Autumn on Lake Audobon

Autumn on Lake Audobon
Autumn on Lake Audubon, Photo by Alison Kamat

Sunday, May 4, 2014

The Privatization Backlash, The Atlantic, April 23, 2014

This article by Molly Ball highlights the growing outrage over many facets of outsourcing government services by contract to the private sector.  Not explicitly addressed are public-private partnerships (PPPs) in which government and the private sector work together on a single project, but it displays many of the same phenomena. 

Both outsourcing and PPPs have become quite common in Virginia and, closer to home, Fairfax County.  Whether it's the costly giveaway deal with Comstock to develop the Wiehle station area with 2,300 Metrorail parking spaces, the Fairfax Connector, MWAA's management of the Dulles Toll Road, etc., taxpayers run a major risk of unknowingly taking on a significant added tax or other financial burden--and often with poorer performance. 

From personal experience in overseeing large federal contracts, I am very confident of the truth of the central proposition of this article:  There is no real cost saving in outsourcing government services and often the costs are exorbitant.  On the other hand, a government agency can gain access to unusual needed expertise in relatively quick order rather than taking the time to develop the needed expertise internally.  The downside then becomes continuing dependency on outside expertise at great taxpayer expense.

It is not a simple problem.  A Chicago alderman has offered a solution that calls for greater transparency and cost-benefit analysis following Chicago's parking meter debacle.  In Virginia, transparency on PPPs is actually forbidden and truly independent cost-benefit analyses are rarely done.  For example, Supervisor Hudgins was well along in negotiating an affordable housing development PPP to be located at the Reston South Metro parking lot before an outraged public put an end to it.  Obviously, no cost-benefit analysis was done for this proposal nor for the Comstock Wiehle station development scheme. 

Here are some excerpts from the article:

For decades, city and state governments have seen contracting as a cost-saving panacea. But past experience has left some of today's policymakers more skeptical.

A few years ago, Chicago residents accustomed to parking on the street got a rude shock. Parking-meter rates had suddenly gone up as much as fourfold. Some meters jammed and overflowed when they couldn't hold enough change for the new prices. In other areas, new electronic meters had been installed, but many of them didn't give receipts or failed to work entirely. And free parking on Sundays was a thing of the past.
The new meter regime sparked mass outrage. People held protests and threatened to boycott. But there was little recourse: The city had leased its 36,000 meters to a private Morgan Stanley-led consortium in exchange for $1.2 billion in up-front revenue. The length of the lease: 75 years.
If the meter situation seemed like a bad deal for Chicago's parkers, it would soon become clear that it was an even worse one for the city's taxpayers. . .
How did this happen? The meter deal passed the city council just four days after then-Mayor Richard Daley—desperate to fill a recession-caused budget hole—presented it. There were no public hearings, and the aldermen never saw the bid documents. Afterward, some aldermen who voted for it said they wished they'd known more of the details, but it was too late. "We're stuck with it for the next 71 years," Alderman Roderick Sawyer told me recently.
Sawyer, a South Side Democrat who was not in office when the meter deal passed, is trying to ensure similar proposals will get more scrutiny in the future. He has introduced an ordinance that would require more transparency, including public hearings and a comprehensive economic analysis, for any proposed city partnership with a private entity.

"This is just about the process," Sawyer said. "We're not saying all privatization deals are bad. But if we're going to do this, let's be honest with the public and let them know what's going to occur: It's going to save this much money, it's going to cost this many jobs."
Sawyer is not alone. . .
Please read the rest of the article here.

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