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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.