Researchers call privatization a danger to consumers

| 10/18/2007

A private research group dedicated to consumer protection believes the road to privatization is a rocky one at best.

The U.S. Public Interest Research Groups issued the report Thursday, Oct. 18, titled “Road Privatization: Explaining the Trend, Assessing the Facts, and Protecting the Public.” The group is not part of the federal government.

The author of the report, Phineas Baxandall, senior analyst for tax and budget policy for U.S. PIRG, insists that no privatization deal should last longer than 30 years or contain any “budget gimmicks.” The author also calls for more public accountability, increased elements of public control over transportation decisions, and “fair value” so that toll revenues aren’t sold off at a discount.

The PIRG report defines privatization as the “transfer of traditionally public functions to the private sector.”

Privatization, Baxandall insists, “creates a private monopoly with no meaningful ongoing competition because toll roads rarely compete with one another and deals last for several decades.”

Baxandall stated that the public sector, aka the government, can finance construction and repairs at a cheaper interest rate than the private sector.

Yet investors from the private sector continue to pressure state governments and transportation agencies into considering long-term leases in exchange for large cash payouts.

In a chapter called “The Dangers of Road Privatization,” the author states that privatization paves the way for non-compete clauses and lets investors call the shots about toll increases.

The report outlines deals made in Illinois and Indiana that allowed private investors to lease major toll roads for long periods of time in exchange for large sums of cash. The report also states that 14 other states already had or were considering some type of highway privatization.

“Figuring out the fair price for a toll road is a high-stakes guessing game,” Baxandall’s report stated.

“Despite the uncertainty over actual future costs and revenues on toll roads, a number of factors prevent the public from receiving full value for a concession deal.”

To read the full report, click here.

– By David Tanner, staff writer