Selling Public Property to Balance The Budget?
Robbie Wills poses the question above on his web site. Below is the full article. Beneath it is my response.
Kimberly Leonard writes for Stateline.org that some states struggling to balance their budgets are moving to sell or lease public property such as state office buildings, prisons and major tollways, a strategy attacked by some as a short-term fix. Arizona and California lawmakers, for example, have pursued “sale-leasebacks” of state buildings. Connecticut is planning to sell unused office buildings, vacant land, cars and equipment.
Should Arkansas state entities such as the Arkansas Department of Environmental Quality or the Arkansas Teachers Retirement System, both of whom own their own buildings, follow a similar path? Should we be unloading surplus vehicles and other equipment?
Here’s the link and here’s an excerpt:
The deals afford the states quick cash, while guaranteeing investors a profit after recouping the cost of the building through the long-term lease payments from the state. Arizona officials said they have received about 100 inquiries from interested buyers, including real estate investors, financial investors, the private sector and nonprofits.
My response is below.
I believe that selling state property is a badly conceived idea. This property belongs to the citizens of the state in perpetuity. It is difficult to conceive the costs to future generations based on current evaluations. For instance, there were large areas of poor scrub land in Oklahoma that yielded oil. Who knows what treasures lay beneath the soil of Arkansas? As some of the studies I have included links to indicate, it’s extremely difficult to calculate value for even short periods of time.
You might argue that many of these shifts of public property could be done as leases. But the leases I have seen in the press are for periods of time like 75 years. For all intents and purposes that is forever as far as this generation is concerned. We have an ongoing responsibility to the citizens both future and current that should not be abdicated by putting it off.
Politically there are powerful interests determined to promote this kind of privatization. Are the people of Arkansas well served by a new and determined group of lobbyists whose successful efforts could result in millions and eventually billions of dollars of profit diverted from public possession and public needs? Citizen activism is a brief phenomenon. Lobbyists and business interests are eternal.
Would these be fair deals? Arkansas budget shortfalls are likely to be regular in the future with important needs unfunded in the short term. How hard are the Arkansas negotiators likely to be when the budget must be completed on a fixed schedule and vital public needs are at stake? The City of Chicago negotiated in the middle of a budget crunch and signed on to a very poor deal.
The Texas Legislature researched and debated the subject quite heatedly. They killed the deal amid concerns that they simply could not figure out the proper value and what kind of safeguards the public deserved.
South American began the privatization process almost twenty years ago by privatizing highways. What happened? It was a disaster. The promised benefits failed to materialize. The report concludes that private public partnerships on roads are always suboptimal. (page 5)
In conclusion, privatization is a short term solution for long term budge problems, a band aid when surgery is necessary. The benefits are unproven, disputable or simple not there. These kinds of decisions that transfer public property to the private sector are worthy of the greatest possible scrutiny and they seldom receive it.
Let me point out one additional matter. If privatization is always better than public management, why are you employed? If you and your colleagues are unable to find viable revenue for the state’s future and incapable of creating highway authorities and other governmental bodies capable of good performance, why shouldn’t you be privatized? (Forgive me, I would never suggest actual privatization nor do I wish to infer you are not working hard or performing a valuable service to Arkansas. I am merely taking the argument for privatization to its logical conclusion.)
If democracy is the best form of government, what does yielding up large portions of the public’s possessions to private industry say about our ability to govern ourselves? The citizens of the United States have faced war and a succession of economic crises. We don’t have to yield to these challenges by quick fixes. We are the people who will show the world how a democracy even in the most serious of economic difficulties can survive and prosper.
Dennis Enright’s testimony before the United States Senate (2008)
Dennis Enright’s testimony before the Texas State Senate Committee On Transportation and Homeland Security (August 12, 2008)
Report of the Legislative Study Committee on Private Participation in Toll Projects
This was hardly a recommendation and on July 8, 2009, the Texas Legislature denied the Texas Department of Transportation the authority to build privatized toll roads in cooperation with private developers.
This is U.S. PIRG’s report on toll roads and protecting the public interest.
The City of Chicago decided to lease out their 36,000 parking meters. The Office of the Inspector General released a devastating report that the city has rushed through the deal and had not properly analyzed the costs.