Category Archives: Public/Private.Partnerships

Feds join court fight to restart $5.6 billion P3 Purple Line light rail

Source: Jim Watts, Bond Buyer, July 17, 2017
 
The Federal Transit Administration has joined Maryland in a court battle seeking to overturn a federal judge’s order that halted work on the $5.6 billion Purple Line light rail project being financed as a public-private partnership. The FTA filed documents on Friday with the U.S. Court of Appeals for the District of Columbia Circuit to join the state’s case as it fights District Judge Richard Leon’s decision in August 2016 to vacate the project’s federal environmental clearance.  Maryland was only five days away from signing an acceptance agreement with the FTA for a $900 million New Starts grant when Leon’s order cut off funding for the Purple Line until a final decision in a lawsuit over environmental issues that was filed in 2014. …

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Maryland seeks fast track for Purple Line appeal
Source: Jim Watts, Bond Buyer, July 5, 2017
 
Maryland is urging a federal appeals court to speed up the state’s effort to overturn a lower court order that has halted work for almost a year on its proposed $5.6 billion Purple Line light rail system being financed as a public-private partnership. Maryland Attorney General Brian Frosh filed a motion July 3 with the U.S. Court of Appeals for the District of Columbia asking the court to expedite the hearing schedule by ordering briefings to begin by July 20 and end no later than Aug. 24. At that point, the court likely would hear oral arguments before issuing a decision. …

Opinion: The Purple Line is fading to black
Source: Washington Post, April 5, 2017
 
After a quarter-century of planning, several hundred million dollars in public money, scores of public hearings and endless studies, the Purple Line, one of the Washington area’s most important transit projects, may be facing extinction. If that happens, it would be a testament to dysfunction, inertia and judicial negligence.  Having come within five days of receiving $900 million in federal funding, the 16-mile light-rail line was dealt an unwarranted setback last summer by a federal judge, whose ongoing foot-dragging, combined with the Trump administration’s hostility to new transit ventures, imperils an east-west link that would be a lifeline for tens of thousands of residents of Montgomery and Prince George’s counties and would revitalize an arc of close-in suburban communities. With every passing day, the Purple Line’s prospects are dimming. The federal funding agreement frozen in August by U.S. District Judge Richard J. Leon was the project’s linchpin; without it, a multibillion-dollar public-private partnership cannot go forward, and investors who were ready to start building are stuck. Without a green light now from Mr. Leon, it may be all but impossible to revive the federal funding agreement for the foreseeable future. That’s because the Trump administration has proposed halting all cash for transit projects that lack signed funding agreements, starting almost immediately and lasting for the remainder of the fiscal year. …

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Trump’s Infrastructure Plan Isn’t Much of a Plan

Source: Michael Granof and Martin Luby, Fortune, July 12, 2017

President Donald Trump hasn’t fully outlined his prescription for making American infrastructure great again, but he has called for a major dose of public-private partnerships—also known as P3s. These P3s, he promises, provide “better procurement methods, market discipline and a long-term focus on maintaining assets .” That’s true enough in some cases, but P3s are no cure-all for every public project. Despite the hype, the public-private approach does not provide new funding sources to communities, nor does it work for many types of public projects. …

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World Offers Cautionary Tale for Trump’s Infrastructure Plan
Source:Peter S. Goodman, New York Times, June 16, 2017
 
The rest of the planet bears a warning for President Trump’s plan to lean heavily on private business in conjuring a trillion dollars’ worth  of American infrastructure: Handing profit-making companies responsibility for public works can produce trouble.  In India, politically connected firms have captured contracts on the strength of relationships with officialdom, yielding defective engineering at bloated prices. When Britain handed control to private companies to upgrade London’s subway system more than a decade ago, the result was substandard, budget-busting work, prompting the government to step back in. Canada has suffered a string of excessive costs on public projects funneled through the private sector, like a landmark bridge in Vancouver and hospitals in Ontario. …

Editorial: Public Works, Private Benefit
Source: New York Times, June 9, 2017
 
President Trump’s infrastructure plan is turning out to be a mirage. He had talked about a $1 trillion, 10-year effort. But the White House now proposes allocating only $200 billion, which would come from cutting aid to states and localities and giving it to Wall Street investors as tax credits, which it hopes will attract $800 billion in investment for big projects that would turn a profit through tolls and user fees. … But most of the nation’s unmet infrastructure needs involve smaller projects to operate, maintain and upgrade — not only highways, but also water, sewer and other systems that are of no interest to private investors.

