Reason Foundation

New Wisconsin Recall Poll: Reason-Rupe Finds Broad Support for Pension, Health Care Reforms

Posted on May 24, 2012, 8:00am | Emily Ekins

Gov. Scott Walker leads Milwaukee Mayor Tom Barrett 50-42 among those likely to vote in Wisconsin’s June 5 recall election, according to a new Reason-Rupe poll of 708 Wisconsin adults on cell phones and landlines.

In the presidential race, 49 percent of all adults surveyed approve of the job President Obama is doing and 45 percent disapprove. President Obama leads Mitt Romney 46-36 in Wisconsin, with 6 percent selecting the Libertarian Party’s Gary Johnson. Obama’s margin over Romney shrinks to 45-41 among those likely to vote in June’s recall election, with Johnson taking what would be a crucial 5 percent of the vote.

The Reason-Rupe poll finds voters overwhelmingly support many of the key changes Gov. Walker and the legislature implemented on public sector pensions and health care last year. Reason-Rupe finds 72 percent favor the change requiring public sector workers to increase their pension contributions from less than 1 percent to 6 percent of their salaries. And 71 percent favor making government employees pay 12 percent of their own health care premiums instead of the previous 6 percent.

Taxpayers actually wish state lawmakers had cast an even larger net with their reforms. Police and firefighters were exempted from the pension and health care adjustments but 57 percent of taxpayers say they should not have been.

The public supports asking government workers to pick up more of the tab for their own benefits because 65 percent say public sector workers receive better pension and health care benefits than private sector workers, 22 percent say benefit levels are about the same, and just 7 percent believe private sector benefits are better than those in the public sector.

When asked what state and local officials should do if pensions and health benefits are underfunded, 74 percent favor requiring government employees to pay more for their own health care and retirement benefits. In sharp contrast, 75 percent oppose cutting funding for programs like education and 74 percent oppose raising taxes to help fund government worker benefits.

To deal with rising retirement costs, 69 percent favor shifting future state employees, those who haven’t been hired or promised pensions yet, to 401(k)-style retirement plans instead of the current defined-benefit plans.

If state and local governments have to reduce spending, voters were asked what should be cut first: 38 percent say public employee pension benefits, 29 percent believe prison and court cuts should be made first, 17 percent would reduce funding for roads and infrastructure, 5 percent chose education, and 4 percent would target health care spending.

Government employee unions are viewed favorably by 35 percent of those surveyed and unfavorably by 31 percent. Voters remain split on limiting the collective bargaining power of public sector unions, with 47 percent in favor of, and 46 percent opposed to, restricting unions’ ability to negotiate things like health care and pension benefits.

The Reason-Rupe poll finds significant differences in attitudes between public and private sector employees. For example, 65 percent of government employees have a favorable view of public employee unions and just 11 percent view unions unfavorably. In contrast, only 27 percent of private sector employees have favorable opinions of public employee unions, while 37 percent view them unfavorably.

And while 72 percent of all respondents favor the law requiring public sector workers to increase their pension contributions, only 48 percent of government employees favor the change, while 80 percent of private sector employees favor it.

The complete Reason-Rupe survey is online here (pdf).

This Reason-Rupe poll, conducted May 14-18, 2012 by ORC International, surveyed a random sample of 708 Wisconsin adults on cell phones and landlines. The results have a margin of error of plus or minus 3.7 percentage points. The poll includes 609 likely voters who are registered and said they are certain or likely to vote in the June 5 recall election.

This is the latest in a series of Reason-Rupe public opinion surveys dedicated to exploring what Americans really think about government and major issues. This Reason Foundation project is made possible thanks to the generous support of the Arthur N. Rupe Foundation.

New York City Launches Parking Meter Privatization Initiative

Posted on May 24, 2012, 7:00am | Leonard Gilroy

Last week, the Bloomberg administration in New York City announced plans to issue a request for qualifications from private bidders interested in a potential lease of the city's parking meter system, following in the footsteps of Indianapolis and Chicago, which have inked similar deals in recent years. This is a sensible move for NYC, as privatization can not only unlock value trapped in parking assets, but it can also provide a powerful means of deploying new, cutting-edge parking technology at a time when fiscal conditions prevent the city from making such investments on its own.

As Ted Mann wrote in The Wall Street Journal last week:

Officials said they are motivated in part by a belief that a private company could help alleviate some of the well-known frustrations of parking in New York: circling block after block in a search for an empty spot or dashing out in the middle of dinner to feed a meter.

Although other cities have embraced more driver-friendly technologies, New York has been slow to catch up.

The city's 7,800 muni-meters represent only a slightly more modern approach—they accept credit and debit cards—than the 31,000 single-space meters that gobble coins in boroughs outside Manhattan.

With enough incentive, officials believe, an outside party could come up with innovations for the Internet age, such as a system to pay with a smartphone or a mobile app that would direct drivers to vacant spaces detected through sensors in the pavement.

In the Bronx, the city Department of Transportation is running a pilot program to test pavement sensors, including whether they will work in New York's climate. But that is a small test, and broadening that program, or one like it, to the entire city could be risky and expensive.

"The odds are higher that [private companies] will move with greater alacrity," Deputy Mayor Robert Steel said.

A deal also could offer potential savings for the city on labor costs, but officials said it is too soon to say what a contract might look like.

[…] New York City officials said they aren't looking for an upfront balloon payment and wouldn't strike a deal that relinquished control over the setting of parking-meter rates—a key source of friction in Chicago.

New York's meters brought in $149 million in revenue in the last fiscal year, a spokesman for the city DOT said. Parking tickets are handled separately from meter operations, and neither enforcement nor parking-ticket revenue would be included in any privatization deal, a city spokeswoman said.

"We're not looking to sell out the system, which some people have done and which I don't understand at all," Mr. Steel said. "Our process has been to consider locking in the current performance, and, if it makes sense, transferring the risk to a third party."

[…] If the city's request for qualifications reveals suitable bidders, a request for proposals would follow, likely several months from now.

More here from Noah Kazis at Streetsblog, as well as this follow-up article from Mann.

Notably, the Bloomberg administration has been emphatic that if a deal is ultimately reached, the city will retain controls over parking rates and parking violation enforcement. Some journalists have misconstrued this to imply that similar deals in Indianapolis and Chicago lacked those controls, but that is not the case.

For example, Chicago officials authorized a set schedule of rate increases for the first five years of the 75-year lease term, and then rates are allowed to adjust annually beyond that with a maximum cap (capped by inflation). However, city council approval is required for any rate increase after the first five years. So the private concessionaire cannot just change whatever rates it wants; rates are controlled either in the contract (first five years) or must be approved by the city council (remainder of lease term). The Indianapolis privatization has similar rate controls.

Earlier this week, my colleague Harris Kenny posted his parking asset privatization update extracted from Reason Foundation's recently released Annual Privatization Report 2011 (APR2011). The article offers an update on last year's news from the Chicago and Indianapolis parking leases, and it also provides an overview of other governments' efforts in 2011 to explore similar parking transactions, including Los Angeles, Sacramento, New Jersey Transit and Pittsburgh.

Momentum appears to be continuing in 2012. In addition to New York CIty, some of the more notable developments thus far in 2012 include:

Ohio State University: As Harris noted in APR2011, last year Ohio State University officials released a request for qualifications—and approved seven potential bidders for—a potential long-term lease of its parking system, which would be a first-of-its-kind asset monetization by a public university. Last last month, OSU took the next step, issuing a request for proposals seeking at least $375 million in an upfront payment from a private operator in return for a 30-50 year concession. If a deal is finalized, then the school would put the entire upfront payment into its long-term investment pool to support the university's long term academic mission. Bids are due by the end of this month. More details are available on the university's parking proposal homepage. Predictably, students and professors don't like it.

Sacramento, CA: As Harris and I wrote back in March, officials in Sacramento had been pursuing a lease of its downtown parking meters and garages in order to help finance a brand new downtown NBA arena to try to keep the Sacramento Kings from leaving town. As we wrote, parking privatization makes sense on its own, but doing so in order to subsidize a boondoggle arena and its wealthy patrons does not. Luckily for Sacramento taxpayers, this arena deal crashed and burned last month, when the city and the Kings' owners reached an irreconcilable impasse in their larger negotiations to finance the arena. More details here. Interestingly, one media outlet reported recently that city staff have left open the possibility of a standalone parking asset lease to generate revenues for other capital assets.

Harrisburg, PA: The state receiver charged with paying down Harrisburg's staggering debt and closing structural budget deficits is pursuing several potential sales and long-term leases of city assets as part of the city's fiscal recovery plan, including a long-term lease to operate the city's system of parking garages, meters and surface lots. Back in March, the city's receiver shortlisted 12 of 18 potential bidders for a long-term lease of the city's parking assets, and last month nine of those bidders submitted responses to a request for qualifications. The receiver is expected to make a final selection by June. The state's Commonwealth Court must approve any final deal, and officials expect that the Court could make its determinations as early as late June.

Wilkes Barre, PA: Last Friday, the Wilkes-Barre City Parking Authority released a request for qualifications for a 30-year or 50-year lease of its 2,273 garage and surface lot spaces and 800 parking meters. It has also hired a parking consultant to help assess the potential value of its parking assets and prepare the RFQ. City officials are seeking an upfront payment of at least $20 million, and responses are due back by June 8, 2012. The RFQ is available here.

Reason Foundation has a lot of research available in its archive on the privatization of parking assets. For more, see here.

Will Indiana, Pennsylvania Follow in Illinois' Footsteps on Lottery Privatization in 2012?

