Public goods and spaces at risk as State House leaders seek to expand public-private partnerships

The way is being paved for a massive expansion of public-private partnerships in Rhode Island, putting public goods and public spaces, such as water, schools, jails, courthouse and even public parks and broadband Internet service at risk of corporate ownership and control.

kinds-of-ppp
Privatization targets

As Rhode Islanders sought to come to grips with the results of the presidential elections, the “Commission to Study the Upgrade of Facilities by Encouraging Private Investment in Qualifying Projects” held a sparsely attended public meeting at the Rhode Island State House on November 16 to discuss the best way to create new public-private partnerships (aka P3s or PPPs), an effort that some critics see as a slippery slope towards the privatization of public goods and spaces.

Commission chair Sean O Coffey, an attorney with Burns and Levinson, a law firm that does a lot P3 work, described the commission as, “A committee to study the utility of public-private partnerships in Rhode Island, and determine whether we need any legislative supplements or perhaps comprehensive legislation to make these types of projects more feasible in our state.”

One could already see the privatization of a public good in the make-up of the committee itself, which was entirely made up of lawyers and lobbyists but no elected officials or critics of P3s. Representative Joseph Shekarchi, recently elected to House Majority Leader and the person who introduced the legislation to create the commission, was absent. (See below for a list of commission members)

The commission listened to three presentations at this meeting, followed by a long conversation between commission members and the presenters. This piece deals with the first of the three presentations, the other presentations will be the subject of future postings in this series. The first presentation dealt with defining what a P3 is, from the point of view of corporate and finance insiders.

John Smolen
John Smolen

“There is a lot of debate, historically, about a P3 (Public-Private Partnership). Some people think that a P3 is any relationship between a public entity and a private entity, but we’re talking in a more technical sense here of a public-private partnership really fundamentally grounded in contract,” said John Smolen, partner at the law firm Nossaman LLP on behalf of the National Council for Public-Private Partnerships (NCPPP), of which he is also a board member. “It’s where a public entity, through an enabling statute, ordinance or otherwise is empowered to enter into an arrangement with a private sector for participation and financing of a public project.”

According to Smolen, P3’s are, “in a way, in between two extremes. On one extreme is a traditional, government procurement… on the other side of the spectrum there is a privatization, which is taking a public good, and essentially selling to the public sector and removing your responsibility for it.

“A public-private partnership,” continues Smolen, “is neither of those things.

“So, if there’s a political point to make, and it’s often confused, public-private partnerships isn’t a fancy long word for privatization. It simply is not. Privatization is a completely different legal undertaking…”

P3s, said Smolen, can be created for a single project, but establishing a “pipeline” of projects sends a strong signal to the market that Rhode Island is ready to deal, increasing corporate interest in such deals.

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The privatization “spectrum”

Though Smolen denies that P3s are privatization of public goods, he does admit that they exist on a “spectrum” between public and private ownership of public goods and services. Mandeep Tiwana, head of policy and research at CIVICUS, writes that, “public-private partnerships are becoming a pathway – supported by international financial institutions and large corporations – to entrench neo-liberal economic orthodoxy, causing the state to withdraw from its basic responsibilities.”

Tiwana goes on to say that “big businesses are increasingly eyeing the public sector as an avenue for profit making. And governments are only too willing to outsource basic responsibilities to the private sector, increasing the gap between those who are able to pay for monetized access to public services and those who cannot.”

Tiwana challenges the notion that, “the public sector is unwieldy, therefore in need of being made effective and efficient through privatization:

First, the notion of making the public sector fit for purpose through better governance mechanisms is discarded out of hand. The ingrained assumption that the private sector brings greater efficiency needs to be scrutinized and tested more. The private sector enters into partnerships not out of charity but in order to turn a profit, thereby passing on an additional cost to the public.

“Second, moving public services into the private sphere reduces the potential for accountability to be exercised by citizens. It hives off parts of the public sphere from direct scrutiny and also introduces the potential for corruption in deal making.

“Third, partnership in delivery breeds elite influence over policy which ultimately works to the detriment of majority interests. The potential for insider access that allows private partners direct access to policy makers is a recipe for increased nepotism in society.

“Finally, the on-going rapid shrinkage of the public sector to accommodate private interests amounts to an abdication of state responsibility and indeed betrayal of the social contract between citizens and the state. Taxes and other forms of revenue are paid to governments in the expectation that quality essential services will be provided to citizens at reasonable cost. When these are outsourced and allowed to become another avenue for profit by elite interests, there is bound to be public discontent.”

The next meeting of the Commission at the Rhode Island State House will be in the first or second week of December. Before then I’ll have made all the video from the first meeting available.


Commission Members:

Present:

Commission Chair Sean O Coffey, lawyer with Burns and Levinson.

Tim Scanlon, executive director of CIRI, Construction Industries of Rhode Island

Gary Ezovski, advisor to The New England Coalition for Affordable Energy and
regulations committee chair for the RI Small Business Economic Summit

John Simmons, executive director, Rhode Island Public Expenditure Council

Richard Bernardo, manager of In House Design at RIDOT

Michael McNally, board member at Commerce RI

Absent:

Daniel Egan, president of the Association of Independent Colleges & Universities of Rhode Island

Representative K. Joseph Shekarchi, RI House Majority Leader


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