Wheeler lectures us on "facts," offers few
This site got a rare visit yesterday from the Oregon state treasurer, Ted Wheeler. Wheeler took umbrage at our questioning of his new pet project, a consortium of states and local governments called West Coast Infrastructure Exchange, or WCX. According to him, we were wrong to describe it as a move to "privatize" public infrastructure projects, and he criticized us quite pointedly for allegedly not knowing the facts:
The first message is that the infrastructure projects remain under public ownership. Period.
The goal is to reduce the costs associated with planning, procurement and financing projects - something you mention frequently on this blog.
Another goal is to encourage more private sector investment in the bonds associated with these projects - this reduces the cost to taxpayers as well as investment risk - again something you raise on this blog repeatedly.
We often find that local jurisdictions lack the technical expertise to design, finance and build complex projects. We want to provide more technical assistance to local jurisdictions so that they don't waste taxpayer money - something I would think you would support.
Finally, we are encouraging the West Coast to think more about who we can compete in a Pacific Rim economy as a competitive region. This means we want to work together where it makes sense.
I don't mind criticism when due, but please make an effort to get the basic facts correct. You can always inquire in advance if you have specific questions.
We have many questions, but let's start with the first point Wheeler made it in his condescending comment: "the infrastructure projects remain under public ownership. Period." If that's the case, why does all the literature surrounding this expedition keep telling us we are going to be entering into "performance-based partnerships" with private financiers?
What is a partnership? Let's look at the legal definition, shall we? Oregon Revised Statutes 67.005(7):
"Partnership" means an association of two or more persons to carry on as co-owners a business for profit created under ORS 67.055, predecessor law, or comparable law of another jurisdiction.
If the financiers are going to be "partners," doesn't that necessarily mean that they will be co-owners of the assets of the "partnership"? And if those are street lights and public water systems, then public assets are being privatized. Only Humpty Dumpty could make the word "partnership" mean something different.
It's basic corporate finance that there are two ways to finance an asset or venture: debt or equity. We already have a municipal bond market, where debt financing is provided to state and local government on a daily basis. If we're talking about some other "innovative" mechanism to raise money, we must be talking about equity. That is, private ownership.
As far as "making an effort to get the basic facts correct," we'd like to, but for all the glossy p.r. shinola being pumped out by Wheeler's office and his BFF's at CH2M Hill, there are precious few "facts" available for public view. Here's the sparkly website. Click around -- see if you can find any details about the structure of the mysterious deals that this group is proposing. Who will have ownership of what? What will the rights and the obligations of the parties be? Supposedly they're going to lure investors who have never wanted, and still don't want, municipal bonds:
Creating and advancing new mechanisms for project finance, including those that could be attractive to private investors that have traditionally not invested in public infrastructure...
What promises will need to be made to draw the new money in? Unless we turn off the p.r. machinery and get to the details, there are no meaningful "facts," just happy spin: "innovation in infrastructure finance and delivery through performance-based partnerships... innovative financing and management structures can help to make critical projects more feasible... create and develop innovative new methods to finance and facilitate development of the infrastructure needed to improve the region’s economic competitiveness... connect projects to innovative financing, including potentially private capital." Until the money boys come clean with exactly what they're after, such turgid language is suspicious -- indeed, alarming.
The other thing that's worth noting here is that while this is a confab of various governments up and down the West Coast, it's clearly Wheeler's baby. Here's the loose contract that the government players have signed. In it, there's more Oregon involvement than anyone else's:
During the start-up phase (2012-2013), the WCX will operate as a non-profit entity with an interim management team representing each partner office, with coordination by the Oregon State Treasury, and financial support from the Rockefeller Foundation.... Operating under the non-profit rules of Oregon law, WCX will be governed by a Board of Directors and employ an Exchange Manager who will hire and manage loaned staff subject to the Board’s approval.... Sponsorship will be provided by the Oregon Treasurer’s Office, continuing under the auspices of a state-sponsored non‐profit corporation, and financial support will be provided by the Rockefeller Foundation.
It's no surprise that our state treasurer is protective of his newborn baby. But until more cards are shown, residents have every right to be wary. That baby's head could wind up turning all the way around and shooting out pea soup.