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Reason's Len Gilroy Talks TVA Privatization, Annual Privatization Report on Heartland Institute Podcast

Posted on May 23, 2013, 3:54pm | Leonard Gilroy

Earlier this week, I had the pleasure of sitting down with the Heartland Institute's Steve Stanek for an episode of their Heartland Daily Podcast, where we discussed President Obama's recent budget proposal to study a potential privatization of the Tennessee Valley Authority (TVA). From Heartland's Somewhat Reasonable blog:

President Barack Obama has proposed studying the possibility of privatizing the Tennessee Valley Authority, the nation’s largest government-owned utility. Privatization expert Leonard Gilroy of The Reason Foundation tells Heartland's Steve Stanek why the president has a good idea, and why area politicians in both major political parties oppose it.

An iTunes link for this podcast is available here. Beyond the proposed TVA privatization, we also discussed several highlights from Reason Foundation's Annual Privatization Report 2013.

Speaking of the TVA, I was also quoted in a Budget and Tax News article last week on the privatization proposal. Here's an excerpt:

The Chattanooga Times Free Press newspaper declared in an editorial that opposing TVA privatization is a mistake and noted the disconnect between some Tennessee politicians who declare they favor free enterprise and limited government yet oppose privatization.

“The only real argument for keeping the TVA's assets in government hands are weak arguments like, ‘people like the TVA how it is’ and ‘that's how we've always done it.’ Sadly, that stale mindset has overtaken area Republican lawmakers who claim to oppose government control and socialist programs,” the newspaper’s editors wrote. [...]

Privatization expert Leonard Gilroy of Reason Foundation said he sees lots of institutional opposition to privatization.

"Despite being an utterly nonessential federal asset, there appears to be no political will in Congress whatsoever to authorize a TVA privatization," he said. "Senator Alexander, Senator [Bob] Corker (R) and other Tennessee congressmen of both political parties have already condemned the proposal to merely study privatization, which is all the President has proposed. This just goes to show how difficult it is in real life to shut down government agencies and enterprises once they spring to life and build constituencies."

Nonetheless, he said privatization ought to be studied.

"There's nothing inherently governmental about running a power business, so privatization could provide an opportunity to bring in a businesslike approach and more efficient operations and management compared to what's seen today as a government-owned enterprise," he said. "However, there would be some very thorny implementation issues to work out, not the least of which being how to handle the divestiture of the TVA land and power assets that were originally seized from private hands to begin with."

For a more detailed analysis of the merits and challenges associated with privatizing the TVA, check out this recent Reason Foundation article by Steve Esposito. 

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New at Reason: Looking Back at the Last Year in Local Government Privatization

Posted on May 6, 2013, 4:25pm | Leonard Gilroy

The rollout of Reason Foundation's Annual Privatization Report 2013 continues today with the release of the Local Government Privatization section—authored by Reason's Harris Kenny, Adam Summers and Steven Titch—which provides an overview of the latest on privatization and public-private partnerships in local government. Articles include:

  • Mayor Emanuel Establishes Chicago Infrastructure Trust
  • Public-Private Partnerships for Parking Assets
  • Yonkers, New York Pursuing Innovative School Partnership Approach
  • City of Austin Releases Surprising Outsourcing Study
  • Georgia Contract Cities Continue to Evolve
  • Finding New Ways to Provide Parks and Recreation Amenities
  • Water and Wastewater Privatization Update
  • Solid Waste Collection Update
  • Non-Profit Partnerships for Animal Shelters Grow
  • ANALYSIS: Is Managed Competition Dead in San Diego?
  • ANALYSIS: San Diego, San Jose Lead the Way in Local Pension Reform
  • ANALYSIS: Despite Glossy Reports, Muni Broadband is Still a Net Money Loser
  • Local Government Privatization News and Notes

» Annual Privatization Report 2013: Local Government Privatization
» Complete Annual Privatization Report 2013

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New at Reason: Privatization Developments in Criminal Justice and Corrections

Posted on May 6, 2013, 3:55pm | Leonard Gilroy

The rollout of Reason Foundation's Annual Privatization Report 2013 continues today with the release of the Criminal Justice and Corrections section—authored by Leonard Gilroy, Harris Kenny, Alexander Volokh and Andrew Livingston—which provides an overview of the latest on privatization and public-private partnerships in criminal justice and corrections. Topics include:

  • 2012 Corrections Privatization Overview
  • State and International Corrections Privatization Update
  • State and Local Correctional Healthcare Privatization Update
  • ANALYSIS: Recent Developments in the Federal Civil-Rights Liability of Federal Private Prisons
  • FOCUS: The Emergence of Social Impact Bonds: Paying for Success in Social Service Innovation
  • FOCUS: Colorado, Washington State Vote to Tax and Regulate Recreational Marijuana for Adults

» Annual Privatization Report 2013: Criminal Justice and Corrections
» Complete Annual Privatization Report 2013

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New at Reason: Looking Back at the Last Year in Education Reform and School Choice

Posted on April 29, 2013, 9:00am | Leonard Gilroy

The rollout of Reason Foundation's Annual Privatization Report 2013 continues today with the release of the Education section—authored by Reason's Katie Furtick and Lisa Snell—which provides an overview of the latest on school choice, charter schools, student-based budgeting and more. Topics include:

