Today we found out that inflation is running as hot as summer temperatures. The year over year increase in the Consumer Price Index (CPI) hit a 40 yea

Today we found out that inflation is running as hot as summer temperatures. The year over year increase in the Consumer Price Index (CPI) hit a 40 year high of 8.6 percent, shattering expectations of inflation potential cooling off. Taxpayers Protection Alliance released a statement ([link removed]) calling on the Biden administration to stop shrugging its shoulders and pointing fingers and begin taking tangible steps to instill confidence in consumers and businesses by addressing tariffs and regulatory accumulation. Earlier in the week, TPA held a panel with Senator Rand Paul (R-Kentucky) to discuss what Congress can do to get price increases under control, including Senator Paul’s Six Penny Plan to balance the federal budget. We were delighted to be joined by representatives of the National Taxpayers Union, the R Street Institute, and the Foundation for Economic Education for this event. You can watch the
event here. ([link removed])

Utilities Flush Taxpayers Cash

This week, TPA highlighted two local infrastructure boondoggles posing a serious threat to taxpayers. This is particularly relevant as wads of cash continue to be distributed to fund all sorts of projects under the recent infrastructure spending package.

First, we turn to Baltimore. When hundreds of millions of Americans flush their toilets every day, they reasonably expect that their local wastewater systems will take care of the rest. While most of the time this works out swimmingly, pipes and sewers can certainly cause a stink and wear out. One recent, high-profile example of this is Baltimore’s Back River water treatment plant where there are rampant and unlawful discharges of human waste into the ecosystem. Baltimore received approximately $640 million under the American Rescue Plan (ARPA), funds (which at the very least) could have funded clog removal efforts and wastewater plant cleaning operations. But, Baltimore hasn’t allocated any of that money to fix the Back River plant. Former Maryland Environmental Secretary Ben Grumbles urged Baltimore’s city government to put the dollars to good use, stating, “MDE [Maryland Department of the Environment] is extremely concerned that effluent violations for nutrients and solids continue to
directly and negatively impact the health of Patapsco River and Chesapeake Bay... dedicated funding is necessary to ensure that effective operation and maintenance issues are resolved.” Yet, in October of 2021, Baltimore Mayor Brandon Scott made consultant engineer Yosef Kebede the permanent head of the Department of Public Works’ Bureau of Water and Wastewater, a position that gave the bureaucrat significant control over Back River Plant operations. An investigative report by Baltimore Brew senior editor Mark Reutter reveals that Kebede embarked on a series of firings and forced dismissals, sidelining senior officials who had more than 130 years combined experience in wastewater management.

Reutter notes,“[i]n their place, Kebede has installed as plant manager, Betty Jacobs, whose career was in safety, not sewage, and a new maintenance manager, Prim Rambissoon, who was an instrumentation technician.” Kebede’s prioritization led to workers focusing on property landscaping when they should have been focused on clearing system clogs. Proposals for relatively inexpensive mechanical fixes stalled in the system’s bureaucracy, and the number of working centrifuges (to process solids) dwindled from two to zero.

As things went from bad to (way) worse, the state was forced to step in and wrestle away control from beleaguered city management. Under the watchful eye of state authorities, things seem to be tentatively improving. It’s only a matter of time, though, before the city resumes control and taxpayer dollars are at risk and recklessly spent on the wrong priorities. President Biden and his Congressional allies believe that throwing more money at the problem can fix wastewater woes, but the reality is that taxpayer funding can easily be mismanaged by bureaucrats with little know-how or incentive to get the job done. Policymakers need to think outside the box to ensure smooth sailing beneath the drain. As the federal government continues to spend $350 billion in “recovery funds” on water, sewer, and broadband, privatization must be a part of that plan. Privatization is no panacea, but is certainly worth studying as an alternative to endless bailouts from Washington, D.C.

Trouble In Paradise

Next we turn to the U.S. Virgin Islands, where a local utility is making all the wrong waves. Over the past half-decade, the federal government has allocated hundreds of millions of subsidies to the Virgin Island’s Water and Power Authority (WAPA). Yet, without explanation, the utility has chosen to ignore repaying many of its debt obligations. Now, according to reports WAPA is demanding further federal funding to transition their electricity generation capabilities entirely to solar power, despite recent controversies regarding mismanagement of major energy projects by WAPA.

