contractor licensing law resulted in customers becoming 16% less likely to find at least one qualified contractor on the site, with an overall negative impact of licensing as high as 25%. As Nastasi notes, licensing, in this case, squanders some of the benefits buyers and sellers can enjoy from online platforms. 

ESG Investing Violates Fiduciary Duty in Public Pension Plans 

Investing based on environmental, social, and governance (ESG) standards is a hot topic. Reason Foundation Senior Fellow Richard Hiller argues that ESG investing must be subject to clear fiduciary standards for public pension funds, so they first ensure secure retirement benefits for their members and limit costs to taxpayers. Hiller points out the important differences between individual investors, who are free to pursue any investment strategies—such as boycotts of companies and industries for ESG or activist reasons— they want and pension systems, whose advisors have a fiduciary duty to pursue the best strategies to maximize returns. When public pension fund managers make decisions based on ESG or any other political motivations, they violate that fiduciary duty, Hiller writes. 

NEWS & NOTES 

STATE GOVERNMENT 

West Virginia University Seeks Potential Energy P3: Inframation News revealed that West Virginia University released a request for proposals (RFP) for financial advisors to assist in developing a public-private partnership (P3) for the school’s utility systems, including energy and chilled water facilities. According to the RFP’s language, the school “envisions some form of public/private partnership, whether in the form of a concession agreement, design-build-finance-operate-maintain agreement, or some other transactional structure.” 

Hawaii Rejects P3 for Aloha Stadium: After three years of planning and millions spent on the project, Hawaii Gov. David Ige revealed he would reject using a public-private partnership to redevelop Aloha Stadium near Honolulu. Instead, a state agency (The University of Hawaii has been mentioned, though a final decision is still pending) will pursue the project itself with $350 million set aside by the state legislature earlier this year, according to the Ige administration and the state’s Department of Business, Economic Development, and Tourism. 

LOCAL GOVERNMENT 

Mississippi City Begins Outsourced Public Works: This month, the city of Petal, Mississippi, began a contract with Alabama-based ClearWater Solutions to take over most of the duties of the town’s public works division. Aside from solid waste management, which WastePro handles for the city in a separate contract, the ClearWater contract will cover all other division functions, including water and sewer operations, as well as road and fleet maintenance. Town aldermen voted to enter into the contract in August, citing difficulties in hiring and keeping employees, performance and compliance issues, as well as rising costs of pensions and health insurance.     

Towamencin Faces Vote That May Make Sewer Sale Illegal: In November, residents in Towamencin Township, Pennsylvania, will vote on a referendum that could potentially void a pending sale of the city’s sewer system to NextEra Energy for $115 million. Supporters of the referendum hope that by creating a home rule charter, the sale of the sewer system could be canceled, but admit the strategy “hasn’t been tested yet.” In May, town supervisors approved the deal, which still awaits an approval decision by the Pennsylvania Public Utility Commission. 

Economic Study Shows Benefits of Police Work Outsourcing: A report by the Montreal Economic Institute showed how large American cities can save taxpayers money by delegating non-critical police functions to private employees. By outsourcing a combination of administrative work and traffic enforcement, the study found that Los Angeles, Miami, and Milwaukee could annually save anywhere from $31 million, Milwaukee’s low estimate, to over $350 million, Los Angeles’ high estimate. The authors also cite the advantages of competitive bidding to ensure those functions are handled by the most capable and accountable actors. 

Texas City Releases RFP for Publicly-Owned Waterfront Parcel: The city of Beaumont, Texas, released a request for proposals to seek a purchaser and developer for 555 Main Street, a 2.7-acre downtown lot that sits on the Neches River waterfront. The city is providing $25 million for the project and also cleaned up a rail yard site to facilitate the purchase. Attracting economic development is a primary concern the city says. Beaumont’s population doubled from 1940–1960 but has mostly remained stagnant for the past 60 years. 

FEDERAL GOVERNMENT 

U.S. Air Force Releases Microreactor RFP: The United States Air Force released an RFP for a pilot program dedicated to creating a nuclear microreactor at Eielson Air Force Base in Alaska. The Air Force hopes to develop microreactors for its more remote installations, citing their adaptability to changing conditions and ability to operate independently from the power grid. The microreactor resulting from the project will be privately owned and operated. 

QUOTABLE QUOTES 

“Our (Public Employees Retirement System), we pay 17.4 percent on that, which kind of hurts us,” Ducker said in a previous story. “And we’ve noticed over the last year or so that we’re losing people that are going into construction and other jobs that are just able to pay more…So the privatization could be a good thing for some of the employees because they would get a pay increase. It’s tough when you’re paying folks $15 and $16 an hour, and other municipalities and private entities are paying $19 to $22 an hour.” 

—Petal Mayor Tony Ducker on the decision to outsource the city’s public works division 

“(T)he reality of policing in the United States is that we have asked police to take on more and more responsibilities that are increasingly far removed from critical policing tasks.” 

—From “Enhancing Public Safety While Saving Public Dollars with Auxiliary Private Security Agents” by the Montreal Economic Institute

“I am concerned that we spent three years and $25 million to get to this point, and we were all ready to go. And here we are two months before the end of their term, they’re saying that they somehow have a miraculously better idea to hasten this project?” 

–Hawaii State Sen. Glenn Wakai on the decision not to pursue a P3 for the redevelopment of Aloha Stadium 

“The release of the RFP for the Eielson AFB micro-reactor is a critical next step in furthering the development and deployment of reliable and clean energy technology at Department of the Air Force installations. This program is extremely important to mission assurance and sustainment in the face of climate change and continued national defense threats, and demonstrates the department’s commitment to ensuring our installations have a safe, reliable supply of energy, no matter their location.” 

– Deputy Assistant Secretary of the Air Force for Environment, Safety, and Infrastructure Nancy Balkus on a pilot program to develop a nuclear microreactor at Eielson Air Force Base

The post Privatization and Government Reform News: Impact of occupational licensing, ESG investing, and more appeared first on Reason Foundation.

New Medi-Cal Amendment Ensures More Expensive Ambulance Rides 

A recently passed amendment to California’s Medicaid program, Medi-Cal, is set to raise the average cost of an ambulance ride from about $120 per trip to over $1,000 per trip without justification. Local California fire departments were a large advocate for the change, which they seem to see as a potential financial windfall if they are can shift emergency medical services (EMS) to be under the purview of their departments. In a new article in the Orange County Register, Reason Foundation’s Austill Stuart explains why the Medi-Cal amendment will hurt taxpayers and how it could potentially disrupt EMS services across California.  

Jackson’s Water System Problems Need Long-Term Commitments 

The residents of Jackson, Mississippi, had already been without drinkable water for weeks when the city’s water and sewer systems failed amid major flooding last month. While the boil advisory has been lifted and service has mostly returned, Jackson’s water infrastructure problems remain, including malfunctioning equipment in the city’s treatment facilities and a lack of personnel capable of operating and maintaining the equipment itself, according to a recent U.S. Environmental Protection Agency inspection report. The city has deep financial problems, too. Jackson’s bond rating is barely investment grade, and it has lost over 14% of its residents over the last 10 years. The situation is so bad that a bipartisan mix of officials agree that an entity other than Jackson should operate the city’s water systems, with Mississippi Gov. Tate Reeves suggesting privatization as an option. In a new article, Reason Foundation’s Austill Stuart examines the depths of Jackson’s water problems, why the city is likely going to require private capital and solutions to address them, and how to best protect taxpayers.  

Long Overdue Reforms to the FDA Regulation of New Drugs Could Save Lives 

“There are few areas of public policy where the results have been as diametrically opposed to the intentions as pharmaceutical regulation in the United States,” writes Reason Foundation’s Managing Director of Drug Policy Geoffrey Lawrence in a recently released policy brief on how to reform the Food and Drug Administration. The paper includes recommendations on how to reform the FDA, streamline the drug approval process, use pharmaceuticals approved by the European Union, reduce prescription drug costs, and help achieve the broad public goal of improving the lives and health of all Americans.

Uneven Progress Toward Transparent and Machine-Readable Financial Reporting In Florida 

The Florida Division of Auditing and Accounting released a business reporting language taxonomy that local governments can use to release their financial reports digitally. A 2018 Florida House Bill mandated XBRL as a necessary common standard. But after the bill’s passage, the Government Finance Officers Association said it “opposes efforts to mandate the use of specific technologies by state and local governments for financial reporting and disclosure.” In a recent commentary, Senior Policy Analyst Marc Joffe explains why XBRL is the best fit for financial reporting by local governments and how it can help provide taxpayers and policymakers with data in a consistent and usable manner to increase transparency and accountability. 

Keep Congress Away from College Football  

While college football players can now earn money from their name, image, and likeness (NIL), the National Collegiate Athletic Association continues to cling to the “amateur” status of players. This long-outdated idea has reached the point of being a fairy tale, allowing universities and their athletic departments to rake in billions of dollars annually in revenue, as Reason Foundation Director of Education Reform Aaron Garth Smith describes in a recent commentary. The NCAA knows its rules may be on shaky legal grounds, which is why it is lobbying Congress for a federal policy that would preserve the NCAA’s strong grip while keeping players from reaching their full market potential.

NEWS & NOTES 

STATE GOVERNMENT 

Puerto Rico Chooses Partner for Cruise Ports Public-Private Partnership: In August, the Puerto Rico Ports Authority (PRPA) selected Global Ports Holdings as its partner for a 30-year concession of the San Juan Cruise Port. The deal includes an initial $75 million payment to the PRPA and $350 million in capital investments in the port by the company to improve services and expand capacity. 

Hawaii Modifies Resort RFP Action to Exclude Sale: Earlier this month, the Hawaii Board of Land and Natural Resources modified an action it made in July to disallow a sale of state properties, opting instead for a lease. The Hawaii Department of Land and Natural Resources (DLNR) wants to tear down or renovate a waterfront hotel and a nearby condo building, but funds are not available for the project or for an environmental assessment and impact statement (EIS). Therefore, a long-term lease is seen as the only way to attract developers to fund both the EIS and the renovation work. DLRN staff canceled a previous request for qualifications/proposals process for the project last year after it couldn’t fully verify the financials of its preferred proponent. 

LOCAL GOVERNMENT 

Los Angeles Jail Diversion Program Shows Promising Results: The Rand Corporation recently released a report evaluating the early results of the Los Angeles County “Just in Reach Pay For Success” (JIR PFS) program, which provides permanent supportive housing (PSH) for individuals eligible for diversion from jail. In early results, participants spent an average of 24 fewer days in jail compared to a control group. The Los Angeles County Department of Corrections oversees the program, which was originally started in 2017 and is funded by $10 million from the Conrad Hilton Foundation and United Healthcare. Success payments are based on maintaining a 92% and 90% PSH retention rate after six- and 12-month intervals, respectively, and a 42% jail avoidance rate for participants over two years. 

Miami-Dade Releases $10 Billion Downtown Redevelopment RFP: Miami-Dade County released a request for proposals in August for a $10 billion downtown redevelopment project. The county is providing 17 acres of land adjacent to most of the county government’s offices. It hopes to find partners to develop potentially 17-to-24 million square feet in a combination of housing, offices, retail, parking, a transit terminal, and a minimum of 2.5 acres of green spaces. The chosen developer for the project would pay the county to lease the land for up to 99 years.   

Annapolis Closes on Parking and City Dock P3: Earlier this month, the city of Annapolis and the Maryland Economic Development Corporation reached financial close with Annapolis Mobility and Resilience Partners on a $70 million public-private partnership that includes renovations to a downtown parking garage and the Annapolis City Dock. The parking improvements will be procured as a design-build-finance-operate-maintain project. For the dock, the work will be design-build-finance and includes a raised seawall and storm surge barriers as well as green spaces to capture stormwater.  

Pittsburgh Announces Micro-mobility Pilot: The city of Pittsburgh, Carnegie Mellon University, and mobility services provider Spin announced the creation of a pilot program to provide micro-mobility solutions to low-income workers. The pilot program will provide 50 selected individuals free access to public transit, bikes, scooters, and zip cars in a year-long test. This program is intended to track socioeconomic progress and will compare results to a 50-person control group evaluated by Carnegie Mellon. The Richard King Mellon Foundation is providing $200,000 for the funding alongside $50,000 from Spin. 

Baltimore Starts Guaranteed Income Pilot Program: In August, Baltimore revealed it had started processing payments to individuals in its Baltimore Young Families Success Fund. A group of 200 individuals is scheduled to receive monthly cash payments of $1,000 for two years in exchange for participating in interviews and answering surveys about their experiences. Local nonprofit the CASH Campaign of Maryland and personal finance portal Steady will provide operational support for the city’s project, which will be evaluated by Johns Hopkins and is being funded by $4.8 million in American Rescue Plan Act funds as well as grants from private donors.  

New Jersey Town Forced to Outsource Animal Control After Resignations: Last month, two animal control officers in Stafford Township, New Jersey, resigned, leading the town to temporarily outsource the town’s animal control services to A-Academy. The contract, which Mayor Greg Myhre made clear is an “emergency decision,” will last until the end of the year. 

QUOTABLE QUOTES 

“The Just in Reach Pay for Success program appears to significantly reduce participants’ use of many county services…The program may provide a feasible alternative—from a cost perspective—for addressing homelessness among individuals with chronic health conditions involved with the justice system in Los Angeles County.” 

—Sarah B. Hunter, lead author of a Rand Corporation Report about Los Angeles County’s “Just in Reach” jail diversion program, in a press release.

The post Privatization and Government Reform News: Expensive ambulances, Jackson’s water crisis, FDA reform, and more appeared first on Reason Foundation.

Innovators in Action: Rethinking K-12 Transportation

Whether K-12 transportation is handled in-house or outsourced to private companies, it typically uses large school buses that can often hold 50 or more students. In rural areas especially, traditional school buses can be unnecessarily costly as larger, often-unfilled, and less fuel-efficient vehicles struggle to handle routes where students live further apart. In Arizona, a state grant program aimed at improving K-12 school transportation had many rural families concerned about their lack of flexibility and options. State Senator Sine Kerr, a dairy farmer who represents a rural district, saw an opportunity to help fix the problem by allowing the use of smaller passenger vans—those carrying 15 or fewer passengers—to transport students. In June, her efforts resulted in the legislature passing and Gov. Doug Ducey signing Senate Bill 1630, which allows K-12 students to be transported in passenger vans. In addition to being more fuel efficient, easier to maintain, and less costly, the vans do not require a commercial driver’s license (CDL) to operate. In a recent Innovators in Action interview with Reason Foundation’s Christian Barnard and Ari DeWolf, State Sen. Kerr discusses the new law, how it addresses concerns with safety and gives schools and families more efficient options, and how urban and suburban school districts plan to utilize the legislation’s flexibility.  

States Need Forward-Thinking Approaches to Meet Water Demands

With Arizona’s recent passage of a water infrastructure financing law, Senate Bill 1740, the state is helping ensure Arizonans have access to adequate drinking water and sanitary sewer conditions going forward. As the Bureau of Reclamation demands additional cuts in water allotments to states that rely on the Colorado River, it is important that states give local governments the tools and funding they need to pursue agreements and projects with private and public entities to secure water rights, as well as building resiliency and diversifying sources to prepare for changing climate conditions and increased demand from growing populations. In a new commentary, Austill Stuart highlights Arizona’s legislation as an example that other states should take into consideration as securing water rights becomes more difficult and projects become more expansive.

Changing the Conversation on New Highway Tolls

Due to a combination of the improved fuel efficiency of cars and public and political resistance to tolling and gas tax increases, policymakers and transportation agencies face increased difficulty in financing the needed reconstruction and expansion of highway systems, especially ones with bridges, tunnels, and other expensive assets. Many highways and bridges are nearing the end of their original useful lives and operating capacities. In this column, Reason’s Robert Poole explores these road funding debates, examines multiple recent examples of opponents stopping potential toll-financed projects, and outlines why tolling and mileage-based user fees are likely to provide a more stable, sustainable means of building and maintaining highways going forward.

Housing Regulations Increase Prices, Hurt Young Homebuyers

Homeownership was already becoming historically difficult for younger Americans before inflation rose to levels not seen in decades, prompting the Federal Reserve to raise interest rates, which makes it more difficult for homebuyers. State and local governments have long contributed to the housing problem in two key, related ways: excessive regulatory costs and restricting new housing supply. In a new post, Reason’s Vittorio Nastasi details recent research and trends in housing affordability and reforms that local governments can implement to reduce barriers to homeownership.

NEWS & NOTES

LOCAL GOVERNMENT

NYC Seeks New Ferry Operator After Audit Report Reveals Massive Expense Underreporting: The comptroller for New York City released an audit report in July revealing that the New York City Economic Development Corporation (NYCEDC) underreported expenses for operating ferry routes. Between July 2015 and the end of 2021, the comptroller’s office found NYCEDC should have reported $758 million in ferry-related expenses but only reported $534 million, an undercounting of over 40%. NYCEDC also dramatically understated its taxpayer subsidies per trip over the six-and-a-half-year period, including $8.59 per trip instead of $12.88 last year. In response to the comptroller’s findings, NYCEDC has agreed to issue a request for proposals (RFP) to find a new ferry operator. NYCEDC also noted in its response that it feels it “accurately and properly enforces” its ferry operating contract agreement, but would look to address other reporting issues in its next contract.

NYC Announces New Homelessness P3: In July, New York City Mayor Eric Adams announced the creation of the Homeless Assistance Fund, an $8 million public-private partnership (P3) between the city and over 60 local businesses and nonprofits. The effort seeks to offer support networks to homeless people with an emphasis on outreach and location. The public-private partnership represents an extension and expansion of the “Connect to Care” initiative created by local nonprofit Breaking Ground.

Fort Lauderdale Cancels Shared Government Center With Broward County: In July, the city of Ft. Lauderdale canceled its pursuit of a project to build a government complex to be shared with Broward County, according to an email from Fort Lauderdale City Manager Chris Lagerbloom sent to Infralogic. After planning on a joint project with the county for several years to replace the existing city hall and Broward County Government Center East, Ft. Lauderdale plans instead to pursue a standalone city hall building through a separate procurement.

Wichita Creates New Golf Course Oversight After Privatization Rejection: In July, the Wichita City Council approved an ordinance to create a board of governors that would replace the current advisory committee in overseeing the city’s four municipal golf courses. The change was recommended after the city council voted 5–2 to reject the privatization of the four courses earlier this year. Unlike the advisory committee, which reported to the Wichita Board of Park Commissioners (that recommended privatization), the board of governors would report directly to the city council.

Monterey Water Utility Releases Microgrid RFP: Monterey, California, public water utilities Monterey One Water and the Monterey Regional Waste Management District released a request for qualifications/proposals (RFPQ) looking for qualified firms to provide consulting services concerning the feasibility of potential microgrid and renewable energy projects. The two agencies seek three major objectives from the projects: to find the best use of waste products derived from agency activities (such as waste-to-energy, composting materials, or fertilizer), to enable an energy microgrid that includes “islanding” capabilities—where smaller energy generation and storage sources (referred to as “distributed generators”) feed the larger grid in the event of power plant outages—and to assess the integration of renewable generation sources and energy sources. Responses to the RFPQ were due at the beginning of August, and the agencies hope to announce contracts next month that will be implemented in October.

Louisiana Parish May Pursue P3 for New Jail: At the encouragement of Lafayette Mayor-President Josh Guillory, the Lafayette Parish Council voted 4–1 to approve a resolution that allows the parish to potentially partner with a private firm to build, finance, and maintain a new jail. The parish sheriff’s office would operate the jail. The parish plans on releasing an RFQ for the potentially 25-to-40-year project later this month and selecting a development partner in October.

Florida County Cancels Broadband Contract: Last month, Jackson County, Florida, canceled a contract with private firm P3 Group to build out broadband capability in a “middle mile” project. The cancelation occurred in response to plans by P3 Group to change major provisions of the contract, including using wireless instead of installing a fiber network and applying for grant funding instead of 100% private financing. The county plans to solicit bids in the near future.

Indiana City Finalizes Broadband Contract: In July, the city of Boonville and AT&T reached financial close on a project to install a fiber network with over 4,000 access points around the city. AT&T expects the $4.4 million project to be completed by Jan. 2024.

STATE GOVERNMENT

Connecticut Launches $75 Million P3 for Small Business Development: In July, Connecticut Governor Ned Lamont announced a $150 million small business P3 that will provide low-interest loans of $5,000 to $500,000 to small businesses and nonprofits in the state. Dubbed the Connecticut Small Business Boost Fund, recipient firms will be required to employ no more than 100 people and have less than $8 million in annual revenues. The state will provide half of the funding ($75 million) initially, hoping to increase the program’s size through additional private investments to reach the $150 million total.  

Alaska University Issues RFQ for Utilities Systems: Earlier this month, the University of Alaska–Fairbanks issued a request for qualifications to find a partner to operate, maintain, and invest in its energy and utility systems in a 50-year agreement. The school hopes to receive an up-front payment as well as transfer the risks of maintaining safe and reliable systems, which include energy generation and distribution, water, sewer, compressed air, and steam.

QUOTABLE QUOTES

“Walt Whitman waxed poetic about New York City’s ferries, but EDC’s [Economic Development Corporation’s] responsibility is to provide adequate oversight and report accurately. For a successful 21st-century ferry system, we need more transparent reporting, better cost controls, and a new RFP to operate the system.”  

–New York City Comptroller Brad Lander in a press release on NYC Economic Development Corporation underreporting ferry expenditures

“The P3 Group presented a change in the proposal from potential fiber to wireless, as well as alternative funding avenues. The P3 Group’s original proposal was to bring 100 percent financing to the project. At the July 26, 2022 Board meeting, the P3 Group proposed a completely new strategy for broadband by way of a wireless solution rather than fiber optic cable. They also proposed to go after grant funding rather than 100 percent financing.”

–A Jackson County press release cited in the Dothan Eagle on ending a municipal broadband contract

The post Privatization and Government Reform News: Rethinking K-12 transportation, water needs, and more appeared first on Reason Foundation.

Annual Privatization Report: Aviation 

For over three decades, Reason Foundation has published its Annual Privatization Report, a thorough examination of government contracting and public-private partnerships at all levels of government. The report has long provided valuable information to bring greater accountability, competition, innovation, and transparency into how governments partner with the private sector in delivering public services. This month, Reason released the Annual Privatization Report 2022: Aviation, authored by Senior Transportation Policy analyst Marc Scribner. This report reviews developments in the United States and worldwide regarding private-sector participation in airports, air traffic control, and airport security. 

Arizona Legislation Aims to Secure Water-Supply Future with Public-Private Partnerships 

The Arizona State Legislature ended its session with a major win for the public-private partnership approach to major infrastructure investment, setting aside $1 billion over the next few years for water projects and overhauling the state agency tasked with providing water to ensure robust and mutually beneficial collaboration with the private sector for many years to come. In a recent Arizona Republic op-ed, Reason Foundation’s Austill Stuart and Leonard Gilroy explain how the P3 model addresses a key dilemma for a large and fast-growing state whose farmers are already facing haircuts in water supplies resulting from drought conditions in the Colorado River. Private investors can assume much of the up-front costs and risks in building the considerable infrastructure required, while the state government and rate-paying water consumers face more predictable and consistent costs. 

Michigan Budget Includes XBRL Provision, Funding  

Michigan’s 2022–2023 state budget proposal includes a provision requiring the state’s Treasury Department to begin the process of migrating local government financial reporting to machine-readable form. Unlike publicly listed companies, the Municipal Securities Rulemaking Board requires U.S. state and local governments to disclose financials in .pdf documents, impeding the collection of government financial data. The Michigan XBRL provision follows House Bill 1073 in Florida, which requires some machine-readable financial reporting. But while the Florida bill only applies to a type of financial report used by agencies in Florida, the Michigan provision applies to reports filed by government agencies in most states, in addition to Michigan, making duplication easier. The bill’s language is expected to result in a partnership between the Michigan Treasury Department and the University of Michigan’s Center for Local, State, and Urban Policy which has already been working on machine-readable government financial standards in connection with the city of Flint.  

Government, Not Private Enterprise, Failed Flint 

The tragic water quality crisis suffered by the people of Flint, Michigan, has been linked to the deaths of 12 residents and the illnesses of dozens more. Reason Foundation Senior Policy Analyst Marc Joffe writes that “the biggest failures in Flint were made by the government,” not private water companies. “It is important to recognize that government officials have managed Flint’s water system since 1912 and made the decisions, or failed to make the decisions, that triggered the water crisis,” Joffe writes. He also urges public and private actors to follow best practices to ensure citizens get full transparency and accountability from private water providers and for governments to conduct meaningful oversight.

NEWS & NOTES 

STATE GOVERNMENT 

Court Rules Arizona’s Inmate Health Care Services Violates Constitution: In a June ruling, U.S. District Judge Roslyn O. Silver found the standard of inmate health care services overseen by the Arizona Department of Corrections, Rehabilitation and Reentry (ADCRR) violates 8^th Amendment protections against “cruel and unusual” punishment. Codefendants ADCRR and contracting partner Centurion were cited as overseeing a prisoner health care program that “failed to provide, and continue to refuse to provide, a constitutionally adequate medical care and mental health care system for all prisoners.” While staffing has consistently fallen short of maximum levels, the plaintiff inmates assert that Centurion knew that the low staffing levels that ADCRR agreed to would be insufficient to deliver adequate care. The court now must appoint an individual to create an injunction to bring services back to a constitutionally-acceptable level. 

