Bob Ficano, John Rakolta And The Big Jail Problem

June 04, 2013, 10:43 AM

There are few things politicians and the people who elect them love more than a public-private partnership. They look innovative, let taxpayers think they’re getting something for nothing, and give the impression of right-thinking, business-friendly government.

There’s nothing wrong, of course, with a business maintaining a local park, or partnerships like the Riverfront Conservancy or the consortium of businesses that donated police cars to Detroit earlier this year. This sort of government-business cooperation is philanthropy that is both reasonable in appearance and practice.

At other times, however, public-private partnerships swim in murkier ethical waters.

The Wayne County Business Development Corporation/EDGE Opportunities is a prime example. The Bob Ficano-created nonprofit, if you recall, was comprised of business people, including county contractors, who provided “support” for county government. For instance, as WXYZ reported in 2011, they provided bonuses to pay for county officials' overseas junkets. It's impossible to look at this public-private partnership and not wonder if county government was working primarily for the public’s interests or those of specific private-sector actors.

The WCBDC/EDGE appearance of impropriety raises its head once more as we learn that after spending more than $100 million, the county is likely to scrap its jail project because of cost overruns and design issues. Rather than finishing the new jail, they’ll just use that empty one sitting on Mound Road. And Dan Gilbert's Greektown Casino, which sold the site to the county, might buy it back.

Fateful Choice

That sounds neat and tidy until you realize, as Nolan Finley reported Monday, a sale likely requires the county to demolish its over-budget, under-finished jail. Oh yeah, and they totally could’ve had that Mound Road facility for $1.5 million before they undertook this nine-figure boondoggle.

Why does a nearly broke county build a massive new jail when a perfectly good one is available for pennies on the dollar?

The answer might have something to do with the fact that John Rakolta was a WCBDC/EDGE director back then, and Rakolta’s Walbridge construction firm got the lucrative jail-building contract.

We will never know if Rakolta’s largesse toward county officials — paying for their bonuses and overseas junkets through WCBDC/EDGE—influenced the decision to build a new jail instead of buying/fixing up the old facility. It’s doubtful anyone would cop to such shenanigans.

The mere appearance of impropriety is just as bad as impropriety itself.

Agency Problems

Voters and taxpayers must be able to trust public officials to make decisions in the public’s best interest — not the politicians' best interest, and certainly not the best interest of donors and cronies.

When they don’t, economists call it the principal-agent problem: “Agency problems arise when the incentives between the agent [public officials and public contractors] and the principal [citizens] are not perfectly aligned and conflicts of interest arise. As a result the agent may be tempted to act in his or her own interest rather the principal’s.”

It’s not like Ficano or other officials are on the hook for the project’s sunk costs. Nor is it likely that Walbridge will refund money already spent. Taxpayers and residents pay the consequences for this disaster.

Did Team Ficano initially reject the Mound Road facility and undertake a new Walbridge-built prison because it wanted to ensure Rakolta kept approving those delicious bonuses and luxurious European junkets over at the county’s nonprofit?

Who the hell knows?

I attempted to reach John Rakolta to get his explanation but was told by a Walbridge spokeswoman that they aren't allowed to comment on the jail project per the contract with the county. Though, really, what could he say? No one can be expected to prove a negative and, short of that, there's no way to completely assuage reasonable suspicions here. That valid questions can be asked about the relationship is problematic enough. This is why honest public officials and honest contractors should make doubly sure they aren't entangled in a way that creates the appearance of impropriety. 

The incestuous relationship between official and contractor ensures that Wayne County residents cannot, as principals, trust that county officials are acting in their best interest as their agents.

Cut the Cord

There are two ways to prevent this sort of principal-agent problem.

First, all these politically-connected “support” nonprofits (i.e. WCBDC/EDGE, Rick Snyder’s New Energy to Reinvent and Diversify Fund, the infamous Kilpatrick Civic Fund) should be shuttered immediately. Campaign finance laws should be re-written to explicitly bar their existence. Recent local history has shown transparency isn’t enough to keep the agents acting in the principals’ best interests when “nonprofit” money is floating around.

Second, there must be consequences for politicians and contractors that put their best interests above residents’ and taxpayers’ interests.

Ficano’s term ends next year and, while his career looks as dead as yesterday’s hamburger, it seems unlikely he'll exit office before his term expires. Still, his administration shouldn’t be trusted with any new big projects or initiatives. They can stick to administrative tasks like ordering next year’s road salt until they're replaced.

Let's wish Rakolta and Walbridge the best of luck pursuing private sector clients, but they simply cannot be allowed near another government contract. Even projects that aren’t directly funded by taxpayers, but will take advantage of public bonding for initial cash flow, should be off-limits. Like Team Ficano, Walbridge has proven to be a poor agent for residents and taxpayers. It’s time for us, as principals, to cut them loose. 

Clipping the wings of public agents who appear to be placing their own needs above the public's best interest not only punishes bad behavior, but it also sends a powerful reminder to all the other contractors and politicians that they'd better know their place if they know what's good for them.

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