Privatization and Government Reform Newsletter: Contracting Mass Transit Services, a Government-Owned 5G Network , and More
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Privatization and Government Reform Newsletter

Privatization and Government Reform Newsletter: Contracting Mass Transit Services, a Government-Owned 5G Network , and More

Plus: More delays for USPS fleet contract, Boston looks to sell parking garage, state and local budget deficits, and more.

In this issue:

  • Technology: A Federally-Owned 5G Network Would Be a Disaster
  • Economic Recession and COVID-19: Examining State and Local Government Tax Revenues, and How Theme Park Re-Openings Would Help California
  • Transportation: How to Effectively Contract Mass Transit Services
  • News and Notes
    • Local Government: Maryland K-12 Public-Private Partnership Gets Board Approval, Boston Parking Garage Sale Set to Fund Affordable Housing, Illinois Municipality Looks to Privatize Marina
    • Federal Government: Further Delays for USPS Fleet Contract, Defense Agencies Seek Health Care and Information Technology Contracts
    • Prisons and Corrections: Pressure on Pennsylvania Prison to De-Privatize, Mississippi Accused of Loose Contract Enforcement
  • Quotable Quotes

A Federal Government-Owned 5G Network Would Be A Disaster

The U.S. Department of Defense (DOD) recently issued a request for information (RFI) related to the potential establishment of a federally-owned 5G network.  A nationalized 5G network would cost taxpayers billions, slow down innovation, and put the U.S. behind China in the race for 5G.  Additionally, it would likely disrupt private competition and financing in ways that penalize established providers. Reason Foundation’s Rebecca van Burken writes that auctioning spectrum to established private sector 5G providers would be the best way for the federal government to ensure efficient and cost-effective 5G delivery and performance for all users.

COVID-19 and the Recession’s Effect on State and Local Tax Revenues  Exaggerated

While the economic and market volatility related to the COVID-19 pandemic will likely continue for some time, revenue losses to state and local governments appear to have been much milder than some experts predicted in the spring of 2020. Census Bureau data released last month show that combined state and local revenues were less than 1 percent lower in 2020 than they were in 2019. Total revenues equaled $1.12 trillion in tax revenue during the first nine months of the 2020 calendar year, which is just $8 billion less than they collected during the same period in 2019. In a new article, Reason’s Marc Joffe dives into the Census Bureau data and debates over the need for federal stimulus and aid for state and local governments that Congress has been calling for.

Safely Reopening Theme Parks Would Help Anaheim, California

Reason Foundation’s Marc Joffe explains why cities like Anaheim and the state of California should consider finding ways to safely re-open theme parks, which “do not seem to be a major source of contagion anywhere around the world.” Not only has the Disney World theme park in Orlando, Florida, been reopened since July 2020, but the park has also not been found to be instrumental in spreading COVID-19 among visitors or employees. While reopening theme parks would not stop all the budgetary problems the city of Anaheim is experiencing, it would give cities that depend on theme parks some fiscal relief.

Contracting Mass Transit Services

A pair of new publications authored by Reason Foundation’s Baruch Feigenbaum and Joe Hillman outline the processes and strategies instrumental to effectively contracting mass transit services. Though successful strategies will vary greatly by agency, the principles of public control, promoting competition, and ensuring transparency should be at the heart of any successful transit contracting strategy. Done well, contracting mass transit services can improve the quality, efficiency, and cost-effectiveness of transit for taxpayers and riders.

In “Contracting Effective Transit: A How-To-Guide,” the authors build a step-by-step template to guide agencies to effective contracting decisions within transit, supplemented by case studies of transit agency contracting decisions.

The second publication, “Contracting Mass Transit Services,” further explores transit contracting with a greater emphasis on the “why” of contracting transit, while also using case studies and data to guide agencies through some of the obstacles that prevent successful contracting practices from taking shape.

News and Notes     

Local Government

Maryland County Approves K-12 Schools P3: In late October, Maryland’s Prince George County Board of Education approved a public-private partnership (P3) that would lead to the building and/or remodeling of five area schools by a private consortium, as well as provide maintenance services for them for 30 years.  The deal is estimated to be worth $1.24 billion.

Boston Looks to Sell Parking Garage to Help Build Affordable Housing: In a December press release, Boston Mayor Martin J. Walsh announced the city was looking to sell its Lafayette parking garage and issued a request for proposal (RFP) for the transaction. The 150,000+ square-foot garage sits in downtown Boston and offers roughly 1,030 parking spaces. First constructed 40 years ago, the garage currently operates under a ground lease and profit-sharing agreement set to expire in 2022. The RFP asks potential partners to view the asset in terms of how it can be best utilized in the future while keeping the asset operating mainly as a parking garage. Revenue from the sale would predominantly go to developing and preserving affordable housing in the area. The city hopes to complete the transaction in the latter half of 2022.

Pennsylvania City Looks at Potential Wastewater System Sale: York, Pennsylvania, issued a request for proposals (RFP) last August to seek a buyer for the city’s water system and treatment plant. Still looking for a buyer in November, the city council approved a change to the city’s $10 million sewer bond that allows the use of funds for repairs, including the replacement of effluent filters containing sand “past its usable life.” In addition to a potential private buyer, at least five municipalities have expressed interest in acquiring the infrastructure, each separately approving measures to create a regional authority.

