Reason Foundation

http://www.reason.org
http://www.reason.org/news/show/congressional-leaders-flunk-tr

Reason Foundation

Congressional Leaders Flunk Transportation Policy 101

Threatening states, working to "undo" public-private partnerships is counterproductive

Samuel Staley
May 22, 2007

If anyone needed evidence that Congress can screw up transportation policy on a grand scale, look no further than Rep. James Oberstar (D-MN) and Rep. Peter DeFazio's (D-OR) letter to governors and state transportation department heads on May 10. “We write to strongly discourage you from entering into public-private partnership (PPP) agreements,” they write, referring to the innovative tool being used by Texas, Georgia, Indiana, and Illinois and other states to fund desperately needed roads and infrastructure.

Leaping over a line rarely crossed in more than 50 years of transportation policy making, Oberstar and DeFazio threaten to "undo" any agreements they or their Congressional colleagues believe "do not fully protect the public interest and the integrity of the national [transportation] system."

The Congressmen are the highest ranking members of the House Committee on Transportation and Infrastructure, so their words and intent carry weight. But their claims lack any consideration of the evidence. The only specific cases they cite in their letter are agreements for long-term leases of the Chicago Skyway and Indiana Toll Road to private companies. "These deals make good business sense to the companies that are investing in the projects," they claim, "but we have serious concerns about whether these transactions offer a net balance of benefits to the American public."

If these are the projects that have the Congressmen worried, they need a lesson in basic cost-benefit analysis. The city of Chicago netted $1.8 billion from their agreement. Indiana faced a $3.8 billion short-fall in its 10-year transportation plan before it leased its toll road. These leases did more than allow the state and local governments to fund their transportation plans. They committed private companies to do something their agencies could not: invest in the continuous maintenance of their roads, upgrade these facilities to keep traffic moving, and shift the burden of financing these investments from taxpayers to the private sector.

Texas, another frequent target of partnerships critics, is using public-private partnerships to build the Trans Texas Corridor, a set of major north-south and east-west routes that directly addresses dramatic increases in freight moving from Mexico into the U.S. and Canada. Public and private toll road authorities are also using public-private partnerships to add essential road capacity to Texas boom towns so they can meet their state's urban mobility goals.

If these are the cases that Congress holds up as cautionary tales, critics are walking on thin ice indeed. While these agreements are not perfect—we learn from each deal—virtually any objective analysis would find their contributions to the public welfare far exceed any glitches in the contracts.

An independent observer is left with the impression that Oberstar and DeFazio are motivated by blatant ideological opposition and inside the Beltway politics.

Some simply believe Americans have a political claim to free roads—taxes should be increased to cover the costs regardless of the impacts on quality and congestion. This is the policy of the status quo and reflects ideology, not sound policy analysis. The current funding system can't keep up with rising travel, shifting travel patterns, and the demands of a growing economy.

Moreover, contrary to the Congressmen's naïve and simplistic characterization of the private sector's interest in their letter, the U.S. is behind the curve. The entire London transportation system—including the subway, local bus, and intercity bus system—is managed by private companies under public-private partnerships. The French government divested itself of its remaining equity interest in the private companies that manage its intercity highway network in 2005. China and India are aggressively using private companies to provide transit services and roads in many of their cities.

Indeed, Cofiroute broke a political logjam that prevented a long overdue road from being built on the west side of Paris when it proposed (and the government accepted) an underground tunnel. Macquarie and other firms spurred new generations of engineering investments in Australia through the creative use of tunnels and elevated highways to get traffic moving again while protecting the integrity of urban neighborhoods.

In the end, the Congressmen are reverting to a self-styled central planning mentality, perhaps laying the foundation for the nationalization of the U.S. highway system. By reviewing individual state agreements, Obserstar and DeFazio are effectively suggesting Congressional approval of major transportation projects on a case-by-case basis. They are creating conditions that make higher taxes and the federal direction and coordination of all road investments inevitable.

The U.S. is facing a severe transportation capacity crisis, and most everyone agrees that the existing gas tax is not up the task of providing adequate funding. All major metropolitan areas are expected to see significant increases in congestion in the coming decades. By 2030, 12 urbanized areas will have congestion levels equivalent to current day Los Angeles even with current transportation plans. Now is the time to encourage innovation, not discourage it. Let the states experiment, vigorously and without ideologically motivated Congressional blinders.


Samuel Staley is Research Fellow


Print This