On a CalChiefs podcast, which its creators describe as “the voice of the California Fire Service,” Southern Marin Fire Protection District Deputy Chief Ted Peterson provided some details on exactly how municipal fire departments are seeking to take over emergency medical services (EMS) delivery from county-level EMS systems: increased reimbursements for transporting Medi-Cal patients through the Public Provider Ground Emergency Medical Transport (PPGEMT) program.  

The federally-funded program is increasing nearly threefold, but the private ambulance companies that perform most of the EMS work for counties in California cannot access it. Thus, union officials argue that since municipal fire departments are already handling the first responder element of EMS and can access PPGEMT funds as a public agency, why not let these municipal fire departments control it all, draw more federal money, and strongarm ambulance contractors already providing services today into accepting less money for the same work by taking over their contracts from counties?  

One reason the fire unions’ desired scenario would be problematic lies in their chosen accounting methods, which ensure fire unions would receive much more money for doing no more actual work. The federal reimbursement of the PPGEMT program doesn’t rely on any formal financial reporting documents, but a standardized, averaged reimbursement rate fueled by informal cost reports that are “proprietary to each agency so they cannot be shared,” as Peterson notes. Basically, each fire department must, on its own, determine how much it costs to perform its first responder function,s and those costs are averaged out to a flat reimbursement rate.  

Setting aside obvious questions like how government cost reporting could possibly ever be considered “proprietary” and not transparently reported like other government budget figures, the podcast mostly served as a rallying cry for fire departments to adopt similar accounting practices and gimmickry to ensure those “informal” and “proprietary” cost reports show losses as high they can get away with, even encouraging colleagues to “appeal” if they get audited over their cost reports. 

Over time, Peterson says, the increases will lead to “billions” of dollars for fire departments “for not doing anything except filling out some forms” and “increase(ing) our cost per transport two to three times what it is today.” 

While shielding private intellectual property and trade secrets from public view is not unusual in private businesses in market competition, the same is not true of governmental budgetary information and financial statements, which require public, transparent reporting. Public agencies should not get special treatment to hide their accounting methods from taxpayers. 

But there’s no reason to stop at accountability of accounting methods. For EMS to maintain effectiveness, much less improve, competition needs to be preserved. That becomes increasingly difficult as municipal fire agencies exploit their ability to access taxpayer funding to dominate EMS, while private ambulance company workers provide most EMS services. Peterson speaks of fire agencies playing a part of the larger EMS “team,” but typically, on a team, those who contribute the most get paid the most. 

Instead, private ambulance companies could find themselves at the mercy of whatever municipal fire department administrators are willing to give them, threatening the exit of providers. The fire takeover of EMS in the city of Chula Vista has already shown that. The city raised the money provided for EMS to nearly $4,000 per trip, but the subcontractor company running the ambulances received less funding than they did under the previous arrangement and, overall, less than the fire agency that managed, but didn’t provide, the actual ambulance services.   

What’s more, the Chula Vista fire department blamed the ambulance company for the rate increase it fought for, even though the incremental new revenue from the rate increase went to the fire department.  

Those tactics threaten the exit of ambulance providers from the system entirely, which would be bad for taxpayers since fire departments are so dependent on them. Even if fire departments invest enough in ambulances, equipment, and services to provide full EMS, without competition and transparency, who is to say whether taxpayers are getting the best allocation of their funds? 

Ironically, the podcast inadvertently highlights the need to emphasize cost and accountability. For example, if it costs over $2,000 for a trip to bring first responders to an accident, as Peterson claims in the podcast, the first thing to ask should be if there’s a way to do that more efficiently. How many emergency calls actually require the use of a ladder truck and personnel? Peterson says that departments charging much less were found to understate costs—should they not be subject to competitive pressure? Are there no better ways? 

A level playing field between public and private actors best ensures EMS services in California toe the line between competitiveness and providing care to all patients. But California’s existing laws prohibit private EMS service providers from dedicated PPGEMT funding, so as fire agencies take over EMS, they can hold that funding over private providers’ heads based solely on their status as public agencies, as Chula Vista’s experience shows.  

More so, EMS providers asking for federal reimbursement should open their cost accounting to the public. Fire departments insisting the cost accounting of their EMS first responder functions that go to determining federal awards remain hidden from public scrutiny should raise a red flag for every taxpayer. If fire departments are so confident their claims are legitimate, they should welcome the added transparency. 

The post With EMS takeover attempts, California’s fire departments seek more taxpayer funding to do less  appeared first on Reason Foundation.

Small oversaw the implementation of an innovative public safety program that combined police, fire, and emergency medical services under the new Palmyra Department of Public Safety, with Small becoming Palmyra’s first public safety director. In the time Small has served in this role, the village’s property crime rate has plummeted by 88% to just over five property crimes per 1,000 residents. The village managed to accomplish this feat while simultaneously reducing its fine revenue by more than two-thirds. 

