The Privatization of U.S. Infrastructure

[Dechristo]

Investors from around the world are scrambling to get in on the latest cash cow.

 

For example, the investors in the $3.8 billion deal for the Indiana Toll Road, struck in 2006, could break even in year 15 of the 75-year lease, on the way to reaping as much as $21 billion in profits, estimates Merrill Lynch & Co.

[JayB]

As long as they have to meet certain standards for the operation of such that are defined and enforced by someone other than themselves, I don't find this any less objectionable than a toll road operated by a state.

 

Word out here is that the debt for the MassPike was retired in 1981, the average change-maker is paid $55K, and fully 1/3 of the tolls go to maintaining the toll infrastructure - and I'd be amazed if this figure includes future liabilities for retirement and healthcare. Not sure a private enterprise which, by its very nature, is under constant public scrutiny could extract any more money from the public than the folks that operate this stretch of highway.

 

The only objective advantage that public ownership of toll roads could have over the private ownership of toll roads or vice versa is efficiency. If one operator could make a convincing claim that their management will result in greater utility - shorter lines, lower fees, better maintenance - than another then I'd opt for whoever had the stronger claim.

 

Given the extensive network of highways that's already in place, it's hard to see how awarding such franchises would necessarily lead to monopoly control over commuters unless the public highways that offered alternative routes to the same place were decommissioned. Another benefit of private versus public ownership of new transportation options is that they'll be more responsive to actual effective demand than those funded by the government. More people willing to pay a given price for a given mode of transportation between points A and B equals a higher probability of the said mode coming into being than those funded by tax revenue.

 

 

 

 

[cj001f]

JayB-

That's not new with state owned infrastructure:

 

[jordop]

If any of you had the distinct pleasure of driving any number of BC's highways this winter, you could see wholescale infrastructue privitization in action. Witness the charred semi wrecks outside of Golden when the curves weren't properly sanded. Or the mom and pop operations management company in charge of logisitics when the passes were closed to avi hazard.

 

All of these folks were awarded the contracts because they were the lowest bidders on work for which there were no specific performance standards. Evidence would suggest that between Merrit and Hope the company only plowed the road beneath the traffic webcams where they knew government watchdogs would be monitoring.

 

The government responded to public outcry by denying the contractors their $100k "winter bonus"

 

Contracts are for 10 years. Large cancellation fees prohibit anyone from doing anything

[ashw_justin]

There are some advantages to private control of roads, utilities, lotteries, parking garages, water systems, airports, and other properties. To pay for upkeep, private firms can raise rates at the tollbooth without fear of being penalized in the voting booth.

 

Replace "pay for upkeep" with "maximize profits" and then maybe we are talking about the Real World. Tolls will go up, and only a fraction of the increase (if any) will come back in any form to the 'consumer.' Why? Because they can. And they will (if they went to business school).

 

All hail neofeudalism!

[cj001f]

There are some advantages to private control of roads, utilities, lotteries, parking garages, water systems, airports, and other properties. To pay for upkeep, private firms can raise rates at the tollbooth without fear of being penalized in the voting booth.

 

Replace "pay for upkeep" with "maximize profits" and then maybe we are talking about the Real World. Tolls will go up, and only a fraction of the increase (if any) will come back in any form to the 'consumer.' Why? Because they can. And they will (if they went to business school).

 

All hail neofeudalism!

 

That's not much different than the state controlled infrastructure. The Dulles Toll Road in Virginia was paid off shortly after construction, now it's just a revenue generator.

[ashw_justin]

Yeah but where does the generated revenue go? That's the difference, right?

[JayB]

If your objective is to increase the tax yield or generate revenue for transportation infrastructure, there are much more efficient and cost effective means of doing so than the construction and operation of toll roads.

 

I'd venture a guess that it's ultimately more economically efficient and the net tax yield is higher when the state simply taxes the revenues generated by a private toll road than when the state assumes the liability for the construction, operation, maintenance, and staffing of the same - so I wouldn't be so quick to assume that the "generated revenue" is actually any greater for the the state when you account for the true costs.

 

 

[ashw_justin]

If the government is inefficient it should clean up its own act, not cop out like this. The government should do its damn job, not try to wash its hands of the problem by turning the control of public domain over to private interests, just because it seems cheaper and easier. Private "efficiency" is not magic, it's cost-cutting for a profit, or in other words, stealing from the poor in order to give to the rich (that being the company and those with a stake in it). I don't trust a private company to handle public business because it is inherently selfish. The government is meant to serve the will of the people. A company serves only itself.

[cj001f]

Yeah but where does the generated revenue go? That's the difference, right?

 

Not necessarily. Read the book I linked earlier - Robert Moses led the construction of much New York infrastructure to further his own megalomania, paid for by tolls

[JayB]

How is a privately financed and constructed road any more part of the public domain than a privately financed and constructed cell phone tower?

 

If we are talking about a toll-road, the only rational consideration is which operator provides optimum utility while minimizing the costs to the public. The only thing that should matter to a logical person is the cost of the inputs (tolls) relative to the value of the outputs (speed, ease, safety of travel, etc), not who they are handing the change over to.

[ashw_justin]

What about accountability? The article itself seems exited by the notion of immunity from the public. That bit about voting is scary. We're talking about turning the public into enslaved serfs to corporate lords--from a respresentative government subject to the will of the people, to feudal lordships in complete dominance over their subjects.

