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PSN on April 13, 2006 - 3:57pm
We've written before about the new 75-year lease of an Indiana toll road to a Spanish-Australian partnership, and the bad deal for taxpayers and democracy that it represents. The state's largest consumer group filed a lawsuit yesterday saying that the deal was so bad that it violates the state constitution. The Citizens Action Coalition argues that the state constitution requires lease proceeds to pay down public debt, rather than diverting long-term returns from a lease to immediate public spending. The lawsuit highlights the core problem with this kind of privatization -- it's essentially a theft from future taxpayers and consumers to help pay for government spending today.
Texas is also moving forward on an even larger privatized toll road project, the so-called Trans-Texas Corridor, a network of tens of billions in roads, trains, pipelines and related projects all sold to private corporations. In March 2005, the state contracted with a Spanish-Texas consortium for a 70-year concession to build and manage the first leg of the corridor through Central Texas and is now looking for bids to connect North Texas to Mexico.
Both these projects are part of a disturbing trend in the states. Since 2004, private companies have bid about $35 billion to build and operate toll roads across the country, with 17 states pursuing privatization of highways in some form.
Allowing some private investment in building infrastructure is not the problem -- that's common in countries around the world. The corrupt aspect of many of these new state projects are the extreme long-term leases that undermine democratic control of our transportation infrastructure for multiple generations. And in both Indiana and Texas, not only will private companies control the roads they lease, they will have "noncompete" contracts that allow them to block any new roads in the same area that future governments might decide to build.
The experience of California down in Orange County is illustrative. They sold rights to a private company for $120 million to build a private highway that opened in 1995. But when growth caught up with initial capacity, the government was blocked by a non-compete clause from building other road improvements. So they were forced to buy back the road for $207.5 million -- a hefty increase over what the original company had paid them -- and illustrating the fiscal danger of thinking the easy up-front money from privatization won't have costs down the road.