LOCAL GOVERNMENT 

Denver Extends Pay-for-Success Supportive Housing Program: The city of Denver announced its Supportive Housing Social Impact Bond (pay-for-success) initiative would be retained and extended through a new initiative dubbed “Housing to Health” (H2H), which began in July. The program includes nearly $12 million from private funders, along with up to $6.3 million from the US Treasury to deliver comprehensive supportive housing services for up to 125 chronically homeless persons. A federal Social Impact Partnership Pay for Results Act grant of up to $5.5 million will be dependent on whether federal health care and incarceration costs are reduced among the chosen population over a seven-year period. The Urban Institute received a separate grant to evaluate the program at its 2029 conclusion. 

Philadelphia Expands Homelessness Partnership Initiative: Philadelphia announced an expansion of its “Shared Public Spaces” initiative—a partnership between local civic organizations, businesses, and government to find humane solutions to reducing chronic homelessness in the city. Its leaders noted a 38% drop in homelessness in its Center City District since 2019 through efforts that include employment offers, showers, and laundry services. Chronic homelessness counts by police have shown dramatic falls in parts of the city since the program started. 

Colorado Springs Transitions Community Center to P3: Last month, Colorado Springs announced it had halted a search for a new private operator for the city’s Westside Community Center and would convert the city-owned community center into a public-private partnership. The proposed P3 plan includes city operational staff as well as staff and resources for partnered organizations for services at the center, which the city plans to start choosing in September. After implementation, Colorado Springs expects the center’s budget to almost quadruple—from around $100,000 to nearly $375,000. The P3 arrangement replaces the nonprofit Center for Strategic Ministry, which had run the center under contract since 2010 when the city first sought an outside operator. 

Mississippi City Seeks Public Works Outsourcing Contract: In June, the Petal Board of Aldermen voted in favor of receiving non-binding proposals for firms to operate the Mississippi city’s public works department. Proponents are hoping that the move could help Petal tackle the rising costs of providing guaranteed retiree pension and health care benefits for its workers. Public employee retention has been a problem, too, with the city losing workers to higher-paying jobs, so local officials feel privatizing the department could produce a workforce that would be better equipped and better paid. 

New Jersey City Rescinds Sewer Concession: In June, the Pleasantville City Council voted 4–3 to abandon a concession agreement of the city’s sewer system to Bernhard Capital Partners. The deal called for Bernhard to operate the sewer system and collect user charges from customers for 39 years, with the New Jersey city receiving an upfront $15 million payment as well as $57.1 million guaranteed in capital investments over the agreement’s term. The city’s initiation of the termination likely means it must compensate Bernhard for up to $1.5 million in expenses made from pursuing the deal. Pleasantville previously terminated negotiations with New Jersey American Water in 2019 before the present attempt at an agreement, for which New Jersey American Water and Plenary groups were also shortlisted alongside Bernhard. 

Oregon County Courthouse Reaches Financial Close: The Clackamas County Board of County Commissioners voted 4–1 to approve a public-private partnership to develop a new county courthouse facility. A Fengate-led consortium—which beat out shortlisted teams led by Plenary and Balfour Beatty—will design, build, finance, operate, and maintain the $300 million, 258,000 square foot facility for 39 years. County officials expect the deal to reach financial close in August. 

QUOTABLE QUOTES   

“Denver’s Social Impact Bond program proved we can break the cycle from streets to emergency rooms to jails and back to the streets for our residents facing chronic homelessness, and we’re going to expand those efforts. Our community is incredibly fortunate to have such strong partnerships among funders, providers, and other government organizations. This is a proven strategy of providing housing first with the right supports in place for people to exit homelessness, remain housed, and prosper. Together, we’re making this innovation possible.” 

—Denver Mayor Michael B. Hancock, on the city’s Pay-for-Success supportive housing program and the announcement on its expansion via the Housing to Health Initiative 

“Our [Public Employees Retirement System], we pay 17.4 percent on that, which kind of hurts us. And we’ve noticed over the last year or so that we’re losing people that are going into construction and other jobs that are just able to pay more…So the privatization [of the Petal Public Works Department] could be a good thing for some of the employees because they would get a pay increase. This isn’t something that should cost anybody employment, and there would be a few positions that [the city] would need to retain as well.”

—Petal Mayor Tony Ducker, quoted in a June 2022 article on exploring the outsourcing of the city’s public works services to a private firm 

The post Privatization and Government Reform News: Trends in aviation, Arizona water P3s, and more appeared first on Reason Foundation.

Former Green Beret Receives Savas Award for Afghanistan Rescue Efforts

Scott Mann, who spent over 20 years in the Army in special operations, founded a private network of former military personnel that rescued over one thousand Afghan nationals who worked with the United States. Dubbed Task Force Pineapple, the operation grew from Mann coordinating efforts on his cell phone in the wake of the Taliban’s return to power in Afghanistan to a full-fledged public-private partnership, with government agencies calling on Task Force Pineapple to save Afghan nationals at risk of retaliation. For his valiant efforts to save American allies left behind after the U.S. withdrawal from Afghanistan, Reason Foundation presented Mann with the 2022 Savas Award for Privatization earlier this month.

Municipal Water Systems Vary in Fiscal and Environmental Soundness

Municipal water systems often struggle when their user charges don’t cover operations costs, especially when those costs are rising to comply with the Enviromental Protection Agency’s regulations. Indeed, there is a bit of a chicken and egg problem where lack of sufficient revenue from users and/or high internal cost structures lead to deferred maintenance that causes challenges in meeting EPA standards. Reason Foundation Senior Policy Analyst Marc Joffe reports the results from a detailed study of 900 municipal water systems’ financial health and violations of EPA standards. Through a combination of mapping, data visualization, and three case studies, he shows how poor financial conditions and regulatory compliance challenges can push water systems toward failure. 

Annual Privatization Report 2022: Transportation Finance

Reason Foundation has published its Annual Privatization Report (APR), a thorough examination of government contracting and public-private partnerships (P3s) at all levels of government, for more than three decades. APR has long provided valuable information to bring greater accountability, competition, innovation, and transparency into how governments partner with the private sector in delivering public services. Late last month, Reason Foundation released the Annual Privatization Report 2022: Transportation Finance. In this report, Reason Foundation Director of Transportation Policy Robert Poole gives a review of developments over the past year on infrastructure finance funds, with a strong emphasis on their role in transportation infrastructure, as well as investments in transportation made by pension funds.

Informal Sector Critical for Effective Child Care

”Large federal spending on center-based and other licensed daycare will not solve the childcare crisis,” argues Reason Foundation Senior Policy Analyst Max Gulker. In a recent article, he focuses on the individual daycare choices parents make, noting the significance of the informal sector, where arrangements based on close social relationships are particularly important. These arrangements have certain positives, including flexibility and preexisting trust, that daycare centers cannot fully match. President Biden’s Build Back Better plan offers billions in subsidies for daycare centers, but a truly “better” approach should offer smaller-scale ways to foster informal care from the bottom up.

NEWS & NOTES

LOCAL GOVERNMENT

JFK Airport Reaches Financial Close on Terminal One Project: Earlier this month, the Port Authority of New York and New Jersey (PANYNJ) reached financial close with a Ferrovial-led consortium for their Terminal One project, a 38-year public-private partnership (P3). Financiers will provide $6.3 billion in loans and 2.3 billion in equity for the project, which replaces a previous procurement attempt that ended in 2020 after financiers withdrew commitments. In addition to upgrading and expanding facilities at the international terminal, the consortium aims to increase reliance on renewable energy to 50% while cutting back on energy usage by 30%. PANYNJ expects the construction phase of the project to be completed by early 2026.

Richmond Plans Coliseum Redevelopment, Future RFP, Sale Likely: In May, Richmond’s City Council approved two measures aimed at the eventual sale of the Richmond Coliseum, which officially closed back in early 2019. The ordinances include the transfer of ownership to the Richmond Economic Development Authority, which must issue a request for proposals to solicit buyers to demolish the structure, clean up the site within a year of demolition, and redevelop the seven-acre site within three-and-a-half years.

Indiana Town Considers Aquatic Center P3: Pendleton, Indiana, located northeast of Indianapolis, released a Request for Proposals and Qualifications (RFPQ) for a new indoor/outdoor aquatic center P3. The town and a local school district each operate a community pool, and each pool would require significant financial resources to maintain viability. The two pool owners see their combined efforts as a way of sharing costs and obtaining improved facilities that can accommodate all parties’ needs. They plan to offer a 13-acre plot as a site for the aquatic center, which would operate under a 99-year lease agreement. Responses to the RFPQ are due at the end of June, and the town hopes to have the center fully operational by 2024.

STATE GOVERNMENT

Colorado Enacts Expanded P3 Enabling Legislation: In May, Colorado Governor Jared Polis signed SB 22, which allows any state agency, except the Colorado Department of Transportation and higher education institutions (which have existing guidelines), to enter public-private partnerships (P3s). The executive director of the state’s Department of Personnel now has a year to develop procurement guidelines for P3s, sales, and leases, including unsolicited proposals as well as competitive bidding arrangements. State agencies selling real property would transfer proceeds into a newly established fund with the state treasurer. The legislation also creates a P3 subcommittee within the state’s economic development commission, which would review all potential “contracts, sales, and leases” of state property, but the initiating P3 agency would not be obligated to act on their recommendations. 

California Releases RFQ for Dam Removal: In May, the California Department of Parks and Recreation (CDPR) released a request for qualifications (RFQ) for services related to removing the Rindge Dam, located in Malibu State Park. The nearly 100-year-old structure was decommissioned in 1967 and has since disrupted the habitat of spawning aquatic life, in addition to blocking the movement of sediment to replenish nearby ocean beaches. Statements of qualification are due in July, and CDPR hopes to be awarding contracts this fall.  

HIGHER EDUCATION

William & Mary Moves Forward with Housing and Dining Redevelopment P3: In May, William & Mary (W&M), located in Williamsburg, Virginia, issued an RFQ for a proposed project to develop housing and dining facilities. According to an April presentation made with advisors Brailsford & Dunlavey, the school plans to demolish and replace 2,350 beds worth of residence halls and renovate roughly 1,700. W&M hopes to have the project completed by 2032, after which on-campus housing will remain about the same as present (5,000) but will be fully equipped with air conditioning and ventilation (compared to 42% at present) and will be confined to 15 fewer residence halls. 

Kentucky University Selects Housing and Dining P3 Partner: In June, Murray State University’s Board of Regents voted unanimously in favor of the school entering a predevelopment agreement with RISE Real Estate to develop new dining and housing facilities for the school. The school and RISE will next work on development plans, which will include the demolition of a residence hall for two new halls expected to house a combined 600 students. The school also plans to solicit for a nonprofit to join the venture soon and hopes a full plan can be greenlit in October. 

QUOTABLE QUOTES

“[Task Force Pineapple] represented a public-private partnership that was agile and working. We started getting phone calls from the government to move their own people out…When that last plane left Kabul, we had 6,000 people on our manifest. Twenty babies were born in our safe house, and their medical care was fully sustained by donations from the private sector. It was all the private sector. It was all volunteers. There was no humanitarian aid.”

—Scott Mann, retired Green Beret and founder of Task Force Pineapple, in accepting the Savas Award for Privatization earlier this month

“Rindge Dam has changed the ecological, hydrological, and aesthetic character of Malibu Creek. It is a total barrier to high-quality spawning and rearing habitat for the federally endangered Southern California steelhead trout (Southern steelhead). Rindge Dam also has resulted in segmented habitat for other aquatic and terrestrial wildlife species. Moreover, it has interrupted the natural sediment transport regime of the watershed, which means the sediment trapped in the reservoir behind the dam cannot flow downstream to nourish the beach and nearshore habitats. On a broad scale, this changed sediment transport regime has contributed to a loss of coastal resilience in the area.” 

—From a May 2022 request for qualifications issued by the California Department of Parks and Recreation for the removal of Rindge Dam

Correction June 27, 2022: The “Colorado Enacts Expanded P3 Enabling Legislation” section was updated to clarify the procurement guidelines and process.

The post Privatization and Government Reform News: Savas Award and Annual Privatization Report 2022 appeared first on Reason Foundation.

• ANNUAL PRIVATIZATION REPORT 2022: Surface Transportation Trends
• INFRASTRUCTURE: Long-Term P3s Deliver Value and Effective Risk Management
• TRANSPORTATION: California High-Speed Rail Slows, Becomes Less Safe 
• HOUSING: Local Governments Must Take Affordable Housing Lead
• NEWS & NOTES
• QUOTABLE QUOTES

Annual Privatization Report 2022: Surface Transportation

Reason Foundation has published the Annual Privatization Report, a thorough examination of contracting and public-private partnerships (P3s) at all levels of government, for more than 30 years. In the first section of the Annual Privatization Report 2022: Surface Transportation, Reason’s Baruch Feigenbaum details highway and passenger rail service public-private partnership projects throughout the world, including a thorough review of transportation policy trends across the United States.

Long-Term Infrastructure Partnerships Deliver Value, Shield Taxpayers from Risks 

Private firms are often well-positioned to assume financial risks associated with potential cost overruns and delays that can occur on infrastructure projects. Public-private partnerships allow government agencies to work with companies to effectively deliver and maintain infrastructure, providing an essential risk management tool for agencies looking to limit risks to taxpayers while maintaining infrastructure assets. In this backgrounder, Reason’s Robert Poole explores some of the benefits and tradeoffs of revenue-risk and availability payment approaches to long-term transportation P3s. 

California High-Speed Rail Meets Facts on the Ground

The original California high-speed rail ballot initiative promised voters a trip from San Francisco to Los Angeles in under three hours, with trains traveling 220 miles per hour. In a new article, Reason’s Marc Joffe details some of the project’s latest developments including the decision to share sections of track with commuter trains, which significantly slows speeds and presents a growing safety risk to drivers and pedestrians.

Local Governments Must Play Lead Role in Affordable Housing

As housing prices continue to rise and impact more Americans, many of the key solutions are more likely to be found at a local level. In a recent article, Baruch Feigenbaum outlines how changes to zoning laws, building-approval processes, and height limits could help increase the supply of housing.

NEWS & NOTES

WATER

California Coastal Commission Votes Down Los Angeles Area Desalination Plant: The California Coastal Commission voted unanimously to deny the construction of a $1.4 billion desalination plant in Huntington Beach. The plant would have been similar in size to the existing desalination plant in Carlsbad, which can generate up to 50 million gallons of potable water per day and provides around 10% of drinking water to San Diego area residents.

Maryland and Baltimore Spar Over Wastewater Treatment Plant Takeover: Maryland’s secretary of environment directed the Maryland Environmental Service to take over operations at the city of Baltimore’s Back River Wastewater Treatment Plant. Inadequate maintenance and staffing have long contributed to the treatment plant’s excessive pollution problems, which include a backup of underground sewage that extends 10 miles. After a recent inspection, Maryland’s Department of the Environment (MDE) notified the city that it had two days to comply with established pollution discharge permits and then issued the directive after the city could not comply in the short window. The directive requires MDE to charge the city for the work it completes until the city addresses pollution and operational issues. In response, Baltimore filed a complaint aiming to end the takeover through an expedited court decision that would occur between late May and late July.

Pennsylvania City Gets Agency Approval for Sewer Sale: In April, the Pennsylvania Public Utility Commission approved the sale of York’s sewer system to Pennsylvania American Water. The $235 million deal affects over 40,000 customers in the city and surrounding townships. Local government leaders cited a budget shortfall and the need to avoid service cuts as motivations for the sale. Local ratepayers will endure an initial heavy rate increase of about 48%—the city was planning a 41% increase prior to the sale—in the first year of the agreement, preceding a three-year rate freeze.

TRANSPORTATION

Renewed Purple Line Agreement Reaches Financial Close: The Maryland Department of Transportation, the Maryland Transit Administration, and private consortium Maryland Transit Solutions reached financial close on the $3.7 billion restructured Purple Line P3 project. The light rail project stretches 16 miles through DC-area Montgomery and Prince George’s counties.  The route includes 21 stations with four providing easy access to the DC Metrorail system. Delays have pushed the project’s expected completion date to 2026.

Retired CalTrans Contract Manager Guilty of Corruption: Former California Department of Transportation (Caltrans) Contract Manager Choon Foo “Keith” Yong pled guilty to rigging competitive bidding processes and receiving bribes for contracts he oversaw. From 2014 until his 2019 retirement, Yong worked with companies bidding on around $8 million in Caltrans contracts so preferred firms would win. Co-conspirator firms would receive a kickback from the winning firm and Yong would receive bribes, which totaled around $800,000 in cash, wine, furniture, and remodeling services. Yong faces up to a total of 20 years in prison and $1.25 million in fines. 

LA Seeks Parking Management Partner: The Los Angeles Department of Transportation issued a request for proposals (RFP) for the management of parking violations and permits. The estimated $70 million annual contract would also have the private contractor develop and operate software and hardware systems for managing parking, assisting in parking enforcement, and supplying customer service. After a July deadline on proposals, the city hopes to announce a winner in late September.

Michigan K-12 District Considers Transportation Contracting: Bay City Public Schools (BCPS) issued an RFP to find a partner to handle student transportation for the Michigan school district. BCPS looks to enter an initial two-year contract, with the school district retaining the right the negotiate an extension. After a late May deadline on proposals, BCPS hopes to announce the contract winner in June, which would begin the contract in July. BCPS will supply facilities, fleet, and maintenance for providing the service, making the contract focused on driving operations.

LOCAL GOVERNMENT

Indianapolis Suburb Gets Strong Response for Sports Complex Sale: As of early May, the city of Westfield, Indiana had received 16 responses from firms interested in purchasing or operating the Grand Park Sports Complex, which spans 400 acres and includes the training facilities for the Indianapolis Colts. The city announced the sale in March, with supporters noting the park covered its operating expenses but has started to lose money overall due to depreciation nearly equal to operating expenses. If the facility is sold, Westfield hopes to pay off $80 million in debt secured for the complex. The city will continue to accept proposals, which must include the retention of all city employees involved for at least two years, until late June.

La Crosse Explores Outsourcing Entertainment Complex Management: The city of La Crosse, Wisconsin, issued a request for expressions of interest to find a potential partner to operate and manage the city’s La Crosse Center. The entertainment and convention complex opened in 1980 and has grown over the years to include 120,000 square feet of space, including a recently completed $40 million renovation and expansion. If the city is satisfied with the responses, it will issue an RFP to shortlisted firms later this year.

QUOTABLE QUOTES

“The [Maryland Department of the Environment] has determined that the decline in the proper maintenance and operation of the plant risks catastrophic failures at the Plant that may result in environmental harm as well as adverse public health and comfort effects.”

– From a directive issued by the Maryland Department of the Environment calling for the state takeover of the Baltimore-area Back River Wastewater Treatment Facility.

“The City of York is facing an unsustainable financial situation, which will require significant tax and fee increases and painful cuts to essential services – including the police department – to balance the budget and pay the City’s bills. Such a plan would be catastrophic to City residents and businesses and would likely reverse the recent economic gains that have been made in the City of York.”

– From York’s FAQ page on why the city’s sewer was put up for sale.

“The City has been fortunate to have excellent leaders and staff to guide Grand Park since its inception, as well as great partners for its operations. But even their monumental efforts have a ceiling because of red tape inherent in operating Grand Park as a municipality. So, we are at a point at which we need the private sector’s input on how Grand Park can reach new heights for the benefit of the City and its residents.”

– Andy Cook, mayor of Westfield, on the proposed sale of a 400-acre sports complex.

The post Privatization and Government Reform News: Surface transportation trends, revenue-risk, and more appeared first on Reason Foundation.

Local Governments Lost Millions of Dollars Running Golf Courses in 2020

Local governments across the country lost millions running golf courses in 2020, a Reason Foundation analysis found. In a recent analysis, Senior Policy Analyst Marc Joffe reports that in a sample of 217 golf courses and systems run by local governments, 70 percent (155) reported losses totaling $61 million for the year. The 62 municipal golf operations that made money reported a combined income of $16 million. The analysis includes an interactive map with results for all 221 local course systems identified. In an additional piece, Joffe details how $20 million of the losses came from public golf courses in California.

Pennsylvania House Bill Seeks To End State Liquor Monopolies

“Pennsylvania House Bill 2272 would wisely remove the state’s government control of distilled spirits sales and distribution but needs supporting legislation to replace the state’s needless monopolies,” writes Reason Foundation’s Austill Stuart in a one-page backgrounder. Instead of calling for an end to the state’s distilled spirits monopolies and replacing them with a competitive framework, however, the bill would merely make the monopolies illegal. It also lacks the language to specify how private firms could actually enter the liquor retail or wholesale industries.  

Philadelphia Suburb Confronts Criticism Over Potential Sewer Sale

Towamencin Township, Pennsylvania, is conducting town hall meetings to discuss the possible sale or lease of the Philadelphia suburb’s sewer system. While local officials see the opportunity to help shore up finances and better manage sewer management risks, public criticism has grown louder as a final decision approaches. In a new article, Stuart shows why some criticisms of the deal mischaracterize water and sewer public-private partnerships and why it is important for public officials to communicate the costs and trade-offs involved if the government continues to operate the system. 

NEWS & NOTES

LOCAL GOVERNMENT

Fort Lauderdale Selects Partner Water Treatment P3: Fort Lauderdale’s City Commission selected a consortium of IDE Technologies, Kiewit, and Ridgewood Infrastructure to design, build, finance, operate and maintain a $385 million replacement water treatment plant (with a 50 million gallons per day capacity) over a 32-year period. The consortium and the public works division must still negotiate the final terms for the agreement.

Loudoun County Approves School-to-Housing Conversion: Loudoun County, Virginia, voted to approve a transfer of a vacant K-12 school to a private developer to create affordable housing. The agreement calls for private firm Capretti Land, Inc. to convert the vacant Old Arcola School and a surrounding six-acre parcel into 74 rental housing units. Capretti submitted the plan as an unsolicited proposal. It also calls for the construction of two bus stops and facilities for both recreation and recycling. The land under consideration must now undergo zoning approvals.

New Orleans Releases Solid Waste RFPs: New Orleans issued a pair of requests for proposal (RFPs) for solid waste pickup services in Service Area Two, which covers portions of the city east of the French Quarter and north of the Mississippi River. The area has had trouble maintaining consistent solid waste services and the city government is looking to find more reliable service by splitting it into two portions. The city hopes to evaluate proposals by early May.

STATE GOVERNMENT

LSU Utilities P3 Reaches Financial Close: The Louisiana State University (LSU) Board of Supervisors reached financial close with CenTrio and Tiger Energy Partners in March on a 30-year, $810 million public-private partnership to upgrade and operate the school’s water and energy utilities. Tiger—a joint venture of Bernhard Energy and Johnson Controls—will design initial (and potentially future) upgrades to the school’s utility systems, which include gas-powered steam and water chilling plants. CenTrio will finance, operate, and maintain the systems in a deal expected to save over $1.5 million annually, while also improving efficiency and reliability.

University of Louisville Shortlists Utility Project Partners: The University of Louisville released a shortlist of four potential partners for its utilities P3 project. The P3 partner will operate under a 50-year agreement to manage and operate the steam and chilled water system for the school’s main campus. The school also wishes to secure an upfront payment to contribute to its endowment, for which it will pay $5.9 million annually to cover the project’s financing, as well as a separate fee for operations, maintenance, and lifecycle improvements. The school hopes to choose a preferred partner by the end of the year.

Oregon Spirits Initiative Survives Challenge: The Oregon Supreme Court recently rejected a challenge to a ballot initiative that would end the state’s distilled spirits retail monopoly. The initiative would allow private grocers to sell distilled spirits, which the state has handled since Prohibition’s repeal. The initiative needs to obtain 112,000 petition signatures by July 8 to make it on the state’s November 2022 ballot.  

One Mississippi Wholesale Spirits Bill Fails, Another Passes: After passing both chambers, Mississippi House Bill 512 died in conference late last month. The bill would have ended the state government’s monopoly on the wholesale and distribution of distilled spirits. Senate Bill 2844, which calls for the construction of a privately-operated warehouse for the state’s Alcohol Control Board, was adopted by a conference committee in early April after passing both houses. The warehouse would replace an existing structure and require $55 million in state general obligation bonds.

Florida University Closes on Housing P3: Florida Polytechnic Institute announced it has shortlisted six teams for a student housing public-private partnership project calling for 700 total new beds to be developed by the fall of 2026. The partner would also operate an additional 542 existing units refinanced through the combined transaction.

FEDERAL GOVERNMENT

GAO Report Notes Progress on Military Housing Privatization Problems: A March report by the Government Accountability Office (GAO) noted progress in improving oversight of the Department of Defense (DoD) private housing program. Starting in 2018 through March 2022, GAO issued four reports raising concerns about the DoD’s oversight of its private housing program, which includes about 99% of military housing. The March 2022 update notes progress in areas of concern, including housing oversight, clear communication with residents, and performance measurement. A total of 15 of the GAO’s 30 recommendations from previous reports have now been implemented.

IRS Collection Contractor Underperforming: A report by the U.S. Treasury’s Inspector General chided the Internal Revenue Service for improper recordkeeping and raised concerns about unscreened contract employees having access to taxpayer data. The report found from Fiscal Year 2017 through FY 2020, the program collected $969 million in revenue, netting $679 million total, but still falling well short of a projected $1.9 billion in collections. 

