Brawley: P3s Tax the Public to Profit Govco

Today Representative Robert Brawley (Robert.Brawley@ncleg.net) made the following post regarding the current push to privatize roads via public-private-partnerships (P3s):

P3s Tax the Public to Profit Govco

As an American and lifelong Republican, I am all for free markets and business success. What I do not stand for is propping up industries or companies that cannot survive and prosper on their own merits. If you succeed by building a better widget or offering a better service than your competitor, hats off to you. However, if your business model is based on deceit, spreading propaganda and riding on the coattails of American taxpayers, shame on you. Unfortunately for millions of Americans, legislators are selling-out America’s prime infrastructure assets to corporations and private entities looking to capitalize off of the public and America’s infrastructure that was purchased, built and maintained with taxpayer funds. Whether it is roads, water systems or utilities, corporations and private entities are pervasively colluding with politicians to garner the acceptance of Private Public Partnerships (P3s).

An article published in the November/December 2012 issue of Dollars & Sense magazine by Darwin Bond-Graham highlights many of the problems with P3s. The concerns quoted below have been raised by concerned citizens on both sides of the aisle. Corporate management of people and public services is an unsavory idea regardless of your political affiliation.

In 1995, California granted a private company the right to construct express toll lanes along the State Route 91 freeway in Orange County, a region inhabited by millions, with some of the heaviest traffic flows in the nation. This was the first modern privatized highway in the United States. The California Private Transportation Company (CPTC), a partnership of three corporations—Level 3 Communications, Granite Construction, Inc., and the French toll operator Cofiroute SA—completed the project with $130 million in mostly privately sourced money. To recoup this expense, and to make a profit, CPTC was given a 35-year concession to operate the toll route. State leaders promised that the private company would provide greater efficiency and savings, and that the public would benefit from clear and safe roads, even during a time of government budget constraints.

It did not take long for things to unravel. The SR-91 toll lanes did not unclog what local traffic reporters referred to as the “Corona Crawl,” so state and local officials sought to expand nearby highways to ease worsening congestion and improve safety. When transportation offices announced the improvement plans, CPTC unexpectedly filed a lawsuit, citing a non-compete clause in their contract to build and operate the toll lanes. The people of California were legally blocked from improving their highways because it could reduce private profits. In 2003, the Orange County Transportation Authority was forced to purchase the SR-91 toll lanes for $208 million to put an end to the fiasco.

In 2004, California’s state legislature halted the experiment in privatizing highways. But that did not stop other states from pushing forward with privatization. In Virginia and Texas, several major privatized freeways were built in the 2000s. Then, in 2009, things came full circle. California once again authorized so-called public-private partnerships to procure highways and other public goods. Although privatization of transportation projects has a tarnished record, owing much to California’s costly experiments over a decade ago, all across the United States major highway and other infrastructure upgrades are once again being handed over to private investors, now under the moniker of “public-private partnerships,” or [P3s].

[A P3] is a rebranding of privatization. The phrase purposefully evokes a win-win scenario involving equal “partners” working toward a common goal. Government leaders have been sold this new kind of privatization as a solution to declining tax revenues and borrowing capacity, while private companies claim to be offering their expertise and capital in a spirit of public service.

Let’s be honest. Private companies do not exist to give away goods or services. Their goal is to earn a profit and return substantial gains to their investors. That is a worthwhile goal from a business standpoint; however, it is a conflict of interest when companies are tasked with supplying essential public services. In contrast, government services are designed to serve the public – not profit from the public. You cannot serve the public’s basic infrastructure needs in an equitable fashion if your goal is to make a profit.

[A P3] is the result of a long ideological campaign against public-sector unions and “big government,” which conservative think tanks, pundits, and politicians blame for growing deficits and crumbling infrastructure. This worldview, meanwhile, hails private companies and the private profit motive as the bearers of efficiency and fiscal discipline.

P3s do not reduce “big government”, they only increase it with the insertion of “big business”. Private companies can be just as inefficient as the public sector, and are no less prone to project overruns or management mistakes. Whether it’s a government project or a corporation, you still have human beings at the helm. Greed, human error and mismanagement exist in both the private and public sectors – just ask Enron or Lehman Brothers.

Finally, [a P3] is obviously a money-making opportunity. It is propelled by an infrastructure-industrial complex composed of global construction corporations, investment banks, private-equity firms, and elite law firms organized as vertically integrated consortiums. Allied through their own trade associations, they are actively pressing for new laws to expand the types of public infrastructure from which they can extract profits, and in recent years they have been quietly succeeding.

The American public depends on the equitable accessibility to basic needs, such as water, roads and emergency services. Seeking ways to profit from the public for services that they cannot pick and choose from (such as the airport they use, the interstate they drive on, or the water they drink) is essentially forcing the public to buy your product – that is not a free market practice.

