Privatization and Government Reform Newsletter: State Government Update, Harrisburg’s Water Woes, and More
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Privatization and Government Reform Newsletter

Privatization and Government Reform Newsletter: State Government Update, Harrisburg’s Water Woes, and More

Plus, conservative backlash to public-private toll roads, how to solve blue-green algae problems in Florida, and more.

In this issue:

Main Articles:

  • Annual Privatization Report 2019: State Government Update 
  • Water: Harrisburg’s Dilemma, P3s for Florida Wetlands Restoration
  • Transportation: A Conservative Case for Highway Tolling
  • Environment: P3s Offer Way to Tackle Blue-Green Algae

News and Notes:

  • Water: Maryland Establishes “Smart Ponds,” San Antonio Completes Private Pipeline, St. Clairsville Delays, Harrisburg Rejects Privatization, Godfrey Sells System
  • Government Reform: Federal “Yellow Pages Test” Legislation Introduced
  • Higher Education: Iowa Finalizes Utilities P3s
  • Corrections: Alabama’s Shortlist for New Prisons, Arkansas Counties Seek Private Prison
  • Military: Private Housing Fraud Allegations Prompt Investigation

Main Articles

Annual Privatization Report 2019: State Government

The latest chapter of Reason Foundation’s Annual Privatization Report 2019—now in its 31st year—reviews developments in privatization and public-private partnerships at the state level. The state government report includes an update on budgetary issues and the latest news on dozens of decisions made by state governments on the privatization and outsourcing of government services and infrastructure, including transportation projects, public higher education, liquor control, privately-managed Medicaid and public assistance programs, lotteries, and more.

» Annual Privatization Report 2019: State Government 

Harrisburg’s Water Problems Require Bold, Long-Term Vision

Harrisburg, Pennsylvania, like many cities in the eastern U.S., has faced many problems with its aging water and wastewater systems, including the regular discharge of raw sewage into local waterways after heavy rains. While the Environmental Protection Agency has cut the city some slack over the years in fixing its problems, Harrisburg will need to find a way to start making major improvements soon. Though the city recently rejected a sale of the combined systems to a private company (see more in News and Notes below), Reason Foundation’s Austill Stuart explains why private sector help will likely need to be a component of any long-term solution to fix Harrisburg’s sewage discharge problems since even the city’s proposed $300 million dollar plan falls well short of what

» Harrisburg’s Water and Wastewater Systems Need Major Investment

A Conservative Case for Highway Tolling

Federally-funded highways have been the norm for so long in the U.S. that many residents possess a natural tendency to oppose the introduction of tolls on highways. Increasingly, conservatives in states like Connecticut, Florida and Texas are opposing public-private partnerships and toll roads. In a new policy brief, Reason Foundation’s Robert Poole explains why attacks on tolling from conservatives are inconsistent with their principles and details a value-added tolling approach conservatives should support. Poole writes, “This policy brief reviews conservative opponents’ arguments, finding some of them to be justified and others to be mistaken. It provides some historical context on American tolling and cites economist Milton Friedman’s prescient assessment of the defects of the gas-tax model back in 1952. Building on those thoughts, this brief explains how tolling could be reformed consistent with basic conservative principles of limited government, decentralization, and markets.”

» A Conservative Case for Highway Tolling  

P3s Present Solution for South Florida’s Blue-Green Algae Problems

Blue-green algae, increasingly found in south Florida’s wetlands, represent a major problem to the state’s vital tourism industry. Formed when excessive nutrients settle in bodies of water, blue-green algae destroy wildlife and are harmful to pets and humans. Most agree that significant investments in storage and treatment facilities provide the best path forward to stopping the growth and spread of blue-green algae. In a recent commentary, Reason Foundation’s Vittorio Nastasi examines how public-private partnerships (P3s) could mitigate the region’s algae problem by providing effective infrastructure for treatment and storage. Previously, Pasco County, Florida, and Prince George’s County, Maryland, have used P3s to create wetlands and tackle problems related to water and stormwater pollution. The success in Prince George’s has led to a new state-level program (see more in News and Notes below).

» Florida Task Force Makes Good Start in Tackling Blue-Green Algae

News and Notes

Maryland Establishes “Smart Ponds” P3: Building off of stormwater P3 success in Prince George’s County, Maryland Gov. Larry Hogan announced a new state-level stormwater public-private partnership intended to help better protect the Chesapeake Bay from pollution and to reduce area flooding. The Maryland Department of Transportation will commit $4 million to the project, which initially calls for the installation of ponds at four Walmart locations and an additional privately-owned property. The partnership includes officials from the EPA, Walmart, and TNC/Opti Development Partners LLC—a venture formed by the nonprofit group, The Nature Conservancy, and Opti, a private company.

San Antonio Finishes Water Pipeline: In late September, the San Antonio Water System (SAWS) announced it had finished installing its 142-mile pipeline for its Vista Ridge project, which is expected to meet 20 percent of the area’s water demand, delivering 16 billion gallons of water per year to area residents. As mentioned in Reason Foundation’s Annual Privatization Report 2016: Local Government Privatization, the San Antonio City Council approved the 30-year, $3.4 billion design/build/finance/operate/maintain P3 project in 2014 between SAWS and Vista Ridge Consortium—a team led by Abengoa Water USA and Bluewater Systems.

Harrisburg Refuses Water Board Privatization: In November, Harrisburg Mayor Eric Papenfuse announced the city would reject privatizing Capital Region Water (CRW), the water utility that operates Harrisburg’s water and wastewater systems. The decision came after CRW said it would delay implementing a stormwater fee for six months, while going forward with a $300 million plan to improve the system prevent raw sewage spillages into nearby waterways that occur with heavy rains.