QUOTABLE QUOTES

“In addition to the projected annual cost savings of around $1.5 million in electricity, natural gas and maintenance, other benefits to LSU include budgeting predictability, improved reliability of its infrastructure, and built-in redundancy from generating excess capacity.”

–Louisiana State University’s Executive Vice President of Finance and Administration and Chief Administrative Officer Kimberly J. Lewis announcing the university’s 30-year utilities public-private partnership.

“Amongst many other flaws in various aspects of our government, the pandemic exposed our liquor system as outdated and the PLCB [Pennsylvania Liquor Control Board] as inept.  It has been 88 years since the end of prohibition, and it is time for this Commonwealth to modernize the sale of liquor once and for all.”

—Pennsylvania State Rep. Natalie Mihalek on her proposal to privatize Pennsylvania’s state-run liquor system.

The post Privatization and Government Reform News: Municipal golf losses, sewer sale, and more appeared first on Reason Foundation.

MAIN ARTICLES:

• FEDERAL GOVERNMENT: Recovery Funds State and Local Governments Didn’t Need and the Broken Budgeting Process
• STATE GOVERNMENT: New Hampshire Should Not Run Cannabis Retail Shops
• DATA TRANSPARENCY: CUSIP Issues Prevent State and Local Government Transparency

NEWS & NOTES:

• STATE GOVERNMENT: Puerto Rico P3 Challenge Denied, PennDOT selects Major Bridge P3 Pre-Development Partner, New York Seeks Information Act Request Expediter and More
• LOCAL GOVERNMENT: Philadelphia Airport Pursues Parking P3, Syracuse Solid Waste Woes Signal Possible Contracting, Wichita Rejects Municipal Golf Privatization, and Virginia County Finalizes Park P3 

MAIN ARTICLES

Federal Recovery Funds to State and Local Governments and the Broken Federal Budget Process

By early last year, most state and local governments had not experienced the widespread revenue shortfalls many predicted the COVID-19 pandemic would cause. But Congress passed the American Rescue Plan Act (ARPA) in March 2021 anyway, flooding state and local governments with another $350 billion without any clear provisions tying the federal funds to governments that were actually experiencing revenue losses. In testimony presented to the U.S. House of Representative’s Oversight and Reform Committee, Reason Foundation’s Marc Joffe outlines a laundry list of problems in ARPA’s aid to state and local governments.

In a recent article, Joffe also discusses the continuing worsening of the federal budgeting process, which recently produced a $1.5 trillion omnibus spending bill that “is likely to add hundreds of billions to the deficit over CBO’s 10-year projection window.” Joffe details the bleak outlook going forward for federal budgeting but notes several avenues for improvement.

New Hampshire Should Reconsider State-Operated Cannabis Retail Outlets

New Hampshire’s legislators are currently considering a bill to legalize adult recreational cannabis through a state retail monopoly model that is similar to how the state handles distilled spirits. Unlike most distilled spirits “control” states—where governments own and/or operate wholesale distribution, retail sales, or both for the liquor market—New Hampshire’s distilled spirits retail monopoly operates more like a competitive firm than most state-run monopolies, keeping prices low, and attracting significant (over 50% revenues) sales from residents of neighboring states. In the proposed marijuana bill, the state’s liquor control board, the New Hampshire Liquor Commission (NHLC), would sell cannabis as well as distilled spirits, while keeping cannabis growing, distribution, and testing in the private sector’s hands. A recent article by Reason Foundation’s Director of Drug Policy Geoff Lawrence and Austill Stuart explains why the plan is misguided and having NHLC run the recreational cannabis retail function would create undue risk for the state and taxpayers.

Lawsuits Could Help Free Up Government Spending Data

While securities exchanges such as the New York Stock Exchange provide investors with easy, real-time access to securities pricing, data on state and local government debt is a tougher find. One obstacle to making such data available rests at the feet of the American Bankers’ Association, which keeps its CUSIP (Committee on Uniform Securities Identification Procedures) numbers used to identify bond issuances on a tight leash, usually requiring access to expensive subscription services to even view them, and then only through gated services. The lack of good data availability makes analysis of state and local debt needlessly difficult. Reason’s Joffe explains why class action lawsuits against CUSIP could eventually lead to greater transparency and analysis of state and local government debt data.

NEWS & NOTES

STATE GOVERNMENT

PREPA P3 Challenge Ended in Ruling: Puerto Rico bankruptcy Judge Laura Taylor Swain struck down a Puerto Rican Senate challenge to a June 2020 deal that outsourced operations of Puerto Rico’s electricity distribution and transmission lines to Luma, Inc. Senators sought to have the three-year, $136.3 million contract declared “null and void” due to failure to register it with the Puerto Rico Digital Real Estate Registry, which Swain saw as a technical violation, unfit for nullification of the agreement. Swain also ruled the challenge would violate a bankruptcy stay that protects the Puerto Rico Electric Power Authority from lawsuits.  

PennDOT Selects Major Bridge Replacement Finalist: The Pennsylvania Department of Transportation (PennDOT) announced it has selected Macquarie-led consortium Bridging Pennsylvania Partners (“BPP”) as its preferred proponents for its Major Bridge P3 Initiative. The project will replace up to nine rural bridges located on various Interstates: 78, 79, 80, 81, 83, and 95. PennDOT and BPP’s pre-development agreement calls for the first of multiple packages of bridges to be under contract by December, with construction starting sometime between fall of 2023 and the spring of 2024. This P3 follows the success of PennDOT’s Rapid Bridge Replacement P3, a $1 billion deal finalized in 2015 that replaced over 550 bridges on roads in predominantly rural areas. Unlike the Rapid Bridge Replacement Ps, however, toll revenues will used to offset the costs of the project.

New York Seeks Partner for Streamlining Public Information Requests: In early March, the New York State Office of Information Technology issued a request for quotes in hopes of securing a partner to provide a software platform capable of facilitating public information request receipt and response. The move follows a change made by Gov. Kathy Hochul last October that allows agencies’ general counsel to process Freedom of Information Law requests, which previously were handled by the governor’s office.

West Virginia Bill Gives Greater Leeway for Parks Contracting: West Virginia Senate Bill 485, which currently sits in the Senate Finance Committee would give the state’s Department of Natural Resources (DNR) added ability to contract out parks and park facilities operations to private entities. Operating contracts for existing park facilities would be allowed to increase in term from 10 to 30 years, with renewals capped at 20 years (previously 10 years). DNR would also be able to enter contracts for new facilities at any state parks or forests under its jurisdiction, currently limited to just six (of 35) state parks. While initial contracts to construct new facilities would also raise term limits to 50 years (from 25), renewing such contracts would have term limits reduced from 10 years to five.

LOCAL GOVERNMENT

Philadelphia Airport Officials Pursue Parking P3: In late January, Philadelphia’s Department of Aviation paid off over $58 million in bonds issued by the Philadelphia Parking Authority (PPA). The move signals the probable privatization of the Philadelphia International Airport’s (PHL’s) parking assets, which PPA has operated since the 1970s. Officials see the need for modernizing parking facilities and transitioning some customer parking spaces to freight handling, which the PPA prohibits the airport from doing. But by retiring the PPA’s debt, the airport can now enter a competitive bidding process to select a replacement operator. In another potential transaction announced last year, Philadelphia International is looking to acquire additional land for its freight expansion plans.

Syracuse Considers Solid Waste Privatization as Performance Continues Decline: Syracuse has faced considerable problems with its solid waste collection in recent years. A couple of years after the state’s review board demanded the city improve services, Syracuse’s Department of Public Works commissioner rated the solid waste division a “C minus” in March, while the deputy public works commissioner rated its performance as “poor.” This month, consultants Barton & Loguidice presented local leaders with a report that examined several approaches to improving operations, including full privatization, saying the city might save around $1.5 million per year if “bids align with (nearby) Utica,” but could pay over a half-million more per year if the bidding resembled Buffalo’s experience. 

Wichita Rejects Municipal Golf Course Privatization: Early this month, the Wichita City Council rejected a proposal to privatize four of the city’s municipal golf courses in a 5–2 vote. City Manager Robert Layton said that the proposed deal with KemperSports, which manages over 120 golf courses in the U.S., would have increased the courses’ profitability nearly two-fold, from $400,000 to $750,000. While the city’s courses have been in black ink during the COVID-19 pandemic, they lost money as recently as 2019. In addition to greater profitability, KemperSports CEO Josh Lesnik claimed the deal would also lead to a wider base of course users by appealing to more young people. Critics of the deal, including Wichita Mayor Brandon Whipple, cited non-compete clauses for KemperSports employees (i.e., the city couldn’t hire them back if operations returned in-house), and an annual $200,000 in management paid to the company without them assuming the revenue risk for the courses.

Virginia County Finalizes P3 for Public Park: Earlier this month, the Fairfax County Parks Authority and the Great Falls Grange Foundation (GFGF) signed an agreement for the local nonprofit to operate the Great Falls Grange, a public park and events space, located in the northern part of suburban Washinginton D.C., serving 1.1 million residents. GFGF has worked to restore the park grounds as well as an old schoolhouse on the property that dates to the late 1800s, and an additional nearly century-old building for events. 

QUOTABLE QUOTES

“[The agreement between the Philadelphia airport and parking authority] did not allow us to function the way we needed to function.”

– James Tyrell, chief revenue officer for the Philadelphia International Airport, on an agreement with the city’s parking authority that prevents the airport from transitioning to more freight handling.

“I commend Governor Hochul for her commitment to breaking down the barriers [and] to sharing information and data with the public in a timely way. ITS is proud to assist the governor in executing her vision of what is possible when openness and transparency becomes the rule and not the exception.”

–Angelo Riddick, New York’s Information Technology Services chief information officer, on efforts to expedite freedom of information requests.

“Taxpayer funds should always be used judiciously. Giving $350 billion in emergency aid to state and local governments that, for the most part, were not facing a fiscal emergency was not a judicious use of federal taxpayer money.”

–Reason Foundation’s Marc Joffe in testimony to the U.S. House Committee on Oversight and Reform on the American Rescue Plan Act’s spending.

The post Privatization and Government Reform News: Federal recovery funds raw deal for taxpayers, state-operated cannabis stores, and more appeared first on Reason Foundation.

MAIN ARTICLES:

News & Notes

• LOCAL GOVERNMENT: D.C. Selects Streetlight Partner, a Possible Nonprofit Future for Charleston Public Schools, and Iowa City OK’s Water and Wastewater Contract

• STATE GOVERNMENT: Three State Liquor Privatization Proposals, and Arizona State University Housing Gets New Private Management 

• FEDERAL GOVERNMENT: Military Housing Partner Receives Hefty Fraud Fine

MAIN ARTICLES

Assessing States’ Telehealth Practices

The COVID-19 pandemic has highlighted many innovative practices in health care service delivery, including telehealth, which has been crucial in curtailing unnecessary in-person provider-patient interactions. Although telehealth practices have grown in recent years, states vary greatly about what constitutes telehealth services, when they can be allowed in lieu of in-person interaction, who pays for them, who can administer them, and a variety of other critical factors.

In a new report, Reason Foundation’s Vittorio Nastasi joins the Cicero and Pioneer Institutes’ Josh Archambault in taking an in-depth look at how telehealth practices vary across the 50 states. The report examines the types of health services eligible for telehealth, the methods of telehealth services allowed, scope-of-practice rules concerning the types of health care professionals allowed to perform telehealth services, and payment implications for patients, providers, and insurers. 

Development Impact Fees Do Both Harm and Good

Many parts of the country are affected by high housing costs, and government policies often place upward pressure on housing costs through land-use regulations, building codes, taxes, and fees. Development impact fees—designed to capture revenue for infrastructure investments that benefit new development—often suffer from flaws that make them counterproductive. For example, owners of high-value property often pay the same fees as owners of lower-value properties and the misuse of fee revenues for purposes better handled by other revenue streams. 

In a recent article, Reason’s Vittorio Nastasi demonstrates how poorly designed impact fees can cause housing costs to rise in regressive ways and how they could be tweaked to act more like user fees.

Alabama’s Prisons Have Many Problems, Including the Prisons Themselves

Alabama received notice from the U.S. Department of Justice in 2019 that the conditions inside the state’s prisons were so poor they constituted “cruel and unusual punishment.” While many factors play a role in such conditions, one obvious reason for the DOJ’s designation is the physical conditions of the prisons themselves. The state has tried to secure funding to build new facilities to replace some of its older prisons but has received backlash from a variety of sources, including the financial services industry, which is under pressure from criminal justice activists to reject any deal to build new prison facilities.

In a recent article, Reason Foundation’s Austill Stuart shows why the well-intentioned pressure from activists looking to make criminal justice reforms can end up harming the state’s efforts to improve its corrections system to the detriment of inmates, staff and taxpayers.

NEWS & NOTES

Balfour Beatty Pleads Guilty Over Fraudulent Military Housing Repair Records: In December, the Department of Justice ordered Balfour Beatty to pay $65 million in fines ($33.6 million criminal, $31.8 restitution) and undergo a three-year probation period after the company pleaded guilty to fraud over maintenance at its military housing facilities. Investigations found numerous cases of maintenance work entries that were falsified in a myriad of ways, from reporting repairs that never happened to deliberately inflating customer response metrics with no indication that the behavior would end without intervention.

Virginia Liquor Retail Privatization Legislation Introduced: House Bill 328, which would end Virginia’s liquor retail monopoly, was introduced in the Virginia General Assembly last month. The legislation calls for selling all state stores run by the Virginia Alcoholic Beverage Board Authority (ABC) while maintaining ABC’s wholesale monopoly for liquor.

Pennsylvania Proposal to Privatize Liquor Wholesale, Retail: HB 2272, introduced in January in the Pennsylvania General Assembly, would amend the state’s constitution to prohibit the state’s monopolies on liquor wholesale and retail. Lawmakers have made several attempts to end the state’s twin liquor monopolies over the past decade. This proposal alone does not specify how retail and wholesale of liquor would be handled without the agency monopolies that it would deem illegal.

Oregon Ballot Initiative Would Allow Non-Government Liquor Retail: Initiative 335, filed in January, would allow private retail establishments to sell liquor in the state of Oregon. Currently, only the state’s Liquor and Cannabis Commission is allowed to sell liquor in stores it owns and operates. The proposed ballot initiative would end the retail liquor monopoly, allowing grocers and other “large” retailers (minimum 4,000 square feet) to obtain liquor retail licenses and compete with the state-run liquor stores. State law requires a minimum of 6% of the number of voters in the most recent gubernatorial election to sign a petition for the initiative to make the ballot.

Arizona State University Finalizes Student Housing Deal: In January, Harrison Street and American Campus Communities (ACC) reached financial close on a joint venture to take over ownership and operation of eight student housing facilities at Arizona State University (ASU). ACC previously entered a P3 with ASU to own and operate the facilities—this deal gives Harrison Street a 45% ownership stake in the properties.

D.C. Selects Streetlight P3 Partner: The District Department of Transportation and the D.C. Office of Public-Private Partnerships announced they had selected Plenary Infrastructure DC as the preferred partner for the DC Smart Street Lighting Project. The estimated $309 million performance-based project will upgrade 75,000 area streetlights to LED technology and enable greater monitoring and control technologies. The improved lighting is also expected to save 50% on energy consumption and add nearly 250 wireless access points to improve broadband connectivity. The construction phase is expected to be completed in two years, after which Plenary will oversee all service operations for the remainder of the 15-year period.

Underperforming Charleston Public Schools Face Possible Private Nonprofit Management: A vote on a proposal to improve performance in Charleston, South Carolina, area schools that could lead to private nonprofit management was delayed in January. The $31 million Reimagine Schools initiative calls for community commissions to develop turnaround plans for over 20 schools in the Charleston area, which could include nonprofit organizations taking over the management of schools. No new date for a vote was available at press time.

Iowa Town Votes to Outsource Water, Wastewater: In December, the Boone (Iowa) City Council voted 5–2 in favor of outsourcing water and wastewater management to U.S. Water Services in a five-year contract worth approximately $8 million. Residents and utility workers were somewhat surprised by the move, which reportedly had no bidding process prompting the contract award. Iowa’s Department of Natural Resources notified the city a decade ago that it needed millions of dollars in upgrades.

QUOTABLE QUOTES

“Instead of promptly repairing housing for U.S. service members as required, BBC [Balfour Beatty Communities LLC] lied about the repairs to pocket millions of dollars in performance bonuses. This pervasive fraud was a consequence of BBC’s broken corporate culture, which valued profit over the welfare of service members. Today’s global resolution sends a clear message to companies that if they do not maintain adequate compliance programs, voluntarily self-disclose misconduct, and fully cooperate with the government, they will pay a price that outweighs the profits they once reaped.”

– Deputy Attorney General Lisa O. Monaco on Balfour Beatty being found guilty of lying about repairs at military housing units the company operates

“We are very pleased to advance this major streetlight modernization project that exemplifies Mayor Bowser’s commitment for a safer, stronger DC. It also puts into effect a government procurement model that increases cost savings and performance accountability, both of which we know are incredibly important to every District resident.”

– Director of the District Department of Transportation Everett Lott on selecting a preferred partner for the street lighting project

The post Privatization and Government Reform News: Telehealth laws, impact fees, and more appeared first on Reason Foundation.

Main Articles:

• GOVERNMENT FINANCE: U.S. Debt, Congressional Budgeting Process and Inflation
• CORRECTIONS: Rikers Island Internal Problems Blamed Externally
• FINANCE: Municipalities’ Ill-Informed ESG Chase
• TRANSPORTATION: WMATA Needs Capable Operator

News & Notes:

• STATE GOVERNMENT: Oklahoma Foster Care Pay-for-Success Expands, Arizona Corrections on Trial, Mississippi Child Support Contracting Results Mixed, Montana Seeks Rural Broadband P3, Hawaii Seeks Tourism P3
• LOCAL GOVERNMENT: Santa Clara Shortlists for Water P3, Flint and University of Michigan Announce Data Transparency Pilot, South Carolina-based Recidivism P3 Expands to Capital, Boston Wants P3 for Long-Vacant Lots, Mississippi Counties Combine for P3 Development, Louisiana Locale Rejects City Hall P3  
• FEDERAL GOVERNMENT: Energy Department Seeks Private Waste Cleanup Help, Senate Bill Includes Federal Land P3 Pilots, Commerce and State Departments Seek Multibillion Dollar IT Contracts  

MAIN ARTICLES

U.S. Debt, Inflation Threat to U.S. Future

With publicly held debt on track to reach over 200% of GDP in the next three decades, it’s long past time for Congress to reform its budgeting process in ways that discourage deficit spending. Recent inflation numbers only underscore the need for Congress to control spending, as the Fed reins in rising prices to counter a spendthrift legislature.

In an article that first appeared in the Daily Caller, Marc Joffe calls on Congress to embrace budgeting and spending reforms that add teeth to spending limits. In another column, Joffe looks at the Federal Reserve’s delicate balancing act to control inflation, and how Congress obstructs it.

Rikers Island’s Problems Require External Solutions

Long considered among the most dangerous corrections facilities in the world, New York City’s Rikers Island Correctional Facility has seen its problems grow in recent months due to mass absenteeism among correctional officers—up 54% from last year in August—leaving remaining staff overwhelmed. But instead of embracing outside help, the jail’s corrections officers’ union is suing the city for trying to find private contractors willing to step in. New York’s legal ban on corrections private contracting notwithstanding, Rikers needs external help, due in large part to actions by the corrections officers’ union, Austill Stuart argues in a recent article.

Municipal ESG Investing is Proving to be Impractical

Environmental, Social, and Governance (ESG) investment strategies are gaining popularity among municipal governments, with local governments issuing $50 billion in certified “green” bonds since 2014. While analysts are starting to include ESG ratings in their scores, Marc Joffe argues that ESG rating schemes need plenty of tweaking before reflecting their stated goals of emissions reduction.

WMATA Procurement and Operations Need to Be in Capable Hands

Over the past several decades, the Washington Metropolitan Area Transit Authority (WMATA) has presided over an era of poor operation and maintenance of its Metrorail, compounded further by bad procurement practices. October’s train derailment is just the latest example of WMATA’s rail problems, which include reliability, safety, and reduced ridership. WMATA now has indefinitely reduced service by about half as it continues to struggle to provide enough trains to operate. In a recent article, Austill Stuart shows how an improved ability to find problems with Metrorail suffers as its operator struggles to address them.

NEWS & NOTES

STATE GOVERNMENT

Oklahoma Expands Pay-For-Success Program for Foster Care Alternatives: The Oklahoma Department of Human Services and nonprofit Impact Accelerator recently signed a contract that expands a pay-for-success program designed to keep children out of foster care by working with their parents. The nonprofit provides a treatment and monitoring program, called Intensive Safety Services, designed for parents to overcome abuse and neglect problems, potentially keeping their children out of foster care. Arall Family Foundation funds the majority of the project, which will use about $730,000 annually to hire therapists and staff. First debuted in 2015 in Oklahoma County, the program reports an 80% success rate of keeping children at home with their parents during the treatment program. The newest contract adds greater capacity in Garfield, Cleveland, and Comanche counties.

Arizona Corrections Agency Ignored Contractor’s Increased Staffing Recs:  A vice president of Centurion—the Arizona Department of Corrections (ADOC) health care contractor—admitted on the last day of a trial that ADOC ignored the company’s recommendations for increased staffing to improve services. The trial (Jensen v. Shinn) stems from a class-action lawsuit filed on behalf of ADOC inmates claiming that the agency’s poor prison health care services constitute “cruel and unusual punishment.” According to the company’s Vice President, Tim Dolan, Centurion recommended increasing staff by a little over 160 full-time equivalents in 2019, but ADOC blocked additional hires, including during negotiations over a contract extension approved earlier this year. If Judge Roslyn Silver calls for receivership, the federal government would take over prison health care oversight in the state and could demand hiring more workers, altering or ending existing contracts, and/or bringing corrections health care services back in-house.

Mississippi Legislative Report on Outsourced Child Support Enforcement Shows Mixed Results: The Mississippi Joint Legislative Committee on Performance Evaluation and Expenditure Review (PEER) issued a report in October that found problems with the state’s privatized Child Support Enforcement contracting while noting some performance successes. PEER concluded the Mississippi Department of Human Services “inefficiently” conducted the procurement process, which resulted in a contract with YoungWilliams that “was insufficient to hold YoungWilliams accountable for its performance,” and also chided the contract monitoring program for failing to address “root causes” of problems. The report found that the privatization effort, which started in 2016, did improve paternity and child support order establishment and helped maintain a high level of cost-effectiveness, yet had not improved collections.

Montana Seeks Broadband Proposals: Montana’s Department of Administration announced in November that it is seeking qualified engineers to help deploy broadband through the state’s ConnectMT program. Senate Bill 297, passed earlier this year, establishes guidelines and goals of ConnectMT, including limiting funding to capital (non-operating) expenses and confining project areas to “unserved” areas. Applicants must agree to pay at least 20% of project costs, with priority given to applicants who provide higher percentages of project funding.

Hawaii Seeks Private Firms for Tourism and Promotion Services: In November, the Hawaii Tourism Authority (HTA) issued an RFP seeking private firms to provide marketing and management services for the tourism agency’s global events. HTA looks to enter a four-year contract with a one-year option. Proposals were due in early December.

LOCAL GOVERNMENT

Santa Clara Shortlists for Water Delivery P3: Santa Clara Valley Water (SCVW) shortlisted three teams in early November for the city’s Expedited Purified Water Delivery P3, Inframation News reported. Consortia led by Kiewet Development, Epcor, and a joint venture of Fengate and California Water Service group will submit proposals for the estimated 30-year project, which seeks to provide 11,200 acre-feet of recharged potable water annually to area customers. The estimated $600 million DBFOM availability payment project is expected to include constructing an 18- to 20-mile pipeline and a purified water pump station. SCVW previously attempted the project starting in 2015, but it was placed on hold in 2018 after a delayed RFP, and canceled earlier this year.

Flint Collaborates with the University of Michigan on Data Transparency Pilot: The city of Flint, the Michigan Center for Local, State, and Urban Policy (CLOSUP) and the University of Michigan’s Gerald R. Ford School of Public Policy announced a new pilot program in December that would report they city’s audited financial statements using eXtensible Business Reporting Language (XBRL). The open and machine-readable reporting standard, used by the SEC and agencies in over 60 countries, allows greater government data accessibility for the public, as well as for government leaders to improve their agencies’ fiscal health. The project will also work with historical data to investigate the origin and evolution of the city’s fiscal problems.

Charleston Recidivism-Reduction Program Expands to Columbia: In October, a nonprofit working to reduce recidivism among high-risk parolees in Charleston, South Carolina expanded into the state’s capital city of Columbia. Nonprofit Turn90 (formerly “Turning Leaf”), established in 2014 and redesigned in 2016 to focus on reentry services programming, boasts a 78% success rate of avoiding re-incarceration among participants.

Louisiana City Rejects P3 for New City Hall: Zachary, Louisiana’s city council rejected a P3 proposal in a 4-1 vote to build a new city hall. The plan called for the city to provide the $12 million construction costs and lease the land to firm Downtown Strategies for 30 years, after which the company would sell the building to the city for the lesser of either the amount owed or the appraised value of the building. Council members, who appear to agree a new facility is needed, cited uncertainty over retail space success and the long term of the contract lease as concerns preventing support of the project.

