More Public Infrastructure Sale Tales of Woe

Coming to a state or city near you, and quite possibly the one you are in….bankers bearing promises of solving budget woes by selling public infrastructure to private investors. This is in best case scenario makes about as much sense as using your house as an ATM to pay expenses, and in a worst-case scenario, is more like burning your furniture to heat the house.

But desperate times lead to desperate and often short sighted measures.

Reader May Sage pointed us to this Truthout article, which we recommend reading in full. Key extracts:

States and cities are being told that they can fix their budgets and have money left over by leasing their infrastructure for 50, 75 or even 99 years. It sounds great, even miraculous. But we all need to slow down and do our homework, because the rule “If it sounds too good to be true, it is” still applies, and there are good reasons why state and local governments should not want any part of these deals.

The truth is that, rather than making money on just tolls and fees, private contractors make their money through big tax breaks and by squeezing state and local governments for payments for the life of the contracts….

But that’s not all. Infrastructure privatization contracts are full of “gotcha” terms that require state or local governments to pay the private contractors. For example, now when Chicago does street repairs or closes streets for a festival, it must pay the private parking meter contractor for lost meter fares. Those payments put the contractors in a much better position than the government. It gets payments, even though Chicago did not get fares when it had to close streets…..

Highway privatization contracts also often include terms that forbid building “competing” roads or mass transit. Some even require making an existing “competing” road worse. For example, the contract for SR-91 in Southern California prohibited the state from repairing an adjacent public road, creating conditions that put drivers’ safety at risk. A proposed private highway around the northwest part of Denver required that local governments reduce speeds and install speed humps and barriers and narrow lanes on “competing” roads to force drivers to use the privatized road….

Virginia decided to promote carpooling to cut down on pollution, slow highway deterioration and lessen highway and urban congestion. As a result, Virginia must reimburse the private contractor for lost revenues from carpoolers, even though not all of the people in a car would otherwise have driven individually….

But contractors have not always done a good job in keeping their agreements.

Shortly after it took over the Indiana Toll Road, the private contractor put sand-filled barrels in turn-arounds with no notice to the state. State officials begged and pleaded for the barrels to be removed, so police and emergency crews could get to accidents and deal with other public safety problems as quickly as possible. Those pleas fell on deaf ears, while the turn-arounds remained blocked for months.

This is only a partial list of infrastructure horror-shows. Expect to read of a lot more as this troubling trend continues.


Originally published at naked capitalism and reproduced here with permission.