Posted 5 months ago on Oct. 3, 2013, 3:22 p.m. EST by LeoYo
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The Interstate of the Future: Privatization or Innovation?
Thursday, 03 October 2013 00:00 By Ellen Dannin, Truthout | News Analysis
Sources for much of the information on infrastructure privatization may be found in Crumbling Infrastructure, Crumbling Democracy: Infrastructure Privatization Contracts and Their Effects on State and Local Governance.
It could be said that Robert Poole, the Searle Freedom Trust Transportation fellow and director of transportation policy at the Libertarian Reason Foundation, has never seen a toll road - or, more precisely, a privatized toll road - he didn't like. Exhibit A: his newly released Interstate 2.0: Modernizing the Interstate Highway System via Toll Finance.
Poole calls his project "Interstate 2.0" to signal that Reason's agenda is something that cool, leaning-forward folks will want to support. But the bottom line is that Poole's proposal offers nothing innovative: just another proposition for the kind of relentless privatization that has stricken cities across the country, rolled into a highway-long package. Ken Orski's highly influential Innovation Briefs for September 17, 2013, reviews the challenges Poole's proposal faces and then sums up the next steps Poole must take to see his proposal bear fruit:
So, we hope that Mr. Poole's study will be brought not just to the attention of the Beltway audience and the toll-advocacy community where it will predictably meet with plaudits, but, more importantly, to the attention of governors, state DOTs and state legislators. Their collective judgment will be decisive in whether Congress votes in favor of lifting the current legislative restriction against Interstate tolling or leaves it in place. A presentation at the upcoming AASHTO annual conference on October 17-22, followed by presentations at the next annual conferences of the National Governors Association and the National Conference of State Legislatures (NCSL) would be a good way to start the dialogue.
Orski sounds pessimistic, but Poole, a founder of the Reason Foundation, is not without powerful allies that include a Who’s Who of conservatives. They include the Koch family foundations and the Olin, Scaife and Bradley Foundations.
Poole's case for rebuilding the interstate and funding it through electronic tolling combined with privatization is essentially a TINA (There is No Alternative). He posits that our Interstate system is crumbling and overburdened and fuel taxes don't yield enough to pay for new highway construction (as they have in the past). Therefore, Poole says, construction of a new interstate should be financed through electronic tolling - and, to minimize the danger of risks, recruiting the cooperation of "private partners" is the way to go. However, the Reason report and its cheerleaders ignore the heavy downsides to infrastructure privatization, which have been playing out in cities across the country - high costs for individuals, public anger, secrecy, entrenched corporate control. The report also ignores the fact that we live in a changing transportation world: one in which an increasing numbers of cars and trucks driving increasing numbers of miles do not make up the preordained future.
The Insidious Tradition of Public-Private Partnerships
Existing US highway privatization contracts run for 50 to 99 years, making predictions of highway use - and revenues - a challenge. In addition, traffic projections, which translate into tolls paid, have been notoriously unreliable, even in contracts' first years. Traffic predictions, which tend to be about 25 percent on the high side, mean that projects get built but then fail to bring in the revenue that was forecast.
In addition, infrastructure privatization contracts are full of "gotcha" provisions to ensure private contractors make money. The Chicago parking meter deal is an example. The cost to the public of building Reason's Interstate 2.0 would include far more than tolls. It will include lost public control and reimbursing private "partners" for lost anticipated earnings. Public anger over privatization contract terms has led contractors to refuse the public to see the contracts, essentially repealing Freedom of Information Act rights.
As problems with infrastructure privatization have come to light, the deals have been "rebranded" partnerships, such as public-private partnerships. "Rebranding 3.0" claims that these new deals are simply agreements as to which party bears what level of risk. Nice try, but the reality of infrastructure privatization is unequal power and information. In public-private partnerships, the public is usually a first-time, "one-shot" player and must turn to industry insiders for advice. The insiders have strong incentives to stick with the standard industry contract, no matter which side of the table they are on in each deal.
On the other side of the table are private contractors who are repeat players and know these deals inside and out. (More on repeat players and one-shot players in general can be found here.) Not only that, but industry insiders who advise the public "partner" are paid a "success fee" only if a privatization deal is consummated. What is the likelihood that the public's "adviser" would explain just how these deals work?
To get a handle on the nature of these deals, one can "profitably" turn to the Ferengis of "Star Trek: Deep Space 9" and their Rules of Acquisition, such as FRA 62, "The Riskier the Road, the Greater the Profit," FRA 74, "Knowledge Equals Profit," and FRA 8, which warns that "Small Print Leads to Large Risk."
The False Premises of Interstate 2.0
Claiming that these deals are priced based on risk allocation is akin to calling new roads on old roadbeds "Interstate 2.0." Reason's proposal actually seems more like version 0.75 in its treatment of the interstates as a closed system, unconnected to non-interstate roads, planes, and trains, and in its lack of concern for problems whose solutions call for less traffic, such as environmental degradation, air pollution, climate change and injuries and deaths caused by interstate accidents.
Who benefits from Reason's proposal? Many sectors do. Highway construction companies want the work. Unions that represent their employees want their members to have the work. Financiers connected with highway privatization want the projects to be funded. And people want to get from point A to point B.
However, there are alternatives to privatization and to more truck and car traffic. Rather than turn public infrastructure over to private contractors, bonds can be sold to raise funding for repairs and improvements. This old-fashioned way to pay for infrastructure leaves the public in control of our roads and our futures.