Privatization and Government Reform Newsletter (Issue 34, June 2018 Edition)
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Privatization and Government Reform Newsletter

Privatization and Government Reform Newsletter (Issue 34, June 2018 Edition)

Highway finance and public-private partnerships, pension problems in Austin, housing the homeless, managing municipal golf courses and more.

In this issue:

  • INFRASTRUCTURE: New Reason FAQ on Highway PPPs
  • TRANSPORTATION: APR Air Transport, Transportation Finance Chapters Released
  • PENSIONS: Reason, TX Public Policy Foundation Report on Austin’s Pension System
  • SOCIAL WELFARE: Using PPPs to Manage Homelessness
  • LOCAL GOVERNMENT: How Detroit Can Restore Municipal Golf Courses

INFRASTRUCTURE: New Reason FAQ on Highway Public-Private Partnerships

As state and local governments increasingly face fiscal challenges in making improvements to existing highways, adding highway capacity, and ensuring projects are sufficiently maintained to avoid deferred maintenance problems, PPPs have emerged as a policy tool to help ensure efficient project delivery as well as maintenance and upkeep of highways over their design life.

While common in much of Europe and elsewhere, highway PPPs remain a newer phenomenon in the U.S., and one not always well understood by both advocates and critics alike. In a new report, Reason Foundation’s Austill Stuart and Baruch Feigenbaum answer some common questions individuals often pose about highway PPPs, while clearing up common misconceptions made about PPP agreements.
» Full Report

TRANSPORTATION: Latest Developments in Aviation, Transportation Finance

In May, Reason Foundation released the Air Transportation and Transportation Finance sections of its Annual Privatization Report 2018, now in its 31st year of publication. The two sections, both authored by Reason Foundation’s Robert Poole, provide detailed accounts of worldwide PPP developments concerning airports and highway financing, as well as commentaries concerning contemporary issues in the two respective areas, including asset recycling, the increased use of public pension funds in transportation finance, air traffic control reform, and the federal airport privatization pilot program.
» Annual Privatization Report 2018: Air Transportation
» Annual Privatization Report 2018: Transportation Finance
» Annual Privatization Report 2018 Homepage

PENSIONS: Reason, TPPF Release Report on City of Austin’s Pension System

In a new report, the Pension Integrity Project at Reason Foundation and the Texas Public Policy Foundation (TPPF) provide a detailed pension analysis of the City of Austin Employees’ Retirement System (COAERS), which currently has approximately $1.3 billion in unfunded pension liabilities and needs reforming to ensure its long-term solvency and longevity. The report provides a detailed examination on the various factors that contributed to the city’s pension debt, and using advanced modeling methods it evaluates a range of potential policy options that can be applied today to prevent more difficult decisions in the future.
» Full Study
» News Release 

SOCIAL SERVICES: Using PPPs to Manage Homelessness

For the first time this decade, homelessness is rising, especially in the western U.S. With the federal government providing only $2.4 billion of the estimated $20 billion needed to combat homelessness, state and local governments with hard budget restraints must face the challenge themselves. As state and local governments find providing services and meeting financial obligations to current and retired civil servants increasingly difficult, funding for services to help find housing for homeless citizens can often lag.

Private organizations can offer an alternative that may prove more effective and less costly. In a new commentary, Nicholas DeSimone offers several examples of communities that have entered into PPPs with private organizations to offer housing and a wide range of other services designed to keep the formerly homeless population housed.
» Full Article

LOCAL GOVERNMENT: Detroit Must Improve Long Game to Restore Municipal Golf Courses

Once popular and well-maintained, Detroit’s four municipal golf courses have deteriorated, barely avoiding full closure in late March. To attract the estimated $18 million needed in upgrades and improvements, the city needs to think long-term, writes Reason Foundation’s Austill Stuart in a new article. While a new multi-year management contract likely benefits the city in terms of cost savings, to attract the millions needed, the city should be thinking in terms of decades, not two-year increments.
» Full Article

NEWS & NOTES

U.S. DOT FTA Releases PPP Guidance: In June, the U.S. Department of Transportation’s Federal Transit Administration (FTA) issued a final rule on its Private Investment Project Procedures (PIPP), intended to help the federal government encourage more private investment and participation in public transit project planning, construction, design, finance, maintenance, and operations. The rule would allow recipients of federal grants to identify FTA regulations serving as roadblocks to private investment or the use of a PPP, giving the FTA administrator authority to grant the modification or suspension of certain requirements.

