The push back against privatization, or putting public services and assets in the hands of private entities, has become more organized. Last week, a public interest group released a legislative agenda to combat privatization, which they say too often contributes to the downward spiral of local economies and the growing wage gap in the U.S.
The newly-released “Taxpayer Empowerment Agenda” is a package of policy recommendations intended to assert taxpayer control over public resources. Unveiled by In The Public Interest (ITPI), a resource group focused on privatization and contracting, the agenda is being introduced to lawmakers across the country in the hopes of making government contracting processes more accountable and transparent.
“We wanted to introduce a set of proactive public protections aimed at defending our communities from the often detrimental effects of privatization,” said Shahrzad Habibi, research and policy director for ITPI.
Habibi said policymakers in cash-strapped states and cities are often lured into deals by private contractors that promise “better, faster or cheaper” projects and services. But, she added, such promises rarely result from the deals.
“A lot of times they say they can cut costs, but it’s because they cut corners and slash wages and benefits,” she said. “So it’s not actually providing more efficient services, or providing better services. Most of the time they just take family supporting jobs and make them poverty level jobs.”
The “Taxpayer Empowerment Agenda” lays out 11 policy suggestions focused on increasing transparency, accountability, shared prosperity and competition in government contracts.
If government officials are entertaining the notion of privatizing a public asset, the plan would put safeguards in place to increase oversight and protect taxpayer dollars, according to Habibi.
The agenda calls for “commonsense” requirements for companies being funded with tax dollars, such as opening contractor books and meetings to the public; allowing language in the contract that permits the government to cancel the deal if promises of quality and cost savings are not met; and paying a living wage and providing reasonable benefits to employees.
The plan also recommends the elimination of automatic contract renewals as a means to increase competition, and a requirement that every contract submit to a thorough cost analysis guaranteeing a minimum of 10 percent savings before any privatization deal is finalized.
“When a private entity takes control of a public program or infrastructure, then the public no longer has direct say over what’s happening there,” said Amisha Patel, executive director of the Grassroots Collaborative. “We can’t vote out a private developer or CEO.”
The Grassroots Collaborative, a coalition of community and labor groups, has repeatedly spoken out against privatization. Last year, the group pushed back against Mayor Rahm Emanuel’s controversial “Infrastructure Trust” public-private partnership.
Patel said governments often see a cost reduction in the first few years of a privatized contract, but because the deals are commonly 50 to 75 years long, the savings do not often pan out over time.
“We definitely need a public process,” Patel said. “If there’s any attempt to enter into a new contract of privatization, then lets make sure there’s enough time to debate, to understand the risks over time, and establish protections for workers so contractors aren’t cutting costs on the backs of workers.”
As an example of “disastrous” privatization, ITPI and Patel both point to the city of Chicago’s 75-year deal with the private company Chicago Parking Meters LLC (CPM). In exchange for an upfront payment $1.15 billion in 2008, CPM will collect revenues from 36,000 of Chicago’s pay-to-park stations for roughly the next seven decades.
Signed by former Mayor Richard M. Daley, the contract resulted in skyrocketing meter rates and millions of dollars being paid out by the city to compensate the leasing company for out-of-service meters. Many Chicago City Council members have said they didn’t have enough time to properly review the deal before they were asked to vote on it, and by the time Emanuel took office in 2011, there was only $125 million remaining to be spent of the cash payment.
“Why did we sell our parking meters in the first place,” asked Patel. “The idea was that we’d have this rainy day fund that would keep us going for decades to come and it disappeared within a matter of two or three years.”
She added that the city would have been much better off had it kept the parking meters public.
“It made no sense to give away an actual revenue producing asset to a private entity for them to collect our money,” she said. “If we had modernized them ourselves and kept them public, all of the proceeds from the meters would actually be going back to the city to fund vital services.”
Ald. Roderick Sawyer (6th) agreed with Patel, calling the city’s contract with CPM a “bad deal.”
In November, Sawyer proposed an ordinance in Chicago calling for similar provisions recommended in the “Taxpayer Empowerment Agenda”.
“People are solely looking at the bottom line, they’ll cut all costs necessary, and usually these costs are labor costs,” he said. “Instead of producing decent paying jobs, we’re talking about non-unionized, no health care, probably not always full-time positions, all in the interest of just saving money. Who does that benefit? Does it help a few Chicagoans who are paying out services? Sometimes. But at what cost?”
Called the “Privatization Transparency and Accountability Ordinance,” the legislation would require public hearings before the Chicago City Council votes on any proposed privatization deal. The ordinance would also call for a cost-effectiveness study for every privatization contract the city wishes to enter; living wages and benefits to be provided for workers, half of which would be have to be residents of Chicago; and a guaranteed cost savings of at least 10 percent.
“This ordinance is a commonsense approach to privatization, we need exposure before things get privatized,” the alderman stressed. “We need to make sure these deals are in the best interest of the people of Chicago.”
Patel added that, looking at the parking meter deal in hindsight, she doesn’t understand why Emanuel would not want to make sure safeguards are in place to “protect taxpayer dollars during privatization deals.”
Katherine McFate, president and CEO of the Center for Effective Government, said she is optimistic several municipalities across the nation will adopt policies recommended in the “Taxpayer Empowerment Agenda." The Center for Effective Government, a non-profit research and policy think tank that promotes transparency and accountability in government, has endorsed the proposal.
She called provisions in the agenda, and Sawyer's ordinance, "responsible public policy."
Because private sector firms have to make a profit, while the public sector doesn’t, McFate added, "taxpayers are paying for high salaried executives and company profits." Privatization in this manner, she continued, contributes to the nation's growing wage gap and the erosion of the middle class.
"In outsourcing like this, you often see wages being squeezed and people being asked to do more for less," she said. "The bottom line is, you’re losing democratic control over public services and public assets and we think that’s very problematic."