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.

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.

In 2021, National Public Radio reported:

The Michigan Attorney General’s Office Thursday announced criminal charges for eight former state officials, including the state’s former Gov. Rick Snyder, along with one current official, for their alleged roles in the Flint water crisis.

Together the group face 42 counts related to the drinking water catastrophe roughly seven years ago. The crimes range from perjury to misconduct in office to involuntary manslaughter.

The drinking water debacle is linked to at least 12 deaths and at least 80 people sickened with Legionnaires’ disease after untreated water from the Flint River caused lead to leach from old pipes, poisoning the majority Black city’s water system.

Snyder, a Republican who left office two years ago, is facing two counts of willful neglect, both misdemeanors which each carry a maximum sentence of one year in prison and a fine up to $1,000.

While it seems clear the biggest failures in Flint were made by the government, some observers have characterized the crisis in Flint as primarily a failure of water privatization. Michigan Citizens for Water Conservation, for example, characterized the decision to switch water sources as “a straight-up power grab in service to corporations seeking to privatize water and public infrastructure.”

Similarly, environmental justice activist Thomas Stephens of Detroiters Resisting Emergency Managemen told listeners of Democracy Now: “The very essence of life itself, water, is being privatized and being subjected to a corporate bottom-line approach that is in violation of the human rights of the people, the most vulnerable people, in the state.” 

A headline at The Intercept conveyed a similar message: “From Pittsburgh to Flint, the dire consequences of giving private companies responsibility for ailing public water systems.” The headline’s implication is that a large private water company, Veolia, was responsible for the Flint disaster. But, The Intercept notes “the initial elevation of lead levels there has been traced to the city’s decision to switch its water source from Lake Huron to the Flint River, which occurred before the city hired Veolia.”

When Flint switched water sources, it transitioned from one government water supplier to another. The new supplier, Karegnondi Water Authority (KWA) is governed by an appointed 15-member board and was created pursuant to Act 233, Michigan Public Act of 1955. Its financial reports follow government accounting standards. As such KWA is not a private, for-profit entity. 

In February of 2015—almost 10 months after Flint switched water sources—Veolia received a $40,000 contract to evaluate the city’s water supply and make recommendations after residents complained about water quality issues and the city had received three violation notices from the Michigan Department of Environmental Quality. 

The violations did not involve lead contamination. Two were related to bacteria and one involved total trihalomethanes (TTHM), a disinfection byproduct that has been linked to bladder cancer.

Veolia was asked to assess the Flint water system in light of bacteria and TTHM issues, not for lead. However, there are credible allegations that Veolia’s investigation was insufficient. Families of four children impacted by contaminated Flint water have sued the company and, in January of 2022, a judge denied Veolia’s motion to dismiss the suit. Recent testimony at the trial indicates that Veolia employees were aware that lead was in some samples of drinking water, but that company management decided to remove any mention of this issue from the company’s report. 

For its part, Veolia has put up a website to give its side of the story. According to the company’s timeline of events: 

Despite the mandate for VNA [Veolia North America] to focus on TTHMs, when VNA detected corrosive water that could result in lead issues in the future, VNA brought the issue to the attention of City officials, investigated the lead testing data provided by city officials, and made recommendations to address the potential future issue. 

Further, although lead is not specifically mentioned in Veolia’s report from March of 2015, the company did make the following recommendation: 

Contract with your [Flint’s] engineer and initiate discussions with the State on the addition of a corrosion control chemical.  This action can be submitted and discussed with the state at the same time as the other chemical and filter changes saving time and effort.  A target dosage of 0.5 mg/L phosphate is suggested for improved corrosion control. 

Phosphate is known to reduce lead levels in drinking water, so had this recommendation been followed, the health impact on Flint’s children may have been reduced. But this recommendation came 11 months after the water supply switch and only six months before the lead issue was widely publicized, so most of the damage had already been done. 

Irrespective of whether Veolia could have done more to warn the city about lead problems, 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. The government’s chronic management and financial issues set the background for the failures in Flint.