Reason Foundation’s Vittorio Nastasi and Austil Stuart recently sat down with James Small to discuss his successes in Palmyra which he credits to an outcome-based policing approach.  

Nastasi: Can you describe how Palmyra’s public safety agencies were performing before you were hired? 

Small: Things hadn’t gone well in public safety in general for a long time. For both police and fire, there was a real vacuum in leadership. For example, the previous police chief really struggled in his role, was removed by the board, and had not been replaced for 3 years after he was removed. So, we had a police department, we had cars that said ‘police’ on them, and we hired police officers to go out and do police things. But there was no vision beyond that. 

Without any clear leadership, the mentality was, “Okay, we’re going to go out and enforce some things.” But there wasn’t any purpose behind that enforcement effort, so officers would go out on the highway in the 25 MPH zone writing speeding tickets. But ultimately, that wasn’t doing anything for the community. There was a high property crime rate that was running about twice the state average, you weren’t seeing things getting prosecuted properly, and there was just a variety of breakdowns in the system.  

Nastasi: What was the community’s perception of the police department? 

Small: There was a real breakdown in trust in the community. I would go out to introduce myself to the community, and people would just tell me about their awful experiences with the police department. Some people described retaliation for making a complaint about an officer. I don’t think it had gotten as far as some of the excessive use of force cases you see on the news, but it was an escalation of conflict within the community. I think that is something we’re seeing in law enforcement in general, and it’s really a failure from a customer satisfaction perspective.  

Nastasi: Writing traffic tickets on the highway was bringing in a lot of revenue for Palmyra, though. Did you get any pushback when you started implementing changes? 

Small: The police department was issuing about $90,000 in fines every year, and that would account for about 10% of the village’s budget. Now, did they actually collect $90,000? That’s a different question, but that’s how much they were budgeting for. I think our number last year was about $27,000, so we’re at about 30% of where we started. The revenue issue definitely came up at points with the board. I had a village board member come up to me one time and say, “All these warnings are costing us a lot of money.” 

Nastasi: Was reducing fine revenue the goal, or just a byproduct of your mission? 

Small: The mission of our department isn’t to raise money. It is to go out and reduce victimization in the community, and we’re doing that extremely well. Reducing victimization required us to change our tactics and stop seeking out enforcement to raise revenue. Some revenue may be generated from some of our work, but it should never be the objective.  

I subscribe to what I call an ‘outcome-based strategy.’ I believe our actions should result in our desired outcomes: reducing victimization in the community, improving trust in the police, and creating a sense of community safety. We need to be focusing on facilitating those outcomes. So, we shifted into this problem-solving mindset to move the vision from the police being punishers to the police being facilitators. 

I think there is a place for tickets, but I think we’ve seen such an overreliance on punishment. We’ve forgotten that the real goal is to change behavior. We should be asking ourselves, “What can we do to facilitate changing behavior and remove obstacles from this person’s path?” 

Nastasi: What does that look like in practice? 

Small: Sometimes it involves referring people to the human services system or coordinating with a probation officer––actions you might think of as being beyond the scope of a traditional law enforcement officer. Take somebody, for instance, that had their license suspended because they weren’t paying their fines. What we do in that situation is give that person a 30-day notice from us saying they need to pay their fines. We print out a document from the Wisconsin Department of Motor Vehicles saying what they need to do to get their license reinstated, how much they owe, what court they must go to, and the court’s address. If they need to extend that 30-day notice, that’s fine. We’ll do that if they’ve made progress or set up a payment plan that might take a little longer than our initial deadline. It’s not a free pass. There are consequences on the other end if they don’t pay their tickets, but we’re giving them a chance. Most people take that chance when you tell them what they need to do.  

Stuart: Can you describe briefly the decision to consolidate Palmyra’s public safety agencies?  

Small: I was hired as the director of public safety providing administrative supervision over the fire and rescue services. I was also hired as the chief of police, and we were going to have a separate fire chief and an emergency medical service director. It was never the plan for me to be the director of all three.  

We had a very severe personnel issue in the fire department. I want to say there were eight chiefs in the 15 years prior to my arrival. My initial recommendation to the board was to dissolve the entire fire service agency. We went around and thought about partnering with one of the neighboring agencies. None of them were interested, so that wasn’t going to be an option in our case.  

One day one of our board members looked at me and said, “Well, I’ve seen you in a police car, a fire truck, and an ambulance all in the same day. Why can’t we just get more people like you?” My answer was that nobody had done it that way. I mean, this model is out there, but every example of it was created on day one as a consolidated public safety department. Previous efforts to merge two departments on the fly like that hadn’t been successful. By the end of 2017, we had fully implemented the combined public safety model. 

Efficiencies gained by consolidating the two budgets together ended up allowing us to add two additional full-time positions. Some of the freed-up funds also absorbed some of the lost revenue from traffic citations. We also trimmed down our vehicle fleet.  

Stuart: How did consolidating the departments help you implement your vision? 

