SUBSCRIBE to Capitol Fax      Advertise Here      Mobile Version     Exclusive Subscriber Content     Updated Posts    Contact
CapitolFax.com
To subscribe to Capitol Fax, click here.
Perils of privatization

Monday, Jun 23, 2014

* As this Sun-Times story shows, privatization often means less sunlight

Chicago’s Navy Pier — touted as the biggest tourist attraction in Illinois — has long been a patronage haven where political insiders turned for jobs and lucrative deals to sell everything from expensive meals to gumballs.

Who was cashing in used to be a matter of public record. It no longer is, since the state of Illinois and City Hall turned over operation of the government-owned pier to a private, not-for-profit group three years ago for $1-a-year rent.

Navy Pier Inc. doesn’t have to explain how it’s spending $115 million in government bonds that were sold to pay for a face-lift for the 98-year-old pier, either. […]

(F)ormer Mayor Richard M. Daley’s handprints are all over Navy Pier Inc. Five months before Daley left office in May 2011, his former chief of staff John Schmidt incorporated Navy Pier Inc. The deal for NPI to take over control and governance of the pier was signed a month before Daley departed City Hall, taking effect in July 2011. Also, NPI’s board includes Daley’s daughter, his former campaign manager, two of his former chiefs of staff, his onetime top City Hall lawyer and civic leaders who were longtime Daley supporters. […]

Beside a roster of pier employees and salaries, Brodsky also declined to make public contracts that Navy Pier Inc. has signed with restaurants and other vendors — all public information before his group took over in July 2011. […]

On Friday, the Better Government Association, which also was denied Navy Pier Inc. records, filed suit against McPier and NPI in Cook County circuit court to get them. The watchdog group argues the not-for-profit agency was created to shield pier operations from public view.

* And as this AP story shows, sometimes it doesn’t work as originally advertised

Illinois’ private lottery contract has never reached the lofty sales promises it used to win a bid four years ago and is expected to fall more than $200 million short of what it owes the state when the budget year ends June 30.

But Northstar Lottery Group says it’s been hamstrung by state officials, with whom they have an already frosty relationship and accuse of throwing up road blocks — from canceling games it wanted to launch to prohibiting the sponsorship of Chicago’s Pitchfork Music Festival in 2013 because of headliner R.Kelly.

Regardless, Northstar’s 10-year contract with the state details that falling short of its goals by 10 percent two years in a row is grounds for ending the partnership, no questions asked. It missed targets by almost 20 percent last year, and is on track to do the same this year. […]

When Northstar took over the 40-year-old program, it promised contributions of $1 billion to the state in the fifth year of its contract. But it has been about $400 million short since in its first three years — money that is supposed to go toward schools, charitable organizations and a $31 billion capital construction program launched in 2009.

* So, what could possibly go wrong?

Last year North Riverside officials received a letter from a state agency ordering the village to start paying more into its underfunded pension accounts or face a financial reckoning.

The ultimatum and a shortage of cash prompted the village to consider an unusual solution — privatizing its fire department. […]

The letters, obtained by the Tribune, detail an enforcement mechanism that will allow the department to divert sales taxes and other revenue from a town’s coffers to local police and fire pension funds starting in 2016.

The mechanism was included in a 2010 law that requires local governments to pay enough toward their police and fire pensions each year to make the pensions 90 percent funded by 2040. Currently, the state requires municipalities to make annual payments but does not have the same enforcement tool.

North Riverside officials are publicizing the fire department privatization plan in advance of a Department of Insurance hearing Thursday, during which they plan to pitch the idea.

Discuss.

- Posted by Rich Miller        


25 Comments
  1. - Steve - Monday, Jun 23, 14 @ 10:03 am:

    It’s disingenuous to call Navy Pier privatization. It’s private when the property is sold to the private sector. Until then ,it’s not private. After all, most private malls aren’t funded by government bonds.


  2. - DuPage - Monday, Jun 23, 14 @ 10:11 am:

    North Riverside’s privatization plan is obviously a scheme to not pay their financial obligations to their pension system(s).


  3. - wordslinger - Monday, Jun 23, 14 @ 10:12 am:

    –(F)ormer Mayor Richard M. Daley’s handprints are all over Navy Pier Inc–

    The great legacy of Richard II continues. He truly was the indispensable man.