LAX People Mover Reaches Financial Close: In early June, the city’s Los Angeles World Airports (LAWA) and LAX Integrated Express Solutions (LINXS)—a private consortium made up of Fluor, Balfour Beatty, ACS Infrastructure Development, Dragados USA, HOCHTIEF PPP Solutions, Flatiron, and Bombardier—reached financial close on the airport’s $4.9 billion Automated People Mover (APM) rail project, the law firm Nossaman, LLP noted on its Infra Insight Blog. The project calls for a new 2.25-mile railway to be constructed, with three stations located inside LAX’s Central Terminal and one each to parking, rental car, and Metro facilities, as well as a new pedestrian walkway at the airport. LINXS would operate the APM, using revenues from milestone and availability payments provided by LAWA to finance its debt obligations.

Ravenhall Prison Wins Award for Australia’s Best PPP: In late May, Infrastructure Partnerships Australia gave Ravenhall Correctional Centre in Melbourne the award for Australia’s Best Infrastructure Project, citing the private prison’s innovative approach toward inmate care and its on-schedule, on-budget construction. Ravenhall, built and run by GEO Group, operates under a contract that provides the operator payment incentives for reducing recidivism in its prisoners, designing every part of its Ravenhall facility to work toward the goal of rehabilitation, including multiple reintegration programs and a unit dedicated to forensic mental health.

D.C. Nears New Contract for Circulator Bus System: If the D.C. Council approves, the operation of the District’s Circulator bus system will change hands this summer, the Washington Post reported. After 13 years with First Transit, D.C. plans to enter a five-year, $140 million contract with RATP Dev, citing problems with bus upkeep under the current arrangement with First Transit, which has amassed numerous fines from taking buses out of service. A purchase of 40 new Circulator buses coincides with the new contract, which would begin in July and would make RATP Dev full operator of the Circulator in October. Management and oversight will also change. The D.C. Department of Transportation (DDOT), which funds the Circulator, will replace D.C. Metro in monitoring and overseeing the contract. Although not required by the contract and already standard practice for RATP Dev, DDOT has encouraged the new operator to hire on current Circulator drivers. Some members of the community and Amalgamated Transit Union International have pushed back against the change in private operators, wanting the system to be transferred into public hands when the First Transit contract ends, also citing concerns over reduced benefits. The council has until mid-July to decide on the contract.

Las Vegas Issues Courthouse RFP: In late April, Inframation News reported that the city of Las Vegas released a Request for Proposals for designing and building a new, up-to $55 million, 100,000 square foot courthouse to be leased back to the city for up to 25 years, with purchase options available to the city after the third year. Proposals were due in mid-May, and the city hopes to finalize an agreement and begin construction later in 2018, eyeing a 2021 completion date.

Baltimore Mayor Seeks Parking Leases to Help Neighborhood Development: In May, Baltimore Mayor Catherine Pugh announced plans to lease three city-owned parking garages to private operators to raise $55 million for a new neighborhood investment fund, the Baltimore Sun reported. City Council members pushed back against the plan, wanting more guidance on how the money would be used and what neighborhoods would receive the funding. The city’s spending board, which is controlled by the mayor’s office, is expected to approve the deal later in June.

Nonprofits in PA County Exit Re-entry Contracts in Response to RFP: In late April, and in response to the release of a revised RFP that followed the rejection of all previous proposals, three local nonprofits currently providing re-entry services in Lancaster County, PA gave notice of their exit from the program and from further participation in the RFP process, Lancaster Online reported. The county received two proposals from the revised RFP: one from GEO Reentry Services, which bid on parolee services, and another from local nonprofit New Choices/New Beginnings (NC/NB), which bid on services for incarcerated inmates. RMO, which submitted one of the bids rejected last year, cited a low limit on housing costs for parolees for prompting their exit. YWCA said it wouldn’t submit a proposal because the RFP offered no funding for sexual assault victims counseling, while Compass Mark cited that the RFP did not provide funding for services from inmate children pre-sentencing, only post-sentencing. The committee drafting the RFP will evaluate the two proposals and issue findings concerning the bids’ favorability soon.

