Annual Privatization Report: Aviation
For over three decades, Reason Foundation has published its Annual Privatization Report, a thorough examination of government contracting and public-private partnerships at all levels of government. The report has long provided valuable information to bring greater accountability, competition, innovation, and transparency into how governments partner with the private sector in delivering public services. This month, Reason released the Annual Privatization Report 2022: Aviation, authored by Senior Transportation Policy analyst Marc Scribner. This report reviews developments in the United States and worldwide regarding private-sector participation in airports, air traffic control, and airport security.
Arizona Legislation Aims to Secure Water-Supply Future with Public-Private Partnerships
The Arizona State Legislature ended its session with a major win for the public-private partnership approach to major infrastructure investment, setting aside $1 billion over the next few years for water projects and overhauling the state agency tasked with providing water to ensure robust and mutually beneficial collaboration with the private sector for many years to come. In a recent Arizona Republic op-ed, Reason Foundation’s Austill Stuart and Leonard Gilroy explain how the P3 model addresses a key dilemma for a large and fast-growing state whose farmers are already facing haircuts in water supplies resulting from drought conditions in the Colorado River. Private investors can assume much of the up-front costs and risks in building the considerable infrastructure required, while the state government and rate-paying water consumers face more predictable and consistent costs.
Michigan Budget Includes XBRL Provision, Funding
Michigan’s 2022–2023 state budget proposal includes a provision requiring the state’s Treasury Department to begin the process of migrating local government financial reporting to machine-readable form. Unlike publicly listed companies, the Municipal Securities Rulemaking Board requires U.S. state and local governments to disclose financials in .pdf documents, impeding the collection of government financial data. The Michigan XBRL provision follows House Bill 1073 in Florida, which requires some machine-readable financial reporting. But while the Florida bill only applies to a type of financial report used by agencies in Florida, the Michigan provision applies to reports filed by government agencies in most states, in addition to Michigan, making duplication easier. The bill’s language is expected to result in a partnership between the Michigan Treasury Department and the University of Michigan’s Center for Local, State, and Urban Policy which has already been working on machine-readable government financial standards in connection with the city of Flint.
Government, Not Private Enterprise, Failed Flint
The tragic water quality crisis suffered by the people of Flint, Michigan, has been linked to the deaths of 12 residents and the illnesses of dozens more. Reason Foundation Senior Policy Analyst Marc Joffe writes that “the biggest failures in Flint were made by the government,” not private water companies. “It is important to recognize that government officials have managed Flint’s water system since 1912 and made the decisions, or failed to make the decisions, that triggered the water crisis,” Joffe writes. He also urges public and private actors to follow best practices to ensure citizens get full transparency and accountability from private water providers and for governments to conduct meaningful oversight.
NEWS & NOTES
Court Rules Arizona’s Inmate Health Care Services Violates Constitution: In a June ruling, U.S. District Judge Roslyn O. Silver found the standard of inmate health care services overseen by the Arizona Department of Corrections, Rehabilitation and Reentry (ADCRR) violates 8th Amendment protections against “cruel and unusual” punishment. Codefendants ADCRR and contracting partner Centurion were cited as overseeing a prisoner health care program that “failed to provide, and continue to refuse to provide, a constitutionally adequate medical care and mental health care system for all prisoners.” While staffing has consistently fallen short of maximum levels, the plaintiff inmates assert that Centurion knew that the low staffing levels that ADCRR agreed to would be insufficient to deliver adequate care. The court now must appoint an individual to create an injunction to bring services back to a constitutionally-acceptable level.
Denver Extends Pay-for-Success Supportive Housing Program: The city of Denver announced its Supportive Housing Social Impact Bond (pay-for-success) initiative would be retained and extended through a new initiative dubbed “Housing to Health” (H2H), which began in July. The program includes nearly $12 million from private funders, along with up to $6.3 million from the US Treasury to deliver comprehensive supportive housing services for up to 125 chronically homeless persons. A federal Social Impact Partnership Pay for Results Act grant of up to $5.5 million will be dependent on whether federal health care and incarceration costs are reduced among the chosen population over a seven-year period. The Urban Institute received a separate grant to evaluate the program at its 2029 conclusion.
