View Full Version : US states mull sale of roads

12-27-2008, 09:53 PM

US states mull sale of roads

ST. PAUL (Minnesota) - MINNESOTA has a huge budget deficit, but the state still owns a premier golf resort, a sprawling amateur sports complex, a big airport, a major zoo and land holdings the size of the Central American country of Belize.

Valuables like these are in for a closer look as 44 states cope with budget deficits.

Like families pawning the silver to get through a tight spot, states such as Minnesota, New York, Massachusetts and Illinois are thinking of selling or leasing toll roads, parks, lotteries and other assets to raise desperately needed cash.

Minnesota Gov Tim Pawlenty has hinted that his January budget proposal will include proposals to privatize some of what the state owns or does. The Republican is looking for cash to help close a $5.27 billion (S$7.63 billion) deficit without raising taxes.

Republican lawmakers are pushing to privatize the Minneapolis-St. Paul International Airport and the state lottery.

Both steps require a higher authority - federal legislation in the case of the airport, a voter-approved constitutional amendment for the lottery. But one lawmaker estimated an airport deal could bring in at least $2.5 billion, and the lottery $500 million.

Massachusetts lawmakers are considering putting the Massachusetts Turnpike in private hands. That could bring in upfront money to help with a $1.4 billion deficit, while also saving on highway operating costs.

In New York, Democratic Gov. David Paterson appointed a commission to look into leasing state assets, including the Tappan Zee Bridge north of New York City, the lottery, golf courses, toll roads, parks and beaches. Recommendations are expected next month.

Such projects could be attractive to private investors, including foreign firms, and public pension funds looking for safe places to put their money in this scary economy, said Mr Leonard Gilroy, a privatization expert with the market-oriented Reason Foundation in Los Angeles.

'Infrastructure is more attractive today than ever,' Mr Gilroy said. 'It's tangible. It's a road. It's water. It's an airport'.

'It's something that is - you know, you hear the term recession-proof.'

Labour unions do not like privatization deals out of fear that worker wages and benefits will be squeezed as private operators try to boost their profit by streamlining services.

Taxpayers, too, can lose out if the arrangements do not work - and sometimes even if they do, said Mr Mark Price, a labour economist with the Keystone Research Center in Harrisburg, Pennsylvania.

Higher tolls on privatised roads can push drivers onto state-operated roads, wearing them down faster and raising public costs over time.

'You're privatising some profits in this process and socialising some losses,' Mr Price said.

Selling or leasing public assets can produce an immediate infusion of cash for the state, while foisting the tough decisions, such as raising tolls, onto private operators instead of the politicians.

'The downsides are often after they leave office,' said Mr Phineas Baxandall, a researcher with the consumer-oriented US Public Interest Research Group in Boston.

Some states struck major privatization deals well before the economic crisis hit, following a practice of leasing toll roads that is more common in Europe and Asia.

Indiana, for example, brought in $3.8 billion in 2006 by leasing the Indiana Toll Road to an Australian-Spanish partnership for 75 years. Chicago stands to collect $2.5 billion by leasing Midway Airport to a group of US and Canadian investors, if the federal government approves, and has raised an additional $3.5 billion since 2005 through deals for the Chicago Skyway toll road, parking ramps and parking meters.

But in September, investors walked away from a $12.8 billion bid to lease the Pennsylvania Turnpike to a Spanish-American partnership for 75 years after legislators failed to act on the deal.

And Texas lawmakers uneasy over a proposed private toll road system approved a two-year moratorium on such contracts last year. -- AP

12-27-2008, 10:14 PM
how can you mangle a lottery to the point where it is cheaper to sell it?

12-28-2008, 12:00 AM
how can you mangle a lottery to the point where it is cheaper to sell it?
HUH?!It is NOT cheaper to sell it - you are simply bringing in part of the future profits to spend NOW, while the investors get the difference forever or for a very long time.

This kind of selloff of our childrens' future is one of the most disgusting, evil, despicable, lazy, disgusting (worth saying twice), rotten acts the current generations are doing to take away every chance at any kind of decent life for their future in our country. The shortfall of funding for Social Security and even the National Debt (prior to ths year) is trivial compared to selling off the very infrasructure itself.

12-28-2008, 08:44 PM
Chicago leased the Chicago Skyway


....and recently the parking meters. No more free parking on the holidays.


12-29-2008, 12:38 PM
What this will do over time if DRIVE consumers away from the higher priced items. For the Indiana Toll Road it will PUSH drivers to drive on the free nearby surface roads, even at the cost of more time to do it (each driver will make their own decision based upon the extra time involved and extra costs involved with the stop and go driving on the side roads).

For Chicago, if the parking rates go too high it will drive businesses and residents OUT of cerain neighborhoods over time since it will effectively raise te cost of living there.

If the airport in MN is sold how will the investors get their money back? Higher usage fees, which means higher ticket prices for ALL passengers passing through the airport. Over time the economics will dictate more direct flight that BYPASS Minn/St Paul, possibly even causing the loss of their Hub Status. If that would happen then the entire state economy is effected since the reason many businesses are located in that area is BECAUSE OF their transportation hub status. (look how Atlanta developed once they decided to build a HUGE airport and become the "Southern Hub". At the time they made the huge financial gamble metro Birmingham was the same size as metro Atlanta ... today no comparison.

All of these sales have long term consequences. They bring in money in the short run but can create massive future negative consequences as the long term economics of their sale and consequent higher prices to consumers plays out over time.