A new University of Michigan report on Flint’s financial situation states: 

State-appointed receivers made temporary improvements to balance budgets and improve short-term liquidity, but failed or were simply unable to address the structural causes of Flint’s fiscal distress…

These cost pressures are felt acutely in the water system, leading to increasingly unaffordable user rates for residents. Between 1980 and 2018, Flint’s inflation-adjusted user rates increased by 320 percent. In an effort to spare residents confiscatory rates, cities often look for opportunities to cut costs. Often, the choice is to defer maintenance. In Flint, deferred maintenance has led to water main breaks and leaks that have become a hazardous and expensive problem. Flint loses 40 to 60 percent of its potable water to leaks—a typical amount is 10 percent. This drives up user rates further. 

Given the rapid escalation in Flint’s water rates, it is somewhat understandable that city officials and emergency managers would have preferred less expensive water from KWA as a short-term way to reduce costs—if they were unaware of the problems that came with it.

As the University of Michigan report notes, business-type activities like water systems are intended to be self-sustaining. Even if Flint wanted to subsidize the water system with general revenues, it would have been a challenge to do so because tax revenues have been flat to declining since 2000 due to employers and individual taxpayers moving out of the city. 

This certainly doesn’t excuse the government’s failures and the decision to use KWA, which had serious negative unintended consequences that were not identified and remediated quickly enough to avoid serious harm.

As the public awaits conclusions from the numerous criminal and civil court cases related to the failures in Flint, private companies continue to provide water services in numerous cities to millions of Americans. So it is important to focus public policy discussion on how both public and private water providers can improve their procedures to avoid such terrible consequences in the future. 

Given the nation’s need to rebuild and modernize so many local water systems, public-private partnerships are going to continue to play a key role in delivering safe water to Americans. Public and private actors in the process need to follow best practices, use water contracts that ensure taxpayers and citizens get full transparency and accountability from private providers on water quality and rates, and governments must conduct meaningful oversight to ensure the terms of the contract are met.

The post Government failures, not privatization, are to blame for Flint’s water crisis 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.

Amongst the 221 entities, 27 are local governments in California. And of those 27 local governments, 24 lost money operating municipal golf courses in 2020. These 24 local governments lost a combined $20 million of taxpayers’ money on their golf-related operations.

The largest operating loss, over $4 million, was recorded by the Indian Wells Golf Resort, owned by the city of Indian Wells. The course earned $11 million in revenue but had $15 million in expenses. The other California golf courses showing financial losses greater than $2 million in 2020 were in the cities of Carlsbad and Dinuba. Carlsbad’s facility, The Crossings Golf Course, roughly breaks even on a cash flow basis but does not cover its depreciation expenses. Dinuba’s Ridge Creek Golf Club also reported revenues largely offsetting cash operating expenses but not covering depreciation.

There were three local governments—Mission Viejo, Pacific Grove, and Seaside—that turned an operating profit, making a combined $300,000 operating public golf courses in fiscal 2020.

There are many other government-run golf courses that could not be included in this examination due to the way some governments report this information. Los Angeles, for example, owns 13 golf courses but the city does not separately report the courses’ financial results. Instead, financial information about Los Angeles’ golf courses is included in the larger bucket of the city’s larger parks and recreation fund.

Based on the national and state data showing so many local governments losing money, it is clearly time to sell these municipal golf courses or partner with the private sector to run them.

Antioch, California, for example, contracts out the operation of its municipal golf course to a private company. Antioch Public Golf Course, Inc. has been operating the city’s Lone Tree Golf Course since 1982 and has the concessions contract through 2033. It is not subsidized by the city and its operating results are not reflected in the city’s financial statements.

As Reason Foundation Vice President Adrian Moore put it, “Government-owned golf courses are a real head-scratcher. They serve no public interest that is not already served well by the private sector. Indeed, they are most often a nice subsidy for relatively wealthy golfers, paid for by all the non-golfing taxpayers.”

