Privatization and Government Reform Newsletter: Transportation Finance, Telemedicine Services During Coronavirus and More
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Privatization and Government Reform Newsletter

Privatization and Government Reform Newsletter: Transportation Finance, Telemedicine Services During Coronavirus and More

Plus: The damage done by California’s AB5, congressional action needed on the U.S. Postal Service, and more.

In this issue:

Main Articles:

  • Annual Privatization Report: Transportation Finance, Aviation and Surface Transportation
  • Health Care: Telepharmacy Services Offer Promise for COVID-19 
  • Government Reform: Zoning Restrictions, California’s AB5 Problems 
  • Federal Government: U.S. Postal Service Reforms Need Congressional Action
  • Transit: More Contracting Would Help Boston’s Transit Line

News & Notes:

  • State Government: Transit Problems, Maryland Managed Lanes, Alabama Prisons P3, Contract Tracing’s Privacy Concerns, Iowa’s Pay-For-Success Program
  • Local Government: Port of Los Angeles Eyes Public-Private Partnerships, Ohio City Rejects Water Privatization, Minneapolis Animal Control Contract, New Mexico Public Safety Facility P3, and More
  • Higher Education: Energy, Housing P3s Reach Milestones

MAIN ARTICLES

Annual Privatization Report 2020: Aviation, Surface Transportation, and Transportation Finance

For over 30 years, Reason Foundation’s Annual Privatization Report (APR) has provided the most comprehensive account of privatization of government services and public-private partnerships (P3s). This month, we released the first three chapters of the 2020 report: Aviation, Surface Transportation, and Transportation Finance.

Authored by Reason’s Robert Poole (Aviation, Transportation Finance) and Baruch Feigenbaum (Surface Transportation), with assistance from Joe Hillman, the chapters examine public transportation P3s in airports, bridges, roads, and highways, as well as light rail and public transit. Each section includes additional analysis of topics specific to its area of focus, including air traffic control reform throughout the world, domestic legislation, and regulations affecting various forms of transportation infrastructure, including toll roads and enabling legislation for public-private partnerships.

Telepharmacy Services Can Help COVID-19 Response 

Telemedicine and telepharmacy services can help contain the spread of the coronavirus through reduced face-to-face contact in health care facilities and pharmacies. Both services are getting increased attention amid the pandemic, and states are looking to expand their use to help hedge against the potential overburdening of health care facilities and crowding of retail pharmacies.  In this recent article, Reason Foundation’s Vittorio Nastasi goes through state efforts to increase the use of telepharmacy innovations, including the expanded use of kiosks capable of providing 24-hour access to services, as well as expanded services to underserved areas.

Restrictive Commercial Zoning Hurts Recovery Prospects 

The COVID-19 pandemic has drastically changed work for many of the Americans fortunate enough to maintain their jobs, including a greater embrace of telecommuting. The retail and food service industries will see drastic changes, too, as restaurants and retail try to adapt to social distancing measures. Many prepared food and retail businesses in large urban areas are likely never to return. Reason’s Austill Stuart and Marc Joffe examine how urban areas can work to help soften COVID-19’s toll on potential blight problems by allowing greater flexibility in zoning regulations and the innovative use of public space.

Pandemic Intensifies Major Damage Done by California’s AB5

California’s Assembly Bill 5 (AB5) required most California businesses to designate all independent contractors as “employees” subject to insurance and other benefits in addition to solely wages. As millions lose their jobs amid the COVID-19 pandemic, lawmakers scrambling to issue exemptions from AB5’s requirements, which it had initially issued to various licensed professions, including doctors, insurance agents, and lawyers. Reason Foundation’s Vittorio Nastasi shows how the COVID-19 pandemic’s effects are intensifying both the law’s ill effects and why repealing the law is the best answer.

