Privatization & Government Reform Newsletter #11

Privatization and Government Reform Newsletter

Privatization & Government Reform Newsletter #11

September 2014 edition: Indiana Toll Road bankruptcy, pension reform, Endangered Species Act reform, and more

In this issue:

PRIVATIZATION: Implications of the Indiana Toll Road Bankruptcy

Last week, the company that won a 75-year concession in 2005 to operate, maintain, and improve the Indiana Toll Road filed for a Chapter 11 bankruptcy proceeding. While critics of the toll road lease may be hoping that the bankruptcy will slow or reverse the growing trend of private investors moving into the U.S. transportation sector, Reason Foundation’s Robert Poole writes that this is unlikely and explores what lessons can be learned from the Indiana Toll Road experience.

» return to top

TRANSPORTATION: 21st Annual Highway Report Released

More money is going to state highways, but there has been very little progress in improving their condition according to the 21st Annual Highway Report by Reason Foundation. The report measures the condition and cost-effectiveness of state-owned roads in 11 categories, including pavement condition on urban and rural Interstates, deficient bridges, unsafe narrow lanes, traffic fatalities, administrative costs, and total spending on state roads. Overall, Wyoming, Nebraska and South Dakota had the most cost-effective state highway systems in 2012, whereas Hawaii, Alaska and New Jersey maintained the least cost-effective systems.

» return to top

PENSIONS: San Diego Pension Reform Case Study

In 2012, San Diego faced a nearly $2.3 billion unfunded pension liability, and the city’s annual pension payment increased from $43 million in 1999 to $231 million in 2012, consuming about 20% of the general fund budget that year. Faced with such serious problems, San Diego embarked on a series of incremental pension reforms designed to help the city stabilize its finances and start down the road to fiscal recovery. A new Reason Foundation report examines the history that led to pension problems in San Diego, the path to reform, the Proposition B reforms adopted in 2012, the bureaucratic and legal hurdles the city still faces in implementing its reforms, and the lessons learned from San Diego’s experience.

» return to top

ENVIRONMENT: The Case for an Endangered Species Reserve Program

While intended to prevent rare species from going extinct, the Endangered Species Act has been criticized for imposing perverse and counterproductive penalties that can prompt landowners to rid their property of endangered species and their habitat, as opposed to protecting it. A new Reason Foundation study proposes a new approach-the Endangered Species Reserve Program-that would remove the counterproductive penalties and replace them with an entirely voluntary system in which landowners are compensated for investing in habitat and species conservation.

» return to top

INNOVATORS IN ACTION: Building PennDOT’s Public-Private Partnership Program

The latest installment of Reason Foundation’s Innovators in Action monthly interview series-which profiles innovative policymakers in their own words, highlighting good government efforts delivering real results and value for taxpayers-examines the Pennsylvania Department of Transportation’s (PennDOT) two-year old public-private partnership (PPP) program, which has already taken projects to market and begun entering into contracts. The agency has caught national attention for its ambitious project to use a PPP model to replace 558 deficient bridges in one contract, an initiative that is currently in procurement. I recently interviewed PennDOT Office of Policy & Public-Private Partnerships Director Bryan Kendro on the development of Pennsylvania’s PPP program, the bridge replacement and safety patrol PPP initiatives, other projects in development, and much more.

» return to top


House Committee Releases PPP Report: The U.S. House Transportation and Infrastructure Committee’s Panel on Public-Private Partnerships recently released its final report and recommendations on the use of PPPs to finance infrastructure projects in transportation, water, government buildings, and other public facilities. Topics covered in the report include expanding the public sector’s capacity to better structure PPP agreements, changes to federal programs to facilitate the use of PPPs by states and local governments, and ways to improve traditional procurement processes and enhance transparency and accountability. “We know the private sector has significant interest in investing in U.S. infrastructure, but the challenge has been how to make sure our federal policies allow this potential to be responsibly unlocked while also protecting the public interest,” according to Committee Chairman Bill Shuster (R-PA) Shuster. The full report is available here.

FDOT Reaches Close on I-4 Ultimate PPP Project: The Florida Department of Transportation (FDOT) announced earlier this month that it had completed the commercial and financial close of the I-4 Ultimate PPP project, a $2.3 billion project to reconstruct 21 miles of Interstate 4 in Orange and Seminole Counties and add four express toll lanes to the existing general purpose lanes. I-4 Mobility Partners is the concessionaire that will finance, design, build, operate, and maintain the project under a 40-year agreement. FDOT will set and collect the tolls, paying the concessionaire back over the life of the agreement through an availability payment model. “This is a monumental milestone for one of the most congested corridors of the state, which draws millions of tourists and is an important mid-point in Florida for commerce and commuters,” according to FDOT Secretary Ananth Prasad. More information on the I-4 Ultimate Project is available here.

