Lawmakers Urge Limits to Road Privatization
Oberstar, DeFazio Say Plans Can Supplement, Not Replace Public Funding
By Sean McNally, Senior Reporter
This story appears in the June 11 print edition of Transport Topics.
Leaders of the House Transportation Committee, in a paper released last week, gave faint praise to plans for public-private transportation projects, but warned states that such deals should preserve the public’s interest by avoiding price-gouging and restrictions on competing roadways, and should be negotiated openly, with relatively short terms.
The paper, by committee chairman James Oberstar (D-Minn.) and Rep. Peter DeFazio (D-Ore.), head of the panel’s highways subcommittee, said partnerships with private investors, “can supplement — but not provide a substitute for — public investments.”
The Oberstar-DeFazio paper, issued June 4, said it tried to show the benefits, “small as they are, of private-public partnerships” and to warn of “the potential pitfalls, huge as they are.”
During a June 7 hearing, DeFazio told Department of Transportation officials that the pitfalls were especially dangerous when states make deals, “monetizing existing assets and giving monopoly authority to an entity for up to 100 years to price an asset which is irreplaceable and which you can’t compete with in many cases.”
The committee’s top Democrats said in the paper the benefits they cited include “more efficient and effective construction, management, operation and maintenance of transportation facilities,” if projects are done “under the right circumstances and conditions.”
Oberstar and DeFazio have been critical of the concept of privatization and the Bush administration’s promotion of private investments in public projects.
Specifically, they have taken issue with deals involving the Indiana Toll Road, which was leased for 75 years, and the Chicago Skyway, which was signed away for 99 years.
They said the deals should be short-termed and provide “flexibility” for future government officials to adapt to changing needs, citing “European experience” that shows public leverage over private lessors “dissipates very rapidly” and “is virtually exhausted [in] about 10 years.”
Also, privatization deals should not “undermine broadly supported social and public policy goals” by harming the environment or denying access to lower income individuals, they said.
They said states should “regulate PPP toll facilities to provide private operators with a reasonable return . . . while protecting the public from potential . . . price gouging.”
Also, such deals “should not include noncompete clauses” and should be entered into through an open process. They said states should not enact legislation allowing unsolicited proposals that do not undergo an established planning process.
The revenue generated from partnerships “should only be used for projects to enhance transportation safety, capacity and mobility, preferably within the corridors from which they are generated.”
Oberstar and DeFazio also said these projects “should be pursued with vigorous federal oversight and coordination to produce a robust regional and national transportation system.”
In the hearing June 7, DeFazio said he was concerned about “a single-minded push here toward public-private partnerships.”
Last year, DOT published model legislation supporting privatization and other partnerships. Using private capital is one of several areas highlighted by DOT as part of its congestion mitigation plan.
DeFazio told the officials he thought DOT had engaged in “one-sided advocacy here like we’re making transportation policy out of the Heritage Foundation. And that’s not going to be acceptable to a majority of the people in the Congress.”
The Heritage Foundation describes itself as a “conservative think tank” and it has been an advocate of transportation privatization.
In a letter to state transportation officials in May, Oberstar and DeFazio threatened to “undo” any partnerships they felt did not protect the public interest or the integrity of the national transportation system (5-21, p. 4).
Barry Ciccocioppo, a spokesman for Pennsylvania Gov. Ed Rendell (D), told Transport Topics the state had received the committee’s letter, but was continuing to look at a possible lease of the Pennsylvania Turnpike.
“The general reaction, in Pennsylvania, as I’m sure is true in other states, we have very serious transportation funding needs and it appears the federal funding for transportation is going to be cut,” he said. “We need a way to make up for that gap and Gov. Rendell at least is looking at all possible ways to fund the repair of bridges and highway in our state.”
A Federal Highway Administration spokesman defended the agency’s efforts to promote public-private partnerships.
“The FHWA has consistently promoted PPPs as one of many financial options available to states,” said agency spokesman Ian Grossman. “Innovations in highway financing will play an even greater role in the years ahead.”
Jim Berard, transportation committee spokesman, said that despite the leaders’ concerns, it was unlikely the committee would take any legislative action before the 2009 reauthorization of federal highway legislation.
“That’s probably the best vehicle to address this,” Berard said, “because that’s the vehicle that provides the federal funding. If there’s any legislative action, it most likely will be in there.”
This story appears in the June 11 print edition of Transport Topics.
Leaders of the House Transportation Committee, in a paper released last week, gave faint praise to plans for public-private transportation projects, but warned states that such deals should preserve the public’s interest by avoiding price-gouging and restrictions on competing roadways, and should be negotiated openly, with relatively short terms.
The paper, by committee chairman James Oberstar (D-Minn.) and Rep. Peter DeFazio (D-Ore.), head of the panel’s highways subcommittee, said partnerships with private investors, “can supplement — but not provide a substitute for — public investments.”
The Oberstar-DeFazio paper, issued June 4, said it tried to show the benefits, “small as they are, of private-public partnerships” and to warn of “the potential pitfalls, huge as they are.”
During a June 7 hearing, DeFazio told Department of Transportation officials that the pitfalls were especially dangerous when states make deals, “monetizing existing assets and giving monopoly authority to an entity for up to 100 years to price an asset which is irreplaceable and which you can’t compete with in many cases.”
The committee’s top Democrats said in the paper the benefits they cited include “more efficient and effective construction, management, operation and maintenance of transportation facilities,” if projects are done “under the right circumstances and conditions.”
Oberstar and DeFazio have been critical of the concept of privatization and the Bush administration’s promotion of private investments in public projects.
Specifically, they have taken issue with deals involving the Indiana Toll Road, which was leased for 75 years, and the Chicago Skyway, which was signed away for 99 years.
They said the deals should be short-termed and provide “flexibility” for future government officials to adapt to changing needs, citing “European experience” that shows public leverage over private lessors “dissipates very rapidly” and “is virtually exhausted [in] about 10 years.”
Also, privatization deals should not “undermine broadly supported social and public policy goals” by harming the environment or denying access to lower income individuals, they said.
They said states should “regulate PPP toll facilities to provide private operators with a reasonable return . . . while protecting the public from potential . . . price gouging.”
Also, such deals “should not include noncompete clauses” and should be entered into through an open process. They said states should not enact legislation allowing unsolicited proposals that do not undergo an established planning process.
The revenue generated from partnerships “should only be used for projects to enhance transportation safety, capacity and mobility, preferably within the corridors from which they are generated.”
Oberstar and DeFazio also said these projects “should be pursued with vigorous federal oversight and coordination to produce a robust regional and national transportation system.”
In the hearing June 7, DeFazio said he was concerned about “a single-minded push here toward public-private partnerships.”
Last year, DOT published model legislation supporting privatization and other partnerships. Using private capital is one of several areas highlighted by DOT as part of its congestion mitigation plan.
DeFazio told the officials he thought DOT had engaged in “one-sided advocacy here like we’re making transportation policy out of the Heritage Foundation. And that’s not going to be acceptable to a majority of the people in the Congress.”
The Heritage Foundation describes itself as a “conservative think tank” and it has been an advocate of transportation privatization.
In a letter to state transportation officials in May, Oberstar and DeFazio threatened to “undo” any partnerships they felt did not protect the public interest or the integrity of the national transportation system (5-21, p. 4).
Barry Ciccocioppo, a spokesman for Pennsylvania Gov. Ed Rendell (D), told Transport Topics the state had received the committee’s letter, but was continuing to look at a possible lease of the Pennsylvania Turnpike.
“The general reaction, in Pennsylvania, as I’m sure is true in other states, we have very serious transportation funding needs and it appears the federal funding for transportation is going to be cut,” he said. “We need a way to make up for that gap and Gov. Rendell at least is looking at all possible ways to fund the repair of bridges and highway in our state.”
A Federal Highway Administration spokesman defended the agency’s efforts to promote public-private partnerships.
“The FHWA has consistently promoted PPPs as one of many financial options available to states,” said agency spokesman Ian Grossman. “Innovations in highway financing will play an even greater role in the years ahead.”
Jim Berard, transportation committee spokesman, said that despite the leaders’ concerns, it was unlikely the committee would take any legislative action before the 2009 reauthorization of federal highway legislation.
“That’s probably the best vehicle to address this,” Berard said, “because that’s the vehicle that provides the federal funding. If there’s any legislative action, it most likely will be in there.”
