February 12, 2008

Headlines

1. Big wave of unity stopped Calif toll road in its tracks
2. NJ: Toll-roads agency may evade scrutiny
3. NJ: Gov. Corzine will compromise on toll plan
4. GAO asks Congress to direct DOT and industry to set criteria for P3s
5. Texas highway funding law gives boost to public agencies, panelists say

News Summaries

1. Big wave of unity stopped Calif. toll road in its tracks

Among the towers of withering support provided by advocates for the 241 Foothill South Toll Road at last week’s California Coastal Commission hearing was the charge that surfers, as hard-core locals, were opposed to the measure because they didn’t want inlanders coming to the beach, reports the San Diego Union-Tribune. For some, this may be true, but for the thousands of surfers who gathered at Wyland Hall at the Del Mar Fairgrounds last Wednesday, the day marked a proud moment in surfing history, as surfers proved themselves to be a compassionate, conscientious subset of the population capable of rallying together in an uncanny manner when galvanized by a cause.

2. NJ: Toll-roads agency may evade scrutiny
New Jersey Gov. Jon S. Corzine would bar the public from examining the inner workings of the toll-road corporation that he wants to create to raise $32 billion, even though it would employ thousands and spend billions of dollars, according to the Courier Post. Under Corzine’s draft legislation for the toll-road monetization plan, the proposed Public Benefit Corp. would not be subject to the state’s Open Public Records Act. If approved, the corporation would operate more than 334 miles of state roads and could hike tolls by as much as 800 percent in the next 14 years.

3. NJ: Gov. Corzine will compromise on toll plan
Few were surprised when Gov. Corzine announced over the weekend that he would no longer seek to add tolls to Route 440, reports The Philadelphia Inquirer. "Oh boy, what a shock that was," joked Senate President Richard J. Codey, alluding to widespread speculation from day one that Corzine ultimately would leave Route 440, which connects New Jersey to Staten Island, toll-free. The question now is what other compromises the governor might consider as he tries to get his financial restructuring plan – including his toll-hike proposal – through the Legislature. The plan has drawn plenty of critics: Every Republican lawmaker has pledged to vote against it and a handful of Democrats, including State Sen. John Adler (D., Camden), have also voiced opposition.

4. GAO asks Congress to direct DOT and industry to set criteria for P3s
Congress should direct the Transportation Department and industry to develop criteria to identify and protect national interests in future public-private partnership deals that states and localities enter into to build public highways, the Government Accountability Office said in a report, according to The Bond Buyer (subscription). "In developing these criteria, the [transportation] secretary should identify any additional legal authority, guidance, or assessment tools required, as appropriate and needed, to ensure national public interests are protected in future highway public-private partnerships," said the report, which was released late Friday. "The criteria should be crafted to allow the department to play a targeted role in ensuring that national interests are considered in highway public-private partnerships, as appropriate." The report comes as lawmakers have been critical of Transportation Secretary Mary Peters for encouraging states to explore so-called P3s, as traditional funding sources such as the federal gas tax have failed to keep up with needs. States are increasingly exploring P3s for roads, including leases for as much as 99 years with teams of private firms to design, build, operate, maintain, and finance projects. In return the private group collects the tolls on the road for the length of the lease. Rep. James L. Oberstar, D-Minn., chairman of the House Transportation and Infrastructure Committee, has been a particularly vocal critic of the DOT’s P3 agenda. He believes that encouraging states to make their own deals with private partners would produce a national transportation network of varying quality from region to region. The GAO report cautions that there are many pitfalls in P3s, including what rate of return is reasonable and at what point profits should be shared with the public entity. Also, tolls on privately run roads are more likely to go up at steeper rates than under publicly managed roads.

5. Texas highway funding law gives boost to public agencies, panelists say
Texas’ new highway finance law placed a two-year chokehold on private development of toll roads, but it also cleared some obstacles standing in the way of turnpikes developed by existing agencies, transportation executives told The Bond Buyer‘s Texas Public Finance Conference yesterday. (subscription) "With all the discussion of public-private partnerships, a lot of people lost sight of the value of the public agencies already in operation," said Susan Buse, chief financial officer of the North Texas Tollway Authority. SB 792, passed in the final days of the Texas Legislature’s 80th Session last May, made sweeping changes in how highways and tollways are funded, placing a two-year moratorium on privately owned tollways. Exceptions were made for projects already in the works in the Houston, Dallas-Fort Worth, San Antonio, and El Paso areas. The new law, signed by Gov. Rick Perry in June, gave right of first refusal on toll projects to existing agencies, such as the NTTA in the Dallas suburb of Plano, the Harris County Toll Road Authority in Houston, or regional mobility authorities, including new RMAs such as El Paso’s. In the process of drafting the legislation, the NTTA was granted the right to bid for a $5 billion project that had already been awarded to a private developer, the team of Spanish toll-road consortium of Cintra and investment banker JPMorgan. Since winning that contract last year, the NTTA has issued $3.3 billion of bond anticipation notes – the largest such deal in history – to provide up-front payments to regional governments for the concession to build the State Highway 121 tollway. The authority expects to take out the Bans with long-term bonds within months. In the process of winning the contract, the NTTA and other toll agencies learned some lessons from the negotiation process, according to Buse. "One of the things we learned from the proposals of the private sector is that raising toll rates no longer appeared to be political suicide," she said. SB 792 also provided a new process for valuing proposed tollways, a "template" that the NTTA is applying to projects still in the proposal stage, State Highway 161. The market valuation study is underway. The results will allow the authority to decide whether to accept the project.

Publications
Report. Highway Public-Private Partnerships: More Rigorous Up-front Analysis Could Better Secure Potential Benefits and Protect the Public Interest. GAO-08-44, February 8, 2008, http://www.gao.gov/cgi-bin/getrpt?GAO-08-44 Highlights – http://www.gao.gov/highlights/d0844high.pdf

Book. Prison Profiteers: Who Makes Money form Mass Incarceration, edited by Tara Herivel and Paul Wright. The New Press, 2008. Prison Profiteers brings together a formidable array of lawyers, prisoners, journalists and advocates to provide a unique look at who, exactly, is benefiting form mass imprisonment.

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