Donald Trump’s Infrastructure Plan Faces an Urban-Rural Divide in Congress
Source: Ted Mann, Wall Street Journal, June 8, 2017
 
President Donald Trump’s plan to tap the private sector to rebuild $1 trillion worth of roads, bridges and rails has encountered an early problem: geography.  The administration says it will rely on private investors to supply the vast majority of cash to support a decadelong infrastructure rebuilding effort. But members of Congress from rural areas are wary.  That is because private investors are looking for infrastructure projects that throw off steady streams of revenue, from which they derive their profits, and those tend to be found near population centers. … Support from Republicans, many who represent rural areas, will be crucial in getting a large infrastructure package through the GOP-led Congress, since many Democrats have said they would oppose efforts to rely on tolls, rather than federal aid, to pay for building projects.

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America’s public housing crisis may worsen with Trump budget

Source: Lawrence Vale, Associated Press, July 12, 2017
 
… As someone who has spent 25 years researching and writing about the travails of public housing in the U.S., I had this immediate thought: Could the same thing happen here?  Various commentators have pointed out that American regulations require sprinklers and do not permit the use of cladding materials with combustible plastic cores in high-rise structures.  Yet while the facades of American public housing may be less flammable, the system suffers from a toxic convergence of long-deferred maintenance, squeezed budgets and cost-cutting measures. Privatization policies, deeply rooted suspicions about the character of public housing residents and long-term inattention all threaten the capacity of stigmatized low-income families to remain in their homes. …

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Ben Carson reckons with proposed HUD budget cuts
Source: Jonathan Easley, The Hill, June 30, 2017

… Now, as HUD secretary, Carson controls the $46 billion government agency that oversees housing for the poor. President Trump’s proposed 2018 budget would cut HUD spending by $6 billion. “We will use whatever resources we have very efficiently,” Carson said. “The other thing to keep in mind is that the traditional view of HUD and government is we ride in on a white horse with a bucket of money … and go off to the next thing,” he continued. “That particular model has led us to the point where we have three to four times as many people in need of affordable housing and it’s getting worse.” Carson, who had no experience in government before becoming HUD secretary, is grappling with decisions about which programs to keep, which to shutter, and how to improve the ones that remain. …

Carson: HUD will focus on public, private sectors partnerships
Source: Mallory Shelbourne, The Hill, April 26, 2017

Ben Carson, President Trump’s secretary of Housing and Urban Development (HUD), said in a new interview that his forthcoming agenda will promote partnerships between the public and private sectors.   “The biggest tools are the partnerships — public, private, nonprofit and faith community partnerships — which allow us to leverage those federal dollars …” Carson told The Associated Press in an interview published Wednesday. …  

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Betsy DeVos Picked A Student Loan CEO To Run The Student Loan System

Source: Molly Hensley-Clancy, Buzzfeed News, June 20, 2017
 
When the Trump administration announced its pick to run the $1.3 trillion federal student loan system on Tuesday, there was one notable thing about the candidate that wasn’t mentioned in the press release: He’s the CEO of a private student loan company.  The Education Department’s statement described A. Wayne Johnson as the “Founder, Chairman and former CEO” of a payments technology company called First Performance Corporation. … But what wasn’t noted was Johnson is currently the CEO of Reunion Student Loan Services, a detail confirmed by a company representative reached by phone on Tuesday afternoon. Reunion originates and services private student loans, and offers refinancing and consolidation for existing loans. …

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Betsy DeVos undoes Obama’s student loan protections
Source: Danielle Douglas-Gabriel, Chicago Tribune, April 11, 2017