Postal Service Needs Competition for Financial Sustainability

The United States Postal Service (USPS) has had considerable difficulties maintaining its solvency as email, text messages and technology have reduced demand for the USPS’ core and most profitable services: delivery of letters and bulk mail. Already limited in its ability to reduce money-losing retail outlets and gain additional self-generated sources of revenue, rigid labor rules and obligations to retirees made a bad situation more dire—even before the COVID-19 pandemic hit. About the only financial bright spot for the USPS over the past decade lies in its increased ability to hire “non-career” workers not subject to the labor costs, retiree benefit obligations, and restrictions its career employees face. Stuart explains why Congress should open additional channels that would allow USPS to save money and generate revenues, as well as subject its operations and workforce to private-sector competition, an approach that has worked throughout Europe.

Boston Area Transit Benefits from Contracting, Could Use More

During a two-year break from the state’s competition-limiting “Pacheco Law,” the Massachusetts Bay Transit Authority (MBTA) took ample opportunity to subject in-house functions to competition, enter beneficial contracts with private firms, and re-negotiate contracts with public sector unions to save taxpayers money. Given that the coronavirus pandemic brings new challenges to ridership and revenue concerns, exempting MBTA from the Pacheco Law again could be beneficial for saving money and improving services. In this analysis, Stuart shows how contracting out has not only saved money, but also has worked to make MBTA’s commuter rail safe compared to the MBTA’s own transit lines.

NEWS & NOTES

STATE GOVERNMENT

Maryland’s Purple Line Project Seeks Extension After Contractors Quit, Agency Rejects Funding

Purple Line Transit Partners (PLTP), the consortium for Maryland’s Purple Line Transit P3, faced a pair of setbacks in early May that have led PLTP to seek a 470-day extension:  the Maryland Transit Authority rejected funding for the Purple Line P3, according to Inframation News, and the Washington Post reported that Purple Line Transit Constructors (PLTC)—the DB (design-build) partners of the DBFOM (design-build-finance-operate-maintain) project made of Fluor, Lane Construction, and Taylor Brothers—exited the P3 project. The events occurred mere weeks after the project scored the victory of getting a third lawsuit dismissed. PLTC cited difficulties obtaining rights-of-way, litigation-caused delays, and regulation as all contributing to the decision to exit the deal, an estimated $5.6 billion project, and a $1.2 billion removal from Fluor’s backlog.

Maryland Receives RFQ Responses for Managed Lanes P3

Another multi-billion-dollar public-private partnership in Maryland, the I-495/I-270 Managed Lanes Project, is moving forward. The Maryland Department of Transportation announced it received responses to a request for qualifications from four groups interested in potentially submitting bids for the estimated $7.6 billion project, Inframation News reported. The state hopes to shortlist teams from the four groups—one each led by ACS, Cintra, Itinera, and Transurban—in July, with a request for proposals (RFP) released later in the year. The state has left responsibility for obtaining financing solely to the private teams, which are likely to apply for federal funds to provide for a portion of the project’s financing, making the project somewhat contingent on whether Congress raises the cap for private activity bonds.

Alabama Receives Private Prison Proposals

The state of Alabama’s corrections system needs significant reform. The state has done a poor job with respect to corrections in the past and is severely overcrowded, in part, due to the large number of inmates serving low-level drug and property crime convictions. Now the state is trying to improve its results through the use of an agreement with the private sector. The Alabama Department of Corrections recently announced it had received proposals from two consortia in what would be a nearly $1 billion long-term public-private partnership to build and operate three prisons. “This transformative initiative will improve our state’s infrastructure by replacing aging and dilapidated facilities that increasingly pose public safety risks and only will continue to unnecessarily drain taxpayers’ dollars,” said Alabama Governor Kay Ivey in a May press release announcing the two finalists for the project. The state hopes to select a final proposal this summer.