Small: All our police officers have fire and EMS training, so the staff can fill multiple roles on one call. For example, they may need to take law enforcement action during an EMS call. We were concerned that the public wouldn’t want someone with a jacket that has ‘police’ written on the back in their house for some EMS calls where there might be drugs or something involved. That fear hasn’t materialized. I think that has a lot to do with how our police officers interact with people.  

When we’re on an overdose scene, for example, we’re primarily concerned with resolving the medical issue and getting the person whatever treatment they need. Some cases might involve criminal elements that need to be investigated, but by the time we get there, everyone has been cooperative, and they trust the system. Usually, when we take someone like that through the criminal process, it’s to get them to a drug court so they can get into treatment. We work with the district attorney’s office to send them to drug court because giving them a $400 ticket in municipal court isn’t going to change their behavior.  

Stuart: Do you think any of Palmyra’s experience could inform other jurisdictions? Palmyra is a relatively small town with a relatively small police force. How scalable do you think your model is? 

Small: The combined public safety model can work well in rural communities where call volumes are low enough to share personnel across the agencies. This isn’t a good model for large cities with high call volumes, but the philosophy behind it is scalable. Getting police out of this mindset of punishing people into submission is important because I think that’s one of the problems we’ve seen in the criminal justice system. There is too much emphasis on punishment and not enough on changing behavior. There are people that need to be held in prison because the public needs to be protected from them. But in most cases, we should be looking to solve problems. That’s not just a philosophy for police and fire services, it’s how we should be operating as a government generally. That’s how we build trust. I haven’t received a complaint about an officer in five years. When I first got in, I was getting several a month.  

This interview has been lightly edited for clarity. 

The post Innovators in Action: James Small, public safety director of Palmyra, Wisconsin appeared first on Reason Foundation.

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.

Conditions are so bad that Rep. Bennie Thompson (D-MS) and Mississippi Gov. Tate Reeves (R), who agree on little else, agree that Jackson needs a new water operator. Gov. Reeves raised the possibility of water privatization at a recent  press conference:

“I’m open to all options. Privatization is on the table,” Reeves said.

 “Having a commission that oversees failed water systems as they have in many states is on the table… There have been even a number of city council members that I have seen over the last several weeks that have talked a lot about the need to hire outside contractors to come in and run different pieces of or the system as a whole.”

“I think you’re seeing more and more individuals recognize that the operations of city government in general, but particularly the operations of the water system… it ain’t Republican or Democrat or ideological, it’s about delivering a basic service to the people you represent,” he said.

Reeves and the state government will play a role in helping Jackson overcome its water problems. Still, the financial and productive capital required for such a large undertaking will likely need to come from the private sector. Long-term, Jackson’s water, sewer, and stormwater system need an estimated $2 billion to get them working again and back in compliance with the Environmental Protection Agency.

Jackson’s shaky finances and the dire shape of its water and sewer operations mean merely outsourcing maintenance, as Jackson Mayor Chokwe Antar Lumumba suggested as an alternative to privatization, would not solve the long-term water system replacement concerns, attract the needed capital investments to repair and rebuild, or truly address the city’s more extensive environmental compliance and staffing concerns.

While outsourcing would certainly help some of the day-to-day operations issues, Jackson would still be mostly on its own for getting itself back into compliance and finding the $2 billion needed for system repairs and upgrades. 

Jackson’s previous bad contracting experience with its water system should not prevent the city from seeking a long-term deal now. A few years into a 2013 water contract with Siemens to repair sewer infrastructure and upgrade billing and meter systems, Jackson filed a complaint in court against the company, claiming it was misled into the 15-year $90 million contract with promises of increased revenues that never materialized and work that was never done. Before going to trial, the parties agreed to a settlement equal to the original contract’s total amount, $90 million, paid to the city.

In the future, a well-written, long-term privatization contract can set clear benchmarks for the private company to meet and instill financial penalties for failing to do so. Any privatization contract should protect Jackson’s taxpayers, make it easy to hold the private water company accountable for meeting its commitments and avoid some of the problems from the Siemens deal. 

Six weeks without drinking water has drawn public attention to the government’s failures in Jackson and decades of failing to comply with EPA standards. For example, drinking water quality is partly ensured by monitoring the turbidity—cloudiness from impurities—of water samples taken from the system. A 2020 EPA inspection found that the turbidity monitoring equipment at one of Jackson’s two water treatment plants didn’t work because it hadn’t been calibrated in around three years, resulting in continuously inaccurate readings. And, in an example of how hard it will be for the city to fix all of its water problems itself: The technician position needed to perform water turbidity maintenance and monitoring is not filled right now. In fact, the job no longer exists in the city government at all.  

Additionally, the EPA found that when Jackson’s lead levels rose above acceptable limits, the city didn’t notify residents. The EPA report also noted that Jackson did not have a plan to remove lead service lines from its water system—something the city has been required to do but has been failing since 1992. 

