Editorial: Perry's hypocrisy, cronyism with toll roads

Link to article here.

This statement sums up his column and why politicians like Perry, Hutchison (despite her ad that indicates she’s against foreign-owned toll roads like the Trans Texas Corridor, her transportation plan states she FOR road privatization), Cornyn, Nichols, and others continue to push the privatization of our public roads:

It’s not about doing the right thing for Texas; it’s about selling out Texans for Wall Street’s fun and profits.

Toll Roads: By the Numbers

Posted Friday, Jan. 08, 2010

“I’m not real fond of raising [gas] taxes when there’s a recession going on.” — Texas Governor Rick Perry, quoted at www.rickperry.org

Our governor keeps shifting his excuse for opposing the gasoline taxes that would bring all Texans highways equal to the sharply increased traffic demand. Gov. Perry’s position, quoted above, rings false for several reasons:

1. He was against raising the gasoline tax in the best of financial times. You’ll find out why in a moment.

2. The proposed tax that Perry was rejecting to get our highway construction in gear to accommodate past and future growth was one thin dime per gallon.

3. Of all the things government does with tax dollars that give huge immediate returns to the national or state GDP, infrastructure investment tops a very short list. Some have suggested that every dollar invested in new roads adds $6 to the economy as it is spread around. That’s an overstatement, but easily $1.50 or more returns to the economy for every new highway dollar spent.

4. Highway funds go to hire people to build roads and supply the construction material: Therefore, road construction quickly lessens any recession’s effect.

Step Over a Dime: Expensive PR

Years ago I wrote that, having had the same gasoline tax for nearly 20 years, Texas easily could add a dime to the price of gas and get the roads built that we desperately need. That dime could come close to fully funding new construction to lower the congestion caused by our massive growth. This was the legitimate use for such funds; after all, government is supposed to invest for our economic future.

Looking at Department of Energy data on gasoline use in Texas, over the past decade that dime per gallon could have added close to $12 billion to our highway fund.

Keep in mind that 11 years ago gas was selling for 99 cents, so a dime per gallon would not have been missed. Come to think of it, drivers would have missed that amount even less when gasoline was $4 a gallon. But therein lies the hypocrisy: Elected officials, both state and federal, refused to raise taxes to fund new highways claiming “no new taxes” — but said not a word when speculators took oil from under $12 a barrel in 1999 to $147 in the summer of 2008. A dime for needed highways, very bad; but untold hundreds of billions of dollars for oil speculators is OK?

Nobody likes higher taxes, but that’s because the average person doesn’t perceive any extra benefit from paying more. But public roads benefit everybody — and everyone can identify this smart use of public funds. And now? Allowing private corporations to build toll roads that everybody will have to use is just “new taxes” under a different name.

“Value-Priced” Motoring

When toll operators find their ventures insufficiently profitable they simply raise their tolls — again and again. Doubt that? Just look at the recent toll increases on the NTTA projects over in Dallas and Collin counties.

Maybe it’s time someone explained what it really costs you to drive on a toll road, as opposed to that extra dime a gallon to buy roads for everyone. You need to know this, because apparently Dallas Fort Worth will soon become America’s new Toll Road Capital.

Gordon Dickson published the most recent information on new toll roads in the Star-Telegram on December 27, 2009. His story contained this news: “Tolls could go as high as 75 cents per mile when congestion is at its worst. That could be more than five times higher than the average 14.5 cents per mile that motorists currently pay on Dallas-area toll roads. It’s a concept called ‘value pricing.’”

Up to 75 cents a mile, and it’s called value pricing?

That’s as Orwellian as doublespeak like “war is peace” and “freedom is slavery.”

Let’s Do the 4th-Grade Math

Building a toll road that you have to use has the exact same effect as paying a higher tax on gasoline to use that highway. Remember, whether the road is free or toll you still pay 38.4 cents in federal and state gasoline taxes; that’s the baseline for this calculation.

We will assume that your vehicle averages 20 miles per gallon: If you drive that vehicle 20 miles on a toll road charging the maximum 75 cents per mile, you pay your 38.4 cents in current taxes plus another $15 in tolls. Therefore tolls and taxes to drive on that road total $15.38 per gallon of gasoline. And to think you were complaining when gas was four bucks.