Posted on May 21, 2012, 10:00am | Leonard Gilroy

One of the more interesting developments last year in the world of privatization was Illinois' first-of-its-kind privatization of the operation of its lottery, covered in detail in Reason Foundation's Annual Privatization Report 2011 (lottery article link here; full report here). Illinois officials crafted the privatization initiative such that the private operator committed to increasing net lottery revenues to the state by an expected $1 billion over what the state had estimated under in-house operation over the next five years, with the new revenues dedicated to education and infrastructure.

The Annual Privatization Report 2011 article noted that Illinois' lottery deal caught the attention of policymakers in several other states in the second half of last year, and in just the last two months, two additional states have begun taking formal steps to evaluate the potential for similar transactions.

Last Wednesday, the Indiana State Lottery Commission announced a solicitation seeking firms interested in assuming operation of the Hoosier Lottery. As Leslie Weidenbener wrote last week in The Courier-Journal:

The state will take steps to hire a private company to help run the Hoosier Lottery in an effort to make more money from the games — a step already taken by Illinois and under consideration in Pennsylvania, New Jersey and other states as well.

The Indiana State Lottery Commission voted 3-0 Wednesday to seek information from companies that would be willing to “perform a broad scope of services” for the lottery. Then in September, the state plans to accept actual bids.

“Gov. Mitch Daniels has consistently challenged all of us to identify and implement changes that promote more effective and more efficient state government,” said Hoosier Lottery Executive Director Karl Browning in a statement the agency issued Wednesday afternoon. "The goal is to become more strategic in our business approach in an effort to increase revenue for the State of Indiana," he said.

[...] The Hoosier Lottery released what it called a “Request for Expression of Interest” on Wednesday, which lists areas of potential growth opportunities:

• Reconfiguring the current retail and distribution network, potentially increasing its scope and reach;
• Optimizing commission structure for retailers and other distributors;
• Optimizing the gaming experience within the legal parameters of the United States and the State of Indiana;
• Enhancing marketing activities;
• Marketing the Lottery to new, infrequent and lapsed players to increase the breadth of its customer base
• Implementing new technology platforms to enable more effective and efficient operations; and
• Making improvements to the supply-chain.

Similarly, last month Pennsylvania Gov. Tom Corbett announced that his administration had launched a similar process, testing the market for interest in a private management contract for that state's lottery. According to the Governor's press release:

Governor Tom Corbett today announced his administration is taking an innovative step that could increase future funding for a wide range of vital programs for older adults supported by the Pennsylvania Lottery.

The commonwealth has issued a Request for Qualifications to pursue a private management agreement for the Pennsylvania Lottery. Should the state decide to move forward with accepting bids, qualified private sector firms will compete to offer new ideas to maximize the Lottery’s performance and increase revenues that support programs serving older Pennsylvanians.

“The Pennsylvania Lottery is the nation’s one and only lottery that benefits older adults and that will not change,” Corbett said. “This initiative is simply part of my administration’s efforts to tap private sector innovation to make state government work more efficiently and effectively, which is precisely what taxpayers expect.

“Our state’s fast-growing population of older adults means time is not on our side, and we need to maximize funding for senior programs and services in a way that does not ask taxpayers to dig any deeper into their pockets,” Corbett added.

A private management organization may be better able to quickly adapt new technologies, develop new games and optimize retail outlet performance. It would be required to cover any initial shortfall to financial returns assured by any private management agreement.

In accordance with federal guidelines, the commonwealth would continue to own the Lottery – it would not be sold. A private management firm would be responsible for the Lottery’s operations, but the commonwealth would still conduct the Lottery and retain full rights to control, inspect and audit the Lottery.

[...] [State revenue secretary Dan] Meuser noted that over the last five years, Lottery net profits have grown an average of just 0.3 percent per year. In addition, the Lottery’s net revenue is projected to grow about 1 percent, on average, per year through fiscal year 2014- 15, which is not likely to keep pace with cost increases and demand for current programs.

These are encouraging developments in both states, as operating a lottery enterprise is not a core function of government in any semblance of the imagination. However, full privatization is not an option; any divestiture or long-term lease of lottery revenues would be prohibited under federal law according to the U.S. Department of Justice. So Illinois pioneered the next best thing: turning over lottery operations to a private consortium with deep operational expertise as a means to maximize marketing and retail performance, and thus maximize net revenues to the state. Why would anyone reasonably expect government agencies to manage such business functions better than...well, a real business?

And it's no free-for-all for the private sector, as the contract in Illinois (and presumably the next states to follow their lead) requires the operator to receive state approval of its business plan annually and submit to other public controls. As I wrote in APR2011:

Illinois Gov. Pat Quinn announced the winning bidder for a contract to take over the management of the state lottery in September 2010. Officials expect the move to generate $4.8 billion for the state over the next five years, a $1.1 billion increase over the revenues projected under state management. Under the terms of the 10-year contract, the winning bidder—Northstar Lottery Group, a partnership between GTECH, Scientific Games and Energy BBDO—will take over responsibility for lottery operations, management and marketing functions in exchange for a portion of revenues. The state will continue to exercise control and oversight over all significant business decisions, including the state approval of annual business plans and ability to access all vendor information regarding lottery operations.

The deal also ties the operator’s compensation to its performance at enhancing lottery revenues. Through a combination of an annual $15 million management fee and incentives for extra profits, Northstar stands to earn over $330 million over five years if it reaches state-determined revenue targets. However, the contract includes a 5% total net income cap on the potential profits for the contractor, as well as penalties paid to the state if the company fails to hit revenue targets. The contractor will retain all current lottery employees and has announced its intention to hire an additional 100 private sector employees.

Read the whole thing here, and see here for more fascinating tales from the voluminous Annual Privatization Report 2011.

Polling Metro Denver Voters' Support of Tax Hikes for Public Transit

Posted on May 18, 2012, 12:09pm | Harris Kenny

Last month I wrote on Reason Foundation's Out of Control Policy Blog about the Denver Regional Transportation District (RTD) Board's decision to abandon a proposed tax hike that would have doubled the current transit-dedicated, 0.4 percent regional sales tax along the Northwest Corridor.

For context, the new revenue would have specifically gone towards FasTracks, a regional transit program approved by voters in 2004 projected to cost $4.7 billion and be complete by 2017. According to the latest estimates, FasTracks costs ballooned up to $7.4 billion and won't be complete until 2042. For more on FasTracks see my previous posts here, here and here.

Two major factors behind RTD's decision were uncertainty over voter support and ambiguity over the proposed use of funds. A reader recently sent me a poll conducted by Ciruli Associates, a Colorado-based research and consulting firm, which sheds light on metro Denver voters' attitudes towards tax hikes for FasTracks. This poll was released prior to RTD's decision and likely played a role in their decision.

According to Ciruli Associates:

The Ciruli Associates question in this survey used a historical context of the revenue provided for the project since its 2004 inauguration.  Previously, polls have shown people like transit, especially light rail, and would like the system built out quicker.  But, the decline in trust in government makes RTD and its ability to manage finances and the project an issue in this election.

First, the broad numbers. 49 percent of voters support the tax increase, while 46 percent of voters oppose it. Only 17 percent of voters definitely support the tax increase, while 30 percent (almost one-third) definitely oppose it.

Next, a breakdown by party affiliation. A majority of Democrats (65 percent) support the tax increase, while a majority of Republicans (57 percent) and independents, or unaffiliated, voters (56 percent) oppose it.

Finally, a breakdown by geography. Ciruli Associates note that interestingly, "Voters in the two counties that should receive the most benefit from the next phase of transit expenditure, Adams and Boulder, are among the least supportive of the tax increase. Even Denver is only mildly supportive."

This poll was conducted from April 6-10, 2012 in the seven-county metro area known as the Northwest Corridor by Ciruli Associates for The Buzz. Ciruli Associates used RDD probability sampling with 500 voters and calculated a margin of error of ⁺ 4.4 percentage points.

This poll was not widely cited in the lead up to the RTD Board's vote and only came to my attention today, however its results remain informative. Most Colorado transportation observers recognize that the relevant question is not if RTD will seek voter approval for another transit-dedicated tax hike, but when?

For related research, see Reason-Rupe's December 2011 national poll on transportation and public transit here.

Puerto Rico's Infrastructure Renaissance Continuing in 2012

Posted on May 15, 2012, 4:40pm | Leonard Gilroy

Under the leadership of Gov. Luis Fortuño, Puerto Rico continued to emerge as a leader in attracting private investment in public infrastructure in 2011, with public-private partnerships (PPPs) undertaken or underway that include a modernization of 100 K-12 schools, a $1.5 billion toll road lease and an ongoing procurement for a long-term lease of San Juan's international airport. As I wrote in Reason Foundation's recently released Annual Privatization Report 2011 (see Puerto Rico excerpt here):

In two short years, the administration of Governor Luis Fortuño has turned Puerto Rico into a privatization leader among its state peers. To address the territory's chronic deficits and unsustainable debt, the administration has advanced a range of reforms that include major spending reductions, optimization of government operations and the enactment of a new law in 2009 inviting private investors to modernize or develop new infrastructure across a variety of sectors.

That law, Act No. 29, is now bearing fruit. It authorized government agencies to enter into public- private partnerships (PPPs) with private firms for the design, construction, financing, maintenance or operation of public facilities, with a set of priority projects that include toll roads, transit, energy, water/wastewater facilities, solid waste management and ports. The law also established a new Public Private Partnership Authority (PPPA), a new center of excellence within the Puerto Rico Government Development Bank responsible for identifying, evaluating and selecting PPP projects and for monitoring and enforcing the terms of PPP contracts.

