December 18, 2014

PUBLIC PRIVATE PARTNERSHIPS – RISKS AND AGENDA 21 FUNDING ISSUES

Also known as PPP's or P3

Purpose: To provide background on what a PPP is, the risks in general usage, and the problems when they are used to fund Agenda 21 sustainable development projects. See our separate page on Agenda 21 if you do not know what it is.

Background on PPP’s

- Many governments now rely on PPP’s to finance transportation infrastructure like highways or trains because private partners put up financing as part of deal vs government loading up on more debt. Thus, these are like pension guarantees that are not funded – they are not recorded as government debt. A primary, early example is funding of normal roads, bridges, tunnels and airports without any mandatory “green” or “sustainable development” requirements.

- Opposition to PPP’s has arisen since they are now also being used to implement Agenda 21 and sustainable development projects and the original purpose has morphed to a tool used to implement "Green sustainable development" objectives from the UN Agenda 21 without adequate oversight or understanding by the public.

- There might be some confusion about the use of “public-private partnerships” . The Brookings Institute says there were only 377 P3’s in the US from 1985 to 2011, while we constantly see the term used in local government planning statements. Thus, the formal definition from Brookings might be for large transportation infrastructure projects that can be tracked, and the local Agenda 21 version we are concerned with might be an NGO and local government agency “working together” without any formal infrastructure financing being involved. (I will research this further to clarify, with examples). It may be just the second type that is most prevalent in “sustainable development” projects leading to local citizen opposition because they operate without voter control, have Agenda 21 objectives and are created or operated without much transparency.

- Another term for this might be public joint funding

- Started in UK in 1992 – same year that Agenda 21 was adopted.

- Canada adopted in 2009 with creation of a “Crown corporation”, but earlier versions started at provincial level sponsored by the Canadian Council for Public-Private Partnerships in 1993. Before this, most PPP's were one off with a local or State agency, but now there is a movement to create Statewide or Countrywide mechanizms to formalize PPP creation. Such programs could be benign, and basically to create a straightforward infrastructure component like a bridge. The problem comes when they include criteria or reward firms for implementing "green" objectives that are derived from the socialist Agenda 21 program.

- 1400 PPP’s signed in Europe in last 20 years.

- HERE is a good 2009 overview of PPP’s in a general sense related to transportation infrastructure funding by Robert Puentes of the Brookings Institute think tank. This does not address the issues related to using PPP’s for “sustainable development” or Agenda 21 programs. Those risks are described below. However, the biggest risk to me of any PPP is any type of government guarantee or liability immunity. Back in California, a private firm funded and built a toll freeway, probably through a PPP type of program, and it never broke even, requiring local government, who guaranteed it, to cover some of the shortfalls. Also, some programs fail to clearly describe or show the true costs of government commitments for any maintenance, operations expense (i.e. if the private firm fails).

Types of Projects funded by PPP’s

- Water service privatization

- Airports or ports

- Health public-private partnerships

- Ownership or leasing of existing government facilities, like a toll road, to a private firm.

- Roads, toll roads, tunnels, toll bridges or bridges <<< the standard use for PPP’s

- Railroads, bike trails, bus systems, mixed use housing areas meeting Agenda 21 criteria

Reasons for PPP’s

- Shift government capital spending from government debt to private programs. This basically enables more spending without more debt on the government balance sheet. If the government agency has hit bonding caps, this lets them run up more debt than may be prudent. Kinda like unfunded pension liabilities.

- A local government parks & rec program “works with” a local, private owner of a recreation facility to use it for agency run programs. An example is the “public private partnership” discussed by the Parks Master plan for Lake County, FL where the County would apparently rent or lease the owner’s ball fields for county run league programs. (See para 5.1 HERE) . This could be a beneficial program if there are no required tradeoffs for the vendor and the costs and policies are all objective and transparent.

- Combine design, operator, financing in one program, so it is run by private firms, not govt

- Agenda 21 implementation – supports friendly companies and organizations (including NGO’s) with grants, tax breaks, etc. if they in turn agree to implement Agenda 21 components desired by planners, but to the detriment of personal freedom or property rights.

- In turn for grants and tax breaks, company agrees to certain Agenda 21 objectives – green building, buffers, mixed use plans, restrictions, government controls, focus on non-auto transportation like trains, bikes, buses.

- Use of a P3 could be a step to privatization of a government service, like prison construction and management.

Risks & problems with PPP’s

- P3 Project justification is questionable. If a true need and market justification existed, then the market economy would do the project without government participation. Example is the Orange Blossom Express railroad project in Lake County, FL where $18-million of tax funds will renovate old rail lines belonging to CSX, but CSX won’t do it themselves, AND they still retain ownership without any payback requirement. Rushing in with government assistance distorts free market perspectives.

- Most P3 projects are for corporate welfare or subsidies. They include a means of using tax breaks, regulatory easing, taxpayer support for corporate subsidies. A clear example is the Lake County, FL “partnership” or contract with the Covanta firm for waste disposal where after a 20 year contract, the County, after paying bond payments for 20+ years, still did not own the waste processing facility paid for with tax revenues. That was clearly a sweetheart deal and left Covanta with ownership of the facility. Now, the contract is expiring and the County would have to continue paying fees to use the facility paid with taxpayer funds via bonds. Another example in Lake County is the MPO led process to raise $18-million in government spending to rebuild a local train track owned by CSX, but not obtain ownership rights or future payback provisions for all the funding. Essentially, CSX will get the $18-million rehab project without any repayments to taxpayers for the funding.

- P3’s bypass standard procurement systems and thus can include work objectives or reduced oversight that would not be approved through transparent or competitive bidding and procurement systems.

- P3’s encourage return favors – “I’ll vote for your PPP if you vote for mine”.

- P3's hide true debt for government projects by skipping government debt and loan accounting and just guaranteeing future stream of income to pay off private partner.

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