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Denver City Council “Swallows the Kool Aid” – It Approves a $1.8 Billion Public-Private Partnership Agreement at Denver International Airport With Ferrovial, S. A.

August 15, 2017

From left to right – Councilperson Stacy Gilmore (abstained), Rafael Espinosa (opposed), Mary Beth Susman (supported), Jolon Clark (supported) voting on D.I.A. contract with Ferrovial S. A.

Last night, at a meeting which began on August 14, 2017 but ended on August 15 at 1:15 am in the morning, the Denver City Council approved a $1.8 billion renovation project the contract of which will span over 34 years to reorganize the security system at Denver International Airport (D.I.A.). The proposal was essentially strong-armed by Mayor Hancock and his staff through a mostly pliant city council. The council, excluded from the negotiations, was given a week to read a 15,000 page contract before being forced to vote on it.

The management for the project, as well as a good deal of authority of the D.I.A administration, was handed over to a consortium of businesses, the main participant of which is Ferrovial S.A, a Spanish corporation whose bread and butter has been airport construction and administration. Ferrovial has an 80% share in the arrangement.

In the end, despite long-winded and generally boring rationalizations that went on ad nauseum until after 1 a.m. in the morning, the vote wasn’t even close. In its overwhelming majority, the Denver City Council had swallowed the Kool aid of what is referred to as “public-private partnerships. In a vote in which the council sold off what little is left of its soul, it voted 10-2 for the project with one abstention. Only council persons Rafael Espinoza and Debbie Ortega voting and speaking clearly against the project. Others, among the generally more liberal (or thought to be) members of the council,who for one given reason or another voted in favor of the proposal included Paul Lopez, Paul Kashmann, Robin Kniech. Stacy Gilmore, who claimed a possible personal conflict of interest concerning a brother-in-law, abstained.

In the end, despite long-winded and generally boring rationalizations that went on ad nauseum until after 1 a.m. in the morning, the vote wasn’t even close. In its overwhelming majority, the Denver City Council had swallowed the cool aid of what is referred to as “public-private partnerships. It voted 10-2 for the project with only council persons Rafael Espinoza and Debbie Ortega voting and speaking clearly against the project. Others, among the generally more liberal (or thought to be) members of the council,who for one given reason or another voted in favor of the proposal included Paul Lopez, Paul Kashmann, Robin Kniech. Stacy Gilmore, who claimed a possible personal conflict of interest concerning a brother-in-law, abstained.

Although Ferrovial is easily running the consortium show, it chose its partners wisely, with an eye on winning local support. Denver’s two Black city councilmen, Christopher Herndon and Albus Brooks, along with the city’s Black business community they represent, appeared nothing short of mesmerized that Magic Johnson Enterprises had joined the project with a 19% share in the equity. Bringing Saunders Construction (1%) on board, a local construction company gives the project the aura of some local participation was enough to give the Denver area construction unions a pretext for getting on board. With only 20% control offered to its consortium partners, Ferrovial is clearly in the driver’s seat.

Although the term, “public-private-partnership” has a kind of cooperative sounding ring it is, more often than not simply yet another way to for private investors to make big profits at the expense of the public welfare. In the case of the D.I.A project, private investors will take minimal risks and gain a good deal of profit in a project that would otherwise be publicly funded and in which the city would and should ultimately profit. Although there have been a number of smaller contracts between the city and private business over the years – just the week prior the council approved using a local publicly owned golf course for a three-day mega-rock concert – because of the size of project, the D.I.A. deal is easily precedent setting. More than likely it opens the doors to more of the same as a Denver Post headline on the vote suggests: “Denver’s 34-year deal at DIA might be the city’s first big public-private partnership, but don’t expect it to be the last.”

As is the case with most council votes, despite appearances to the contrary and denials, is that the vote had been already decided behind closed doors, and while in rare cases it does happen that public input at the time of the vote might sway a council vote, this is highly unlikely. It makes the public input little more than an exercise in futility, an illusion, that the council is seriously weighing public testimony. The more salient question usually concerns the forces behind the scenes lobbying for the proposal and why.

Needless to say it is quite easy to note that the business community was behind this vote along with minority entrepreneurs and the construction unions yet the real engines of the process remain somewhat obscure. The project was pushed very hard by Denver Mayor Michael Hancock’s office. This coalition – big business, finance, small business interests and the construction unions – cooperating (colluding?) with a  city government, has shaped the city’s development landscape here for decades, including the original D.I.A. project. They are committed to privatizing public assets, willing to give away public property to the sacred cause of private profit.  Still, a more profound analysis of who pushed this project behind the scenes is needed.

The Colorado labor movement could have made the difference, but the split between the construction unions who supported the project (and have supported others like in the past) and the service unions that do the work of maintaining the airport, was key. Whatever power the unions might have had to either get a better contract, or to oppose the deal outright, was lost by this lack of unity, and more frankly, the willingness of the construction unions to betray their working class sisters and brothers in the service sector for a few pennies (well more than a few – but still). Here in Colorado, this is an old story, unfortunately. Never has it been more vividly the case as last night at the City Council meeting.

