Private vs. public
By Randy Grider
Pretend you are a farmer who needs money. You have several acres you can’t afford to farm even though your customers demand more produce. You also need better equipment, and you have some existing debt. You could make some changes to improve your situation, but that would mean a lot of sacrifices for the foreseeable future.
An out-of-town agent agrees to give you a lot of cash up front, but he wants to run your existing fields and keep the profits for the next 20 years. Would you take the deal?
Let’s say you negotiate with the agent to get a better arrangement. The agent must maintain a certain crop yield and he must keep all existing property in good order for the terms of the lease. You can take the money you received up front and turn unused acreage into more fields. Now would you take the deal?
The leasing or privatizing of public toll roads resembles the scenarios above. In the new world of privatization, a consortium of usually either foreign or foreign-domestic investors lease and operate public facilities for a set period – with 99 years being the normal maximum. In return, the consortium gives the governing body of the public entity a large sum of money up front.
In the past few years, some state and local governments that struggle with funding constraints but need to improve their infrastructures have turned to privatization. Two examples are the $1.8 billion, 99-year lease of the Chicago Skyway and the $3.8 billion, 75-year lease of the Indiana Toll Road. Both are touted as being successful and well run. But while some view privatization as a great way to fund improvements for our aging and overcrowded highway system, others see it as selling out and giving up control of our public highways.
The recently formed Americans for a Strong National Highway Network, a coalition that includes the American Trucking Associations, the Owner-Operator Independent Drivers Association, NATSO, the American Automobile Association, the Recreation Vehicle Industry Association and the American Highway Users Alliance, opposes the trend toward privatizing toll roads and bridges.
Among the solutions offered by the coalition are fuel tax evasion countermeasures, ending exemptions for many groups that don’t pay fuel taxes and requiring better accountability for highway user funds.
Last year, our sister publication Overdrive produced a two-part series on congestion. From its report, let’s look at just a few of the facts that have brought privatization to the forefront:
- Traffic bottlenecks across the nation cost the trucking industry about $8 billion per year (2004 study prepared for Federal Highway Administration). Overall, congestion costs the U.S. economy about $168 billion annually.
- FHWA estimates that by 2020 29 percent of U.S. urban highways will be congested or exceed capacity for much of the day and 42 percent will be congested during peak periods.
- The American Trucking Associations estimates that freight tonnage will increase by more than 33 percent during that same period.
- Because Congress hasn’t increased federal fuel taxes (and they are not indexed to inflation) annual Highway Trust Fund revenues will fall $23 billion short of maintaining highway and transit systems and $48 billion short of improving the systems by 2015.
- Factoring in state and local monies (58 percent of the annual highway funds) the government must find another $500 billion to merely maintain our roads by 2015. Improvements will run more than $1 trillion.
The bottom line: we’ve got a huge highway capacity problem that has been ignored far too long. What everyone can’t agree on is where the money to solve it should come from. Whatever solutions are settled on will require sacrifices. The status quo is not an option.
Facts show us that we can’t afford to sit at this crossroads any longer. Each day we’re stuck here will cost us more and more in the future. It’s time to pick a road and get moving.