Ideally, local governments should be looking to sell this valuable real estate they are sitting on to pay down unfunded public pension liabilities, fund needed infrastructure repairs and expansions, and maximize the value for taxpayers rather than losing money on golf. Between home builders, companies looking for large swaths of land, and professional golf course management companies, many of California’s municipal golf courses would generate significant money in sales.

Some state legislators are eyeing these money-losing public golf courses as a way to help reduce the state’s housing crisis.

California Assemblymember Cristina Garcia, D-Bell Gardens, recently proposed a measure, Assembly Bill 1910, that would give local governments an incentive to convert their public golf courses into a mixture of housing and public open space. Under the proposal, state redevelopment grants would be provided only for projects that make at least 25% of new residential units affordable units limit non-residential units to one-third of the development’s square footage. While some of the restrictions are onerous and ideally would not be in the final bill, they are imposed as a condition for unlocking state grant support and may be necessary to build the coalition of Democratic support needed to advance the policy.

There are important debates to be had about how to best proceed with these golf courses and properties, but, ultimately, it’s clear that governments should not own and operate golf courses, especially when they are losing millions of taxpayer dollars.

A version of this column first appeared in the Orange County Register.

The post Local governments in California lost $20 million running public golf courses in 2020 appeared first on Reason Foundation.

In contrast, 62 of the 221 local governments broke even or turned a profit on their public golf courses in 2020. In the aggregate, these 62 governments made $16 million via their public golf courses in fiscal 2020.

Four governments did not provide net income results.

Thus, combining the profits and losses of the 221 entities identified, local governments across the country lost a total of $45 million operating public golf courses in fiscal 2020.

Five government-run golf facilities reported losses of greater than $2 million in 2020, three in California.

The largest operating loss by a public golf course—over $4 million—was recorded by the Indian Wells Golf Resort, owned by the city of Indian Wells. The course earned $11 million in revenue but had $15 million in expenses.

The other California golf courses showing losses greater than $2 million were in the cities of Carlsbad and Dinuba. Carlsbad’s facility, The Crossings Golf Course, roughly breaks even on a cash flow basis but does not cover its depreciation expenses.

The two other public golf courses that lost over $2 million in 2020 were the Mallard Cove Golf Course in Lake Charles, Louisiana, and the Wailua Golf Course on the Hawaiian Island of Lihue, which is owned by Kauai County.

Obviously, the extent of COVID-19-related lockdowns likely played a role in the 2020 financial results of many courses, particularly in California, Hawaii, and other states with strict or long shutdowns.

The 221 golf course funds Reason Foundation identified in municipal financial statements represent a subset of all golf facilities owned by local governments across the country. There are a variety of reasons not all of the public golf courses can be listed here. Los Angeles, for example, owns 13 golf courses but the city does not separately report the courses' financial results. Instead, financial information about Los Angeles' golf courses is included as part of the city’s larger parks and recreation fund.

Due primarily to the value of the land, the 221 local governments reported net assets of almost $800 million related to their golf courses. In many cases, these figures likely underestimate the current market property values of public golf courses, especially in metropolitan areas.

The operating expenses, revenues, profits and losses, assets and liabilities reported by the local governments for 2020 are available in the spreadsheet below.

Local Governments’ Expenses and Revenues Related to Public Golf Courses in 2020

The post 155 local governments across the U.S. lost a total of $61 million operating public golf courses in 2020 appeared first on Reason Foundation.

