9. Privatization of America’s Infrastructure

Sources:

Mother Jones, February 2007
Title; “The Highwaymen”
Author: Daniel Schulman with James Ridgeway
http://www.motherjones.com/news/feature/2007/01/highwaymen.html

Human Events, June 12,2006
Title: “Bush Administration Quietly Plans NAFTA Super Highway”
Author: Jerome R. Corsi
http://www.humanevents.com/article.php?id=15497

Student Researcher: Rachel Icaza and Ioana Lupu
Faculty Evaluator: Marco Calavita, Ph.D.

We will soon be paying Wall Street investors, Australian bankers, and Spanish contractors for the privilege of driving on American roads, as more than twenty states have enacted legislation allowing public-private partnerships to build and run highways. Investment firms including Goldman Sachs, Morgan Stanley, and the Carlyle Group are approaching state politicians with advice to sell off public highway and transportation infrastructure. When advising state officials on the future of this vital public asset, these investment firms fail to mention that their sole purpose is to pick up infrastructure at the lowest price possible in order to maximize returns for their investors. Investors, most often foreign companies, are charging tolls and insisting on “noncompete” clauses that limit governments from expanding or improving nearby roads.

In 1956, President Eisenhower signed the Federal-Aid Highway Act, which called for the federal and state governments to build 41,000 miles of high-quality roads across the nation, over rivers and gorges, swamps and deserts, over and through vast mountain ranges, in what would later be called the “greatest public works project in human history.” Eisenhower considered the interstate highway system so vital to the public interest that he authorized the federal government to assume 90 percent of the massive cost.

Fifty years later, states are selling off our nation’s enormous, and aging, infrastructure to private investors. Proponents are celebrating these transactions as a no-pain, all-gain way to off-load maintenance expenses and increase highway-building funds without raising taxes. Opponents are lambasting these plans as a major turn toward handing the nation’s valuable common asset over to private firms whose fidelity is to stockholders—not to the public transportation system or the people who use it.

On June 29, 2006, Indiana’s governor Mitch Daniels announced that Indiana had received $3.8 billion from a foreign consortium made up of the Spanish construction firm Cintra and the Macquarie Infrastructure Group (MIG) of Australia. In exchange the state handed over operation of a 157-mile Indiana toll road for the next seventy-five years. With the consortium collecting the tolls, which will eventually rise far higher, the privatized road should generate $11 billion for MIG-Cintra over the course of the contract.

In September 2005, Daniels solicited bids for the project, with Goldman Sachs serving as the state’s financial adviser—a role that would net the bank a $20 million advisory fee. When Goldman Sachs, one of the nation’s most active and most profitable investment banks, with deep connections to Washington, began advising Indiana on selling its toll road, it failed to mention the fact that, even as it was advising Indiana on how to get the best return, its Australian subsidiary’s mutual funds were ratcheting up their positions in MIG—becoming de facto investors in the deal.

Many are suspicious that governors like Daniels across the nation are taking questionable advice from corporate investment banks—and from Washington.

Despite public concerns, privatization of US transportation infrastructure has the full backing of the Bush administration. Tyler Duvall, the US Department of Transportation’s assistant secretary for transportation policy, says the DoT has raised the idea with “almost every state” government and is working on sample legislation that states can use for such projects. Across the nation, there is now talk of privatizing the New York Thruway to the Ohio, Pennsylvania, and New Jersey turnpikes, as well as of inviting the private sector to build and operate highways and bridges from Alabama to Alaska.

In Texas, Governor Rick Perry still refuses to release details of a $1.3 billion contract his administration signed with Cintra for a forty-mile toll road from Austin to Seguin, or of an enormous $184 billion proposal to build a 4,000-mile network of toll roads through Texas.

It is known, however, that the Bush administration is quietly advancing the plan to build a huge ten-lane NAFTA Super Highway through the heart of the US along Interstate 35, from the Mexican border at Laredo, Texas to the Canadian border north of Duluth, Minnesota, financed largely through public-private partnerships. The Texas Department of Transportation will oversee the Trans-Texas Corridor as the first leg of the NAFTA Super Highway, which will be leased to the Cintra consortium as a privately operated toll road. Construction is slated to begin in 2007.

Authors Daniel Schulman and James Ridgeway warn that, just as the creation of a National Highway system promised to “change the face of America,” in Eisenhower’s words, so too could its demise.