  • 2012 School Choice Roundup In the States
  • School Choice Performance in 2012
  • Charter School Market Share for 2012
  • Charter Schools Nationally Recognized in 2012
  • Public Opinion of School Choice in 2012
  • High-Achieving Charter Schools Serve Diverse Demands of their Communities
  • Weighted Student Formula in the States

» Annual Privatization Report 2013: Education
» Complete Annual Privatization Report 2013

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New at Reason: Looking Back at the Last Year in State Government Privatization

Posted on April 22, 2013, 1:43pm | Leonard Gilroy

The rollout of Reason Foundation's Annual Privatization Report 2013 continues today with the release of the State Government Privatization section—authored by Reason's Leonard Gilroy and Lisa Snell—which offers an overview of the latest on privatization and public-private partnerships in state government. Topics include:

  • State Budget Update
  • Privatization of State Lottery Management
  • The Emergence of Social Impact Bonds: Paying for Success in Social Service Innovation
  • California Pioneers Public-Private Partnerships for Private Operation of State Parks
  • Higher Education Public-Private Partnerships Update
  • State Liquor Privatization Update
  • Social Infrastructure Public-Private Partnerships Update
  • Child Welfare Privatization Update
  • State Privatization News and Notes

» Annual Privatization Report 2013: State Government Privatization
» Complete Annual Privatization Report 2013

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New at Reason: Looking Back at the Last Year in Federal Government Privatization

Posted on April 15, 2013, 3:47pm | Leonard Gilroy

The rollout of Reason Foundation's Annual Privatization Report 2013 continues today with the release of the Federal Government Privatization section—authored by Reason's Adam Summers, Anthony Randazzo, Steven Titch and Victor Nava—which offers an overview of the latest on postal service reform, space privatization, financial regulation, telecommunications and more. Topics include:

  • BCFC Outlines $795 Billion in Federal Budget Savings
  • Congress Takes on Postal Service Reform—Again
  • Space Privatization Update
  • ANALYSIS: Google, Facebook, Antitrust and the “Public Good”
  • ANALYSIS: Private Sector is Best-Positioned to Lead Cybersecurity Policy
  • ANALYSIS: Privatization of Financial Regulation is Not Impossible

» Annual Privatization Report 2013: Federal Government Privatization
» Complete Annual Privatization Report 2013

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New at Reason: Looking Back at the Last Year in Toll Roads, HOT Lanes, Infrastructure Finance

Posted on April 8, 2013, 9:00am | Leonard Gilroy

The rollout of Reason Foundation's Annual Privatization Report 2013 continues today with the release of the Surface Transportation section—authored by Reason's Robert Poole—which provides a comprehensive overview of the latest on toll roads, HOT lanes, infrastructure finance and other news on privatization and public-private partnerships in surface transportation. Topics include:

  • Federal Reauthorization—MAP-21
  • State Public-Private Partnership Enabling Legislation
  • Transportation Infrastructure Finance 2012
  • Private Activity Bonds
  • Major Public-Private Partnership Highway Projects
  • Leasing Existing Toll Roads
  • Managed Lanes and Networks

And in case you missed it, Reason Foundation released the Air Transportation section of the Annual Privatization Report 2013 last week, also authored by Poole. It offers an overview of the latest on privatization and public-private partnerships in air transportation, with topics including airport privatization, U.S. airport security, and air traffic control.

» Annual Privatization Report 2013: Surface Transportation
» Complete Annual Privatization Report 2013

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Privatization Proposed for Micke Grove Zoo in San Joaquin County, CA

Posted on May 29, 2012, 7:00am | Harris Kenny

Zachary K. Johnson of the Record Staff reports:

It has been six years since Micke Grove Zoo lost its national accreditation and more than three years since work to remake the eastern end of the zoo came to a halt, leaving a large, dormant construction site...

And now a newly-invigorated nonprofit organization is hoping to breathe new life into the public zoo with a plan to privatize it, reclaim its lost accreditation and guide the San Joaquin County institution into a bigger future.

The Micke Grove Zoological Society - longtime supporters of the zoo and its programs - would like to one day take over operations. The group has hired a consultant (Terry Maple) who is an expert in zoo privatization.

The Micke Grove Zoological Society is rightly identifying a national trend towards public-private partnerships for amenities like zoos, which was recently highlighted here in Reason Foundation's Annual Privation Report 2011. According to some estimates, as many as three-quarters of all U.S. zoos are now privately operated, including cities like Sacramento, Fresno, Atlanta, Chicago, Dallas, Denver, Houston and Seattle.

Issues at the Micke Grove Zoo in San Joaquin County, California are similar to those seen at many zoos across the country over the past few decades. In short, scarce taxpayer dollars have been directed towards high priorty services like law enforcement and education, while amenities such as zoos have been neglected. Johnson reports the Micke Grove Zoo lost its accreditation in 2006 due to its outdated facilities and lack of veterinary space.

Under the proposed partnership the private partner, the Micke Grove Zoological Society, would assume control of day-to-day operations and improve conditions for the animals in hopes of regaining the facility's accreditation. Meanwhile the public partner, San Joaquin County, would retain ownership of the facility and retain oversite through the contract. Maple explains the plan saying, "This is going to be fun to take this zoo to the next level. It will be a smarter organization, a more flexible organization."

