Out of Control Policy Blog

Friday Privatization News Highlights (9/2/2011 edition)

News articles on some of the more interesting developments on the privatization and public-private partnership (PPP) front over the last two weeks include:

Federal Government

  • "Contract winner must hire predecessor's employees, new rule says" (Federal Times): If we're looking for onerous and counterproductive rules and regulations to eliminate at the federal level, this new Labor Department rule would be a good place to start. Under the rule, any company that wins a federal services contract previously held by another company has to hire the old company's employees. Not only does this represent an unwarranted intrusion into companies' ability to make their own personnel decisions, but it could also drive up costs for the public sector as well (if companies are forced to hire more employees than they need, or are forced to hire less productive employees than they otherwise would). This idea appears to have been taken straight from Bad Procurement Policy 101.

State Government

  • "Ohio becomes 1st in nation to sell state prison to private company; 4 others not sold" (Washington Post): Yesterday, Ohio corrections officials announced the results of a large-scale procurement that will see the state raise $72 million from the sale of one state prison to a private operator and two others turned over to private management, for an estimated $13 million in total, annualized cost savings. More details from Bloomberg here.
  • "VDOT announces public-private partnership to maintain rest areas" (Land Line): This week, Virginia transportation officials announced a new PPP that will upgrade the state's 42 rest areas and welcome centers. The state is partnering with a vendor that will expand vending and advertising at the facilities and will pay the state $2 million per year for the privilege. The deal is structured to also give the state a revenue share based on percentage of total sales. According to Virginia Gov. Bob McDonnell, "As part of this innovative program, we see great opportunity to offset rest stop costs now and into the future. […] Partnering with the private sector will enable us to expand and improve the services that we offer visitors while saving taxpayer dollars." More here and here.
  • "Bill Looks to Require Districts to Seek Bids on Support Services" (Michigan Capitol Confidential): Our friends over at Michigan's Mackinac Center weigh in on the proposed House Bill 4306, which would require all Michigan school districts to solicit bids for school support services (e.g., food, transportation, custodial) and compare them to in-house costs. The bill does not mandate any actual privatization; it just requires a bidding process. The idea builds on the rapid expansion of non-instructional school service outsourcing in the state in recent years. According to Mackinac's latest privatization survey, 295 of the state's 550 districts (53.6%) are outsourcing some of their non-instructional services, up from 31 percent in 2001. For more details on the Mackinac survey, see here and here.
  • "Illinois approves privatization for new roads" (Land Line): Illinois has become the latest state to adopt enabling legislation providing the state broad statutory authority to pursue PPPs for new transportation projects. Unfortunately, they've opted to require legislative approval of all PPP projects, injecting a degree of political risk into the process that could potentially make some bidders wary of pursuing projects in Illinois.
  • "Bill would allow private groups to run state parks" (The Union of Grass Valley): A bill (AB 42) approved by the state assembly and currently under consideration by the California State Senate would allow the state to enter into PPPs with nonprofits to take over operations of state parks threatened by closure. This would certainly be a step forward, though legislators would be smart to expand this authority to include for-profit recreation management firms as well. The U.S. Forest Service already uses for-profit concessionaires to operate dozens of recreation areas throughout California today, and about half of their recreation sites nationally, so it's a proven model that works.
  • "Firm proposes public-private partnership to improve I-70 mountain corridor" (Denver Post): The global engineering/construction firm Parsons has submitted an unsolicited proposal to Colorado officials proposing a new PPP to rebuild the Interstate 70 mountain corridor using private financing. This is a high-traffic corridor with billions in identified needs and little by way of state funds to address them.
  • "Tri Rail privatization studied as way to add FEC commuter service" (South Florida Business Journal): Transit officials in Florida are reportedly considering privatization as a means to add commuter rail service along the Florida East Coast Railway in South Florida.

Local Government

  • "Parking deal netting city more meter money" (Indianapolis Business Journal): So far, so good with Indianapolis' parking meter privatization. After signing a 50-year concession with ACS last year for the management of its downtown parking meters, the decision already appears to be paying off for the city. The article reports that total meter revenues increased to $1.7 million in March-June quarter, up from $1.3 million during that same quarter in 2010. The concessionaire is sharing those revenues with the city, and the city's take rose to $498,273, a dramatic increase over the $108,265 it collected from the meters over that same time period last year when the meters were still an in-house operation. What's even more exciting is what's to come: ACS will soon be rolling out a mobile phone app that will allow users to feed their meters electronically. I'd imagine it will have other features beyond that that will make life a lot easier for system users. I would be nice to hear a mea culpa from the Chicken Littles who predicted post-privatization doom and gloom amid the pre-concession debates last year, but I'm not holding my breath.
  • "StarTran audit to look at privatizing all or part of bus service" (Lincoln Journal Star): Transit officials in Lincoln, Nebraska have hired a consultant to evaluate potential options for privatizing the city's public bus service as part of a larger transit management review.
  • "Santa Paula Water Recycling Facility Receives Prestigious 2011 Public-Private Partnership Award For Innovation" (Water Online): The National Council of Public-Private Partnerships has given an innovation award to Santa Paula, California's new water recycling plant. The facility, the first 100% privately funded water recycling facility in the country, was built for the city by PERC Water and Alinda Capital under a 30-year contract.
  • "City of Flint postpones leasing out public golf courses" (The Flint Journal): Flint officials have had to slow down their ongoing golf course privatization process in order to hammer out details with the various bidders selected to take over operations, including a public employee union.

For more on privatization, see Reason Foundation's privatization research archive.

Leonard Gilroy is Director of Government Reform


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