Thursday, February 28, 2013

Puerto Rican San Juan Airport Going Private

Bob Sechler, of the Wall Street Journal, has published an article unveiling Puerto Rico's plan to privatize its airport. The proposed plan is set to privatize San Juan's Luis Muñoz Marín International Airport, and is expected to generate 2.6 billion dollars.

The Federal Aviation Administration (FAA) initially announced an airport privatization program sixteen years ago, but the program has gained little momentum since. Stewart International Airport in Newburgh, N.Y was the only airport to go private under this program. Chicago's Midway Airport considered privatizing in 2009, but was unable to receive proper funding largely due to the financial crisis. Recently, Chicago has decided to reconsider the idea of privatization. One should expect other U.S. airports to keep a close eye on the outcome of Puerto Rico's privatization. Only time will tell if this will spark interest from other American airports to explore privatization.

Wednesday, February 20, 2013

The Human Right(s) to Water and Sanitation: History, Meaning and the Controversy Over Privatization

Author, Sharmila L. Murthy
Sharmilia L. Murthy has an interesting new paper focusing on humans rights to proper drinking water and sanitation. Specifically, she examines the conflicts that can arise when the private sector get involved in the water and sanitation sectors: The paper, The Human Right(s) to Water and Sanitation: History, Meaning and the Controversy Over Privatization can be found here. The abstract for the paper is presented below:
The recognition by the United Nations (UN) General Assembly and the UN Human Rights Council in 2010 of a human right to safe drinking water and sanitation has propelled awareness of the global water and sanitation crisis to new heights, while also raising a host of challenging issues. The framing of water and sanitation as a human right can be understood as a response to global water service trends that have increasingly emphasized economic efficiency, environmental sustainability, and privatization. The history of the International Covenant on Economic, Social and Cultural Rights (ICESCR) sheds light on some of the controversies around the scope and meaning of the human right to water and sanitation, including the politics of privatization. Although international human rights law has historically been neutral with respect to economic models of service provision, human rights principles are relevant as to how to engage the private sector in the provision of basic services. Three key themes that highlight the tensions between human rights and private sector involvement in the water and sanitation sectors are explored: financial sustainability, efficiency, and dispute resolution. Human rights principles are guideposts for regulation, monitoring, and oversight, which are critical elements when the private sector is involved in the delivery of water and sanitation services.

Friday, February 15, 2013

Pennsylvania's Attorney General Rejects Contract for Lottery Privatization

Pennsylvania Attorney General, Kathleen Kane
I have been keeping up with the latest news regarding Pennsylvania's proposed plan to privatize its state's lottery. I previously posted two articles to this blog (found here and here) tracking the most recent developments of the story.

For the past couple of weeks, Pennsylvania's Attorney General, Kathleen Kane has been reviewing the legality of the drafted contract. Governor Tom Corbett had a deal in place with British company, Camelot Global Services, to hand over control of the state's lottery to the private company.

Kathleen Kane announced yesterday that she has rejected the proposal "because the deal usurps the legislature's powers and runs afoul of state gaming regulations." Kane insists that she is striking the deal down simply because it is illegal. She further explains that she did not judge the contract for its potential profitability, only its constitutional legality. When reached for comment, Governor Corbett expressed his disappointment in the decision, and he is currently evaluating his options to appeal the decision. Angela Couloumbis, of the Philadelphia Inquirer, posted an article providing more details on this latest decision.

Sunday, February 10, 2013

Pennsylvania Liquor Privatization: Harmful to Small, Local Business

Pennsylvania Governor, Tom Corbett revealed a new proposal last week, which aims to privatize the state's liquor distribution. This announcement comes on the heels of the governor's controversial decision to privatize the state's lottery system. This new proposal has many local beer distributors worried about rising costs for licensing. An article from BusinessWeek addresses some of the concerns:
"For one, the business owners say the governor's plan would create an unlevel playing field for beer distributors who would face competition from supermarkets, convenience stores and big-box stores selling beer. 
Under Corbett's proposal, distributors could buy an enhanced license for $150,000 to sell smaller packages of beer such as six-packs along with wine. They also could purchase separate licenses to carry liquor.
In the meantime, grocery stores could sell six bottles of wine and up to a 12-pack of beer for a license costing $25,000 to $30,000 annually. Convenience stores could sell six-packs with a $15,000-a-year license.
Big-box stores, such as Costco and Target, could sell six bottles of wine and cases of beer through a $35,000 annual license."
Local businesses are concerned with their ability to compete against large corporations. Many small business owners are left wondering whether they will be able to support their families if the proposal goes through.
 "It would really dilute the marketplace. As far as Pennsylvania beer distributors, we all have to be small, family-run businesses. We can't own more than one outlet. You are asking us in a new world to compete against Walmart and Costco, plus other major chains of liquor stores that would move in. That would be difficult to compete against," said Tom Bowman, owner of Beer Express in Lower Paxton Twp.

