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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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