By Kara Rumsey
For the Citizen Patriot
Facing persistent budget shortfalls, public officials are showing interest in public-private partnerships. Such partnerships would allow private companies that build and operate roads and other transportation facilities in Michigan to collect their own tolls or other fees from the public. The Michigan House is considering a bill that would authorize these deals.
Unfortunately, the proposed legislation does not ensure that the public would receive the value, efficiency and safety it deserves from its transportation network. Instead, it would open the door for industry to take advantage of Michigan's budget shortfalls and pay fire-sale prices for vital roads and other public infrastructure.
The main benefit of privatized roads is quick up-front cash, but privatization in other states shows that Michigan could end up losing money in the long term. Texas set a moratorium on these deals after finding out that they were losing more than $1 billion by going private.
Getting a good price isn't all that's needed to protect the public. The length of the deal also matters. The risks of a bad deal grow exponentially over time, making the possibility of extremely long contracts like the 75-year Indiana Toll Road and 99-year Chicago Skyway deals a particular concern.
Some perspective: Henry Ford introduced the Model T in 1908, only 101 years ago. Michigan's population has increased from 2.8 million in 1910 to 10 million now. Massive, unforeseeable changes likely will take place in transportation technology, networks, demographics and population over the next generations.
In the face of such uncertainties, Michigan cannot predict its transportation needs, nor the revenue potential of toll roads, well enough to negotiate a deal that fairly allocates risks, dictates policy or sets a fair price.
Without the proper public interest protections, the state risks losing the ability to meet transportation needs as they develop. Some privatization contracts have prohibited government from improving or expanding nearby transportation facilities.
In other deals, states must pay private operators if policy decisions reduce toll revenue. For example, the state of Indiana paid the private operator of the Indiana Toll Road more than $400,000 for waiving tolls to speed evacuations after a flood.
The goal of private investors is to maximize profits, and profits increase with more traffic, higher tolls, and less investment in the roadway — interests at odds with those of the public.
To protect the public interest, any legislation should mandate that road privatization agreements meet the following requirements:
• The state must be free to make future transportation policies or improvements without paying penalties to operators of private roads.
• Cost-benefit analysis must demonstrate that the deal will save the public money over the long term.
• No deal should last longer than 30 years.
• Contracts should require state-of-the art maintenance and safety standards.
• There must be complete transparency to ensure proper public vetting of proposals.
• The legislature must approve a deal's final terms to provide accountability.
If investors aren't interested in following such common-sense rules, then Michigan shouldn't be so desperate to accept their deals.
— Kara Rumsey works as an advocate for the Public Interest Research Group in Michigan.
