Puerto Rico will soon be privatized. As soon as the Financial Control Board arrives, the island will be converted into a grotesque “public private partnership.” Hospitals, schools, highways, caserios…even electricity, beaches and the water supply…will be “privatized” by the Financial Control Board when it arrives in September 2016.
Sadly, the government of Puerto Rico will even help them do it…
Because in 2009, while he was governor, Luis Fortuño created the “Public-Private Partnerships Authority.”
Shortly after that, Fortuño privatized highways PR-5, PR-22, and the Luis Muñoz Marin Airport. And now, the whole island will be privatized — with Fortuño arranging many of the deals, from his law firm of Steptoe & Johnson in Washington, D.C.
This is a prescription for disaster because public-private partnerships, or “P3s,” have a spotty history, at best.
In California in 2003, the Orange County Transportation Authority had to pay $208 million, in order to end a disastrous P3 on State Route 91.
Also in 2003, in San Diego, California, an Australian investment bank named Macquarie Infrastructure Partners assumed management and revenue control of the South Bay Expressway. But the moment the toll road opened to traffic, the Macquarie shell company filed for bankruptcy, and the US Dept. of Transportation lost $80 million in taxpayer money.
The following year, the California state legislature halted its experiment in privatizing highways.
In 2012, the Ohio Public Interest Research Group (PIRG) issued a highly critical study of plans to privatize the 241-mile Ohio Turnpike.
Currently in New York, P3s are not authorized under state law. New York State Comptroller Thomas DiNapoli issued detailed P3 reports in 2011 and 2013, both of them highly skeptical, citing five areas of concern: poorly drafted agreements, under-valuation of the public property, excessive fee and toll increases, unrealistic fiscal expectations, and budget gimmickry.
In Canada, just last year, Bonnie Lyski, the auditor general of Ontario, studied 74 P3 projects. She found that these P3s cost Ontario taxpayers $8 billion more in loans and other expenses, than if they had been publicly funded.
In British Columbia, the Macquarie company – the same one that pulled a bankruptcy maneuver in California – refined another maneuver called “equity flipping.” Macquarie invested only 10-15% of its own money into two hospital and two highway projects, borrowed the rest from a bank, then flipped all four P3 projects to other corporate buyers. Macquarie reaped profits of up to 50 percent – on the full value of each deal. One of the hospitals, the Abbotsford Regional Hospital and Cancer Centre, was eventually flipped four times.
A 2007 study of Macquarie’s projects in the US found an abysmal record. None of these projects operated successfully or turned a profit. Two of them went bankrupt. Macquarie’s most substantial US project, the Indiana Toll Road project, was near insolvency and attempting to restructure its loans.
This is a problem for Puerto Rico. As of 2009, Macquarie is developing the P3 program for the entire island.
In 2011, Macquarie was the “financial advisor” for the 35-year P3 concession on the PR-5 and PR-22 highways, with $1.2 billion of project financing.
With a history of strategic bankruptcies, equity flips and failed projects, Macquarie is leading Puerto Rico into the brave new world of public-private partnerships. On the other side of the table: dozens of hedge funds, all jockeying for position.
All of them are politically wired. One of them spent millions in Washington, to ensure that Chapter 9 bankruptcy relief stayed bottled up in committee.
Just one of them, Apollo Management, gave $250,000 to Hillary Clinton for a speech in May 2015. Jeb Bush received $900,000 from them.
47 of them contributed $1.28 million to Gov. Andrew Cuomo’s election fund.
Picture yourself as Puerto Rico, sitting at this table. Your island is broke. You allegedly “owe” $72 billion. You have no bankruptcy protection. Your P3 advisor is Sammy Glick.
47 sharks are drooling for your water, electricity, highway and beach concessions. A Financial Control Board has been appointed, to ensure that the sharks get them.
There will be no “partnerships” at this table, but rather a grand buffet…with Puerto Rico as the main course.
Puerto Rico is about to be sold off. Union jobs will disappear. The water your children drink, the electricity in your home, the roads you drive on…all of these will be owned by North American billionaires. There will be no P3s on the island, only P5s…
Public Private Partnerships for the Plunder of Puerto Rico.
For a history of the War Against All Puerto Ricans, read the book…
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