The EPA viewed the improvement plan insufficient, as it would only eliminate 60 percent of the raw sewage that spills from overflows of the Susquehanna River and nearby waterways, which would appear to be further hampered by delaying a stormwater fee that will serve as a dedicated revenue source to tackling raw sewage discharge. Even still, Mayor Papenfuse said he hopes to come to an agreement with the EPA in 2020 that will not include a sale or lease of the city’s systems to a private company.

St. Clairsville, Ohio, Announces Delay on Private Water Decision: In November, St. Clairsville councilmembers voted to delay a decision to sell the city’s water system to Aqua Ohio. The move came after the company said it would extend its offer into April 2020, citing the recent election of Mayor Kathryn Thalman, who opposes the sale.

Godfrey, Illinois, Sells Wastewater System: Last month, the village of Godfrey sold its wastewater system to Illinois American Water for $13.6 million, a deal approved in October by the Illinois Commerce Commission. Under terms of the sale, approved by the village last October, for each of the first 10 years following the sale the company will invest capital in the wastewater system (which serves approximately 6,200 customers), averaging out to around $2 million per year. In addition to wanting a private partner to better handle compliance with the state’s environmental rules, $5 million of the sale proceeds will be used to avert rate increases.

The University of Iowa Receives Approval for Utility P3: The University of Iowa’s Board of Regents and the state gave final approval for the school’s 50-year utilities P3. Partnering with ENGIE and Meridiam, the private consortium will pay the school an initial $1.2 billion, of which it plans to use a small portion to retire existing debt related to the infrastructure. The rest is slated to provide grants for programs that support the school’s strategic plan, which includes the elimination of all coal sourcing of power by no later than 2025 as part of a larger “zero-carbon” transition.

Lawmakers Introduce Federal “Yellow Pages Test” Legislation: This month, Rep. Mike Steube (RFL) and Sen. John Thune (RSD) introduced legislation in their respective chambers to subject much of the federal government to competition from the private sector in providing goods and services that are commercial in nature. The Freedom From Government Competition Act of 2019 (H.R. 5329, S.2990) would subject agencies to reviews over functions deemed as “commercial” to ensure they are providing the best value for taxpayers, while also allowing increased opportunity for the private sector to compete with the public sector for providing goods and services that are commercially available. “The bill has been likened to codifying a ‘Yellow Pages’ test, meaning that if the federal government is doing something that can be found in the Yellow Pages, or now in a simple online search, the product or service should be subject to market competition,” said Thune’s press release

Northern Virginia Bus Drivers Strike Over Privatization: In October, bus drivers operating routes in the Virginia suburbs outside of Washington D.C. staged a strike in response to outsourcing. Last year, the Washington Metropolitan Area Transit Authority (WMATA) entered a contract with private firm Transdev to operate the bus routes. Transdev and the bus drivers’ union have since been unable to agree to contract terms, and while the union has called on WMATA to intervene, the authority’s general manager, Paul Wiedefeld, sees no reason for WMATA to get involved in the negotiations.

Alabama Shortlists Four Teams for Private Prison Plan: In November, Alabama Gov. Kay Ivey and the Alabama Department of Corrections announced that it would seek bids from four companies to design, build, finance, and maintain three new prisons in the state, one of which would be primarily dedicated to rehabilitative purposes. The four teams will receive the state’s Request for Proposals this month, and responses are likely to be due in the spring of 2020.

Air Force Investigates Private Housing Fraud Allegations: Problems continue for the military’s use of private companies for housing. In November, the Military Times revealed that the Air Force is conducting an investigation of multiple allegations that employees of private company Balfour Beatty falsified maintenance records to obtain bonuses. Allegations from earlier in the year led the Air Force to warn that the company will be subject to formal dispute resolution actions from the defense arm unless there is “prompt and substantial improvement” from Balfour Beatty.

Arkansas Counties Move Closer to Private Jail Agreement: Bradley County and the Drew County Quorum Court separately voted to waive competitive bidding on a project so they can pursue a contract for a new private regional correctional facility to be built by Louisiana-based LaSalle Corrections. Bradley and its neighboring southeastern Arkansas counties are expected to share the facility to house 600 inmates, many of whom officials expect will be low-security risk prisoners from overcrowded prisons elsewhere in Arkansas. Only 45 beds would be set aside for Drew County inmates, and just 12 beds for Bradley County.

Quotable Quotes

“[This wastewater system sale will] serve residents well today and in the future. Illinois American Water will not only make the EPA mandated improvements to bring the system up to compliance, but their team of experts will ensure reliable service for years to come. This partnership also provides significant net proceeds to help fund other village needs and priorities. We welcome this expanded partnership with Illinois American Water in our community.”
– Godfrey Mayor Mike McCormick on the sale of the village’s wastewater system to Illinois American Water

“The (University of Iowa) is pleased to partner with ENGIE and Meridiam over the next 50 years in order to deliver on its strategic plan, which is focused on the success of students; research and discovery; diversity, equity, and inclusion; and engagement. With ENGIE and Meridiam, the university has found partners that share our values of investing in our people, improving sustainability, and transitioning toward a zero-carbon footprint.”
– University of Iowa President Bruce Harreld on the school’s recently approved 50-year utility management P3

“This innovative public-private partnership shows that public entities, partnering with businesses and nonprofits, can drive real environmental progress at a lower cost. These investments in stormwater infrastructure are investments in flood resiliency, in ecosystem restoration and in the communities where we live.”
– Maryland Department of the Environment Secretary Ben Grumbles on the state’s new “Smart Ponds” P3