In this issue:
- FEDERAL GOVERNMENT: Recovery Funds State and Local Governments Didn’t Need and the Broken Budgeting Process
- STATE GOVERNMENT: New Hampshire Should Not Run Cannabis Retail Shops
- DATA TRANSPARENCY: CUSIP Issues Prevent State and Local Government Transparency
NEWS & NOTES:
- STATE GOVERNMENT: Puerto Rico P3 Challenge Denied, PennDOT selects Major Bridge P3 Pre-Development Partner, New York Seeks Information Act Request Expediter and More
- LOCAL GOVERNMENT: Philadelphia Airport Pursues Parking P3, Syracuse Solid Waste Woes Signal Possible Contracting, Wichita Rejects Municipal Golf Privatization, and Virginia County Finalizes Park P3
By early last year, most state and local governments had not experienced the widespread revenue shortfalls many predicted the COVID-19 pandemic would cause. But Congress passed the American Rescue Plan Act (ARPA) in March 2021 anyway, flooding state and local governments with another $350 billion without any clear provisions tying the federal funds to governments that were actually experiencing revenue losses. In testimony presented to the U.S. House of Representative’s Oversight and Reform Committee, Reason Foundation’s Marc Joffe outlines a laundry list of problems in ARPA’s aid to state and local governments.
In a recent article, Joffe also discusses the continuing worsening of the federal budgeting process, which recently produced a $1.5 trillion omnibus spending bill that “is likely to add hundreds of billions to the deficit over CBO’s 10-year projection window.” Joffe details the bleak outlook going forward for federal budgeting but notes several avenues for improvement.
New Hampshire’s legislators are currently considering a bill to legalize adult recreational cannabis through a state retail monopoly model that is similar to how the state handles distilled spirits. Unlike most distilled spirits “control” states—where governments own and/or operate wholesale distribution, retail sales, or both for the liquor market—New Hampshire’s distilled spirits retail monopoly operates more like a competitive firm than most state-run monopolies, keeping prices low, and attracting significant (over 50% revenues) sales from residents of neighboring states. In the proposed marijuana bill, the state’s liquor control board, the New Hampshire Liquor Commission (NHLC), would sell cannabis as well as distilled spirits, while keeping cannabis growing, distribution, and testing in the private sector’s hands. A recent article by Reason Foundation’s Director of Drug Policy Geoff Lawrence and Austill Stuart explains why the plan is misguided and having NHLC run the recreational cannabis retail function would create undue risk for the state and taxpayers.
While securities exchanges such as the New York Stock Exchange provide investors with easy, real-time access to securities pricing, data on state and local government debt is a tougher find. One obstacle to making such data available rests at the feet of the American Bankers’ Association, which keeps its CUSIP (Committee on Uniform Securities Identification Procedures) numbers used to identify bond issuances on a tight leash, usually requiring access to expensive subscription services to even view them, and then only through gated services. The lack of good data availability makes analysis of state and local debt needlessly difficult. Reason’s Joffe explains why class action lawsuits against CUSIP could eventually lead to greater transparency and analysis of state and local government debt data.
NEWS & NOTES
PREPA P3 Challenge Ended in Ruling: Puerto Rico bankruptcy Judge Laura Taylor Swain struck down a Puerto Rican Senate challenge to a June 2020 deal that outsourced operations of Puerto Rico’s electricity distribution and transmission lines to Luma, Inc. Senators sought to have the three-year, $136.3 million contract declared “null and void” due to failure to register it with the Puerto Rico Digital Real Estate Registry, which Swain saw as a technical violation, unfit for nullification of the agreement. Swain also ruled the challenge would violate a bankruptcy stay that protects the Puerto Rico Electric Power Authority from lawsuits.
PennDOT Selects Major Bridge Replacement Finalist: The Pennsylvania Department of Transportation (PennDOT) announced it has selected Macquarie-led consortium Bridging Pennsylvania Partners (“BPP”) as its preferred proponents for its Major Bridge P3 Initiative. The project will replace up to nine rural bridges located on various Interstates: 78, 79, 80, 81, 83, and 95. PennDOT and BPP’s pre-development agreement calls for the first of multiple packages of bridges to be under contract by December, with construction starting sometime between fall of 2023 and the spring of 2024. This P3 follows the success of PennDOT’s Rapid Bridge Replacement P3, a $1 billion deal finalized in 2015 that replaced over 550 bridges on roads in predominantly rural areas. Unlike the Rapid Bridge Replacement Ps, however, toll revenues will used to offset the costs of the project.