Despite its short life, the PPPA has built a world-class PPP program utilizing global best practices, and it has already seen some major successes advancing projects through the procurement pipeline.

Read the rest of the Annual Privatization Report 2011 article here for more on Puerto Rico's schools, toll road and airport PPP initiatives that advanced in 2011.

I'm pleased to report that momentum has continued into 2012. Earlier this year, Puerto Rico's Public-Private Partnership (PPP) Authority announced what will become the next PPP project in their infrastructure pipeline—a design-build-finance-maintain project for a new 600-bed, privately-financed juvenile correctional detention and treatment facility, a project estimated to potentially save the commonwealth over $4 million annually. This will be Puerto Rico's first social infrastructure project in corrections, and upon completion, operations of the facility will remain in the public sector (though the private developer will continue be responsible for ongoing facility maintenance). The PPP Authority decided to move forward into procurement for this project based on the results of a feasibility and value-for-money analysis prepared for the project, available here. Statements of qualification from interested bidders were due last week. More information on this project is available here.

Also, earlier this month, the PPP Authority and the Ports Authority announced two consortia— Grupo Aerpuertos Avance (a team combining Ferrovial and Macquarie) and Aerostar Airport Holdings (a team combining Aeroportuario del Sureste and Highstar Capital)— as finalists for a long-term lease of San Juan's international airport. Six consortia were shortlisted last September out of 12 applicants, and the winning bidder is expected to be announced next month.

For more on Puerto Rico's robust and impressive PPP program, see:

• My February 2012 live, video interview with PPP Authority director David Alvarez at Reason Weekend in San Juan.
• My August 2011 print interview with Alvarez.
• Puerto Rico's PPP Authority website.

For more of the latest in state and local government privatization, see the full Annual Privatization Report 2011.

Testimony: FLAIR Act Would Bring Efficiency, Accountability to Federal Land Management

Posted on May 3, 2012, 3:40pm | Leonard Gilroy

Today I had the opportunity to testify at a remote field hearing of the House Committee on Natural Resources' Subcommittee on Energy and Mineral Resources regarding federal geospatial spending, duplication and land inventory management. Two proposed bills in particular—H.R. 1620 ("Federal Land Asset Inventory Reform Act of 2011") and H.R. 4233 ("Map it Once, Use It Many Times Act")—were the focus, and together they would be an important step towards developing a central, federal real property inventory and eliminating massive duplication in various agencies' mapping and geospatial data collection and use.

Here's an excerpt of my testimony:

Managing real property can often be considered a mundane chore in the public sector. Each government agency often has its own monitoring and tracking methods, which are often not compatible or interoperable with other agencies, leading to a lack of standardized reporting methods at agencies and departments. Without the ability to know what government agencies own, it becomes very difficult to manage those assets in the most cost-effective and efficient ways.

In June 2010, Reason Foundation published a report (“Knowing What You Own: An Efficient Government How-To Guide for Managing Federal Property Inventories,” available at: reason.org/studies/show/what-the-federal-government-owns) outlining the case for a federal real property inventory that is a central record of government-owned land and assets and an important component of efficient property management. In that report we assert that government initiatives to develop an adequate portfolio management system for publicly owned real estate are a sensible step towards improved asset management and public accountability and should be given serious consideration.

[…]

Unfortunately, when it comes to knowing what it owns, the federal government is lacking. The absence of a robust real property inventory presents a major challenge for right-sizing the federal property portfolio and causes higher than necessary operating costs and maintenance responsibilities.

The U.S. Government Accountability Office (GAO) has long noted deficiencies in federal real property management. For example, a 2002 GAO report found that the international inventory of federal real property “contained data that were unreliable and of limited usefulness. Therefore decision-makers, such as Congress and the OMB, do not have access to quality data on what real property assets the government owns, their value, how efficiently assets are being used and what the overall costs are involved in preserving, protecting and investing in them.”

The full testimony is here. I go on to discuss how state governments are stepping up on this issue, including Georgia, Virginia and Oklahoma. They are discovering that developing centralized real property inventories offer a range of benefits:

• A comprehensive and current list of land and assets would allow the government to assess whether public property is being used and maintained in the most efficient manner possible.
• Inventories serve as a tool to assess the potential value of divesting underutilized or unnecessary land or assets, which can generate revenues for government and lower maintenance and operations costs.
• Selling or leasing assets to the private sector can expand the tax base and encourage economic growth.
• Inventories can potentially help lower lease and maintenance costs through space consolidation and more efficient utilization.
• Inventory information helps governments plan with more precision, improves efficiency and cost effectiveness and increases officials’ ability to monitor the use of taxpayer money.

Additionally, the two pieces of proposed legislation explicitly encourage partnering with private sector firms to acquire commercially available geospatial services, as opposed to doing such work in-house. Not only is there a robust private sector marketplace that can support government's needs in this sector, but it also makes little sense for governments to provide duplicative services that the private sector is already efficiently providing.

As I conclude in my testimony, this is an important issue in these challenging economic times:

Considering the nation’s ongoing economic challenges, the government should take proactive steps to maximize the value of its resources, ensure efficient management and enable private sector economic growth through asset divestiture. Real property management is not a partisan issue, nor is it an issue of spending priorities. It is an issue of good governance and fiscal responsibility.

For more on this issue, see:

• Reason Foundation's 2010 study by Anthony Randazzo and John Palatiello outlining the case for a federal real property inventory
• My March 2012 blog post on privatizing geospatial activities to make state governments more efficient.
• Reason's 2004 report by John Palatiello, "What's in the Government's Attic?"

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

Being Taken for a Ride on High-Speed Rail in California

Posted on April 27, 2012, 4:21pm | Adam Summers

In my latest commentary, I once again tackle the boondoggle that is the California high-speed rail project, specifically, the most recent version of what passes for a business plan from the California High-Speed Rail Authority (CHSRA).

When the High-Speed Rail Authority recently released yet another version of its purported business plan, it was just another day in the world of the ever-changing high-speed rail plans and assumptions made by the Authority and its backers. The fourth incarnation of the plan relies upon sharing tracks with commuter trains in both Los Angeles and the Bay Area in order to trim estimated costs from $98.5 billion to "only" $68.4 billion—still more than 50% more expensive than the plan voters thought they were approving in November 2008. But, as the non-partisan Legislative Analyst's Office (LAO) observed, this plan makes no more sense than any of the previous ones.

The LAO analysis concludes,

We find that HSRA has not provided sufficient detail and justification to the Legislature regarding its plan to build a high-speed train system. Specifically, funding for the project remains highly speculative and important details have not been sorted out. We recommend the Legislature not approve the Governor’s various budget proposals to provide additional funding for the project.

The vast majority of the expected funding continues to be wishful thinking. As I relate in my article,

As with every other attempt at a plan, the latest effort from the CHSRA lacks any basis in reality. Once again, most of the funding is to come from unidentified federal and private-sector sources that almost certainly will not materialize. In fact, 83.2 percent of the project’s proposed funding is unaccounted for, including $38.6 billion the CHSRA hopes to receive in federal funds (in addition to the approximately $3.5 billion in federal stimulus and transportation funds that has already been allocated), $13.1 billion expected from private investors, and $5.2 billion to come from other sources such as local governments.

In response to such criticisms, CHSRA Chairman Dan Richards argued that it is simply common practice for transportation projects to go forward without knowing from where the money will come. “I spent 12 years on the [Bay Area Rapid Transit] board in the transit world; we never knew where all of the money was coming from,” Richards said. “Our colleagues in Southern California just adopted a $540 billion regional transportation plan for the Southland, for the next 20 years, same time period we’re talking about here. They don’t know where all of the money is coming from.” Added Richards, “It is just part and parcel of the transportation world that people don’t know these things now.”

If ever there was a window into the mindset of a government central planner, this is it. So the excuse for such irresponsibility and carelessness with scarce taxpayer dollars is the notion that “Everyone else (in government) is doing it!” Besides, who needs to know minor details like how something is going to be paid for when your state faces yearly multi-billion-dollar deficits?

Yet CHSRA board member Mike Rossi calls the new business plan “credible, reasonable, and transparent.” Many of the high-speed rail planners are clever people, so it is hard to believe that they could be so divorced from reality. There are many special interests involved in a project of this scope, however (which is yet another reason why such things should be left to the voluntary decisions of people in a free market, rather than forced down people's throats through the political process), so perhaps it is simply an attempt to intentionally delude taxpayers whom they hope will be too apathetic or uncritical to notice otherwise.

One of the things that continually amazes me is how basic assumptions such as the cost of the project and the estimated ridership—which affects everything from how much revenue the system will generate to how much it will affect traffic congestion and greenhouse gas emissions—can change so dramatically, so quickly, and yet the supporters of high-speed rail cling to the project with religious fervor and never question how these seemingly arbitrarily-determined numbers affect the viability of such a large project. As I argued in my column,

The CHSRA and many advocates of high-speed rail have demonstrated that they are beyond reason, despite all the facts that contradict their hopes and assumptions. High-speed rail advocacy has become more of a religious crusade than a policy position. Avoiding the facts stacking against this project is how cost estimates can triple, then be reduced by one-third. It’s how ridership estimates can magically plummet to one-third of their original estimates (see this CalWatchdog article for a good summary on the project’s changing assumptions). It’s how major decisions such as changing from dedicated high-speed rail tracks to tracks shared with slower commuter trains on both ends of the system can be made. And yet with all these arbitrary changes, high-speed rail acolytes have not batted an eye or even questioned how the plan can still be considered feasible, much less profitable.

