Tag Archives: public-private partnerships

Five ways privatization is ruining America – Salon.com

17 Aug

The incentive to fail was also apparent in road privatization deals in California and Virginia, where ‘non-compete’ clauses prevented local municipalities from repairing any roads that might compete with a privatized tollroad. In Virginia, the tollway manager even demanded reimbursement from the state for excessive carpooling, which would cut into its profits.

The list goes on. The Chicago parking meter deal requires compensation if the city wishes to close a street for a parade. The Indiana tollroad deal demanded reimbursement when the state waived tolls for safety reasons during a flood.

Plans to privatize the Post Office have created a massive incentive to fail through the Postal Accountability and Enhancement Act, which requires the USPS to pre-pay the health care benefits of all employees for the next 75 years, even those who aren’t born yet. This outlandish requirement is causing a well-run public service to default on its loans for the first time.

Also set up to fail are students enrolled in for-profit colleges, which get up to 90 percent of their revenue from U.S. taxpayers. Less incentive remains for the schools after tuition is received, as evidenced by the fact that more than half of the students enrolled in these colleges in 2008-9 left without a degree or diploma.

via Five ways privatization is ruining America – Salon.com.

WAll Street’s infrastructure racket, Rahm Emanuel

10 May

From Salon, on the corpstate at its best, Chicago-style:

Here is how the “infrastructure trust” works: the city pays for upgrades to its roads, rail or schools with dollars pooled by Emanuel’s friends from the banking and investment world. Meanwhile, the city retains “ownership” of the infrastructure, though this comes at the cost of having to ensure a revenue stream for the fund. Emanuel’s favorite example is his $225 million pet project to green-retrofit some of the city’s older buildings. The savings on energy usage stemming from the renovations are then extracted and used to pay off investors. Of course, the city could also sell municipal bonds to raise necessary funds, and then use the savings in energy costs to pay the loan back at a much lower cost to taxpayers. But then Emanuel’s friends (and campaign donors) would not be the richer for it.

While the mayor bills his plan as “bold” and “innovative,” the reality could not be further from the truth. Public-private partnerships (PPPs) have been around for decades in various forms and their track record is replete with delays, cost overruns and prolonged legal battles. What’s more, the beneficiaries of these investment mechanisms are the same rapacious Morgan Stanleys and Goldman Sachs that gave us the mortgage-backed securities scandal and the ensuing recession. Using the economic malaise they created as cause, they have ratcheted up their advocacy of PPPs as a means of helping cash-starved public entities finance capital-intensive projects.

The upshot is that they are holding us hostage all over again. They are using infrastructure built over decades with public monies as collateral to extract profit off of the back of taxpayers. A cursory look at some past projects of this nature demonstrates that PPPs are often inefficient, overly costly and inherently unjust.

Examples: the London Underground, Orange County’s privatized HOV (high-occupancy vehicle) lane, and an expressway from San Diego to Mexico.