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Road Privatization

Road Privatization. Dangers for the Public and How to Protect Against Them Phineas Baxandall U.S. PIRG (Federation of State Public Interest Research Groups) Phineas@PIRG.org April 28 th , 2008 NASHTO Annual Conference, Washington, D.C. Four Questions. What’s happening? Why now? Why bad?

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Road Privatization

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  1. Road Privatization Dangers for the Public and How to Protect Against Them Phineas Baxandall U.S. PIRG (Federation of State Public Interest Research Groups) Phineas@PIRG.org April 28th, 2008 NASHTO Annual Conference, Washington, D.C.

  2. Four Questions • What’s happening? • Why now? • Why bad? • How to stop it

  3. Growing Trend • States with highway privatization projects under way or officially proposed in 2007: AK, CA, CO, FL, GA, IL, IN, MO, NC, NJ, NV, NY, OH, OR, PA, TX, UT, VA • Past Projects: AL, CA, FL, IL, IN, MI, TX, VA • Recent legislation in a majority of states to enable road privatization

  4. Why now? • Gas taxes don’t keep up with inflation • Transportation Trust Funds running out • Elected officials prone to short-term payoffs if long-term problems distant • Investors looking for sure returns and future market share

  5. Pitfalls of Road Privatization • Public won’t receive full value • Loss of public control • Contracts can not handle contingencies • Threat to safety and maintenance • Lack of transparency and accountability • One-time instead of sustainable revenue

  6. Outsources what the public does best • Borrowing long-term capital – The public sector does more cheaply • Political will to raise tolls – Public decisions should be democratically accountable • Transportation planning and policy – should be integrated, contingent, and in the public interest

  7. Higher private costs Must pass on higher borrowing costs: US government credit = 4.39% US corporate (AA rated) = 5.45% (April 25, 2008) Additional profit margin for shareholders Additional costs to assess, monitor, and enforce private operators

  8. Loss of public control Private investors need: • Certainty that traffic flow (customers) will not be disrupted. • 50+ year contracts for tax benefits and profit margins

  9. Investors require certainty against: • “Competing” local roads  They want non-compete clauses. • Disruptions from mandated improvements that don’t increase profits • Requirements to install new technologies • Lower tolls to stop diverted traffic to local communities • Any future policies that reduce toll traffic without compensation for losses

  10. Long-term contracts cannot protect the public against contingencies A lot happens in 30, 50, 99 years • Model T launched in 1908 • Interstate Highway system 1956 • Huge population shifts, new technologies The public cannot predict future needs, allocate risks, or determine terms of a fair deal.

  11. Stopping bad road privatization • Raise the bar with common sense public interest protections • Benchmark against comparable public borrowing and future toll hikes • Build broad coalitions • Reverse federal incentives

  12. Public opinion against privatization 84%opposeprivate ownership of roads; only 14% support the concept. 66% are opposed to allowing private companies to build, own and collect tolls for new roads – even if those companies gave a portion of the toll money to the state. National Association of Realtors poll, 2007

  13. …But not necessarily for the right reasons • Hate tolls • Don’t trust government with the money

  14. Raise the bar Seven Public Interest Principles • Public control • Fair value • No deal longer than 30 years • State-of-the-art safety and maintenance standards • Complete transparency and accountability • Legislature must approve final deal • No budget gimmicks Provisions reduce profit potential and political appeal

  15. Benchmark vs. public sector • Shows that private deals are risky • Shows deals squander potential value • Exposes real source of profits: NOT innovation and efficiencies of public-private partnership, INSTEAD: borrowing from future budgets and hiking tolls

  16. Broad coalitions Public Interest Research Groups (PIRGs) American Automobile Association American Highway Users Alliance American Motorcyclist Association American Trucking Associations National Association of State Highway and Transit Unions National Association of Truck Stop Operators Recreational Vehicle Industry Association Sierra Club (NJ) Owner-Operator Independent Drivers Association Plus: Toll collectors unions, regional planning associations And Public Opinion is Against Privatizing Roads

  17. Reverse federal incentives Stop DOT subsidies for private borrowing Protect integrity of the Interstate Highway System

  18. Conclusion • Big threat with profound long term implications • Privatization is vulnerable • It can be exposed and prevented

  19. http://uspirg.orgPhineas BaxandallPhineas@pirg.org http://www.uspirg.org/issues/transportation/stop-bad-road-privatization

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