Moreover, the bond measure (Prop. 1A) that voters narrowly passed back in 2008 requires that a trip between Los Angeles and San Francisco on the high-speed train system take no more than 2 hours, 40 minutes. That probably would not have happened even under the older plans, but seems to be pure fantasy now that the high-speed trains will have to share tracks with slower commuter trains at both ends of the system. As Quentin Kopp, former California state senator and CSHRA chairman who was a leading figure in pushing for the passage of Prop. 1A and the creation of the CHSRA, admitted of the new plan, “This isn’t high-speed rail.” Added Kopp, “High-speed trains have separated tracks. That’s how they could achieve speeds and travel times promised to voters in the 2008 ballot measure.”

The high-speed rail project is such a disaster on so many fronts—economically, politically, even environmentally—that one can only hope that the plug will be pulled before California wastes more billions of dollars it does not have. At the very least, voters should have the chance to re-vote on such a project that is so different from the one put before them in 2008. Barring that, it will be up to the voters to use the initiative process to kill the high-speed rail system in order save themselves from more financial waste and abuse.

See my full article here.

Denver's RTD Abandons Tax Hike for FasTracks

Posted on April 25, 2012, 12:56pm | Harris Kenny

Monte Whaley of The Denver Post reports:

A FasTracks proposal to link commuters in the northwest Denver metro area to downtown is stalled after the Regional Transportation District (RTD) board of directors decided Tuesday night not to pursue a tax increase in November that would fund the idea.

All 12 members of the RTD board said the timing is wrong for any kind of tax hike—which would have gone for to all unfunded and partially funded corridors—and there still remains too many questions about the plan.

This vote shelves an ongoing conversation about solving surface transportation needs in the Denver metropolitan area. In this piece I highlight two motivating factors behind their decision, and offer three takeaways for what to expect moving forward.

First, for those unfamiliar, I outlined the context of this vote in a reason.org commentary last month:

In 2004 voters in Denver’s Northwest Corridor approved raising a regional 0.4 percent sales tax, generating $894.6 million to build a Commuter Rail Transit (CRT) line known as the Northwest Rail Line by 2017. The proposed 41-mile diesel, 7-station diesel-powered (non-electric light rail) CRT would start at Denver’s Union Station and would have stations in Westminster, Walnut Creek, Broomfield, Louisville, Boulder, Gunbarrel and Longmont. The Northwest Rail Line is one piece of a larger regional transit program known as FasTracks...

Overall FasTracks is a multi-billion dollar transit expansion program that aims to ultimately comprise of 122 miles of CRT and light rail, 18 miles of bus rapid transit (BRT) and 21,000 new complementary parking spaces across eight counties. When voters approved FasTracks it was projected to cost $4.7 billion - these estimates have proven to be totally inaccurate.

Fast forward to spring 2012: FasTracks costs ballooned from $4.7 up to $7.4 billion and the system is not expected to be complete until 2042. Last year alone FasTracks' system-wide capital costs increased by $968.3 million and eighty five percent of that increase came from the Northwest Rail Line. The RTD Board of Directors weighed four options for the Northwest Rail Line that all hinged on ballot placement, and voter approval, doubling the initial FasTracks regional sales tax from 0.4 percent up to 0.8 percent. They pursued—and ultimately abandoned—a hybrid option prepared by the RTD staff that would have provided supplemental BRT from Westminster to Longmont until CRT was complete.

The RTD Board of Directors essentially punted on making a decision by abandoning the tax hike for the hybrid option, and they were primarily motivated by two factors.

1. It's uncertain whether or not voters would approve a tax increase this fall. For example, last fall voters rejected Proposition 103, which would have collected an estimated $3 billion in tax revenue for education, by nearly 40 points. Gov. John Hickenlooper famously described the state of the electorate last fall saying, "There's no appetite for taxes anywhere, all over the state." In addition to their analysis and public outreach, RTD reportedly conducted telephone polling to gauge voter willingness to support a tax increase and they likely weren't encouraged by the results.
2. Several board members expressed concern over the ambiguity of the proposed hybrid option. Board member John Tayer was quoted in The Denver Post saying, "I will not support going forward... until we have a specific plan and a specific time frame."

This vote is only a temporary setback, as the Board explains in a press release:

RTD will continue to work aggressively to seek alternative funding sources for the program including grants, public-private partnerships and unsolicited proposals. The Board will continue to explore pursuing a sales and use tax election in the future when the time is right for the region.

There are three takeaways from this vote by the RTD Board of Directors.

1. It's only a matter of time before another revenue raising ballot measure is discussed for the Northwest Rail Line. Stakeholders along the corridor have expressed continued dismay over the fact that full service won't be provided until 2042 at the earliest.
2. This may open the door for more innovative alternatives. Initial cost and completion projections have been totally inaccurate throughout FasTracks with the exception of one aspect: the Eagle P3 Project. The Eagle P3 project is a 34-year design-build-finance-operate-maintain (DBFOM) public-private partnership signed with Denver Transit Partners in July 2010. As mentioned above, RTD has signaled willingness to pursue similar public-private partnerships in their efforts to complete the line. RTD currently evaluating an unsolicited proposal for rail along I-225. 
3. Finally, with more time, it's likely that officials will be convinced of the merits of BRT. A recently launched global database on BRT systems demonstrates their efficacy in 134 cities around the world carrying over 22.4 million passengers daily. U.S. BRT leaders include New York City, Pittsburgh and Boston. The Board considered BRT prior to choosing the hybrid option. Compared to the CRT option, the BRT option would have offered: an earlier competion date, more frequent on-peak and off-peak service and more frequent stops; while offering comparable travel times, costing half as much in the short run and requiring lower annual operation and maintenance costs in the long run.

This project is one to watch in the coming months and years ahead because RTD has signaled interest in the types of innovative alternatives that would meaningfully address the Denver metropolitan area's surface transportation needs—before 2042 and beyond.

For more on the Northwest Rail Line and FasTracks, see my previous posts here and here.

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

The Year 2011 in State Government Privatization and Public-Private Partnerships

Posted on April 24, 2012, 3:53pm | Leonard Gilroy

The rollout of Reason Foundation's Annual Privatization Report 2011 begins today with the release of the State Government Privatization section, which I co-authored with Reason's Lisa Snell. This section of APR 2011 provides an overview of the latest on privatization and public-private partnerships in state government. Topics include:

• In New Jersey, the Christie administration continued to expand its portfolio of privatization initiatives in 2011, which included highway maintenance, manual toll collection, state-run horse racing facilities, vehicle fleet operation, the NJ Network TV station and more.
• Two ratings agencies upgraded Louisiana's credit rating in 2011, citing the state's strong fiscal management, strong employment levels and sustainable levels of public debt. Privatization remained a central feature of the Jindal administration's fiscal management in 2011, with progress on some of its major healthcare privatization initiatives in Medicaid delivery, public employee health care and behavioral health services.
• New Ohio Gov. John Kasich has already taken significant steps to advance privatization as a key component of his governing agenda, including privatizing the state's economic development agency, selling a state prison to a private operator, and hiring advisors to analyze the potential privatization of the Ohio Turnpike and Ohio Lottery.
• In late 2011, Washington State became the first state since the end of Prohibition in 1932 to fully privatize the sale and distribution of liquor, and several other states, including Pennsylvania and Virginia, considered similar moves. Today, 33 states have completely private wholesale and retail trade in liquor, while 17 states still retain a state-run wholesale and/or retail liquor monopoly.
• Puerto Rico continued to emerge as a leader in attracting private investment in public infrastructure, with public-private partnerships undertaken or underway in 2011 that include a modernization of 100 K-12 schools, a $1.5 billion toll road lease and an ongoing procurement for a long-term lease of San Juan's international airport.
• In 2011, both Texas and Connecticut enacted broad-ranging laws to authorize private sector financing for infrastructure assets.
• As state park systems continued to face significant fiscal pressures in 2011, policymakers in states like Arizona, Utah and California took steps to expand the use of private for-profit and nonprofit operators to take over state parks threatened with closure.
• Illinois' groundbreaking lottery privatization program got underway in 2011, an initiative designed to generate an additional $1 billion in revenues to the state over the next five years. Policymakers in California, New Jersey, and Ohio are considering similar moves.
• After years of implementation challenges that prompted a dramatic overhaul, Indiana's privatized welfare eligibility modernization program significantly improved its performance in 2011, prompting federal officials to authorize its expansion throughout the state and award the state $1.6 million in recognition of its progress at reducing its error rates for food stamp processing.
• Other topics include public-private partnerships in higher education, an update on state child welfare privatization systems and more.

» Annual Privatization Report 2011: State Government
» Complete Annual Privatization Report 2011 homepage

[Op-Ed] (Colorado SB 124) is a Misguided Attempt to Create Jobs

Posted on April 23, 2012, 1:27pm | Harris Kenny

Colorado recently lawmakers Senate Bill 124, which seeks to cut the strings on tax incentive programs for tourism projects. As I explain in my recent op-ed in The Colorado Springs Gazette entitled "Tax incentive program is a misguided attempt to create jobs": 

Nearly 8 percent of Coloradans are unemployed and seeking a job, and with numbers like that it’s normal for policymakers to focus on job creation. However a misguided attempt to create jobs through tourism projects might be made worse by the recently passed SB 124. The projects were originally approved with strings attached to limit taxpayer risk and lawmakers seeking to cut those strings aren’t considering the consequences.