New York Seeks Partner for Streamlining Public Information Requests: In early March, the New York State Office of Information Technology issued a request for quotes in hopes of securing a partner to provide a software platform capable of facilitating public information request receipt and response. The move follows a change made by Gov. Kathy Hochul last October that allows agencies’ general counsel to process Freedom of Information Law requests, which previously were handled by the governor’s office.
West Virginia Bill Gives Greater Leeway for Parks Contracting: West Virginia Senate Bill 485, which currently sits in the Senate Finance Committee would give the state’s Department of Natural Resources (DNR) added ability to contract out parks and park facilities operations to private entities. Operating contracts for existing park facilities would be allowed to increase in term from 10 to 30 years, with renewals capped at 20 years (previously 10 years). DNR would also be able to enter contracts for new facilities at any state parks or forests under its jurisdiction, currently limited to just six (of 35) state parks. While initial contracts to construct new facilities would also raise term limits to 50 years (from 25), renewing such contracts would have term limits reduced from 10 years to five.
Philadelphia Airport Officials Pursue Parking P3: In late January, Philadelphia’s Department of Aviation paid off over $58 million in bonds issued by the Philadelphia Parking Authority (PPA). The move signals the probable privatization of the Philadelphia International Airport’s (PHL’s) parking assets, which PPA has operated since the 1970s. Officials see the need for modernizing parking facilities and transitioning some customer parking spaces to freight handling, which the PPA prohibits the airport from doing. But by retiring the PPA’s debt, the airport can now enter a competitive bidding process to select a replacement operator. In another potential transaction announced last year, Philadelphia International is looking to acquire additional land for its freight expansion plans.
Syracuse Considers Solid Waste Privatization as Performance Continues Decline: Syracuse has faced considerable problems with its solid waste collection in recent years. A couple of years after the state’s review board demanded the city improve services, Syracuse’s Department of Public Works commissioner rated the solid waste division a “C minus” in March, while the deputy public works commissioner rated its performance as “poor.” This month, consultants Barton & Loguidice presented local leaders with a report that examined several approaches to improving operations, including full privatization, saying the city might save around $1.5 million per year if “bids align with (nearby) Utica,” but could pay over a half-million more per year if the bidding resembled Buffalo’s experience.
Wichita Rejects Municipal Golf Course Privatization: Early this month, the Wichita City Council rejected a proposal to privatize four of the city’s municipal golf courses in a 5–2 vote. City Manager Robert Layton said that the proposed deal with KemperSports, which manages over 120 golf courses in the U.S., would have increased the courses’ profitability nearly two-fold, from $400,000 to $750,000. While the city’s courses have been in black ink during the COVID-19 pandemic, they lost money as recently as 2019. In addition to greater profitability, KemperSports CEO Josh Lesnik claimed the deal would also lead to a wider base of course users by appealing to more young people. Critics of the deal, including Wichita Mayor Brandon Whipple, cited non-compete clauses for KemperSports employees (i.e., the city couldn’t hire them back if operations returned in-house), and an annual $200,000 in management paid to the company without them assuming the revenue risk for the courses.
Virginia County Finalizes P3 for Public Park: Earlier this month, the Fairfax County Parks Authority and the Great Falls Grange Foundation (GFGF) signed an agreement for the local nonprofit to operate the Great Falls Grange, a public park and events space, located in the northern part of suburban Washinginton D.C., serving 1.1 million residents. GFGF has worked to restore the park grounds as well as an old schoolhouse on the property that dates to the late 1800s, and an additional nearly century-old building for events.
“[The agreement between the Philadelphia airport and parking authority] did not allow us to function the way we needed to function.”
– James Tyrell, chief revenue officer for the Philadelphia International Airport, on an agreement with the city’s parking authority that prevents the airport from transitioning to more freight handling.
“I commend Governor Hochul for her commitment to breaking down the barriers [and] to sharing information and data with the public in a timely way. ITS is proud to assist the governor in executing her vision of what is possible when openness and transparency becomes the rule and not the exception.”
–Angelo Riddick, New York’s Information Technology Services chief information officer, on efforts to expedite freedom of information requests.
“Taxpayer funds should always be used judiciously. Giving $350 billion in emergency aid to state and local governments that, for the most part, were not facing a fiscal emergency was not a judicious use of federal taxpayer money.”
–Reason Foundation’s Marc Joffe in testimony to the U.S. House Committee on Oversight and Reform on the American Rescue Plan Act’s spending.