For more on zoo partnerships, see the following extract from Annual Privatization Report 2011 entitled, "Privately Operated Zoos Now Considered the Standard."

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Private Screening Could Solve TSA Theft Issues

Posted on May 9, 2012, 1:36pm | Baruch Feigenbaum

The Transportation Security Administration (TSA) is hiring screeners without adequately checking their backgrounds. Recently, the TSA purchased equipment that does not work, mishandled screening of congressional members and allowed a loaded gun on a plane.

According to Bloomberg:

The arrest April 25 of two current and two former TSA screeners at Los Angeles International Airport marked the third bribery case involving agency employees this year. Also in April, a TSA screener admitted to accepting $1,200 in bribes from drug traffickers sending the narcotic oxycodone from Florida to Connecticut through an airport in White Plains, New York.

Agency officers have also been accused of stealing iPads, cash, laptops and jewelry from baggage.

“This pattern suggests there’s something wrong in the vetting process TSA uses in hiring and screening its own people,” said Robert Poole, director of transportation studies at the Reason Foundation in Los Angeles, which advocates for free market solutions to policy issues. “It’s certainly a question Congress should be asking.”

All TSA security officers undergo thorough criminal background checks, submitting their fingerprints to the FBI and cross-checking names against terrorist watch lists, Kawika Riley, a TSA spokesman, said in an e-mail. 

Further:

Applicants are supposed to be disqualified for any one of 28 criminal offenses ranging from interference with navigation to espionage, treason and felony arson. Theft and bribery felonies are on the list, as are unpaid taxes, child support arrears or $7,500 in delinquent debt.

The TSA said in a 2008 post on its official blog that more than 200 employees had been fired for theft. Last year, taking a closer look at agency numbers, the news website New York Press concluded the number had expanded to about 500.

Agents were sentenced to jail terms after being convicted of stealing $40,000 from a checked bag at New York’s John F. Kennedy International Airport.

All agencies both public and private are going to have some personnel issues. Hiring is an imperfect science. However, the TSA has a problem with a much higher percentage of its employees than other government departments or private companies. Assuming DOT is accurately checking the background status of its employees, the agency is targeting the wrong people. The agency needs to study its hiring and recruiting standards to determine why so many future employees might be tempted to steal from customers.

One solution for solving this problem is for TSA to set the security standards but have private companies run the screening operation. If private screening company employees engage in criminal activity, the companies could face penalties or contract cancellation. As a government monopoly the TSA has no incentive to improve its hiring. Creating a better process would be the “right thing to do” but I am not convinced TSA leadership will be moved by a moral argument. 

The U.S. screening model is different from the process in many other countries. In most European countries and Canada private screening is the responsibility of private companies. The Governmental Accountability Office and others have studied private contracting and found the performance of TSA screening contractors to be as good or better than that of TSA’s own screeners. A 2008 catapult study commissioned by the TSA suggested that the agency expand private screening to several different types of airports. Instead of implementing the report's findings, TSA ignored its own study and refused to publish the results.

In the recently passed FAA reauthorization bill Congress requires that TSA now provide details on any opt-out application it denies. In the past, TSA has denied most of the applications because they did not provide a "clear and substantial benefit."

According to my colleague, Bob Poole, in March’s Airport Policy and Security Newsletter #77:

CNN reported on Feb. 2nd that TSA turned down two pending airport requests to take part in the Screening Partnership Program while approving one. Both Mooney Airport in Montana and Orlando Sanford in Florida (in Rep. John Mica’s district) were denied access to the program, because they “failed to demonstrate an operational, security, or cost advantage that provides a clear and substantial benefit over federalized screening operations.” Those criteria are not in the 2001 Aviation and Transportation Security Act legislation; they are the creation of Pistole and his TSA team. Moreover, insisting that the airport demonstrate a cost savings in advance is very difficult, since the airport itself is unable to issue an RFP and select the most responsive and cost-effective TSA-approved company. Instead, the way TSA has always managed the process, the airport applies to TSA for permission and if TSA deigns to grant it, TSA itself selects (by a process known only to itself) the security firm it deems the best fit for that airport. 

The airport that was approved is West Yellowstone in Montana. That airport is only open about half the year, and so under TSA screening, the agency flies in a team of its screeners each spring, puts them up in local lodging, and flies them home again in the autumn. Hence, if the airport hires qualified locals to do the screening, the cost will be about half, once travel and lodging costs are eliminated.

In the past, TSA director John Pistole and the Obama Administration relyed on ideological reasons and not sound policy analysis for their rejection of private screening. Maybe the new aviation bill will change that; but its doubtful.

Safety and cost issues should override politics in something as critical as airport security. But that’s not how the TSA operates.


For more details on private screening see the Annual Privatization Report 2011: Air Transportation.

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Much of the Capital in PPPs Comes from American Sources

Posted on May 4, 2012, 6:00am | Baruch Feigenbaum

The Reason Foundation’s Annual Privatization Report 2011 Surface Transportation Chapter reveals that much of the capital in Public Private Partnerships comes from American sources. Specifically as my colleague Bob Poole explains:

In the United States, concerns continue to be raised about “foreign takeovers” of infrastructure. It is therefore worthwhile to compare the nationality of the funds providing equity for infrastructure projects with the nationality of the concession companies that are implementing the projects. Based on Infrastructure Investor’s analysis of the 30 largest investors, 34% of the capital comes from U.S-based institutions, with Australia’s share at 29%. When you add Canada to the U.S. share, the total of North American investors is 54%. European institutions constitute 14% of the capital.