Contact Tracing Methods Raise Major Privacy Concerns 

Along with making personal protective equipment (PPE) and testing kits widely available, contract tracing is a significant tool public health agencies and health care providers can use to help mitigate the spread of the coronavirus. But contract tracing raises very real concerns over privacy. While app-based methods can vary in the degree to which they protect the privacy of users, one non-digital means of contact tracing being adopted and considered by states that raises unique concerns is the practice of governments requiring businesses to keep records on every customer that visits their premises. A recent article on Route 50 explores how such mandates can severely undermine public trust in a time where it is most severely needed, using the example of contact tracing in the sexually-transmitted disease to make a case for greater privacy safeguards.

Iowa Soybean Farmers Enter Pay-For-Success Agreement with Cargill, Quantified Ventures

An April press release revealed that the Iowa Soybean Association (ISA) was entering into a pay-for-success (PFS) venture with private firms Cargill and Quantified Ventures to help conserve water and improve soil health. The PFS arrangement establishes the Soil and Water Outcomes Fund to compensate farmers for employing best practices for soil management through monetizing the benefits of adopting those practices, such as through the reduction of mineral content in ways established by the Clean Water Act and through increased sequestration of carbon into soil, in a project that could potentially be adapted in watersheds throughout the country.

LOCAL GOVERNMENT

New Port of Los Angeles Executive Director Eyes P3s for COVID-19, Redevelopment 

In an interview with the American Journal of Transportation, new Port of Los Angeles Executive Director Gene Seroka said he will look to use P3s to help get through the COVID-19 pandemic and bring more development back to the port, which has lost business from Atlantic and Gulf coast ports. As of mid-May, Mr. Seroka was working with Honeywell to mass-produce protective face masks on-site for local health care facilities and aims to potentially use P3s to re-attract business to the port by cutting costs. 

New Mexico County Announces Public Safety Training Facility P3

Bernalillo County (which includes Albuquerque) issued a request for qualifications (RFQ) in late April for a P3 whereby a private partner will design, build, finance, operate, and maintain a training center for public safety workers. Responses were due in late May.

Minneapolis Enters Animal Control Contract with U.S. Department of Agriculture

The Minneapolis Park and Recreation Board recently agreed to adopt a contract with the U.S. Department of Agriculture’s (USDA’s) Animal and Plant Health Inspection Service to help eradicate beavers and coyotes from the area. The contract permits the federal agency to use various kinds of traps and firearms to remove the animals from 6,500 acres managed by the city’s Parks and Recreation board, where beavers are contributing to flooding issues and coyotes present a potential threat to humans and pets. The contract runs through the end of March in 2023, does not prevent the board from contracting with other agencies or private individuals for the same purposes, and will not exceed $50,000.

City of Buffalo Announces Environmental Impact Bond

Buffalo Mayor Byron W. Brown announced during his State of the City address that the city intends to pursue a $30 million Environmental Impact Bond (EIB) program, the nation’s largest to date. The project looks to eliminate the effects of “combined sewer overflows,” which occur when heavy precipitation enters water infrastructure and overburdens treatment facilities, resulting in outfalls that empty waste into waterways. Funding would go to private property owners with significant amounts of impervious surfaces to develop, operate, and maintain green infrastructure on their lands, with a goal of reaching the “greening” of over 500 acres under the EIB.

St. Clairsville Rejects Aqua America Offer for Water, Wastewater Systems

The St. Clairsville, Ohio City Council voted against pursuing a sales agreement with Aqua America for the city’s combined water and wastewater systems, the Times-Leader reported. Facing numerous state mandates, including the closure of a local treatment plant, engineer Jeff Vaughn told reporters that the city aims to purchase water from Belmont County via upgraded connector lines as an alternative solution. 

Park City Leak Detection Contracting Wins Green Award

Park City, Utah, received a Smart 50 Award from Smart Cities Connect for contracting efforts to cut down on leakage in its municipal water system, Treatment Plant Operator noted in its May issue. The ski resort destination entered contracts to use acoustic detection and data collection technologies with Xylem-subsidiaries Wachs Water Services and Visenti, respectively, to help identify leaks in the city’s water system. The changes are already saving the city 300 gallons of previously leaked water per minute through investments that have reduced chemical and pumping use by $150,000 per year, enough to match the initial investment in 18 months.