The bill would modify the Regional Tourism Act passed in 2009, which approved tax increment financing for six total tourism projects. The Regional Tourism Act stipulated that only two projects could be chosen over the next three years and SB 124 would remove that stipulation until officials reach the six project cap. Despite passage through the legislature:

... (T)he bill faces bipartisan opposition in the Legislature and from the Governor’s office. Officials at the Colorado Office of Economic Development and International Trade have also questioned SB 124, citing uncertainty over whether the program will work. Gov. Hickenlooper’s critique centers around the need for oversight provisions and accountability measures that demonstrate projects will attract out-of-state visitors.

The piece later details how the Pew Center on the States determined Colorado belongs among the bottom half of states "trailing behind" in accountability for tax incentive programs. The piece concludes:

As long as the state is in the business of doling out special treatment through the tax code, taxpayers might as well know what they’re getting for their money. SB 124 is an excellent opportunity for Gov. Hickenlooper to flex his famed pragmatism and send a message that now is not the time to cut the strings and set loose Colorado’s flawed tax incentive programs, it’s time to rein them in.

Read the full piece available online here. For more, see my previous blog post on the aforementioned Pew study here. 

Denver’s RTD Publishes 2011 Report on FasTracks

Posted on April 15, 2012, 5:56pm | Harris Kenny

Every year Denver’s Regional Transportation District (RTD) publishes a report detailing ongoing rapid transit projects within the boundaries of the Denver Regional Council of Governments (DRCOG). RTD’s largest project is FasTracks, a multimodal, multi-billion dollar transit expansion program that aims to ultimately comprise of 122 miles of commuter rail transit (CRT) and light rail, 18 miles of bus rapid transit (BRT) and 21,000 new complementary parking spaces across eight counties.

When Denver-area voters approved FasTracks in 2004 the system was slated to cost $4.7 billion and be complete by 2017. RTD has been unable to finish FasTracks on budget or on time. The report notes that overall costs increased from $4.7 billion in 2004 up to approximately $7.4 billion in early 2012. All other things unchanged, the system won’t be done until 2042. So, what’s next?

Last week RTD published its 2011 Annual Report to DRCOG on FasTracks. For a detailed system-wide update by region, see the full report available online here. The report includes an RTD map with a comprehensive view of the system:

FasTracks Plan, Rapid Transit Lines

Source: Regional Transportation District, 2011 Annual Report to DRCOG on FasTracks, April 3, 2012.

While the system is large, the Northwest Corridor has been at the center of the conversation over the past six months. RTD is asking DRCOG to approve a new option that would double the original regional 0.4% sales and use tax along the Northwest Corridor to generate more revenue for FasTracks. This option would expedite portions of rail construction and provide intermediary BRT service until rail is complete. Ultimately RTD hopes to complete the Northwest Rail Line out to Longmont, and estimates they will initiate construction and begin revenue service between 2026-2032. If DRCOG approves this option, then RTD will begin the process of placing the initiative on the November 2012 ballot.

For more on FasTracks see my previous reason.org commentary, "Denver’s RTD Weighing Options for Northwest Corridor."

State Tax Collections Rise $62 Billion in 2011

Posted on April 14, 2012, 6:07pm | Harris Kenny

State tax collections increased $62.1 billion—or 8.9 percent—up to $763.7 billion in 2011, according to the U.S. Census Bureau’s recently released 2011 Annual Survey of State Government Tax Collections. See the following figure for a breakdown of the $763.7 billion in state tax collections by category in 2011:

All 50 states experienced a positive increase in total tax collections; whereas in 2010 only 11 states experienced a positive increase. There are nine states where tax collection increased by 10 percent or greater in 2011, including:

• North Dakota (+44.5%)
• Alaska (+22.4%)
• California (+17.4%)
• Illinois (+15.3%)
• New Mexico (+15.1%)
• Wyoming (+14.1%)
• Idaho (+10.5%)
• Colorado (+10.4%)
• Minnesota (+10.1%)

In an accompanying press release, the U.S. Census Bureau highlights the following findings from the report:

States with the largest percent increase in motor fuels tax revenue were California (+80.3 percent), Alaska (+37.4 percent), North Dakota (+13.1 percent) and Kentucky (+10.6 percent).

Severance taxes—collection for removal or harvesting of natural resources (e.g., oil, gas, coal, timber, fish, etc.)—were up $3.5 billion, a 31.2 percent increase. This followed a 16.4 percent decrease in fiscal year 2010. The largest increases in severance tax revenue were seen in the West.

Revenue on taxes imposed distinctively on insurance companies and measured by gross or adjusted gross premiums (insurance premium sales tax) increased $593.8 million, up 3.8 percent. This followed a 5.3 percent increase in fiscal year 2010. The largest increases in insurance premium sales tax revenue were seen in the Northeast and South.

It’s important to note that state tax collection data does not include: employer and employee assessments for retirement and social insurance purposes; collections for the unemployment compensation taxes imposed by each of the state governments; or tax collections from local governments.

This data is only one piece of the state revenue puzzle. For context, in 2010 state tax collection accounted for approximately one third of total state government revenue. That being said, growing state tax collections suggest an ease to state budget woes. For related research on this topic, see Reason Foundation’s Tax and Budget Policy Research Archive.

Sales Taxes Aren't Killing Best Buy

Posted on April 13, 2012, 3:52pm | Steven Titch

A few weeks back, now-former Best Buy CEO Brian Dunn blamed the retailer's $1.7 billion quarterly loss and its decision to close 50 stores nationwide on the fact that its online competitors, Amazon.com in particular, "aren't encumbered by the costs of running physical locations and in many cases don't have to collect sales tax."

Dunn's comments rehash the now-familiar meme that forcing e-retailers to collect sales tax is the silver bullet to saving brick-and-mortar retailers. It gives politicians on all sides cover--for some, it's a way to keep revenues coming in for excessive spending. For others, it's a handy way to wave the flag for local commerce.

But slapping consumers with more taxes isn't going to save retailing. In a short piece this week, BusinessWeek explores the fundamental shifts online retailing has created in consumer behavior. Here's a nugget from the article:

Best Buy’s decline reflects a cultural shift that’s reshaping the retail world. All big-box stores, and Best Buy in particular, thrived in an era when comparison shopping meant physically going from store to store. The effort required of consumers was a kind of transactional friction. With the advent of mobile technology, friction has all but disappeared. Rather than ruminate with a salesperson before making a selection, tech-savvy consumers are more likely to walk into stores, eyeball products, scan barcodes with their smartphones, note cheaper prices online, and head for the exit. Shoppers can purchase virtually any product under the sun on Amazon or eBay while sipping a latte at Starbucks. For traditional retailers, that spells trouble, if not death. “So far nothing Best Buy is doing is fast enough or significant enough to get in front of these waves,” says Scot Wingo, CEO of e-commerce consulting firm ChannelAdvisor.

Certainly e-commerce created competitive problems for Best Buy, but the sales tax advantage e-commerce has was likely the least of them. Brick-and-mortar retailing is facing an out-and-out crisis that's going to require creativity and innovation to solve. Taxing consumers who buy online won't do much toward that end.

Innovators in Action: Osceola County, Florida Commissioner Frank Attkisson

Posted on April 13, 2012, 9:00am | Harris Kenny

In the latest installment of Reason Foundation's Innovators in Action series, I interview Osceola County, Florida Commissioner Frank Attkisson.

Osceola County policymakers faced few choices when, admist ongoing county-wide budget woes, the library system alone faced a $3 million budget deficit. In response, the Commission voted to approve the first-ever public-private partnership for libraries in Florida. They ultimately signed a five year contract that netted $6 million in savings with Maryland-based Library Systems & Services Incorporated (LSSI).

While the public-private partnership model is proven in states like California and Texas, this is a major move for Florida and one that is likely to be replicated by other local governments across the state. Here's an excerpt from the interview:

Kenny: The first concern that many people have when it comes to libraries is access. How did the commission address this concern and how might other policymakers address it?

Attkisson: If another commission wants to do this, the boogey man is going to come out and people will try to scare them. Elected officials control these contracts and the public trusts us to deliver value for their money. We (the commission) control the hours and set the standards. We know what it costs and want the private sector to help us realize our vision for our libraries.

The vendor has an option to set up ancillary businesses to provide additional services to users, like a coffee shop. Think about how much has changed in ten years. We didn’t have computers or Internet. Now it’s a given that you’ll have those resources. That’s totally different from the libraries of ten years ago. We were able to leverage procurement to achieve substantive goals.

You have to have the backbone to say it will take 3-6 months to transition. But I’m comfortable that once we do, nobody will want to go back because we’ll have more capability than ever before.

Read the full interview available online here. For more, see Reason Foundation's Innovators in Action 2012 series available online here.

Pew Finds States Barely Evaluate Tax Incentive Programs

Posted on April 12, 2012, 9:50pm | Harris Kenny

Today The Pew Center on the States published an eye opening report entitled Evidence Counts: Evaluating State Tax Incentives for Jobs and Growth. First, kudos to Pew for conducting this report and asking important questions about state tax policy. The report starts with a refrain commonly seen here on Reason Foundation’s Out of Control policy blog, which is that state governments are strapped for cash and need to both get their fiscal houses in order and foster economic growth.

Many policymakers feel the way to foster economic growth is by supporting politically favored businesses—as opposed to promoting economic freedom—so they pass lavish tax incentive programs totaling billions of dollars across the country in hopes of turning things around. Today’s Pew report addresses a critical follow up question: Do states measure to see if their tax incentives are having an impact? Their answer? Barely.

