New Safeguards For Public Library Privatization Pass Senate

Legislation adding safeguards to library privatization proposals passes the Senate

CALPIRG

Sacramento, CA—Legislation that will help ensure proposals to privatize public libraries are a good deal for the public passed the state senate today.  Among other provisions, the bill requires any deal to have specific performance standards and a limit of 5 years.

According to Pedro Morillas, Legislative Director for the California Public Interest Research Group, “The point of privatizing community run services like libraries is generally so those communities can save money.  This bill makes sure that privatization deals deliver on what they promise.”

Specifically this legislation will:

–    Improve public notice requirements
–    Require demonstrated cost savings for the duration of a contract
–    Make all bids competitive
–    Require proven qualifications of a contractor
–    Insert protections from involuntary employee displacement
–    Provide protections from contracts approved solely on the basis that savings result from lower wages
–    Require future performance and financial audits

An example of a deal gone bad is the city of Santa Clarita, which recently handed over control of its libraries to a private entity and the decision has already cost the city $12 million more than anticipated.  Under this bill, cities are free to privatize their libraries, but it will be much harder to miss unanticipated costs that end up defeating the purpose of a deal in the first place.

“Libraries are more than just a collection of books and magazines. If cities are going to give up control of these public structures they should be sure the public comes out on top in the deal,” added Morillas.

Here are CALPIRG’s general principles on privatizing public assets:

(1) Any deal must clearly create net long-term benefits, not just a short-term budget fix.

(2) Privatizing during a budget crisis undermines the state’s negotiation leverage – As a potential “seller” of public assets, the state should not undermine its own bargaining position by including potential lease proceeds in draft budget plans.  No proceeds from asset leases or sales should be included in budget proposals unless they have already been finalized.

(3) Asset lease proposals should include public escape clauses – Over the course of many decades, unforeseen events or long-term trends can make it beneficial for the public to relocate, replace, merge or eliminate government buildings.

(4) Private “cost savings” should not lead to hidden costs for the public—Investors can’t cut corners and call it “efficiency”.

(5) Strong public transparency and accountability – Private leaseback deals must include very high standards of public transparency in the bidding and negotiation process and continue with full public disclosure throughout the life of a deal.

(6) Escrow accounts should ensure that public assets are returned in top condition – Essentially investors should leave a security deposit with the state so taxpayers aren’t on the hook for neglected repair and upkeep.

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CALPIRG, the California Public Interest Research Group, is a non-profit, non-partisan consumer group that takes on powerful interests on behalf of its members, working to win concrete results for our health and our well-being.