Widespread COVID-19 Building Closures May Affect Water Quality 

An overlooked and largely unknown dilemma arising from the COVID-19 pandemic—effects caused by not using commercial water and wastewater end-user lines for prolonged periods of time—will be studied by a research program funded by the National Science Foundation. While periods of non-use of buildings occur with some frequency, the potential for so many buildings to sit without use of their water-related systems simultaneously could result in potentially significant heavy metal accumulation, based on the application of previous research. Additionally, since previously closed health care facilities have opened to handle additional capacity in areas with high coronavirus infection rates (though not without difficulty), ensuring quality in water delivery systems of previously idle facilities may need to account for metal accumulation. The research will be led by Purdue University Engineering Professor Andrew J. Whelthon and assisted by researchers at Virginia Tech, Legionella Risk Management Inc., Arizona State University, University of Memphis, University of Iowa, Northeastern University, and Polytechnique Montréal in Canada.

Bowling Green, Kentucky Rejects Transit Proposals

The western Kentucky city of Bowling Green rejected three proposals from private firms (whose names have not been released) to manage and operate transit services throughout the city, following a request for proposals (RFP) issued in February, the Bowling Green Daily News reported. The city followed up the rejection by allowing resubmissions to a revised RFP with clarifying language, for which responses were due in late April, but no additional details have been made available since. The city gave respondents three options for bid proposals: management and services each separately, or both combined management and services. Two firms chose the combined approach, while one bid only on management. The western Kentucky city has outsourced transit services to Community Action since 2003.

St. Thomas Seeks Harbor Transportation Proposals

St. Thomas Island of the U.S. Virgin Islands issued an amended RFP this month for a private partner to operate transportation services between four destinations on and near the island, the St. Thomas Source reported. The terms of the contract include a three-year base, renewable for an additional two years at the government’s discretion, as well as requiring the private partner to operate vessels that hold at least 80 people and report ridership data to the government on a monthly basis. The chosen partner would also be responsible for all compliance and regulatory risk, as well as marketing and promotional activities. RFP responses, including a fare schedule subject to government approval, were due in mid-June.

New Jersey Township Outsources Its Legal Department

The town of Toms River recently voted to eliminate its in-house legal staff in favor of outsourcing legal services to a private firm, Jersey Shore Online reported. The firm of Dasti, Murphy, McGuckin, Ulaky, and Connors, which includes former Toms River Councilman Gregory McGuckin, will take over providing legal services for the coastal township. Toms River looks to save money by eliminating full-time staff, noting that several nearby towns have achieved savings from outsourcing legal services to the firm.

HIGHER EDUCATION

University of Idaho Shortlists for Utilities P3

In late March, the University of Idaho shortlisted two consortia, one led by ENGIE and another consisting of Plenary and Sacyr, for its campus utility systems P3, Inframation News reported. The likely 50-year concession agreement is expected to provide $1.2 billion in payments to the school from the chosen consortium while helping the school achieve carbon footprint reduction targets. The school hopes to choose a preferred proponent this spring, building off of a November 2019 Request for Qualifications that produced 12 initial respondents. 

Texas A&M Medical Housing P3 Preferred Proponent Selected

In February, the Texas A&M University system chose an American Triple I Partners/Medistar consortium as its preferred proponent for a 60-year, $546 million P3 to provide housing for health care students in Houston, as well as to provide a center for its new engineering medicine program. 

University of Kentucky Wet Lab P3 Receives Proposals 

The University of Kentucky announced it had received responses (while refusing to specify how many) to a new RFP (after a previous attempt in early 2019) issued in March for its Wet Laboratory P3, according to Inframation News. The school seeks a private partner to add 40,000 square feet of combined laboratory and office space to its Coldstream Campus, located roughly seven miles north of the school’s main Lexington Campus. 

