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Christie courtship of corporate partners yielding mixed results

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A few past missteps shouldn't doom future privatization efforts, says former New Jersey Congressman Dick Zimmer.
A few past missteps shouldn't doom future privatization efforts, says former New Jersey Congressman Dick Zimmer. - (Aaron Houston)

Gov. Chris Christie's effort to privatize the operations and marketing of New Jersey's lottery has sparked fierce opposition from unions and Legislative Democrats, but it's also put the spotlight on the state's — and Christie's — mixed record on privatization.

Shortly after taking office in 2010, Christie initiated a task force, led by former U.S. Rep. Dick Zimmer, to study privatization opportunities in the state. In May 2010, the commission released a 57-page report detailing some 40 privatization targets; if all were implemented, the report said, the state could save more than $210 million per year.

"Generally speaking, the administration has been taking a look at many opportunities, including going beyond those that we identified, and working I think fairly comprehensively to use privatization as one tool to make government more cost effective, and actually improve the quality of the services delivered," Zimmer said.

Before the lottery issue arose, Christie's most high-profile privatization moves came in 2011, when he put New Jersey's public broadcasting system, NJN, and the state's two race tracks, Meadowlands and Monmouth Park, into private hands. The jury's still out on both efforts: Democratic lawmakers have harshly criticized NJN's successor, NJTV, with Assemblyman Patrick J. Diegnan (D-South Plainfield) calling it "an embarrassment"; the racetracks' new operators, meanwhile, have cut operational costs, but continue to seek new revenue in areas like off-track wagering and sports betting.

The governor also has moved to privatize highway maintenance and concessions and state parks, among others.

"By and large, I think it's working well, even though there are very few astonishingly large projects that are being undertaken," Zimmer said.

Art Maurice, a lobbyist who advised Zimmer's commission, hopes the state moves on some of those big-ticket items soon.

Maurice, president at Tonio Burgos & Associates of New Jersey, said the state also could save money by more aggressively moving to privatize state-owned water and wastewater systems, a process that could save the state some 25 percent on operational costs, according to the report.

Such efforts already are happening on the local level. In November, Bayonne's local finance board approved a 40-year deal with United Water to take over the city's water and sewerage operations. The deal came with a $150 million payment to the Bayonne Municipal Utilities Authority — but also with an 8.5 percent rate hike for residents.

Maurice said the state also stands to save millions if NJ Transit privatizes its parking lot operations. As of 2010, the agency had 144 parking lots to its name.

"The core mission of New Jersey Transit is to move commuters," he said. "Running, managing, administering and maintaining parking is not part of its core mission. So that's an easy one."

In late 2010, NJ Transit announced plans to privatize operations at 81 lots, but the plan has been mired by delays.

If done right, Maurice said privatizations, or public-private partnerships, can leverage government oversight with private-sector financial and technical know-how.

Still, the idea of putting important public services in the hands of profit-driven companies has risen eyebrows.

"The idea that there are these core public functions that need to be sold off is not one that has a good track record in New Jersey," said Seth Hahn, legislative and political director at CWA New Jersey. "The history in New Jersey is waste, fraud, abuse and political kickbacks. And consumers and taxpayers get hurt."

For instance, as noted in Zimmer's report, the 1998 implementation of E-ZPass was plagued with problems almost from the beginning, with multiple delays and revenue that came in far short of targets. An effort that same year to privatize motor vehicle inspections saw a similar fate, with allegations of rampant mismanagement.

Hahn said Christie's lottery effort has gotten off to a bad start, with only one bidder responding to the state's request for proposals. The commission didn't propose a lottery privatization, Zimmer said, because a Bush-era Justice Department memo seemed to limit the opportunities for privatizing state lotteries.

Michael Drewniak, a Christie spokesman, said there is no federal prohibition on the partial lottery privatization the governor is seeking. But Zimmer's report suggested multiple bidders are important.

"If an RFP attracts only one single bidder, it may be defective, and in need of revision or rebidding," the report states.

David Rousseau, a state treasurer under Gov. Jon S. Corzine who now works at the think tank New Jersey Policy Perspective, said the Corzine administration was always looking at ways the state's business could be done more effectively. But he said privatization doesn't always make sense.

"People are always saying 'I'll do this for this much money,' which appears to be a savings," he said. "Then, two or three years down the road, all of a sudden they come back and say it could be X (number of dollars)."

Rousseau said state leaders also have to consider the social costs. In some cases, privatization may lead to cost savings because people are getting lower benefits or poorer service.

Zimmer's report also highlighted positive New Jersey privatization experiences, such as the public-private Hudson-Bergen light rail, and the state's use of private schools to provide universal preschool access. The state has had good and bad experiences with privatization, but "you can't look at the experience in the past and say they prove privatization doesn't work," he said. "It just proves that privatization done improperly can create problems. But there are many examples, including the ones we cited in the report, that were in existence before the governor took office, that are quite successful."

E-mail to: jaredk@njbiz.com
On Twitter: @jaredkaltwasser

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