[Dechristo]

How is a privately financed and constructed road any more part of the public domain than a privately financed and constructed cell phone tower?

 

If we are talking about a toll-road, the only rational consideration is which operator provides optimum utility while minimizing the costs to the public. The only thing that should matter to a logical person is the cost of the inputs (tolls) relative to the value of the outputs (speed, ease, safety of travel, etc), not who they are handing the change over to.

 

I realize, for many of these discussions, opinion needs to be distilled for economy of time. But, the issues discussed do not take place in a controlled lab environment, which is the problem I have with many of your arguments, JayB. You do not seem to allow for, or take into account, the vagaries of human characteristics in carrying-out or managing these endeavors when money and avarice are surely part of the mix.

[JayB]

This is why I'd tend to limit my support to such projects to cases where the infrastructure in question would not exist at all were it not for the private investment, and there are alternatives that prevent the establishment of a government sanctioned private monopoly. If the narrows bridge fell down and a private company wanted to build the replacement, then I'd oppose the project. If a private company wanted to build a second bridge somewhere else that would allow folks to choose between a free, grid-locked megacluster, and paying $10 for a faster alterative, then I'd support that. It's been a while since I lived there, but when I was living in Colorado and heading to points north of Denver during periods of high traffic, I liked having the choice of paying a few bucks to hop on 470 and drive around most of the mess.

 

Having said all of that, I don't think that anyone who is familiar with the Big Dig could claim that corruption, avarice, etc have been wholly extinguished from public enterprise either. I also suspect that a private corporation would be viewed much less sympathetically than a public workforce, and that it would be quite a bit easier for the unions, politicians, etc to impose tolls at a threshold that would cause a revolt were they assessed by a private corporation. For some reason $5 tolls and $66K a year change-makers with 6 weeks vacation bother the average person less than $4 tolls that lead to private profits which are subject to taxation.

 

I'd probably agree with folks who say that private monopolies combine the worst defects of both public and private enterprise into a single entity. When unchecked avarice and inefficiency meet in a single entity it's not pretty.

 

 

 

[cj001f]

What about accountability? The article itself seems exited by the notion of immunity from the public. That bit about voting is scary. We're talking about turning the public into enslaved serfs to corporate lords--from a respresentative government subject to the will of the people, to feudal lordships in complete dominance over their subjects.

 

Historically those agencies are the least accountable of public ones.

 

 

 

I see nobody shares my real worry - this is like an elderly couple who reverse mortgages their home to pay for more trinkets for their bum son.

[Stefan]

I would support privatization of toll roads only if I saw a reduction in my taxation dollars.

 

Driving is not right. It is a privilege, and toll roads means I could vote with my dollar.

 

But if I saw no reduction in tax dollars then I would be pissed.

[archenemy]

Didn't the privatization of some of our prisons fail?

[tvashtarkatena]

How is a privately financed and constructed road any more part of the public domain than a privately financed and constructed cell phone tower?

 

If we are talking about a toll-road, the only rational consideration is which operator provides optimum utility while minimizing the costs to the public. The only thing that should matter to a logical person is the cost of the inputs (tolls) relative to the value of the outputs (speed, ease, safety of travel, etc), not who they are handing the change over to.

 

There's an enormous difference between an entity that exists to make a profit verses one that exists to distribute and maintain a shared public resource equitably, just as there is a difference between a 'customer' and a 'citizen'.

[Seahawks]

Didn't the privatization of some of our prisons fail?

 

Yes. What will happen here is that we will sell the roads, Everything will go to Hell. We (tax payers) will have to buy them back at 4 times what we got and then we will be taxed more to fix them.

[ashw_justin]

I think that before parading under the banner of 'private efficiency,' we better think through the implications of a system in which the only voting we get to do is with our dollar.

[JayB]

How is a privately financed and constructed road any more part of the public domain than a privately financed and constructed cell phone tower?

 

If we are talking about a toll-road, the only rational consideration is which operator provides optimum utility while minimizing the costs to the public. The only thing that should matter to a logical person is the cost of the inputs (tolls) relative to the value of the outputs (speed, ease, safety of travel, etc), not who they are handing the change over to.

 

There's an enormous difference between an entity that exists to make a profit verses one that exists to distribute and maintain a shared public resource equitably, just as there is a difference between a 'customer' and a 'citizen'.

 

Of course, but in the case of a road that's funded, built, and maintained with private dollars we are not talking about a "shared public resource."

 

In the particular case of toll roads, the only rational considerations have to do with maximizing utility while minimizing costs to the public. I think that in general, with respect to highways, you maximize utility with public funding that's generated in some manner other than the direct collection of user fees.

 

However, if you are looking at the specific case of private versus public toll roads it's not quite as clear which one is most likely to be the superior alternative. In most cases the particulars of where the road goes, what the alternatives are, and how capably and efficiently it will be maintained under private versus public ownership in a particular state have to be taken into account. If I lived in a state where the public sector tends to be characterized by integrity and efficiency, the case for public administration might be stronger than in a state like Massachussetts, where the record in not terribly strong in this respect.

 

 

[JayB]

Didn't the privatization of some of our prisons fail?

 

Yes. What will happen here is that we will sell the roads, Everything will go to Hell. We (tax payers) will have to buy them back at 4 times what we got and then we will be taxed more to fix them.

 

There aren't many cases where establishing a private monopoly over an existing public resource has ended well.