MAIN ARTICLES:

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

NEWS & NOTES:

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

MAIN ARTICLES

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

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

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

New Hampshire Should Reconsider State-Operated Cannabis Retail Outlets

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

Lawsuits Could Help Free Up Government Spending Data

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

NEWS & NOTES

STATE GOVERNMENT

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

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

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

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

LOCAL GOVERNMENT

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

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

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

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

QUOTABLE QUOTES

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

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

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

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

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

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

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

MAIN ARTICLES:

News & Notes

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

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

• FEDERAL GOVERNMENT: Military Housing Partner Receives Hefty Fraud Fine

MAIN ARTICLES

Assessing States’ Telehealth Practices

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

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

Development Impact Fees Do Both Harm and Good

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

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

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

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

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

NEWS & NOTES

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

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

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

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

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

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

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

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

QUOTABLE QUOTES

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

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

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

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

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

MAIN ARTICLES:

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

NEWS & NOTES:

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

MAIN ARTICLES

State and Local Governments Mostly Not Spending Federal Relief

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

Biden Executive Order Shows Promise for Worker Freedom

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

Consumers Benefit from Greater Competition in Alcohol Distribution

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

NEWS & NOTES

STATE GOVERNMENT

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

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

LOCAL GOVERNMENT

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

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

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

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

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

FEDERAL GOVERNMENT

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

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

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

QUOTABLE QUOTES

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

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

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

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

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

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

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

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

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

Main Articles

News & Notes

Annual Privatization Report 2021

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

Fire “Alliance” Model Takes Competition Out of EMS 

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

Tackling Space Traffic and Orbital Debris

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

Capitol Hill’s Spending Raises Concerns Amidst Inflation Unknowns

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

News & Notes

State Government

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

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

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

Local Government

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

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

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

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

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

Corrections

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

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

Water

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

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

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

FEDERAL GOVERNMENT

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

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

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

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

Quotable Quotes

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

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

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

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

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

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

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

Reports from 10TV in Columbus, Ohio, and the Associated Press raise significant questions about the foster home Bryant was in. “Police took at least 13 reports related to foster children who went missing from the home since 2017 or other problems at the home, records show,” the AP reported.

The 911 call that set in motion the chain of events that resulted in Bryant’s death was the seventh such call from that home since November 2020. Two of the earlier 911 calls involved a runaway child, and two other calls involved gunshots.

At this time, we know that multiple foster children were in the house, including Ma’Khia and her younger sister, but we do not have the precise total. In any case, the number of children appears to have exceeded the capabilities of the caregiver. The Associated Press added:

The younger sister of 16-year-old Ma’Khia Bryant called 911 a few weeks before Bryant’s fatal shooting by a Columbus police officer, saying the girls had been in a fight with each other and she wanted to leave their foster home, records show.

“I don’t want to be here no more,” the girl told a police dispatcher, adding that she’d been in the home more than a year

Why Bryant, her sister, and other children were in this particular foster home deserves significant scrutiny. At the macro level, America simply has too many children in foster care. We do a huge disservice to foster children by placing them with unqualified or uncaring foster parents and encouraging competent caregivers to take on additional children at the risk of exceeding their bandwidth.

For those of us who grew up in functional homes, it can be hard to imagine how children can thrive without the unconditional love that our natural and adoptive parents, fortunately, gave us. While many foster parents are excellent (and often go on to adopt children), many others are incapable or uncaring. Having been forcibly extracted from their original homes and often having gone through multiple foster placements, these children are often traumatized. Ideally, they should be placed in the care of short-term super-parents who are skilled in helping them through this difficult period. Unfortunately, we do not have enough of those types of foster caregivers.

One solution is to reduce the number of children in foster care so that those in the system get the best possible placements. Policies to lower the caseload include keeping children in their birth homes whenever it is safe to do so and accelerating reunification or adoption processes for children who can’t return home.

While there is much criticism of hasty and unjustified removals of children by county authorities, the unfortunate reality is that some birth parents abuse and seriously neglect children. In those cases, removal from the home is in the children’s best interests. But once they are in foster care, more attention should be paid to shortening the time children spend in the foster system.

The sooner a child can be restored to a normal home environment, the greater the opportunity he or she will have to recover from the trauma that both removal and foster care cause. As a volunteer Court Appointed Special Advocate (CASA) for foster children, I have seen firsthand that the system is not prioritizing adoption once the reunification option has been ruled out.

One problem is the lack of incentives to minimize children’s time in the system. In the Ohio case, for example, amidst allegations of abuse Ma’Khia Bryant was removed from her biological mother’s home in March 2018—more than three years before her death.