No state was spared in this analysis because every state has at least one tax incentive program, and most have several. Tax incentives come in the form of tax credits, exemptions and deductions; financial assistance for relocation or workforce expansion; and a variety of other mechanisms. Pew reviewed almost 600 documents and interviewed over 175 government officials and policy experts to evaluate whether or not states gauge the effectiveness of their tax incentives, and if they do, Pew examined how well they do it.

Ultimately, the report finds:

... (N)o state regularly and rigorously tests whether (its tax incentives) are working and ensures lawmakers considers this information when deciding whether to use them, how much to spend, and who should get them. Often, states that have conducted rigorous evaluations of some incentives virtually ignore others or assess them infrequently. Other states regularly examine these investments, but not thoroughly enough.

Since no state met Pew’s expectations for the study, it became a battle to avoid last place. States are evaluated under two criteria, scope and/or quality of evaluation, and are split into three categories listed below.

• 13 states are “leading the way,” which means they're “meeting both criteria for scope of evaluation and/or both criteria for quality of evaluation.”
• 12 states are achieving “mixed results,” which means they're “meeting only one of the criteria for scope and/or quality of evaluation.”
• 26 states (including the District of Columbia) are “trailing behind,” which means they're “not meeting any of the criteria for scope or quality of evaluation.”

Below is an infographic provided with the report detailing where states rank and highlighting four recommended steps for state policymakers:

For a detailed evaluation of state performance, see page 32 of the report available online here. Stay tuned because I will be exploring the report’s specific findings—by policy area and by state—over the next week. In the meantime, check out Reason Foundation’s Government Reform Tax and Budget Policy Research Archive and State Government Privatization Research Archive for more ideas on ways that policymakers can turn things around in their states.

ALEC Releases 2012 Rich States, Poor States Report

Posted on April 11, 2012, 2:31pm | Leonard Gilroy

Today, the American Legislative Exchange Council (ALEC) released the fifth edition of its annual Rich States, Poor States report, authored by Arthur Laffer, Stephen Moore and ALEC's Jonathan Williams. As with previous editions, this helpful report provides a current snapshot of state economic conditions, offers some worthy primers on tax policy/research issues, and ranks the states along an index that includes such metrics as income tax rates, property and sales tax burdens, recently enacted tax policy changes, debt service as a share of tax revenue, public employees per 1,000 residents and more.

From the executive summary:

In chapter 1, the authors lay the groundwork for understanding what states must do in order to increase growth and become prosperous. First, they set the stage by identifying the biggest winners and losers in the ALEC-Laffer State Economic Competitiveness Index over the past five years. From there, Messrs. Laffer, Moore, and Williams provide a lesson in economics 101, discussing the merits of supply-side economics, the theory of incentives, and the evidence behind taxpayers voting with their feet—very strongly against high taxes. Finally, this chapter highlights the best policies of the states, from pension reform, to closing budget gaps, to pro-business tax reform, and everything in between. Readers should be on the lookout for Oklahoma, Kansas, and Missouri, where the personal income tax may soon become a thing of the past.

Chapter 2 evaluates the influence several policy variables have on state economies. The authors begin with the personal and corporate income taxes, comparing the states with the highest tax rates to the states with the lowest, or in some cases zero, tax rates. The results speak for themselves. The no income tax states outperform their high tax counterparts across the board in gross state product growth, population growth, job growth, and, perhaps shockingly, even tax receipt growth. This chapter allows readers to see the data and decide which policies they think have the greatest effect on state economies.

In chapter 3, the authors delve into one of the most anti-growth tax policies: The unpopular and economically damaging “death tax.” From what not to do to where not to die, the authors combine anecdotal evidence with the data to show why the death tax is one of the worst possible taxes for state economies. Less than half the states impose death taxes, and that number is quickly dwindling. Ohio and Indiana are leading the effort to eliminate these growth killing taxes, and we expect others to soon follow in their footsteps.

Finally, chapter 4 is the much anticipated 2012 ALEC-Laffer State Economic Competitiveness Index. The first measure, the Economic Performance Rank, is a historical measure based on a state’s income per capita, absolute domestic migration, and non-farm payroll employment—each of which is highly influenced by state policy. This ranking details states’ individual performances over the past 10 years based on the economic data.

The second measure, the Economic Outlook Rank, is a forecast based on a state’s current standing in 15 equally weighted policy variables, each of which is influenced directly by state lawmakers through the legislative process. In general, states that spend less, especially on transfer programs, and states that tax less, particularly on productive activities such as working or investing, experience higher growth rates than states that tax and spend more.

In this year's edition, the top 10 states in the Economic Outlook rankings were (from 1 to 10, in order): Utah, South Dakota, Virginia, Wyoming, North Dakota, Idaho, Missouri, Colorado, Arizona and Georgia. Rounding out the bottom of the list were (from 41-50, in order): Minnesota, New Jersey, Rhode Island, Connecticut, Oregon, Hawaii, Maine, Illinois, Vermont and New York.

For the Economic Performance rankings, the top 10 performing states were (in order from 1 to 10): Wyoming, Texas, Montana, North Dakota, Alaska, New Mexico, South Dakota, Virginia, Oklahoma and Arkansas. The bottom 10 performing states were (from 41 to 50): Minnesota, Wisconsin, Massachusetts, Connecticut, New Jersey, Indiana, California, Illinois, Ohio and Michigan.

Another interesting component of the 2012 report is the intro feature outlining the "10 Golden Rules of Effective Taxation," a reality check of sorts for how tax policy works in real life (not the fantasy world in which the "Buffett rule," for example, is touted as some realistic fiscal solution). Here are the 10 rules, which the report discusses in detail:

1. When you tax something more you get less of it, and when you tax something less you get more of it.
2. Individuals work and produce goods and services to earn money for present or future consumption.
3. Taxes create a wedge between the cost of working and the rewards from working.
4. An increase in tax rates will not lead to a dollar-for-dollar increase in tax revenues, and a reduction in tax rates that encourages production will lead to less than a dollar-for-dollar reduction in tax revenues.
5. If tax rates become too high, they may lead to a reduction in tax receipts. The relationship between tax rates and tax receipts has been described by the Laffer Curve.
6. The more mobile the factors being taxed, the larger the response to a change in tax rates. The less mobile the factor, the smaller the change in the tax base for a given change in tax rates.
7. Raising tax rates on one source of revenue may reduce the tax revenue from other sources, while reducing the tax rate on one activity may raise the taxes raised from other activities.
8. An economically efficient tax system has a sensible, broad base and a low rate.
9. Income transfer (welfare) payments also create a de facto tax on work and, thus, have a high impact on the vitality of a state’s economy.
10. If A and B are two locations, and if taxes are raised in B and lowered in A, producers and manufacturers will have a greater incentive to move from B to A.

There's a ton worth checking out in this report, including features on the estate tax and a detailed performance comparison for high-vs.-low tax states that merit a thorough read. The full report is available here.

Innovators in Action: Carrollton, Texas City Manager Leonard Martin and Director of Competition Tom Guilfoy

Posted on April 5, 2012, 7:00am | Leonard Gilroy

In the latest installment of Reason Foundation's Innovators in Action series, I interview the Dynamic Duo of Carrollton, Texas: city manager Leonard Martin and director of competition Tom Guilfoy. Trust me—you don't want to miss this. There's a reason I call them the Dynamic Duo.

Ten years ago, Carrollton's city leaders charted a new direction for how the city would operate, directing administrators to transform the bureaucracy from a government culture to a competitive, business-like culture. Officials hired Martin to lead this change, and he created a new Director of Competition—the first both for the city and nation—whose sole purpose was to drive the city's culture to become competitive, either using in-house or external service providers to provide services to residents "cheaper, faster, better, and friendlier."

Martin and Guilfoy developed a robust managed competition program where all government service costs are fully burdened with overhead costs just like private businesses, and government compares their fully loaded cost of service delivery against private sector costs to seek the best provider. In some cases, this has led to re-engineering of city services, and in others, like solid waste collection and vehicle fleet maintenance, the city has turned to private service providers.

Overall, Martin and Guilfoy estimate that managed competition has saved the city $30 million over the last decade (and they add that it's a conservative estimate). Moreover, despite an increase of over 40,000 residents, the city still operates with about the same number of employees on the payroll in 1990, a testament to both the results of competition and the city's fiscal stewardship.

In the interview—available here—Martin and Guilfoy discuss the first decade of managed competition in Carrollton, the process used, and what it takes to create a culture of competition in city government. Here's a small excerpt:

Martin: [...] Government has been taught that there are only two options: raise taxes or cut services. You hear it in Washington. You hear it in the states and cities. No, there's another option: run it like a business and make it efficient. We don’t try to be everything to all people.

[...] Our exercise wasn’t really fancy. We took legal pads, put a line down the middle, and on the left side put essential services and on the right, non-essential. We listed out every service we did. The things we learned that we were doing were things we didn’t previously have a clue on, like the movies. We don’t need to go out and undercut businesses, so we just stopped doing some things. Another example is karate, where you can’t drive down the street and not see a school on every other corner. Yet city government was offering karate classes. And you’re out there with your black belt, paying your lease, paying taxes on your business that I get to keep to undercut you at the rec center.

I had an employee that defended it to me once, saying that there were people that couldn’t afford to go take karate. So I told him that was an excellent point that I hadn’t thought of. At the time George Bush was president, and I said, “I’m quite sure that President Bush had to know karate under the Constitution in order to run for president.” Because obviously if you’re going to be President then you have to know karate. I wanted to be an astronaut, and my town didn’t provide me astronaut training. It’s amazing I was able to become a city manager since my town let me down on astronaut training.