    I guess that’s how you run government like a business. Big business surely loved him.


  4. - OneMan - Monday, Jun 23, 14 @ 10:14 am:

    The lottery thing is interesting because if I were Northstar I would have put all sorts of things in the contract in case the State of Illinois decided to be, well the State of Illinois.

    Reductions if video gaming came, reductions if they got in the way of my marketing reductions if the state got in my was as it were.

    But I suspect they wanted the business so bad, they either decided it would be best to ignore the ‘government risk’ as it were or didn’t see it coming.

    Heck some guy wrote about these risks 8 years ago…

    http://htsblog.blogspot.com/2006/05/ok-so-we-might-be-leasing-lottery.html


  5. - A guy... - Monday, Jun 23, 14 @ 10:16 am:

    3 excellent stories for the price of one Rich.
    1) The whole Navy Pier story is fascinating, but their obligation to share info seems air tight now. It shows how the City Council does business. No reporting amendment in the agreement. I don’t even remember this happening in RMD’s last days. Or just very vaguely. It would seem this kind of thing was predictable with an agreement like this. But, it’s only making news now…3 years hence. Oy.

    2)With the proliferation of video poker gaming all over the place, a lot of lottery players have moved into these mini parlors instead of a less predictable lottery. The law of diminishing returns at work. “A fool and his money part quickly”. They’ll never hit those goals whether privatized or publicly managed.

    3) North Riverside is the first of many munis who will attempt privatizing. If you’re a non home-rule community (not sure if North Riverside is or not), it’s next to impossible to raise revenue to meet these pension payments even if you sacrifice a whole slew of other services. Go to referendum to raise taxes for public pensions? That would be a futile mission. The only way to fix this is through collective bargaining or cities and villages around the state petitioning for bankruptcy. This is going to get worse before it gets better.


  6. - walker - Monday, Jun 23, 14 @ 10:36 am:

    @One Man: Very impressive analysis that you wrote in 2006.

    The interesting policy question is: where’s the breakeven for the state when deciding whether to operate it internally or to sell. How do we factor in risk and unpredictability, versus presumed improvements in productivity?

    Do we just take the highest bidder, say “show me”, and lay off some risk. Or do we believe that at some level the State can run it “better.”

    Illinois is already among the most “privatized” and “outsourced” state governments in the country. That’s one reason we have a very low number of state employees per capita. It’s part of our management problem — not always part of our solution.

    Didn’t we try private fire companies at first, and find them lacking? Just sayin.


  7. - Bemused - Monday, Jun 23, 14 @ 10:39 am:

    Eventually this private non-profit thing will need to be looked into. Seems to be a way around some government regulations and you can not FOIA their documents.

    I bumped into this issue when a central IL Housing Authority created a non-profit to run some of their construction projects thru. It seemed to allow them to get around Prevailing wage and competitive bidding issues. I filed a complaint with IDOL who let it pass even though the Housing Authority documents showed they created the non-profit and controlled appointments to the non-profit board. Early on both entities shared board members.

    What was even more interesting, some of the revenue from the construction projects when finished went to bonuses for Housing Authority employees. This info was gained from Housing Authority minutes which could be acquired thru FOIA.


  8. - privatization - Monday, Jun 23, 14 @ 10:47 am:

    Looking into my Crystal ball I can see the future for Illinois. It will start slow and it appears already has in Chicago. We can privatize almost everything in the state and save billions on Pensions. We can also save on health insurance since the contractor would be in charge of that too. The Unions will not complain because as in other states the private employees will still be in the Unions. This will save the whole state! No more Pension payments other than the already. earned.


  9. - A guy... - Monday, Jun 23, 14 @ 10:51 am:

    Walk, we certainly have and certainly did see some issues with privatization in the Fire Service. I for one would like to see something different than total privatization. Some consolidation of public unions could alleviate some of these issues. What is a lot different now than before is how much more of the Fire Service is actually EMS service rather than Fire. That area is easier to privatize. There needs to be some “cool heads” negotiating in good faith on this before it gets out of hand. Only both sides can move this away from being caught between a rock and hard place. The more intractable people are on this, the worse it is for everyone.