Among other problems, the EPA report also discovered that filter membranes in water treatment facilities were not functioning and were damaged beyond repair, automated treatment systems were failing, and low staffing levels were a constant problem.

Jackson’s water problems are severe, and solving them won’t be inexpensive. Still, the right long-term partnership could help the city overcome its obstacles as cost-effectively as possible. Hiring capable partners legally bound to perform well would put Jackson on a path to bring its system into compliance and start reducing its backlog of maintenance and repairs.  

Without a privatization deal, Jackson’s water system will likely worsen. Procuring a multi-decade lease will undoubtedly be challenging, but without one, there is no path to address Jackson’s many water and sewer management problems fully.

The post Jackson’s boil advisory lifted, now must address long-term water problems  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.

Arizona is dedicating $1 billion over the next three years to fund water rights acquisition, conveyance, and conservation efforts while allowing the water projects to be established through a wide variety of contracting and procurement methods. This substantial investment better equips Arizona to respond and adapt to the challenging demands of both its growing population and the dwindling availability of freshwater supplies, a move other Western states should watch with keen interest.

The Associated Press reports seven Western states relying on the Colorado River should expect more water cuts:

But those reductions represent just a fraction of the potential pain to come for the 40 million Americans in seven states that rely on the river. Because the states failed to meet a federal deadline to figure out how to cut their water use by at least 15%, they could see even deeper cuts that the government has said are needed to prevent reservoirs from falling so low they cannot be pumped.

“The states collectively have not identified and adopted specific actions of sufficient magnitude that would stabilize the system,” Bureau of Reclamation Commissioner Camille Touton said. Together, the missed deadline and the latest cuts put officials responsible for providing water to cities and farms under renewed pressure to plan for a hotter, drier future and a growing population. Touton has said a 15% to 30% reduction is necessary to ensure that water deliveries and hydroelectric power production are not disrupted.

Seven states and Mexico rely on water from the Colorado River for both consumption and recreational needs. And the water needs in those Western states are increasing. The populations in Arizona, Colorado, Idaho, Nevada, and Utah all grew by more than 10% over the past decade, according to Census Burea data.

Back in 2016, the Bureau of Reclamation (BOR) forewarned: “Growing demands in the Colorado River system, coupled with the potential for reduced supplies due to climate change, may put water users and resources relying on the Colorado River at risk of prolonged water shortages in the future.”

While both this and next year’s announced cuts by the BOR will not affect residential use, the current cuts have already forced Arizona farmers to cut back around 65% of their Colorado River allotment. The drier Colorado River is not all due to a drying climate, either—agricultural interests draw heavily from groundwater supplies that also source about half of the Colorado River’s water. Continued dry conditions and groundwater extraction could lead to a 30% decline in the river’s flows over the next 30 years, which would necessarily include even more drastic water allotment cuts.

While many conversations and assessments will need to be made before Arizona’s water projects come to fruition, the recently-passed legislation and its dedicated funding show there are possibilities to start solving Arizona’s water use demands.

The state may end up conveying water from the Mississippi River or transferring desalinated water from offshore Mexico, both ideas that Arizona is examining, or it may discover those ideas are not financially viable. For now, the fact that those ideas and others are even being considered demonstrates state lawmakers recognize the need to find creative ways to overcome water problems that will likely only intensify as populations in many parts of the West continue to grow.

In an era where bipartisan agreement is increasingly rare, Arizona lawmakers from both major political parties wisely agreed that securing water for the coming decades required swift action that was bold enough to embrace an “all of the above” type approach, which means local governments and potential public and private partners will not be limited in looking for ways of potentially delivering innovative solutions to secure and save water.

Modern technology has provided the means to make sure there can be enough water to sustain populations all over the world, including in dry, fast-growing environments like the Western United States. While some methods are still quite expensive and not always practical at scale, potable water can now be generated from almost any potential source, including seawater and even raw sewage.

For Western states to meet their growing populations’ water needs, they will need funding, the flexibility to seek a wide variety of projects, and a determination by lawmakers and local leaders to pursue the right arrangements to structure those critical projects and operate and maintain them for decades.

Managing and operating water projects comes with inherent risks. For example, cities in the Eastern United States have dealt with deferred maintenance issues with their aging municipal water systems. Needed repairs and upgrades that have been put off for years become increasingly expensive and difficult for governments and taxpayers to fund.

Long-term leases and public-private partnerships with clear contracts and accountability can be effective in shielding taxpayers from the financial risks of building and maintaining many expensive water infrastructure projects. Governments can transfer the risks to private companies better capable of managing those risks.

While Western states and the federal government have made efforts to plan for higher water demand and reduced supplies from traditional sources, much work remains to be done. Arizona made a critical step in passing legislation earlier this year that gives the state’s local water systems varied and valuable tools to help manage water acquisition, conservation, and conveyance. Arizona’s legislation saw nearly unanimous support in both legislative chambers and other states might find it useful to adopt a similar approach as they seek to secure water for the future.