Bowie State Mixed-Use P3 Reaches Financial Close 

Maryland’s Bowie State University reached financial close with Balfour Beatty on the school’s mixed-use housing P3, the company reported in a press release. The 170,000 square feet of housing and shared space will include room for 557 beds and an “entrepreneurial center” for school-based business organizations. The Balfour Beatty-led consortium also includes architect Design Collective and Smoot Construction, with the Maryland Economic Development Corporation serving as a planning partner with the school. Construction began in February with an expected fall 2021 completion date.

Santa Rosa Junior College Housing P3 Reaches Financial Close

Inframation News noted that Santa Rosa Junior College in California reached financial close with Servitas on the school’s housing public-private partnership, a DBFOM lease to add 360 on-campus beds to the Sonoma County-based campus. Wildfires in 2017 destroyed housing for many faculty and students at the two-year college and led to the project being pursued. 

QUOTABLE QUOTES

“We (The Port of Los Angeles) charge twice as much as the ports on the East and Gulf coast charge today to move a container on and off the ship. We have to redirect that. The Port of Los Angeles has a 9-point plan that will include incentive monies on the transactional basis and continued investment through cycle. During this economic downturn, we have to become more competitive. We’ve lost 20 percent of our market share since the unfortunate labor lockout of 2002 and we have to reverse course. I don’t know that we will ever get it all back. The Eastern, Gulf Coast, Pacific Coast of Mexico and British Columbia have done a great job. They’ve hired superior talent. They’ve invested a lot of money and they’ve aligned their politics in those states. We have a long way to go … We’re going to go out there swinging and we’re going to make sure that we make the investments that are necessary to attract cargo here because if everything else is equal, we’re the fastest gateway between Asia and the middle part of this country …”
–Port of Los Angeles Executive Director Gene Seroka, in an interview with the American Journal of Transportation on how the port is adapting during the pandemic. 

“The proposing team’s own school and office building water testing evidence indicates such extended shutdowns will have drastic consequences on building drinking water safety: chemical and microbiological water quality potentially presenting serious public health risks. As inhabitants return, they will encounter extremely stagnated water with excessive lead, copper, and bacterial concentrations, that may include pathogens like Legionella pneumophila. There are no national or industry guidelines for building reopening after extended shutdowns. A fundamental understanding of water quality deterioration mechanisms precipitated by large-scale shutdowns and plumbing decontamination is critically lacking.”
—From the abstract of research being led by Purdue University Engineering Professor Andrew J. Whelton onf the effects of municipal water quality from prolonged lack of use of buildings prompted by the COVID-19 pandemic.

“Cities face massive stormwater challenges as they respond to a changing climate. Nature-based solutions reduce urban flooding risk and CSOs, and the EIB reduces Buffalo’s financial risk. It’s a winning combination!”
—Eric Letsinger, CEO of  Quantified Ventures, on Buffalo, New York’s new $30 million Environmental Impact Bond program.

“The more data, the more tools in the toolbox of the contact tracer the better, but fundamentally contact tracing is meant to be done in a way that is respectful of people’s freedoms and privacies. I don’t think this does anything to advance the trust that a marginalized population would have of these authorities.”
—Matt Prior, spokesperson for the National Coalition of Sexually Transmitted Disease Directors, in  Route 50 article on privacy concerns related to COVID-19 contract tracing.

“We resurveyed that area and also listened to the individual water service lines. We found eight services that had failed. They were leaking 5 to 30 gpm (gallons per minute) into the ground. The service lines could have leaked for a long time without detection because the water wasn’t surfacing; it was just draining into the rocky soil. 
We fixed those lines, and that reduced our water loss by an additional 200 gpm.” 
— Park City (UT) Water Resource Manager Jason Christensen, in an article in Treatment Plant Operator on the benefits of the city’s contract with Xylem subsidiaries for water  system leak detection. 

Austill Stuart is the director of privatization and government reform at Reason Foundation and editor of Reason's Annual Privatization Report.