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The Folly of Privatization

By German Lopez · October 30th, 2013 · Commentary
commentary 2013-10-30

Privatization schemes in Cincinnati and Ohio just went through a bad month.

In Cincinnati, the city administration on Oct. 9 announced the parking plan, which leases the city’s parking meters, lots and garages to the Greater Cincinnati Port Authority and its band of private operators, will only generate an $85 million payout — and even that payout is effectively reduced to $70-$71 million because the city is now responsible for building a parking garage at Seventh and Sycamore streets. The city originally promised $92 million, or $21-$22 million more than it’s actually getting.

At the state level, two reports released this month blasted Gov. John Kasich’s own privatization schemes. First, an Oct. 8 report for the re-inspection of the privatized Lake Erie Correctional Institution (LECI) found violence is set to remain at the high levels reported for 2012, despite improvements in other areas. Then, an Oct. 23 report on JobsOhio criticized the privatized development agency for conflicts of interest and a total lack of transparency.

Really, none of the revelations should come as any surprise.

When lawmakers propose privatization schemes, they’re really just shifting the burden. They’re saying the government can’t handle a certain responsibility, whether it’s parking, prisons or development, and putting the responsibility on a private company. But the problem is private companies often have other interests, such as profit, that conflict with public priorities.

So what seems like a cost-cutting measure for a city or state will naturally come with other costs that aren’t easy to calculate in a dollar figure.

For a parking system, that means less money going to the city and more going to private companies in the long term. For a prison, that means worse rehabilitation services and security. For a development agency, that means less transparency and potential conflicts of interest as a private board tries to protect its interests from the watchful eye of the media and taxpayer.

Does that mean privatization schemes are always bad? Not necessarily. But it does mean taxpayers and lawmakers should go into the deals with a lot of safeguards in mind.

To Cincinnati’s credit, some of that seems to be happening with the parking plan. The city manager and Port Authority, which is a city-funded entity, ultimately have veto power over parking rate and hour changes, and the Port Authority’s parking contracts with private operators will regularly come up for renewal — just in case Xerox gets a little too excited with parking tickets.

Unfortunately, the same doesn’t seem to be happening with LECI, which the Kasich administration sold to Corrections Corporation of America (CCA) in 2011, or JobsOhio, which replaced the Ohio Department of Development in 2011. 

LECI is probably the better of the two deals, although it’s still pretty bad. Over the past two years, CityBeat’s investigations into the prison uncovered what can only be described as a deteriorating facility with sharp increases in violence and numerous reports of unsanitary conditions. Thankfully, the state appeared to have some control over the mess when it docked $500,000 in payments to CCA and threatened to cut even more if the company didn’t get its act together. Still, it’s a shame the state could only react after conditions got so bad.

JobsOhio, on the other hand, appears to be a total disaster. We can only say “appears” because no one really seems to have a clue. That’s not due to a lack of investigative prowess or curiosity; it’s because state lawmakers have made it practically impossible to verify what is going on at the agency. 

Whenever CityBeat tries to file a public record request for anything involving JobsOhio, it’s rebuffed with talk of trade secrets and other fancy terms state officials use to mask what can only be suspected as shady activity. Other newspapers, ranging from The Toledo Blade to The Columbus Dispatch, have complained of similar difficulties.

In that sense, the governor and legislators have actually made JobsOhio worse. After State Auditor Dave Yost began a mini-crusade to audit JobsOhio, Kasich and his Republican colleagues quickly passed legislation that basically made the agency immune to an audit.

In all of these cases, it’s easy to look at the sinking schemes and blame mismanagement on the part of the governor, mayor, city manager, legislators or council members. But that’s really missing the target. 

The issue is privatization itself. Despite lawmakers’ many attempts to market the schemes as easy, common sense deals, privatization is not a free lunch. It comes with a cost that in many cases can’t be valued in financial terms but is often much worse than a few million dollars.



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