The large majority of project experience is European. Of the top 10 companies, eight are from Europe, one from Australia and one from China. Of the top 20 companies, 14 are from Europe (Spain, France, Germany, UK and Portugal), three from China, and one each from Australia, Mexico and Brazil. A U.S. firm does not show up until position 33. We can see that while the large majority of infrastructure development and operational expertise currently resides with European firms, the majority of the capital is coming from North American and Australian investment funds. Those who raise political concerns about foreigners “buying our toll roads” seem to have missed the difference between those who are building and operating these infrastructure projects and those who are financing them. More than half of all the equity investment is coming from North American funds.

The reason why “foreign control” has become an issue is because the United States entered the infrastructure privatization arena late in the game. Many European countries as well as Australia, Brazil, India and many others have been using PPPs for more than 20 years. Since foreign nations used PPPs before the U.S., it is only natural that many foreign companies are leaders in PPPs. Additional U.S. PPP infrastructure projects will lead to additional U.S. companies becoming involved in PPPs. 

For many years, the U.S. was fortunate to have a robust federal funding source: the federal gas tax. Although the country could have enhanced its infrastructure with PPPs there was no pressing need. Times have certainly changed. As a result of inflation the gas tax has diminished purchasing power. Vehicles are more fuel-efficient than ever resulting in less money for infrastructure. Additionally, an increasing amount of fuel tax revenue is diverted to transit, non-motorized transportation uses, or economic development projects. While PPPs are not ideal for every transportation project they can reduce the contributions from cash-strapped governments allowing projects to be built far sooner than if the public sector acted alone. PPPs are more important than ever for constructing a robust infrastructure system.

Unfortunately, xenophobic politicians who exaggerate the influence of foreign companies have become a major threat to PPPs. These xenophobes can be found in both political parties and appeal to union members and tea-party members alike. While fear of foreign investment is misplaced and illogical, it is also not accurate. While infrastructure development and operational experience resides with foreign companies, the majority of the capital is coming from U.S. sources. In addition, most contractors hired by foreign companies are American. While foreign companies may be managing the process, they are employing American workers.

Annual Privatization Report 2011: Surface Transportation

Annual Privatization Report 2011: Homepage

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APR 2011: Corrections and Public Safety

Posted on May 2, 2012, 5:35pm | Harris Kenny

The rollout of Reason Foundation's Annual Privatization Report 2011 (APR 2011) concluded this week with the Corrections and Public Safety section, which provides an overview of the latest news and trends in public-private partnerships in corrections and public safety. Highlights include:

  • According to the most recent data compiled by the Bureau of Justice Statistics, the total U.S. prison population declined for the first time in nearly four decades. The decrease is attributed largely to a decline in new prison admissions relative to prison releases in state prisons.
  • Approximately 8 percent of the total prison population is currently housed in privately owned and/or operated facilities, while the remaining 92 percent continue to be housed in government-run facilities.
  • In the 2011 case Brown v. Plata, the U.S. Supreme Court ruled California’s correctional system is providing unconstitutional mental and medical care to inmates. At the time, California held about 156,000 inmates in a system designed for less than 80,000 inmates – nearly twice the design capacity. In response, the court ordered the state reduce its system-wide prison population at or below an average of 137.5 percent of prison design capacity.
  • A new form of public-private partnership is emerging in the United Kingdom and Florida that could dramatically reduce recidivism and transform corrections, whereby contractors would be compensated for achieving specific performance goals in reducing recidivism and improving rehabilitation. Florida is exploring this model for an 18-county region and would apply dozens of performance measures to quantify outcomes.
  • In September 2011, the Ohio Department of Rehabilitation and Correction, under the guidance of Gov. John Kasich, 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—the first sale of its kind in the nation—and two others turned over to private management, for an estimated $13 million in annualized cost savings.
  • Lawmakers in Texas, Florida, Arizona, North Carolina, Pennsylvania and elsewhere are pursuing meaningfully expanding the role the private sector plays in inmate healthcare delivery.

» Annual Privatization Report 2011: Corrections and Public Safety [pdf, 1.4 MB]

» Complete Annual Privatization Report 2011 homepage

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Chicago, Los Angeles, Tulsa and Jacksonville and Other Local Governments Turning to Privatization

Posted on April 30, 2012, 7:20pm | Harris Kenny

In case you missed it, the rollout of Reason Foundation's Annual Privatization Report continued last week with the release of the local government privatization section. This section details the latest trends and government reforms being implemented in cities across the United States.

For example, Chicago Mayor Rahm Emanuel recently announced a plan to raise $7 billion—largely through private financing—to rebuild the city’s critical infrastructure. Emanuel, former White House chief of staff to President Barack Obama, has followed the path blazed by former Mayor Richard Daley, who privatized dozens of city services, including long-term leases of Chicago’s parking meters and the Chicago Skyway toll road, during his tenure. Emanual also implemented a new competitive bidding program in recycling that has lowered costs by over $2 million in the six months since private companies started competing with city crews.