So that guy quit. I respect that person because they lived up to their principles. And I assure you that there were lots of places in government he could go that had that same philosophy: that anyone who wants something gets it. Not here. The council has stayed firm to our policies. We’ve known other places where the staff want to do managed competition, but the council doesn’t want to push on employees because the employees are viewed as a strong voting base. You see that especially at the state levels, where politicians cater to that state bureaucracy.

Our councils have not gotten into that, and they’ve stayed on firm ground and done what’s right for the taxpayer. You got people on the council that have been there for years and understand the culture and are proud of it. All of that takes some courage.

Read the rest of the article here. All I can say is that it's a must-read for anyone interested in what cutting edge city management looks like. One of the more interesting takeaways from the interview is that implementing tools like managed competition is necessary but not sufficient. To really streamline government and keep it lean, you need to change the culture of the bureaucracy. Martin and Guilfoy's insights on that subject alone are fascinating and, frankly, should be internalized by every public administrator (and politician) in the country.

With policymakers at all levels of government seeking ways to reduce spending and improve services delivered to taxpayers, Reason Foundation's Innovators in Action series highlights good government efforts that are delivering real results and value for taxpayers. It is our hope that that the examples and experiences offered by innovators like Martin and Guilfoy will inspire reform-minded mayors and administrators elsewhere to provide better, leaner and cheaper government to taxpayers.

[Note to readers: In previous years, we have published Innovators in Action in an annual report format, the last edition having been released in early 2010. The publication has been on a temporary hiatus since then, but we have resumed publication in a slightly different format. In order to deliver timely content to our readers on a more frequent schedule, we're publishing one Innovators article per month on reason.org. Other articles featured in the Innovators in Action 2012 series are available here.]

Gov. Cuomo Ushers Through $132.6 billion NY State Budget

Posted on April 2, 2012, 2:35pm | Harris Kenny

Last week New York Governor Andrew Cuomo, Senate Majority Leader Dean Skelos and Assembly Speaker Sheldon Silver announced the early passage of the state’s fiscal year 2013 budget. The Legislature approved the $132.6 billion budget on Friday March 30. According to an article by Thomas Kaplan in The New York Times:

The voting on Friday marked the first time the Legislature had approved a state spending plan with more than 24 hours to spare since 1983 – when Mr. Cuomo’s father, former Gov. Mario M. Cuomo, passed his first budget.

Four major stories jump out of this budget deal.

1. Fiscal Responsibility: Lawmakers closed a multi-billion dollar deficit ($2 billion, or 3.5% of the state budget, according to the Center on Budget and Policy Priorities) without raising taxes or imposing fees. State spending growth held to 2% for the second year in a row, while net spending (state and local) was reduced for the second year in a row thanks in part to tax caps on local governments. State spending will total roughly $88.8 billion in FY 2013. Most impressively, out year deficits have been reduced by a cumulative $72 billion since Gov. Cuomo took office.
2. Government Reform: Lawmakers are empowering the Office of General Services (OGS) to serve as a clearinghouse for state agencies, thereby transforming procurement by facilitating bulk purchase common goods and services through centralized contracts. Officials will leverage the state’s purchasing power to save $100 million in FY 2013 and a projected $755 million over five years. They’re also eliminating 25 state boards and commissions that are no longer active or whose missions have been completed or become redundant, such as the Department of State’s Barbers Board. (See the full list of eliminated boards and commissions available online here, for more on the new OGS initiatives see here).
3. Transportation Infrastructure: Lawmakers are enhancing their focus on transportation infrastructure. The budget establishes the New York Works Task Force to coordinate capital plans across state government and funds the New York Works program with $232 million in state capital funds and $917 in federal funds for $1.2 billion in new spending. This is in addition to $1.6 billion already allocated this year to core transportation capital investment. And most importantly, these funds are in addition to the advancement of the Tappan Zee Bridge replacement project. (For more on the Tappan Zee Bridge replacement project, see my colleague Baruch Feigenbaum’s latest Out of Control Policy Blog post here.)
4. Criminal Justice: The Budget serves as the launching point for Gov. Cuomo’s Close to Home Initiative, which seeks to reform the state’s juvenile justice facility system. Specifically it allows New York City officials to take responsibility for the case of lower risk youth who come from the City. This applies to youth in non-secure and limited security facilities. The aim of the program is to reduce crime and improve outcomes for youth and the communities in which they live by providing targeted educational, mental health, substance abuse and other service needs without compromising public safety. The program is expected to save $4.5 million in FY 2013 and $27 million in FY 2014, in part by reducing the state’s juvenile justice system capacity by 140 beds in FY 2013 and 180 beds in FY 2014. (For more on the Close to Home Initiative see a write-up by the New York State Juvenile Justice Advisory Group here.)

Overall there are some major accomplishments in this budget. Kudos to state policymakers for finding common ground and balancing innovation with fiscal responsibility along the way. Once considered in the dysfucntional company of states like California and Illinois, New York appears to be taking serious strides in the right direction.

Politics & Garbage Privatization in Norwalk, CT

Posted on March 21, 2012, 12:18pm | Leonard Gilroy

The public works director in Norwalk, Connecticut is making a case for privatization of waste collection, estimating savings of over $1.2 million in the first two years. Per The Daily Norwalk:

The city would save $360,000 in fiscal year 2012-13 if it were to outsource garbage collection, says Hal Alvord, director of the Department of Public Works. That figure would jump to $950,000 the following year.

If the plan is not approved, the council would need to add $800,000 to its 2012-13 budget, or the price of four garbage trucks. "Our newest truck is 12 years old," Alvord said. "If the truck is broken down by the side of the road or you can't get it out of the garage, the garbage isn't going to get picked up."

The cost of pickup by city workers would be $126 per household in 2012-13, Alvord said. This compares to $30 a household for recycling pickup, which is contracted to City Carting. Rowayton, which has contracted out garbage collection for decades, will pay $76 a household.

Eight public works employees are assigned to refuse. The city's garbage truck drivers get $30.64 an hour, and the laborers get $22.86 to $29.18 an hour. Private sector drivers get $20 to $23 an hour, and laborers earn $12 to $15 an hour.

The hourly rate does not include benefit costs, according to Jim Haselkamp, the city's personnel director. Alvord said benefits are equal to about 51 percent of a city worker's salary and 30 percent of a private contractor's salary.

"You can see right there, that's the basis for a big chunk of the savings," Alvord said. "Another big part of the savings that we get in Norwalk is from workers' comp from injuries."

Sanitation workers made up 10 percent of the public works staff from 2005 to 2010, but 42 percent of the workers' comp complaints came from the sanitation department. The regular sanitation claims totaled $538,000. Catastrophic claims – from employees whose injuries prevent them from returning to work – resulted in settlements of $1,206,115 to three people. A total of 1,400 work days were lost to sanitation claims.

[…] If the plan goes through, the eight workers would be reassigned as truck drivers and would be paid less. The city has agreed to give them a one-time lump sum payment of $7,000 as compensation, the amount of money they would lose over a year.

"We took this position on outsourcing solid waste because we had a way of continuing to provide that service to residents, to do it in a manner that provides significant savings of money and protects the jobs and health of our employees because nobody would get laid off," Alvord said.

Absent any other information, one might think that at the very least this might be compelling enough for city electeds to authorize a procurement. Remember that going to procurement means nothing more than just the government testing the market to see what kind of bids it gets back. They're not obligated to actually privatize anything if the bids don't pencil out or make fiscal sense. In fact, governments should be doing way more of this sort of bid process for public services, because at the very least—even if you end up not going to contract—you've still gotten a third-party, independent validation of your budget for that particular service, a comparative benchmark of sorts.

But so far, at least based on media reports, that kind of thinking doesn't yet seem to be at play with some of the electeds in Norwalk, who seem antsy amid current union bargaining. Cutting to the chase, from today's Daily Norwalk:

Alvord said last week that many council members had not heard the numbers in the case to outsource. He presented that case in an executive session.

"Clearly they don't understand," he said. "I don't know how anybody can sit here and say, 'I don't see any cost savings.' But, you know, some of these positions were set in concrete long before this."

In other words, pro-labor pols will argue the sky is red if that's the way to avoid privatization. When policymakers get so cozy with unions that even mentioning alternative management regimes that could benefit taxpayers is verboten/scary/heresy, then it's time for taxpayers to reassess the fortitude of their leaders. The unions aren't the root problem; it's electing sycophantic politicians that offer reflexive deference to labor interests over taxpayers.

The IRS Gets Sued for an Illegal Licensing Scheme

Posted on March 20, 2012, 3:33pm | Anthony Randazzo

Most people don't like to fight the IRS, but the Institute for Justice is not most people. Last week IJ sued the Internal Revenue Service for authorizing an illegal licensing scheme that is driving thousands of independent tax advisors out of business. Check out the video for the whole story.

IJ's website says: 

Congress never gave the IRS the authority to license tax preparers, and the IRS can’t give itself that power.

But last year the IRS imposed a sweeping new licensing scheme that forces tax preparers to get IRS permission before they can work. This is an unlawful power grab that exceeds the authority granted to the IRS by Congress.

The burden of compliance will fall most heavily on independent tax return preparers and small businesses. Unsurprisingly, big firms such as H&R Block and Jackson Hewitt support the licensing scheme. As The Wall Street Journal explained: “Cheering the new regulations are big tax preparers like H&R Block, who are only too happy to see the feds swoop in to put their mom-and-pop seasonal competitors out of business.”