The post Western states facing water cuts should look at Arizona’s recent water legislation 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.

With the state’s elected leaders prudently setting aside more than $500 million for water augmentation and conservation projects and overhauling the state agency responsible for financing water infrastructure in the closing days of the legislative session, Arizona’s robust tradition of using public-private partnerships (P3s) to deliver critical water investments appears set to enter a transformative new phase. 

The state’s economy today would not exist without the legacy of major waterworks like the Central Arizona Project or Salt River Project’s network of dams, reservoirs, and canals—projects built with extensive collaboration between federal, state, and private entities. Cities like Phoenix have also used public-private partnerships to deliver major new water and wastewater infrastructure.  

Financing water infrastructure is complex, but the fundamental issue for Arizona is simple: There aren’t enough traditional tax or ratepayer dollars today to deliver the future water infrastructure Arizona needs.

Offshore desalination plants, new reservoirs, and multistate pipeline agreements are among the types of promising—but costly—new-build water supply projects that have captured the minds of policymakers.

These projects could easily cost billions of dollars on their own and, back in 2013, the U.S. Environmental Protection Agency estimated the state would need $7.4 billion by the mid-2030s just to improve, repair, and upgrade existing water infrastructure, a figure that excludes costly expansions needed to accommodate population growth.  

Public-private partnerships provide opportunities to overcome many of the water infrastructure challenges that Arizona faces, including sourcing, conveyance, and treatment. They have been used extensively around the world to ensure water systems and treatment facilities are financed, built, operated, and upgraded in ways that minimize taxpayer exposure. 

When government water agencies enter partnerships designed to manage major financial and operational risks, they shield taxpayers and users from unexpected repairs and other costly problems.  

While water P3s typically involve large projects with high upfront costs, they also include decades-long commitments to operations and maintenance that government agencies typically lack the resources to do alone, resulting in lower operating costs over the long term. 

Private partners are on the hook for decades for managing the systems under performance-based contracts, as well as handing managed assets back to government owners in good shape. Contracts designed to protect the public interest while outlining clear terms for project delivery give partner firms the incentive to find value through the right capital investments that balance cost and quality.  

Some major P3 investments are being used to secure and deliver water from new sources to accommodate population growth. In 2016, fast-growing San Antonio, Texas, entered a 30-year, $923 million P3 to deliver up to 50,000 acre-feet of water per year via a new 140-mile pipeline to provide about half of the water needed to meet future population demand.

The partnership puts the risks of securing the water on the private partner responsible for negotiating with local landowners to secure drinking water supplies, as well as the risk of building and operating a 140-mile pipeline to deliver the water to the city from its watershed source. The project was financed with loans taken out by the private partner, which will be repaid by the city over several decades from collected user fees.

Santa Clara, California, after an unsuccessful attempt a few years back, is close to finalizing a similar 30-year, $600 million public-private partnership that would secure water from multiple sources. 

Just as Arizona’s water challenges aren’t confined to sourcing clean water, P3s can be and have been used to overcome numerous ecological and environmental challenges. Chicago, Atlanta, Baltimore, and many large cities have partnered with private firms to deliver and operate wastewater treatment and processing facilities to help prevent massive pollution problems, often to comply with EPA and state consent decrees.  

Opportunities also exist to encourage land ownership practices through P3s that reduce the strain put on water and sewer infrastructure: Prince George’s County in Maryland has worked with landowners and developers to integrate more porous ground surfaces capable of diverting stormwater from the area’s overburdened sewer systems. And San Mateo, California, is in the process of exploring an advanced water treatment P3 that can keep clean water in reserve for droughts and other hazardous conditions. 

Innovations in leak detection, a problem that results in 1.7 trillion gallons worth of lost revenue for water systems each year, are also becoming a source of water agency contracting, as technology allows detection using acoustics without digging.  

With the Arizona state legislature setting aside a major down payment for critical water projects and simultaneously expanding the state finance agency’s toolkit to deliver them the key to success will be giving governments the greatest flexibility to enter long-term public-private partnerships designed to increase water supplies through acquisition, treatment, conservation and more. 

Arizona’s continued economic success will require effective partnerships between public, private, and stakeholder interests to secure the state’s clean water future in a fiscally responsible way going forward.  

A version of this commentary first appeared in The Arizona Republic.

The post How to maximize Arizona’s water investment 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.

Transportation Finance by Robert Poole

Surface Transportation by Baruch Feigenbaum

The post Annual Privatization Report 2022 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.

