Privatization and Government Reform News: Municipal golf losses, sewer sale, and more

In this issue:

Local Governments Lost Millions of Dollars Running Golf Courses in 2020

Local governments across the country lost millions running golf courses in 2020, a Reason Foundation analysis found. In a recent analysis, Senior Policy Analyst Marc Joffe reports that in a sample of 217 golf courses and systems run by local governments, 70 percent (155) reported losses totaling $61 million for the year. The 62 municipal golf operations that made money reported a combined income of $16 million. The analysis includes an interactive map with results for all 221 local course systems identified. In an additional piece, Joffe details how $20 million of the losses came from public golf courses in California.

Pennsylvania House Bill Seeks To End State Liquor Monopolies

“Pennsylvania House Bill 2272 would wisely remove the state’s government control of distilled spirits sales and distribution but needs supporting legislation to replace the state’s needless monopolies,” writes Reason Foundation’s Austill Stuart in a one-page backgrounder. Instead of calling for an end to the state’s distilled spirits monopolies and replacing them with a competitive framework, however, the bill would merely make the monopolies illegal. It also lacks the language to specify how private firms could actually enter the liquor retail or wholesale industries.  

Philadelphia Suburb Confronts Criticism Over Potential Sewer Sale

Towamencin Township, Pennsylvania, is conducting town hall meetings to discuss the possible sale or lease of the Philadelphia suburb’s sewer system. While local officials see the opportunity to help shore up finances and better manage sewer management risks, public criticism has grown louder as a final decision approaches. In a new article, Stuart shows why some criticisms of the deal mischaracterize water and sewer public-private partnerships and why it is important for public officials to communicate the costs and trade-offs involved if the government continues to operate the system. 

NEWS & NOTES

LOCAL GOVERNMENT

Fort Lauderdale Selects Partner Water Treatment P3: Fort Lauderdale’s City Commission selected a consortium of IDE Technologies, Kiewit, and Ridgewood Infrastructure to design, build, finance, operate and maintain a $385 million replacement water treatment plant (with a 50 million gallons per day capacity) over a 32-year period. The consortium and the public works division must still negotiate the final terms for the agreement.

Loudoun County Approves School-to-Housing Conversion: Loudoun County, Virginia, voted to approve a transfer of a vacant K-12 school to a private developer to create affordable housing. The agreement calls for private firm Capretti Land, Inc. to convert the vacant Old Arcola School and a surrounding six-acre parcel into 74 rental housing units. Capretti submitted the plan as an unsolicited proposal. It also calls for the construction of two bus stops and facilities for both recreation and recycling. The land under consideration must now undergo zoning approvals.

New Orleans Releases Solid Waste RFPs: New Orleans issued a pair of requests for proposal (RFPs) for solid waste pickup services in Service Area Two, which covers portions of the city east of the French Quarter and north of the Mississippi River. The area has had trouble maintaining consistent solid waste services and the city government is looking to find more reliable service by splitting it into two portions. The city hopes to evaluate proposals by early May.

STATE GOVERNMENT

LSU Utilities P3 Reaches Financial Close: The Louisiana State University (LSU) Board of Supervisors reached financial close with CenTrio and Tiger Energy Partners in March on a 30-year, $810 million public-private partnership to upgrade and operate the school’s water and energy utilities. Tiger—a joint venture of Bernhard Energy and Johnson Controls—will design initial (and potentially future) upgrades to the school’s utility systems, which include gas-powered steam and water chilling plants. CenTrio will finance, operate, and maintain the systems in a deal expected to save over $1.5 million annually, while also improving efficiency and reliability.

University of Louisville Shortlists Utility Project Partners: The University of Louisville released a shortlist of four potential partners for its utilities P3 project. The P3 partner will operate under a 50-year agreement to manage and operate the steam and chilled water system for the school’s main campus. The school also wishes to secure an upfront payment to contribute to its endowment, for which it will pay $5.9 million annually to cover the project’s financing, as well as a separate fee for operations, maintenance, and lifecycle improvements. The school hopes to choose a preferred partner by the end of the year.

Oregon Spirits Initiative Survives Challenge: The Oregon Supreme Court recently rejected a challenge to a ballot initiative that would end the state’s distilled spirits retail monopoly. The initiative would allow private grocers to sell distilled spirits, which the state has handled since Prohibition’s repeal. The initiative needs to obtain 112,000 petition signatures by July 8 to make it on the state’s November 2022 ballot.  

One Mississippi Wholesale Spirits Bill Fails, Another Passes: After passing both chambers, Mississippi House Bill 512 died in conference late last month. The bill would have ended the state government’s monopoly on the wholesale and distribution of distilled spirits. Senate Bill 2844, which calls for the construction of a privately-operated warehouse for the state’s Alcohol Control Board, was adopted by a conference committee in early April after passing both houses. The warehouse would replace an existing structure and require $55 million in state general obligation bonds.

Florida University Closes on Housing P3: Florida Polytechnic Institute announced it has shortlisted six teams for a student housing public-private partnership project calling for 700 total new beds to be developed by the fall of 2026. The partner would also operate an additional 542 existing units refinanced through the combined transaction.

FEDERAL GOVERNMENT

GAO Report Notes Progress on Military Housing Privatization Problems: A March report by the Government Accountability Office (GAO) noted progress in improving oversight of the Department of Defense (DoD) private housing program. Starting in 2018 through March 2022, GAO issued four reports raising concerns about the DoD’s oversight of its private housing program, which includes about 99% of military housing. The March 2022 update notes progress in areas of concern, including housing oversight, clear communication with residents, and performance measurement. A total of 15 of the GAO’s 30 recommendations from previous reports have now been implemented.

IRS Collection Contractor Underperforming: A report by the U.S. Treasury’s Inspector General chided the Internal Revenue Service for improper recordkeeping and raised concerns about unscreened contract employees having access to taxpayer data. The report found from Fiscal Year 2017 through FY 2020, the program collected $969 million in revenue, netting $679 million total, but still falling well short of a projected $1.9 billion in collections. 

QUOTABLE QUOTES

“In addition to the projected annual cost savings of around $1.5 million in electricity, natural gas and maintenance, other benefits to LSU include budgeting predictability, improved reliability of its infrastructure, and built-in redundancy from generating excess capacity.”

–Louisiana State University’s Executive Vice President of Finance and Administration and Chief Administrative Officer Kimberly J. Lewis announcing the university’s 30-year utilities public-private partnership.

“Amongst many other flaws in various aspects of our government, the pandemic exposed our liquor system as outdated and the PLCB [Pennsylvania Liquor Control Board] as inept.  It has been 88 years since the end of prohibition, and it is time for this Commonwealth to modernize the sale of liquor once and for all.”

—Pennsylvania State Rep. Natalie Mihalek on her proposal to privatize Pennsylvania’s state-run liquor system.