Taking on Asset Privatization: Recent Cases and State-Based Responses Phineas Baxandall Senior Analyst for Tax & Budget Policy U.S. Public Interest Research Group AkPIRGAkPIRG / Arizona PIRG / CALPIRG / CoPIRG / ConnPIRG / Florida PIRG / Georgia PIRG / Illinois PIRG / INPIRG / Iowa PIRGArizona PIRGCALPIRGCoPIRGConnPIRGFlorida PIRGGeorgia PIRGIllinois PIRGINPIRGIowa PIRG Maryland PIRGMaryland PIRG / MASSPIRG / PIRGIM (PIRG in Michigan) / MoPIRG / NCPIRG / NHPIRG / NJPIRG / NMPIRG / NYPIRG /MASSPIRGPIRGIM (PIRG in Michigan)MoPIRGNCPIRGNHPIRGNJPIRGNMPIRGNYPIRG Ohio PIRGOhio PIRG / OSPIRG / PennPIRG / RIPIRG / TexPIRG / WashPIRG / WISPIRGOSPIRGPennPIRGRIPIRGTexPIRGWashPIRGWISPIRG

Road data excludes 40 design-build projects for $16.6 billion

Road data excludes 40 design-build projects for $16.6 bn

Strategy = Raise the bar

State Investors Public

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 Public State Investors