A group of citizens, the Towamencin Neighbors Opposing Privatization Efforts (NOPE), has been driving much of the local opposition to the sewer deal, raising fears over rate increases and a lack of local control over the sewer infrastructure. Both sets of concerns suffer from misinformation or misunderstandings about sewer leases or privatization, how the sewer system is regulated, and how it would be operated if there’s a deal. For example, the town’s answers to frequently asked questions (FAQs) make it clear that because of the system’s needs for capital improvements and maintenance, residents’ sewer rates are going to rise whether or not there is a lease or sale and those rates increases could even be higher if there isn’t a sale. The FAQ says:

Any future capital expenditures, of which there is an identified ~$11 million over 10 years on the sewer conveyance side and ~$10.5 million through 2025 for the sewer treatment side, would likely be funded through a combination of fund balance and publicly issued debt. Any publicly issued debt would likely be supported through future rate increases.

Aside from the capital costs outlined the Township would also likely have to raise rates to keep pace with inflation and the effect it has on the various inputs that are used in the sewer collection and treatment process. Similarly, it is likely that there would be increased operational costs that are associated with permitting changes.

These types of cost increases are inevitable issues for water and sewer systems.

Additional concerns are raised within the FAQs document about maintaining regulatory compliance and meeting the town’s pension obligations. Preventing the sewer sale would not eliminate those needs and concerns, it would just give the local government fewer ways to address them.  

Local leaders should try to demonstrate how residents’ concerns over a potential lack of local control would be legally addressed in any sewer contract with a private partner. The sewer system’s buyer or lessor would be governed by terms specified in a contract to ensure the town wouldn’t get blindsided by poor service or unexpected rate increases. If sold, the Pennsylvania Utilities Commission would have to approve all rate increases. If leased, the agreement would set the permissible rate increases agreed to by both the township and the company. As is the case with continued government operation, rate hikes will happen, but they would be predictable and set by the contract.  

Towamencin officials should also make it clear that the locality would not lose control over how the sewer is operated, either. As part of any lease or sale, the new sewer operator would have to comply with contractual terms set by Towamencin specifying how the sewer is going to be operated and maintained for decades, as well as the upgrades and replacements that must be made over the life of the contract. Towamencin can and should set the standards to be met and the penalties for failing to meet those terms. These deals often include financial penalties through contract provisions. And if a private sewer operator completely fails to do those things, the contract would have termination agreements that allow Towamencin to get out of the deal. The operator would also be subject to fines from the Environmental Protection Agency and other regulators.  

In contrast, if the government continues to operate the sewer system, there’s a greater likelihood of putting off needed investments. Deferred maintenance issues add even more costs that taxpayers must ultimately bear. If the town falls behind on replacement and a sewer pipe breaks, for example, taxpayers have to pay to replace the broken pipe and to clean up the mess. The breakage could also damage roads or other infrastructure the pipe is buried under or cause other issues that ultimately fall upon residents to pay for.

A private provider under a multi-decade lease or sale agreement will want to avoid such problems, which add costs the company has to absorb in addition to losing money for failing to meet the terms of the agreement. The company has financial incentives to do maintenance on schedule and prevent costly problems that come from deferring maintenance.

Sales and leases can be valuable tools when governments lack the resources internally to effectively manage all that’s demanded of them. Such agreements allow local agencies to set detailed terms that must be met while transferring financial risks from taxpayers to private partners, who may be better capable of handling them.

It’s understandable for local residents to demand more information about potential sewer leases and sales but completely removing risk management tools like public-private partnerships and privatization would make governing more difficult.

Towamencin’s sewer system is clearly in need of repair and modernization, which means an increase in rates and costs regardless of who is running the system. Local officials and residents should look at all available options and solutions to determine how the needed repairs, maintenance, and upgrades can most efficiently be provided. 

The post Towamencin needs to show residents how a sewer deal would improve infrastructure and protect taxpayers appeared first on Reason Foundation.

Pennsylvania House Bill 2272—Making the State’s Distilled Spirits Monopoly Illegal

The post Pennsylvania House Bill 2272: Making the state’s distilled spirits monopoly illegal 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.

A crucial difference between adult-use cannabis and alcohol, however, is that cannabis is still a Schedule 1 controlled substance at the federal level. Growing, manufacturing, or selling cannabis is a federal crime. Thus, while the state can serve as a retailer of distilled spirits without violating federal law if New Hampshire runs cannabis dispensaries, they could be considered a federal criminal enterprise. 

As a result, New Hampshire would be in violation of federal law and its state employees and officers could be subject to arrest at any time and any or all of the state’s assets could become subject to seizure by federal law enforcement. In addition to potential criminal liability, New Hampshire’s employees and officers could be grouped together and subject to civil penalties under federal racketeering laws.

Attorney General Merrick Garland has said the Biden administration isn’t interested in pursuing marijuana prosecutions: “I do not think it the best use of the department’s limited resources to pursue prosecutions of those who are complying with the laws in states that have legalized and are effectively regulating marijuana.”

While federal charges may seem unlikely under the Biden administration’s Department of Justice at the moment, this or future administrations could change directions so there are very real legal risks. With the threat of federal prosecution in the background, similar proposals for state-run marijuana dispensaries in New Mexico and Virginia were ultimately abandoned in favor of a private commercial model in which the state grants licenses to private companies to operate highly regulated cannabis enterprises.

