As desperate state governments scramble to close budget gaps, the latest tactic is to sell off public assets for a fraction of their long-term value, surrendering public control in the process. A new report by the U.S. Public Interest Research Group Education Fund documents the scope of this new phase of privatization as it affects public roads. Public Roads, Private Costs: The Facts About Toll Road Privatization and How to Protect the Public provides the first comprehensive overview of this troubling national trend.
The report’s authors are Phineas Baxandall, senior analyst for tax and budget policy at U.S. PIRG and Kari Wohlschlegel and Tony Dutzik of Frontier Group. (See previous OTC blog post on road privatization.)
Photo by Mahalie, via Flickr, licensed under a Creative Commons Attribution, ShareAlike license.
The 60-page report describes the current state of privatization of roads and the economic and political reasons for this accelerating trend. Two appendices itemize the 15 completed private road projects in the U.S. and another 79 that are proposed or underway.
What was once a minor phenomenon affecting a few roads – most notably, the 150-mile stretch of Interstate 90 in Indiana and the Chicago Skyway, which links downtown Chicago to the Indiana Toll Road – has become a genuine national trend. With tax revenues declining due to the recession, state legislatures seem more willing to liquidate or lease valuable public assets for a song.
Public Roads, Private Costs is especially useful in explaining why road privatization is such a bad deal for the public:
- Government cedes control of transportation planning.
- The public generally does not receive full value for its investment in infrastructure, and must pay rising tolls into the future.
- Contracts typically force the public to compensate private companies if future state policies reduce toll traffic.
- States don’t have the capacity to oversee or enforce private road agreements – even as private companies turn to risky financial schemes to manage highways.
- Private road management is far less transparent than government management.
- And since many contracts run for 50 years or more – in order to obtain large federal tax subsidies – states can be locked into bad deals for a long, long time.
The painful irony is that the road privatization boom has been fueled by the very banks and investment firms that are responsible for the current economic meltdown. Awash in speculative cash, these firms actively pushed for deals that would allow them to finance public road infrastructure – and then privatize the gains, at the expense of the public, for decades to come.
Fortunately, public pushback against road privatization is starting to materialize. Proposed deals with beaten back in New Jersey and Pennsylvania in 2007 and 2008, respectively. And the Texas legislature is considering a bipartisan bill that would put in place strong safeguards against bad deals.