The main source of project financing, however, comes from investment banks that lend to the consortium partners. P3 proponents claim that this private financing source is a solution to the budgetary constraints of governments that face huge backlogs of deferred infrastructure investment. A recent Congressional Budget Office (CBO) report, however, shows the flaw in this argument: “The case is sometimes made that using funds from private capital markets to finance roads can increase the resources available to build, operate and maintain roads,” the report notes. “But the sources of revenues available to pay for the cost of a highway project —whether it uses the traditional financing approach or a public-private partnership—are the same: specifically, tolls paid by users or taxes collected by either the federal government or by state and local governments.”

Whether it’s through tolls or taxes, the source of revenues are still people. P3s create fertile ground for monopolistic and corporate cronyism practices. Government that is By the People and For the People should steer clear of partnerships that increase the gains of the private sector at the expense of the public. Socialist and non-democratic countries do P3s very well, which is another example why they are an un-American practice.

I ask my fellow legislators and the public to speak up against plans to implement P3s for our roads and other public infrastructure assets that are essential to a free society.

5 Responses to Brawley: P3s Tax the Public to Profit Govco

  1. shuds12 says:

    Excellent. Shar

  2. Tom says:

    Gas prices on the VA-NC State line were 3.15 on June 26, and on the same day they were hovering above 3.49 per gallon in Charlotte NC. The private contractor is making profits, yet our our gasoline tax is being squandered on other projects by various State Agencies. Each State Agencies should be asked 3 questions. 1. What do you do? 2. How are you doing? 3. PROVE IT with hard verifiable date before taxpayer monies are spent. PROCESS IMPROVEMENT in the State Agencies will solve this problem on a short fall of cash.

  3. darryl bost says:

    Representative Brawley, thank you for standing up for common sense and American Values. If Tillis et al, allow this toll lane abomination to happen, he will never get my vote again. Aqua NC is a perfect example of p3’s that abuse their position, thru outrageous pricing and deplorable customer service. Kick them out of NC with the toll trolls.

  4. Richard John says:

    Required reading for every resident in the country. I for one am tired of taxes being used to support profit by private companies when the product does not produce what is advertised and ends up costing exponentially more than if the government just did it correctly to begin with. How many examples of $100 that’s a supposed deal results in $300 to buy out the loss contract when it might have cost &120 to begin with — does it take to get reality into the heads of these so called leaders???? We need more Robert Brawleys thought process and less Thom Tillis

  5. Randy Mintken says:

    Robert,

    Thank you once again for shedding light on the truth. The clouds over the P3, HOToll plan are building. Hope we will see the current plan wash down the sewer in a gully washer before a shovel hits the dirt, as it should. The legacy of the current legislature depends upon their strength and conviction to do what is right. You must kill this outdated scheme from California, which began with the formation of the Reason Foundation in 1988, and first put HOToll lanes publicly to paper in 1993 (a scheme to toll our nation’s highways one lane at a time”. For those of you reading this that do not think it affects you, beware!

    Consider this: In 1983 the mobile phone was introduced, in 1991 the World Wide Web, and in 1998 Google. Why are HOTolls not being embraced across the country? If they were so great they would have spread across the country like a wildfire by now. The first was installed in California in 1998. Why have there been more failures than successes? The answer is simply that they are flawed. Each new attempt in this experiment is supposed to be the answer to all our transportation funding prayers. They are not. HOTolls are based on fantasy, and not reality. They are being forced upon the public through manipulative scheming.

    Why HOV lanes were installed on I-77, according to NCDOT:

    From NCDOT

    Quote from 1993 (http://reason.org), over ten years earlier:

    “The proposal involves modifying the current concept of High Occupancy Vehicle (HOV) lanes. Current HOV lanes are not very effective at reducing traffic; 43 percent of car-poolers are members of the same household. They cost everyone but serve few drivers. We propose replacing HOV lanes with HOT lanes: High Occupancy/Toll lanes.”

    Why did NCDOT start construction of HOV lanes on I-77, in 2004? You probably know that answer by now.

    Some are choosing to blindly believe HOToll lanes built, designed, and managed by a P3 are the answer to our transportation prayers on I-77 north of Charlotte. So will HOToll lanes work? Who can you trust? Trust history. They will not!

    What Poole, and others do not understand is people. He thinks he can engineer citizen behavior, and he has convinced others. He has not predicted the response of Tar Heels. At least one political leader has already been quoted as calling this a “blood bath”, and the fight is just beginning.

    This is about so much more than a single toll road. This is about scheming, manipulation, inequity, inefficiency, and if not lies, then withholding of the truth to push an agenda – “to toll us one lane at a time”, across the state, across the country.

    Join the fight:

    Widen I77

    Toll Free NC

    When will NCDOT start to listen and collaborate, and stop scheming and manipulating? When will our political leaders force them to? Robert Brawley is fighting the good fight to support citizens, not toll operators. We need more of the same, from local government, regional planning organizations, state agencies, and state government.

    The Tar Heel state needs a Carolina Plan for 21st century transportation infrastructure, not an old, worn out, California plan.

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