Governments Sell Roads to Raise Cash

With the encouragement of Washington, local and state governments are privatizing roads. Chicago has leased its Skyway to an Australian-Spanish firm for nearly $2 billion. And Indiana has leased its entire toll-road system to the same company for nearly $4 billion.

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STEVE INSKEEP, Host:

You know, there's that old scam which has become a joke where a city slicker offers to sell some rube the Brooklyn Bridge as though anybody could own a public work like a bridge or a highway.

Well, times have changed and NPR's Kathleen Schalch has the latest in privatization.

KATHLEEN SCHALCH: For nearly 50 years, the Chicago Skyway's been a landmark with its suspension bridges, vistas of the city's skyline and cheery tollbooths topped with big glowing letters proclaiming it's name.

(SOUNDBITE OF COINS FALLING INTO TOLL BASKET)

SCHALCH: Nowadays though, the change drivers pitch into toll baskets no longer winds up in city coffers. Chicago recently became the first American city to privatize an existing toll-road, leasing its skyway to a Spanish-Australian consortium for 99 years.

This summer Indiana became the first state to do it. It turned over the entire Indiana toll-road to the same foreign joint venture.

If this is a nationwide trend, it reverses the centuries-old idea that public works should be just that.

Why is this happening? Because governments are desperate for cash.

ROBERT PUENTES: There's no question that there's a transportation finance crisis.

SCHALCH: Robert Puentes is a transportation expert with The Brookings Institution.

PUENTES: State after state is feeling it. The federal government is feeling it. We know that the federal Highway Trust Fund, which is the main source of revenues for the federal program, is in serious jeopardy. It's scheduled to be bankrupt by the close of this decade.

SCHALCH: Traffic is crawling. Roads and bridges are crumbling. The money for repairs and new roads is supposed to come mainly from gasoline taxes, but politicians have no appetite for increasing them.

Indiana Governor Mitch Daniels says his state's funding gap was so big that even tripling its gasoline tax wouldn't be enough.

MITCH DANIELS: All over the state there are major projects that people have thought about, dreamed about, schemed about, even paid to design in some cases. We had no money to build them. And it was, to be honest, a con job.

SCHALCH: So Daniels decided to lease the toll-road, naming the proposal Major Moves after a Hank Williams, Jr. song he likes to sing.

DANIELS: (Singing) I'm making some major moves, city girl, to get to you. I'm making some major moves, oh, darlin'.

SCHALCH: Daniels was delighted when the winning bid for the Indiana toll-road topped $3.8 billion, more than enough to check off the state's wish list.

DANIELS: This state can leap forward. We will put tens of thousands of people to work building roads, bridges, possibly airports and other facilities we wouldn't otherwise have.

SCHALCH: All the same, the lease set off a political firestorm that's still smoldering, especially in northern Indiana along the toll-road in towns like South Bend.

ROGER MATLOCK: Honestly, I don't think it's any good, really.

SCHALCH: Outside a convenience store near the South Bend exit, Roger Matlock leans on his red tow truck.

MATLOCK: It's our road, why lease it out to somebody else, especially a foreign country?

SCHALCH: A few steps away, Deb Drummond(ph) pumps gas.

DEB DRUMMOND: It seems totally outrageous. Will they keep the roads up the same way is a question. Will the tolls be, you know, outrageously higher than they are now is a question. And for 75 years - we don't know what things are going to be like in 75 years.

SCHALCH: The deal squeaked through the state legislature by one vote. Pat Bauer, a short feisty Democrat from South Bend, tried hard to defeat it. He sits in a restaurant booth near the toll-road and explains why.

PATRICK BAUER: The people in this area were promised this road would be free so I think there's a huge philosophical problem in this country and in this state about people profiteering from government services. And roads, especially interstate roads, roads that were built for our national protection being sold to overseas companies I have a lot of problem with.

SCHALCH: Bauer believes the state got taken for a ride. He says the company's earnings will dwarf what they paid for the lease because they can raise tolls every year.

Governor Daniels contends the lease brought in far more than the state could have possibly earned operating the road itself.

DANIELS: They're obliged to run a great toll-road better than the one we've got. They're going to invest billions of dollars of their own on top of what they have paid for the lease because they believe that they can run a road that more people will choose to drive on. It'll be quick. It'll have modern technology.

SCHALCH: You don't have any regrets it sounds like.

DANIELS: No, zero.

SCHALCH: The lease deal has the enthusiastic backing of the Bush administration where Daniels once served as budget director. The White House has been urging governments to try what it calls public-private partnerships.

Congress has helped pave the way as well, offering tax-free bonds for private investors and making it easier to charge tolls on interstates.

Public officials are intrigued, according to Mike Duvally. He's a spokesman for Goldman Sachs which negotiated the leases for both the Chicago Skyway and the Indiana toll-road.

MIKE DUVALLY: Municipalities are taking a look and trying to decide whether these types of transactions would be right for them. I can tell you that bankers from Goldman Sachs have talked to officials in about 35 states.

SCHALCH: Candidates for leasing even include at least one of the nation's icons. The cash-strapped state government of New Jersey is looking into leasing the New Jersey Turnpike. Can the Brooklyn Bridge be far behind?

Kathleen Schalch, NPR News.

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