Taking on Asset Privatization: Recent Cases and State-Based Responses

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Taking on Asset Privatization Recent Cases and
State-Based Responses
Phineas Baxandall Senior Analyst for Tax Budget
Policy U.S. Public Interest Research
Group phineas_at_pirg.org
AkPIRG / Arizona PIRG / CALPIRG / CoPIRG /
ConnPIRG / Florida PIRG / Georgia PIRG / Illinois
PIRG / INPIRG / Iowa PIRG Maryland PIRG /
MASSPIRG / PIRGIM (PIRG in Michigan) / MoPIRG /
NCPIRG / NHPIRG / NJPIRG / NMPIRG / NYPIRG /
Ohio PIRG / OSPIRG / PennPIRG / RIPIRG / TexPIRG
/ WashPIRG / WISPIRG
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Road data excludes 40 design-build projects for
16.6 billion
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Road data excludes 40 design-build projects for
16.6 bn
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(No Transcript)
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Strategy Raise the bar
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State
Public

• Investors

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• What do investors want that the public does not?

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• What do investors want that the public does not?

Lots
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• What do investors want that the public does not?

Lots
Public understands conflict of interest
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How Does it Work?

• Up-front outlays for 50 years rising user fees
• Lease assets or build new capacity
• Contract protects revenues
• Proprietary information blocks full disclosure
• In other words, the state outsources borrowing
  rate hikes

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Basic message
Public assets should be operated for the public
interest

1. Public must receive full value
2. Public must retain control
3. Full transparency and accountability

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Public must receive full value

• Investors want high fees, low costs

Public wants to save money
Solution Benchmark deal against public financing
with same user fees ? All costs and revenue ?
Over the entire term, not this budget Show how
public would lose money
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Public must retain control

• Investors want certainty about revenue stream and
  future costs

Public wants to operate for public benefit
without hidden costs
Solution Prevent non-compete and adverse
action clauses in contract. Show how risks would
shift to public.
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Full transparency and accountability

• Investors want to keep information proprietary

Public wants to avoid back-room deals, corruption
Solutions ?All bids, contracts, projections and
communication promptly disclosed, including
between private partners ?Time and forums for
public feedback ?Legislature must approve final
terms of major deals
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Publicly Raising the Bar Feeds Political Advantage

• Opposite of back-room negotiations
• Common-sense protections expose
• Public risks
• Budget gimmicks
• True source of profits
• Conflicts with public interest
• Requires investors to internalize risks

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The more public the better
State
Public
Investors