Education Secretary Betsy DeVos on Tuesday withdrew a series of policy memos issued by the Obama administration to strengthen consumer protections for student loan borrowers.  The Education Department is in the middle of issuing new contracts to student loan servicing companies that collect payments on behalf of the agency. These middlemen are responsible for placing borrowers in affordable repayment plans and keeping them from defaulting on their loans. But in the face of mounting consumer complaints over poor communication, mismanaged paperwork and delays in processing payments, the previous administration included contract requirements to shore up the quality of servicing. Companies complained that the demands would be expensive and unnecessarily time consuming. … DeVos has withdrawn three memos issued by former education secretary John King and his under secretary Ted Mitchell. One of the directives, which was later updated with another memo, called on Runcie to hold companies accountable for borrowers receiving accurate, consistent and timely information about their debt. … The Obama administration requested routine audits of records, systems, complaints and a compliance-review process. … The exhaustive list of demands were a direct response to an outpouring of complaints to the Education Department and the Consumer Financial Protection Bureau. The CFPB, in particular, has documented instances of servicing companies providing inconsistent information, misplacing paperwork or charging unexpected fees. Because the federal government pays hundreds of millions of dollars to companies such as Navient, Great Lakes and American Education Services to manage $1.2 trillion in student loans, advocacy groups and lawmakers argue that more should be required of these contractors. …

Federal Student Loan Servicing: Contract Problems and Public Solutions
Source: Eric M. Fink, Roland Zullo, Elon University School of Law, University of Michigan, June 2014

One consequence of the 2007–2008 financial crisis was an abrupt shift from bank-based to direct federal student loans. This momentous change required the Department of Education to rapidly establish the capacity to service loans, which was achieved by outsourcing this responsibility to four large for-profit firms and a group of smaller regional entities. Loan servicing involves routine payment processing, account management and borrower communication, as well as the non-routine yet more labor intensive role of assisting borrowers that face hardship with debt repayment. Borrowers have expressed dissatisfaction with the present system. Complaints jumped significantly in the first two years of the loan servicing contracts and remain at historic highs. Several factors contribute to this increase, including the lackluster job market for graduates. However, upon close inspection it appears that loan servicers bear part of the blame for neglecting their responsibility to counsel borrowers with distressed loans. The Student Loan Ombudsman’s Office of the Consumer Finance Protection Bureau has issued several reports that further validate this assertion. To understand why the system is underperforming, we draw attention to the public-private contract. A question for any public-private contract is whether the incentives within are adequate to encourage contractor behavior consistent with the mission of the service. In our review of the contract terms, we conclude that the incentives to reduce operational costs far outweigh the incentives to be responsive to the needs of borrowers…This case illustrates the inherent limitations of a performance-based contract as an administrative tool. Regardless of design, contractors will strive to minimize operational commitment to any labor-intensive task, in this instance attending to the personal needs of borrowers….

For Sale: Puerto Rico

Source: Heather Gillers, Wall Street Journal, June 26, 2017 

Puerto Rico has no cash and can’t borrow money anymore. So it is looking to sell itself off in parts. The troubled U.S. territory is preparing to seek bids in coming months from private companies willing to operate or improve seaports, regional airports, water meters, student housing, traffic-fine collections, parking spaces and a passenger ferry, according to a government presentation reviewed by The Wall Street Journal.

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The Bankers Behind Puerto Rico’s Debt Crisis
Source: Michelle Chen, The Nation, June 8, 2017
 
Puerto Rico’s economic crisis has now washed the burden of its colonial legacy onto Washington’s doorstep. Congress has been trying to contain the island’s ballooning debt under the hardline austerity program of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). But since the program is governed by a control board run by the same financiers responsible for driving the debt crisis in the first place, the island continues to sink into poverty while its creditors feast on the spoils.  To underscore how Puerto Rico’s revolving door of big finance and politics is underwriting the debt crisis, a report by the AFL-CIO and the community-labor coalition Committee for Better Banks (CBB) traces the career of the head of PROMESA, Carlos M. García, from his role as a head banker of Santander to his current political post overseeing the privatization and pillage of Puerto Rico’s anemic public assets.