  10. - Plutocrat03 - Monday, Jun 23, 14 @ 11:04 am:

    This is faux privatization at best. A coarse effort to eliminate public scrutiny as worst.

    Remember that sunshine is the best disinfectant……


  11. - phocion - Monday, Jun 23, 14 @ 11:07 am:

    Rich, you failed to include the most interesting nugget on the McPier article: The AG issued an opinion saying that McPier is exempt from FOIA. This is a breathtaking backtrack from AG Madigan’s oft-claimed position of a liberally construing the Freedom of Information Act. Fortuntely, an AG Opinion has, at best, persuasive authority with a Court. Hopefully the BGA will prevail in its litigation for a little sunlight at McPier.


  12. - Demoralized - Monday, Jun 23, 14 @ 11:10 am:

    I don’t see how FOIA applies to a private organization. The operation of McPier is now privatized. The fact that they are renting the space from the government doesn’t make them a government entity subject to FOIA.

    It’s fine if you think the set-up stinks. But that doesn’t give anybody a right to get info from a private organization.


  13. - A guy... - Monday, Jun 23, 14 @ 11:15 am:

    Demo, you’re absolutely right. Even if this looks like an abuse of power (it is), the time to address it was in the agreement, not 3 years later. This craziness was absolutely predictable. Subjecting NFPs to FOIA would have more unintended harmful consequences than anyone could imagine. That would be loony at a whole different level.


  14. - lake county democrat - Monday, Jun 23, 14 @ 11:19 am:

    Speaking of the lottery, the Sunday New York Times had an interesting op-ed referencing a Univesity of NY at Buffalo study about gambling expansion and the effect on the poor: http://opinionator.blogs.nytimes.com/2014/06/21/gaming-the-poor/?_php=true&_type=blogs&module=Search&mabReward=relbias%3Aw%2C%5B%22RI%3A5%22%2C%22RI%3A14%22%5D&_r=0


  15. - James the Intolerant - Monday, Jun 23, 14 @ 11:33 am:

    When I was with the city many of the electrical functions were outsourced. We paid twice what it would cost the city workers to do it. Since total benefits cost for employees was approx. 35%, including pension, that would seem to cost taxpayers more than the pension cost.


  16. - Arizona Bob - Monday, Jun 23, 14 @ 12:37 pm:

    @Dem
    =I don’t see how FOIA applies to a private organization.=

    It’s pretty simple. If you want to be transparent in government, you require that key bidding information, as well as contracts with vendors and hirees and their salaries, be submitted to the government agency. Then the docuements become subject to FOIA.

    Of course the entire intent here was to avoid transparency, and have taxpayers pay a premium to hire the politically connected to well paid, little work positions.You know, like the siz figure “pay off” non-profit board job Blago was looking to get his wife into, according to the phone transcripts.

    Seems like the Dems did a pretty good job of accomplishing that goal here.


  17. - Upon Further Review - Monday, Jun 23, 14 @ 12:39 pm:

    I cannot argue what happened with these contracts, but the deals smack more of crony capitalism than privatization. I have seen some improved results from some privatization deals such as when the Chicago Park District and the Cook County Forest Preserves turned over their golf courses to private managers.


  18. - Charlatan Heston - Monday, Jun 23, 14 @ 12:41 pm:

    Their 990’s are interesting but are far from the whole story…


  19. - Demoralized - Monday, Jun 23, 14 @ 12:41 pm:

    @Arizona Bob:

    My point was that a private entity isn’t subject to FOIA. As @A guy said, this was an issue to be dealt with at the time McPier was privatized. It is what it is now and I doubt there’s anything that can be done about it.

    Are you now advocating that anybody that does any sort of business with the government subject their records to FOIA? Do you know what can of worms you are opening? I thought you were for less government intervention.


  20. - Anon - Monday, Jun 23, 14 @ 2:01 pm:

    AZ Bob makes a good point (for a change)in suggesting that governments require certain information in any contracts with the private sector to manage public facilities. That way private companies aren’t subject to FOIA, but information pertinent to the public would be FOIAble from the government agency.


