Taking on Asset Privatization: Recent Cases and State-Based Responses
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Transcript of Taking on Asset Privatization: Recent Cases and State-Based Responses
Taking on Asset Privatization: Recent Cases and State-Based Responses
Phineas BaxandallSenior Analyst for Tax & Budget PolicyU.S. Public Interest Research Group
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
RoadsRail
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Privatization By Sector - Cost (in Millions of USD)
Under construction or completed by 1985
Total Planned and Funded Since 1985
Road data excludes 40 design-build projects for $16.6 billion
Privatization by Sector - Number of Projects (since 1985)
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Roads Rail Water Buildings
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Under construction or completed by 1985
Total Planned and Funded Since 1985
Road data excludes 40 design-build projects for $16.6 bn
Strategy =Raise the bar
StateInvestors Public
What do investors want that the public does not?
What do investors want that the public does not?
Lots
What do investors want that the public does not?
Lots
Public understands ‘conflict of interest’
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
1. Public must receive full value
2. Public must retain control
3. Full transparency and accountability
Public assets should be operated for the public interest
Basic message:
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
Public must receive full value
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.
Public must retain control
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
Full transparency and accountability
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
The more public the better
PublicStateInvestors