PennDOT Announces Safety Patrol PPP: In early September, Pennsylvania Department of Transportation officials announced the agency’s first sponsorship effort made possible under Act 88, the state’s 2012 public-private partnership enabling legislation. Under the three-year contract, insurance company State Farm will sponsor PennDOT’s roving safety patrol, which offers free motorist assistance on expressways in the Lehigh Valley, Harrisburg, Philadelphia, and Pittsburgh regions. The sponsorship will offset nearly 11 percent of the state’s $4 million annual cost to operate the service. More information is available here.

San Antonio Water System Announces Terms for Major Water Pipeline PPP Contract: Last week, San Antonio Water System officials announced the finalization of a draft agreement with the Vista Ridge Consortium-a team including Abengoa Water USA and Blue Water Systems, L.P.-that involves the purchase of up to 50,000 acre-feet of water per year for 30 years from 3,400 landowners in Burleson County that will be conveyed through a privately financed, 142-mile pipeline. The project is designed to increase the city’s water supply-enough to serve 162,000 households-without impacting the environmentally sensitive Edwards Aquifer supply. If approved by the water system’s board of trustees and the consortium, the contract will be considered by the city council in late October. More information, including the draft contract, is available here.

Nassau County, NY Signs Wastewater PPP Contract: In early September, Nassau County officials signed a 20-year, $1.2 billion contract with United Water for the operation and management of the county’s three wastewater treatment facilities and sewage system. County officials expect to save an estimated $230 million over the life of the contract and improve the system’s operations and performance on environmental standards, which helped the project garner support from an array of community and environmental advocacy organizations. “This partnership was formed to dramatically improve the County’s ability to protect our environment and the health and well-being of our residents,” Nassau County Executive Edward Mangano said in a press release. “Together with United Water, we will implement unprecedented advances in environmental protection, odor control, management efficiencies, plant aesthetics, and public information.” The project is the largest of its kind in the U.S., according to company officials.

Cincinnati Pursuing Revamped Parking PPP: Less than a year after new Cincinnati Mayor John Cranley’s administration cancelled a plan to lease the city’s parking system to the local port authority in exchange for an $85 million upfront payment, the Cincinnati Enquirer reports that the administration is pursuing a proposal to enter into a PPP with Xerox that would guarantee the city at least $1.1 million per year and would see the deployment of over 1,500 upgraded parking meters, new pay-by-smartphone options for consumers, and new parking meter analytics to improve enforcement.

Task Force Endorses Privatization of Dallas’ Fair Park: The Dallas Morning News reported earlier this month that a task force established by the mayor has recommended privatizing the operations and management of the 277-acre Fair Park in order to streamline its governance and create new opportunities for investment. The task force recommended handing over management of the park to a new nonprofit organization, similar to the structure used in the privatization of the Dallas Zoo in recent years.

Kansas City Officials Reverse Course on Privatized Ambulance Billing: In a unanimous vote late last month, Kansas City’s city council repealed a vote from earlier in the summer that directed the city’s fire chief to outsource billing for emergency medical services, according to The Kansas City Star. The earlier privatization vote prompted the union representing the city’s civilian workers to launch a petition drive seeking enough signatures to put the issue to a public vote. The union gathered 8,000 signatures, more than the required number needed to force the council to put the measure on the ballot. The privatization was expected to save the city $700,000 in the current budget, so city officials will need to find commensurate savings in other service areas to make up the difference.

Milwaukee County Zoo Considering Concession Proposals: The Journal-Sentinel reported earlier this month that the Milwaukee County Zoo has received six bids on a potential five-year concession for the provision of food services, catering, and retail operations. A proposal evaluation team has shortlisted two teams for further interviews. The request for proposals required bidders to establish a guaranteed minimum annual concession payment to the county, as well as potential capital investments. If zoo officials decide to advance one of the two remaining proposals, the matter would be sent to the Milwaukee County Board of Supervisors for final approval.

» return to top

Additional Resources:

Stay in Touch with Our Pension Experts

Reason Foundation’s Pension Integrity Project has helped policymakers in states like Arizona, Colorado, Michigan, and Montana implement substantive pension reforms. Our monthly newsletter highlights the latest actuarial analysis and policy insights from our team.

This field is for validation purposes and should be left unchanged.