FEDERAL GOVERNMENT

U.S. Dept. of Energy Issues Final RFP for Radioactive Waste Cleanup: In October, the U.S. Department of Energy’s Office of Environmental Management released a final RFP for radioactive waste management services at the DOE’s Hanford site in southeast Washington state. The expected 10-year contract has a limit of $45 billion and will replace a current contract with Washington River Protection Solutions.

Senators Introduce Bill to Establish P3 Pilots in National Parks, Forests: In November, Senators Joe Manchin of West Virginia and John Barrasso of Wyoming introduced the “Outdoor Recreation Act,” which establishes pilot programs to advance performance-based contracting and P3s. One looks for both public and private organizations to invest in recreational amenities and nearby businesses in local communities through pay-for-success and performance-based contracting measures. A second pilot targets private organizations in contracts to upgrade campsites on federal lands.

U.S. Commerce, State Departments Issue IT Solicitations: The U.S. Department of State announced in October that it would be seeking IT service contracts worth up to $8 billion. The agency hopes to award contracts early next year, replacing SAIC’s $2.5 billion Vanguard 2.2.1 contract, awarded in 2010. In November, the U.S. Department of Commerce issued its own $1.5 billion IT solicitation through an RFP. Six areas of support services will be included in the procurement: CIO support; Digital Document and Records Management; Managed, Service Outsourcing and Consulting; IT Operations & Maintenance; Information Technology; Services Management; and Cyber Security. The agency expects to award multiple contracts for the project, which will be initially one year but expandable up to 10.

QUOTABLE QUOTES

“Programs like ISS create positive generational impacts by reducing the level of trauma that children and families would otherwise experience through the removal process and strengthening protective factors that we believe are inherent in all families…Parenting is hard for all of us and we know, without a doubt, that families can be successful with the right supports. When we can keep children safely at home, it is ultimately better for children and families and builds skills that will pay dividends for generations to come.”

– OKDHS Child Welfare Director Dr. Deborah Shropshire, on expanding its pay-for-success program to keep children out of foster care

“We’ve seen the success in Charleston, and any program that helps former inmates, especially those highly likely to return to prison, is something we want more of.”

– Bryan Stirling, Director, South Carolina Department of Corrections, speaking on the early success of Turn90

“This document is the epitome of deliberate indifference. Prison officials were told in Jan 2020 that they needed to increase health care staff by 15 percent and nothing happened. Instead, what happened over the next year and half is that many, many people died preventable deaths…I think what it shows is that Centurion’s leadership recognized that the current staffing model that the state has dictated to them is not adequate to provide basic health care.”

– Corene Kendrick, Deputy Director of the ACLU National Prison Project, on the Arizona Department of Corrections’ refusal to allow for increased prison health care staff, as recommended by the state’s contractor

The post Privatization and Government Reform News: U.S. debt and inflation risks, New York City’s correctional staffing problems and more. appeared first on Reason Foundation.

MAIN ARTICLES:

• GOVERNMENT FINANCE: Federal COVID-19 Relief Mostly Remains Unspent
• OCCUPATIONAL LICENSING: Biden Executive Order Promising Worker Freedom
• REGULATION: Wholesaler Hypocrisy on Direct-to-Consumer Alcohol Shipping

NEWS & NOTES:

• STATE GOVERNMENT: Texas Releases Managed Care RFP, Pennsylvania Seeks Private Sector Help for Homeless
• LOCAL GOVERNMENT: Financially-Stressed Florida Waterpark Outsourced, Syracuse Selling Historical Government Building, Florida City Rejects Marina Lease Deal, Texas City Closes on Desal Plant, Illinois City Rejects Water Deal
• FEDERAL GOVERNMENT: Amtrak Closes on Station P3, Army Joint Base Enters Water Deal, Veterans Administration Awards Records Digitalization Contract

MAIN ARTICLES

State and Local Governments Mostly Not Spending Federal Relief

The American Rescue Plan Act of 2021, signed in March 2021, allocated $172 billion in pandemic aid to state and local government agencies. However, at the end of the initial reporting deadline, less than 3 percent ($4.9 billion) of the total had been spent by state and local governments, suggesting that some of the initial claims about the need and demand for COVID-19 pandemic relief were overstated. While the next reporting deadline, which falls on Halloween, is likely to reveal more of the aid spent, a new article from Reason Foundation’s Marc Joffe examines why lawmakers should exercise caution on new relief spending. In addition to the slow pace of the spending, rating agencies’ overly generous estimates of the multiplier effects of the stimulus spending, and federal strings attached to the spending itself, further demonstrate why added relief for state and local governments should be avoided.

Biden Executive Order Shows Promise for Worker Freedom

While the two major political parties typically agree on very little with respect to employment and worker freedom, occupational licensing remains one rare area of common ground. The Biden administration sent a strong signal of support this summer by signing an executive order that looks to target “unfair occupational licensing restrictions,” non-compete clauses that bind workers from finding new jobs, and other anti-competitive measures related to employment. In an article from this summer, Reason Foundation’s Vittorio Nastasi explores some of the detrimental effects of rampant occupational licensing and how the Biden administration’s executive order can help provide some relief for workers.

Consumers Benefit from Greater Competition in Alcohol Distribution

With the pandemic and supply chain issues limiting access to a variety of consumer products and services, efforts in many areas to open up competition and increase access should be lauded. However, liquor and spirits distilleries are still largely subject to state control and compulsory distribution networks that limit competition, decrease consumer access and bar them from shipping products directly to consumers In a recent article, Reason Foundation’s Austill Stuart explains why keeping distilleries from shipping products directly to consumers reduces competition and choice while empowering interests that benefit from the anti-competitive status quo.

NEWS & NOTES

STATE GOVERNMENT

Texas STAR Health Managed Care Draft RFP Released: In September, the Texas Department of Health and Human Services released a draft request for proposals (RFP) to find a single provider to operate the state’s STAR Health Program for children and young adults. Based on previous year totals, the contract award is likely to cost around $350 million per year. Potential providers will be evaluated on several metrics: Connecting patients to health care resources will be the number one weighted value (24%), while timeliness to resources (22%), encouraging Medicaid participation by providers (18%), prioritizing value in health service delivery (14%), and robust reporting and recordkeeping (12%) will also be considered. This month the agency expects to issue the full RFP, which calls for a six-year contract with up to two three-year renewal options, and then hopes to award the contract next June.

Pennsylvania Housing Authority Seeks Partners to Support Local Housing Initiatives: In September, the Pennsylvania Housing Finance Agency issued an RFP, seeking proposals from private organizations to manage around $45 million annually to support affordable housing initiatives across the state. Grant funding will be provided by the Pennsylvania Housing Affordability and Rehabilitation Enhancement (PHARE) Fund, which obtains revenue from a combination of impact fees from locales in the state’s Marcellus Shale Oil region, and a realty transfer tax. Proposals are due in November.

LOCAL GOVERNMENT

Florida City Water Park Considers 30-year O&M Deal: The City Council of Cape Coral, Florida, voted in October on a 30-year proposal with ProParks Management to operate and maintain the city’s SunSplash water park. The attraction has been losing money in recent years, necessitating taxpayer support to subsidize the park’s operation.

Syracuse Issues RFP for City Hall Redevelopment: Syracuse Mayor Ben Walsh announced in August the city was releasing an RFP to sell and redevelop its City Hall Commons building, which was previously taken over by the city in 1991 and dates back to 1869. Proposals were due this month.

St. Petersburg Marina Lease Falls Through: The City Council of St. Petersburg, Florida, declined to authorize a 25-year lease agreement for the city’s marina in August. While the city council wished to upgrade the facilities, it ultimately rejected a lease of the marina. The deal would have required private partner Safe Harbor Development to manage and operate the marina while also funding capital investments to improve marina components nearing the end of their useful lives.

Texas City Closes on Brackish Water Treatment Plant: The City of Alice, Texas, and Seven Seas Water Group reached financial close on a public-private partnership to design, build, finance, and operate a brackish water reverse osmosis desalination plant, the state’s first. Although a precise price figure was not available, previous estimates put the project’s cost at close to $12 million. The contract has a 16.5-year project term, after which the city will retain full operational control of the facility. 

Illinois City Ends Negotiations Over Water/Wastewater Sale: After a year and a half of pursuing a deal, Rock Island City Manager Randy Tweet released a statement saying the Illinois city would no longer pursue a sale of its municipal water and wastewater systems, citing public backlash and an infusion of $26 million in COVID-19 relief funds from the federal government. While local officials said that a potential deal could be beneficial to the city, months of protests from residents, utility workers, and unions led the city to end talks with American Water on the possible deal.

FEDERAL GOVERNMENT

Amtrak Train Station P3 Reaches Financial Close: In September, Amtrak announced it had reached financial close with Plenary North America on a public-private partnership for its William H. Gray III 30^th Street station in Philadelphia, the rail operator’s third-busiest. The private partners will be responsible for designing, building, financing, and maintaining an estimated $92 million in improvements and repairs to the station for 50 years, with the entire project estimated at $527 million. 

Army Joint Base Water Privatization Deal Implemented: In October, American Water took over operations of the water and wastewater systems at Joint Base Lewis-McChord in a privatization deal. The company will operate and manage the systems for 50 years, a contract agreement valued at $771 million. 

VA Awards Patient Records Digitization Contract: The U.S. Department of Veterans Affairs and private firm Health Gorilla finalized a deal to provide digital access to medical records to all eligible patients and doctors, the company announced in a press release. Veterans will control who accesses their records through digital authentication and will be able to revoke access through their own user settings. Terms of the contract were not available. 

QUOTABLE QUOTES

“The American promise of a broad and sustained prosperity depends on an open and competitive economy. For workers, a competitive marketplace creates more high-quality jobs and the economic freedom to switch jobs or negotiate a higher wage. For small businesses and farmers, it creates more choices among suppliers and major buyers, leading to more take-home income, which they can reinvest in their enterprises.  For entrepreneurs, it provides space to experiment, innovate, and pursue the new ideas that have for centuries powered the American economy and improved our quality of life. And for consumers, it means more choices, better service, and lower prices. Robust competition is critical to preserving America’s role as the world’s leading economy.”

–From the Biden administration’s “Executive Order on Promoting Competition in the American Economy,” signed in July

“While privatization would potentially benefit the city and relieve bond debt, taking the burden of EPA mandates off the city and providing some money for much needed infrastructure improvements, most of the council felt that it really should not be left up to seven council members. We felt this decision should be up to the citizens.” 

–Rock Island Alderman Randy Hurt on the decision to decline an offer to sell the city’s water and wastewater systems to American Water

“Over the (30-year) term of the lease…we have an opportunity to make well over $10 million. Sunsplash had been in debt for a while. We had to pay a subsidy to them and this puts us in a position now where we can not only collect revenue over a certain point from ProParks but also rent and also property taxes.”

–Cape Coral City Councilman Tom Hayden on a potential lease to enter a 30-year P3 with ProParks Management to operate the city’s SunSplash waterpark

“The City’s needs have changed since it first took ownership of City Hall Commons in 1991. Today, we think there is a higher and better use for this great building. The property is more than 150 years old. Without investment, the upkeep and maintenance needs will continue to rise. Given the City’s needs and the interest in downtown, the time is right to return this property to a private owner.”

–Syracuse Mayor Ben Walsh on the decision to sell the city’s 150-year old City Hall Commons Building to a private developer

The post Privatization and Government Reform News: Federal COVID-19 relief mostly unspent, promise for worker freedom, and more appeared first on Reason Foundation.

Main Articles

News & Notes

Annual Privatization Report 2021

The three transportation-focused chapters of Reason Foundation’s Annual Privatization Report, a publication now over three decades old, were recently released. The Transportation Finance section, authored by Reason’s Robert Poole, looks at transportation public-private partnerships (P3s) and infrastructure investment worldwide. Baruch Feigenbaum’s Surface Transportation chapter focuses on U.S. and foreign P3 projects related to highways and passenger rail, as well as federal and state-level enabling legislation and regulatory concerns. The Aviation chapter, also authored by Poole, examines trends in airport privatization and other airport regulation issues.

Fire “Alliance” Model Takes Competition Out of EMS 

In a series of articles, Reason Foundation’s Austill Stuart touches on various anti-competitive concerns with California’s Assembly Bill 389 and the so-called fire “alliance” model, which fire districts use as a stopgap to take over emergency medical services (EMS) fully without being subject to competitive bidding. With AB 389 passed and sent to Gov. Gavin Newsom’s desk, Stuart’s most recent article, “California passes EMS bill but doesn’t address anti-competitive landscape,“ discusses the remaining problems with competitive bidding in EMS.

Tackling Space Traffic and Orbital Debris

While space is vast, earth-bound humans use a limited and increasingly busy area to place satellites and space stations. In a new policy brief, Reason Senior Fellow Rebecca van Burken shows how public-private partnerships will need to play a key role in addressing the growing mand-made orbital debris (“space junk”) problems and managing space traffic in the coming decades.

Capitol Hill’s Spending Raises Concerns Amidst Inflation Unknowns

Current U.S. inflation numbers—which remained at a year-over-year rate of 5.4% in June and July—may turn out to be a worrying trend or just a blip over the long run. While some economists and federal oversight agencies continuously warn of the potential problems related to the federal government’s deficit spending, Congress keeps ignoring them. In a pair of articles in The Hill, Reason’s Marc Joffe warns against Congress’ continued spending and calls out budgetary and spending gimmicks embedded in the proposed $3.5 trillion reconciliation package. He also looks at credit rating agencies’ reactions to the current politics surrounding raising the U.S. debt limit. 

News & Notes

State Government

Puerto Rico Energy Agency Remains in Privatization Battle: The Puerto Rico Electric Power Authority (PREPA), subject to several privatization attempts over recent years, saw dueling political bodies fighting over the utility’s fate. In May, Gov. Pedro Pierluisi vetoed a bill that would have delayed privatizing PREPA, arguing that the bill undermines an established operations and maintenance (O&M) contract with LUMA Energy entered in 2020. The Puerto Rico House of Representatives tried to work around the governor’s veto by voting 43–0 (two abstaining) to deny authorizing $750 million to PREPA to implement the LUMA contract. After initially asking the legislature to reconsider and release the funding, the Financial Oversight and Management Board for Puerto Rico, which is responsible for moving the territorial government and PREPA through bankruptcy, voted to overrule the House. In doing so, the board cited its granted budgetary authority from the Puerto Rico Oversight, Management, and Economic Stability Act, or PROMESA, to implement PREPA’s obligations under the contract. The board won out, with the contractors taking over O&M duties in June.

Court Ruling Requires Kentucky to Rebid Managed Medicaid Contracts: A judge issued a ruling in April that nixes the state’s six managed Medicaid contracts, worth a combined $8 billion, and requires the state to rebid them. This is the state’s third denial over managed Medicaid contracts over the past few years. In 2019, Gov. Andy Beshear killed the first set, and a rebid resulted in the same contract winners: Aetna, Humana, Molina, UnitedHealthcare, and WellCare. Anthem, which submitted a bid but was not selected, challenged Molina’s placement over hiring a member of Beshear’s transition team. The challenge was denied, though Anthem was brought on as a sixth contractor. The current contracts will remain in place as dates for the new bidding process are secured.

Connecticut Lottery Releases RFPs after RFQ Gets Strong Response: In May, after receiving 15 responses to a request for qualifications (RFQ) earlier in the year, the Connecticut Lottery Corporation (CLC) released a request for proposals (RFP), seeking private firms capable of handling online and retail sports betting in the state. The terms call for providing up to 15 sports betting retail locations and roughly 2,900 lottery retail locations. While local news outlets pointed to a late July award announcement, pitting tribal casino operators against each other with respective online gaming operators—Foxwoods aligned with DraftKings, and Mohegan Sun with FanDuel—no further updates were available at press time. The state gaming agency released another RFP in August related to online gaming only, perhaps signaling a change in procurement strategy. 

Local Government

Chicago Moves Closer to First Casino: In April, the city of Chicago issued a request for proposals (RFP) from private firms that want “to apply for the sole casino license in the country’s third-largest metropolitan market.” The city seeks a developer to construct and operate the city’s first casino while meeting Leadership in Energy and Environmental Design (LEED) certification for all buildings, as well as requirements for using minority-owned businesses and local residents to complete much of the work. Proposals were due in late August and the city hopes to award a contract next year.

NYC Housing Administration Releases Repair RFP: The New York City Housing Administration (NYCHA) issued an RFP for a large-scale repair contract worth an estimated $360 million. The contract winner will be responsible for repairs in four Chelsea (Manhattan) developments that include 24 buildings and 2,073 apartments. The RFP review and the scoring process will all include residential input.

Dallas Issues P3 for Public Library: In August, the city of Dallas announced an RFP for a private partner to build or remodel the city’s library branch at North Oak Cliff, located southwest of the city. The contract sought will be more or less a design-bid project, as the city looks for its partner to create a “turnkey” facility that likely will require extensive worker training, but no long-term operations or management considerations.

Kansas City Releases RFP for Homelessness P3: The Land Bank of Kansas City, Missouri, released a combined request for proposals/qualifications (RFP/Q) to find partners to rehabilitate or rebuild, as well as manage and maintain, over 100 city-owned properties. The city would sell each property for $1 to qualified organizations, which would be required to begin construction within 120 days of the sale date. Partners would then offer the housing to homeless and low-income (≤30% area median income) households. Proposals were due in June. An additional RFP, released in August, seeks partners to develop more low-income housing by converting vacant buildings.

Oregon County Receives Green Light for Courthouse P3: In May, the Clackamas County (Oregon) Commission approved a competitive process to find a private consortium to design, build, and finance a new courthouse for the county, following up with an RFQ in July. The county will require a minimum 50-year useful life for the new building, which replaces a structure that dates to 1936. Officials hope a structure can be completed by 2025.

Corrections

Alabama Prison P3 Financer Exits, Leaving Uncertain Future: An Alabama private prison project’s underwriting and financing companies withdrew in late April over activist criticism. The project called for a CoreCivic-led consortium to design, build, partially finance, and maintain two new state-operated facilities that would be leased back to the Alabama Department of Corrections (ADOC). In response, Alabama State House Speaker Hal McCutcheon said some of his colleagues wanted a special legislative session to look for a “Plan B.” A 2019 notice from the U.S. Department of Justice describes conditions in ADOC facilities as violating the Eighth Amendment to the Constitution’s protections against cruel and unusual punishment. The ADOC’s many problems include overcrowding, violence, lack of supervision, and numerous overdoses on synthetic cannabis and other drugs. In late 2020, the U.S. Department of Justice filed a lawsuit against the state over the conditions. The state legislature is holding a special session that will include prison construction issues starting next week.

Tennessee Corrections Abandons Behavioral Health Contract Selection: In a brief press release, the Tennessee Department of Corrections (TDOC) announced in May that it would issue a new RFP to rebid its facilities’ behavioral health services and exit a $123 million contract awarded to Centurion last year. While not giving specifics, the decision appears to have come in response to a complaint about the contract filed by Corizon, a rival bidder who previously won contracts in 2012 and 2016 for the services. The complaint accuses Wesley Landers, chief financial officer for the Tennessee Department of Corrections, of having “ongoing communication with Centurion senior executives, including Wells, providing confidential information such as drafts of the bidding documents,” the Missouri Independent reports, while also increasing performance bond requirements from $1 million to $118 million, effectively eliminating Corizon from winning the contract. The trial over the contract is set for November.

Water

Santa Clara Retries Water Delivery P3: In May, the Santa Clara (CA) Valley Water Authority (SCVWA) issued an RFQ for its latest attempt at securing an expedited water P3 to deliver potable water to the city, a  design-build-finance-operate-maintain (DBFOM) availability payment project of up to 30 years. The authority hopes to benefit greatly from securing a partner who can deliver the project quickly and reliably while also committing to a lifecycle-focused maintenance schedule. SCVWA also looks to utilize performance-based metrics where possible, including for the needed pipeline’s construction, service reliability, and maintenance/stewardship. Either San Jose’s or Palo Alto’s wastewater treatment facilities will provide source water and will require constructing a nearby advanced wastewater treatment facility and, terminating the pipeline at the existing Los Gatos Recharge Station. SCVWA previously released RFQs for the project in 2016 and 2018 and had hoped to shortlist proposers this summer.

Fargo-Moorhead P3 Clears Milestone: The Fargo-Moorhead Flood Mitigation Project passed a major milestone in June when the Metro Flood Diversion Authority chose Miami-based Red River Alliance to design and build a $1 billion diversion channel to prevent flooding along the Red River in Fargo and neighboring parts of Minnesota. The Army Corps of Engineers is also assisting the local authority with the project. A financing package was also approved for the deal, which includes $569 million in guaranteed federal loans expected to save $438 million in borrowing costs. The P3 is also expected to save $330 million in construction costs compared to traditional procurement methods.

Buffalo Issues Largest-Ever Environmental Impact Bond: The Buffalo Sewer Authority issued a $54 million Environmental Impact Bond in June, the agency noted in a press release. The project—a collaboration between the agency; the Ralph C. Wilson, Jr. Foundation; Environmental Consulting and Technology, Inc.; Morgan Stanley; and Quantified Ventures—seeks to modify 200 acres of green infrastructure to better manage stormwater. Through planting trees, installing permeable pavement surfaces, and other stormwater-diverting technologies, the city hopes to prevent combined sewer overflows that occur when stormwater overwhelms “combined” (designed to divert sewage as well as stormwater) sewage structures prevalent in many large cities.

FEDERAL GOVERNMENT

Study of U.S. DOT Database Shows P3s Delivering for Disadvantaged Compared to DBB: A study published in July by the board of the National Academy of Sciences’ Transportation Research Record found that, despite P3 opponents’ claims to the contrary, P3s perform well in delivering opportunities for organizations within the U.S. Department of Transportation’s Disadvantaged Businesses Enterprises (DBE) program. While authors—University of Maryland engineering professors Kunqi Zhang and Qingbin Cui—also note the delivery method itself had little effect on DBE attainment, the greater scope of contracting and subcontracting opportunities within P3s compared to Design-Bid-Build (DBB) appeared to offer greater opportunities for DBE than DBB for the 134 project contracts they examined in the USDOT’s Major Transportation Project Database. Most likely due to the lack of available long-term data, their analysis focused on the design-build side of the P3 projects exclusively, although many projects in the study included operations and maintenance (O&M) in their respective contracts, which can provide even more opportunities for DBEs.

NASA Seeks Private Flight Support Partner: In late July, NASA released a draft RFP to solicit private partners to provide operations support at the agency’s Johnson Space Center in Houston. The support NASA seeks will focus on several key areas, including updating and maintaining navigation software and spaceflight enabling services and supporting research and development services.

National Fish and Wildlife Federation and International Paper P3 Announce Grant Awards: The National Wildlife Federation and International Paper Company announced in June that they would award nine habitat restoration grants to states in the Mississippi valley. Aggregate goals of the funded projects include planting 3.6 million trees and restoring 8,000 acres of wetlands. In addition to International Paper and the NFWF, the program received funding from the Walton Family Foundation, the Arbor Day Foundation, and the American Forest Federation. 

Coast Guard Waterways Commerce Cutter RFP: The United States Coast Guard issued an RFP in May for a partner to design, build, and deliver 30 new Waterway Commerce Cutter (WCC) vessels to replace its aging fleet. WCCs predominantly serve as “tenders” in U.S. intercoastal waterways for construction and repairs of marine aids. Responses to the RFP were due at the end of July, and the Coast Guard plans to award a contract next year, with full delivery of the ships by 2030, a Congressional Research Service release noted. 

Quotable Quotes

“This paper examined DBE goal and DBE attainment on 134 contracts, 37 of which have data on the DBE attainment. P3 was compared with two other groups: design–bid–build (DBB) and design–build (DB)/construction manager at risk (CMAR). The research addressed the long-held suspicion that small firms lose in P3s.”

—Authors Kunqi Zhang and Qingbin Cui in their Transportation Research Record study, which found major transportation P3 projects offer more opportunities for small and disadvantaged businesses than design-bid-build projects.

“The $750 million operational reserve is not a payment to LUMA Energy but a requirement under the operation and maintenance agreement that ensures PREPA would have sufficient funds to operate and pay vendors and fuel suppliers. A significant portion of the funding will also go towards investments in the grid and reconstruction projects that will eventually be reimbursed by FEMA…PREPA’s lack of funds to maintain the system and inability to maintain adequate cash reserves are some of the reasons that exacerbated PREPA’s problems and inability to respond quickly to hurricanes Irma and Maria. The operational reserve is a critical step toward ensuring that never happens again, especially when managed by a professional operator.”

– Natalie Jaresko, executive director of the Financial Oversight and Management Board of Puerto Rico, in a press release.

“After years of planning, we are beyond excited to begin the RFP process for Chicago’s first casino… We look forward to collaborating with world-class operators to develop a premier entertainment destination that will catalyze growth in our dynamic economy, create sustainable, good-paying jobs for our workforce and bring new financial opportunities to our businesses.” 

– Chicago Mayor Lori E. Lightfoot in a press release on the city’s casino-resort development project.

The post Privatization and Government Reform News: Transportation P3s, solutions for space debris, and more appeared first on Reason Foundation.