Foster parents, private non-profit foster family agencies, attorneys, and therapists are all largely compensated based on their caseloads. The more children that are in the system, the more revenue is available to fund many of the services related to these children.

One alternative would be to gradually decrease compensation rates for attorneys and foster family agencies the longer that children remain in the foster system (perhaps after nine months) while using the money that would be saved to offer bonuses to those involved in successful adoptions.

State oversight of county child protective service agencies should focus more of their attention on the ability of these agencies to properly close cases. While county social workers do not have financial incentives to hold onto cases, they may not have the motivation to close them either. Assigning more aspects of the adoption process to private entities could also accelerate case resolution while incentivizing safe, positive outcomes for the kids involved.

Policymakers and advocates should also be cautious about allowing other cultural and political issues to impede the adoption process. For example, the Supreme Court is currently deliberating on Fulton v. City of Philadelphia, a case in which a Roman Catholic adoption agency is challenging the city’s decision to stop referring cases to it in light of its unwillingness to certify same-sex couples as suitable parents. Ideally, child protective services would hire a broad array of adoption agencies, including many that permit same-sex couples to adopt.

Similarly, Bethany Christian Services, the nation’s leading Protestant foster care and adoption agency issued a report, which included recommendations to scale back the 1994 Multi-Ethnic Placement Act, which sought to make adoption colorblind. While it is reasonable for an adoption agency to determine whether a white couple has the social awareness to sensitively raise a black child, this flexibility should not be abused by social workers who are opposed to interracial adoption.

As The Dispatch’s David French recently wrote:

Yet as a proud parent of an adopted black daughter (as most readers know, our beautiful youngest daughter is from Ethiopia), I agree with Bethany that it can be harmful to children for parents to walk into adoption with a purely colorblind philosophy. As much as we might want to live in a world where race doesn’t matter, and we’re all one human family, it’s a simple fact that children of color face different challenges from white children as they navigate our culture and as they’re raised in white families.

And while I’m a firm supporter of transracial adoption, I also think that a true “best interests of the child” adoption standard should include an analysis of whether the family is thoughtfully approaching the unique challenges that will face their adopted kids.

This isn’t critical race theory. This is life. This is experience. You can try to be as colorblind as you want, but your child will not be. He or she will be keenly aware of his or her differences. Your community will not be. And it is on the parents to prayerfully and carefully prepare for this reality. We do not yet live Martin Luther King’s “content of your character” dream, and while we do not, it is imperative to prepare parents for the world as it is.

Not all adoptive parents are suitable for every child currently in foster care and experienced, trained intermediaries should be able to exercise some discretion in efforts to more quickly, and successfully, place children in healthy environments. Government and private agencies serving foster children should be given the incentives and tools to make child‐centered decisions that safely reduce the number of kids in the system, increase prudent family reunifications, and more timely adoptions.

The post The Foster Care System Needs Reform appeared first on Reason Foundation.