Puerto Rico strikes second restructuring deal with bondholders
Source: Hazel Bradford, Pensions & Investments, May 15, 2017
 
Puerto Rico reached a restructuring agreement with bondholders invested in the commonwealth’s Government Development Bank, officials announced Monday in San Juan. … Puerto Rico’s Federal Affairs Administration said in that statement that GDB creditors “have agreed to substantial discounts to the principal,” but did not provide further details on the agreement, which calls for bondholders to exchange claims for one of three tranches of bonds issued by a new municipal entity. The new bonds will have varying principal amounts, interest rates, collateral priority, and other payment terms.  It is the second agreement reached with bondholders and Gov. Ricardo Rosello, following one announced April 6 with holders of bonds issued by the Puerto Rico Electric Power Authority. The PREPA agreement restructures $9 billion in debt by offering them 85 cents on the dollar, and giving PREPA more time to begin making payments. …

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3-year, no-bid extension for Alameda County’s ambulance contract, despite firefighter criticism

Source: Matthias Gafni, Bay Area News Group, May 10, 2017

Alameda County supervisors extended their ambulance contract with Paramedics Plus by three years despite fierce criticism by firefighters complaining the process wasn’t open for competitive bids and changes in service delivery were not included. … The agreement will lessen fines for failures to hit response times, saving the company about $3.5 million, along with other givebacks from the county, such as reimbursements for some 5150 (mentally unstable) transports and a continued break from paying support fees totaling about $5.5. million annually. The company has said it is bleeding money during its contract and needed the breaks, especially from the “draconian” fine system. Firefighters have complained that the extension should not have been awarded without a proper open bidding process. They believe ambulance service has suffered, and a change to the delivery system, similar to the Contra Costa County model pairing firefighters with private ambulance companies, is preferable. The vote came days after a judge dropped Alameda County from a federal lawsuit alleging it accepted illegal kickbacks from Paramedics Plus. The county was dropped from the suit because it agreed in April to pay $50,000 to the feds and $21,000 in attorney fees for accepting payments from the ambulance company. The company claims the agreement was legal. …

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Opinion: Contra Costa ambulance deal slightly helps response time, but has taxpayer risk
Source: Daniel Borenstein, Contra Costa Times, November 2015

The private-public partnership, apparently the first in California, is probably the best option available because it should slightly speed response time and reduce service duplication, and might enable the county to tap some federal dollars that would otherwise be lost. … But Contra Costans should realize that the plan carries downside financial risk and, contrary to some suggestions, probably won’t provide significant upside benefits for the beleaguered Contra Costa Fire Protection District for years, if at all. … An outside consultant, using current collection rates, estimates that the fire district will collect $39 million the first year and pay out, primarily to AMR, $37 million, netting a $2 million profit. But there are two major caveats. First, the consultant, former Livermore-Pleasanton Fire Chief Stewart Gary, warns in his analysis that declining numbers of patients with insurance to fully cover ambulance bills makes projections difficult and presents “one of the largest risks.” Second, the new venture will need about $9 million of seed money to cover early operations before bill payments start coming in. That advance will come from the fire district’s reserves and must be repaid.

Supes approve new cost-saving ConFire/AMR pact
Source: Martinez News-Gazette, July 26, 2015

In a search to further savings in a cash-strapped district, Contra Costa Fire has proposed a new partnership with its longtime ambulance provider, American Medical Response. ConFire will take over responsibility for billing and collecting insurance reimbursements as well as the liability if anticipated revenue doesn’t materialize. AMR will essentially function as a subcontractor providing ambulances and paramedics for a set fee. The new approach comes with added risks for taxpayers, but CityGate said that declining insurance reimbursements threaten all public agencies responsible for providing ambulance services. If private providers can’t turn a profit, they said, taxpayers could be asked to keep them afloat. Alameda County’s ambulance provider, Paramedics Plus, recently asked for an injection of $5 million of public funds to cover some of its losses. Contra Costa supervisors said they were still on board with ConFire’s plan and directed the county to proceed with negotiating a five-year contract that would take effect next year.