Last year in Los Angeles, Mayor Antonio Villaraigosa worked to advance public-private partnerships for city-owned parking garages, the Los Angeles Zoo, animal shelters and public art facilities. While Los Angeles hasn’t moved ahead on zoo reforms yet, Tulsa Mayor Dewey Bartlett successfully partnered with a nonprofit to privatize management of the Tulsa Zoo. Mayor Bartlett is pursuing an ambitious reform agenda with initiatives such as identifying underutilized city assets that could be closed (maintenance garages) and sold (over 500 city vehicles).

Similarly, new Jacksonville Mayor Alvin Brown is looking to partner with the private sector. Shortly after taking office in 2011, Mayor Brown created a new Office of Public Private Partnerships that’s currently exploring ways to reduce costs on city services and optimize public assets.

This section of the Annual Privatization Report identifies the privatization of parking garage and meter operation as an emerging local privatization trend of the past year, led by newcomer Indianapolis. New York, Sacramento, Pittsburgh, Memphis and Harrisburg are some of the cities that have also investigated parking privatization.

You can find the complete local government section of Reason Foundation’s Annual Privatization Report available online here.

» Annual Privatization Report 2011: Local Government Privatization

» Complete Annual Privatization Report 2011 homepage

 

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The Year 2011 in Surface Transportation and Aviation Privatization

Posted on April 26, 2012, 10:53am | Baruch Feigenbaum

The rollout of Reason Foundation’s Annual Privatization Report 2011 continues today with the release of the Surface Transportation Privtization and Aviation Privatization sections authored by Reason’s Bob Poole. The Surface Transportation section provides a comprehensive overview of the latest on toll roads, HOT lanes and other news on privatization and public-private partnerships in surface transportation. The Aviation section provides a comprehensive overview on the latest news on domestic and international airport privatization and privatization of airport security. Topics include:

 Surface Transportation

  • In 2011, infrastructure finance continued to recover from the credit market crunch of 2009. The amount of capital available in infrastructure equity investment funds reached a new all-time high.
  • Over the past five years, the 30 largest global infrastructure investment funds have raised a total of $183.1 billion dedicated to financing infrastructure projects, with the bulk coming from U.S., Australian and Canadian inventors. 
  • Eight major privately financed transportation projects were under construction in the U.S. in 2011 totaling over $13 billion investment, including megaprojects in Virginia, Texas and Florida. 
  • In 2010 CalPERS, the largest U.S. public employee pension fund, purchased a 12.7% equity stake in London Gatwick Airport, and public pension funds in Arizona, Louisiana, Oregon, Texas and San Diego are seeking similar investments. 
  • Puerto Rico’s Public-Private Partnership Authority announced a $1.5 billion lease of the PR-22 and PR-5 toll roads, their as its first large-scale project.  Ohio officials are considering a similar lease of the Ohio Turnpike.
  • Other topics include the federal role in private infrastructure finance, an update on high-occupancy toll and express lane projects in the U.S., and a review of toll road developments in the states and across the world.

Aviation 

  • In the aftermath of the credit markets crunch of 2008–2009, the airport market continued its recovery in 2011, with efforts including Puerto Rico's current plan to privatize San Juan’s Luis Munoz Marin International Airport and Chicago's continued interest in a potential Midway Airport lease. 
  • A total of 48% of European air passengers were handled by partly or fully privatized airports in 2011, with that share likely to grow with impending privatization initiatives in Spain and Greece. 
  • Amid public outrage over TSA’s introduction of body scanners and aggressive pat-downs, the administration and Congress continued to battle over proposals to allow airports to opt-out of TSA security and hire private screeners. However, some progress was made in Washington D.C. over reviving the trusted traveler program, advancing a more risk-based approach to security.
  • Since 1990, 51 governments have commercialized their air traffic control systems, separating the air traffic control functions from regulatory bodies, removing them from civil service, and making them self-supporting from fees charged to aircraft operators. However, there was no significant progress in 2011 toward commercializing air traffic control in the United States. 
  • Other news on domestic and international airport privatization and air traffic control commercialization 
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Privatization and Public-Private Partnership Trends in Local Government in 2011

Posted on April 25, 2012, 12:00am | Harris Kenny

The rollout of Reason Foundation's Annual Privatization Report 2011 continues today with the local government section, which provides an overview of the latest on privatization and public-private partnerships at the local level. Highlights include:

  • 57 percent of city finance officers report their cities were less able to meet their financial needs in 2011 than in 2010 while general city revenues declined for the fifth straight year, according to the National League of Cities. This “new normal” fiscal condition is hitting local governments across the U.S. that continue to feel the squeeze of the prolonged economic downturn.
  • Chicago Mayor Rahm Emanuel, and former White House Chief of Staff to President Obama, hit the ground running during his first year in office. He implemented managed competition for the city’s Blue Cart recycling program allowing private companies to compete with the public sector, the move is projected to provide Chicagoans cost-savings exceeding 50 percent. The city began outsourcing the water bill call center in summer 2011 and is considering outsourcing the collection of city ambulance fees to improve collection rates.
  • Parking assets remain the hot item in local government privatization. Chicago and Indianapolis are realizing substantial gains from their reforms and were joined in 2011 by a host of cities (such as New York, Pittsburgh, Sacramento, Memphis and Harrisburg) that are considering similar efforts.
  • San Diego, California is finally implementing the managed competition mandate approved by voters in 2006. City employees won bids for the Publishing Services Department and Fleet Services Division, with new contracts expected to save y 30 percent ($5.2 million) and 13 percent ($22 million) respectively over the separate five-year contracts. Officials are also exploring street sweeping services, utilities call centers, street and sidewalk maintenance and landfill operations.
  • Toronto Mayor Rob Ford championed efforts to privatize trash collection in District 2 could save residents anywhere from $35-$92 million over the course of the seven-year contract. Half the city’s trash collection is now provided by the private sector, allowing for cost and service comparison before further privatization.
  • New mayors in Tulsa and Jacksonville have quickly moved to apply competitive forces to public service delivery. In Tulsa, Mayor Dewey Bartlett is implementing 1,134 strategic opportunities compiled by KPMG to realize cost savings, enhance revenue collection and improve efficiency. In Jacksonville, Mayor Alvin Brown appointed a new public-private partnership commissioner who will oversee a wide range of streamlining initiatives.
  • Contract cities in Georgia continue evolve, with the latest improvement coming in the form split service contracts that saved taxpayers almost 30 percent, or over $7 million, in Sandy Springs for example.
  • A 2011 survey conducted by American University found that 93 percent of city officials support government contracting with the private sector, and 63 believe that most public agencies do a good job at contract management.
  • Jefferson County, Alabama filed the largest government bankruptcy in American history. The county held approximately $4.23 billion in debt owed to more than 5,000 creditors that traced back to a 1996 federal judge ruling that obligated the county to rebuild its sewer system.

» Annual Privatization Report 2011: Local Government [pdf, 1.7 MB]

» Complete Annual Privatization Report 2011 homepage

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New at Reason: Review of Federal Privatization Issues in 2011 and Today

Posted on April 23, 2012, 11:59pm | Leonard Gilroy and Harris Kenny

The rollout of Reason Foundation's Annual Privatization Report 2011 begins today with the release of the Federal Government Privatization section, authored by Reason's Adam Summers and Anthony Randazzo. This section of Reason Foundation's Annual Privatization Report 2011 provides an overview of the latest federal insourcing, housing finance, private spaceflight and other news on privatization and public-private partnerships in the federal government. Topics include:

  • The ongoing dispute over what constitutes “inherently governmental” functions continued in 2011, and new Obama administration regulations could undermine federal outsourcing policy standards dating back to 1955.
  • Regulators implementing the Dodd-Frank Act are creating significant risk for both mortgage investors and securitizers and appear likely to undercut the private mortgage industry while benefitting government mortgage providers. 
  • In 2011, Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) combined to purchase or guarantee 95 percent of all new mortgages in America with some mortgages worth as much as $729,750. Every one of these mortgages is backed by taxpayer money.
  • Federal agencies, under the encouragement of President Obama, are expected to generate nearly $13 billion in cost savings from asset divestiture, $9.8 billion of which comes form the Department of Defense’s Base Realignment and Closure (BRAC) efforts.
  • The federal government owns approximately 1.2 million properties that cost $20 billion a year to maintain. Recent Congressional efforts to pass a Civil Property Realignment Act could save as much as $15 billion, according to the Office of Management and Budget.

» Annual Privatization Report 2011: Federal Government Privatization [pdf, 1.9 MB]

» Complete Annual Privatization Report 2011

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New at Reason: Annual Privatization Report 2011

Posted on April 23, 2012, 11:58pm | Leonard Gilroy and Harris Kenny

We are pleased to announce that today marks the launch of Reason Foundation's Annual Privatization Report 2011. Now in its 25th year of publication, the Annual Privatization Report is the world's longest running and most comprehensive report on privatization news, developments and trends.

Readers will notice that APR 2011 features the same format as last years report, published in as a series of reports arranged by topic, rather than one consolidated report as in previous years. We expect that this will make it easier to use as a resource and find the information you're looking for. The individual sections of APR 2011—which will be released over the next two weeks—include:

  • Federal Government Privatization
  • State Government Privatization
  • Local Government Privatization
  • Air Transportation
  • Surface Transportation
  • Education
  • Telecommunications
  • Corrections and Public Safety

We started the rollout today with the APR 2011 Federal Government Privatization section. It provides an overview of the latest federal insourcing, housing finance, private spaceflight and other news on privatization and public-private partnerships in the federal government.

» Annual Privatization Report 2011: Federal Government Privatization [pdf, 1.9 MB]

» Complete Annual Privatization Report 2011

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Reason Writers Around Town: Room for Debate on Privatization

Posted on April 4, 2011, 2:19pm

The New York Times' Room for Debate blog sets up their latest topic: "Is Privatization a Bad Deal for Cities and States? To save money, New York is turning the clock back on outsourcing by replacing private contractors with city workers."

Reason Foundation Director of Government Reform Leonard Gilroy, editor of the Annual Privatization Report, writes:

Contracting works by introducing competition into an otherwise monopolistic system of public service delivery. Governments operate free from competitive forces and without a bottom line. Agency and program budgets are too rarely tied to results, so poor performance in government is often perversely rewarded with budget increases.

Contracting usually generates cost savings for taxpayers between 5 and 20 percent on average, though the benefits of competition extend far beyond cost control. For example, service quality improvements, improved risk management, innovation, and access to outside expertise are other benefits often cited by satisfied government customers.

