Trouble in Public-Private Toll Road Paradise? CorridorWatch.org learned some of the most interesting information about public-private partnerships and related activities taking place in the U.S. from sources outside the country. April 2008 was no exception. An article titled, "Macquarie model blowtorched," appeared in that Friday's Sydney Morning Herald and it told us there was trouble in PPP paradise. The Herald report pointed us to a document just released by RiskMetrics Group, an international corporate governance service headquartered in New York. The document they authored is a report titled, "Infrastructure Funds: Managing, Financing and Accounting; In Whose Interest?"  The 39-page report details a host of concerns and issues that should give pause to anyone who thinks PPP infrastructure deals are free of serious risk. Michael West of The Sydney Morning Herald writes, "The RiskMetrics research is likely to send shockwaves through the sector and give both state and federal governments cause for concern as governments have mostly privatized public assets via these structures." And so it should. We have often described the financial model being used by Cintra's partner Macquarie as 'Enron-style accounting.' History has demonstrated time and again that if it sounds too good to be true, it probably isn't true. This report is another step forward in debunking the PPP easy money myth. We have consistently described the Trans Texas Corridor financial scheme as highway alchemy and are certain we will eventually be proven right.  Summarizing the report the Herald article says, "RiskMetrics critiques the financially-engineered infrastructure model for its high debt levels, high fees, paying distributions out of capital rather than cashflow, overpaying for assets, related-party transactions, booking profits from revaluations, poor disclosure, myriad conflicts of interest, auditor conflicts and other poor corporate governance." We hope government officials at both the federal and state level will carefully study the RiskMetrics report. As we all know tremendous pressure is being applied by the Federal Highway Administration to push state government into public-private partnerships deals, partnerships we fear will lead to disaster. We also hope this report will give rise to a greater examination of the financial impact these partnerships will have on the public. Special caution must be exercised to ensure that public infrastructure such has highways, rails, and utilities serve the public interest above any private interest.

It's not about transportation . . . It's about revenue. "Governor Perry and his friends spent a great deal of time researching ideas to create more revenue"  — Transportation Commissioner Ric Williamson (March 25, 2003) [citation] [full text] "in your lifetime most existing roads will have tolls" — Transportation Commissioner Ric Williamson (October 11, 2004) "It's either toll roads, slow roads or no roads" — Transportation Commissioner Ric Williamson (May 2004) [more about tolls]

800 Attend TxDOT Public Hearing in LaGrange. March 23, 2004 TxDOT Director Responds with Letters to the Editor [text]

 

[ AUSTIN RALLY PHOTO ALBUM ]

 

 

"It's either toll roads, slow roads or no roads"
— Transportation Commissioner Ric Williamson (May 2004)

"Highway tolls are yet another form of regressive taxation, designed to push the burden of public costs downward onto the average taxpayer/driver, while the lion's share of the benefits go to the industries demanding state-subsidized mobility and infrastructure."
— Michael King, Capitol Chronicle: Blame It on the Kids, Austin Chronicle (February 1, 2002)  [link]

"If you aggressively invite the private sector
to be your partner,
you can't tell them where to build the road"
– Ric Williamson, Chairman, Texas Transportation Commission, May 24, 2006

 

Borrowing money by issuing bonds will make highways more expensive.

Bonding will not generate new money for highways.

Toll roads represent double taxation.

Creates an incentive to turn toll projects into cash cows.

Users of toll roads will subsidize other highways.

Undermine legislative oversight bypassing legislative control of a treasury-based fund.

 

The California Experience   "When the state first embraced toll roads, think tanks, politicians and government officials couldn't find enough superlatives to describe them." But this public-private toll plan turned into disaster.

Camino Colombia Toll Road The state's first and only private toll road fails, Jan.'04.

 

"Simple logic should tell us it's impossible for the private sector to
deliver the same service for less and make a profit as well."
— Ellen J. Dannin, Professor of Law, Wayne State University Law School [more]

 

"The highways of Texas are built and paved in part by paths of gold leading to the Texas Governor's Mansion." — R.G. Ratcliffe, Highway plans bring money to politicians, Houston Chronicle (August 30, 2002)

"Highway contractors, chemical pipeline executives and financial bond firms that stand to benefit from the plan have contributed more than $300,000 to Mr. Perry." — Wayne Slater, The Dallas Morning News (January 2002)

"Texas 130 underwriters Goldman Sachs, Salomon Smith Barney and Lehman Brothers will earn about $21 million for handling the state bond sales for the highway. Goldman and Salomon gave $10,000 each to last year's campaign to pass Proposition 15, a state constitutional amendment that significantly changed the way Texas finances roads." — R.G. Ratcliffe, Highway plans bring money to politicians, Houston Chronicle (August 30, 2002)