New opposition to P3s may put Texas in a traffic jam

Source: Richard Williamson, Bond Buyer, May 15, 2017 (Subscription Required)
 
Once a champion of public-private partnerships, Texas has turned against the most common form – tolled highways – amid increasingly organized resistance. With the defeat of House Bill 2861 on May 5, Texas lawmakers slammed the door on 18 major toll projects valued in the billions of dollars. The bill was designed to speed funding for redevelopment of major thoroughfares in the state’s largest metro areas by tapping private investment. Proponents promised to deliver projects in a decade rather than decades.  Conservative politicians in the early 2000s led by former Gov. Rick Perry promoted toll roads as a palatable alternative to raising fuel taxes for funding new highways and lanes and as a way to accelerate the state’s economy. …

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Trump’s Public-Private Infrastructure Vision Rejected in Texas
Source: Mark Niquette, Bloomberg, May 9, 2017
 
President Donald Trump’s plan to invest $1 trillion in U.S. infrastructure with the help of public-private partnerships has hit a speed bump in Texas. Wary of public opposition to new highway tolls, the Texas House voted on May 5 to reject a bill that would have allowed the partnerships, known as P3s, to participate in 18 highway projects costing as much as $30 billion. The defeat leaves the second most-populous U.S. state unable to tap into the partnerships to finance the infrastructure improvements, even as Trump is proposing to expand their use. …

… The bill’s failure underscores the difficulty Trump faces in his bid to use private investment to reach $1 trillion in funding to rebuild roads, bridges, airports, veterans’ hospitals and other facilities. While P3 deals take different forms, they generally involve private investors accepting risk and responsibility for design, construction and operation of a project in return for a revenue stream made up of tolls, user fees or regular tax outlays known as “availability payments.” … Texas previously had broad authority for such partnerships, and some state entities can still use them for such work as building dormitories at universities. But in 2007, the state Legislature voted to restrict P3’s use for transportation-related projects and require that each new proposal for one be authorized. …

Missouri lawmakers send ban on project labor agreements to Greitens

Source: Celeste Bott, St. Louis Post-Dispatch, April 27, 2017

Missouri’s cities and counties could lose state funding if they force nonunion contractors to pay workers union wages for public projects, under a measure now headed to Gov. Eric Greitens’ desk.  Current law allows both union and nonunion contractors to bid on public construction projects. But under a project labor agreement, local governments can require nonunion contractors to pay union wages, something Missouri Republicans call an unfair practice that discourages competition.  The legislation also would ban local governments from giving preferential treatment to union contractors. Governments that violate those provisions would lose state funding and tax credits for two years.  Greitens, a Republican, has listed the elimination of the agreements, or PLAs, among his labor reform priorities, which he says will persuade more businesses to set up shop in Missouri. …

Gov. Scott Walker signs laws on unions, cannabis oil

Source: Jason Stein, Milwaukee Journal-Sentinel, April 17, 2017
 
Contractors won’t have to work with unions on taxpayer-funded building projects and parents will have an easier time getting an anti-seizure drug derived from marijuana, under legislation Gov. Scott Walker signed Monday.  The measure on labor agreements, which passed the Legislature on party-line votes, is the latest in a series of moves to roll back union power by Republican lawmakers in recent years. Walker signed the law at Amerilux International, a De Pere distributor of construction materials. …

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Walker to Sign Bill on Local Governments’ Labor Agreements
Source: Associated Press, April 14, 2017
 
Gov. Scott Walker will sign a bill Monday that blocks local governments from requiring collective bargaining agreements on public projects. … The Republican-controlled Legislature easily passed the legislation this session despite opposition from Democrats, who called it another attack on unions. …

Canadian town picks Uber for public transit

Source: Stephen Shankland, CNET, April 4, 2017

… Innisfil, population 32,727 as of 2014, concluded in a March council meeting that subsidizing the car-hailing service was a better deal than paying for a bus line. The city plans to pay 100,000 Canadian dollars (about $75,000) for a first stage of the program and CA$125,000 for a second round about 6 to 9 months in. That compares to CA$270,000 annually for one bus and CA$610,000 for two, the town said. The town evaluated on-demand transit proposals as an alternative to buses. … Innisfil will subsidize Uber trips so citizens pay between CA$3 and CA$5 themselves, depending on the destination, the town said. …