24 October 2007 at 10:07:05 AM
The deals, common in Europe for decades, got jump-started in the U.S. in 2005 when Chicago enriched its treasury by $1.8 billion by selling a 99-year lease of the Chicago Skyway to Spanish roads operator Cintra and Australian bank Macquarie. At about the same time, Texas bagged $1.2 billion to let a Cintra-led consortium build the first part of the Trans-Texas Corridor and collect tolls on it for 50 years. In 2006 Indiana signed a 75-year lease for the 157-mile (253 km) Indiana Toll Road in exchange for $3.8 billion, funding the state's transportation needs for the next decade--and grabbing the attention of other budget-conscious states. "It was an earthquake in transportation," says Bob Poole, director of transportation studies at the Reason Foundation, a think tank.
But since the spring, a backlash has taken hold. Texas, a pioneer in privatization under the enthusiastic leadership of Governor Rick Perry, saw its legislature impose a two-year moratorium on new projects. The Pennsylvania legislature bounced Rendell's first attempt to privatize the turnpike, though now he's trying again in the wake of shifting state politics. The mother of all toll roads, the New Jersey Turnpike, is under review, but Governor Jon Corzine, a former Goldman chairman, disappointed eager bankers in June when he flatly stated, "We're not going to privatize."
The issue exploded last May when a letter was sent by the House Transportation Committee's James Oberstar of Minnesota and Peter DeFazio of Oregon to all 50 Governors, expressing concern that a flood of local deals might put "parochial and private interests" ahead of an "integrated national transportation network"--and threatening to undo any deals found not to be in the public's interest. That's pointedly at odds with the Department of Transportation (dot), which, following the lead of the Bush Administration, has been a huge supporter of privatization and helped pave the way by letting some companies issue debt with the same tax advantages as municipal bonds. The dot also drafted model legislation for states considering deals and in at least one case--when Texas backed off a deal with Cintra--threatened to withhold funds.
Yeah, that's the Republican Bush administration- roads aren't for people, they're there to make companies a profit.
So what's not to love? The most common gripe is populist. Tolls often skyrocket under private owners, though with the blessing of elected officials, who avoid the political costs of raising tolls or taxes themselves. That's how privatized roads deliver double-digit returns for investors and often lead to upgrades like electronic tolling. But there are other devils lurking in the details, like noncompete clauses that may prevent transportation agencies from building new roads, or the inability to use roads for economic development by, say, adding a new exit to attract businesses. Some officials get queasy about locking themselves into long leases; Colorado officials already regret offering a 99-year lease for the Northwest Parkway. Others are turned off by the hard sell from investment bankers who advise states on some deals and bid on others. "This should be the last option," says Texas state senator John Carona, "not the first."
I don't guess Carona was TOO unhappy about these, since he sold Texas out. Maybe he just likes to watch the hot air exploding from his mouth.
At the core of the debate is a fundamental issue: Is building roads one of those things, like trade policy, that only the Federal Government should steer, or is there a better way? Forty-five percent of the money spent on American roads comes to the states from the Federal Government, but Congress hasn't raised the gas tax, its main source of highway funds, since 1993. And that's just fine by people who find the free market efficient and earmark-free.
And therein lies the flaw. The gas tax hasn't been raised AND it gets spent on other stuff.
The article actually seemed like it was trying to subtly be FOR PPPs, because it has a Hillary Clinton inevitability tone to Big Corporate Interests Who Can Profit trumping the little guy. Well, this citizen isn't for it.
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