THIS PAGE
TO A FRIEND
Foreign Privatization
of U.S. HighwaysMonday, May 21, 2007
By Henry Lamb
Part I:
Privatization explained
American roads are the hottest commodity in the international marketplace. State and local governments are falling all over themselves to sell off highways, bridges, and all sorts of other revenue-producing infrastructure, to international financiers who are eager to snap up structures Americans have already paid for, and for which they continue to pay maintenance costs through endless taxes.
The Chicago Skyway, for example, brought $1.83 billion from a Spanish-Australian partnership. The 157-mile Indiana tollway, brought $3.85 billion from the same partnership. And the state of Texas has recently concluded a deal to sell a Trans-Texas Corridor for $7.2 billion to the same Spanish company who partnered with a Texas construction company.
What’s going on here? Why are government officials so eager to sell off our infrastructure? Because it’s a win-win deal for everyone - except the people who pay taxes and use the highways. Governments get a pot full of cash up front, and the “public-private” partnerships get a long term cash-cow. The taxpayers and highway users get ______, well, you fill in the blank.
Actually, these “sales” are long term leases, which is much worse than an outright sale. The Chicago Skyway deal is for 99 years. The Indiana Tollway is for 75 years. In what condition will these important roads be when they are returned to government? The folks who celebrate the deals today - and spend the billions - will be pushing up daisies by the time a new crop of government officials will have to explain why the roads have crumbled.
The roads that exist today were bought with taxes and tolls. They are maintained with taxes and tolls. Neither taxes nor tolls will be reduced when these roads are sold to public-private partnerships. In fact, taxes are likely to increase, and the tolls are certain to increase. Tolls for commercial use on the Indiana Tollway were scheduled to double during the first three years of the deal. Auto tolls would remain flat for the first three years, and then “catch up” with the commercial rate.
When the taxpayers and highway users get slapped in the budget by these increases, and complain to their elected officials, the elected officials can do nothing but say “we’re sorry, it’s out of our hands for the next 99 years.” When the roads begin to crumble and potholes begin to appear, elected officials can do nothing but say, “we’re sorry, it’s out of our hands for the next 99 years.”
When the people of Texas learned about the $7.2 billion deal the state was constructing, they overwhelmed the legislature and demanded a two-year moratorium during which the consequences of the deal could be studied. The moratorium legislation passed the state House and Senate by a combined vote of 165 to 5 - more than enough to override the governor’s threatened veto. But legislators are trying to take the teeth out of the legislation by exempting half the roads in Texas.
The Chairman of the Senate Transportation Committee says that the public-private partnership project must go forward, because the state has not raised gasoline taxes in 16 years, and there’s not enough money to build the roads that are desperately needed.
Well, now, he didn’t say what portion of the state and federal gasoline taxes were spent on non-highway projects. He didn’t say why the gasoline taxes were not increased if a valid need existed. He didn’t say why the state could not raise the necessary construction funds the same way the public-private partnership will raise it - by pledging future revenues to pay for the funds borrowed. He didn’t say why he is eager to turn public transportation over to a public-private partnership that is not accountable to the voters.
There is another reason for the media hype and popularity of public-private partnership funding. To meet the anticipated construction costs of the NAFTA Super-corridor network, incredible sums of capital must be amassed - rather quickly. Not all cities or states have the expertise or the credit worthiness to structure a multi-billion-dollar financing package. It’s much easier to turn to an outfit that has done it before - and damn the consequences that will fall on another generation.
The sale, or long-term lease, of the nation’s infrastructure is not just a fix for immediate congestion problems, it is a method of financing a whole new infrastructure designed to allow goods to flow from Chinese-controlled ports in Mexico, throughout the United States, and into Canada. Proponents of the project know that it will be much easier to get financing from public-private partnerships than from taxpayers who are already over-taxed. Left up to the taxpayers in each state, the international
That’s why it is necessary to take the matter out of the hands of taxpayers, and let the professional bureaucrats do what they know is best for the poor, uneducated taxpayers, who, in the end, must still pay the bill. The sale of the nation’s infrastructure is nothing less than a national tragedy.Part II: Who’s to blame for the sellout?
