US Congress seen paving way for private toll roads

[savafan]

http://news.yahoo.com/s/nm/bizhighwa...NlYwMlJVRPUCUl



By Daniel Sorid 1 hour, 36 minutes ago

SAN FRANCISCO (Reuters) - The next road you travel -- and pay a toll to use -- could be privately owned.

Looking for ways to finance highway projects without hitting the public trough, the U.S. Congress appears set to pass a proposal to encourage private ownership of new toll roads.

The provision, part of the highway spending bill now being hammered out by a Senate and House conference committee, would allow private companies to raise up to $15 billion for highway projects with bonds that are exempt from federal income taxes.

While the proposal has broad support in Washington and the business community, the idea of private highways has incited grassroots opposition in some states, with some saying the government -- not a profit-seeking company -- is the proper owner of the public's roads.

Toll road owners such as Spain's Cintra and Australia's Macquarie Infrastructure Group stand to benefit from the move to private infrastructure bonds, since their tax-exempt status would keep interest rates and funding costs low.

The move would also bring lucrative fees to Wall Street banks and others for underwriting and trading tax-exempt debt.

"The time has come for this," Sen. Jim Talent (news, bio, voting record), a Missouri Republican who co-sponsored the proposal, said in a telephone interview. "I think we have an excellent chance of the $15 billion bond issue coming out of conference."

MAJOR SHIFT

While highway spending has traditionally been the government's responsibility, many states faced with tight budgets have given corporations the right to build, operate and maintain roads.

States have the right to regulate toll rates or limit profits, but generally give operators wide latitude to run the roads as they see fit, which concerns some commuters.

Texas, California and Virginia are among the states at the forefront of the movement, one of the most significant changes to the interstate highway network since its inception in the 1950s.

Companies already own projects such as the Chicago Skyway Bridge and the 407 Express that rings Toronto, and interest in privatizing more of the U.S. highway infrastructure is increasing. One bottleneck, however, has been financing.

Jose Lopez De Fuentes, director of Cintra's U.S. and Latin American operation, said private road builders currently face complex regulations governing the issuance of tax-exempt bonds.

The provision expected to emerge from Congress would help Cintra raise funds to finance such projects as a proposed $7 billion investment in the Texas highway system, he said.

Cintra's proposal, which includes a new link on the congested Dallas-San Antonio route, has triggered some opposition, but the state transportation department is ecstatic.

"That's a pretty good deal any way you slice it," said Gaby Garcia, a spokeswoman with the Texas department. "They'll cover the table with $7 billion and say, 'We'll raise that money on our own without any help from you."'

TAPPING THE TAX ROLLS

But Ellen Danning, a law professor at Wayne State University in Detroit who has written on privatization, said private companies are not necessarily more efficient at running roads, and their tolls amount to a regressive tax on highway building.

A better solution to public underfunding of the road system may be to roll back tax cuts that are squeezing the federal budget, Danning said.

"One of the things to ask yourself is, why doesn't the government have the money to spend on the infrastructure that we need?" she said.

And while the private-activity bonds will not require any outlay of public funds, the government would pay for the plan in the form of reduced tax rolls, estimated at $500 million over six years.

In a highway bill that would cost $275 billion or more in that time, $500 million is a small price to pay for a novel financing mechanism that could pay for dozens of projects, said Katherine Hedlund, an Arlington, Virginia-based partner at Nossaman, Guthner, Knox & Elliott LLP, which advises state governments on transportation issues.

"Federal funding through gas taxes and state and local taxes are no longer sufficient to maintain our highway assets and to build the additional assets we need to get ourselves out of congestion," Hedlund said.

Private road builders and public-private partnerships can pay out less interest on tax-exempt bonds, reducing the financing costs of projects by 20 percent, she said.

Ed Mortimer, director of transportation infrastructure at the
U.S. Chamber of Commerce, said an additional $15 billion in financing could fund 20 or 30 highway projects.

The proposal could provide a special boost to projects to expand connections between ports or industrial sites and the highways. Such roads are less popular -- but no less important -- than routes used by commuters.

"Sometimes," Mortimer said, "those projects are the hardest ones to get funded."

[registerthis]

I have no problems with this at all. Perhaps when a private organization has a profit/loss statement to concern themselves with, they'll be more inclined to perform maintenance and upkeep on the road.

[Johnny Footstool]

I don't like it. There is a danger that backwater states like Missouri will forego any maintenance to their own highways (they pretty much do that now). State highways will become even more riddled with potholes. Eventually, private roads will be the only driveable thoroughfares, and the corporations that own them will basically have a monopoly on road travel.

[registerthis]

I don't like it. There is a danger that backwater states like Missouri will forego any maintenance to their own highways (they pretty much do that now). State highways will become even more riddled with potholes. Eventually, private roads will be the only driveable thoroughfares, and the corporations that own them will basically have a monopoly on road travel.

I-44 between St. Louis and Springfield was always a particular favorite of mine.

I think you have a legitimate concern, but the implementation of private toll roads doesn't mean that public highway maintenance would stop being funded, in much the same way that the existence of private schools hasn't meant the end of public schools--many of whom are churning out very qualified students.

[ochre]

How about providing incentives for developing viable mass transit, or alternate fuel vehicles instead? More roads for more cars doesn't necessarily seem like the most current events conscious approach.

Oh, that's right. Lobbyist and special interest groups would find it tougher to fleece the government in those scenarios.

[Blimpie]

Speaking as someone who has a vested interest in this industry, I think road and bridge privatization is a good idea. My company has evolved into one that does highway contracting work in about ten states. Although it is not our preference, we currently find ourselves jumping around here and there trying to "go where the work is" because our home state does not have the highway funding to bid all of the work that is required.

Meanwhile, Congress remains in their second year of gridlock (no pun intended) relative to the reauthorization of the newest version of the federal Transportation bill. Right now, it has become nothing more than a partisan attempt to payback favors to campaign contributors; while, attempting to remain mindful of budget constraints.

Things like this already occur with the privatizing of certain tollbooths (the Cross Island Parkway booth on Hilton Head was owned by Lockheed Martin). On a similar note, contractors who do Ohio Department of Transportation projects are issued tax-exemption certificates for all materials they purchase for use on ODOT jobs. This way, the state can keep taxpayer dollars from being used to pay, well, taxes. The REAL dilemma will come forth--not when the roads and bridges are built--but when the states, counties and private entities are trying to pass the buck on maintaining the infrastructure. That's where most of the hidden costs truly lie in this industry.

At the end of the day, if taxpayer dollars can be saved on roadwork without compromising safety or design, most people shouldn't care if roads are privatized. As long as we don't begin seeing the "Geritol Florida Turnpike" or the "United Dairy Farmers Bypass", most citizens would be hard-pressed to even notice such a change.

[Redsfaithful]

How about providing incentives for developing viable mass transit, or alternate fuel vehicles instead? More roads for more cars doesn't necessarily seem like the most current events conscious approach.

Oh, that's right. Lobbyist and special interest groups would find it tougher to fleece the government in those scenarios.

My sentiments exactly.

[Chip R]

I wouldn't mind these roads being toll roads as long as the tolls paid for upkeep of said roads.

[Rojo]

Ochre got it right.

If this is such a great "Market Oriented Solution" then why do these companies need their bonds tax exempted?

To recap, Congress has encouraged fossil fuel use, de-funded public infrastructure, cut taxes for the rich and sub-contracted work to foreign companies. All in the same bill!

Fantastic.

[Falls City Beer]

How about providing incentives for developing viable mass transit, or alternate fuel vehicles instead? More roads for more cars doesn't necessarily seem like the most current events conscious approach.

Oh, that's right. Lobbyist and special interest groups would find it tougher to fleece the government in those scenarios.

Per usual, awesome, intelligent, forward-thinking ideas. Which means the government will pan them.

[MuEconRedLeg]

How about providing incentives for developing viable mass transit, or alternate fuel vehicles instead? More roads for more cars doesn't necessarily seem like the most current events conscious approach.

Oh, that's right. Lobbyist and special interest groups would find it tougher to fleece the government in those scenarios.

The public continues to buy cars and crowd roads; therefore they demand upkeep and expansion from the government, even if it is not the best path.

To democracy or not to democracy?

[creek14]

I'm going to make my driveway toll access, that way maybe the in-laws won't visit as often.

[TRF]

so, I own a private toll road. And unless you pay the toll, no access.

now imagine that toll comes in the form of a card. you swipe the card, and it automatically computes the miles and sends you a monthly bill. Now imagine filling out the application for said card and being rejected because your credit score is too low, or a mistake on your credit report.

want to bet this happens at some point?

[RedsBaron]

I'm going to make my driveway toll access, that way maybe the in-laws won't visit as often.

[Chip R]

The public continues to buy cars and crowd roads; therefore they demand upkeep and expansion from the government, even if it is not the best path.

To democracy or not to democracy?

That's an excellent point. I like mass transit as much as anyone but if the people don't want it and aren't going to use it, what are you going to do? I lived in Kansas for about a year and would have to use the Kansas Turnpike every time I wanted to visit my family back in Iowa or if I wanted to go to Kansas City or Oklahoma. That turnpike was really smooth to drive on - and I know from what Johnny speaks of about Missouri roads. Sure, the tolls are a bit of a pain but if they go to keep the roads up on a regular basis, I'm all for them. Perhaps the money that went for the upkeep on the interstates could go to the secondary roads.