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Thursday, November 15, 2012

Kitz, Wheeler gung ho on privatizing street lights, water

That greasy press conference in San Francisco yesterday, unveiling the latest self-enrichment scheme to be inflicted on taxpayers by CH2M Hill, had quite the sinister ring to it. The official press release from Oregon Treasurer Ted Wheeler, who ought to know better, had the wretched stench of "public-private partnership" all over it:

The West Coast Infrastructure Exchange (WCX) brings together governors, treasurers and key infrastructure development agencies in the three states and British Columbia.

The shared goal: Make vital public works and energy projects more feasible in order to improve economic competitiveness and to maintain the region’s unparalleled quality of life.

The exchange plans to achieve that goal by helping West Coast states and British Columbia explore strategies such as bundling and alternative funding methods, including the potential of private capital, to finance critical infrastructure projects....

No projects have been selected. But the Exchange is laying the groundwork to identify a first wave of projects. These could include energy efficiency, municipal lighting, water aquifer recharge, and other projects constructed through performance-based partnerships with the private sector.

Bring on the graft! Bring on the profiteering! God help America, and especially the State of Oregon. The looting never ends.

UPDATE, 11/16, 11:21 p.m.: We follow up here.

Comments (28)

The looting may be ending, at least according to the Portland Business Alliance,
they're done.


Jack - this is exactly why we had the press conference yesterday which you objected to on this very blog. 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. Thank you.

Jack - Have you looked at the schmucks running the Long Island Power Authority lately? Government owned and operated, and a big disaster as far as getting people's power back on again.

"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."

Mr. Wheeler,

It's these kind of public private projects that get the taxpayers in deeper. How about the road fix from Corvallis to the beach? The biggest debacle in state transportation history. Yet, no one takes responsibility for it. It's like watching two baseball players both go for the fly ball and neither one catches it in the end. Or takes responsibility for dropping the ball.

I support the private sector taking on jobs for the good of the public. At the same time, if as you say, government employees do not have the expertise to carry out the job they are tasked with, and require the private sector to do the work, then government can shrink substantially, can it not?

Thanks for making the effort to get the basic facts correct, and for taking the time to respond to my specific question.


Shannon - Oregon is a traded sector economy. We make things and sell them to other states/regions. Our economic prospects are tied to our ability to support freight mobility, roads, bridges, airports, seaports and the like. The West Coast Infrastructure Exchange is an effort to make our planning, procurement, and financing more cost-efficient. It will connect more private sector dollars to local projects, many in rural areas. It will not fix stupid but it will make it more likely that best practices are shared. To your example - I'm not an expert on it but my own view is that any project sponsored by a government entity is ultimately their responsibility.

"he exchange plans to achieve that goal by helping West Coast states and British Columbia explore strategies such as bundling and alternative funding methods, including the potential of private capital..."

It's sad when real life mimics (or is it mocks) commercials, as soon as I read this I thought of the commercial "We ALL bundle" (a commercial being run by vonage versus the packages/bundles that cable has been running)

local jurisdictions lack the technical expertise to design, finance and build complex projects

That right there is a big red flag that they shouldn't be doing it. Period.

Borrowing money more efficiently misses the point that the state and local governments have borrowed way too much and spent even more on wasteful and frivolous endeavors. Stop the madness.

If you really want to get serious about being competitive, start with a chainsaw to Oregon state government. 10% would be a good start for this year, and another 10% next year. Actual cuts on the dollar amount spent, not projected growth. Creating an infrastructure exchange is just more foolishness.

Native I was referring to local water and sewer projects. Not sure why that raises a "red flag." I don't mind outhouses myself, but I think we can do better. I also don't see why we can't both live within our means AND make smart investments that make us more economically competitive in the future.

Sorry I meant Andrew, not Native...

Ted - thanks for engaging the bojackers (not sure that term is how everybody wants to be referred).