• Health Care: Expanding Access to Health Care Through State Telehealth Reforms
• Transportation: Removing the Ban on Commercial Interstate Rest Areas
• Legislation: Connecticut Bill Facilitates Needed Projects 

News & Notes

• Transportation: Los Angeles Approves Rail Pre-Development Projects, Improving Rail Movement, and Streetlighting Partnership
• State Government: Colorado Workers’ Comp Privatization Fails, Alaska DMV Privatization Proposal 
• Higher Education: Maine Shortlists Housing P3, Texas Tech and Florida Atlantic Announce Laboratory-Based P3s

State Reforms Are Key to Expanding Telehealth

While telehealth was already emerging as a technology with great promise in delivering health care services, the COVID–19 pandemic spurred the need to build on existing platforms to allow better access to telehealth, resulting in more access to health services when in-person interaction has been difficult. But telehealth’s benefits are not confined to pandemics and its demonstrated success should continue as states increasingly allow and expand the use of telehealth services.

In a pair of new publications, Reason Foundation’s Vittorio Nastasi explores how two states can initiate reforms that enable greater access to telehealth. In “Medicine in a Digital World—Ensuring Permanent Access to Telehealth Care in Louisiana,” a collaboration with Louisiana’s Pelican Institute, Nastasi and co-author Eric Peterson examine what’s holding back telemedicine, including a lack of guidance for health care boards to govern the practice and a lack of rulemaking mandate. In “Expanding Access to Telehealth in Florida,” Nastasi and the James Madison Institute’s Sal Nuzzo tackle scope-of-practice laws and Medicaid limitations, which hinder telehealth proliferation in Florida, despite the state’s demonstrated progress on the issue.

Interstate Rest Area Commercialization Is Needed and Long Overdue

While a few major tolled highways like the New York Thruway and the Indiana Toll Road offer travelers full-service commercial plazas, rest areas on fuel-tax-supported interstates eek by with only parking, restrooms, and vending machines. This is because existing federal policy bans public rest area commercial development, which could better serve truckers and motorists. In a new report, “Rethinking Interstate Rest Areas,” Reason Foundation’s Robert Poole explores how the outdated federal law prevents addressing the shortage of safe overnight parking for truckers and the growing need for electric vehicle charging stations. Poole details how a change in federal policy could lead to a reimagining of Interstate rest areas.

Connecticut’s Public Infrastructure Needs Private Sector Help

Like most states, Connecticut faces myriad deferred maintenance problems with its bridges, roads, water systems, and other public infrastructure. While the state does allow some public-private partnership (P3) authority, it affects only a handful of agencies, and existing legislative roadblocks prevent projects from taking shape in the first place. In a piece for the Connecticut Mirror,  I examine how Connecticut’s Senate Bill 920 could expedite the needed replacement of infrastructure assets while also minimizing deferred maintenance problems in the future. 

News and Notes

Transportation

Los Angeles Metro Approves Transit Corridor Pre-Development Contracts, Announces Environmental Review Options

This month Los Angeles County Metropolitan Transportation Authority announced it would consider five procurement options for the Sepulveda Valley public-private partnership project’s environmental review process. The project calls for a private team to develop and operate a rail line that would run from the west side of Los Angeles north to the San Fernando Valley. Two options include constructing a monorail line, while the other three rely on heavy rail construction, with the monorail options mostly running above ground, and the heavy rail lines mostly running underground. Back in March, Metro approved a pair of pre-development services contracts for the project with two private consortia: rail-focused Sepulveda Transit Partners, which includes Bechtel, Meridiam, and American Triple I Partners, and LA SkyRail Express, a monorail-focused consortium of John Liang and BYD Transit Solutions. While the selection of a final P3 partner is not expected until 2025, early estimates price the initial baseline monorail proposal at $6.1 billion and the heavy rail proposal at $10.8 billion.

Passenger and Freight Rail Partner to Improve Movement Between D.C. and Richmond

Amtrak, the Virginia Rail Express (VRE), state of Virginia, and private rail operator CSX formally announced a new $3.7 billion effort, called “Transforming Rail in Virginia,” aimed at improving the rail movement of freight and passengers through Virginia from Richmond to the District of Columbia. The most troubling spot is CSX-owned Long Bridge, which is the only means for traditional passenger and freight trains to cross the Potomac River from Arlington, Virginia, into Washington, DC. A major component of the planned project is an estimated $1.9 billion new passenger bridge to allow CSX to operate the existing Long Bridge itself, planned for a 2030 completion. The plan also calls for Virginia to acquire 386 miles of railroad right-of-way, 223 miles of rail from CSX, and an additional $1 billion invested by the state in rail infrastructure projects. The completed vision requires finding partners and funding to construct and operate a four-track corridor from Richmond to Washington, DC (two each for freight and passengers), to be completed in two phases. Amtrak is providing $944 million in funding and VRE is providing $200 million for the project.

D.C. Releases Streetlight P3 RFP

A recent press release revealed that the District of Columbia’s Department of Transportation and Office of Public-Private Partnerships has released a request for proposals to three shortlisted providers—Plenary Infrastructure DC, Meridiam Smart Solutions DC, and DC Smart Lighting Partners—for a streetlighting public-private partnership. The project calls for replacing 75,000 streetlights with LED lighting with remote monitoring and controlling capabilities. This technology reduces energy consumption by over 50 percent, upgrades Wi-Fi access points, and eases adaptation of new technologies as they become available.

State Government

Colorado Legislative Committee Rejects Pinnacol Privatization Bill

In March, the Colorado House’s State, Veterans, and Military Affairs Committee killed House Bill 1213, which would have made the state’s workers’ compensation insurer, Pinnacol, into a private entity. While attempts have been made to privatize the insurer over the past two decades, Pinnacol itself, and companies that had previously opposed the change, came out in favor of the restructuring. By law, Pinnacol can only sell workers’ compensation insurance, and only in the state of Colorado, both constraints would have been eliminated by the bill.

Alaska DMV Privatization Proposal Withdrawn

Alaska Gov. Mike J. Dunleavey recently withdrew a plan to replace six of Alaska’s Department of Motor Vehicles offices in rural areas with private vendors. Political opposition to the plan grew over claims that the move would cost more money. However, figures provided by the Alaska Department of Administration in a March presentation to a House Finance subcommittee used to justify those claims lacked any details to verify the source of the numbers and the methodology used to determine them. The withdrawn proposal keeps the six rural DMV locations—in Delta Junction, Eagle River, Haines, Homer, Tok, and Valdez—operating “in-house” for at least another year.

Higher Education

The University of Maine System Releases Housing P3 RFP

The University of Maine system released a request for Proposals (RFP) to four shortlisted firms for a P3 to design, build, finance, and potentially operate new housing developments on its Farmington and Presque Isle campuses that would combine for roughly 400 beds. Proposals are due in early May, with the winning proposal expected to be selected in June.

Florida Atlantic University Solicits Marine Testing P3

In March, Florida Atlantic University (FAU) issued invitations to negotiate (ITNs) to find a private partner to build a marine research facility on leased land from FAU’s Harbor Branch Oceanographic Campus. While details are still in development, proposals sent in response to the ITNs are due in May and FAU looks for the partnership to extend to no later than April 2060.

Texas Tech Announces Partnership to Promote Geological Research

Texas Tech University (TTU) announced it had formed a public-private partnership with Midfield Oilfield Group (MOG) to improve geological research and data accessibility. The venture’s primary purpose is to enhance the availability of TTU’s and MOG’s vast collections of rock core samples and cuttings. Texas Tech’s roughly 250,000 samples, originally gifted to the school by Exxon Mobil, would be incorporated into MOG’s proprietary web portal datastak, which already includes data for millions of rock and well samples. Although figures were not available, MOG will also commit to funding undergraduate and graduate scholarships.

Quotable Quotes

“The District is excited to move forward with our plan to modernize over 75,000 lights in neighborhoods across the city. With this RFP, we will continue to lead the country in energy efficiency by replacing inefficient lights, improve public Wi-Fi access, and expand tools to protect our neighborhoods.” 

—Washington, DC, Deputy Mayor for Planning and Economic Development John Falcicchio in a press release announcing the RFP release of the streetlighting public-private partnership.

“What is also transformative is that this initiative is being done in cooperation with the host freight railroad, as this agreement increases capacity, reliability, and fluidity for BOTH freight and passenger rail. Rather than increase passenger rail at the expense of throughput capacity for freight operators, we have worked collaboratively with CSX to create a ‘win-win’ for both freight and passenger rail.”

—Virginia Secretary of Transportation Shannon Valentine in March testimony on the $3.7 billion “Transforming Rail in Virginia” initiative.

The post Privatization and Government Reform Newsletter: Expanding Telehealth Access, Interstate Rest Area Commercialization, and More appeared first on Reason Foundation.

• Local Government: Local Revenues Exceeding Expectations
• Education: Prince George’s County’s K-12 Public-Private Partnership
• Telecommunications: Protecting Floridians’ Digital Privacy

News & Notes

• State Government: Hawaii Awards Medicaid Contracts, Mississippi Liquor Bill Fails
• Energy: Puerto Rico Seeks Renewables And Storage
• Higher Education: Fresno State Closes On Energy P3, Iowa Approves Bookstore Deal
• Local Government: New Orleans Narrows Theme Park Redevelopment Search, City in New York Outsources Waste For Savings And Better Services
• Federal Government: GSA Inspector General Exposes Fleet Underutilization

Main Articles

Local Government Tax Revenues Are Exceeding Expectations 

One of the brighter spots for state and local governments during the pandemic has been finding out the worst-case revenue projections resulting from the COVID-19 pandemic have largely not come to fruition. While also subject to variation across locations, many local governments, at least so far, are largely finding their tax revenues are meeting, and often exceeding, the low projections. In a recent article, Reason Foundation’s Marc Joffe explores why the local government revenue news warrants some optimism and why “the most pessimistic revenue scenarios outlined at the beginning of the COVID-19 crisis are failing to materialize for most local governments.”

Prince George’s County’s K-12 P3 Provides Effective Blueprint Ripe for Replication

Prince George’s County Public Schools (PGCPS) reached financial close with Prince George’s County Education & Community Partners—a consortium comprising Fengate Asset Management, Gilbane Development Company, Gilbane Building Company, Stantec, and Honeywell—on a 30-year public-private partnership (P3) to design, build, finance, and maintain six of the Maryland school district’s schools. While the PGCPS project may be the first successful P3 of its kind, the thinking behind the project seems applicable to many jurisdictions. School districts can recognize that the goals of educating students and providing the facilities in which to educate them require different resources and know-how, and the private sector can help. 

The agreement allows PGCPS to oversee the broader direction of the new school facilities while capitalizing on private sector resources to save an estimated $174 million in avoided deferred maintenance costs and construction costs. In a recent article, Reason Foundation’s Austill Stuart dives into the agreement further and highlights how other jurisdictions could utilize similar agreements to put school facilities management on a more lifecycle-focused approach. Such a redirection would give school districts newer facilities and avoid many of the deferred maintenance problems that plague older school facilities. 

Florida Bill Would Strengthen Florida Citizens’ Digital Search Protections

Florida Senate Bill 144 looks to ensure Floridians’ digital property privacy remains as protected from unreasonable searches as physical property. The bill received a favorable vote from the State Senate Judiciary Committee earlier this month after receiving one from the Senate’s Criminal Justice Committee in January. In testimony presented to the Florida Senate, Reason Foundation’s Vittorio Nastasi and Adrian Moore explain why SB 144 is crucial for Floridians’ digital privacy protection. While recognizing a need for law enforcement and other authorities to obtain personal digital information may be legally justifiable in some cases, the availability of data raises numerous questions over when and how such information can be obtained, and how it is used.  “It is vital to protect important personal data in all forms, analog or digital,” they write. 

News and Notes

State Government

Hawaii Awards Managed Medicaid Project Contracts

The Hawaii Department of Human Services announced in March that it would be rewarding contracts to five private health plans to operate the state’s managed Medicaid program. Alohacare, Hawaii Medical Service Association, WellCare Health Insurance of Arizona, and United HealthCare will receive statewide contracts, while Kaiser Permanente will be awarded a contract confined to the islands of Oahu and Maui. The five-year contracts combine to $11 billion and also include three-year-long extension options combining to total $2 billion per year. The new contracts, which will take effect in July, replace contract awards rescinded early last year due to the onset of the COVID-19 pandemic.

Mississippi Legislature Passes, Kills Liquor Privatization Bill

The Mississippi State Senate, following the House’s affirmative vote last month, passed and amended a bill to end the state government monopoly of liquor sales in early March. Covering both wholesale and distribution, House Bill 997 would have created a license for private firms to take over government monopolies. A week later, however, the bill died when it was denied a chance for a conference committee.  

Energy

Puerto Rico Energy Utility Releases RFP for Renewable Energy, Storage 

The Puerto Rico Electric Power Authority (PREPA) released a request for proposals (RFP) seeking private partners to expand the island’s renewable energy generation capacity by one gigawatt and its energy storage capacity by 500 megawatts. The PREPA request is the first of a series of tranches to expand renewable energy generation by 3.75 gigawatts and energy storage capacity by 1.5 gigawatts over a three-year period. The requests serve in part to comply with Act 17, approved by Puerto Rico’s legislature in 2019, which requires the territory to obtain 20percent of its energy from renewable resources by next year, scaling up to 40percent by 2025, and reaching 100percent by 2050. Responses to the RFP are due in May.

Higher Education

Fresno State Closes on Energy Public-Private Partnership

Fresno State University and consortium Bulldog Infrastructure Group reached financial close on a 33-year concession lease of the school’s utilities, a P3 agreement worth $600 million. Consortium member Meridiam secured a $170 million sustainable development goal bond for part of the project’s financing, contingent on the partnership reducing 30 percent of the system’s consumption. If met, the energy savings would trigger an interest rate reduction, while failing to meet and maintain the ambitious goals would result in a financial penalty to the consortium, which also includes Noresco and GLHN.

The University of Iowa Approves Bookstore Outsourcing Contract

The Board of Regents for the University of Iowa approved a contract for Follet Higher Education to manage and operate the school’s “Hawk Shop” and University bookstore, the school newspaper The Daily Iowan noted. The school issued a solicitation last year after continuing to lose money operating it over the past five years. The agreement requires Follet to keep the store in its present spot, on the ground floor of the Iowa Memorial Union building, and requires the contractor to pay an undisclosed percentage of revenues back to the school. Follet will also be required to submit $250,000 payments for each five-year management term, annual $100,000 payments for utilities (which are managed by an Engie-Meridiam consortium in a P3 that reached financial close last year), and a combined $60,000 annually for student life and library programs. All current university employees will also be retained by Follet, which will take over operations in April.

Local Government

New Orleans Selects Three for Theme Park Site Redevelopment 

Earlier this month, New Orleans announced it had shortlisted three finalists—Bayou Phoenix, Kiernan West and S.H.I.E.L.D., and Situs Development Collective—for its project to redevelop the site of a former Six Flags theme park, also once known as Jazzland. The city nearly sent out a request for qualifications (RFQ) late last year for the 150-acre site, which has sat idle since destruction during Hurricane Katrina in August 2005. After the theme park company declared bankruptcy, the city ended its lease with Six Flags in 2009 and the city’s industrial development board took control of the site.

City in New York Votes to Outsource Residential Solid Waste

The common council of Gloversville, New York, voted 5–2  to contract out residential solid waste pickup to Twin Bridges Waste and Recycling. Mayor Vince DeSantis expects the contract to save $500,000 over its four-year term, the Daily Gazette reported. Director of Public Works Chris Perry added that the move would allow two current employees to remain in higher-priority functions of removing trash from catch basins and road repair. Perry also noted the deal would likely help rein in worker injuries, which has been a problem in recent years for the solid waste crew. 

Federal Government

GSA Inspector General Finds Costly DC Fleet Underutilization, Recommends Selling Vehicles

A report released by the federal General Services Administration’s Inspector General (IG) in late February found significant underutilization of its DC-area-based vehicle fleet. Citing the agency’s own vehicle replacement standards, the Inspector General found a potential $2.1 million in savings for which it faults the lack of requirement for agency offices to remove underutilized vehicles from their fleets. It also found only one of the 114 vehicles of the NCR (“National Capital Region,” i.e., D.C. area) vehicle fleet met the minimum mileage guidelines to qualify a vehicle for full-time use.

Quotable Quotes

“Since the 2008 flood when the bookstore was not able to operate in the Iowa Memorial Union for many years, and with the ever-increasing online competition for books and apparel, the university-operated bookstore has financially struggled and has operated at a loss for many years—since 2015.”

—University of Iowa Business Manager David Kieft in The Daily Iowan,  referring to problems that led to the school’s new bookstore contract with Follet

“OAS [The GSA’s Office of Administrative Services] lacks any mechanism to require internal fleet customers to remove underutilized vehicles from the inventory and ensure efficiency…Assuming continued underutilization, NCR could save up to an estimated $2.1 million by reducing its fleet of underutilized vehicles based on the average six-year minimum replacement standard of GSA’s standard use vehicles.”

—From a February 2021 report conducted by the U.S. General Services Administration’s Inspector General showing costly underutilization of the vehicle’s DC area fleet, as well as inadequate driver vetting and vehicle inventory management problems

“The government should have to meet the same standards and processes for accessing our personal information in digital form as the constitution set out for our information when it only existed in hard copy. For this reason, it is imperative that digital communications privacy be enshrined in the state constitution.”

—Testimony by Reason Foundation’s Adrian Moore and Vittorio Nastasi, on Florida Senate Bill 144

The post Privatization and Government Reform Newsletter: Local Revenues Exceeding Expectations, Protecting Digital Privacy, and More appeared first on Reason Foundation.

MAIN ARTICLES:

• GOVERNMENT FINANCE: Unprecedented OPEB Survey Reveals $1.2 Trillion Shortfall, Government Revenue Numbers Exceed Expectations 
• FEDERAL: P3s Need Place in Infrastructure Bill, Biden’s Bad Private Prison Ban 

NEWS & NOTES:

• TRANSPORTATION: Maryland Selects Partner for DC-area Toll P3, Pennsylvania Releases Bridge P3 Project List
• LEGISLATION: Mississippi Privatization Bills Advance, Idaho Bill Looks to Establish Consistency With Agency Figures 
• LOCAL GOVERNMENT: Council of Mayors Releases Partnership Report, Maine Towns Eye Partnerships for Homelessness, Repurposing of Municipal Buildings 
• WATER: Baltimore Avoids Water Meter Privatization, Kentucky Town Seeks Wastewater P3
• SOLID WASTE: Chicago Recycling Contracting Decisions, Tampa Anticipates Waste Processing P3
• CORRECTIONS: Alabama Enters $3 billion Private Prison Leases, NM Officials Cite Importance of Private Prisons
• PARKS: Private Lease P3 Possible for Seattle-area Park, NYC Seeks Partner for Central Park Attraction
• FEDERAL: Army Corps Flood Management P3 Granted Permits, Department of Energy Seeks P3 for Lunar Nuclear Energy 

MAIN ARTICLES

New Report Finds $1.2 Trillion in Unfunded OPEB Liabilities

As state and local governments grapple with financing their public pension systems, fully funding other post-employment benefits (OPEBs), which include public worker health care benefits and other non-pension retiree benefits, is also a major problem for many governments. In a new study, Reason Foundation’s Marc Joffe presents the depth and scope of the problem — $1.2 trillion in unfunded liabilities — by reviewing over 30,000 audited financial statements. Exploring OPEB liabilities on per capita and revenue ratio terms, he finds a variety of outcomes for government agencies but a significant portion of the total net liabilities is mostly concentrated in a few states and locales, especially New York. 

Early State Revenue Figures Exceed Expectations

While the COVID-19 pandemic has decimated private sector activity in many industries, early figures suggest less dire state government revenue losses than originally feared. In a post that is being updated with new figures as they become available, Reason Foundation’s Marc Joffe finds many states are exceeding tax revenue expectations compared to forecasts made at various points during the pandemic. There is currently just a .1 percent decline in total state tax revenues compared to 2019, with some states exceeding expectations but others experiencing double-digit revenue losses.

Federal Infrastructure Bill Needs Place for P3s

Despite partisanship and the hostile political divide on Capitol Hill, both major political parties say they want to rebuild and replace the nation’s critical infrastructure. In a recent article, Reason Foundation’s Robert Poole explains why using more public-private partnerships (P3s) for large projects should be a major component of any future infrastructure bill: “(I)nfrastructure investment funds have raised over $600 billion in the last five years, nearly all of it planned for equity investment. If projects are financed with 25 percent equity and 75 percent debt, that $600 billion could finance $2.4 trillion of brownfield refurbishment and greenfield projects,” Poole writes.

Biden’s Proposed Private Prison Ban Imperils Potential Improvements

The Biden administration’s executive order announcing the eventual end of the use of private prisons by the federal Bureau of Prisons should come as no surprise to those who followed the outgoing Obama administration’s attempt to do the same five years ago. It should also come as no surprise that the new executive order contains the same misguided thinking. In a recent article, Reason’s Austill Stuart revisits the 2016 Inspector General report used by the Obama administration, and now Biden administration, to justify their respective bans. Stuart debunks wrong-headed comparisons of public and private prison quality and highlights how ending private prison contracts may disrupt attempts to improve educational, therapeutic, and vocational opportunities for inmates behind bars, as well as the development of private programs that reduce post-release recidivism. 

NEWS and NOTES

TRANSPORTATION

Maryland Chooses Transurban-Macquarie Consortium for DC Beltway P3: In February, the Maryland Department of Transportation announced its selection for Phase I of its $7.6 billion Capital Beltway P3 project. Accelerate Maryland Partners LLC, a consortium comprising equity providers Transurban and Macquarie, along with Archer Western Construction, Dewberry Architects, and Stantec, will add high-occupancy toll (HOT) lanes to Interstate 270 in a 50-year toll concession. Phases II and III will include the addition of HOT lanes to Interstate 495.

PennDOT Releases List for Major Bridge Replacement P3, Issues RFI: The Pennsylvania DOT announced a pair of developments related to its Major Bridge Replacement and Rehabilitation Program P3 in February. After revealing a list of nine structures under consideration of the project (see map and the list below), PennDOT also released a Request for Information (RFI) for the project, hoping to shortlist potential partners and lease a Request for Proposal (RFP) in Fall 2021. PennDOT seeks to use tolling to help fund replacing and refurbishing busy interstate crossings, as the agency reports an annual funding gap of $8.1 billion for its highways and bridges.

Source: Pennsylvania Department of Transportation

LEGISLATION

Pair of Mississippi Privatization Bills Advance in State Legislature: The Mississippi Legislature has advanced a pair of bills that aim to privatize government functions. House Bill 997 would remove the state’s Department of Revenue as the sole liquor wholesaler and distributor, setting up a process that permits and regulates private entities to fill the functions. After passing the House earlier this month, it has been referred to the Senate Finance Committee.   

The second piece of legislation, Senate Bill 2486, commissions a study to look at a variety of alternative arrangements’ feasibility to manage and operate state parks, including transferring them to local governments or private entities. The bill awaits action in the House after passing the Senate in early February.

Idaho Advances Bill to Create Uniform Local Government Accounting System: Idaho lawmakers advanced House Bill 73, which would establish a uniform system for the state’s local governments and school districts to report their financial data. The legislation prompts the state controller to create a comprehensive manual of standards for local agencies to adopt in reporting their figures to the state controller and transfers registration recordkeeping from the legislature to the controller’s office. 

LOCAL GOVERNMENT

Maryland School District P3 Reaches Financial Close: In January, the school district of Prince George’s County, Maryland, reached financial close with Prince George’s County Community and Education Partners—a consortium of FenGate Asset Management, Gilbane Building, Stantec, and Honeywell—a press release noted. The 30-year design, build, finance, and maintenance P3 calls for delivering six new schools. Accelerated construction and cost savings made the project attractive to the school district, which cited a $180 million savings over a traditional design-build-bid approach. These critically-needed savings are expected to fund the estimated $8.5 billion needed to update and replace the 125,000-student school district’s aging facilities as enrollment grows.

U.S. Conference of Mayors Business Council Releases Report on Effective Local Partnerships: In January, the U.S. Conference of Mayors Business Council released its Best Practice Report: Mayors and Businesses Driving Economic Growth, which highlights a variety of programs involving contracting arrangements between local governments and private partners. The entries represent a wide array of services, from facilitating access to fresh produce to enabling contactless delivery and wastewater detection technologies, to other initiatives that help prevent the spread of the coronavirus.

Maine Homeless Shelter Might Become P3: Portland (ME) City Manager Jon Jennings expressed his wishes for a private partner to build a new 200-bed homeless shelter to lease back to the city, the Portland Press-Herald reported. Last summer, the housing authority thought as much as $10 million might be available for the project from state agency MaineHousing but no funds ended up being available. While the state has not provided funding yet, a few bills in the state legislature call for bond measures dedicated to funding homeless shelters. The city council had a workshop scheduled in early February, but details were not available at press time.

RFP Issued for Hallowell, Maine Fire Department Redesign: In another potential Maine community P3, Hallowell issued an RFP in January, looking for firms to convert the town’s 193-year-old fire station building to police and other city departments’ office space, and possibly include other amenities, Mainebiz.biz reported. The city hopes to review potential designs by May. A previous RFP attempt last year failed when the city council rejected the one proposal it received.