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

News & Notes

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

State Reforms Are Key to Expanding Telehealth

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

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

Interstate Rest Area Commercialization Is Needed and Long Overdue

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

Connecticut’s Public Infrastructure Needs Private Sector Help

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

News and Notes

Transportation

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

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

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

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

D.C. Releases Streetlight P3 RFP

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

State Government

Colorado Legislative Committee Rejects Pinnacol Privatization Bill

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

Alaska DMV Privatization Proposal Withdrawn

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

Higher Education

The University of Maine System Releases Housing P3 RFP

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

Florida Atlantic University Solicits Marine Testing P3

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

Texas Tech Announces Partnership to Promote Geological Research

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

Quotable Quotes

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

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

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

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

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

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

News & Notes

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

Main Articles

Local Government Tax Revenues Are Exceeding Expectations 

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

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

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

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

Florida Bill Would Strengthen Florida Citizens’ Digital Search Protections

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

News and Notes

State Government

Hawaii Awards Managed Medicaid Project Contracts

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

Mississippi Legislature Passes, Kills Liquor Privatization Bill

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

Energy

Puerto Rico Energy Utility Releases RFP for Renewable Energy, Storage 

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

Higher Education

Fresno State Closes on Energy Public-Private Partnership

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

The University of Iowa Approves Bookstore Outsourcing Contract

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

Local Government

New Orleans Selects Three for Theme Park Site Redevelopment 

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

City in New York Votes to Outsource Residential Solid Waste

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

Federal Government

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

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

Quotable Quotes

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

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

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

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

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

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

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

Prince George’s County Public Schools (PGCPS) in Maryland entered a deal where a private consortium will design, build, finance and maintain six new K-12 schools in the county for 30 years. The contract looks to take advantage of private-sector resources in ways that have gained traction in many other public infrastructure and service arrangements, including highways, water systems, courthouses, and other government buildings. Instead of merely just entering traditional “design-build” contracts, agencies increasingly look to find ways to utilize networks of public and private actors that can remain committed to keeping infrastructure in a consistent and satisfactory state of use throughout the useful life of the infrastructure. In doing so, they’re transferring risks of designing, building, financing, and maintaining infrastructure assets into actors best equipped to handle them.

While the private sector does regularly perform those functions individually in schools, the Prince George’s County Public Schools long-term partnership agreement better aligns the private sector’s profit incentive with the public sector’s desire to keep facilities in a consistent state of good condition. Knowing they are on the hook for maintaining facilities for decades and ending the agreement with the facilities in good condition, the private partner will likely look to avoid costly deferred maintenance issues that might arise later down the road by spending more money upfront on quality construction materials, design techniques, and maintenance schedules that aim to minimize the deterioration of assets over time and ensure an effective lifespan.

Prince George’s County had a very familiar problem to school districts across the country—relying on school buildings for longer than their intended lifespan. Just as putting off maintenance on a highway can lead to greater replacement costs later, the failures of many government entities to properly plan for, and fund, more preventative maintenance actions and implement long-term solutions causes problems. And their growing size can make getting the right projects funded and selected very difficult and complex.

Educating nearly 150,000 kids is a difficult enough task in itself, but effectively operating and maintaining the billions of dollars in buildings and assets that are needed to facilitate their education is yet another vast area of needed expertise.

With 40 percent of its buildings over 50 years old and an estimated $8.5 billion needed —for which only $210 million is annually available— to repair, replace and upgrade existing facilities, the PGCPS saw an opportunity to find committed help in the private sector to handle those risks, while allowing them to better focus on educating students.

PGCPS retains ownership and control under the contract, which includes provisions that major construction elements are to be completed in under four years as opposed to the up-to 17 years it would’ve taken for construction if the district did not use the public-private partnership. As part of the agreement, PGCPS maintenance staff will complete and assist some of the work, too.

Financing is another dilemma facing school districts and state and local governments. While governments have inherent interest rate advantages over the private sector in obtaining loans, issuing new debt comes with its own credit rating risks and political risks that private financial capital considerations may be able to handle or avoid.

With PGCPS, the quicker construction timeline and overcoming deferred maintenance issues was enough to offset the more expensive cost of private capital, ultimately generating an estimated $180 million in savings over a traditional “design-build-bid” option.

This deal is a structure that works well in infrastructure globally. The public sector retains control, oversight, and of the operation, as well as the ownership of its facilities, while the private partners deliver infrastructure and services to the agencies, often with innovations, speed, and cost savings that government agencies would be unable to achieve on their own.

With K-12 schools, the advantages of entering a P3 to build and maintain schools should be clear. School districts do not build new schools very often. Therefore, while local government boards of education do have some knowledge of how to design educational facilities to their needs, other grittier details over construction and maintenance may fall mostly outside of those agencies’ typical expertise. But by tapping into private expertise through a P3, the local agencies get infrastructure delivered to its specifications, with the added assurance that repair and maintenance problems are handled by parties that have readily available resources to complete the work.