My issue when you start talking about privatizing both the planning and funding of projects is that these private organizations are not doing it for the benefit of the state - they are in it for the money.

This automatically produces a conflict of interest - projects will be built that are NOT NEEDED, TOO EXPENSIVE, and with TOO MUCH DEBT. You may try to pretend that there will be strong government supervision and foresight, but that is your opinion and is NOT backed by any examples.

Rather the examples of handing over key facets of government operations to private interests show very poor results.

Not only does the government lack the expertise to run projects, they also lack the expertise to know when they are being suckered into a really bad deal.

"I'm not an expert on it but my own view is that any project sponsored by a government entity is ultimately their responsibility."

Thanks for responding, Ted-

You've identified the problem with public/private partnerships: The taxpayer is stuck paying the bill whether the work is done, done poorly or not done at all.

You sound like you are in the hip pocket of builders making such a statement. Is there no responsibility for government to protect the tax payer from shoddy work and cost overruns in the millions?

Since you don't sound familiar with the five mile rebuild of Hwy 20, the most expensive highway project the state has ever undertaken, and that has continued to fail and cost millions in overuns during your tenure as Oregon State Treasurer, I've attached the following article from the Register Guard to refresh everyone's memory.


From the article above:

"...four key decisions the state made — all designed to save money — that boxed the state Department of Transportation into a rushed, outsourced, flawed design and a contractor that couldn’t be removed from the job without risking a multiyear, multi­million-dollar legal battle, according to the state’s files."

"The state chose a formula for awarding the bid that favored low price over high quality, so it had no choice but to go with the lowest price, and the least-qualified bidder as rated by the state. The Transportation Department chose Granite, a California contractor whose bid documents show little to no experience building or designing roadways in terrain such as the Coast Range..."

"The Transportation Department outsourced the project design, using a method of building highways known as “design-build.” This means the contractor designs and builds the entire project, rather than using Transportation Department engineers to design a project that could then be split into pieces and bid out to multiple contractors. In theory, design-build transfers most of the responsibility and risk to the contractor: The contractor designed it, so if there’s a problem, it’s the contractor’s fault. In reality, on Pioneer Mountain (Hwy 20), the design-build contract didn’t protect Oregon taxpayers."

I disagree with you that "any project sponsored by a government entity is ultimately their responsibility", if that means we are stuck paying the bill regardless of what we get for our hard earned dollars. It doesn't make any financial or business or common sense.

How do you think we could avoid such costs to the taxpayers in the future, Ted?

I am delighted to see Ted's comments here. Our public servants should be encouraged to participate in virtual town halls on a more regular basis.

Be gentle on him. Our virtual democracy could lead to a real one.

Thanks Tim,
I believe those who are water watchers may be more aware of consequences than some officials who may have more on their plate than to realize the details, either that or they do know and all is OK with them to partnership via regional leading to privatization certainly of some aspects.

My question to Mr. Wheeler then is when you mention that infrastructure will remain under public ownership, period - what happens when others such as private, regional, etc. do become involved, what about the control of such infrastructure and the control of what is important to many, the substance, the actual water?

Shannon - thanks for the link. I wish you were right that a government and its taxpayers bear no responsibility for a project if it isn't a good one but there's a lot of examples out there that suggest the opposite. The way you avoid the cost is to make sure the project, if deemed necessary, be done correctly. That includes making sure the people who plan, build and run it know what they are doing (i.e. have expertise) and that the taxpayers are protected with contracts and procurement strategies that have their interests well represented. This is a key part of what we are looking at.

I appreciate your allowing me to participate in this discussion, as always.

Mr Wheeler,

Considering my low opinion of politicians I have a surprising amount of respect for you and the way you have managed the Treasurers office.

I am however quite concerned to think of you brainstorming public/private financing schemes with Calpers and CH2M in a room paid for by the Rockefeller Foundation. It would seem that Oregon does not need the kind of help they are exchanging.

Straight-up tax exempt financing has worked forever. Why won't it work in the future? Especially at the county/city level.