  21. - anon - Monday, Jun 23, 14 @ 2:14 pm:

    “Go to referendum to raise taxes for public pensions? That would be a futile mission. The only way to fix this is through collective bargaining or cities and villages around the state petitioning for bankruptcy.” If the voters aren’t willing to pay for pensions, why should they have any fire protection services at all? Let them fully internalize the risk of their house burning down and let them pay the vastly increased insurance premiums on their property as a result of living in an unprotected area. Enough is enough.


  22. - Fake Herzog - Monday, Jun 23, 14 @ 2:37 pm:

    Regarding the lottery deal: everyone likes to point out that the private company is falling short of its goals. Fine. It should be held to its own contractual goals (as long as the state is keeping up its end of the bargain). But, how many of these stories note that the private company is also bringing in more revenue for the state than the state ever did — in other words, despite falling short of the goals, Northstar is doing a better job than the state.


  23. - steve schnorf - Monday, Jun 23, 14 @ 3:05 pm:

    Fake, unfortunately for your point, we don’t know how much the non-privatized lottery would be bring in, so we have no idea whether Northstar is bringing in more or less that would otherwise be earned, we only know they are failing to do what they contracted to do


  24. - fed up - Monday, Jun 23, 14 @ 3:10 pm:

    Fake, what the stories dont mention is that they got the contract by falsly claiming the amount of revenue they would bring in. A competitor who submitted an honest bid but lost to Northstars inflated dishonest bid might be able to make more $$$ for the state.


  25. - Yellow Dog Democrat - Monday, Jun 23, 14 @ 8:26 pm:

    @Demoralized-

    Also handy for getting around patronage prohibitions.


TrackBack URI

Sorry, comments for this post are now closed.


* Good morning!
* IDPH wants to ban beer garden smoking
* Yesterday's blog posts

Support CapitolFax.com
Visit our advertisers...

...............

...............


Search This Blog...

Search the 98th General Assembly By Bill Number
(example: HB0001)

Search the 98th General Assembly By Keyword

          
        * Branch Metrics Raises $3 Million From NEA For More Intelligent Deep Links That Make Apps Work Like The Web
        * Making the most of Live Tiles
        * Google working with Airtel as payment gateway for digital purchases
        * DxOMark ranks Xperia Z3 beside Galaxy S5, Xperia Z2
        * Finland’s Jolla Takes Its Sailfish-Powered Smartphone To India, Via Snapdeal
        * Androidsplainin': iPhone haters miss the point again
        * 8 games optimized for the iPhone 6 and 6 Plus

        * FLX.ARM Precision Robotic Arm Offers 3D Printing, Milling And Assembly (video)
        * Paper Towels vs. Hand Dryers (and Which is Actually More Hygienic)
        * Sony Xperia Z3 Compact Breaks Battery Test Records
        * Waterproof Your Apple Watch Using Liquipel Nano-Coating
        * LG Wine Smart Android Flip Phone Announced (Video)
        * Sony Could Dominate The Console Space, According To Analyst
        * Nintendo 2DS Pokemon Omega Ruby/Alpha Sapphire Bundles Unveiled

        * John Danks can finish seasons again
        * Bassitt twirls gem, blanks Tigers for 7 2/3 in first win
        * Carroll, White Sox out to spoil Tigers' Central plans
        * Bassitt twirls gem, blanks Tigers for 7 2/3 in first win
        * White Sox 2, Tigers 0: Chris Bassitt picks up first win
        * Avisail realizes V-Mart will be highly coveted as free agent
        * White Sox announce dignitaries for Paul Konerko Day


        Main Menu
        Home
        Illinois
        YouTube
        Pundit rankings
        Obama
        Subscriber Content
        Durbin
        Burris
        Blagojevich Trial
        Advertising
        Updated Posts
        Polls

