Thursday, December 27, 2012

Privatization failures keep piling up

   Here are a couple more reasons why farming out government services might not always work out for you.

  The first is the latest article on the WEDC debacle in today's Journal-Sentinel. It includes some beautiful quotes from a professor who deals with corporate and financial oversight.
If they were in my class, they'd get a big 'F,' " said Paul Lapides, a business school professor who directs the Corporate Governance Center at Kennesaw State University in Georgia.

"Every single adult citizen in the state should be saying, 'Wait, you have people on this board of directors who aren't reading financial statements and don't have a clue about how internal controls work?' " Lapides added.

He said the board could be viewed as having a "reckless disregard for their duties." Like public company directors, members of boards such as the WEDC have a duty to act in the best interest of the company and are subject to the same liability, Lapides said.

As Wisconsin's flagship jobs agency, the WEDC must prepare numerous re ports for state officials on its job creation programs and its tens of millions of dollars in taxpayer subsidies to businesses. But unlike nearly every other quasi-public authority at the state level, the corporation is not required by law to report yearly on its finances.

Before Dec. 14, WEDC's audit committee of one businessman and two lawmakers had met just twice, and neither they nor the entire volunteer WEDC board had seen full financial statements.
In other words, the Walker Administration and GOP Legislature didn't think of the most basic oversight and accounting measures when they created WEDC in 2011. Now whether the Fitzwalkerstanis are at "unfit-for-office" levels of incompetence, or desired that part of WEDC's structure, I'll leave up to you to decide.

Another story that came out in the last week included the revelation that the state DOA was firing a cleaning firm that damaged the Capitol's marble floor through negligence. This comes a year after Walker and DOA chose to use prison labor to put up the state's Christmas tree in the Capitol Rotunda. Naturally, the Walker DOA is not deciding to take the cleaning and Capitol maintenance duties in-house, but instead will hand out another contract to another private company to help clean up the damage from the first company.

And lastly, we'll take you to the hallmark of bad crony government service contracting- Chicago - where the city's privatized parking meters are now slated to become the most expensive in the country.
On New Year's Day, meters in the city's downtown Loop area will begin charging $6.50 an hour — up from $5.75.

A report from the San Francisco Municipal Transportation Agency says the rate change will make Chicago the city with the most expensive metered parking.

The company that operates the meters plans to have all machines set to the new rates by the end of February.

Former Mayor Richard Daley got the City Council to approve the company's 75-year contract in 2008. In return, the city got a $1.1 billion payment — much of which has already been spent.

Current Mayor Rahm Emanuel has ordered an independent audit of the deal, which is now largely viewed as a financial disaster.
As someone who worked for the City of Milwaukee as Chicago made this deal in 2008, we took a look at it as a possible direction to take to handle the City's revenue issues, and our analysis showed that it was a bad idea for Milwaukee. So we chose to keep Milwaukee's parking in-house, and it continues to be checked by city-accountable Milwaukee parking officers. The Milwaukee parking operation's "profits" will reduce the City's property tax levy by over $60 million between 2011 and 2013, and without the loss of future revenues that Chicago is facing because of it being sold off to Wall Street financiers.

I'm not saying that all privatization is bad or doesn't work- some of it does. But when you see Republicans and corporate Dems trying to say that selling off services is a magic pill that saves taxpayers money and delivers better services, that's absolutely not true. And in all cases, privatization schemes should be closely monitored with the same level of tight oversight of taxpayer dollars that exists with the services done in-house by government workers.

This has consistently not been the case in Fitzwalkerstan, and you see the disasters that result.

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