Labor & Employment Law

Report: Protecting the Public from Privatization Schemes

By James Parks

In response to the fiscal crisis, many cash-starved state and local governments are considering privatizing core public assets, potentially costing thousands of jobs and decreasing the quality of service to the public.

A new report shows workers and interested community leaders how to make sure the public interest is protected and advanced when officials propose privatization schemes. “A Guide to Evaluating Public Asset Privatization,” published by the research group In The Public Interest, gives basic information about privatization deals, and provides examples of important questions that should be asked when officials propose privatizing public services.

Local and state governments have signed contracts to sell off many types of facilities and infrastructure, including government office buildings, landfills, transit systems, roads, parking structures, zoos, convention centers and other assets that could generate substantial capital. These new owners typically get to keep all or part of the revenue, such as advertising or concession revenue, increase fees or rents, and are responsible for maintenance.

The report points out that while many of these schemes provide short-term gain, they also can create bigger problems in the long term. In Chicago, for example, the city sold its parking meters to a private consortium of Wall Street investors for an upfront payment of $1.15 billion. Since then, parking rates in the Windy City have significantly risen, while meter maintenance quality has declined. 

In Arizona, the state sold its state capitol and several other government buildings, only to immediately lease them back at a higher rate. In these and many other deals, the public has been the loser. With privatization comes loss of public control, increased user fees, loss of jobs, lower quality infrastructure and future budget woes.

You can read the report here.

Full post as published by AFL-CIO NOW BLOG on January 24, 2011 (boomark / email).