These regulations are typical government protectionism. They benefit powerful industry insiders and at the expense of entrepreneurs and consumers, who will likely have fewer options and face higher prices. But tax preparers have a right to earn an honest living without getting permission from the IRS. And taxpayers—not the IRS—should be the ones who decide who prepares their taxes.

That is why on March 13, 2012, three independent tax preparers joined the Institute for Justice in filing suit against the IRS in the U.S. District Court for the District of Columbia. This lawsuit challenges the IRS’s statutory authority to impose this licensing scheme, and seeks to overturn regulations that would affect an estimated 350,000 tax return preparers, forcing many of them to stop working in the occupation of their choice.

See the full story here.

California Issues RFP for Private Operation of 5 State Parks

Posted on March 20, 2012, 1:28pm | Leonard Gilroy

For years, Reason Foundation has recommended that cash-strapped states consider tapping the private sector to take over operations of state parks as a means to lower costs and rescue parks threatened with closure in a difficult budget environment. Both the U.S. Forest Service (USFS) and BC Parks (British Columbia) have long pioneered the use of public-private partnerships (PPPs) for park operations, but states have been slow to follow their lead…until now, that is.

California State Parks (CSP) has issued a new request for proposals (RFP) seeking a five-year concession contract (or contracts) to operate campground and day use recreational areas at five park units in the Central Valley (Turlock Lake SRA, McConnell SRA, George J. Hatfield SRA, Woodson Bridge SRA, and Brannan Island SRA). This is the first serious and robust parks PPP procurement of its kind at the state level. The RFP is here, and CSP's sample contract is here. Bidder responses are due on May 1.

The contract would be structured as a concession, a commercial lease through which the state would retain ownership and control over the parks while paying the private operator nothing to operate them. Instead, the private operator would be allowed to retain the user fee revenues (e.g., gate entry fees, camping fees, etc.), in return for an obligation to pay a set percentage back to the state annually as a form of rent. CSP has set a minimum annual rent level for each park that bidders must exceed in their proposals. Bidders can submit proposals for individual parks, but the procurement is designed to give maximum weight to those proposals that cover all five parks. In fact, the parks in question appear to be a mix of revenue generating and revenue losing parks (once operating costs are factored in), so bundling all of them together is likely to be an attractive option to bidders to maximize their ability to mitigate risks.

Up to now, states have only tinkered with this management approach—with more talk than action, generally speaking—so California's procurement represents a paradigm shift in state parks management, albeit a well proven one. The "whole park concession" model being pursued in California is the same PPP concession model used by the USFS for the operation of hundreds of their fee-based recreation areas across the country for more than 25 years now. I routinely visit and camp at concessionaire-operated USFS recreation areas throughout Arizona—there are dozens in that state alone—and can attest to top quality operations and service, far higher than at the state-run parks nearby. In fact, if it weren't for a different logo on camp hosts' shirts, one might never even realize that the parks were not operated by the USFS directly. California also has dozens of USFS "whole park concession" contracts today too, so park users can go see for themselves that there's nothing to fear—and everything to gain—through shifting to PPPs.

See for yourself in this October 2010 Reason.tv video we shot at privately operated USFS recreation areas in the Sedona area. The video recommends concession management as an alternative to the misguided car tax for parks (Prop 21) that failed at the polls in California in November 2010. For more details on how the parks PPP model works, see these other Reason Foundation highlights:

• Private Sector Can Rescue State Parks Headed for Closure
• Taking State Parks off the State's Books
• Taking State Parks off the State's Books, Part II
• Don't Close State Parks; Lease Them
• Balancing California’s Budget and Preserving State Parks
• California's Prop 21: Tax Cars to Pay for Parks?

And last week, the Franklin Center's Steve Greenhut penned an excellent Reason.com article on the potential for private operation of state parks in California.

But don't just take our word for it. The California Legislative Analyst's Office (LAO) released a report earlier this month that recommended PPPs for park operations:

Our research finds that the USFS, as well as many provinces in Canada, currently use private companies to operate and manage entire public parks and recreation areas. Outcomes for these different arrangements vary, but the reported benefits generally include the flexibility to easily reduce or increase staffing levels and lower operating costs from the introduction of competitive bidding. Lower costs were particularly noticeable if several parks in a geographic area were packaged as a single operation, allowing for economies of scale.

According to the provincial park system of British Columbia (BC Parks), bundling a mix of different parks (low–revenue–generating parks and high–revenue–generating parks) helps to attract potential bidders, since it is unlikely that bidders would otherwise elect to operate low–revenue–generating parks. The BC Parks also makes payments to most of their private operators to cover costs that are not recouped by park visitor fees. Even with these payments, BC Parks considers its operations model a success, because the payments, on balance, are less than the full cost of operating the parks.

Another advantage of using private companies to operate the parks is that they generally can procure new equipment and implement new projects more quickly than the state. In addition, privately operated parks also could assist DPR with its cash flow needs by assuming some of the risks associated with operational costs (including unpredictable user demand and fee revenue). Currently, if revenues from park fees are less than projected, the department must cut its operating costs during the fiscal year to make up for this loss in revenues. If private companies operated some of the parks, they could potentially take on this risk, as well as risks resulting from reduced visitor demand and unexpected maintenance costs.

The new RFP is an extremely positive development for park enthusiasts and users in California and elsewhere. For Californians, these parks would otherwise be slated for closure, so the PPP approach offers a lifeline to not only keep them open for public enjoyment, but to do so on a sustainable basis. By shifting revenue risk to the concessionaire, the state would take these parks out of the vicious budget loop that currently has dozens of parks slated for closure. It may even offer an opportunity to start hacking away at the whopping $1.5 billion in deferred maintenance throughout the California parks system (see Figure 5 in the LAO report).

For those outside of the Golden State, CSP is closely watched by parks administrators in other states, and innovative moves by the market leader would set a strong example likely to be replicated in many other states where parks are threatened. According to a recent Huffington Post article:

"We've gotten some pushback, but people are more and more coming to the realization that our budget has serious problems," Roy Stearns, deputy director of the California Department of Parks and Recreation, told HuffPost. "There are private companies in the Parks and Rec business that do it well. People shouldn’t see private enterprise as a dirty word. Our main goal is to get though these tough times."

This is No Time to Go Soft on Medicaid Fraud

Posted on March 19, 2012, 8:38pm | Adrian Moore

New York has decided to soften their audits or medicaid fraud, make them less adversarial. Which is striking considering how much fraud their audit program has uncovered and and how much it has saved taxpayers--$1.5 billion in the first 4 years.

James Introne, Mr. Cuomo’s deputy secretary for health said “An audit need not be an adversarial enterprise. To the extent that an audit turns into an adversarial affair, it may not be conducted properly. An audit is successful when people agree.”

That may be true of audits attempting to identify opportunities, like recovery audits. But it is NOT true of fraud audits.  Everyone is innocent until proven guilty, but audits for fraud have to assume the perpetrators are trying to cover their tracks. So such audits have to be tough.  NY is essentially saying they'd be willing to led some fraudsters get away with it and give up some of that $1.5 billion recovered if it would make everyone more comfortable, less "adversarial." This when NY is has raised taxes and still has a $2 billion budget deficit.

Trenton, New Jersey Nearly Wiped Out by Fiscal Woes

Posted on March 15, 2012, 7:43pm | Harris Kenny

Earlier this week Alex Zdan of The Times of Trenton reported that in Trenton, New Jersey toilet paper and paper towel stocks dwindled as the city council butted heads with Mayor Tony Mack over the city’s paper products supply contract. The council voted twice to reject a $42,000 contract for paper products. They were able to reach a compromise however, Dave Warner of Reuters reports:

The great toilet paper crisis in New Jersey's capital city is over.

Police, firefighters and other Trenton city workers down to their last sheets as the result of a City Council budget battle were rescued late Tuesday by animal rights advocates who offered six months of free rolls printed with a message about filthy slaughterhouses and the resulting fecal matter found in meat.

New rolls of paper were expected to begin arriving in city offices and facilities on Wednesday, thanks to the donation from People for the Ethical Treatment of Animals and an emergency appropriation of $16,000 by the City Council.

All city facilities would have run out of toilet paper by week's end without the stop-gap measure, said city spokeswoman Lauren Ira.

Already, the men's rooms at police headquarters were bare and fire stations, senior centers, recreation facilities and City Hall itself were down to almost nothing after spending for new toilet paper was stalled in debate three times since it came up for a vote in November.

PETA's offer of a free six-month supply came with the condition that each sheet would read, "Slaughterhouses are so filthy that more than half of all meat is contaminated with fecal bacteria."

Mayor Tony Mack was happy with the offer, calling the toilet paper crisis a "fundamental issue in our community."

Stories like this read as if they’re on the front page of The Onion (a satirical newspaper); but all jokes aside, this flash crisis reflects how close some U.S. municipalities are to passing a fiscal tipping point. Trenton was recently featured in an episode of This American Life entitled “459: What Kind of Country” that focuses on how state and local governments across the country are struggling to pay their bills. The episode highlights that Trenton’s budget woes ultimately led policymakers to lay off one third of the city’s police force.

Trenton is not alone. Several nearby state capital cities (Harrisburg, Pennsylvania and Providence, Rhode Island) are suffering similar budget woes. All these cities demonstrate that irresponsible governance has serious consequences. For a chilling vision of what it looks like when policymakers can no longer kick the can down the road, see “Is Harrisburg’s Nightmare America’s Future?” (below) by reason.tv producer Jim Epstein: