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Foreign companies buy U.S. roads, bridges

by Leslie Miller

WASHINGTON –Roads and bridges built by U.S. taxpayers are starting to be sold off, and so far foreign-owned companies are doing the buying.

On a single day in June, an Australian-Spanish partnership paid $3.8 billion to lease the Indiana Toll Road. An Australian company bought a 99-year lease on Virginia’s Pocahontas Parkway, and Texas officials decided to let a Spanish-American partnership build and run a toll road from Austin to Seguin for 50 years.

Few people know that the tolls from the U.S. side of the tunnel between Detroit and Windsor, Canada, go to a subsidiary of an Australian company — which also owns a bridge in Alabama.

Some experts welcome the trend. Robert Poole, transportation director for the conservative think tank Reason Foundation, said private investors can raise more money than politicians to build new roads because these kind of owners are willing to raise tolls.

“They depoliticize the tolling decision,” Poole said. Besides, he said, foreign companies have purchased infrastructure in Europe for years; only now are U.S. companies beginning to get into the business of buying roads and bridges.

Gas taxes and user fees have fueled the expansion of the nation’s highway system. Thousands of miles of roads built since the 1950s changed the landscape, accelerating the growth of suburbia and creating a reliance on motor vehicles to move freight, get to work and take vacations.

In 1956, President Eisenhower pushed to create the interstate highway system for a different: to move troops and tanks and evacuate civilians.

The Bush administration’s plan to let a foreign company manage U.S. ports met a storm of protest in February. But plans to sell or lease highways to companies outside the United States have not met such resistance.

John Foote, senior fellow at Harvard’s Kennedy School of Government, said the government can take over a highway in an emergency. But he objects to selling roads to raise cash.

But that is just what Chicago has done.

Last year, the city sold a 99-year lease on the eight-mile Chicago Skyway for $1.83 billion. The buyer was the same consortium that leased the Indiana Toll Road — Macquarie Infrastructure Group of Sydney, Australia, and Cintra Concesiones de Infraestructuras de Transporte of Madrid, Spain.

Chicago used the money to pay off debt and fund road projects. Skyway tolls rose 50 cents, to $2.50; By 2017, they will reach $5.

The Indiana Toll Road lease is a better deal, Foote thinks, because the proceeds will pay for urgent projects such as road and bridge improvements.

That need is precisely why cities and states have begun to look to foreign investors.

Between 1980 and 2004, people drove 94 percent more highway miles, according to Federal Highway Administration statistics. But the number of new highway lane miles rose by only 6 percent.

Washington is not likely to produce more money to build roads. The federal highway fund — which will have a balance of about $16 billion by the end of 2006 — will run out in 2009 or 2010, according to White House and congressional estimates.

About half the states now let companies build and operate roads. Many changed their laws recently to do so.

So Illinois lawmakers are examining privatizing the Illinois Tollway, New Jersey lawmakers are considering selling 49 percent of the state’s two big toll roads and a gubernatorial candidate in Ohio wants to sell the turnpike.

Indiana Gov. Mitch Daniels, who championed his state’s toll road deal, now wants investors to build and operate a toll road from Indianapolis to Evansville.

Patrick Bauer, the Indiana House’s Democratic leader, says such deals are taxpayer rip-offs.

Bauer believes Macquarie-Cintra could make $133 billion over the 75-year life of the Indiana Toll Road lease — for which Indiana got $3.8 billion.

“In five, maybe 10 years, all that money is gone, and the tolls keep rising and the money keeps flowing into the foreign coffers,” Bauer said.

Orange County, Calif., got burned by a toll-road lease for a different reason.

The road, part of state Route 91, was built and run for $130 million by California Private Transportation Company, partly owned by France-based Compagnie Financiere et Industrielle des Autoroutes. The toll road opened in 1995.

Seven years later, Orange County was looking at gridlock. But it could not build more roads because of a provision in the lease. So it bought back the lease — for $207.5 million.

To encourage more domestic investment in highways, former Transportation Secretary Norman Y. Mineta made a pitch to Wall Street on May 23.

“The time is now for United States investors — including our financial, construction and engineering institutions — to get involved in transportation investments,” said Mineta, who left office July 7.

U.S. companies are getting the message.

San Antonio-based Zachry Construction Co., along with Cintra, received approval on June 29 for a 50-year lease to build and run a toll road from Austin to Seguin for $1.3 billion.

That is part of Texas Gov. Rick Perry’s vision to attract more than $80 billion in private funds for roads by 2030. He wants a new tollway from Oklahoma to Mexico and the Gulf Coast, and one from Shreveport, La., and Texarkana to Mexico. Cintra-Zachry reached a $7.2 billion deal last year to develop the project’s first phase. The announcement of a $1.3 billion deal in June was part of that $7.2 billion agreement, said Perry’s spokesman, Robert Black.

“In Texas, our population is going to double in the next 40 years and our current infrastructure can’t handle that growth,” Black said.

Not everyone in Texas buys the idea. Harris County officials recently voted against selling three toll roads. Also, independent gubernatorial candidate Carole Keeton Strayhorn opposes Perry’s toll road plan.

“Texas freeways belong to Texans, not foreign companies,” she said.


One comment for “Foreign companies buy U.S. roads, bridges”

  1. Check out congress’s latest planned race to the bottom: Air traffic controllers. Let’s apply the magic of “the market” to the people that make sure planes to run into each other:

    The Washington Post
    Congress considers privatizing the air traffic control system

    By Ashley Halsey III
    March 24

    The Federal Aviation Administration is in the middle of a hiring binge for air-traffic controllers, but just how long the 6,000 people who get the jobs can expect to work for the federal government is unclear.

    Frustrated by the FAA’s bureaucratic inertia, there is bipartisan sentiment in Congress to spin off the agency’s biggest single workforce — the almost 15,000 people who control the nation’s air traffic — into a separate corporation.

    Rep. John L. Mica (R-Fla.) presented a bill to the House aviation subcommittee Tuesday that would create a private corporation to govern air travel.

    “The time to stop talking is now,” said Mica, a former chairman of both the subcommittee and the parent Transportation Committee. “The time to act, and act boldly, is now.”

    The daunting complexity of separating a federal agency — either privatizing or creating a government corporation for part of it — was embraced Tuesday by most of the aviation committee and by six of the seven people it summoned to testify.

    The panelists who backed the massive change included Paul Rinaldi, president of the air-traffic controllers union, and Douglas Parker, chief executive for American Airlines, who spoke on behalf of a coalition of major U.S. airlines.

    The concept in play would move controllers to a nonprofit private corporation or government corporation similar to the U.S. Postal Service. A downsized FAA would retain responsibility for aviation safety regulations.

    Congressional frustration with the FAA is regarding its faltering progress in implementing a $40 billion program known as NextGen, which is designed to revolutionize air travel in the United States. The program, in short, is described as moving the movement of airplanes from a World War II-era radar system to a GPS system that will expedite air travel at a time when demand is expected to mushroom.

    In fact, NextGen is a much more complex, integrated system that requires airlines to invest billions in new on-board equipment. As the FAA has moved fitfully in delivering its share of the equipment and shaping policies, the airlines have been reluctant to pour money into an uncertain investment.

    For years, the FAA has faced sharp criticism from the Government Accountability Office and the Transportation Department’s inspector general for being behind schedule and over budget on NextGen. In September, Inspector General Calvin Scovel III said in a report that the NextGen system was “years away” from implementation.

    The FAA said it has made progress and pointed to a federal shutdown of the agency two years ago and sequestration as two events that injected uncertainty into its planning. Judging from the tenor of Tuesday’s hearing, spliting the air-traffic controllers and NextGen from FAA control is a matter of when and how, rather than whether doing so is a smart move.

    “We have $6 billion spent on NextGen, but the airlines have seen few benefits,” said Rep. Bill Shuster (R-Pa.), who chairs the Transportation Committee. “We will never get there on the current path.” Parker, who testified on behalf of the trade group Airlines for America, pointed to dozens of other countries that have separated the regulatory and air traffic control functions, often privatizing the controllers.

    “FAA’s modernization efforts have been plagued with delays,” Parker said. “Transformation, not renovation, is required.”

    Bob Poole, the veteran transportation expert from the Reason Foundation, laid out for the subcommittee the FAA’s shortcomings and the means to resolve them. Poole said that the agency suffered from funding uncertainty because it is subject to the whims of Congress, that in catering to Congress and other stakeholders the FAA has too many overseers and that it labors under a culture that hinders innovation.

    “It really acts as if Congress is its main customer,” Poole said.

    Poole’s recommendations: separate the air traffic control system, shift some user fees from the federal government to the new entity and make airlines and other stakeholders — including airports and passengers — the overseers of the system.

    “A nonprofit corporation would be best,” he said.

    Separating the two functions would be as tricky as brain surgery. The subcommittee’s ranking Democrat, Rep. Rick Larsen (Wash.), said he had 60 questions that needed resolution before a split could occur. Another Democrat, Peter A. DeFazio (Ore.), raised similar concerns.

    They questioned where money to pay for safety certifications and more than $4 billion for airport improvements would come from if the current user-fee revenues that flow to FAA were diverted to a separate air-traffic controller entity.

    They asked whether airlines would be willing to pay much higher landing fees — as is common in Europe — to fund the split. They questioned how small and mid-sized airports would fare. And they asked who would bear the insurance liability and existing pension benefits if the controller force was privatized.

    Larsen asked Rinaldi if he would expect collective bargaining rights, pensions and benefits to continue under a privatized operation.

    “Absolutely,” Rinaldi replied.

    First off, let’s compare these two expectations: First, this appears to be the general plan:

    The concept in play would move controllers to a nonprofit private corporation or government corporation similar to the U.S. Postal Service. A downsized FAA would retain responsibility for aviation safety regulations.

    Yep, let’s turn the FAA’s air traffic contollers into a post office-like government corporation.

    Now compare that plan to this answer by the president of the air traffic controller’s union:

    Larsen asked Rinaldi if he would expect collective bargaining rights, pensions and benefits to continue under a privatized operation.

    “Absolutely,” Rinaldi replied.

    Uhh…while it would be great if the air traffic controllers got to keep their collective bargaining rights, pensions and benefits once they either get privatized or spun off into a government corporation like the US post office, that doesn’t seem like a very realistic outcome.

    And yes, Robert Poole, the “veteran transportation expert from the Reason Foundation” advising this overhaul, is not only the same fellow that welcome the sell off of US roads and bridges to foreign corporations, he also thought Franco’s Spain and Brazil’s military dictatorship were great models for the US emulate back when he was developing the contemporary libertarian ideology.

    Ah, Libertarianism. Enjoy your trip!

    Posted by Pterrafractyl | March 25, 2015, 3:17 pm

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