"Bill would allow private companies to raise up to $15 billion for highway projects with bonds exempt from federal income taxes. "
Congress may urge private toll roads
Seeks new way to fund projects
July 5, 2005
By Daniel Sorid, Reuters
© Copyright 2005 Globe Newspaper Company.
SAN FRANCISCO -- The next road you pay a toll to use could be privately owned.
Looking for ways to finance highway projects without hitting the public trough, Congress appears set to pass a proposal to encourage private ownership of new toll roads.
The provision, part of the highway spending bill now being worked out by a Senate and House conference committee, would allow private companies to raise up to $15 billion for highway projects with bonds exempt from federal income taxes.
The proposal has broad support in Washington, D.C., and in the business community, but the idea has incited grass-roots opposition in some states, with some saying the government -- not a profit-seeking company -- is the proper owner of the public's roads.
Toll road owners such as Spain's Cintra and Australia's Macquarie Infrastructure Group stand to benefit from the move to private infrastructure bonds because their tax-exempt status would keep interest rates and funding costs low.
The move would also bring lucrative fees to Wall Street banks and others for underwriting and trading tax-exempt debt.
''The time has come for this," Senator Jim Talent, a Missouri Republican who co-sponsored the proposal, said in a telephone interview. ''I think we have an excellent chance of the $15 billion bond issue coming out of conference."
Highway spending has traditionally been the government's responsibility, but many states faced with tight budgets have given corporations the right to build, operate, and maintain roads.
States have the right to regulate toll rates or limit profits but generally give operators latitude to run the roads as they see fit, which concerns some commuters.
Texas, California, and Virginia are at the forefront of the movement, one of the most significant changes to the interstate highway network since its 1950s inception.
Companies already own projects such as the Chicago Skyway Toll Bridge System and the 407 Express Toll Route that rings Toronto, and interest in privatizing more of the US highway infrastructure is increasing. But one bottleneck has been financing.
Jose Lopez de Fuentes, director of Cintra's US and Latin American operation, said private road builders currently face complex regulations governing the issuance of tax-exempt bonds.
The provision expected to emerge from Congress would help Cintra raise funds to finance such projects as a proposed $7 billion investment in the Texas highway system, he said.
''That's a pretty good deal any way you slice it," said Gaby Garcia, a spokeswoman with the Texas transportation department. ''They'll cover the table with $7 billion and say, 'We'll raise that money on our own without any help from you.' "
But Ellen Dannin, a law professor at Wayne State University in Detroit who has written on privatization, said private companies are not necessarily more efficient at running roads and their tolls amount to a regressive tax on highway building.
A better solution to public underfunding of the road system may be to roll back tax cuts, Dannin said.
''One of the things to ask yourself is, why doesn't the government have the money to spend on the infrastructure that we need?" she said.
The private-activity bonds will not require any outlay of public funds, but the government would pay for the plan in the form of reduced tax rolls, estimated at $500 million over six years.
In a highway bill that would cost $275 billion or more in that time, $500 million is a small price to pay for a financing mechanism that could pay for dozens of projects, said Karen Hedlund, a partner at Nossaman, Guthner, Knox & Elliott LLP's office in Arlington, Va., which advises state governments on transportation.
The Boston Globe: www.boston.com
© Copyright 2005 Globe Newspaper Company.
Seeks new way to fund projects
July 5, 2005
By Daniel Sorid, Reuters
© Copyright 2005 Globe Newspaper Company.
SAN FRANCISCO -- The next road you pay a toll to use could be privately owned.
Looking for ways to finance highway projects without hitting the public trough, Congress appears set to pass a proposal to encourage private ownership of new toll roads.
The provision, part of the highway spending bill now being worked out by a Senate and House conference committee, would allow private companies to raise up to $15 billion for highway projects with bonds exempt from federal income taxes.
The proposal has broad support in Washington, D.C., and in the business community, but the idea has incited grass-roots opposition in some states, with some saying the government -- not a profit-seeking company -- is the proper owner of the public's roads.
Toll road owners such as Spain's Cintra and Australia's Macquarie Infrastructure Group stand to benefit from the move to private infrastructure bonds because their tax-exempt status would keep interest rates and funding costs low.
The move would also bring lucrative fees to Wall Street banks and others for underwriting and trading tax-exempt debt.
''The time has come for this," Senator Jim Talent, a Missouri Republican who co-sponsored the proposal, said in a telephone interview. ''I think we have an excellent chance of the $15 billion bond issue coming out of conference."
Highway spending has traditionally been the government's responsibility, but many states faced with tight budgets have given corporations the right to build, operate, and maintain roads.
States have the right to regulate toll rates or limit profits but generally give operators latitude to run the roads as they see fit, which concerns some commuters.
Texas, California, and Virginia are at the forefront of the movement, one of the most significant changes to the interstate highway network since its 1950s inception.
Companies already own projects such as the Chicago Skyway Toll Bridge System and the 407 Express Toll Route that rings Toronto, and interest in privatizing more of the US highway infrastructure is increasing. But one bottleneck has been financing.
Jose Lopez de Fuentes, director of Cintra's US and Latin American operation, said private road builders currently face complex regulations governing the issuance of tax-exempt bonds.
The provision expected to emerge from Congress would help Cintra raise funds to finance such projects as a proposed $7 billion investment in the Texas highway system, he said.
''That's a pretty good deal any way you slice it," said Gaby Garcia, a spokeswoman with the Texas transportation department. ''They'll cover the table with $7 billion and say, 'We'll raise that money on our own without any help from you.' "
But Ellen Dannin, a law professor at Wayne State University in Detroit who has written on privatization, said private companies are not necessarily more efficient at running roads and their tolls amount to a regressive tax on highway building.
A better solution to public underfunding of the road system may be to roll back tax cuts, Dannin said.
''One of the things to ask yourself is, why doesn't the government have the money to spend on the infrastructure that we need?" she said.
The private-activity bonds will not require any outlay of public funds, but the government would pay for the plan in the form of reduced tax rolls, estimated at $500 million over six years.
In a highway bill that would cost $275 billion or more in that time, $500 million is a small price to pay for a financing mechanism that could pay for dozens of projects, said Karen Hedlund, a partner at Nossaman, Guthner, Knox & Elliott LLP's office in Arlington, Va., which advises state governments on transportation.
The Boston Globe:
© Copyright 2005 Globe Newspaper Company.
posted by Porkus Maximus Tex: at Tuesday, July 05, 2005
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