Contracting out is simply a policy tool, and like any tool, it can be used well or poorly. There are two critical ingredients to successful government contracting. First, public managers should think carefully about the service quality standards they want to achieve, and then develop strong, performance-based contracts that hold contractors accountable for meeting them. Measurable performance standards should be built into contracts, along with incentives for exceeding standards and penalties for underperformance.

Second, once a performance-based contract is in place, government managers must monitor and enforce the terms of the contract to ensure that contractors perform.

Government contracting needs to be seen as part of a larger fiscal management toolkit that includes performance assessment, priority-based budgeting, sunset reviews, and many other approaches to reform.

Full Gilroy take here. The rest of the Room for Debate discussion is here. Stephen Goldsmith, deputy mayor of New York, helped prompt this topic and you can catch him in Reason.tv's Reason Saves Cleveland video "Privatize It."

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Bill Gates on State Budgets, Entitlement Spending and Education Cuts

Posted on March 7, 2011, 11:00pm | Harris Kenny

Microsoft-founder Bill Gates recently delivered a presentation entitled “How State Budgets are Breaking US Schools” at a TED Event in Southern California (h/t Robert A. Guth, Wall Street Journal). In short, he holds few punches and the ten-minute presentation is worth watching (full video available here).

Gates’ main argument is that, “state budgets are riddled with accounting tricks that disguise the true cost of health care and pensions and weighted with worsening deficits – with the financing of education at the losing end.”

After analyzing budget projections, he declares the fiscal situation “is an increasingly difficult picture, even assuming the economy does quite well, probably better than it will do.”

He targets California, describing the state’s recent budget gimmicks California as tricks that “the guys at Enron never would have done, so blatant, so extreme. Is anyone paying attention to some of the things these (politicians) do?” However, he also acknowledges that budgeting problems are systemic, since only four states have balanced budgets.

Gates cites unfunded healthcare benefits and public pensions as the primary contributors to the pending budget crisis, which boil down to a “young versus old” competition for scarce taxpayer dollars. And, he says that decreased funding for education means it will be more difficult to fund “bold experiments, teacher effectiveness measurement and incentives for excellence.”

His proposes the following solutions:

  • Educating taxpayers as to the basic picture of state budgets and school spending;
  • Holding states accountable with clear and honest accounting (specifically Generally Accepted Accounting Principles (GAAP); and
  • Rewarding courageous politicians who acknowledge the overall spending problem.

States will be wrestling with fiscal crises for the foreseeable future. Fortunately there are many ways to reform education without increasing spending. For the latest education reform news, read Reason Foundation’s Annual Privatization Report 2010: Education section. Topics include:

  • School voucher and tax credit student outcome data;
  • Special education voucher data;
  • 2010 charter school achievement data;
  • Highlights from New Orleans' market-driven education reforms, and more.

Download the full Education section here, and the complete Annual Privatization Report 2010 here. For more, watch reason.tv’s recent piece entitled California’s Parent Trigger Law: Compton Parents Take On the Public School System.

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New at Reason: Review of Local Privatization Issues in 2010 and Today

Posted on February 25, 2011, 5:23pm | Harris Kenny

The rollout of Reason Foundation’s Annual Privatization Report 2010 continues with the release of the Local Government Privatization section, authored by Reason’s Leonard Gilroy, Harris Kenny, Samuel Staley and Adam Summers.

This section of the report provides an overview of the latest privatization and public-private partnerships (PPPs) in local government. Topics include:

  • Privatization of municipal parking assets;
  • Georgia’s evolving contract cities;
  • Zoo privatization in Dallas and Tulsa;
  • Privatization of public libraries in California;
  • Market-based land development in Houston;
  • Updates on privatization in public safety, solid waste/recycling and animal shelter operation;
  • Privatization updates from Chicago, San Diego, Milwaukee and more.

» Annual Privatization Report 2010: Local Government Privatization [pdf, 700 kB]

» Complete Annual Privatization Report 2010

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New at Reason: Review of State Privatization Issues in 2010 and Today

Posted on February 18, 2011, 3:48pm | Harris Kenny

The rollout of Reason Foundation's Annual Privatization Report 2010 continues today with the release of the State Government Privatization section, authored by Reason's Leonard Gilroy, Harris Kenny, Shirley Ybarra and Tyler Millhouse. The document provides a comprehensive overview of the latest on privatization and public-private partnerships (PPPs) in state government. Topics include:

  • Privatization initiatives in New Jersey, Louisiana and Puerto Rico;
  • Divesting state alcohol monopolies;
  • PPPs for state parks management;
  • Lottery privatization in Illinois;
  • Privatization of state workers compensation programs and economic development agencies;
  • PPPs in higher education;
  • Contracting for performance in child welfare privatization and more.