I worry about turning the Wall Street and Calpers wolves loose to feast on Oregon municipalities through this exchange. I hope my fears are misguided.

Best Regards,

All the debt that government is piling on will eventually lead to foreclosure, and hence privatization. And CH2M Hill will be there making a buck at every turn.

When Ted shows me what the heck "performance-based partnerships with the private sector" means, maybe then I'll listen to the rest of his spiel.

In concept "privatizing" sounds good. But I question what always seems to happen when we segment a function of our government. Take the Portland Library District. The property tax rate that Multnomah Co. uses to pay the portion for the library will NOT go down, even though the County's library obligation cesses.

If any or all of the public works provided by cities, counties cess, will their property tax rates proportional decrease?


Will great point. I assume tax exempt financing will continue to be the most viable source of funding for infra projects. That said, the muni market is actually in question going forward as many in Congress are seeking to eliminate the tax advantage as a cost saving measure.

Jack for me performance based means government can terminate its payments to any private sector partner for failure to perform at any point in the development cycle. No lock-in agreements. Performance standards are established by contractual agreement.

Gee, Mr Wheeler, when has PDC ever "terminated" when any of it's partner's failed "to perform" (think of the 9 Agreements of SouthWaterfront URA)?

Please give examples of terminations.

Or how about the State and CoP's update computer programs failures? Any terminations there?


Thus, the newly formed West Coast Exchange will bring together governors, treasurers and other officials from the four governments to try to find ways to get the infrastructure projects moving.

Mr. Wheeler,
I see this newly formed West Coast Exchange as a huge leap over any public involvement, regarding this trillion dollar effort. As far as I know, we the public have not seen any reports as to what any return would be and if this trillion dollar endeavor is even necessary. Naturally corporations standing to make money on the projects are ready for this for obvious reasons. I can envision all plans laid out and then a few meetings around the state to take a look see and most likely a rubber stamp process to the overall plan. I suppose those in charge will think this subject is too large for the people to be involved now and/or to grasp the importance of it. Sorry if this sounds cynical. I also thought better of you than most officials, especially as you stood up to the city regarding the urban renewals and the convention center hotel. Perhaps some of the cynicism comes from having had to deal with this current city council.

infrastructure projects remain under public ownership

private sector partner

Partners are co-owners. And so you are talking about private equity ownership. Of public infrastructure.

You are talking out of both sides of your mouth, Ted. When you and the CH2M shills stop with the fluffy press releases and websites full of catch phrases -- when you lay out the actual details of the structures you're talking about -- maybe you'll have some credibility with me. But so far, I stand by the words "privatization" and "stench."

Stockton, CA had to fight for six long years to get their water rights back. Now is the time to be sure we don't lose ours. Other cities are finding privatization isn't working for them.
We shouldn't even be going down that road, however, it sure does look like that is what the web of power does want and Leonard, the PWB and council going along with the incredible debt swamping that has made our assets and rights vulnerable to the path of privatization.

In Portland, streetlights (and in fact electricity) are already privatized.

Compare PGE (and Pacific Power)'s service, to the Portland Water Bureau...

Of course, Portland's civic leaders look up to Vancouver with glee - Clark Public Utilities, a well run, very conservative utility district, with much lower electric rates. However since the BPA is fully booked up, ANY new company would be forced to buy power at market, not preferred rates, and thanks to the massive lending required to buy up PGE's assets and a necessary city bureaucracy, any such takeover would jack up rates - PLUS reduce property tax revenues, since PGE pays a lot in property taxes that a municipal company does not.

PGE with PERS for all of its employees - yeah, brilliant idea.

Thank you for participating in the conversation, Mr. Wheeler. As you are aware, Jack has long touted your integrity on this blog. I hope that you bear that history in mind as he now makes you sing for your supper, as is his right and role as a blogger.

While you consider which tone and tune to strum... I muse, what rhymes with Fluoride?


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