While the Prince George’s County Public Schools public-private partnership deal appears to be the first of its kind for K-12 schools, colleges have increasingly embraced the P3 model to similar ends. The fast-growing University of California-Merced completed the construction phase of a campus expansion P3 last year. That deal includes provisions that hold the private partner accountable for meeting the school’s ambitious environmental goals for sustainable growth.

Prince George’s County’s P3 is something that other school districts should explore. Tapping the private sector to design and manage school facilities and preventing the costly and problematic deferred maintenance issues many school districts confront is worth examining. By entering public-private partnerships, local governments, school boards, and districts can transfer costs and risks they are often ill-equipped to handle over to private entities, allowing school leaders to focus on education.

The post A Landmark K-12 Education Public-Private Partnership appeared first on Reason Foundation.

MAIN ARTICLES:

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

NEWS & NOTES:

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

MAIN ARTICLES

New Report Finds $1.2 Trillion in Unfunded OPEB Liabilities

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

Early State Revenue Figures Exceed Expectations

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

Federal Infrastructure Bill Needs Place for P3s

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

Biden’s Proposed Private Prison Ban Imperils Potential Improvements

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

NEWS and NOTES

TRANSPORTATION

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

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

Source: Pennsylvania Department of Transportation

LEGISLATION

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

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

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

LOCAL GOVERNMENT

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

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

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

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

WATER

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

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

SOLID WASTE

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

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

CORRECTIONS

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

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

PARKS AND RECREATION

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

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

FEDERAL GOVERNMENT

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

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

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

QUOTABLE QUOTES

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

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

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

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

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

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

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

Main Articles:

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

News & Notes

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

MAIN ARTICLES

Reason Foundation Releases 2020 Ballot Initiatives Guide

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

Massive Federal Government Deficits Require Structural Reforms 

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

Beware of Subprime “Green Bonds”

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

Banning Water Privatization Makes Affordable Municipal Water More Difficult

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

Tackling Florida’s Blue-Green Algae Bloom Problem

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

NEWS & NOTES

STATE GOVERNMENT

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

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

LOCAL GOVERNMENT

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

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

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

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

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

FEDERAL GOVERNMENT

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

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

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

CORRECTIONS AND CRIMINAL JUSTICE

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

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

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

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

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

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

QUOTABLE QUOTES

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

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

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

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

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

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

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

While private sector participation in public sector infrastructure should always be carefully monitored and managed to protect taxpayers’ interests, demanding that private actors exit the areas of public water and sanitation management is not only short-sighted but also makes it more difficult for governments to provide affordable water and sanitation services.

Critics of water privatization point out that shortsightedness in the 20^th century led most government leaders to see clean water as a “limitless resource available to all,” but this mentality has necessitated the need for substantial innovation in the municipal water space. Replacing aging infrastructure, complying with extensive regulatory oversight, expanding capacity for new developments, detecting and fixing breaks and leaks, diverting stormwater, and extracting valuable resources from wastewater are just a few of the adjustments municipalities have made.

When locales cannot engage private entities to help manage these changes, municipalities are left retaining the risks of doing so alone.

Governments are usually ill-equipped to manage all the changes and risks that come up while operating and maintaining water-related systems by themselves. Years of deferred maintenance in water infrastructure means that needed improvements will be costly, especially when you consider the federal and state-level environmental mandates that systems need to comply with. According to a 2012 report from the American Water Works Association, over $1 trillion is needed over the next 25 years for merely expanding infrastructure for growing populations and replacing components past their useful life.

The private sector has offered innovative solutions to better manage the risks of operating public water systems and will continue to provide them. Profit motives in the municipal water sector are not a moral wrong that needs to be corrected. Rather, the private sector can often provide a lifeline for governments trying to walk the tightrope of balancing affordability and reliability.