The economic glue which tantalized a company like Ferrovial – who has more than a few skeletons in its closet – is cheap labor. There is nothing short of a stampede of European-based companies (and others) buying into business in the United States precisely because labor standards here are lower – much lower than in Europe. For Ferrovial, others, like the French-based food concession company Sodexo with strong interests in the state, treat the United States as little more than another Third World country. American companies outsource to Mexico and beyond. More and more European (and Asian – Chinese, Japanese) companies outsource to the USA for the same reason. “Cheap labor” means non-union labor. As in  the periphery and semi-periphery of the global economy, companies like Ferrovial can enjoy cheaper, much cheaper, labor costs because U.S. labor standards – wages and working conditions – are more lax than in Europe.

The economic glue which tantalized a company like Ferrovial – who has more than a few skeletons in its closet – is cheap labor. There is nothing short of a stampede of European-based companies (and others) buying into business in the United States precisely because labor standards here are lower – much lower than in Europe. Ferrovial and others, like the French-based food concession company Sodexo, treat the United States as little more than another Third World country.

While they might have to pay union wages in Europe, Ferrovial’s bottom line will be enhanced, precisely, because they can get away with cheap labor here. One has to wonder if the fact that the Denver City Council was willing to compromise – no, sell its soul – on labor standards for the project wasn’t one of the key’s to the whole arrangement. Ferrovial seemed willing to make compromises on a number of points…but not the bottom line. The service unions at D.I.A. understood they were about to get screwed and fought back accordingly, but as long as the construction unions went along with the deal, union leverage was weak. The feigned concern of many council members about labor standards was shallow and not credible. They threw long-standing city labor standards out the window last night, nothing less.

On this score the rationalizations of council people Lopez, Kashmann, Kniech, who  might have been expected to uphold the labor standards, but didn’t, is noted.  Whatever they might have said,  by their votes they too drank the Kool aid. Rafael Espinoza and Debbie Ortega took principled positions. Espinoza argued that the the city could have run the project quite well and that giving so much authority to a private concern, Ferrovial, was simply unnecessary. Ortega exposed the degree to which the city council was kept in the dark (by the mayor’s office) through much of what was an opaque process. Much appreciated was the intervention of former City Councilwoman, Joan Foster. She made  unambiguous, short, and to-the-point remarks opposing the public giveaway to private concerns, as did several service sector union reprresentatives who addressed the council. There is more to note – that the city council was given a week to read and digest a 15,000 page contract, that the mayor’s office and Ferrovial negotiated secretly, that Ferrovial’s human rights record has been publicly attacked by Amnesty International, or that despite certain empty assurances, it is not at all clear that the current auditor, Michael McNeil, is interested in watch-dogging this project as he should.

And so it goes…la lutta continua…Denver might be “a great city” – for the wealthy, for developers, for finance capital, fracking companies of all shapes and sizes …for the rest of us, the crisis deepens.

More on Ferrovial in later entries…

____________________________________

Links:

Part Two of this series.

After DIA Deal, Denver Mayor’s Office Seeks Buy-In For More Public Private Partnerships. So…this is just the beginning. Plans are a foot to create an “Office of Public-Private Partnerships” “to vet and coordinate such to vet and coordinate such projects, with the National Western Center and the Denver Center for the Performing Arts two likely prospects in the relatively near future.” So the selling off of public assets in the city of Denver, long underway, is about to intensify yet again

Island of Despair: Australia’s Processing Refugees On Nauru – Amnesty International’s damning report on the role of Ferrovial in human rights violation at an Australian refugee holding center on the island of Nauru. It is not possible that the Denver City Council was unaware of this. But apparently it did not enter into the decision to enter into a major contract with the company to remodel the Denver International Airport. Here is a link to a related piece on the $53 million fine that Ferrovial, parent company of Broadspectrum, which ran the holding center, was forced to pay in part.

Unite Goes To Spain To Highlight Ferrovial’s British Scandal – Unite, Britain’s biggest union, was protesting Ferrovial’s involvement in the blacklisting and victimization of trade unionists working on Crossrail – the biggest construction project in Europe. Piece is from July, 2013, but gives a good sense of how Ferrovial has a track record for hiring non-union cheap labor and why they have stubbornly refused to negotiate wage and labor standards with D. I. A. current maintenance employees. Again, there is NO WAY, that the Denver City Council was unaware of this…they just don’t seem to care about the company’s human rights record, or lack there of.