WATER

New Baltimore Mayor Nixes Water Meter Privatization as Problems Remain: The city of Baltimore, which implemented a water privatization ban last year, narrowly avoided privatizing the operation of city water meters. Mayor Brandon Scott, reversed a decision made last October by outgoing Mayor Jack Youngs to outsource the city’s water meter operations to Itron, which has been under an $80 million city contract to install new digital water meters in Baltimore city and county going back to 2013. The county has entered a six-month emergency contract with Itron to conduct meter readings as 63 in-house employees transition back into work after being placed on paid leave last March at the start of implemented COVID-19 restrictions. The move against privatization comes at a challenging time for Baltimore’s water metering operations.  A December 2020 report by the Inspectors General of Baltimore City and County cited an array of city water meter operations challenges: around 74 percent of over 11,000 account-related problems and discrepancies noted between December 2017 and late 2020 remain unresolved. 

Kentucky City Breaks Ground on Wastewater Treatment Plant P3: Bradenburg, Kentucky, which sits about 50 miles southwest of Louisville, broke ground this month on a P3 to design, build, and finance a new $8.3 million wastewater treatment facility for the city and Meade County, a project necessitated by the opening of a large steel plate manufacturing facility in the area. The project consortium consists of equity provider Ross, Sinclaire, and Associates, along with GRW Engineers, the Walker Company, and WP3 consulting.  

SOLID WASTE

Chicago Faces Potential Full Privatization of Single-Family Recycling: Chicago’s Blue Cart recycling program, which handles recycling pickup for area populations living in “low-density” (single-family homes or buildings with four or fewer units) residences, is currently managed by a mixture of six privately- and publicly-managed zones, with Waste Management handling three, the city’s Department of Streets and Sanitation (DSS), two, and Sims Midwest Metal management handling the sixth. The city is currently evaluating a set of proposals that could fully privatize the Blue Cart program, with DSS soliciting proposals for all six zones, though specific details about the competition prevent fully knowing if DSS will remain an operator in the program, Waste Dive reported in January. While some aldermen expressed the desire to take the entire Blue Cart program “in-house,” it was quickly shot down by Chris Suave, the city’s deputy commissioner of policy and sustainability, who stated, “The costs for the city to take the program over are more expensive, and there’s a huge capital investment that would be needed to purchase additional trucks. So there would be a significant increase if we were to take it over in house,” while also noting it would require the tripling of in-house crews to expand operations to cover all zones.

Florida County Eyes P3 for Recycling Facility: Waste 360 reported that Tampa Bay-area Hillsborough County released a draft RFP for a private partner to design, build, and operate a recyclables processing facility for the area in a 12-year contract, with a potential eight-year extension. The county’s Board of Commissioners expects a full RFP to be released in March and anticipates awarding a contract in September 2021, with a 2023 opening for the facility. 

CORRECTIONS

Alabama Governor Signs Pair of P3 Prison Leases: This month Alabama Gov. Kay Ivey signed a pair of P3 leases for new prison facilities, deals totaling an estimated $3 billion. The Alabama Department of Corrections (ADOC) will operate the prisons, while CoreCivic will design, build, and maintain the facilities, which it will lease back to the state for 30 years. The two facilities are expected to house around 7,000 inmates, which is about one-third of the ADOC’s male inmate population. For years, the state has been known for the bad condition and age of many of its correctional facilities as well as their lack of accountability and excessive use of force incidents, all targets of a 2020 report by the Civil Rights Enforcement Division of the U.S. Department of Justice. While the final price tag did initiate blowback, as the governor’s initial estimate of $88 million a year in lease payments ended up starting with a baseline of $94 million, which will increase each year. She noted in a presentation that the price tag reflects an estimated $200 million in average annual savings over the 30-year lease period compared to the state building its own facilities using a more traditional procurement process. 

New Mexico Corrections Secretary and Governor Caution Against Private Prison Ban: New Mexico Department of Corrections Secretary Tafoya Lucero and a spokesman for Gov. Michelle Lujan Grisham pushed back against legislation that would ban private prisons in the state, the Associated Press reported. Citing the large (nearly half) portion of inmates currently housed in New Mexico private prisons and the numerous financial and labor commitments needed to convert its existing private prisons to public ones, Tripp Stelnicki, a spokesman for Gov. Lujan Grisham, noted that without those commitments beforehand, any talk of eliminating private prions in the state is “logistically unfeasible.” 

PARKS AND RECREATION

Suburban Seattle Public Park May Be Leased to Private Company: The city of Everett, Washington, located about 30 miles north of Seattle, is considering leasing part of its publicly-run Forest Park to the private firm Synergo, a KING 5 News reported. The company plans on building a ropes course to attract visitors and generate revenue by charging admission to the new attraction. The city has already cut parks department staff and facilities, including the park’s swimming pool, due to the coronavirus pandemic, and faces an estimated $18 budget deficit for 2021, making new revenue generation a priority. Currently, the city leases part of one of its parks to a private company to operate as a plant nursery.

New York City’s Parks Department Issues Carousel RFP: New York City’s parks department (NYC Parks) issued an RFP for the year-round operation and maintenance of the Michael Friedsam Memorial Carousel in Central Park, looking to enter a one-to-five-year contract with a private concessionaire. NYC Parks is requesting full operations plans and timetables for all planned work (including capital improvements) required to operate the 50-foot diameter attraction adorned with 58 hand-carved and painted horses.

FEDERAL GOVERNMENT

Federal/Local Flood Diversion P3 Passes Procedural Hurdle: The Minneapolis Star-Tribune reported that the Minnesota Department of Natural Resources issued a permit this month for the $2.75 billion Fargo-Moorhead flood diversion project, a P3 overseen by the Army Corps of Engineers and local Metro Flood Diversion Authority (MFDA), which serves the greater Fargo area of around a quarter million. The project looks to build a 30-mile diversion channel to keep rising waters in the Red River away from the towns of Fargo and Moorhead, which respectively sit on the North Dakota and Minnesota sides of the river. While legal battles concerning compensation for the flooding of lands along the diversion channel have blocked the project from taking shape, the permit allows the MDFA to negotiate with landowners in the affected areas over disputes quelled in a settlement last year that ended a legal challenge preventing the permits from being issued. 

NASA and Dept. of Energy Issue RFP for Nuclear Power on Lunar Surface:

In late December, the U.S. Department of Energy’s Idaho National Laboratory, its managing and operating partner Battelle Energy, and NASA issued a draft RFP seeking guidance for a potential project to develop a nuclear fission power plant on the moon’s surface. While a final RFP was expected sometime in February, a news release earlier this month noted that based on initial feedback, a final RFP may be delayed until later in the year.

QUOTABLE QUOTES

“(The Alabama Department of Corrections’) existing dilapidated infrastructure is failing at a rate of one facility every two years, exorbitant deferred maintenance costs are rising by the day, and the Courts may act imminently if real progress is not made soon—given all these risks, there is not one minute to spare.”

—Alabama Gov. Kay Ivey, in a press release announcing the signing of a pair of 30-year leases for new private prison facilities to be built in the state

“PGCPS has among the second oldest school facilities in the state and over 40 percent of our buildings that were constructed nearly 60 years ago now need replacement or complete renovation. Also, PGCPS needs to create thousands of middle and high school seats to avoid forecasted county-wide overcrowding.”

—Prince George’s County Public Schools on its 30-year, $1.2 billion P3 project, which reached financial close last month

“Mayors and business leaders agree that creative public/private partnerships are a major force in shaping cities of the 21st century and experience has shown when businesses and local governments work together, our cities benefit and our nation is stronger.”

—Foreword of January’s United States Conference of Mayors Business Council Best Practice Report: Mayors and Businesses Driving Economic Growth

The post Privatization and Government Reform Newsletter: Funding Infrastructure, Retiree Health Care Liabilities, and More appeared first on Reason Foundation.

• Technology: A Federally-Owned 5G Network Would Be a Disaster
• Economic Recession and COVID-19: Examining State and Local Government Tax Revenues, and How Theme Park Re-Openings Would Help California
• Transportation: How to Effectively Contract Mass Transit Services
• News and Notes
  • Local Government: Maryland K-12 Public-Private Partnership Gets Board Approval, Boston Parking Garage Sale Set to Fund Affordable Housing, Illinois Municipality Looks to Privatize Marina
  • Federal Government: Further Delays for USPS Fleet Contract, Defense Agencies Seek Health Care and Information Technology Contracts
  • Prisons and Corrections: Pressure on Pennsylvania Prison to De-Privatize, Mississippi Accused of Loose Contract Enforcement
• Quotable Quotes

A Federal Government-Owned 5G Network Would Be A Disaster

The U.S. Department of Defense (DOD) recently issued a request for information (RFI) related to the potential establishment of a federally-owned 5G network.  A nationalized 5G network would cost taxpayers billions, slow down innovation, and put the U.S. behind China in the race for 5G.  Additionally, it would likely disrupt private competition and financing in ways that penalize established providers. Reason Foundation’s Rebecca van Burken writes that auctioning spectrum to established private sector 5G providers would be the best way for the federal government to ensure efficient and cost-effective 5G delivery and performance for all users.

COVID-19 and the Recession’s Effect on State and Local Tax Revenues  Exaggerated

While the economic and market volatility related to the COVID-19 pandemic will likely continue for some time, revenue losses to state and local governments appear to have been much milder than some experts predicted in the spring of 2020. Census Bureau data released last month show that combined state and local revenues were less than 1 percent lower in 2020 than they were in 2019. Total revenues equaled $1.12 trillion in tax revenue during the first nine months of the 2020 calendar year, which is just $8 billion less than they collected during the same period in 2019. In a new article, Reason’s Marc Joffe dives into the Census Bureau data and debates over the need for federal stimulus and aid for state and local governments that Congress has been calling for.

Safely Reopening Theme Parks Would Help Anaheim, California

Reason Foundation’s Marc Joffe explains why cities like Anaheim and the state of California should consider finding ways to safely re-open theme parks, which “do not seem to be a major source of contagion anywhere around the world.” Not only has the Disney World theme park in Orlando, Florida, been reopened since July 2020, but the park has also not been found to be instrumental in spreading COVID-19 among visitors or employees. While reopening theme parks would not stop all the budgetary problems the city of Anaheim is experiencing, it would give cities that depend on theme parks some fiscal relief.

Contracting Mass Transit Services

A pair of new publications authored by Reason Foundation’s Baruch Feigenbaum and Joe Hillman outline the processes and strategies instrumental to effectively contracting mass transit services. Though successful strategies will vary greatly by agency, the principles of public control, promoting competition, and ensuring transparency should be at the heart of any successful transit contracting strategy. Done well, contracting mass transit services can improve the quality, efficiency, and cost-effectiveness of transit for taxpayers and riders.

In “Contracting Effective Transit: A How-To-Guide,” the authors build a step-by-step template to guide agencies to effective contracting decisions within transit, supplemented by case studies of transit agency contracting decisions.

The second publication, “Contracting Mass Transit Services,” further explores transit contracting with a greater emphasis on the “why” of contracting transit, while also using case studies and data to guide agencies through some of the obstacles that prevent successful contracting practices from taking shape.

News and Notes     

Local Government

Maryland County Approves K-12 Schools P3: In late October, Maryland’s Prince George County Board of Education approved a public-private partnership (P3) that would lead to the building and/or remodeling of five area schools by a private consortium, as well as provide maintenance services for them for 30 years.  The deal is estimated to be worth $1.24 billion.

Boston Looks to Sell Parking Garage to Help Build Affordable Housing: In a December press release, Boston Mayor Martin J. Walsh announced the city was looking to sell its Lafayette parking garage and issued a request for proposal (RFP) for the transaction. The 150,000+ square-foot garage sits in downtown Boston and offers roughly 1,030 parking spaces. First constructed 40 years ago, the garage currently operates under a ground lease and profit-sharing agreement set to expire in 2022. The RFP asks potential partners to view the asset in terms of how it can be best utilized in the future while keeping the asset operating mainly as a parking garage. Revenue from the sale would predominantly go to developing and preserving affordable housing in the area. The city hopes to complete the transaction in the latter half of 2022.

Pennsylvania City Looks at Potential Wastewater System Sale: York, Pennsylvania, issued a request for proposals (RFP) last August to seek a buyer for the city’s water system and treatment plant. Still looking for a buyer in November, the city council approved a change to the city’s $10 million sewer bond that allows the use of funds for repairs, including the replacement of effluent filters containing sand “past its usable life.” In addition to a potential private buyer, at least five municipalities have expressed interest in acquiring the infrastructure, each separately approving measures to create a regional authority.

Illinois Town Lays Out Process for Privatizing Marina: In December, the Quincy (IL) Park Board released an RFP for a private partner to operate and maintain the town’s Art Keller Marina. Proposals are due this month and officials hope to choose a partner that could take over operations in February 2021. While the Marina has mostly managed to break even over the years, financial losses are projected for 2020 and 2021, and slip rentals have dropped 45 percent in the last nine years.

Local North Carolina Transportation Agency Looks to Acquire Private Ferry Service: Created in 2017, the Bald Head Island Transportation Authority was close to finalizing a $47 million deal in December to acquire ferry and barge assets from a private provider, as well as 36 acres of land and other vessels and tram assets, Inframation News reported. North Carolina Treasurer Dale R. Folwell weighed in at the end of the month, calling for the assets to be given to the authority instead.

Federal Government

USPS Truck Contract Gets Delayed (Again): Already subject to numerous delays before the COVID-19 pandemic, the United States Postal Service revealed to Trucks.com in December that the estimated $6 billion contract to provide replacement vehicles for the agency’s aging fleet, which was mostly built between 1986-1994, will be delayed until at least the first quarter of the 2021 calendar year. The deal looks to add as many as 180,000 new vehicles to replace the current fleet of about 140,000, and USPS will consider issuing awards to multiple companies. While several potential bidders have dropped out of the procurement process, three bidders still remain—a joint venture of the Wisconsin-based Oshkosh Corp and Ford Motor Company; Ohio-based Workhorse Group; and Turkey-based Karsan.

Pentagon Releases Updated Draft RFP for Tricare Support: In December, the Defense Health Agency released an updated draft request for proposals to seek feedback for new managed contracts with private organizations, Bloomberg Government reported. Currently, Health Net Federal Services (a Centene subsidiary) and Humana Military Healthcare Services operate under separate contracts in the western and eastern United States, respectively, with a combined cost of $58 billion to serve over one million military members. The Health Net contract is scheduled to expire in 2023, and Humana’s expires in 2022.

Defense Department Releases RFP for “Fourth Estate” Agencies: The Defense Information Systems Agency (DISA) released an RFP in December for a potential 10-year, $11 billion contract to modernize and upgrade IT networks for “fourth estate” agencies within the DoD—a term that refers to defense agencies falling outside of the scope of the main military branches (Army, Navy, Air Force) and military intelligence agencies, which includes the Office of the Secretary of Defense, the Defense Logistics Agency, and DoD’s contracting agencies (Defense Contract Audit and Management Agencies). DISA hopes to award the contract in late 2021.

Prisons and Corrections

Pennsylvania County Hires Firms to Bring Jail In-house: In December, the Delaware County Council in Pennsylvania approved funding to hire a consulting firm to help facilitate moving jail operations back to the county. The five-year, $259 million contract with GEO group is not set to expire for another three years, but a clause allows the county to exit the contract with six months’ notice. The jail’s warden resigned last year after reports of abusive behavior toward employees. Critics of the move point to the rushed nature of the plan and the continued expense of paying consultants (an additional consulting contract for the same purpose was issued last year), while councilmembers defend the “de-privatization” plan as a major platform item that led to their election.

Mississippi Private Prison Continues to Face Considerable Staffing Concerns: A report by the Marshall Project released in early December shows the privately managed Marshall County Correctional Facility continues to face severe staffing shortages, despite contractual obligations to maintain minimum staffing levels. The rural, roughly 1,000-bed state prison requires at least 19 corrections officers at any given time to secure the facility, though at least one guard in the facility repeatedly worked overnight shifts with only five other officers on duty for the entire facility. Safety provisions requiring escorts for health care and other service workers inside the facility have also suffered due to understaffing, with one officer getting severely beaten while escorting a nurse in 2019 after a prisoner escaped his cell. The report faults the state, which “failed to enforce contractual penalties that punish short staffing,” while noting understaffing remains a problem in many correctional facilities, both public and private.

Quotable Quotes

“We’re not certain we will sell (the sewer system). But in the meantime, we can’t afford to be fined if we begin to dump raw sewage into the Susquehanna.”

—York (PA) City Council President Henry Nixon, referring to the potential sale of the city’s wastewater system and treatment plant in the York Dispatch 

“By contract, MTC (Management and Training Corporation) must have a set number of guards on every shift at its three Mississippi prisons. When a mandatory position isn’t filled, the company is supposed to repay the state the wages plus a 25 percent penalty. At the prison where (prison guard) Adams was attacked, the company paid some refunds to the state for several years. But MTC invoices show those repayments dropped from more than $700,000 in 2017 to only $23,000 in 2018, even as the staff vacancy rate rose…In the company’s two other Mississippi prisons, MTC didn’t repay a penny from 2013 to 2019, despite understaffing.”

—Joseph Neff And Alysia Santo in the Marshall Project report, “No-Show Prison Workers Cost Mississippi Taxpayers Millions”

“Too many generations in my district have been in old and outdated schools. Generations that have been lost, that could have achieved a whole lot more, who didn’t have a fair chance in my district. I refuse to have my grandchild do the same thing.”

—Prince George’s County (MD) Board of Education member Belinda Queen, on approval of the county’s new K-12 school P3 in The Diamondback

“You’ve got varying IT networks with varying levels of maturity and levels of security, and with the goal being integration, this is the way to get after it to ensure we have cost efficiencies and accountability to bring us up to standards.”

—Col. Jon Autrey, chief of the Defense Enclave Services Office at DISA, referring to his office’s current RFP for IT consolidation and modernization in MeriTalk

The post Privatization and Government Reform Newsletter: Contracting Mass Transit Services, a Government-Owned 5G Network , and More appeared first on Reason Foundation.

Main Articles:

• Election Issues: Reason Foundation’s Voters’ Guides to 2020 Ballot Initiatives
• Budgeting: The Federal Government’s Deep Deficit Dilemmas
• Water and Environment: Private Sector’s Role in Water Systems, Subprime “Green” Bonds, and Solutions to Florida’s Blue-Green Algae Problem

News & Notes

• State Government: Boston Extends Commuter Rail Contract, Puerto Rico Finalizes Energy Deal
• Corrections: New Study Highlights Incarceration’s Lost Income, Private Prisons Face Lawsuits,  Idaho Enters, Oklahoma Ends, and Vermont Extends Private Contracts
• Local Government: Seattle Cruise Terminal Cancels P3, Miami-area Water Contracts End, NJ and Texas Locales Finalize Water/Wastewater P3s, Wichita Outsources Art Center Management
• Federal Government: Department of Energy P3s Reach Milestones, Joint Base Selects Water Deal Partner

MAIN ARTICLES

Reason Foundation Releases 2020 Ballot Initiatives Guide

Reason Foundation’s Voters’ Guides to the 2020 ballot initiatives examine a wide variety of issues on ballots across the country. Highlighting and dissecting over 40 ballot initiatives, Reason’s policy experts aim to decipher the initiative language and critical issues that voters in California, Florida, Georgia, Michigan, Nevada, and many other states are considering on policy issues ranging from budgeting to criminal justice reform to drug policy to individual freedom. Reason’s 2020 Voters’ Guide tries to strip out the political noise and highlight the best existing research to analyze each initiative, providing voters with the real-world pros and cons and potential impacts of these initiatives.

Massive Federal Government Deficits Require Structural Reforms 

“The federal budget deficit hit an all-time high of $3.1 trillion in the 2020 budget year,” the Associated Press recently reported. The COVID-19 pandemic and recession have thrown fuel on the massive fires that Congress has normalized over the past century, with annual federal deficits nearing $1 trillion regularly. In a recent article, Reason Foundation’s Marc Joffe and Austill Stuart explore why any fiscally-sustainable solution to the federal government’s deficit spending will require significant structural reforms that effectively challenge norms developed over decades. Since many state and local governments face their own budget deficits and expect at least some federal help with the pandemic, the task becomes even more difficult. A recent report from the National Academy of Public Administrators provided some key insights for tackling both the deficits created by federal budget practices and the deferred maintenance problems facing so much of the nation’s critical infrastructure.

Beware of Subprime “Green Bonds”

Property Assessed Clean Energy (PACE) loans, which rely on property tax assessments for their viability, have become increasingly common in recent years for financing home energy efficiency improvements. Financial companies then package PACE loan portfolios into securities. Unfortunately, consumers often agree to such loans with limited understanding of the arrangements they are entering into, increasing borrower default risk. In a new commentary, Reason Foundation’s Marc Joffe explores some of the potential problems that may arise from an improper risk assessment of these types of green bonds.

Banning Water Privatization Makes Affordable Municipal Water More Difficult

Movements all over the world aim to solve the problems of access to clean water and sanitation by declaring that those are two “rights” and demanding governments provide them to everyone regardless of their ability to pay. In addition to calling for governments to step up to the challenges of managing good water systems that are affordable, reliable, and safe, many groups are also trying to insist that governments do all of the above without the private sector. In a new piece, Reason Foundation’s Austill Stuart explains why banning private management of municipal water and related systems further complicate the already difficult effort to achieve the balance of affordability and reliability, increasing costs over the long term. 

Tackling Florida’s Blue-Green Algae Bloom Problem

Long under-studied, the negative effects of blue-green algal blooms are starting to become clearer to researchers, with the Florida peninsula serving as especially vulnerable to its negative effects on wildlife, erosion, and public health. In a policy brief, Reason Foundation’s Vittorio Nastasi explores how Florida can better manage its blue-green algae problem and its numerous negative effects.

NEWS & NOTES

STATE GOVERNMENT

MBTA Extends Commuter Rail Contract: This summer, the Massachusetts Bay Transit Authority (MBTA) announced a four-year extension to its contract with Keolis to manage and operate the transit agency’s commuter rail lines. The original eight-year, $2.7 billion contract dates back to 2014 and now will be extended to 2026, with an option to leave the contract after 2025. The agency estimates the four-year extension will cost $173.4 million, not including an assumed $100 million per year (minimum) in capital expenditures over the term. The contract also builds off of its established performance-based structure and includes financial penalties and rewards for customer satisfaction, staffing levels, and timely performance, with a fixed-price base.

Puerto Rico Signs Electricity Transmission and Distribution Contract, Launches Legacy Assets Project: The Puerto Rico Electric Power Authority (PREPA) signed a 15-year agreement with LUMA Energy—a joint venture of ATCO Ltd., Quanta Services, and Innovative Energy Management—to manage and operate the electric authority’s transmission and distribution assets, leaving generation in the utility’s hands. According to LUMA’s estimates, the estimated $1.5 billion deal could generate $323 million in savings over the first half of the contract. In a September article in the Puerto Rico-based The Weekly Journal, Puerto Rico Financial Oversight & Management Board Executive Director Natalie Jaresko defended the deal’s performance-based focus, with a full award “paid because it does well—if not, they don’t get the same pay.”

LOCAL GOVERNMENT

Port of Seattle Cancels Cruise Terminal P3: The Port of Seattle (PS) canceled a request for proposals that aimed to find a private partner to build and operate a new cruise terminal for the port, an estimated $200 million public-private partnership (P3). The Port of Seattle previously issued an RFP in August 2019 for the project, shortlisting four proponents in February of this year for a revised RFP. Officials cited the COVID-19 pandemic as playing a major role in the cancellation while suggesting the project might be revisited at some point in the future. “Our current focus remains on public health…The last two decades of growth indicate that there is durable demand for Seattle cruises. When we can, we will convert that demand into more business opportunities and jobs for our region,” remarked Port of Seattle Executive Director Steve Metruck. 

Camden, NJ, Signs Contract to Rehab Combined Sewer Regulators: The city of Camden, New Jersey signed a $5.1 million contract with American Water to rehabilitate 28 combined sewer regulators. For combined (wastewater/stormwater) sewer systems, regulators serve to divert excess stormwater so wastewater treatment plants don’t get overwhelmed by inflows as well as combined sewer overflows where untreated wastewater mixed with stormwater gets discharged into waterways.

North Miami Beach Exits Water Service Contract: In August, the city of North Miami Beach ended its water outsourcing contract, a $190 million 10-year deal originally signed in 2017, with Jacobs Engineering (formerly CH2M Hill) in a 5-2 vote. While opponents of the contract were pleased with the decision after a three-year fight to end the contract, city staff recommended, rather than ending it, to pare the contract down to just operations and maintenance, with the city retaining control of customer service. The city manager and other officials are worried about the transition back to in-house operations, including staffing obligations that must be met within six months: “You could be … simply setting up this process for failure without additional support from Jacobs,” City Attorney Dan Espino noted, noting filling needed positions could take “upwards of a year.”

Texas Town Selects Partner for Desalination Deal: The town of Alice, Texas, announced it had chosen Seven Seas Water (acquired in March by Morgan Stanley) as a partner for its design-build-finance-operate-maintain (DBFOM) desalination plant project. When operational, the brackish water reverse osmosis plant will allow a lower-cost supply for the city’s residents compared to relying on neighboring Corpus Christi in a separate contractual arrangement.