States have found no shortage of private entrepreneurs willing to run state-licensed marijuana businesses and assume the potential risks of federal criminal and civil liabilities while still generating significant marijuana revenues for state governments that grant the cannabis business licenses.

Of the 18 states that have established adult-use, recreational cannabis markets, all of them grant marijuana business licenses to private entities to run the operations while promulgating extensive rules to govern the manner of operations, tracking and storage of inventory, advertising and packaging, testing requirements, and a range of other issues. (Reason Foundation has produced a conceptual framework for state cannabis regulation designed help guide policymakers through this effort.)

States like New Mexico and Virginia that operate state-run liquor systems initially gravitated toward proposals for state-run cannabis facilities out of an instinct to regulate cannabis in the same way those states regulate alcohol. However, while states did adopt differing approaches to the end of alcohol prohibition, there is little argument that distilled spirits meet any definition of a “natural monopoly.” In fact, the approach taken by alcohol regulators often involves excessive government involvement in private industry where the key interests of public welfare could be better addressed through regulation alone. To that end, it would be better to regulate alcohol in the same way that most states have regulated adult-use cannabis than vice versa. 

New Hampshirites seem to agree with this sentiment, as evidenced by a February poll by the University of New Hampshire (UNH) which found “nearly three-quarters (74%) support legalizing marijuana and only 15% are opposed.” Similarly, a UNH poll in May 2021 found 78% of those surveyed said if “marijuana were legalized for recreational use, they would strongly (57%)or somewhat (21%) approve of it being sold at licensed retail outlets and taxed.”

State authorities both implicitly and explicitly acknowledge through House Bill 1598 that they have no expertise in operating a cannabis business, even if doing so would not be in violation of federal law. HB 1598 would assign only the retail function to the state while recognizing that private entities should cultivate, manufacture, package, test and distribute all cannabis products.

The fiscal note even points out that the New Hampshire Liquor Commission (NHLC) plans to hire private consultants to train state employees on how to sell cannabis:

“Commission proposes to enter into a contract with an organization with expertise to advise the commission on product selection, aid in training cannabis store personnel and purchase the cannabis on behalf of the commission for resale and distribution to the 10 state-owned stores.”

To its credit, while governments shouldn’t be running retail stores, New Hampshire has run its distilled spirits retail operations relatively well, with a goal of selling at relatively low prices with high turnover to encourage sales to out-of-state residents that may face higher prices in their home states. The lack of sales taxes, too, provides an incentive for residents of nearby states to make distilled spirits purchases in New Hampshire—the NHLC’s own numbers indicate over half of its sales revenue comes from out-of-state residents.  

But the private sector is far more equipped to effectively serve consumers if the state legalizes marijuana. And given the potential legal risks of New Hampshire of establishing itself as a federal criminal enterprise in violation of federal drug laws, it should, under no circumstances, consider a similar approach in the adult-use cannabis market.

Most of House Bill 1598’s language wisely recognizes that private firms handle the risks of operating in the cannabis supply chain better than public agencies can. The law would keep cultivation, testing, and other vital functions in private sector firms’ hands. It even calls on private firms to train the government employees who would be tasked with operating state-run retail stores. But state-run marijuana stores would be a mistake. State lawmakers should recognize that retail marijuana operations should be private and competitive, with consumer demand as the only regulator of the number of stores allowable.

The post New Hampshire bill would legalize marijuana but create a state-run monopoly to sell it appeared first on Reason Foundation.

Land Line reported on the framework of the latest plan:

But the biggest change in the new framework concerns risk transfer. The private consortium that would have operated and maintained the I-10 Bayway and Mobile River bridge in the rejected public-private partnership (P3) would have taken on the revenue risk. In exchange for being granted the opportunity to collect toll revenue, the private consortium would have assumed the financial risk associated with unanticipated shortfalls in future toll revenue. Under the new framework, the Alabama Department of Transportation (ALDOT), and thus Alabama’s taxpayers, would be taking the revenue risk as well as the risk of operating and maintaining the toll roads, roles often undertaken by the private partner in tolling P3s.

The new framework and ALDOT’s expanded role raise several questions: Will ALDOT be able to collect and generate enough toll revenue for the project to work financially, having never before operated an electronic toll road? The P3 concessionaire with extensive experience operating toll roads and managing costs had planned on charging a $6 toll, more than twice the proposed rate. Is ALDOT capable of delivering mostly similar project components for less than half what experienced toll road operators projected or is it planning to operate at a financial loss? If so, where would the money to cover the likely shortfalls come from?

It remains unclear if drivers using the new Mobile River Bridge and the rebuilt Bayway would pay the same toll as those using only the Bayway. Instead of charging one toll for all drivers, it would make more financial sense to toll the Mobile River Bridge separately. Unlike the Bayway, the bridge is a new addition, an amenity that would allow drivers to avoid using tunnels. 