Foreign Firms Stand To Benefit From Trump Budget, Infrastructure Plans. This article is from the International Business Times of May 30, 2017. Although it does not focus on Ferrovial per se, it is mentioned though – the article gives important perspective. Foreign companies with an emphasis on infrastructural development, of which Ferrovial is one, are expected to have field day in the U.S. economy as a result of Trumpty-Dumpty-s infrastructural program, another Public-Private Partnership program that will be a part of the great public give away to private enterprise. A quote from the article:

But it (the infrastructural plan) also likely will serve as a foundation for some foreign greatness as well, given the prominent roles of just a handful of overseas multinationals in a program used to finance public projects — a program whose funding cap Trump’s budget seeks to eliminate

Crossrails Fee Dispute Exposes Chaos of Rail Privatization – Apparently the privatization of Heathrow Airport is not going along as smoothly as some Denver City Council members suggested. Crossrails is the lite-rail to London’s Heathrow Airport. Like the airport itself, Crossrails has been privatized. Much was made at the Denver City Council meeting (August 14, 2017) on how efficiently Heathrow is run (by Ferrovial). But now there is a dispute between two of the privatized companies – each one trying to pass the buck to the other – over “over track access charges.” The spat is between Ferrovial on the one hand and Qatari and Chinese sovereign investment funds.”

 

7 Comments leave one →
  1. August 15, 2017 10:03 am

    Well said, Rob. You are doing important work keeping us all informed about these shenanigans of the city council (except for Espinoza and Ortega, who still have moral compasses.

  2. Fran Aguirre permalink
    August 15, 2017 11:01 am

    Money and profit instead of the dignity of people! Maddening!

  3. August 16, 2017 2:43 am

    It’s absolutely unbelievable that the Denver City Council would allow itself to be manipulated by Hancock, Hancock’s team and by Ferrovial into accepting the agreement and the lead-up to it. Why would they have ever thought and permitted that one week is acceptable to read a 15,000 page document? Why does the Denver City Council even exist if Hancock is running the show behind closed doors? Why are they letting a foreign entity have control of a contract in one of the largest and most important airports west of the Mississippi? Why weren’t the labor unions more vocal? It looks like a lot of things went wrong and people let themselves be influenced by big names like Magic Johnson and those names of the local construction companies. Your Kool-aid analogy is spot-on! Exactly at this time, our representatives need to be defending our local and domestic interests, not bending to the terms and conditions set by Ferrovial. And now, Denver is stuck for 34 years with a “partner” who will very likely be harmful to our city. Thanks for keeping us posted on these topics, Prof. Prince!

  4. August 16, 2017 3:41 am

    I just wanted to ask if you know why the agreement is labeled as $1.8 billion. Several articles that I have read only mention a contract with $770 million in building costs, with DIA paying 74% (around $479 million + extra $120 million for unforeseeables) and the private companies paying the remaining 26%. Is the $1.8 billion the estimated revenue or does it encompass the entire amount of money ($770 million in costs and $1.010 Million in revenue) that the project will entail?

    Another question: You write that Ferrovial owns 80% of the project, but it looks like they won’t be earning 80% of profits. I was only able to find figures that list a maximum profit of 10.8% allowed for Ferrovial. However, DIA is slated to pay them $24 million a year, which will rise over time. So, if I understand correctly, Ferrovial will only make a maximum of 10.8% of profits plus $24 million per year. Is your 80% referring to the amount of responsibility over management of the project over the 34 years (4 years building time + 30 year agreement)?

    • August 16, 2017 7:55 am

      Hello Robert. I hope you are well. Still in Germany or have you moved on? In answer to your two “comment posts”…1. Unfortunately the “tradition” of a Denver mayor, this one or ones in the past, strong-arming the city council is not new. Seems to be normal working relations in Denver (and elsewhere). The sad part of it is that the mayor strong arms the council and they in turn, do likewise to the public. Most of these council meetings where public input is a part of the scenery, are, unfortunately charades. More often that not the vote has been fixed beforehand – as it was in this case – and the public comments are little more than fluff. Still, it is worth getting one’s two cents in as the council meetings are televised and the public can get a glimpse of how the council responds. I have gone to the past two meetings, after not having been there for a good fifteen years (since a vote against the war in Iraq that I was involved with). I found it “instructive” to listen to the different council people as I tried to figure out (at this point without much success) who are the powers behind the scenes. Here and there an “independent spirit” in the council…- there are one or two now. but little more. 2. concerning the financing. Good for you to look at it more closely. I don’t know the details to be frank and can’t answer your questions, but I’ll look into it. At this point one of my concerns is for the city to stay on top of the money flows. Several speakers at the council meeting spoke about there would be strong financial oversight. Perhaps. But I have heard rumors from knowledgeable sources (that need to be checked out) that the current auditor does not want to get involved in overseeing this project and is trying to distance himself from it. If this is the case – and again – it needs to be verified, it would essentially give the Ferrovial-led consortium the kind of free hand to “self-audit” in our current neo-liberal environment. And you know where that could lead. More on this though when I can sort out the facts. Cheers, best wishes to you. Rob P

  5. Kate Goodspeed permalink
    August 18, 2017 2:41 pm

    Thank you for this very informative piece, Rob, as usual.

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  1. Denver City Council “Swallows the Kool Aid” – It Approves a $1.8 Billion Public-Private Partnership Agreement at Denver International Airport With Ferrovial, S. A. – Part Two | View from the Left Bank: Rob Prince's Blog

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