ustxtxb_obs_2008_10_31_50_00014-00000_000.pdf

MIN THE WRONG OF WAY Texas highways for lease. By PAT CHOATE 11111 he administration of President George W. Bush had three major domestic goals: privatize Social Security, transfer federal work to private corporations, and shift the financing, construction, and operation of America’s busiest highways, including the high-traffic parts of the interstate system, from public freeways to privately oper ated toll roads. The tolling of major parts of America’s road system is a fundamental shift from traditional U.S. policy of providing the best roads at the lowest cost to a market-based approach that seeks to maximize highway revenues. The resulting costs can be high. In northern Virginia, for instance, a private consortium led by an Australian company is now constructing toll lanes inside the public right-of-way and will charge commuters $1.54 per mile during rush hours. Similar projects are under way in 24 other states. The two people responsible for implementing the Bush administration’s tolling policies are U.S. Secretary of Transportation Mary Peters and D.J. Gribbin, the department’s general counsel. Both worked for the Federal Highway Administration during Bush’s first term, and then both left to work for companies involved with tolling. Peters headed consulting at HDR Inc., a major engineering firm. Gribbin was the Washington lobbyist toll road operators. Not surprisingly, George W Bush’s home state of Texas, following the lead of states like Indiana, is a principal proving ground for his administration’s road privatization program. In brief, the generic name for the U.S. Department of Transportation’s privatization program is Public-Private Partnerships. Most often, the arrangement allows a private company either to convert existing highways to toll roads or to plan, finance, build, and operate roads and bridges. In 2005, for example, the state of Indiana created one of the first partnership arrangements by selling a 75-year operating concession on the Indiana Toll Road, which runs east-west for 157 miles across the northern part of the state, to MacquarieCintra, an Australian-Spanish consortium, for a $3.85 billion up-front payment. Newly elected Republican Gov. Mitch Daniels, who was Bush’s first budget director, rushed the deal to a conclusion in a record 117 days in 2005. The enormous up-front payment allowed Daniels to keep his “no-new-taxes” campaign pledge, distribute $250 million to the counties surrounding the toll road, and fund dozens of other projects. In exchange, the toll company got to double the tolls, then double them again. Further on, the consortium can raise tolls according to a generous formula built into the contract. Later, Indiana legislators learned that they had leased a public asset for $3.85 billion that would produce at least $121 billion of revenue over its 75-year contract life. They also discovered that they had given the Spanish and Australian corporations a “no compete” clause in an area 10 miles along either side of the road. If Indiana violated that clause, such as improving local roads that would deflect traffic from the turnpike, the state had to pay the consortium for any lost revenues. Thus, for the next 70 years, two foreign corporations will have control over development in a 20-by-157 mile, 2-million-acre swath through the middle of Indiana. As part of these tolling deals, the state also gets part of the revenuesup to half in the Texas contractsmaking these programs as much about financing state government through transport taxes as it is about providing good roads and bridges. Today, Texas uses half the monies collected for its highway fund to finance nontransportation functions, including education and the Department of Public Safety. Since the state budget surplus is more than $10 billion, road tolling in Texas is also about political ideology. \(The accessible surplus is lower because about $6 billion is reserved for the state’s “rainy day” fund and about $3 billion is earmarked to cover property tax cuts approved by 14 THE TEXAS OBSERVER OCTOBER 31, 2008