Privatization of highways comes under fire in congress

Link to article here. From the Washington Times article he notes below, the best quote is this by U.S. Rep. James Oberstar: “Mr. Oberstar said it is disingenuous to promote privatization of toll roads as a way of keeping taxes down. ‘I spell toll t-a-x,’ he said. ‘Don’t sugarcoat it or say it’s something else.'”

Doubts cast on privatization
By Pat Driscoll
February 15, 2007

Two ranking Congressmen on the House transportation committee said they’re skeptical about how well privatizing highways works.

The issue was taken up at a hearing Tuesday (see background) by the House Transportation and Infrastructure Subcommittee on Highways and Transit.

Subcommittee Chairman Peter DeFazio, D-Ore., said in a statement that he’s not against privatization but some deals, such as the Indiana Toll Road and Chicago Skyway, are better for investors in the long run than they are for motorists.

“Unless protections are built into the lease agreements, these deals allow private companies to make decisions to dramatically increase tolls or decrease road maintenance based on what generates the most profit for stockholders, not what’s best for the traveling public,” he said.

In another statement, DeFazio said a U.S. Department of Transportation official admitted that the agency should disclose potential problems such as monopoly pricing and agreements that limit competition from non-toll roads.

And a NW Financial Group witness said government itself could generate up-front cash, a big selling point in privatization deals, while still holding on to future profits for public use.

(See blogs on non-compete agreements and a recent NW Financial Group report.)

Committee Chairman James Oberstar, D-Minn., said government should encourage private sector innovations to speed up complex projects, but he’s not convinced a scattered approach using numerous public-private partnerships by states will produce a coherent highway system, according to a statement.

“Such a national system can only emerge with strong federal leadership, as when the interstate system was being proposed and subsequently launched,” he said.

Also testifying Tuesday was Robert Poole, a longtime researcher and advocate of road privatization for the Reason Foundation. He said in a statement that gas-tax funding has run into serious problems, but the U.S. is lucky to be able to draw the best from privatization models in Europe and Australia.

“We should also be grateful that the global capital markets have discovered the U.S. highway market, just when we need to mobilize hundreds of billions of dollars to rebuild and expand our highway network,” he said.

For more coverage, see this Washington Times story.