        Archives
        September 2014
        August 2014
        July 2014
        June 2014
        May 2014
        April 2014
        March 2014
        February 2014
        January 2014
        December 2013
        November 2013
        October 2013
        September 2013
        August 2013
        July 2013
        June 2013
        May 2013
        April 2013
        March 2013
        February 2013
        January 2013
        December 2012
        November 2012
        October 2012
        September 2012
        August 2012
        July 2012
        June 2012
        May 2012
        April 2012
        March 2012
        February 2012
        January 2012
        December 2011
        November 2011
        October 2011
        September 2011
        August 2011
        July 2011
        June 2011
        May 2011
        April 2011
        March 2011
        February 2011
        January 2011
        December 2010
        November 2010
        October 2010
        September 2010
        August 2010
        July 2010
        June 2010
        May 2010
        April 2010
        March 2010
        February 2010
        January 2010
        December 2009
        November 2009
        October 2009
        September 2009
        August 2009
        July 2009
        June 2009
        May 2009
        April 2009
        March 2009
        February 2009
        January 2009
        December 2008
        November 2008
        October 2008
        September 2008
        August 2008
        July 2008
        June 2008
        May 2008
        April 2008
        March 2008
        February 2008
        January 2008
        December 2007
        November 2007
        October 2007
        September 2007
        August 2007
        July 2007
        June 2007
        May 2007
        April 2007
        March 2007
        February 2007
        January 2007
        December 2006
        November 2006
        October 2006
        September 2006
        August 2006
        July 2006
        June 2006
        May 2006
        April 2006
        March 2006
        February 2006
        January 2006
        December 2005
        April 2005
        March 2005
        February 2005
        January 2005
        December 2004
        November 2004
        October 2004

        Blog*Spot Archives
        November 2005
        October 2005
        September 2005
        August 2005
        July 2005
        June 2005
        May 2005

        Syndication

        RSS Feed 2.0
        Comments RSS 2.0
        WordPress

        Loading


        * Quinn, Rauner differ over 'common sense' gun laws..
        * Gov. Quinn Promotes High-Speed Rail In Granite .....


        * Ohio grand jury to review highway shooting case
        * Prosecutors seek time to review ex-lawmaker's past
        * Quinn, Rauner differ over 'common sense' on guns
        * Quinn, Rauner promote community investments
        * Illinois medical marijuana applications due Monday
        * Suspect in Joliet double murder waives jury trial
        * Chicago museum only US site for Bowie exhibit
        * Slain girl's mother speaks at Watson memorial
        * U of I Foundation receives increase in donations
        * Illinois city marks birthday with mega bratwurst

        * Governor candidates differ over ‘common sense’ on guns
        * Quinn, Rauner differ over ‘common sense’ on guns
        * Rauner gets support from black Chicago pastors
        * Don’t bet on gaming expansion — yet
        * GOP's Rauner gets another $1M from hedge fund CEO
        * Former Illinois prisoners get help reintegrating
        * Court: Lincoln inmate must use $20K settlement to pay incarceration costs
        * Deadline ahead for Illinois marijuana businesses
        * Gov. Quinn picks up Sierra Club endorsement
        * Statehouse Insider: Rauner hit with double whammy

        * Cross-fertilization? CF Industries in merger talks
        * U.S. cracks down on overseas tax moves
        * United cutting winter schedule long before snow falls
        * University of Illinois donations jump 10 percent
        * George Lucas takes a selfie — and other names at Expo Chicago


        * Our online IDs deserve better security
        * Truck driver arrested after allegedly holding children hostage near Midway
        * Parents who want to attend school fair asked to provide names, emails
        * State rep candidate voted in Illinois and Wisconsin
        * Medical pot license seekers 'everyone from Cheech and Chong . . . to hedge fund guys'
        * U.S. rep wants black contractors to get fair share of 95th Street station project
        * Bishop Blase Cupich: ‘I’m going to love this city’
        * O’Hare plans to test new app to help international travelers
        * Common touts fund-raising concert at Union Park
        * Chicago’s next archbishop Blase Cupich calls for immigration reform, shows off his humor


        * Man tries to lure girl into his car in Woodridge
        * 1 dead, 10 wounded in shootings Monday
        * CTA Red Line briefly delayed after unfounded bomb threat
        * City plan will more than double taxis for disabled
        * Cupich vows to aid poor, help Chicago neighborhoods
        * Challenger tries to tie Duckworth to VA scandal
        * Rauner avoids nursing home questions as trial starts
        * Niles man killed in motorcycle accident in DesPlaines
        * Evanston police investigate overnight shooting
        * Police: Man arrested after holding children at gunpoint in truck


        * A Redo On Redistricting
        * Polls Showing Illinois Governor's Race A Draw
        * Cupich to be next Chicago archbishop
        * Listen to State Week - September 19, 2014
        * Chris Mooney: More Evidence-Based Policymaking Needed
        * African Drumming At Southwind Park On Saturday
        * Investors gather in Chicago seeking cannabis businesses
        * Climate, Space Create Challenges For Local Food
        * Can A Governor Really Create Jobs?
        * How do you find high school dropouts?