Wichita Votes to Outsource Management of Art Center: The Wichita (KS) City Council approved a new budget that includes outsourcing management of the city’s Century II Performing Arts & Convention Center, a deal on which the city hopes to save $5.7 million over the next 30 months. Wichita hopes to release an RFP for the contract after this year.

FEDERAL GOVERNMENT

Pair of U.S. Department of Energy Partnerships Reach Milestones: Two U.S. Department of Energy (DoE) partnerships reached milestones in late summer 2020. In early September, DoE selected Albermarle as its private partner for lithium research projects, one based at DoE’s Argonne National Laboratory to streamline the process for creating lithium-based batteries, and the second at DoE’s Pacific Northwest National Laboratory, a project that aims to commercialize new high-energy cathodes that extend battery life for electric vehicles, through the use of lithium salts.

In August, DoE and Microsoft announced a partnership to develop AI tools to improve disaster response. The two will lead a group deemed the “First Five Consortium” (referring to the first five minutes following a natural disaster), where DoE will develop and test technologies, while Microsoft will provide data storage, software, and other technological capabilities. Systems currently in development include better tools to track and predict the effects of wildfires and floods.

Washington State Joint Base Selects Water Contract Partner: In September, the U.S. Department of Defense (DoD) selected American Water as its partner to own, operate, and maintain the combined water and wastewater systems for the Joint Base Lewis-McChord in Washington state. It is a 50-year contract estimated at around $770 million.

CORRECTIONS AND CRIMINAL JUSTICE

Brennan Center Report Highlights Economic Impact, Lost Income from Incarceration: The Brennan Center for Justice at New York University released a report that provides estimates of an under-studied effect of prison time: income lost from incarceration and criminal convictions. The authors estimate income losses of people touched by the criminal justice system to be $372 billion a year, with the report finding: “People who have spent time in prison suffer the greatest losses, with their subsequent annual earnings reduced by an average of 52 percent. People convicted of a felony but not imprisoned for it see their annual earnings reduced by an average of 22 percent. People convicted of a misdemeanor see their annual earnings reduced by an average of 16 percent.” The study also finds, “People who were imprisoned early in their lives earn
about half as much annually as socioeconomically similar people untouched by the criminal justice system.”

Judge Upholds Most of California Private Prison Lawsuit: A federal judge issued a tentative ruling in July that mostly confirms California’s plan to phase out and ban privately-operated prisons and immigrant detention centers in the state, codified by Assembly Bill (AB) 32, which became law at the beginning of the year. The federal government and GEO Group, in bringing suits against the state, claimed the state cannot intervene in the management of federal corrections facilities. U.S. District Judge Janis Sammartino ruled that the state’s actions do not constitute such an infringement, citing an unsuccessful federal challenge to the state’s “sanctuary” law, AB 54. The ban potentially affects over 11,000 beds in 10 private prison facilities in the state, seven of which are managed by GEO Group.

Arizona Corrections Faces Lawsuit Over Private Prison Use: Five inmates and the Arizona Chapter of the National Association for the Advancement of Colored People (NAACP) filed suit against the state of Arizona’s Department of Corrections and Management and Training Corporation (MTC) over the state’s use of private prisons, alleging that contracting out corrections to private companies violates the U.S. Constitution’s Eighth Amendment protections against “cruel and unusual punishment.” A spokesman for Arizona Gov. Doug Ducey and representatives from private corrections firms claimed the suit is baseless, citing the re-entry programming and educational services provided in private corrections facilities.

Idaho Enters Contract to Send Inmates to Arizona Private Prison: In August, the Idaho Department of Corrections (IDOC) announced it had agreed to enter a contract with CoreCivic to send Idaho inmates to the Saguaro Correctional Center west of Phoenix. The move will result in IDOC transferring inmates from a privately run facility in Texas to the Arizona prison, which allows for roughly twice the available inmate capacity (620 vs 1,200) as under the previous arrangement. The IDOC cites the availability of educational and vocational training opportunities as additional factors in the move.

Oklahoma Ends Private Prison Contract: The Oklahoma Department of Corrections, citing a $24.4 million budget crunch, announced it was ending its contract with CoreCivic to house inmates at the 1,650-inmate Cimarron Correctional Facility in Cushing, which the company has owned and operated since 1997. While the Department of Corrections was open to housing a reduced number of inmates in a reduced contract, the company elected to close the facility instead.

Vermont Extends Mississippi Private Prison Contract: The Vermont Department of Corrections announced in October that it would exercise a one-year extension on a contract to house 225 inmates in the Tallahatchie County Correctional Facility in Mississippi, run by CoreCivic. Signed in 2018, the original contract initiated the move of inmates from a state-run corrections facility in Pennsylvania and allowed for the year-long extension, which comes in the wake of many of the Vermont inmates in Tallahatchie contracting the COVID-19 virus (from which they all have recovered). Looking forward, the VDOC plans to eventually eliminate all contracts to send inmates out of state within the next two years.

QUOTABLE QUOTES

“Our main goals are to provide continuity and the best possible service for our Commuter Rail customers, as well as provide adequate time to plan for a future transformational procurement. With this extension in place, we look forward to continuing this partnership with Keolis…This extension includes a number of additional benefits for riders, including further incentives for on-time performance, measures to address fare evasion, and flexibility and cost certainty in a challenging market.”

— Massachusetts Bay Transit Authority General Manager Steve Poftak, quoted in a press release announcing the agency’s commuter rail contract extension with Keolis

“This public-private partnership places Puerto Rico on the path to achieving the reliable and resilient infrastructure that will give the people of Puerto Rico the peace of mind they deserve. For decades, our electric power system has undergone countless changes and challenges that have affected its operation and the delivery of service to its customers. These challenges were compounded by the impact of Hurricanes Irma and María and the recent earthquakes. The Puerto Rico Public-Private Partnerships Authority is extremely pleased with the selection of LUMA as the company that will lead the historic transformation of the Island’s electrical system.”

— Fermín Fontanés, executive director of the Puerto Rico Public-Private Partnerships Authority, in a press release noting the approval PREPA’s new 15-year contract to manage and upgrade its power grid. 

“We understand from previous studies done by the city of Alice (our cost) is a lower cost than the cost of buying rural water from Corpus Christi and treating it.”

— Richard Whiting, vice president of Seven Seas Water, quoted in the Corpus Christie Caller announcing the selection of the company as partner for its desalination plant project

The post Privatization and Government Reform Newsletter: 2020 Voters’ Guides, Federal Deficits, and More appeared first on Reason Foundation.

Main Articles:

• Annual Privatization Report: Transportation Finance, Aviation and Surface Transportation
• Health Care: Telepharmacy Services Offer Promise for COVID-19 
• Government Reform: Zoning Restrictions, California’s AB5 Problems 
• Federal Government: U.S. Postal Service Reforms Need Congressional Action
• Transit: More Contracting Would Help Boston’s Transit Line

News & Notes:

• State Government: Transit Problems, Maryland Managed Lanes, Alabama Prisons P3, Contract Tracing’s Privacy Concerns, Iowa’s Pay-For-Success Program
• Local Government: Port of Los Angeles Eyes Public-Private Partnerships, Ohio City Rejects Water Privatization, Minneapolis Animal Control Contract, New Mexico Public Safety Facility P3, and More
• Higher Education: Energy, Housing P3s Reach Milestones

MAIN ARTICLES

Annual Privatization Report 2020: Aviation, Surface Transportation, and Transportation Finance

For over 30 years, Reason Foundation’s Annual Privatization Report (APR) has provided the most comprehensive account of privatization of government services and public-private partnerships (P3s). This month, we released the first three chapters of the 2020 report: Aviation, Surface Transportation, and Transportation Finance.

Authored by Reason’s Robert Poole (Aviation, Transportation Finance) and Baruch Feigenbaum (Surface Transportation), with assistance from Joe Hillman, the chapters examine public transportation P3s in airports, bridges, roads, and highways, as well as light rail and public transit. Each section includes additional analysis of topics specific to its area of focus, including air traffic control reform throughout the world, domestic legislation, and regulations affecting various forms of transportation infrastructure, including toll roads and enabling legislation for public-private partnerships.

Telepharmacy Services Can Help COVID-19 Response 

Telemedicine and telepharmacy services can help contain the spread of the coronavirus through reduced face-to-face contact in health care facilities and pharmacies. Both services are getting increased attention amid the pandemic, and states are looking to expand their use to help hedge against the potential overburdening of health care facilities and crowding of retail pharmacies.  In this recent article, Reason Foundation’s Vittorio Nastasi goes through state efforts to increase the use of telepharmacy innovations, including the expanded use of kiosks capable of providing 24-hour access to services, as well as expanded services to underserved areas.

Restrictive Commercial Zoning Hurts Recovery Prospects 

The COVID-19 pandemic has drastically changed work for many of the Americans fortunate enough to maintain their jobs, including a greater embrace of telecommuting. The retail and food service industries will see drastic changes, too, as restaurants and retail try to adapt to social distancing measures. Many prepared food and retail businesses in large urban areas are likely never to return. Reason’s Austill Stuart and Marc Joffe examine how urban areas can work to help soften COVID-19’s toll on potential blight problems by allowing greater flexibility in zoning regulations and the innovative use of public space.

Pandemic Intensifies Major Damage Done by California’s AB5

California’s Assembly Bill 5 (AB5) required most California businesses to designate all independent contractors as “employees” subject to insurance and other benefits in addition to solely wages. As millions lose their jobs amid the COVID-19 pandemic, lawmakers scrambling to issue exemptions from AB5’s requirements, which it had initially issued to various licensed professions, including doctors, insurance agents, and lawyers. Reason Foundation’s Vittorio Nastasi shows how the COVID-19 pandemic’s effects are intensifying both the law’s ill effects and why repealing the law is the best answer.

Postal Service Needs Competition for Financial Sustainability

The United States Postal Service (USPS) has had considerable difficulties maintaining its solvency as email, text messages and technology have reduced demand for the USPS’ core and most profitable services: delivery of letters and bulk mail. Already limited in its ability to reduce money-losing retail outlets and gain additional self-generated sources of revenue, rigid labor rules and obligations to retirees made a bad situation more dire—even before the COVID-19 pandemic hit. About the only financial bright spot for the USPS over the past decade lies in its increased ability to hire “non-career” workers not subject to the labor costs, retiree benefit obligations, and restrictions its career employees face. Stuart explains why Congress should open additional channels that would allow USPS to save money and generate revenues, as well as subject its operations and workforce to private-sector competition, an approach that has worked throughout Europe.

Boston Area Transit Benefits from Contracting, Could Use More

During a two-year break from the state’s competition-limiting “Pacheco Law,” the Massachusetts Bay Transit Authority (MBTA) took ample opportunity to subject in-house functions to competition, enter beneficial contracts with private firms, and re-negotiate contracts with public sector unions to save taxpayers money. Given that the coronavirus pandemic brings new challenges to ridership and revenue concerns, exempting MBTA from the Pacheco Law again could be beneficial for saving money and improving services. In this analysis, Stuart shows how contracting out has not only saved money, but also has worked to make MBTA’s commuter rail safe compared to the MBTA’s own transit lines.

NEWS & NOTES

STATE GOVERNMENT

Maryland’s Purple Line Project Seeks Extension After Contractors Quit, Agency Rejects Funding

Purple Line Transit Partners (PLTP), the consortium for Maryland’s Purple Line Transit P3, faced a pair of setbacks in early May that have led PLTP to seek a 470-day extension:  the Maryland Transit Authority rejected funding for the Purple Line P3, according to Inframation News, and the Washington Post reported that Purple Line Transit Constructors (PLTC)—the DB (design-build) partners of the DBFOM (design-build-finance-operate-maintain) project made of Fluor, Lane Construction, and Taylor Brothers—exited the P3 project. The events occurred mere weeks after the project scored the victory of getting a third lawsuit dismissed. PLTC cited difficulties obtaining rights-of-way, litigation-caused delays, and regulation as all contributing to the decision to exit the deal, an estimated $5.6 billion project, and a $1.2 billion removal from Fluor’s backlog.

Maryland Receives RFQ Responses for Managed Lanes P3

Another multi-billion-dollar public-private partnership in Maryland, the I-495/I-270 Managed Lanes Project, is moving forward. The Maryland Department of Transportation announced it received responses to a request for qualifications from four groups interested in potentially submitting bids for the estimated $7.6 billion project, Inframation News reported. The state hopes to shortlist teams from the four groups—one each led by ACS, Cintra, Itinera, and Transurban—in July, with a request for proposals (RFP) released later in the year. The state has left responsibility for obtaining financing solely to the private teams, which are likely to apply for federal funds to provide for a portion of the project’s financing, making the project somewhat contingent on whether Congress raises the cap for private activity bonds.

Alabama Receives Private Prison Proposals

The state of Alabama’s corrections system needs significant reform. The state has done a poor job with respect to corrections in the past and is severely overcrowded, in part, due to the large number of inmates serving low-level drug and property crime convictions. Now the state is trying to improve its results through the use of an agreement with the private sector. The Alabama Department of Corrections recently announced it had received proposals from two consortia in what would be a nearly $1 billion long-term public-private partnership to build and operate three prisons. “This transformative initiative will improve our state’s infrastructure by replacing aging and dilapidated facilities that increasingly pose public safety risks and only will continue to unnecessarily drain taxpayers’ dollars,” said Alabama Governor Kay Ivey in a May press release announcing the two finalists for the project. The state hopes to select a final proposal this summer.

Contact Tracing Methods Raise Major Privacy Concerns 

Along with making personal protective equipment (PPE) and testing kits widely available, contract tracing is a significant tool public health agencies and health care providers can use to help mitigate the spread of the coronavirus. But contract tracing raises very real concerns over privacy. While app-based methods can vary in the degree to which they protect the privacy of users, one non-digital means of contact tracing being adopted and considered by states that raises unique concerns is the practice of governments requiring businesses to keep records on every customer that visits their premises. A recent article on Route 50 explores how such mandates can severely undermine public trust in a time where it is most severely needed, using the example of contact tracing in the sexually-transmitted disease to make a case for greater privacy safeguards.

Iowa Soybean Farmers Enter Pay-For-Success Agreement with Cargill, Quantified Ventures

An April press release revealed that the Iowa Soybean Association (ISA) was entering into a pay-for-success (PFS) venture with private firms Cargill and Quantified Ventures to help conserve water and improve soil health. The PFS arrangement establishes the Soil and Water Outcomes Fund to compensate farmers for employing best practices for soil management through monetizing the benefits of adopting those practices, such as through the reduction of mineral content in ways established by the Clean Water Act and through increased sequestration of carbon into soil, in a project that could potentially be adapted in watersheds throughout the country.

LOCAL GOVERNMENT

New Port of Los Angeles Executive Director Eyes P3s for COVID-19, Redevelopment 

In an interview with the American Journal of Transportation, new Port of Los Angeles Executive Director Gene Seroka said he will look to use P3s to help get through the COVID-19 pandemic and bring more development back to the port, which has lost business from Atlantic and Gulf coast ports. As of mid-May, Mr. Seroka was working with Honeywell to mass-produce protective face masks on-site for local health care facilities and aims to potentially use P3s to re-attract business to the port by cutting costs. 

New Mexico County Announces Public Safety Training Facility P3

Bernalillo County (which includes Albuquerque) issued a request for qualifications (RFQ) in late April for a P3 whereby a private partner will design, build, finance, operate, and maintain a training center for public safety workers. Responses were due in late May.

Minneapolis Enters Animal Control Contract with U.S. Department of Agriculture

The Minneapolis Park and Recreation Board recently agreed to adopt a contract with the U.S. Department of Agriculture’s (USDA’s) Animal and Plant Health Inspection Service to help eradicate beavers and coyotes from the area. The contract permits the federal agency to use various kinds of traps and firearms to remove the animals from 6,500 acres managed by the city’s Parks and Recreation board, where beavers are contributing to flooding issues and coyotes present a potential threat to humans and pets. The contract runs through the end of March in 2023, does not prevent the board from contracting with other agencies or private individuals for the same purposes, and will not exceed $50,000.

City of Buffalo Announces Environmental Impact Bond

Buffalo Mayor Byron W. Brown announced during his State of the City address that the city intends to pursue a $30 million Environmental Impact Bond (EIB) program, the nation’s largest to date. The project looks to eliminate the effects of “combined sewer overflows,” which occur when heavy precipitation enters water infrastructure and overburdens treatment facilities, resulting in outfalls that empty waste into waterways. Funding would go to private property owners with significant amounts of impervious surfaces to develop, operate, and maintain green infrastructure on their lands, with a goal of reaching the “greening” of over 500 acres under the EIB.

St. Clairsville Rejects Aqua America Offer for Water, Wastewater Systems

The St. Clairsville, Ohio City Council voted against pursuing a sales agreement with Aqua America for the city’s combined water and wastewater systems, the Times-Leader reported. Facing numerous state mandates, including the closure of a local treatment plant, engineer Jeff Vaughn told reporters that the city aims to purchase water from Belmont County via upgraded connector lines as an alternative solution. 

Park City Leak Detection Contracting Wins Green Award

Park City, Utah, received a Smart 50 Award from Smart Cities Connect for contracting efforts to cut down on leakage in its municipal water system, Treatment Plant Operator noted in its May issue. The ski resort destination entered contracts to use acoustic detection and data collection technologies with Xylem-subsidiaries Wachs Water Services and Visenti, respectively, to help identify leaks in the city’s water system. The changes are already saving the city 300 gallons of previously leaked water per minute through investments that have reduced chemical and pumping use by $150,000 per year, enough to match the initial investment in 18 months.

Widespread COVID-19 Building Closures May Affect Water Quality 

An overlooked and largely unknown dilemma arising from the COVID-19 pandemic—effects caused by not using commercial water and wastewater end-user lines for prolonged periods of time—will be studied by a research program funded by the National Science Foundation. While periods of non-use of buildings occur with some frequency, the potential for so many buildings to sit without use of their water-related systems simultaneously could result in potentially significant heavy metal accumulation, based on the application of previous research. Additionally, since previously closed health care facilities have opened to handle additional capacity in areas with high coronavirus infection rates (though not without difficulty), ensuring quality in water delivery systems of previously idle facilities may need to account for metal accumulation. The research will be led by Purdue University Engineering Professor Andrew J. Whelthon and assisted by researchers at Virginia Tech, Legionella Risk Management Inc., Arizona State University, University of Memphis, University of Iowa, Northeastern University, and Polytechnique Montréal in Canada.

Bowling Green, Kentucky Rejects Transit Proposals

The western Kentucky city of Bowling Green rejected three proposals from private firms (whose names have not been released) to manage and operate transit services throughout the city, following a request for proposals (RFP) issued in February, the Bowling Green Daily News reported. The city followed up the rejection by allowing resubmissions to a revised RFP with clarifying language, for which responses were due in late April, but no additional details have been made available since. The city gave respondents three options for bid proposals: management and services each separately, or both combined management and services. Two firms chose the combined approach, while one bid only on management. The western Kentucky city has outsourced transit services to Community Action since 2003.

St. Thomas Seeks Harbor Transportation Proposals

St. Thomas Island of the U.S. Virgin Islands issued an amended RFP this month for a private partner to operate transportation services between four destinations on and near the island, the St. Thomas Source reported. The terms of the contract include a three-year base, renewable for an additional two years at the government’s discretion, as well as requiring the private partner to operate vessels that hold at least 80 people and report ridership data to the government on a monthly basis. The chosen partner would also be responsible for all compliance and regulatory risk, as well as marketing and promotional activities. RFP responses, including a fare schedule subject to government approval, were due in mid-June.

New Jersey Township Outsources Its Legal Department

The town of Toms River recently voted to eliminate its in-house legal staff in favor of outsourcing legal services to a private firm, Jersey Shore Online reported. The firm of Dasti, Murphy, McGuckin, Ulaky, and Connors, which includes former Toms River Councilman Gregory McGuckin, will take over providing legal services for the coastal township. Toms River looks to save money by eliminating full-time staff, noting that several nearby towns have achieved savings from outsourcing legal services to the firm.

HIGHER EDUCATION

University of Idaho Shortlists for Utilities P3

In late March, the University of Idaho shortlisted two consortia, one led by ENGIE and another consisting of Plenary and Sacyr, for its campus utility systems P3, Inframation News reported. The likely 50-year concession agreement is expected to provide $1.2 billion in payments to the school from the chosen consortium while helping the school achieve carbon footprint reduction targets. The school hopes to choose a preferred proponent this spring, building off of a November 2019 Request for Qualifications that produced 12 initial respondents. 

Texas A&M Medical Housing P3 Preferred Proponent Selected

In February, the Texas A&M University system chose an American Triple I Partners/Medistar consortium as its preferred proponent for a 60-year, $546 million P3 to provide housing for health care students in Houston, as well as to provide a center for its new engineering medicine program. 

University of Kentucky Wet Lab P3 Receives Proposals 

The University of Kentucky announced it had received responses (while refusing to specify how many) to a new RFP (after a previous attempt in early 2019) issued in March for its Wet Laboratory P3, according to Inframation News. The school seeks a private partner to add 40,000 square feet of combined laboratory and office space to its Coldstream Campus, located roughly seven miles north of the school’s main Lexington Campus. 

Bowie State Mixed-Use P3 Reaches Financial Close 

Maryland’s Bowie State University reached financial close with Balfour Beatty on the school’s mixed-use housing P3, the company reported in a press release. The 170,000 square feet of housing and shared space will include room for 557 beds and an “entrepreneurial center” for school-based business organizations. The Balfour Beatty-led consortium also includes architect Design Collective and Smoot Construction, with the Maryland Economic Development Corporation serving as a planning partner with the school. Construction began in February with an expected fall 2021 completion date.

Santa Rosa Junior College Housing P3 Reaches Financial Close

Inframation News noted that Santa Rosa Junior College in California reached financial close with Servitas on the school’s housing public-private partnership, a DBFOM lease to add 360 on-campus beds to the Sonoma County-based campus. Wildfires in 2017 destroyed housing for many faculty and students at the two-year college and led to the project being pursued. 

QUOTABLE QUOTES

“We (The Port of Los Angeles) charge twice as much as the ports on the East and Gulf coast charge today to move a container on and off the ship. We have to redirect that. The Port of Los Angeles has a 9-point plan that will include incentive monies on the transactional basis and continued investment through cycle. During this economic downturn, we have to become more competitive. We’ve lost 20 percent of our market share since the unfortunate labor lockout of 2002 and we have to reverse course. I don’t know that we will ever get it all back. The Eastern, Gulf Coast, Pacific Coast of Mexico and British Columbia have done a great job. They’ve hired superior talent. They’ve invested a lot of money and they’ve aligned their politics in those states. We have a long way to go … We’re going to go out there swinging and we’re going to make sure that we make the investments that are necessary to attract cargo here because if everything else is equal, we’re the fastest gateway between Asia and the middle part of this country …”
–Port of Los Angeles Executive Director Gene Seroka, in an interview with the American Journal of Transportation on how the port is adapting during the pandemic. 

“The proposing team’s own school and office building water testing evidence indicates such extended shutdowns will have drastic consequences on building drinking water safety: chemical and microbiological water quality potentially presenting serious public health risks. As inhabitants return, they will encounter extremely stagnated water with excessive lead, copper, and bacterial concentrations, that may include pathogens like Legionella pneumophila. There are no national or industry guidelines for building reopening after extended shutdowns. A fundamental understanding of water quality deterioration mechanisms precipitated by large-scale shutdowns and plumbing decontamination is critically lacking.”
—From the abstract of research being led by Purdue University Engineering Professor Andrew J. Whelton onf the effects of municipal water quality from prolonged lack of use of buildings prompted by the COVID-19 pandemic.

“Cities face massive stormwater challenges as they respond to a changing climate. Nature-based solutions reduce urban flooding risk and CSOs, and the EIB reduces Buffalo’s financial risk. It’s a winning combination!”
—Eric Letsinger, CEO of  Quantified Ventures, on Buffalo, New York’s new $30 million Environmental Impact Bond program.

“The more data, the more tools in the toolbox of the contact tracer the better, but fundamentally contact tracing is meant to be done in a way that is respectful of people’s freedoms and privacies. I don’t think this does anything to advance the trust that a marginalized population would have of these authorities.”
—Matt Prior, spokesperson for the National Coalition of Sexually Transmitted Disease Directors, in  Route 50 article on privacy concerns related to COVID-19 contract tracing.

“We resurveyed that area and also listened to the individual water service lines. We found eight services that had failed. They were leaking 5 to 30 gpm (gallons per minute) into the ground. The service lines could have leaked for a long time without detection because the water wasn’t surfacing; it was just draining into the rocky soil. 
We fixed those lines, and that reduced our water loss by an additional 200 gpm.” 
— Park City (UT) Water Resource Manager Jason Christensen, in an article in Treatment Plant Operator on the benefits of the city’s contract with Xylem subsidiaries for water  system leak detection. 

The post Privatization and Government Reform Newsletter: Transportation Finance, Telemedicine Services During Coronavirus and More appeared first on Reason Foundation.

