Clarke calls Rebuild path to privatization of city facilities

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Mayor Kenney’s proposal to revitalize the city’s parks, recreation centers, and libraries has run up against a problem — suggestions by some City Council members that the plan would put those facilities into private hands.

Kenney’s staff insists privatization is both not the city’s intention and, because of the project’s goals and structure, highly unlikely.

But not impossible.

That is because a nuance in state law requires a purchase option be on the table for all work done as part of the $500 million initiative known as Rebuild. Asked if the city could guarantee no public property would be sold, the project’s spokesman, David Gould, gave a measured response.

“We have no desire to sell off city property,” he said.

Council President Darrell L. Clarke has latched onto the issue, making it a key element of the ongoing debate over Kenney’s ambitious project.

Clarke, who was seen as having lost some political clout during the vote over Philadelphia’s soda tax, seems to be back in the driver’s seat as his colleagues weigh Rebuild. Council members must approve funding for the project before it can move forward, with a vote likely two months off.

The project is expected to involve renovations ranging from the installation of new boilers to the construction of brand new facilities at 150 to 200 individual sites over the course of more than five years.

The Kenney administration wants to have nonprofit partners to act as project managers on Rebuild sites. Under the proposed funding structure, those nonprofits would temporarily lease the sites through a partnership with the city and the Philadelphia Authority for Industrial Development (PAID), a quasi-governmental agency that would issue the bonds.

Clarke’s concerns stem from a clause in that lease structure that gives the project manager the “option … to purchase the renovations.”

Gould said the option is a requirement of the state legislation that makes the funding structure possible. But he and other Rebuild officials say it is unlikely to ever be used.

First, they say, the project manager is only allowed to purchase the improvements — like a new roof or a HVAC system — not the property. For most nonprofits, Gould added, finding the capital to purchase the improvements probably isn’t feasible.

On a more fundamental level, Gould said the city plans to partner with nonprofits “whose mission really aligns with the goals for Rebuild” — privatization not being among them.

“So part of that is making sure the facility continues to serve the surrounding neighborhood and community,” Gould said

He said nonprofits will have to state their long-term goals when applying to work on a site. If a group didn’t say it wanted to use the purchase option, then tried to, it could be deemed a breach of contract, he said.

Asked if there was precedent for that argument in court, Gould said he wasn’t aware of any because the city has “never had that problem” when the structure has been used.

And it has been used successfully, Gould stressed. Delta recently leased several gates at Philadelphia International Airport and acted as the project manager for the improvements there.

Gould pointed to renovations to city libraries made between 1996 and 2002. The city spent $22 million on the work, which was managed by the Free Library Foundation.

“That is very much a mirror of what the city is proposing to do with Rebuild,” Gould said. “A large scale project, multiple facilities were being improved and it was a nonprofit carrying out the improvements. … The option to purchase in that example was not exercised.”

All of the city’s assurances have seemed to do little for Clarke, who first raised the question of privatization at a budget hearing last month and has continued to do so since.

Earlier this week, Clarke said because the purchase option is for the improvements, his concern lies where that work would be substantial — such as the construction of an entirely new facility.

“I believe there will be new facilities built,” Clarke said. “I know one facility in my district that will be significant renovations to an existing facility, could potentially be in the multimillions of dollars. I would not like to see that facility conveyed to a private source.”

Responding to Clarke’s concerns, Gould said there will be very few cases where facilities receive complete overhauls, then reiterated the other safeguards.

Clarke has raised a host of other concerns with Rebuild, including the administration’s intent to get blanket approval from Council for the first round of spending rather than individual approval site by site.

Councilwoman Maria Quinones Sanchez said the purchase language in the lease is a clear example of why Council involvement is so crucial.

“This goes back to the core reason why from day one we’ve insisted that there be Council sign off on all of these,” she said. “Because it allows us to view what is the short-term and long-term goals of the investments that we’re going to make.”

Rebuild staff have said Council members will be deeply involved and, in coordination with the administration, will have approval of what sites get renovated and when.

The privatization issue seems to be barely on other council members’ radar. Councilman Allan Domb said he is more concerned with the city responsibly spending its Rebuild capital. He called the divide between Clarke and the administration over the purchase option “semantics to a degree.”

“I’m not as concerned,” he said. “Because I think at the end of the day everyone’s goal is the same.”

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