"Once again, the taxpayers become the piggy bank to bail out corporations for their own fiscal mismanagement."
Another toll road goes south...
Indiana toll road value plunges from $3.8 BILLION to $445 MILLION
Indiana taxpayers were sold a bill of goods. Despite the public outcry, Governor Mitch Daniels sold the Indiana Toll Road to two foreign entities, Cintra of Spain and Macquarie of Australia, for $3.8 billion in 2006. Now the value of the toll road has plunged to a paltry $445 million.
How do these companies avoid foreclosing on their "asset"? Aggressively higher toll rates, which, in turn, risks pricing yet more motorists off the road. It's the same song the North Texas Tollway Authority (NTTA) is singing. The NTTA just hiked its toll rates 32% to cover its debt service payments due to its failure to meet traffic projections.
This push for toll roads that puts taxpayers on the hook for massive multi-generational debt, particularly the sale our public infrastructure to private corporations so that politicians can go on a spending spree today, is a recipe for economic disaster. Cintra and Macquarie thought they bought a cash cow and now they're scrambling to cover their enormous debt load.
The Indiana Business Journal article dated August 1 says, "With so much invested, the companies have an incentive to milk the lease, taking advantage of language in the agreement that could permit annual toll increases of 5 percent or higher. That's exactly what House Speaker Pat Bauer, D-South Bend, an outspoken critic of the Indiana Toll Road lease, feared from the start. 'It was never meant to be a profit center or to make money,' he said of the highway, which opened in the mid-1950s. 'It was meant to be low tolls for maintenance and, eventually, a free road.'"
Given the abject failure of elected officials to protect the public interest and keep these hogs at the public trough at bay, now taxpayers are faced with the loss of control over their public infrastructure and relentless toll hikes by irresponsible, short-sighted private corporations.
The more things change the more they stay the same...these foreign entities failed to plan for economic downturns thinking the world of cheap and easy credit would last forever. And once again, the taxpayers become the piggy bank to bail out corporations for their own fiscal mismanagement.
A book entitled Outsourcing Sovereignty: Why Privatization of Government Functions Threatens Democracy and What We Can Do About It by Paul Verkuil, a free market proponent and professor, warns about outsourcing public duties to the private sector.
He says: "Not every public solution is wrong and not every private solution is better."
Privatization of government functions obviously breeds greed and reckless fiscal policy that feeds the perception that the taxpayers are the source of easy money. Financial experts John Goldberg and Jim Chanos were early critics of the so-called "Macquarie model" of financing, and warned that these deals were a house of cards that would come crashing down. And here we are.
In Goldberg's paper, "The Fatal Flaw in the Financing of Private Road Infrastructure in Australia," he predicted investors would experience heavy losses due to excessive valuations of toll roads that are monetized and spun off into funds sold to pension funds and other investors.
He also cautioned that government guarantees are buried in the voluminous and confidential financial section of public private partnership (PPP) contracts. The taxpayers and even most public officials are kept in the dark about the details and possible public liabilities. It's not hard for the government to get "out-lawyered" by these sharks.
With politicians like Mitch Daniels and Rick Perry, who can blame these companies for sticking their hands into the public treasury? All it takes is a willing vessel in public office and they're set for life. We must toss out such bought and sold politicians who fail to protect the public interest and sell-out the taxpayers for quick cash for the state, or even worse, for campaign cash.
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