NASA Issues Satellite RFP, Lunar Landing Payload DRFP, RFI: The National Aeronautics and Space Administration (NASA) made two key moves involving PPPs over the last two months. First, in May, the agency issued an RFP asking for private partners to offer to host satellite services for its Tropospheric Emissions: Monitoring of Pollution (TEMPO) instrument. The commercial satellite would carry TEMPO into space, where it would face the earth and provide an unobstructed view of the planet 22,000 miles above its surface to measure atmospheric conditions, providing data several times per day. TEMPO will use the Hosted Payload Solutions (HoPS) contract of the U.S. Air Force’s Space and Missile Systems Center in El Segundo, CA, asking the 12 private providers involved with HoPS to issue proposals. After a July deadline for proposals, NASA hopes to make a decision on a provider late in 2018 or early in 2019.

Second, in late April, NASA issued a Draft Request for Proposals (DRPF) for commercial partners to provide transport services for future payloads of equipment to the lunar surface, ultimately anticipating awarding multiple 10-year contracts for the services. The agency followed up in June with a Request for Information (RFI) that will be used to assess the availability of potential payloads, emphasizing existing technologies to handle delivery without further development and to be ready for launches as soon as 2019.

Pay-For-Success Fund Receives Strong Financial Support: Maycomb Capital’s Community Outcomes Fund, an investment vehicle for pay-for-success and similar social impact programs, received some significant financial commitments in May: $30 million from (former Microsoft CEO) Steve and Connie Ballmer and $10 million each in loan guarantees and commitments to fund future pay-for-success agreements in health and human services from the Kresge Foundation, Impact Alpha reported. Managing partner Andrea Phillips has played an active role in previous pay-for-success deals, including the Rikers’ Island Social Impact Bond, as well as other recidivism reduction and early childhood education efforts. The Fund chose Massachusetts Pathways to Economic Advancement for its initial investment, a program managed by Jewish Vocational Services, which provides vocational language classes, job coaching and searching assistance, and job placement services.

QUOTABLE QUOTES

“(A) study done for the TSA last decade estimat(ed) that 100% screening at all TSA-served airports would cost the agency (or the airports) between $5.7 billion and $14.9 billion per year. Doing a rough extrapolation of the Atlanta, Miami, and Orlando figures to all 450 TSA-served airports, the estimated annual cost of 100% employee screening by contractors would be about $135 million—a far cry from the $6 billion–$15 billion estimate provided by TSA.”
–Robert W. Poole, Jr. in Reason Foundation’s Annual Privatization Report 2018: Air Transportation, p. 20.

“There are numerous opportunities where the private sector can engage in the public transportation industry, ranging from private operators participating in the planning and transportation improvement program process to a public-private partnership, in which a private firm participates in the design, building, finance, operation, and maintenance aspects of a transit facility.
–Office of Public Affairs, U.S. Department of Transportation. “Federal Transit Administration issues the Private Investment Procedures (PIPP) Final Rule.” Transportation.gov. June 5, 2018.

“Note, lunar entrepreneurs and researchers alike: it has never been easier to send amazing payloads to the moon, and unlock the secrets of our celestial companion, and prepare for human exploration soon thereafter!”
–Thomas Zurbuchen, head of NASA’s Science Mission Directorate, in a tweet dated April 30, 2018, following the release of the Commercial Lunar Payload Services DRFP.

“I would encourage systems across the country to integrate diversion practices as the first response to families experiencing a homelessness crisis. By that, I mean embed diversion at every front door where people experiencing homelessness access services.”
–Helen Howell, Executive Director for the Seattle-based nonprofit, Building Changes, in “Extending Our Successes With Diversion To Help Families Quickly Exit,” published on the website for the U.S. Interagency Council on Homelessness, June 4, 2018.

Austill Stuart is a policy analyst at Reason Foundation, a non-profit think tank advancing free minds and free markets.

Leonard Gilroy is Senior Managing Director of the Pension Integrity Project at Reason Foundation, a nonprofit think tank advancing free minds and free markets. The Pension Integrity Project assists policymakers and other stakeholders in designing, analyzing and implementing public sector pension reforms.