Public Works Financing’s June 2017 issue identified many cities, both large and small, that have benefitted from contracting with the private sector for water infrastructure projects. The publication found Tampa saved an estimated $85 million on a 15-year water public-private partnership, as well as saving 50 percent compared to its in-house costs over a 30-year deal on their desalination plant. Seattle saved a combined $120 million on separate projects entered into 1998 and 2001, with savings of 47 percent and 31 percent over in-house services, respectively. Bessemer, Alabama, saved a reported $100 million on the 20-year project it entered into in 1997. And Pawtucket, Rhode Island, saved $37 million on its 20-year water project. Nassau County, New York, expects $378 million in savings just from contracting out operations and maintenance for 20 years.

Even when cost savings are not reported, many of the largest cities in the U.S. have chosen to contract out water and wastewater infrastructure operation and maintenance, as well as to rely on privately-operated (and sometimes, owned) treatment plants and other facilities for wastewater, sludge treatment and other complementary services. Atlanta, Baltimore, New Orleans, Philadelphia, Phoenix, and San Diego are a few of the cities that have done so.

While it may be true that water privatization and outsourcing can frequently come with initially increased rates for consumers—as companies step in to address decades of undercharging and deferred maintenance, rate hikes are typically needed to start to repair and improve the water systems, whether they are in public or private hands.

Typically, long-term concessions and leases of water systems to private companies are designed to minimize rate hikes through effective use of capital and maintenance schedules. Counterfactually, a lack of access to private capital and resources is likely to result in even higher rates since resources for agencies limit the extent to which a long-term “lifecycle” approach to infrastructure can be adopted. By transferring the risks of financing, maintenance, operation, and repair to outside entities in long-term contracts that incentivize effective performance, government agencies can sometimes soften the sticker shock of costly improvements over time, keeping infrastructure in consistently good operating condition — as opposed to deferring maintenance and fixing things as they break.

Undoubtedly, supplying every citizen with clean water, regardless of ability to pay, is a noble goal, but denying the private sector participation makes it unrealistic many financially-strapped governments will be able to meet that goal over the long-term. Maintaining the delivery of clean water, the sanitary diversion of wastewater, and the safe diversion of stormwater for citizens in an efficient manner is not simple or without considerable cost.

Declaring water and sanitation “human rights” is easy. Building, funding, maintaining, and operating those water systems are more complicated. Denying municipalities the option of working with private sector leaders in the industry just makes effective water infrastructure management costlier and more difficult, which ultimately hurts customers and taxpayers.

The post Private Sector Water Management Solutions Help Governments Deliver Affordability and Reliability appeared first on Reason Foundation.

Main Articles:

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

News & Notes:

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

MAIN ARTICLES

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

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

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

Telepharmacy Services Can Help COVID-19 Response 

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

Restrictive Commercial Zoning Hurts Recovery Prospects 

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

Pandemic Intensifies Major Damage Done by California’s AB5

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

Postal Service Needs Competition for Financial Sustainability

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

Boston Area Transit Benefits from Contracting, Could Use More

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

NEWS & NOTES

STATE GOVERNMENT

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

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

Maryland Receives RFQ Responses for Managed Lanes P3

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

Alabama Receives Private Prison Proposals

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

Contact Tracing Methods Raise Major Privacy Concerns 

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

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

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

LOCAL GOVERNMENT

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

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

New Mexico County Announces Public Safety Training Facility P3

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

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

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

City of Buffalo Announces Environmental Impact Bond

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

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

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

Park City Leak Detection Contracting Wins Green Award

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

Widespread COVID-19 Building Closures May Affect Water Quality 

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

Bowling Green, Kentucky Rejects Transit Proposals

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

St. Thomas Seeks Harbor Transportation Proposals

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

New Jersey Township Outsources Its Legal Department

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

HIGHER EDUCATION

University of Idaho Shortlists for Utilities P3

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

Texas A&M Medical Housing P3 Preferred Proponent Selected

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

University of Kentucky Wet Lab P3 Receives Proposals 

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

Bowie State Mixed-Use P3 Reaches Financial Close 

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

Santa Rosa Junior College Housing P3 Reaches Financial Close

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

QUOTABLE QUOTES

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

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

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

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

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

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