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.


Sorry, comments for this post are now closed.


* Unions file suit in St. Clair County
* Reader comments closed for the holiday weekend
* AG Madigan files TRO
* In re James Dimas
* Question of the day
* Weirdest. Oppo Dump. Ever.
* Big bucks reported by Zopp, Raja
* LIVE Comptroller Munger press conference coverage
* Yet another clock starts ticking down
* Hey, Cardinal fans...
* Rauner makes cheery visit to Illinois State Museum
* The Tier 2 difference
* *** UPDATED x4 *** Attorney General goes to court
* Credit Unions – Protecting Financial Futures
* GOP legislator wants "temporary, balanced budget"
* Food for thought
* The blame game
* Meanwhile, in the real world...
* When Indiana invaded Illinois
* 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

          
        * Our 5 best new Windows Phone apps of the week
        * Curved screens versus flat
        * Motorola Droid Turbo experiences battery issues after Lollipop update
        * [Deal] Flipkart slashes INR 9,000 off the price of the Nexus 6
        * Samsung starts rolling out Lollipop update for the Galaxy A5 in Russia
        * Curved iPhone, Galaxy S6, Google Wi-Fi comments & more – Pocketnow Daily Recap
        * This might be the best phone for Ingress

        * Capital Gains: PayPal Buys Xoom, a New Unicorn Emerges and More
        * Microsoft Edge Browser Doesn’t Support Silverlight
        * Keep Condiments From Dripping in the Fridge With Containers
        * Self-Driving Cadillac CTS Will Hit Roads In 2017
        * Bungie Finally Details Destiny: The Taken King Expansion
        * World Of Warships Open Beta Arrives
        * Google May Offer "Did You Mean" Suggestions While Searching on Android

        * White Sox winning fair share of close games
        * All-Star starters unveiled tonight, full rosters Monday
        * White Sox trade rumors: Jeff Samardzija makes sense for everybody
        * All-Star starters unveiled tonight, full rosters Monday
        * Eaton brothers share special July 4th moment
        * Avisail jumps into highlight reels, robs HR
        * White Sox slip past O's for fourth straight win

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


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

        Archives
        July 2015
        June 2015
        May 2015
        April 2015
        March 2015
        February 2015
        January 2015
        December 2014
        November 2014
        October 2014
        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


        * Closer Look: Despite Budget Deadlock, There Are.....
        * The State of Illinois: Despite budget deadlock,.....
        * Illinois mired in uncertainty over budget - Voc.....
        * Closer Look: Despite budget deadlock, there are.....


        * Bison thrive on the Illinois prairie; 14 calves born
        * Boy, 7, killed during violent July 4 celebrations in Chicago
        * Quincy man charged in shooting that killed 1, wounded 1
        * Danville childhood home of Dick Van Dyke on condemned list
        * Traders recall the 'rush' and 'roar' as famed pits close
        * Closer Look: Despite budget deadlock, there are ways out
        * Dead shows set attendance records at Chicago's Soldier Field
        * 7-year-old boy shot, killed in Chicago over Fourth of July
        * Woman who tries to sneak on planes arrested twice in 2 days
        * East St. Louis paid big legal fees to state senator's firm

        * Statehouse Insider: Take the over on when this impasse is going to end
        * Springfield School District has paid nearly $500K in pension penalties in past 6 years
        * East St. Louis paid big legal fees to state senator's firm
        * Illinois Senate honors victims of Charleston church shootings
        * Bill would allow cameras in Illinois nursing homes
        * State employee lawsuit seeks assurance of full pay despite no budget
        * U of I freezes administration hiring over budget
        * Attorney General Lisa Madigan seeks court ruling on state payments during budget impasse
        * Illinois EPA: State has landfill capacity for 21 more years
        * State lawmakers point fingers over budget impasse; temporary budget in limbo

        * Toni Preckwinkle's monster
        * Why Caterpillar is letting its geek flag fly
        * How much could Chicago pension payments jack up your property tax bill? Try 30 percent
        * Who's to blame for the summer of governmental meltdown?
        * Can Rauner pit Cullerton against Madigan against Emanuel?


