Zach Schiller writes for Policy Matters Ohio about “The Great Ohio Sell-Off” of Ohio’s assets approved in the new two year budget. He writes, “We may be giving away public assets, which taxpayers have spent considerable sums to build, for less than they are worth.
Schiller writes, “The new state budget calls for a massive sell-off of Ohio public assets worth billions of dollars. Among the properties that may be privatized are the Ohio Turnpike, six prisons and the liquor distribution business. The budget also authorizes local and exempted village school districts to contract out their bus transportation, universities to enter into agreements transferring buildings and parking facilities to outside entities for up to 99 years, and cities to lease their parking meters for up to 30 years. Operators of a privatized turnpike or liquor business, as well as new entities holding university buildings, would not pay taxes. … The budget contained numerous changes in the law affecting primary and secondary schools that allow for additional private-sector operation of K-12 schools and monies going to private schools.”
Here is an excerpt from Schiller’s report:
Liquor distribution business
The 25-year lease of the state’s liquor distribution business to JobsOhio appears to be underpriced. That was the conclusion of state Sen. Tim Grendell, a Republican from Geauga County, as well as the Center for Community Solutions, a Cleveland research nonprofit. And while the $1.2 billion to be paid for the business would provide $500 million to balance the upcoming two-year budget, after that, the state will no longer receive more than $100 million a year that has been going to support public services, creating a new budget hole.
Parking meters
The authorization for cities to lease parking meters for up to 30 years was slipped into the budget at the last moment, in the conference committee, without hearings or public input. After Chicago leased its parking meters in 2009 for 75 years, rates soared and many meters malfunctioned or were mislabeled. …
Prisons
The budget calls for six prisons to be sold, five of them through an RFP process that has resulted in three big private-prison companies proferring bids (awards are to be announced by Sept. 1). The sales are supposed to generate $75 million after debt sold to pay for the prisons is paid off. Though the sale of the prisons is based on supposed savings that would be achieved by private operation, the state has been unable to show it has a reliable way to compute such savings with two existing prisons run by a private company. A recent study for Policy Matters Ohio found the state’s calculations not only to be riddled with errors, oversights and omissions of significant data, but also potentially tainted by controversial accounting assumptions that many experts consider deeply flawed.
Ownership of prisons raises other issues. One is the creation of perverse incentives: Private prison owners want more prisoners, while as long as public safety is preserved, the public should want to keep people out of prison. After the DRC announced the layoff of 717 workers at prisons to be privatized, The Akron Beacon Journal noted in an editorial, “The likely loss of experienced employees translates into renewed questions about maintaining standards in a system responsible for public safety, empowered to deprive people of their liberty with the goal of providing rehabilitation. Those demands are not easily squared with those of a private business that must make money.”
College and university buildings
The budget authorizes state institutions of higher education to sell “auxiliary” facilities such as student services buildings, dining halls, athletic and health facilities to nonprofit conduit entities, which then enter into leaseback arrangements with a third-party independent funding source. These leases could last up to 99 years; the parties could negotiate that the property would revert back to the university at the end of the lease. The parties could agree to allow the university to administer the property, although this is not mandated. While this may give universities more financial flexibility, it raises a number of concerns. For one thing, the third-party financier does not have to be competitively selected. Second, it allows universities to create debts that are not shown on their balance sheets, which may be desirable in some circumstances but could lead to problems. Third, it creates the likelihood for a for-profit financier to benefit, while no property taxes are paid.
The Ohio Turnpike
A turnpike lease could last up to 75 years, far longer than the existing interstate highway system. This would take out of public control a key piece of transportation infrastructure. … Language in the budget says the turnpike contract may contain terms approved by the budget director including financial and other data reporting requirements. “May” is not the same as “shall.” Thus, there is no certainty that Ohioans will be able to learn key details about a privatized system.
School transportation
The budget reinstitutes language in effect between 2005 and 2009 allowing local and exempted village school districts to terminate transportation employees “for reasons of economy and efficiency” and contract with an outside company instead. While existing law allows city school districts, which are covered by civil service rules, to privatize bus service, other districts were only given explicit authority to do so with the budget bill. … Various incidents in recent years have illustrated the perils of school-bus privatization, such as when a Columbus driver was arrested after police found cocaine-filled syringes on his school bus in 2007 and missing background checks brought the district to a standstill.
Indefinite “public private partnership” agreements for transportation facilities
The budget allows the Ohio Department of Transportation to enter into “public private partnership” agreements for transportation facilities that last indefinitely, removing a limitation that such arrangements could only last for the two-year period in which appropriations were made
