Saturday, June 02, 2007

Public-Private Partnerships: "The voter still pays; he just won't have a vote. And the price he pays will be more."


Who's to blame for the sellout?

June 2, 2007

Henry Lamb
Copyright 2007

The nation's transportation experts have identified their 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," or PPPs, to produce the funding.

  • 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 Gov. 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 Trans-Texas Corridor to go forward.

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 Indiana Gov. 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 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 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 are 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 and chairman of Sovereignty International.

© 2007 Inc.:

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