Even if you use the NTTA system and pay “only” 14.5 cents toll per mile, the net additional cost for each gallon of gas you burn on those toll roads means that you’re out the same as $3.28 per gallon for the luxury of driving on their private highway. And for $3.28 per gallon all you get is one road.

Money Distracts; Big Money Blinds

It’s not just Texas that is refusing to deal with crumbling, outdated or inadequate highway systems and instead turning the task over to private hands. But Texas is abdicating its sovereign duty to protect its citizens from the financial pressures of the highway privateers, not to mention its responsibility to build infrastructure for economic growth.

So how did politicians get the idea that privatizing roads across America was an acceptable future?

Two words: Goldman Sachs.

Yes, large Wall Street investment banks, led by Goldman, started advising states across the nation on how to raise fast money by diverting the most necessary publicly owned assets — roads — into private ownership. You have to admit, it’s brilliant, because it’s a forced and guaranteed market: Americans can’t get out of driving.

As Daniel Schulman and James Ridgeway wrote in their scathing article, “The Highwaymen,” in January of 2007, “Many similar deals are now on the horizon, and MIG and Cintra are often part of them. So is Goldman Sachs, the huge Wall Street firm that has played a remarkable role advising states on how to structure privatization deals — even while positioning itself to invest in the toll road market.

“Goldman Sachs’ role has not been lost on skeptics, who accuse the firm of playing both sides of the fence. ‘In essence, they’re double-dipping,’ says Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association, a truckers’ group that opposes toll road privatization. ’They’re basically in the middle, playing one side against the other, and it’s really, really lucrative.’”

How does “really, really lucrative” for Wall Street translate into “value pricing” for us? It doesn’t. But it’s easy to see how getting 75 cents per mile for permission to drive on a single highway could be an extremely valuable price — for whoever owns that stretch of road.

Oh, and one other thing. These highway privateers can fully deduct the highway’s depreciation for the first 15 years of the lease. So they shelter their income from their highways and then some. That’s one reason why the non-partisan GAO released a study last summer, which concedes that there could be some upside to the concept, also warned that more studies need to be done now on “how best to identify and protect national public interests in future highway public-private partnerships.”

When Will This End?

In many states and before it’s over likely in Texas, roads already bought and paid for by taxpayers either have been or will be sold off to the highway privateers. Now that’s the ultimate insult: Citizens bought the road and maintained it, but the fact that so many drivers use them makes it financially attractive for the state to resell them to private concerns for hard cash. (Notice that no one is considering privatizing Texas’ Farm to Market Roads. There’s just not enough traffic for the expense.) Then those buyers recoup their investment by charging everyone new tolls — under contracts that often extend up to 99 years.

Worse, there’s more evidence of how Wall Street’s quiet PR campaign distorted this issue with the public. Just a few years ago Goldman Sachs put $3 billion into an account for investments into infrastructure, including highways. Goldman also gave $10,000 to Hillco Partners, who lobbied for the 2001 Texas ballot measure to allow for privately operated roads. According to public information, between 2002 and 2005 Goldman paid Hillco lobbyist J. McCartt $95,000 to continue this effort of privatizing our highways. And J. McCartt is a former aide to —you guessed it — Texas governor Rick Perry. No wonder Governor Perry refuses to release the minutes of his meetings on the privatization of our highways.

So, have you been sold on the idea that privatizing roads is a necessity, because our state has no money for new roads and, citing its “no new taxes” policy, steadfastly refuses to raise the gasoline tax by even a dime to build them? Think again. We’ve been set up.

The people selling this “innovative” concept are the same people who deregulated our utilities, leaving Texans paying the nation’s highest electricity rates. It’s not about doing the right thing for Texas; it’s about selling out Texans for Wall Street’s fun and profits.

© 2009 Ed Wallace

Ed Wallace has received the Gerald R. Loeb Award for business journalism, given by the Anderson School of Business at UCLA, and is a member of the American Historical Association. He reviews new cars every Friday morning at 7:15 on Fox Four’s Good Day, frequently contributes articles to BusinessWeek Online and hosts the top-rated talk show, Wheels, 8:00 to 1:00 Saturdays on 570 KLIF. E-mail: wheels570@sbcglobal.net, and access all of Ed’s work at his Web site, www.insideautomotive.com.

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