The Bayway certainly needs rebuilding, but if the new highway isn’t widened and improved—the metropolitan planning organizations’ declaration that the new Bayway is “built to current safety and longevity standards” leaves a lot of leeway on the issue—ALDOT might find renewed opposition to tolling from local residents, who defeated the previously proposed public-private partnership three years ago. 

Since the proposed Mobile River Bridge is six total lanes, the Bayway needs to have at least six, but will it have eight lanes like the previously rejected P3 Bayway? Drivers may not be eager to pay a new toll for a section of Interstate that is nearly identical to the old section, and a wider (in terms of lanes) bridge merging into the Bayway would potentially create its own traffic congestion problems while not doing much to solve existing ones—especially if there’s no additional toll for the Mobile River Bridge. 

Tolling the new Mobile River Bridge separately from the Bayway would allow ALDOT to charge less for the Bayway. Since the state is reportedly putting in as much as $250 million and ALDOT is taking on the revenue risk, at the very least, an additional toll source would help minimize the project’s risk exposure to taxpayers.

By rejecting the previous public-private partnership proposal, ALDOT has placed a heavy burden on itself by having to set and collect tolls without previous experience doing either, and with a toll cap of less than half of what was needed for experienced toll operators for the rejected P3. Spreading the tolling risk to the Mobile River Bridge in addition to the Bayway would help ALDOT meet its revenue goals. It would also put less pressure on the Bayway for toll revenues while putting more pressure on the project component that is both new and provides a travel amenity (no tunnels) previously not available without a lengthy detour. 

Tolling existing Interstate routes, even if completely rebuilt, can sometimes frustrate drivers who are already paying fuel taxes that should be going to maintain and repair the highways being tolled and view the tolls as double taxation. Users should pay the costs of operating and maintaining the infrastructure they use. In this case, a separate toll for the Mobile River Bridge would help take some of the load off the Bayway and frustrated motorists who want the Bayway tolls to be as low as possible. To better promote the interests of Alabama’s motorists and taxpayers, ALDOT should consider these revisions.

The post Latest Mobile River Bridge and Bayway plan raises a lot of questions 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.

The state keeps trying to get prisons built but has endured multiple setbacks over the past year. While criminal justice activists who believe there is no need to expand our prison footprint may applaud those setbacks, the decisions to back out of underwriting bonds for the new proposed facilities make improving conditions more difficult—for inmates, staff, and visitors.

A 2019 notice from the DOJ to the Alabama Department of Corrections (ADOC) provides over 50 pages of documentation of violence and neglect witnessed by DOJ staff that are not even “indicative of the number of violations that (they) found.” Through a combination of poor staffing levels, training, lack of funding (Alabama was dead last in 2015 in annual funding per inmate, at a little over $14,000), and old, dangerous poorly maintained prisons, conditions are “objectively unsafe” for inmates and staff. New facilities are a necessary part of the solution to these ills.

Unfortunately, the backlash from activists against the ADOC’s attempts to get new prison deals finalized have prevented getting even the easiest part of improving conditions started. While they may applaud their work’s effect on financial firms’ decisions, they don’t make improving conditions in Alabama’s prisons any easier. The state plans to close or repurpose 11 facilities as the new ones get completed, but with no path to getting the new ones built, the existing ones must continue to be relied upon. As financiers continue to back out of contracts with ADOC, solutions become even more elusive as the list of firms that could potentially underwrite the new debt dwindles.

On the other hand, anyone who endures reading the DOJ’s full notice would be rightly concerned about the state of ADOC’s staffing numbers and performance. Why would a financial firm want to back the building of a prison for an underpaid and understaffed workforce that has little-to-no control over its own facilities’ operations?

While it would be wonderful for Alabama to have a full, well-trained staff to operate its own prisons, it should not be prerequisite for improving the condition of prisons themselves. Unsurprisingly, educational and occupational training and therapeutic programming are lacking in Alabama’s prisons, but one of the proposed prisons is being designed specifically to facilitate treatment and care. 

The improved conditions of new facilities should give ADOC staff some better incentive to improve themselves, too: Operating and maintaining a prison becomes more difficult when the mere physical state of the facilities “include defective locks; insufficient or ineffective cameras; a lack of mirrors; deteriorating electrical and plumbing system; as well as structural design issues and weaknesses with the buildings and their perimeters.”

Getting Alabama’s prisons to even minimally acceptable standards will be a tough and long journey. And the state is likly face continued roadblocks due to a reluctant financial sector, influenced by activists who see every new prison as bad (even if the new facilies would be mostly replacing existing capacity deemed unsuitable for human life). 

While criminal justice advocates should continue to put pressure on the Alabama Department of Corrections and other agencies that leave inmates in violent and unsafe conditions, ending deals to build facilities with improved conditions helps no one involved, espechially inmates who must live with the lack of results every day.

The post Reluctance to fund new Alabama prisons leaves inmates in ‘cruel and unusual’ conditions appeared first on Reason Foundation.