Diving Deeper: How to intervene in infrastructure projects February - - PowerPoint PPT Presentation

Diving Deeper: How to intervene in infrastructure projects

February 6, 2017

Agenda

• How to intervene in P3 deals
• Understanding existing financial obligations and financing schemes
• Advocating for community benefits
• Resources
• Questions

Why Intervene?

• Lots of talk about Trump’s plan, but infrastructure decisions are still

made by local and state governments

• Advocates can:
• Stop bad deals
• Turn bad deals into good deals
• Improve deals to ensure community benefits

How to Intervene

Know the Basics

• Identify existing infrastructure needs and plans in your region
• Know the applicable law
• Understand enabling legislation/local policy
• Know the federal funding and financing and “strings” attached
• Understand existing financial obligations, constraints and funding

streams

Track and monitor proposals

• Ear to the ground - You have to know what’s coming
• The earlier the better!
• Ask the right questions
• See ITPI’s Guide: Understanding and Evaluating Infrastructure Public-Private

Partnerships (P3s)

• Why is private equity financing being considered for the project in lieu of

traditional public financing? Has traditional public financing been considered?

• What will be the potential impacts on the existing and/or future workforce,

including both the construction workforce and the long-term operations and maintenance workforce?

• If the asset has an associated user fee, what rights does each party have

with regard to rate setting and rate increases?

Monitor the process and players and weigh in at each step

• Process:
• Procurement choice
• Value for Money
• RFI - soliciting interest
• RFQ
• RFP
• Identify and analyze the proposed financing schemes
• Research and track bidders

Understanding existing financial obligations and financing schemes

Carrie Sloan of ReFund America Project

Facing Privatization? Look for existing financial

• bligations
• Predatory Wall Street Deals often at the Root of high debt

levels and rising costs

• Privatization as the “solution” or only real option

Interest Rate Swaps

• Risky derivative add-on to variable rate bonds as “insurance”

against rising interest rates

• Long contracts with high termination penalties
• Banks didn’t adequately disclose risks
• Backfired: extremely costly for issuers

Auction Rate Securities

• Variable rate bond
• Paired with swaps
• Banks didn’t disclose risks
• Banks misrepresented market
• Backfired: extremely costly for issuers

Swaps and Auction Rate Securities

• Banks and advisors collected huge fees to put deals together
• Cities, etc didn’t understand deals
• Banks violated federal rules on disclosure of risk
• Banks manipulated interest rates
• Financial disaster for bond issuers
• Lawsuits, SEC fines

Toxic Deals at the Root of Financial Crisis

• Mass water shut-offs and tax lien foreclosures in Detroit and

Baltimore, & privatization schemes

• Shut offs in Pittsburgh, partial privatization, lead in water, boil

water alerts, lawsuits

• Indianapolis: huge rate increases, privatization, water quality

problems

Pittsburgh Water and Sewer (PWSA)

• City officials/PWSA didn’t understand deals
• Huge paycheck for banks and advisors
• Advisor conflict of interest
• $113 million swaps payday for banks, $87 mil penalty
• Management contract with Veolia:

skyrocketing rates, overcharging, lead in the water, boil water orders, lawsuits

Detroit

• Swaps contributed to bankruptcy
• $537 million in fees to terminate water swaps
• Huge rate increases = ½ of bills to swaps.
• Rationalization for Flint detaching and for privatization scheme

DETROIT INTERVENTION AND VICTORY

Research the Deals and Investigate Your Options

• Did banks/advisors violate rules or break laws?
• Were there conflicts of interest?
• Did officials understand the deals? Were banks misleading?

Watch out for: Rate Securitization and Similar Schemes

• Automatic rate increases to pay investors
• Minimum revenue guarantees for investors
• Tax levies built into contracts
• Other schemes that shift risk to taxpayers, away from investors and

take power away from electeds/public servants

Finding and Fighting Bad Deals- RAP Can Help

• Trainings
• Research Guides
• Resources and reports: www.refundproject.org
• Contact: Csloan@rooseveltinstitute.org

Advocating for Community Benefits in Infrastructure Projects

Ben Beach, Legal Director Partnership for Working Families | 2.6.2017

What are “Community Benefits”?

What are “Community Benefits”?

Lots of Paths

Private Community Benefits Agreements

Land Use Planning

Ordinances and Policies

Shared Resources

Government Agreements

Three Core Principles

Accountability Meaningful Benefit

Democratic Participation

Oakland Army Base

Cooperation Agreement

Lease

Oversight Commission

Community Benefits

REVIVE OAKLAND

Hurricane Sandy Rebuild

Lobbying

Local Law

Community Benefits Metrics

Cumulative Jobs for Sandy Residents Build it Back Direct Hires (Local) 823 16% of all Build it Back Hires to-date are Sandy Impacted Residents Hires through Sandy Recovery Workforce1 with Build it Back Employers 63 with Other Employers 306 Pre- apprenticeship Union Placements 115 Sandy Recovery Workforce1 Subtotal 484 Grand Total 1,307

Date as of January 23, 2017

Indianapolis Criminal Justice Center

Lobbying

P3 Agreement

Community Benefits Agreement

Useful Resources

General P3 Resources

• Brand New from ITPI! A Guide to Understanding and Evaluating Infrastructure

Public-Private Partnerships

• Infrastructure Justice: Building Equity into Infrastructure Financing
• Public Infrastructure as Stealth Privatization, The American Prospect

Community Benefits Resources

• Building America While Building Our Middle Class
• Community Benefits Toolkit

Toxic Financial Deals

• Riding the Gravy Train (info on transit swaps)
• How Wall Street Caused a Water Crisis in America’s Cities, The Nation

Contact Info

Donald Cohen In the Public Interest Donald@inthepublicinterest.org Shar Habibi In the Public Interest shabibi@inthepublicinterest.org Ben Beach Partnership for Working Families ben@forworkingfamilies.org Carrie Sloan ReFund America Project csloan@rooseveltinstitute.org