Recently in Asset Sale/Lease Category

Source: Ellen Dannin, The Pennsylvania State University Dickinson School of Law, July 10, 2009. Penn State Legal Studies Research Paper No. 19-2009

Abstract:     
For all but those who have an ideological commitment to privatization, the issue driving privatization is how to fund public infrastructure. Thus, arguments for privatizing infrastructure are (1) to provide money so cash-strapped governments can fix crumbling infrastructure and (2) to shift future financial risk to the private contractor, as well as, of course, the financial rewards.

The reality, though, is far different. Provisions commonly found in infrastructure privatization contracts actually make the public the insurer of private contractors' return on investment. Indeed, were it not for the lengthy provisions that protect contractors from diminution of their expected returns, the contracts would not run on for so many pages.

Of greater importance, infrastructure privatization contracts give private contractors a quasi-governmental status, with power over new laws, judicial decisions, propositions voted on by the public, and other government actions that a contractor claims will affect toll roads and revenues.

Source:  LESLIE WAYNE, New York Times, June 5, 2009

 

It was hailed as a win-win for Main Street and Wall Street -- a way for states and cities, along with financiers, to make some money.  But now privatization, the selling of public airports, bridges, roads and the like to private investors, looks like a boom that wasn't. Deals are collapsing. Airy hopes of quick profits are vanishing. And what was celebrated as a new wave in finance is, for the moment, barely making a ripple. 

What happened? The financial crisis, for starters. The easy money that Wall Street was counting on to finance its purchases has largely disappeared. Then the Obama administration unintentionally damped interest with its $787 billion economic stimulus package, a windfall that local governments are now racing to spend.

Source: New York Governor, June 1, 2009



Governor David A. Paterson today accepted the final report from the New York State Commission on Asset Maximization. The Commission was charged with broadly examining whether asset maximization can benefit the State, as well as whether any specific New York assets are suitable candidates for Public-Private Partnerships (PPPs). The final report contains 27 major recommendations to help create jobs, generate economic activity and benefit colleges and universities across New York State. Some of the key recommendations include: school construction and renovation in Syracuse and Yonkers; 300 bridge renovations in all corners of the State; wind power on the Great Lakes; and high speed rail.

Source: By Dan Egan and Larry Sandler, Journal Sentinel (WI), May. 24, 2009

 

 .... Now the city could indeed be on the path to become a major-league laboratory for the way that freshwater is delivered, but perhaps not in the way Barrett and regional business and academic leaders hoped for.  Scrambling for cash simply to fund basic city services - and less than a year after the passage of the Great Lakes compact designed to protect the world's largest freshwater system from being drained by profiteers - Milwaukee is looking into turning its state-of-the-art water treatment system over to a for-profit company.

Cities such as Buffalo, Indianapolis and Atlanta have dipped their toes into the water-for-profit business by signing deals with private companies to run their systems for periods ranging from five to 20 years, with varying degrees of success - and failure.  ...  Milwaukee is pondering a 75- to 99-year lease.

 Source: By Rob Lovitt, MSNBC,  9:36 a.m. ET, Wed., May 6, 2009

 

 ........ According to the American Society of Civil Engineers, the nation's infrastructure is in such dire shape that it would take $2.2 trillion over the next five years to reverse decades of underfunding and neglect. The shortfall for transportation infrastructure alone is pegged at more than $800 billion.  

State and local governments are simply unable (or unwilling) to fill the gap. The proposed solution: sell or lease public assets to private companies that would provide money upfront in return for the right to run the operation and keep most of the revenue.

Source: By Karen Pierog, Reuters, Thu Apr 23, 2009 4:50pm EDT

The demise of a deal to lease Chicago's Midway Airport to private operators may put the brakes on the privatization of bigger and high-profile government assets as the global recession eats into the availability of financing.

Financing for future deals may become more selective even as increasing numbers of state and local governments turn to leasing their assets to bolster coffers diminished by the sagging economy.

Source: By James B. Kelleher James B. Kelleher, Reuters,Thu Mar 19, 8:43 pm ET

 

As they struggle to close ballooning budget deficits amid the worst financial crisis since the Great Depression, many U.S. state and local governments will be tempted to follow the example of Chicago.  The third-largest U.S. city has raised billions of dollars in recent years turning public assets over to private businesses that then run them as for-profit enterprises.

...... "The devil is in the details -- as future generations to come will learn," said Pat Andrews, editor of Alltolled.com, a Web site dedicated to preventing more highway privatizations in the state of Indiana, another pioneer of such transactions.

......... Elliot Sclar, a professor at Columbia University in New York, sees the P3s as just the latest product Wall Street bankers have dreamt up to make a buck - and one taxpayers will pay to clean up. ........

Source: Pew Center on the States, (PA), 03/24/2009 -


The unsuccessful effort last year to lease the Pennsylvania Turnpike to private investors provides valuable lessons for other cash-strapped states seeking to fund their highways and bridges, according to a new report by the Pew Center on the States.  With an annual funding gap of $47 billion between the roadway projects the nation needs and those it can afford, states with large deficits and an urgent need to fix aging infrastructure are looking closely at public-private partnerships--a financing approach used in other countries for years but only recently adopted in the United States.

Source: Governing Magazine/February 2009 

The bleak fiscal picture for states is turning into an alarming one. Midway through the fiscal year, more than 40 states faced--or are still facing--shortfalls in their current budgets. For most of them, next year is likely to be the same or worse.

The Center on Budget and Policy Priorities estimates that the combined budget gaps for the remainder of this fiscal year and years 2010 and 2011 will be more than $350 billion. In the current fiscal year, more than half the states already have cut spending, used reserves or raised revenues to pull their budgets into balance--and still the shortfalls keep piling up.

While states await help from President Barack Obama's fiscal stimulus plan, they are looking at less traditional ways to raise money to plug the holes in their budgets. As in Chicago before them (see page 44), one idea that is surfacing in an increasing number of states is turning assets into cash by selling or leasing them. 

Source: By THOMAS FRANK, Wall Street Journal, January 28, 2009


....... Just to make sure Americans do the right thing, the pro-privatization worthies further suggested, in the words of a Reuters account, that maybe the coming federal stimulus package "should tie stimulus funds to private capital involvement." Apparently these privatization deals aren't sweet enough to sell themselves.

But there's good reason to be reluctant to privatize. It doesn't take an MBA to figure out that we didn't build our Interstate highways in order to create opportunities for venture capitalists. The purpose was public service.