Main Articles:

• COVID-19 Pandemic: Private Sector’s Role in Fighting Coronavirus, Bond Rating Threats
• Transportation: FAQ on Mileage-Based User Fees
• Water: Tradeable Permits, Private Innovation Key to Florida’s Water Future
• Government Reform: Short-Term Rentals Pit States Against Municipalities
• Pensions: New Mexico Enacts Bipartisan Pension Reform

News & Notes:

• Energy: Feds Investigate Failed Jacksonville Electric Privatization
• Corrections: KY, MS Sign Emergency Contracts, WA Looks to Follow CA Private Prison Ban
• Health Care: LA, KY Hit Reset on Managed Medicaid
• Higher Ed: Arizona State Finalizes P3, NJIT Announces P3

MAIN ARTICLES

Federal Government’s COVID-19 Response Failed to Tap Private Resources Quickly

Facing a pandemic that may be unprecedented in recent history, the United States’ federal government has not managed its response well. The Trump administration initially downplayed the severity of the coronavirus threat, while also thwarting health care agencies’ attempts to test for COVID-19. The federal government utilized faulty Centers for Disease-Control and Prevention (CDC)-approved tests, blocked private testing, and lagged in relaxing approval regulations and guidelines so tests could be made more quickly and on a larger scale.

In a new article, Reason Foundation’s Austill Stuart shows how the federal government’s initial coronavirus response could’ve been improved by more quickly taking advantage of private sector resources, better communicating with the public, and better coordinating with state and local governments. State agencies and local providers could have conducted more testing and gathered critical information, while vast private production resources could have been harnessed to create, distribute and conduct coronavirus tests and boost production of masks, safety equipment, and more.

Pandemic Threatens Transit Bond Ratings

The Bay Area was the first major U.S. metropolitan area to issue a “shelter-in-place” order in response to the coronavirus pandemic. While it certainly signals that local officials are taking the COVID-19 outbreak seriously, one unfortunate consequence of the restrictive measures has been the impact on the region’s transit systems. Bay Area Rapid Transit (BART) relies heavily on ridership fare revenues and sales tax revenues, which have fallen drastically as a result of the pandemic and government response. BART’s looming financial problems might threaten its general obligation bond rating and could foreshadow similar problems in other major cities, Reason’s Marc Joffe explains.

Frequently Asked Questions About Mileage-Based User Fees 

Many services citizens receive from governmental or private utilities employ a “user-pays” approach — electricity and water customers are typically charged based on how much electricity and water they use in their homes, for instance. For decades, treating roads similarly—tying user fees directly to roadway use—has mostly been rejected in favor of using fuel taxes as a proxy for road usage. But gas taxes will continue to weaken as alternative-fuel vehicles replace traditional fuel vehicles on roads and as traditional fuel vehicles become more fuel-efficient.

In a new publication, Reason Foundation’s Baruch Feigenbaum and Austill Stuart write that fuel taxes’ shortcomings will only continue to get worse over time and explore why replacing fuel taxes with mileage-based user fees (MBUF) could put road funding on a more predictable funding path, help alleviate traffic congestion, and treat drivers more equitably. The authors also work to address various fears and misconceptions over adopting an MBUF system, in part by looking at the results of Oregon’s OReGO pilot program assessing a per-mile charge to drivers.

Market-Pricing, Private Sector Can Alleviate Florida’s Water Troubles 

Despite the abundance of water in and around Florida, fresh water supplies within the state mostly sit well north of the vast majority of the state’s population, which continues to grow at a healthy pace. While municipal water systems typically charge citizens based on the water and sewer services they use, the going rates are subject to political realities that give great incentive to underprice their provision. In a recent analysis, Reason Foundation’s Vittorio Nastasi explains how market-based pricing reforms in water markets, such as tradeable water permits, could help lead Florida to the innovative solutions needed to ensure residents have sustainable and reliable supplies of clean water for generations.

Short-Term Rentals Pit States Against Their Municipalities 

State and local governments quibble over many issues, but a growing example of such disputes concerns the legality and terms of short-term rental platforms, such as Airbnb and HomeAway. As local governments look to ban or restrict them, would-be hosts look to state governments to preempt local restrictions from coast to coast. 

Reason Foundation’s Adrian Moore provides an analysis of the issue based on his firsthand experiences on the subject, which include (a) numerous conversations with local officials, (b) providing expert testimony in lawsuits over the issue, and (c) living in a community with numerous short-term rentals. Moore details how existing laws and homeowners’ associations can serve as effective barriers against the most common objections to allowing short-term rentals.

New Mexico Enacts Bipartisan Pension Reform to Improve PERA Solvency

This month, New Mexico Gov. Michelle Lujan Grisham signed into law Senate Bill 72, bipartisan legislation designed to begin tackling the solvency challenges of the Public Employees Retirement Association (PERA)—the public employee retirement system for state and local workers with over $6.7 billion in unfunded liabilities—through benefit design changes and increased employer and employee contributions. 

The legislation largely codified into law a set of recommendations made by Gov. Lujan Grisham’s Pension Solvency Task Force last fall. PERA administrators have warned that deteriorating cash flow trends may create major financial challenges down the road in underperforming markets, necessitating increased contributions today to avoid benefit payout issues down the road.

The bill passed with bipartisan support and was backed by a diverse array of labor associations and other stakeholders. In the wake of the Solvency Task Force’s report, and throughout the 2020 legislative session, the Pension Integrity Project at Reason Foundation provided actuarial and policy analysis to legislators and an array of other stakeholders. As described in a recent Reason.org commentary, the Pension Integrity Project believes that while additional phases of reform will be needed to ensure long-term solvency, the recently enacted legislation is an important step in the right direction for New Mexico, both from a pension finance and a bipartisan consensus-building perspective.

NEWS & NOTES

Jacksonville Power Privatization Effort Scrapped, Faces Federal Investigation

A probe into the attempted privatization of the Jacksonville Electric Authority (JEA) initiated by Florida State Attorney Melissa Nelson’s office was handed off to federal prosecutors in January. The city abandoned plans to privatize the utility in December at the urging of Mayor Lenny Curry, a week after forcing the resignation of then-CEO Aaron Zahn. In November, auditors discovered a bonus program that would’ve paid out large, uncapped bonuses to employees for meeting modest goals.

NYC Housing Authority Announces Senior Residential P3

This month, Inframation News reported the New York City Housing Authority intends to enter a public-private partnership with a private partner to design, build, finance, operate, and maintain a pair of new housing developments for seniors, one in the Bronx, one in Brooklyn. The two developments are expected to contain a combined 300-to-400 units, with each development occupying a roughly-25,000 square-foot footprint.

Private Prison Company Sues California Over New Law

Private corrections management company GEO Group filed a lawsuit against the state of California over its implementation of Assembly Bill 32, legislation set to phase out privately-operated corrections and detention facilities in the state by 2028. The suit, filed last December, alleges that the California law aims “to undermine and eliminate the congressionally-funded and approved enforcement of federal criminal and immigration law” of federal agencies. The Trump administration filed a separate suit over the law in January, saying the state can prohibit private sector corrections facilities under its own control, “[b]ut it cannot dictate that choice for the federal government, especially in a manner that discriminates against the federal government and those with whom it contracts.”

Washington Private Prison Ban Bill Passes Both Chambers

Similar to California’s AB 32, Washington Senate Bill 6442 would ban the use of private, for-profit corrections companies from operating prisons in the state and also prohibit governmental units from operating privately-managed prisons, or contracting with private corrections facilities outside the state. It passed the state’s House and Senate and is awaiting the governor’s signature. The Washington Department of Corrections would still be able to contract out with private companies for most services, including behavioral and medical health care, educational training, and re-entry. According to the state’s Department of Corrections, Washington’s prison facilities operated at 102 percent of average daily capacity in February 2020.

Miami Courthouse P3 Reaches Financial Close

In late January, Miami-Dade County reached financial close with a consortium for its Civil and Probate Courthouse Public-private Partnership (P3) project, according to a press release. The 34-year, $588 million design, build, finance, operate, maintain (DBFOM) P3 includes $310 million in private placement notes financed by Wells Fargo. The county plans to sell the existing courthouse property, using a 17-acre plot of public land for the greenfield project.

Louisiana Bridge P3 Reaches Financial Close

Fueled by a transportation committee vote in the state legislature to approve the project, the Louisiana Department of Transportation Development (La DOTD) reached financial close with a Plenary-led consortium for its Belle Chasse Bridge and Tunnel Replacement P3, a $162 million, 30-year DBFOM toll-financed project. While many residents expressed opposition to the tolling of the project, DOTD Secretary Shawn Wilson noted the tolling component was critical in obtaining a $45 million federal grant to fund a large portion of the project. Construction is supposed to begin this summer, with an opening date scheduled for 2024.

Outgoing KY Gov. Bevin Signs Emergency Private Prison Contract

Last December, in his last day in office, then-Kentucky Gov. Matt Bevin signed an emergency 10-year, $41 million contract to lease a previously closed private prison in Floyd County. The CoreCivic-owned facility will be managed by the Kentucky Department of Corrections in an arrangement where the state will pay $3.75 million each of the first two years, with 5 percent annual increases for the remaining term of the contract.

New Kentucky Gov. Beshear Announces Managed Medicaid Contract Rebid

Bevin’s successor, Gov. Andy Beshear, announced that the state would rebid all contracts for the state’s managed Medicaid program, which were initially awarded to managed care organizations (MCOs) Aetna, Anthem, Humana, Passport Well Plan, and Wellcare. The state’s Cabinet for Health Services hopes to select new MCOs this spring.

Louisiana Ends Managed Medicaid Contracts

Louisiana Chief Procurement Officer Paula Tregre scrapped the state’s managed Medicaid contracts, saying they resulted from a “fatally flawed procurement process” conducted by the state’s health department, including allegations of breaking state laws and failing to follow the agency’s own established procedures. The total three-year contract awards are estimated worth $21 billion, serving over 1.5 million Louisiana residents, roughly one-third of the state’s population. 

Mississippi Signs Emergency Private Prison Contract

Mississippi’s Department of Corrections (MDOC) signed an emergency 90-day contract in January to send 375 inmates from the Mississippi State Penitentiary in Parchman to a nearby prison in Tutwiler run by private corrections company CoreCivic, the AP reported. Officials said that they lack the security personnel to ensure inmate safety at the state’s prison in Parchman, which has seen several violent incidents recently. Later in the month, it was revealed that the contract may violate a state law that says that any private prison contract must show 10 percent savings on a per-diem basis compared to in-house operations under the MDOC, though officials noted that a lack of available staff makes keeping the inmates in the state-run prison impossible. 

Gulfport Selects Preferred Proponent for Port Lease

The Mississippi State Port Authority selected Turkish-based Yilport as its preferred proponent in a potential 50-year lease agreement with an additional 49-year option, Inframation News reported. The estimated $250 million (minimum) deal would also include expanding the terminal’s capacity nearly threefold compared to 2017 within the first two years after Yilport takes over operating the facility, from 217,000 20-foot equivalent units (TEUs) to 600,000 TEUs. Gulfport would be the first U.S-based facility operated by Yilport, which in 2019 lost out to Macquarie to secure a concession lease of the Long Beach (CA) Container Terminal.

The University of Iowa Closes on Utilities P3

This month, the University of Iowa (UI) announced it had reached financial close with an Engie/Meridiam consortium over a 50-year lease of the university’s energy assets. UI will receive a $1.165 billion upfront payment from the consortium, of which about 15 percent ($168 million) would be used to pay off existing debt as well as consulting fees. The project includes goals to reduce or eliminate energy generation from fossil fuels, including a goal to be coal-free by January 2025. The consortium will receive $35 million annually for their services, while UI plans to make $15 million available annually for grant proposals that help to contribute to the school’s plans.

ASU Reaches Financial Close on Housing P3

Arizona State University (ASU) and a Capstone-led consortium reached financial close on the school’s $118 million mixed-use housing development P3, the company noted in a press release. Capstone will be working with architect Studio Ma and builder DPR Construction for the DBFOM project, which will be located on ASU’s campus in downtown Phoenix and will house an estimated 530 students in 207,000 square feet of residential space. 

Downtown Birmingham Property Owners Sue Parking Authority

Owners of the Birmingham Financial Center, a 17-story building in downtown Birmingham, Alabama, filed a lawsuit against the city’s parking authority over the use of parking spaces in an adjoining parking structure. The Birmingham Parking Authority (BPA) has closed access to the spaces, claiming that previous owners had an agreement to use only 240 of the 350 parking spots. However, documents dating from the building’s origin (in 1980) and its most recent purchase (2016) show an agreement for 350 spaces. While the BPA eventually handed over access to five of the disputed spaces, it refuses to give any access to the remaining 105 spots, even though the owners would have to pay the BPA to use them, resulting in no lost revenue to the authority.

Virginia Announces Study for Comprehensive I-95 Plan

Directed by 2019 legislation (Senate Joint Resolution 276 and House Joint Resolution 581), a group of four state-level agencies [Commonwealth Transportation Board, supported by the Office of Intermodal Planning and Investment, the Virginia Department of Transportation, and the Department of Rail and Public Transportation] will conduct a data-driven study to help drive multimodal improvement projects along Virginia’s 179-mile portion of Interstate 95. 

NJIT Announces Housing P3

The New Jersey Institute of Technology (NJIT) released a request for qualifications (RFQ) for a new student housing DBFOM P3. The RFQ calls for a mixed-use development likely to include office and retail space in addition to apartment-style on-campus homes for 500 students. While a value has yet to be estimated, NJIT hopes to open the new development in 2021 or 2022.

QUOTABLE QUOTES

“The new Civil and Probate Courthouse project is the first social infrastructure public-private partnership of its kind in the State of Florida and represents a significant milestone for the County in its efforts to deliver critical public infrastructure projects through innovative and cost-effective delivery methods.”
—From a Miami-Dade County press release on its Civil and Probate Courthouse P3 project 

“California, of course, is free to decide that it will no longer use private detention facilities for its state prisoners and detainees. But it cannot dictate that choice for the federal government, especially in a manner that discriminates against the federal government and those with whom it contracts.”
– From the federal government’s suit challenging California’s ban on private prisons

“The 2015 Legislature directed the Department of Corrections (DOC) to explore options to increase prison capacity at medium-security through various approaches. The DOC is near capacity and the Caseload Forecast Council (CFC), through its adopted June 2015 forecast, projects the offender caseload to exceed capacity in the near future. While a shortage is estimated for both minimum and medium-security beds, medium-security beds have been the most critical need. For example, a shortage of over 1,000 beds is expected by Fiscal Year (FY) 2024, of which, will include a shortage of approximately 1,100 medium-security beds. The DOC is also experiencing a shortage at minimum security and expects to have a shortage of over 200 minimum security beds in FY2024.”
— From a Washington State Department of Corrections report for the state legislature

The post Privatization and Government Reform Newsletter: Private Sector’s Recovery Role in the COVID-19 Pandemic appeared first on Reason Foundation.

Main Articles:

• Annual Privatization Report 2019: State Government Update 
• Water: Harrisburg’s Dilemma, P3s for Florida Wetlands Restoration
• Transportation: A Conservative Case for Highway Tolling
• Environment: P3s Offer Way to Tackle Blue-Green Algae

News and Notes:

• Water: Maryland Establishes “Smart Ponds,” San Antonio Completes Private Pipeline, St. Clairsville Delays, Harrisburg Rejects Privatization, Godfrey Sells System
• Government Reform: Federal “Yellow Pages Test” Legislation Introduced
• Higher Education: Iowa Finalizes Utilities P3s
• Corrections: Alabama’s Shortlist for New Prisons, Arkansas Counties Seek Private Prison
• Military: Private Housing Fraud Allegations Prompt Investigation

Main Articles

Annual Privatization Report 2019: State Government

The latest chapter of Reason Foundation’s Annual Privatization Report 2019—now in its 31st year—reviews developments in privatization and public-private partnerships at the state level. The state government report includes an update on budgetary issues and the latest news on dozens of decisions made by state governments on the privatization and outsourcing of government services and infrastructure, including transportation projects, public higher education, liquor control, privately-managed Medicaid and public assistance programs, lotteries, and more.

» Annual Privatization Report 2019: State Government 

Harrisburg’s Water Problems Require Bold, Long-Term Vision

Harrisburg, Pennsylvania, like many cities in the eastern U.S., has faced many problems with its aging water and wastewater systems, including the regular discharge of raw sewage into local waterways after heavy rains. While the Environmental Protection Agency has cut the city some slack over the years in fixing its problems, Harrisburg will need to find a way to start making major improvements soon. Though the city recently rejected a sale of the combined systems to a private company (see more in News and Notes below), Reason Foundation’s Austill Stuart explains why private sector help will likely need to be a component of any long-term solution to fix Harrisburg’s sewage discharge problems since even the city’s proposed $300 million dollar plan falls well short of what

» Harrisburg’s Water and Wastewater Systems Need Major Investment

A Conservative Case for Highway Tolling

Federally-funded highways have been the norm for so long in the U.S. that many residents possess a natural tendency to oppose the introduction of tolls on highways. Increasingly, conservatives in states like Connecticut, Florida and Texas are opposing public-private partnerships and toll roads. In a new policy brief, Reason Foundation’s Robert Poole explains why attacks on tolling from conservatives are inconsistent with their principles and details a value-added tolling approach conservatives should support. Poole writes, “This policy brief reviews conservative opponents’ arguments, finding some of them to be justified and others to be mistaken. It provides some historical context on American tolling and cites economist Milton Friedman’s prescient assessment of the defects of the gas-tax model back in 1952. Building on those thoughts, this brief explains how tolling could be reformed consistent with basic conservative principles of limited government, decentralization, and markets.”

» A Conservative Case for Highway Tolling  

P3s Present Solution for South Florida’s Blue-Green Algae Problems

Blue-green algae, increasingly found in south Florida’s wetlands, represent a major problem to the state’s vital tourism industry. Formed when excessive nutrients settle in bodies of water, blue-green algae destroy wildlife and are harmful to pets and humans. Most agree that significant investments in storage and treatment facilities provide the best path forward to stopping the growth and spread of blue-green algae. In a recent commentary, Reason Foundation’s Vittorio Nastasi examines how public-private partnerships (P3s) could mitigate the region’s algae problem by providing effective infrastructure for treatment and storage. Previously, Pasco County, Florida, and Prince George’s County, Maryland, have used P3s to create wetlands and tackle problems related to water and stormwater pollution. The success in Prince George’s has led to a new state-level program (see more in News and Notes below).

» Florida Task Force Makes Good Start in Tackling Blue-Green Algae

News and Notes

Maryland Establishes “Smart Ponds” P3: Building off of stormwater P3 success in Prince George’s County, Maryland Gov. Larry Hogan announced a new state-level stormwater public-private partnership intended to help better protect the Chesapeake Bay from pollution and to reduce area flooding. The Maryland Department of Transportation will commit $4 million to the project, which initially calls for the installation of ponds at four Walmart locations and an additional privately-owned property. The partnership includes officials from the EPA, Walmart, and TNC/Opti Development Partners LLC—a venture formed by the nonprofit group, The Nature Conservancy, and Opti, a private company.

San Antonio Finishes Water Pipeline: In late September, the San Antonio Water System (SAWS) announced it had finished installing its 142-mile pipeline for its Vista Ridge project, which is expected to meet 20 percent of the area’s water demand, delivering 16 billion gallons of water per year to area residents. As mentioned in Reason Foundation’s Annual Privatization Report 2016: Local Government Privatization, the San Antonio City Council approved the 30-year, $3.4 billion design/build/finance/operate/maintain P3 project in 2014 between SAWS and Vista Ridge Consortium—a team led by Abengoa Water USA and Bluewater Systems.

Harrisburg Refuses Water Board Privatization: In November, Harrisburg Mayor Eric Papenfuse announced the city would reject privatizing Capital Region Water (CRW), the water utility that operates Harrisburg’s water and wastewater systems. The decision came after CRW said it would delay implementing a stormwater fee for six months, while going forward with a $300 million plan to improve the system prevent raw sewage spillages into nearby waterways that occur with heavy rains.

The EPA viewed the improvement plan insufficient, as it would only eliminate 60 percent of the raw sewage that spills from overflows of the Susquehanna River and nearby waterways, which would appear to be further hampered by delaying a stormwater fee that will serve as a dedicated revenue source to tackling raw sewage discharge. Even still, Mayor Papenfuse said he hopes to come to an agreement with the EPA in 2020 that will not include a sale or lease of the city’s systems to a private company.

St. Clairsville, Ohio, Announces Delay on Private Water Decision: In November, St. Clairsville councilmembers voted to delay a decision to sell the city’s water system to Aqua Ohio. The move came after the company said it would extend its offer into April 2020, citing the recent election of Mayor Kathryn Thalman, who opposes the sale.

Godfrey, Illinois, Sells Wastewater System: Last month, the village of Godfrey sold its wastewater system to Illinois American Water for $13.6 million, a deal approved in October by the Illinois Commerce Commission. Under terms of the sale, approved by the village last October, for each of the first 10 years following the sale the company will invest capital in the wastewater system (which serves approximately 6,200 customers), averaging out to around $2 million per year. In addition to wanting a private partner to better handle compliance with the state’s environmental rules, $5 million of the sale proceeds will be used to avert rate increases.

The University of Iowa Receives Approval for Utility P3: The University of Iowa’s Board of Regents and the state gave final approval for the school’s 50-year utilities P3. Partnering with ENGIE and Meridiam, the private consortium will pay the school an initial $1.2 billion, of which it plans to use a small portion to retire existing debt related to the infrastructure. The rest is slated to provide grants for programs that support the school’s strategic plan, which includes the elimination of all coal sourcing of power by no later than 2025 as part of a larger “zero-carbon” transition.

Lawmakers Introduce Federal “Yellow Pages Test” Legislation: This month, Rep. Mike Steube (R–FL) and Sen. John Thune (R–SD) introduced legislation in their respective chambers to subject much of the federal government to competition from the private sector in providing goods and services that are commercial in nature. The Freedom From Government Competition Act of 2019 (H.R. 5329, S.2990) would subject agencies to reviews over functions deemed as “commercial” to ensure they are providing the best value for taxpayers, while also allowing increased opportunity for the private sector to compete with the public sector for providing goods and services that are commercially available. “The bill has been likened to codifying a ‘Yellow Pages’ test, meaning that if the federal government is doing something that can be found in the Yellow Pages, or now in a simple online search, the product or service should be subject to market competition,” said Thune’s press release. 

Northern Virginia Bus Drivers Strike Over Privatization: In October, bus drivers operating routes in the Virginia suburbs outside of Washington D.C. staged a strike in response to outsourcing. Last year, the Washington Metropolitan Area Transit Authority (WMATA) entered a contract with private firm Transdev to operate the bus routes. Transdev and the bus drivers’ union have since been unable to agree to contract terms, and while the union has called on WMATA to intervene, the authority’s general manager, Paul Wiedefeld, sees no reason for WMATA to get involved in the negotiations.

Alabama Shortlists Four Teams for Private Prison Plan: In November, Alabama Gov. Kay Ivey and the Alabama Department of Corrections announced that it would seek bids from four companies to design, build, finance, and maintain three new prisons in the state, one of which would be primarily dedicated to rehabilitative purposes. The four teams will receive the state’s Request for Proposals this month, and responses are likely to be due in the spring of 2020.

Air Force Investigates Private Housing Fraud Allegations: Problems continue for the military’s use of private companies for housing. In November, the Military Times revealed that the Air Force is conducting an investigation of multiple allegations that employees of private company Balfour Beatty falsified maintenance records to obtain bonuses. Allegations from earlier in the year led the Air Force to warn that the company will be subject to formal dispute resolution actions from the defense arm unless there is “prompt and substantial improvement” from Balfour Beatty.

Arkansas Counties Move Closer to Private Jail Agreement: Bradley County and the Drew County Quorum Court separately voted to waive competitive bidding on a project so they can pursue a contract for a new private regional correctional facility to be built by Louisiana-based LaSalle Corrections. Bradley and its neighboring southeastern Arkansas counties are expected to share the facility to house 600 inmates, many of whom officials expect will be low-security risk prisoners from overcrowded prisons elsewhere in Arkansas. Only 45 beds would be set aside for Drew County inmates, and just 12 beds for Bradley County.

Quotable Quotes

“[This wastewater system sale will] serve residents well today and in the future. Illinois American Water will not only make the EPA mandated improvements to bring the system up to compliance, but their team of experts will ensure reliable service for years to come. This partnership also provides significant net proceeds to help fund other village needs and priorities. We welcome this expanded partnership with Illinois American Water in our community.”
– Godfrey Mayor Mike McCormick on the sale of the village’s wastewater system to Illinois American Water

“The (University of Iowa) is pleased to partner with ENGIE and Meridiam over the next 50 years in order to deliver on its strategic plan, which is focused on the success of students; research and discovery; diversity, equity, and inclusion; and engagement. With ENGIE and Meridiam, the university has found partners that share our values of investing in our people, improving sustainability, and transitioning toward a zero-carbon footprint.”
– University of Iowa President Bruce Harreld on the school’s recently approved 50-year utility management P3

“This innovative public-private partnership shows that public entities, partnering with businesses and nonprofits, can drive real environmental progress at a lower cost. These investments in stormwater infrastructure are investments in flood resiliency, in ecosystem restoration and in the communities where we live.”
– Maryland Department of the Environment Secretary Ben Grumbles on the state’s new “Smart Ponds” P3

The post Privatization and Government Reform Newsletter: State Government Update, Harrisburg’s Water Woes, and More appeared first on Reason Foundation.