Illinois Town Lays Out Process for Privatizing Marina: In December, the Quincy (IL) Park Board released an RFP for a private partner to operate and maintain the town’s Art Keller Marina. Proposals are due this month and officials hope to choose a partner that could take over operations in February 2021. While the Marina has mostly managed to break even over the years, financial losses are projected for 2020 and 2021, and slip rentals have dropped 45 percent in the last nine years.

Local North Carolina Transportation Agency Looks to Acquire Private Ferry Service: Created in 2017, the Bald Head Island Transportation Authority was close to finalizing a $47 million deal in December to acquire ferry and barge assets from a private provider, as well as 36 acres of land and other vessels and tram assets, Inframation News reported. North Carolina Treasurer Dale R. Folwell weighed in at the end of the month, calling for the assets to be given to the authority instead.

Federal Government

USPS Truck Contract Gets Delayed (Again): Already subject to numerous delays before the COVID-19 pandemic, the United States Postal Service revealed to in December that the estimated $6 billion contract to provide replacement vehicles for the agency’s aging fleet, which was mostly built between 1986-1994, will be delayed until at least the first quarter of the 2021 calendar year. The deal looks to add as many as 180,000 new vehicles to replace the current fleet of about 140,000, and USPS will consider issuing awards to multiple companies. While several potential bidders have dropped out of the procurement process, three bidders still remain—a joint venture of the Wisconsin-based Oshkosh Corp and Ford Motor Company; Ohio-based Workhorse Group; and Turkey-based Karsan.

Pentagon Releases Updated Draft RFP for Tricare Support: In December, the Defense Health Agency released an updated draft request for proposals to seek feedback for new managed contracts with private organizations, Bloomberg Government reported. Currently, Health Net Federal Services (a Centene subsidiary) and Humana Military Healthcare Services operate under separate contracts in the western and eastern United States, respectively, with a combined cost of $58 billion to serve over one million military members. The Health Net contract is scheduled to expire in 2023, and Humana’s expires in 2022.

Defense Department Releases RFP for “Fourth Estate” Agencies: The Defense Information Systems Agency (DISA) released an RFP in December for a potential 10-year, $11 billion contract to modernize and upgrade IT networks for “fourth estate” agencies within the DoD—a term that refers to defense agencies falling outside of the scope of the main military branches (Army, Navy, Air Force) and military intelligence agencies, which includes the Office of the Secretary of Defense, the Defense Logistics Agency, and DoD’s contracting agencies (Defense Contract Audit and Management Agencies). DISA hopes to award the contract in late 2021.

Prisons and Corrections

Pennsylvania County Hires Firms to Bring Jail In-house: In December, the Delaware County Council in Pennsylvania approved funding to hire a consulting firm to help facilitate moving jail operations back to the county. The five-year, $259 million contract with GEO group is not set to expire for another three years, but a clause allows the county to exit the contract with six months’ notice. The jail’s warden resigned last year after reports of abusive behavior toward employees. Critics of the move point to the rushed nature of the plan and the continued expense of paying consultants (an additional consulting contract for the same purpose was issued last year), while councilmembers defend the “de-privatization” plan as a major platform item that led to their election.

Mississippi Private Prison Continues to Face Considerable Staffing Concerns: A report by the Marshall Project released in early December shows the privately managed Marshall County Correctional Facility continues to face severe staffing shortages, despite contractual obligations to maintain minimum staffing levels. The rural, roughly 1,000-bed state prison requires at least 19 corrections officers at any given time to secure the facility, though at least one guard in the facility repeatedly worked overnight shifts with only five other officers on duty for the entire facility. Safety provisions requiring escorts for health care and other service workers inside the facility have also suffered due to understaffing, with one officer getting severely beaten while escorting a nurse in 2019 after a prisoner escaped his cell. The report faults the state, which “failed to enforce contractual penalties that punish short staffing,” while noting understaffing remains a problem in many correctional facilities, both public and private.

Quotable Quotes

“We’re not certain we will sell (the sewer system). But in the meantime, we can’t afford to be fined if we begin to dump raw sewage into the Susquehanna.”

—York (PA) City Council President Henry Nixon, referring to the potential sale of the city’s wastewater system and treatment plant in the York Dispatch 

“By contract, MTC (Management and Training Corporation) must have a set number of guards on every shift at its three Mississippi prisons. When a mandatory position isn’t filled, the company is supposed to repay the state the wages plus a 25 percent penalty. At the prison where (prison guard) Adams was attacked, the company paid some refunds to the state for several years. But MTC invoices show those repayments dropped from more than $700,000 in 2017 to only $23,000 in 2018, even as the staff vacancy rate rose…In the company’s two other Mississippi prisons, MTC didn’t repay a penny from 2013 to 2019, despite understaffing.”

—Joseph Neff And Alysia Santo in the Marshall Project report, “No-Show Prison Workers Cost Mississippi Taxpayers Millions

“Too many generations in my district have been in old and outdated schools. Generations that have been lost, that could have achieved a whole lot more, who didn’t have a fair chance in my district. I refuse to have my grandchild do the same thing.”

—Prince George’s County (MD) Board of Education member Belinda Queen, on approval of the county’s new K-12 school P3 in The Diamondback

“You’ve got varying IT networks with varying levels of maturity and levels of security, and with the goal being integration, this is the way to get after it to ensure we have cost efficiencies and accountability to bring us up to standards.”

—Col. Jon Autrey, chief of the Defense Enclave Services Office at DISA, referring to his office’s current RFP for IT consolidation and modernization in MeriTalk