        * Governor candidates differ over ‘common sense’ on guns
        * Kathleen Parker: Mark Sanford’s ongoing saga with himself
        * Rauner gets support from black Chicago pastors
        * Don’t bet on gaming expansion — yet
        * Thomas Schneider and Jay Scott: Building strong families to curb child abuse, neglect
        * GOP's Rauner gets another $1M from hedge fund CEO
        * Former Illinois prisoners get help reintegrating
        * Court: Lincoln inmate must use $20K settlement to pay incarceration costs
        * Deadline ahead for Illinois marijuana businesses
        * Gov. Quinn picks up Sierra Club endorsement


        * Illinois crop report 9-22-14
        * Top of the Morning, Sept. 23, 2014
        * Area Calendar 9/23/14
        * Discussion will examine response to Ebola crisis
        * West Frankfort building collapses
        * 5th Street Lofts is last piece of Alexander's housing puzzle
        * Attorney General's office says Boyd details are coming
        * Davenport school board to discuss high school schedules
        * Sunshine and plenty of it
        * 1 dead in officer-involved shooting in Davenport


        * Nick Carter, Jordan Knight to play two HOB shows this weekend
        * Chicago Symphony Orchestra might build summer home in Naperville
        * Dawn Patrol: Bears slog out a win; motorcyclist killed outside college
        * Grand Victoria Casino to celebrate its 20th birthday with specials
        * Bears Bites: Half the defense hurt but still an impressive win

        * U.S. House Passes Resolution Condemning An...
        * The Urgent Need for New Antibiotics | Comm...
        * US House of Representatives Unanimously Pa...
        * Elizabeth Roskam Paints Capitol for Ukrain...
        * Illinois vote: Dems split on aid for Syria...
        * Democratic candidate Mason says he's 'flip...
        * Hultgren, Roskam to Host Service Academy D...
        * Ask Peter: Obamacare's Broken Promises - I...
        * Peter Roskam pushes for Alzheimer's resear...
        * Congressman: 'Some good stuff is going on'...

        * Funding reinvested in law enforcement and ......
        * Illinois firms keep $100 billion in foreig......
        * Illinois firms keep $100 billion in foreig......
        * Illinois firms keep $100 billion in foreig......
        * Illinois firms keep $100 billion in foreig......

        * Democrat Giannoulias backs Republican Cros......

        * Beachwood Photo Booth: Intersecting West Rogers Park
        * Colleges Let Taxpayers Help Poor Students While They Go After Rich
        * The Incredibly True Stories Of The Bears' San Francisco Feat, Kyle Fuller's Childhood & Jets Fans In The Wild
        * Local Book Notes: Kickstarting A Skinhead Memoir
        * Chicagoetry: Mirages Of Matchstick Men
        * World Peace Day Celebrations In Illinois: Finding Peace At Home
        * Rauner 'Mislead Public' On Nursing Home Chain Involvement, Social Agenda
        * Maybe we can fight over pies?
        * Eric Metaxas on the future of America's religious freedom
        * Lois Lerner and the IRS Scandal: An Update on the Investigation and Cover-up


        * The Economic Empowerment Forum Endorses Rauner for Governor
        * State Director on Aging Says September Observances Stress the Importance of Healthy Aging - September is Healthy Aging Month; September 23 is Falls Prevention Day
        * Governor Quinn Breaks Ground on First Veterans Home in Chicago - New Facility Will Care for 200 of the Nation’s Heroes
        * Quinn still refusing to fire 20 political cronies
        * Illinois Chamber of Commerce Endorses Rauner for Governor




            Hosted by MCS SUBSCRIBE to Capitol Fax Advertise Here Mobile Version Contact Rich Miller