Laura Wilkerson

Laura Wilkerson
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Salon.com
MARCH 14, 2012 11:32AM

Privatizing the Public Commons

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          “Public-Private Partnerships” are in the news again as Corporate America continues its full-bore assault on the Public Commons.
            In Chicago, Mayor Rham Emmanuel is hard-selling opening up projects that have traditionally been paid for with tax money, common dollars, to pay for projects that benefit the collective public good. Mayor Emmanuel terms this as, “creating a mechanism to leverage new forms of funding,” and vehemently insists that this is not a form of “privatization.”
            Mayor Emmanuel, who made his fortune as an investment banker and whose influence has been honed by immersion in both the Clinton and Obama administrations, has lined up five investment firms: Citibank N.A.; Citi Infrastucture Investors; Macquarie Infrastructure and Real Assets Inc.; J.P. Morgan Asset Management Infrastructure Investment Group and a concern known as Ulico.
            Mayor Emmanuel, whose campaign for the position was heavily funded by entities that stand to make a profit from this deal, proposes that a nonprofit entity be formed to oversee such “public-private partnerships.” By creating a nonprofit entity, the parties involved do not have to abide by the Freedom of Information Act and are exempt from Open Meeting laws and Purchasing Ordinances.   
            The key to making such ventures successful, experts contend, is to, “identify stable revenue sources – ranging from user fees paid by patrons of the new facilities, a public subsidy financed by tax dollars or a combination of creative funding streams – so that the private investor who provides money upfront can get a decent return down the line.”
            Likewise, Hong-Kong based Indiana University Trustee, William H. Strong, is looking to trade “valuable assets” belonging to the University in exchange for investor cash. Strong, who is Morgan Stanley’s co-CEO for their Asia Pacific operations, contends that in a “resource constrained environment, educational institutions, states and cities are going to have to consider what is their core mission,” and suggests that Universities enter into long-term leases with private entities to operate such things as, “parking infrastructure, student housing, university owned hospitals and energy plants,” a startling statement as Indiana University took over control of the non-profit Bloomington Hospital in 2010 amid much controversy and dissention.
            “Resource constraints,” in the form of steeply declining State support for higher education was cited in 2007 when IU privatized its bookstore and motor pool operations. Outsourcing to Enterprise for the motor pool didn’t go as well as expected and in 2009 Indiana University modified the agreement with Enterprise so that IU would supply larger and specialized vehicles needed to transport groups such as theater troops and orchestras and send classes to areas with rugged terrain and also to pay more to Enterprise than the previous agreement had allowed. IU now manages 36 vehicles in its own motor pool, including compact and mid-sized automobiles, while also providing University support through the University funded Travel Management Services.
            The Enterprise contract had previously caused controversy when it was discovered that Trustee Tom Reilly Jr. had attended the wedding of then student Trustee Casey Cox who just happened to be marrying an employee of Enterprise. While at the wedding Reilly, a former Indianapolis chemical company owner with degrees from Harvard and Stanford, cornered the ride’s boss and asked him, “if he’d cut prices to get a contract with IU,” to which the manager replied, “I would cut it a bunch.”
            Also causing controversy was IU’s public-private partnership with search engine platform ChaCha. Charges of conflict of interest arose as IU’s IT guru and newly named President, Michael McRobbie, who had been on the Board of Carmel, Indiana based ChaCha, entered into an agreement which basically conscripted IU library staff as unpaid employees of ChaCha. McRobbie said he resigned from the ChaCha Board on March 1, 2007 when he was appointed President of IU, but SEC filings made three months later still identified him as a member of that Board.  
            Strong, a Purdue graduate appointed by Governor Mitch Daniels in 2010, argues that investors “around the world are sitting on piles of money looking for a low-yield market,” while Associate Dean of the McCormick School of Engineering and Applied Science at Northwestern University, Joseph Schofer, notes that, “After sitting on the sidelines during the recession, private investors are eager to invest for a longer term payback.” Chicago expects its first public-private partnership will be about $200 million in energy efficiency repairs and upgrades to city properties which is expected to save the city $20 million a year in energy costs, money that will be used to pay investors instead of reinvesting in the public good.
            Dean Schofer notes that, “investors are going to put dollars down to make this happen because unlike the public sector, which doesn’t have the money to spend, these folks have the time to wait for the return, even if it is 5 to 7 percent over 30 years.”
            What is maddening is that these individuals and investment concerns have amassed these massive piles of money they are anxious to park in safe, publicly guaranteed, “investments” through massive redistribution of wealth that has dried up public money while grossly enriching a very small segment of society while the greater mass of society literally pays through higher fees and tolls accompanied by a decline in service and a rise among the ranks of the working poor.
            Trustee Strong, one of 9 Trustees appointed to the Board by Governor Mitch Daniels, cites the need to focus on the Universities “core missions” which he cites as “teaching” and “research” without mentioning that vital third rail of university worth: service to the community. That has been stretched to include this notion if the University in any way has served the World in general it has served its “community” but when you lose sight of the community you can reach out and touch, when the University and the Polis fail to lead by example and live their ideals in action, then community becomes nothing more than a convenient and mutable abstraction and what remains after the Body Politic is to be laid upon the Commons for the Vultures to pick clean our bones.

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I think there have been a number of public-private partnerships in Chicago before Rahm arrived--the Chicago Skyway, the parking meter sale-leaseback are two that come to mind--so he's not exactly being original here. There's a lot of low-hanging fruit, Chicago being the most corrupt municipality in America. Trash collection begs for reform--currently it's a graft machine. Most Americans don't/won't care whether there garbage man is a public or private employee.
While private industry obviously has a role to play in society, so does public industry because certain aspects of that society aren't best served by the profit motive. Healthcare and education come immediately to mind. The experience of IU illustrates yet again what happens at the fringes when the only calculation is profit. To cite, another example, there likely would be no women's athletics or minor sports without Title IX. We can argue about whether that's a good thing, but not about the economic viability of the lesser sports.

By the way, if folks in Indiana are concerned about the direction things have gone under Mitch Daniels, you ain't seen nothin' yet. Wait till Pope Pence takes over.
We need to have a vibrant, varied private sector to put money into the public center; not bankers, but we need high tech manufacturing to provide good jobs and pay taxes, we can not buy everything we use from other countries. This is new for us and has gotten out of hand.