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October 3, 2014 11:17 AM Age: 6 yrs
Important: You Have a Chance to Save Your Kids and Grandkids From Even Greater Debt...Category: Larry Checco
Source: Larry Checco
Why the federal government would even consider risking billions of taxpayer dollars by entering into long-term public-private partnerships with one hand tied behind its back is beyond me.
But that’s exactly what will happen if some bureaucrats in Washington get their way.
This column may be a bit wonky for some readers, but stay with me. It’s important to you and your children.
Whether you’re a Republican, Democrat, Independent or Tea Partier, here’s your rare opportunity to hold the government’s feet to the fire—and save your kids and grandkids from even deeper federal debt.
Privatizing Gains and Socializing Losses: It’s not news that all levels of government are strung out financially. Yet the business and financial burdens of providing services and infrastructure to their citizenries relentlessly goes on.
Enter public-private partnerships -- P3s -- whereby governments are turning more and more to the private sector for financing.
For years, P3s have been employed to offset government costs in nations as far-flung and disparate as Great Britain, Australia, Canada, India and Russia -- and P3s are now beginning to gain traction in the United States.
P3s are not a bad thing. In fact, when executed properly, they can be a very good thing.
The rub, however, is that, unlike routine contracts that can be terminated and awarded to another company for any number of reasons, these long-term—usually between 25 and 99 years—P3 agreements almost always guarantee a steady stream of income to the private partner, even if terminated early.
In essence we’re talking about the potential of privatizing profits and socializing losses whenever the government enters into such agreements—to the detriment of we, the taxpayers.
Cases in Point: In an effort to address infrastructure and budget deficits, several states have entered into P3 agreements for the construction and maintenance of toll roads. Unfortunately, almost all of these roads have struggled financially, and in some cases required state and federal government bailouts.
Bailouts to the private sector! Ouch! We’ve seen this movie before.
But here’s another rub: These bailouts are not necessarily to cover for any incomplete road construction, but rather to ensure that investors get their government guaranteed rates of return, which some estimate as high as 12% to 18%.
Take the city of Chicago, which decided to privatize its parking meters using a P3 deal to close a one-year budget deficit. According to the Chicago Inspector General, the city lost anywhere between US$1 billion to $2 billion in future revenues.
In addition to the lost future revenues, the Chicago taxpayers are on the hook to pay the private firm -- even if they want to terminate the deal early.
So who’s minding the chicken coop?
Deep in the belly of the beast exists a small, little known group that sets accounting standards for the federal government, the Federal Accounting Standards Advisory Board -- FASAB.
FASAB created a task force to look more closely at P3 arrangements. In full disclosure, I was invited to be a member of the task force as a taxpayer representative, hence this column and appeal for your action.
Over the course of the last two years, task force members developed specific recommendations to increase accountability and transparency by requiring federal agencies to disclose and reveal P3 arrangements. All of which I agree with, by the way.
The majority of FASAB’s Board of Directors supports the task force’s recommendations. However, one board member’s concern may derail and block the task force’s efforts and impede transparent reporting of P3s. In part, the member argues that the recommendations are too expansive and would include too many P3 arrangements.
Excuse me, but if over time we’re talking about saving taxpayers billions of dollars, my recommendation is to require transparency and greater accountability from my government – not less!
When it comes to effective and responsible oversight, I personally have no problem with asking the government to be as forthcoming as possible so I get the complete picture and not just what they want to show me.
At any rate, this member’s concern may cause other members of the board to change their positions, which would negate the work of the taskforce and leave things status quo with respect to how government auditors handle P3s.
The task force recommendations are currently open for public comment, and will be until January 2, 2015.
During this period, anyone—including you—can respond to the Exposure Draft, entitled Public-Private Partnerships: Disclosure Requirements, which can be found at: http://www.fasab.gov/board-activities/documents-for-comment/.
Don’t be intimidated by what you see or read on the site. The important thing is to send an email to firstname.lastname@example.org stating that you want more, not less transparency whenever the government enters into public-private partnerships.
After all, the private enterprises with which the government is entering into P3s are certainly looking after their self-interest; we need to ensure that the government is looking after ours, the taxpayers’.
We’re not talking chump change here, folks.
Billions of dollars are at stake in these long-term contractual agreements, which our kids and grandkids will be forced to make good on anytime anything goes wrong. And let’s be honest, our government does not have a very good track record when it comes to husbanding American tax dollars.
Take charge. Act NOW to exercise this rare opportunity to change—for the good—the way our government conducts our business.
No excuses or complaining. Just do it!
Contents © 2014 by Larry Checco
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