Philadelphia Expands Homelessness Partnership Initiative: Philadelphia announced an expansion of its “Shared Public Spaces” initiative—a partnership between local civic organizations, businesses, and government to find humane solutions to reducing chronic homelessness in the city. Its leaders noted a 38% drop in homelessness in its Center City District since 2019 through efforts that include employment offers, showers, and laundry services. Chronic homelessness counts by police have shown dramatic falls in parts of the city since the program started.
Colorado Springs Transitions Community Center to P3: Last month, Colorado Springs announced it had halted a search for a new private operator for the city’s Westside Community Center and would convert the city-owned community center into a public-private partnership. The proposed P3 plan includes city operational staff as well as staff and resources for partnered organizations for services at the center, which the city plans to start choosing in September. After implementation, Colorado Springs expects the center’s budget to almost quadruple—from around $100,000 to nearly $375,000. The P3 arrangement replaces the nonprofit Center for Strategic Ministry, which had run the center under contract since 2010 when the city first sought an outside operator.
Mississippi City Seeks Public Works Outsourcing Contract: In June, the Petal Board of Aldermen voted in favor of receiving non-binding proposals for firms to operate the Mississippi city’s public works department. Proponents are hoping that the move could help Petal tackle the rising costs of providing guaranteed retiree pension and health care benefits for its workers. Public employee retention has been a problem, too, with the city losing workers to higher-paying jobs, so local officials feel privatizing the department could produce a workforce that would be better equipped and better paid.
New Jersey City Rescinds Sewer Concession: In June, the Pleasantville City Council voted 4–3 to abandon a concession agreement of the city’s sewer system to Bernhard Capital Partners. The deal called for Bernhard to operate the sewer system and collect user charges from customers for 39 years, with the New Jersey city receiving an upfront $15 million payment as well as $57.1 million guaranteed in capital investments over the agreement’s term. The city’s initiation of the termination likely means it must compensate Bernhard for up to $1.5 million in expenses made from pursuing the deal. Pleasantville previously terminated negotiations with New Jersey American Water in 2019 before the present attempt at an agreement, for which New Jersey American Water and Plenary groups were also shortlisted alongside Bernhard.
Oregon County Courthouse Reaches Financial Close: The Clackamas County Board of County Commissioners voted 4–1 to approve a public-private partnership to develop a new county courthouse facility. A Fengate-led consortium—which beat out shortlisted teams led by Plenary and Balfour Beatty—will design, build, finance, operate, and maintain the $300 million, 258,000 square foot facility for 39 years. County officials expect the deal to reach financial close in August.
“Denver’s Social Impact Bond program proved we can break the cycle from streets to emergency rooms to jails and back to the streets for our residents facing chronic homelessness, and we’re going to expand those efforts. Our community is incredibly fortunate to have such strong partnerships among funders, providers, and other government organizations. This is a proven strategy of providing housing first with the right supports in place for people to exit homelessness, remain housed, and prosper. Together, we’re making this innovation possible.”
—Denver Mayor Michael B. Hancock, on the city’s Pay-for-Success supportive housing program and the announcement on its expansion via the Housing to Health Initiative
“Our [Public Employees Retirement System], we pay 17.4 percent on that, which kind of hurts us. And we’ve noticed over the last year or so that we’re losing people that are going into construction and other jobs that are just able to pay more…So the privatization [of the Petal Public Works Department] could be a good thing for some of the employees because they would get a pay increase. This isn’t something that should cost anybody employment, and there would be a few positions that [the city] would need to retain as well.”
—Petal Mayor Tony Ducker, quoted in a June 2022 article on exploring the outsourcing of the city’s public works services to a private firm