In 2002, one of the nation's biggest privatized toll road projects was introduced in the state of Texas: the Trans-Texas Corridor (TTC) plan. From the beginning, the proposal brought forth heavy criticism from people across party lines around issues of cost, access, transparency, and accountability. All of the contracts involved in the initial development of the TTC Plan were developed and signed without public input and contained many provisions that could be detrimental to the public. Originally envisioned as a series of newly constructed highways connecting major ports, interstate highways, and rail systems, growing public opposition and fiscal constraints have slowed down the development of the TTC. However, supporters of the TTC have recently taken a piecemeal approach in order to pass key legislation that would facilitate the continued development of the TTC and other similar privatization projects.
Transportation Infrastructure
- Airports
- Parking garages and meters
- Ports
- Public transit
- Railroads
- Road and bridge construction
- Road maintenance
- Toll road operation
We depend upon safe and affordable airports, bridges, railroads and roads to travel to work, visit family and friends, and keep our economy running. As states and cities face budget shortfalls, many governors and mayors are selling or leasing transportation-related assets for quick infusions of cash. Private investors see this as an opportunity to reap enormous profits by taking control of transportation arteries and imposing high tolls on travel.
Many of the leases are for 50-99 years. In these agreements, the governmental entity receives a large up-front cash payment from a private company or consortium of companies in exchange for decades-long control of essential infrastructure. Steep increases in user fees and service restrictions often follow. For example, some long-term toll road leases guarantee profit levels by explicitly prohibiting improvements or expansion of other transit in the area. In Texas, John Hancock Financial Services Inc. made the smart business move of buying a toll road for $12 million and then closing it, forcing the state to buy the road for $20 million so it could be reopened. These types of activities can cause major inconveniences and cost to drivers, along with traffic snarls on surrounding streets.
Roads, airports, parking garages, and other transportation infrastructure are critical to the movement of people and goods, and to national security. Public entities give up control of important aspects of the transportation system when they privatize, allowing future decisions to be made for private gain rather than the public interest. In many instances, these deals may provide an influx of short-term cash, but public assets that are sold at bargain prices and under bad terms can affect communities for years to come.
Recent report of interest:
Private Roads, Public Costs: The Facts About Toll Road Privatization and How to Protect the Public
US PIRG Education Fund & Frontier Group, 2009
The Political‐Economics of Private Infrastructure Finance: The New Sub Prime
Elliott Sclar, 2009
Privatization and the Public Interest
US PIRG Education Fund & Frontier Group, 2009
Infrastructure Privatization Contracts and Their Effect On Governance
Ellen Dannin, 2009
For additional reports, please see the research section on the side bar or visit our research library.
Related Cases
In February 2009, the City of Chicago and Chicago Parking Meters LLC signed a 75-year concession agreement for the long term lease of Chicago's 36,000 parking meters. The city received an upfront payment of approximately $1.2 billion. The procurement process lacked transparency and was rushed, as the city's Inspector General later concluded. Within months, parking rates soared and many meters were malfunctioning or mislabeled. Chicago residents complained about the difficulty of parking in the city, while business owners watched their retail traffic decline.
In 2007, Pennsylvania Governor Ed Rendell pushed for the privatization of the Pennsylvania Turnpike as a way to raise money for the state's transportation budget. A consortium led by Spanish company Abertis Infraestructuras and Citi Infrastructure Investors offered $12.8 billion to lease operation of the turnpike for 75 years. As advocates educated the public and lawmakers about the risks involved with the road privatization, the future of the deal became uncertain. The Legislature, which had the responsibility of approving the proposal, effectively killed the deal letting a deadline pass without a vote in September 2008.
In 2007, Florida Governor Charlie Crist proposed the long-term lease of Alligator Alley, a 78-mile stretch of interstate highway, as a way to quickly raise money for budgetary shortfalls. Six teams of bidders expressed interest in the lease, drawn by the potential toll revenue, but when the deadline passed for the submission of proposal, none of them submitted bids. The recessionary economic conditions are thought to have discouraged many of the interested teams from bidding on the lease, but many expect the state to attempt to lease the highway again once economic conditions improve.
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