The nation’s transportation experts have identified the top three priorities: a national freight network; urban congestion; and connecting new urban centers with the interstate system. The American Association of State Highway and Transportation Officials, meeting in national conference last month, heard futurists predict that the cost of meeting the transportation needs would be $3.1 trillion over the next 25 years. State and local governments are turning to “public-private partnerships” (
The City of Chicago was happy to partner with a Spanish-Australian group that paid $1.83 billion for a 99-year lease to operate the Chicago Skyway. The same outfit paid Indiana $3.85 billion to operate the Indiana Tollway for 75 years. The same Spanish company has partnered with a Texas firm to give the state of Texas $7.2 billion to build and operate the first leg of the Trans-Texas Corridor. And Pennsylvania’s Governor Rendell is expecting a bid of between $15- $18 billion for the Pennsylvania turnpike.
Most states have already enacted, or are considering, legislation to authorize this PPP financing of public infrastructure.
Public opposition to PPP financing encouraged the Texas legislature to adopt a two-year moratorium on the state’s PPP projects. The governor’s veto, however, along with threats from the U.S. Department of Transportation, forced the legislature to pass a watered-down compromise bill that blocks only future PPP projects, but allows the current <a href=http://www.freedom.org/news/200706/01/orski.phtml>Trans-Texas Corridor to go forward</a>.
Public opposition to PPP financing encouraged Chairman of the House Transportation & Infrastructure Committee, James Oberstar, and Transit Subcommittee Chairman, Rep. Peter DeFazio, to issue a May 10 letter to governors and state transportation officials that warned about rushing into PPPs that did not fully protect the public interest.
"We don’t need their advice, frankly," said Governor Mitch Daniels. He said the letter was "nothing but Congressional posturing." Daniels’ criticism was typical of the response from state officials.
National Surface Transportation Policy and Revenue Commission Vice Chairman, Jack Schenendorf, told the conference attendees that the federal program no longer has a sense of mission, which has led to competition among the states for federal funds, and to the proliferation of “earmarks” for local political advantage.
Regardless of the finger-pointing, the fact remains that driving in urban areas is a nightmare, and driving on the interstate system is like playing tag with 18-wheelers, and it’s getting worse, not better. The people want relief, but not at the expense of bondage to PPPs.
Officials claim that transportation revenues from traditional sources are barely adequate to maintain existing roads, and do not provide for future construction. If this contention is true, the next question to be answered must be: is this the result of inadequate fuel tax rates, or have the revenues from fuel taxes been siphoned off for other purposes?
This question directed at transportation officials produces an incredible array of slippery answers. Legislators, at every level of government, should insist that transportation taxes be spent on nothing but transportation. If transportation taxes are used exclusively for transportation needs, and the revenue is inadequate, then a tax increase is required to meet the needs of the people.
Realistically, with gas prices above $3 per gallon, no politician will suggest increasing the gasoline tax, when it is so much easier to sell off a highway to a PPP, and reap billions in new money - without having to ask the voters for a tax increase.
The voter still pays; he just won’t have a vote. And the price he pays will be more. Toll-roads
built or operated by PPPs must pay a profit to the shareholders of the firms that put up the money. If the state builds and operates the infrastructure, that profit does not have to be built into the price, and therefore, the voter saves a bundle.
Infrastructure sales to PPPs is the hottest ticket in town. It’s going to take a monstrous effort by the people to reverse this trend that is clearly rushing across the nation like a tidal wave. Transportation officials see PPPs as the answer to their revenue problems. Legislators tend to “go along” with the budget committee, unless they are peppered by contacts from their constituents.
Texas voters tried valiantly to put a moratorium on the sale of the Trans-Texas Corridor to Cintra-Zachry, the Spanish-Australian PPP that wants to pay $7.2 billion to the state. They succeeded in the legislature, but threats from the governor and the federal government ignored what the people want.
In every state, and every community, someone is planning, right now, to sell public infrastructure to a public-private partnership. Chances are better than good that the PPP has its roots in another country. This can’t be good for America.
Henry Lamb is the executive vice president of the Environmental Conservation Organization (ECO), and chairman of Sovereignty International.
NOTE: In accordance with Title 17 U.S.C. section 107, any copyrighted material herein is distributed without profit or payment to those who have expressed prior interest in receiving this information for non-profit research and educational purposes only. For further information please refer to: http://www.law.cornell.edu/uscode/17/107.shtml
