NY, NJ Officials Reject Chicago’s Model of Privatizing Public Assets, Agree Public-Private Partnerships Need Better Safeguards

New York and New Jersey public officials who are exploring new ways to involve the private sector in the delivery of public infrastructure soundly rejected Chicago’s model of selling off public infrastructure at a New York University Institute for Public Knowledge forum on November 16.

Samara Barend, executive director of the New York State Commission on State Asset Maximization, and New Jersey’s Kris Kolluri, former commissioner of the state’s Department of Transportation and current CEO of the New Jersey Schools Development Authority, discussed recent efforts to develop public-private partnerships in both states. Barend’s Commission is setting the rules for future public-private partnerships in New York State for projects like the Tappan Zee Bridge and Robert Moses Causeway Bridge. Kolluri is exploring lease-back arrangements with private builders and operators of public school buildings with American Recovery and Reinvestment Act subsidized bonds.

Both officials were commenting on a report by the Illinois Public Interest Research Group (Illinois PIRG) Education Fund that sharply criticized the City of Chicago’s recent string of closed-door deals to hand over toll roads, parking meters and garages to private companies with leases lasting 75 to 99 years.

“These things the report points to in Chicago are exactly the things that we were determined to avoid in our proposal,” said Kolluri, discussing the Corzine administration’s approach to exploring innovative use of private finance at the state’s toll roads authorities. “Our proposal would have created a nonprofit entity-not a for-profit-and would have included different kinds of stakeholders directly on the decision-making board.”

Barend struck a similar note in outlining her commission’s approach.

“We are heeding the concerns of the US PIRG report,” she said. “With such concerns in mind, the Commission on State Asset Maximization was created to discern how asset maximization could be undertaken in a way that delivers value to taxpayers and protects our public policy goals. New York is trying to redefine public private partnerships. We are not looking to extract money from an asset to close a budget gap. Instead, we are looking at public-private partnerships as a means to accelerate construction, jumpstart job creation, and save taxpayers money in the process.”

The panel included a variety of academics and public advocates. Michael Likosky, an Institute for Public Knowledge senior fellow and member of the Organization for Economic Cooperation and Development (OECD) Working Group on Public Private Partnerships, moderated the event, stressing the need to adopt international best practices in contracting and financing to maintain national competitiveness. Law professors Susan Rose-Ackerman from Yale and Peter Rosenblum of Columbia University concurred on the need for better public protections and transparency. Coauthors of the report, Phineas Baxandall, with US Public Interest Research Group, and Tony Dutzik of Frontier Group also spoke.

“Chicago’s deals generated lots of up-front cash, but fail to meet basic public interest principles,” said Baxandall. “We hope other states and localities will be more careful.”

The Illinois PIRG report highlights how Chicago’s deals were initiated with little transparency, and how they have resulted in a loss of control over important elements of public policy, while failing to deliver on the full value for these assets. The report makes six recommendations to protect the public in private partnerships.

To download the report, “Privatization and the Public Interest: The Need for Transparency and Accountability in Chicago’s Public Asset Lease Deals,” visit the website.