The federal government has provided at least $3.27 billion to assist USVI’s recovery and rebuild following Hurricanes Irma and Maria. As part of these efforts, the Federal Emergency Management Agency (FEMA) has directed more than $1.4 billion to WAPA, with a little more than a $1 billion spent, according to USVI figures. Latest data figures show that roughly $360 million remains unspent and is in the control of the public utility or remains in federal coffers. Oversight of these funds is also vital given WAPA’s recalcitrance to repay its debts and meet other financial obligations. In recent weeks, the credit rating agency, Fitch, maintained a negative view on WAPA’s debt and listed its credit rating as CCC, which reflects a “heightened default risk.” Following a recent USVI Legislature hearing on WAPA’s current state, the utility released a financial report depicting just how dire their financial condition is. According to a May 23rd report that was just released, WAPA has $388.7 million in
total outstanding obligations, including $50.8 million in lines of credit that are owed to two Puerto Rican banks.

WAPA’s exceedingly high debt levels may explain a series of questionable, and unethical moves to help it meet its expenses. For example, over the past year WAPA failed to make several employee pension payments, and recently announced that “employee’s GERS contributions were inappropriately utilized to help the Authority offset and manage operational expenses.” Separately, WAPA has ignored health insurance payments, and delayed millions of dollars’ worth of debt payments owed to one of its lenders. WAPA is reportedly avoiding repayment to its largest creditor who was responsible for $180 million worth of capital improvements within the territory. The Houston-based company, Vitol, successfully constructed Liquid Propane Gas (LPG) conversion facilities between 2013 and 2016 to offer a cleaner, more affordable source of fuel to power the electric grid. This project was designed to wean the USVI off dirty, more expensive fuel. Unfortunately, WAPA is refusing to pay, and instead has chosen a debt
avoidance strategy, while taxpayers build out their solar grid.

The Governor of the USVI has announced plans to construct a large-scale solar facility. Since USVI does not have a significant existing solar footprint, it is likely such a transition will require significant financial resources and take time to construct. WAPA reportedly plans to rely on the Department of Energy and the federal government to pay even more of the bill for an ambitious project, as the Governor recently spoke of traveling to Washington for discussions with Secretary Jennifer Granholm. Building out USVI’s solar capacity may not be much of a cost to WAPA, but it could very well be expensive to federal taxpayers who will have to cover the cost of a duplicative energy project on the island. It would be a disservice to American taxpayers to have WAPA fall further into debt or have the federal government finance new misguided energy boondoggles. Taxpayers deserve answers as to where the FEMA money currently sits and why WAPA is refusing to repay its creditors.

TPA sent a letter to Congress on this issue, available here ([link removed]) .

BLOGS:

Monday: Op-Ed: Detroit should abandon wasteful internet project ([link removed])

Tuesday: Taxpayer Watchdog Applauds Senator Rand Paul’s “Six Penny Plan” ([link removed])

Wednesday: A Wealth Tax Will Curb Investment, Jeopardize Taxpayer Privacy ([link removed])

Thursday: Importation From Canada Does Not Lower Drug Costs ([link removed])

Friday: TPA Responds to May’s 40-Year High Inflation ([link removed])

MEDIA:

June 6, 2022: The Norfolk Daily News ([link removed]) quoted TPA in their story titled,” Democratic senator’s push for IRS to prepare Americans' tax returns creates major concerns.”

June 6, 2022: Patrick Hedger joined Chris Stigall on ‘Philadelphia's Morning Answer’ ([link removed]) to discuss rising energy costs and the private jobs report.

June 6, 2022: The Daily Mail ([link removed]) quoted TPA in their story, “Biden claims his administration has achieved the most 'robust recovery in modern history' - despite gas prices more than DOUBLING since he entered office, approval in his handling of the economy plummeting and inflation at a 40-year high.”

June 7, 2022: The Center Square ran TPA’s op-ed: “The WHO Is Using Big Tobacco’s Playbook to Mislead Smokers Worldwide ([link removed]) .”

June 8, 2022: Fox45 Baltimore ran TPA’s op-ed, “Wastewater Bailout Dollars Get Flushed Down the Drain ([link removed]) .”

June 9, 2022: TPA was quoted in the Wall Street Journal’s ([link removed]) piece titled, “Big Tech Has Spent $36 Million on Ads to Torpedo Antitrust Bill.”

June 9, 2022: Patrick Hedger joined “News On with Miranda Khan ([link removed]) ” on Real America’s Voice to discuss Sen. Rand Paul’s “Six Penny Plan” and the current state of our economy.


Have a great weekend!
Best,
Patrick Hedger
Executive Director
Taxpayers Protection Alliance
1101 14th Street, NW
Suite 1120
Washington, D.C. xxxxxx
www.protectingtaxpayers.org ([link removed])

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