Saturday, February 2, 2013

Privatized Lawmaking

My new manuscript Costs of Codification is ready for submission to the journals now [please download it and take a look - your feedback is wanted].  It includes a discussion of a particular type of privatization - privatized lawmaking, especially in the form of legislative borrowing. There was a shift toward codification in the early twentieth century - all states and the federal government moved from traditional statutes-at-large, arranged chronologically, toward topically-arranged codes or statute sets.  The movement had a symbiotic relationship with the NCCUSL's Model Acts (the most successful being the Uniform Commercial Code) and the ALI's Restatements.  The codification movement created a demand for off-the-shelf, high-quality statutes with attached commentary, which came already in codified format (hierarchical sectioning and numbering, cross-references, indexing, topical sorting, and so forth); and the ready availability of these codes gave significant momentum to the codification movement that had hitherto been floundering. Network effects also apply to uniform codes and model acts - the more states adopt them, the more value they have for additional states considering whether to do so, because of the advantages of harmonization.  The network effects of uniform laws or legal harmonization, however, directly undermine the notion of "laboratories of democracy" - for better or worse.

Professor Nils Jansen published an excellent book (discussed in the article above) in 2010 entitled The Making of Legal Authority, in which he demonstrates that most codes throughout history - European, Near Eastern, and American - have been produced by private individuals or entities, not generated by the legislature itself, although many of these private law drafters worked at the behest of a monarch or legislature.  This has significant implications for our understanding of legislative enactment costs (a species of transaction costs for governance) and the commonly-held assumption that laws originate as a product of public representatives.  In more recent times, the privatization of lawmaking has accelerated with groups like ALEC and other special interests drafting highly partisan, billionaire-sponsored legislation (this occurs on both sides of the political spectrum, but the conservative generators of model acts seem to be more successful at the moment).  Codification fosters and abets this trend, making it easier for special interest groups to influence legislation - in fact, to draft the legislation that legislators will want to introduce.  

Here is the abstract from my article:
Between the Civil War and World War II, every state and the federal government shifted toward codified versions of their statutes.  Academia has so far ignored the systemic effects of this dramatic change.  For example, the consensus view in the academic literature about rules and standards has been that precise rules present higher enactment costs for legislatures than would general standards, while vague standards present higher information costs for courts and citizens than do rules.  Systematic codification – featuring hierarchical format and numbering, topical arrangement, and cross-references – inverts this relationship, lowering transaction costs for legislatures and increasing information costs for courts and citizens, as statutes proliferate.  This Article takes a first look at this problem.  On the legislative side, codification makes it easier for special interest groups to obtain their desired legislation.  It facilitates Coasean bargaining between legislators, and encourages legislative borrowing, which diminishes the “laboratories of democracy” phenomenon.  For the courts, codification changes how judges interpret statutes, prompting them to focus more on the meaning of individual words than on the overall policy goals of enactment, and to rely more on external sources, such as legislative history.  For both legislators and courts, codification functions as a Hartian rule of recognition, signaling legality for enacted rules.  For the citizenry, the reduced legislative costs mean increased legislative output, yielding rapid proliferation of statutes and unmanageable legal information costs.  More disturbingly, codification also fosters overcriminalization.  While it may not be appropriate to revert to the pre-codified regime now, reexamining the unintended effects of codification can inform present and future choices for our legal system. 

- Dru Stevenson 

Holding Off On Chicago's Airport Privatization Deal

Joe Cahill, of, published an article urging Mayor Rahm Emanuel to reconsider privatizing Chicago's Midway Airport. Mr. Cahill preaches patience in making a decision, citing Chicago's recent parking meter privatization deal that quickly turned sour. Essentially, Mr. Cahill feels that the city would be best served by waiting for a better deal.
"Although economic conditions generally have improved, pricing for airport privatizations is still far off the peak. Where investors once paid more than 30 times an airport's earnings before interest, taxes, depreciation and amortization, deals are now likely to yield less than half that multiple."
The entire article is worth a read and can be found here. Below, Mr. Cahill sums up his conclusion regarding the proposed airport privatization.
"Holding off on a deal would produce the greatest benefit for the city, even if it means another major airport goes private first. Rather than selling at the bottom of the market, why not wait for prices to recover and learn from the mistakes of any city that rushes to the front of the privatization line?"