» APR 2010: State Government Privatization [pdf, 900 kB]
» Complete Annual Privatization Report 2010

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New at Reason: Review of Federal Privatization Issues in 2010 and Today

Posted on February 16, 2011, 3:04pm | Adam Summers

The rollout of Reason Foundation's Annual Privatization Report 2010 continues today with the release of the Federal Government Privatization section, authored by Reason's Adam Summers and Anthony Randazzo. The document provides a comprehensive overview of the latest in issues such as public sector versus private sector pay and benefits, the failure of federal housing policies and the need to end federal housing subsidies and dissolve Fannie Mae and Freddie Mac, the Obama administration's proposal to privatize portions of the space program, and other news on privatization and public-private partnerships in the federal government. The articles include:

  • Public Sector Compensation Far Exceeds Private Sector Compensation,
  • Fight over Insourcing Initiative Dominates Federal Contracting Policy,
  • Space, the Private Frontier?,
  • Policy Spotlight: Privatizing the Housing Finance System,
  • Military Housing Privatization Update, and more.

» APR 2010: Federal Government Privatization [pdf, 800 kB]
» Complete Annual Privatization Report 2010

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New at Reason: The Year 2010 in Toll Roads, HOT Lanes, Infrastructure Finance

Posted on February 11, 2011, 7:51pm | Leonard Gilroy

The rollout of Reason Foundation's Annual Privatization Report 2010 continues today with the release of the Surface Transportation section—authored by Reason's Robert Poole—which provides a comprehensive overview of the latest on toll roads, HOT lanes and other news on privatization and public-private partnerships in surface transportation. Topics include:

  • Transportation Infrastructure Finance 2010
  • Long-Term Concessions, the Federal Perspective
  • New PPP Toll Roads
  • HOT/Managed Lanes and Networks
  • Overseas Concession Highway Projects

» APR 2010: Surface Transportation [pdf, 1.1 MB]
» Complete Annual Privatization Report 2010

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New at Reason: Annual Privatization Report 2010

Posted on February 10, 2011, 3:32pm | Leonard Gilroy

I'm pleased to announce that today marks the launch of Reason Foundation's Annual Privatization Report 2010 (reason.org/apr2010). Now in its 24th year of publication, the Annual Privatization Report is the world's longest running and most comprehensive report on privatization news, developments and trends.

Readers will notice that we've made a significant change with APR 2010, publishing it as a series of reports arranged by topic, rather than one consolidated report as in previous years. We expect that this will make it easier to use as a resource and find the information you're looking for. The individual sections of APR 2010—which will be released over the next two weeks—include:

  • Air Transportation
  • Surface Transportation
  • Federal Privatization
  • State Privatization
  • Local Privatization
  • Education
  • Telecommunications
  • Corrections
  • Water

We started the rollout today with the APR 2010 Air Transportation section. It provides a comprehensive overview of the latest news on domestic and international airport privatization, the privatization of airport security - including passenger and baggage screening and the federal Registered Traveler program, and domestic and international trends in air traffic control reform. 

» Annual Privatization Report 2010: Air Transportation [pdf, 800kB]

» Complete Annual Privatization Report 2010

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Innovators in Action 2009

Posted on January 29, 2010, 4:22pm | Leonard Gilroy

Now more than ever, governments at all levels are looking for ways to reduce spending and improve the services delivered to taxpayers. As such, I'm pleased to announce the release of Reason Foundation's Innovators in Action 2009, which profiles nine innovators who have demonstrated leadership through action on privatization, competition, government re-invention and other market-based reforms designed to reduce the costs of government and deliver more value to taxpayers:

  • Georgia Governor Sonny Perdue created the Commission on a New Georgia, an advisory group of corporate executives partnering with the state to re-engineer its bureaucratic machinery.
  • Former New South Wales, Australia Premier Bob Carr embraced privately financed toll roads as a means of delivering infrastructure better, faster and cheaper than traditional government approaches.
  • Louisiana Commissioner of Administration Angele Davis is playing a central implementation role in Gov. Bobby Jindal's wide-ranging efforts to streamline the state bureaucracy.
  • Under the leadership of State Superintendent of Education Paul Pastorek, Louisiana's burgeoning school choice movement is using transparency, standards and accountability to improve student achievement and turn around low-performing schools.
  • Indianapolis Mayor Gregory Ballard has advanced an array of competition and government reform initiatives designed to control costs, improve government performance, and bring best business practices to government.
  • Former Florida Council on Efficient Government Executive Director Henry Garrigo helped to create a national model for a state center of excellence in privatization to ensure sound decisionmaking on outsourcing proposals.
  • Chicago's Chief Financial Officer Gene Saffold oversaw the Windy City's $1.15 billion lease of the city's downtown parking meter system in 2009.
  • Former AT&T executive Oliver Porter led a citizen task force that created the template for the largely privatized government in Sandy Springs, Georgia.
  • Chief Information Officer Eric Gillespie and his colleagues at Onvia saw major gaps in the federal government's commitment and ability to deliver on stimulus spending transparency— and they stepped in to fill it by creating Recovery.org at a fraction of the cost it took the feds to create their own Recovery.gov.

Amidst today's massive deficits and red ink, we need government leaders who are willing to ditch the failed status quo and seek out better ways of doing things. We hope the examples and experiences offered by these innovators will inspire reform-minded officials at all levels of government to provide better, leaner and cheaper government to taxpayers.

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Privatization News Roundup, Dec. 21, 2009

Posted on December 21, 2009, 2:34pm | Leonard Gilroy

Some privatization news highlights from the last two weeks that haven't been covered elsewhere on the blog:

FEDERAL

STATE & LOCAL:

INTERNATIONAL:

» Reason Foundation's Annual Privatization Report 2009
» Reason Foundation's Privatization Research and Commentary

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