          * Two men killed in Gresham after shots fired at SUV
          * Inside a weekend crime scene: 'Somebody walked up with a mask on'
          * 3 killed, 27 wounded over eight hours in Chicago, including boy, 7
          * Three children among four hurt in Elgin fireworks incident
          * Grandmother of slain boy, 7: 'Who would do that to a baby?'
          * July 4th festivities around Chicago
          * Grateful Dead watch parties: 'The next best thing'
          * Follow our live coverage of the Fourth


          * Coping while black: A season of traumatic news takes a psychological toll
          * Rauner proposal would advance $450M to help Chicago schools
          * For same-sex marriage opponents, the fight is far from over
          * Emails show Emanuel, top officials aware of Clinton's private address
          * After pension payment, Chicago Public Schools to make $200M in cuts
          * CPS, Emanuel warn of deep cuts, layoffs to school district
          * After marriage equality, what's next for the LGBT movement?
          * The night Chicago politicians spent punching each other in the face
          * The legacy of Willie Dixon on his 100th birthday
          * Preckwinkle may reevaluate sales tax plan if Springfield acts on pensions


          * Bernard Schoenburg: Independent redistricting proposal could be on 2016 ballot
          * Statehouse Insider: Take the over on when this impasse is going to end
          * Statehouse Insider: Take the over on when this impasse is going to end
          * Springfield School District has paid nearly $500K in pension penalties in past 6 years
          * Letter: Rauner being set up for a fall
          * Angie Muhs: A year later, optimistic and grateful
          * East St. Louis paid big legal fees to state senator's firm
          * Illinois Senate honors victims of Charleston church shootings
          * Kenny Hartman: EPA stifling input on renewable fuel changes
          * Bill would allow cameras in Illinois nursing homes


          * 2015 Champaign County Freedom Celebration fireworks show
          * Best of teams: No. 35, South Carolina
          * Daily Digest 7/5/15
          * Daily Digest: Ceremony to honor forest anniversary
          * Best of teams: No. 36, North Carolina State
          * Best of Illini: No. 35, Gabe Megginson
          * Best of Illini: No. 36, James Crawford
          * 70-year-old factory opened as radio maker
          * The perfect gift for Hepburn fans
          * Ask 'Mimi,' July 5, 2015


          * At least one injury in I-88 crash between semi, motorcycle
          * Greece's finance minister says Greek people have said 'no more' to continued austerity
          * Injury, lane closures in 1-88 crash between semi, motorcyle
          * The Latest: European socialists call for new Greek talks
          * Pair of lions kept as pets by Gaza family arrive in Jordan

          * House lawmakers overcome hurdle on key tra...
          * Rodney Davis talks funding with Bloomingto...
          * The agency that fought Illiana gets a new ...
          * Rep. Dold takes educational cruise down Ch...
          * Lawmakers decry high turnover rate of VA h...
          * CBD Oil, and politics
          * Simon considering state Senate bid
          * Killer Congressman Tom MacArthur trying to...
          * Shutdown? State may not notice
          * Rep. Bob Dold

          * Durbin on Overtime Rules - Alton Daily News...

          * Thousands Line Route For Arlington Heights......

          * CPS pension bill paid for with the the lives of teachers and students. In debt by design.
          * I will be talking about Confederate flags direct from the NEA RA on WBAI radio Monday morning.
          * Supreme’s agree to hear fair share case. Public employee unions in jeopardy.
          * Why my NBI was more than about the Confederate flag. 
          * Rev. William J. Barber: “The Confederate war flag belongs in a museum — not over or on our state house or on state-issued license plates. It is a symbol of terror, hatred and treason to America’s ideal.”
          * Story can help you and your buyers avoid financial roadblocks
          * Morning Minute: U.S. pending home sales at highest level in nine years, NAR says
          * U.S. Supreme Court Rules on Texas ‘Disparate Impact’ Case
          * Today’s the day for associations to meet NAR core standards
          * CIPS course offered July 22


          * State, Teamsters Reach Tentative Agreement - Workers at IDOT, DHS, IDES, and CMS in Cook County to Vote on New Contract
          * Governor Rauner Extends Tax Filing and Payment Deadlines for Businesses and Individuals Impacted by Recent Tornado - Deadlines Pushed to December 31, 2015
          * Illinois EPA Releases Annual Report on Landfill Capacity
          * IDNR Urges Public to Leave Fireworks Displays to Those Who Are Licensed and Trained - Fireworks Show Sponsors Reminded to Check Credentials of Fireworks Vendors
          * Governor Receives Initial Criminal Justice Commission Report




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