Category: Public Private Partnerships
Link to article here.
Ohioans sideline sale of Ohio Turnpike
By Terri Hall
January 19, 2013
In a victory for state sovereignty, property rights, and taxpayers, the grassroots managed to defeat Ohio Governor John Kasich’s proposal of selling off the Ohio Turnpike to a private toll operator using a controversial public private partnership (P3). The state officially pulled the plug on the P3, announcing the turnpike would stay public but the state will issue bonds backed by future toll revenues to generate needed cash. Kasich considered the turnpike an ‘unused asset’ that he could sell-off for a half century to get $3 billion now for other road projects. But Ohioans had a different opinion.
At the first public hearing held by the state to get public feedback last summer, 75 of 77 attendees said they were against privatizing the Ohio Turnpike. The Cuyahoga County Commissioners in northern Ohio opposed the sale. Many pointed to the poor conditions of the Indiana Toll Road once it was handed to Spain-based Cintra and Australian company Macquarie in a 75-year lease. Rates more than doubled, maintenance went down, and the concession company is struggling financially.
A lawsuit was filed last August in Franklin County to challenge the Constitutionality of the sale of public assets to private interests. A consumer group, the Public Interest Research Group (PIRG) released a report citing eight concerns with privatizing the Ohio Turnpike, including the state’s ability to expand parallel free roads due to non-compete agreements. P3s erode state sovereignty over its public infrastructure and can hamper future policy decisions based on what the state gives away in these sweetheart deals.
Kasich said it was lease the turnpike or face a gas tax hike. Some local officials believe Kasich yanked back the Inner Belt project in Cleveland citing a lack of funds in order to force the locals to support the lease to generate cash. It didn’t work. They suspected politics was at play and didn’t bite, though the local chamber of commerce predictably fell in line. The governor’s new plan to go into bond debt backed by future toll revenues and toll hikes on trucks in order to pay for other projects around the state is a departure from current road policy. It will take a change in state law in order to divert toll revenues.
The playbook has been identical for many governors across the nation, most Republican, but there are plenty of Democrats like former Governors Ed Rendell of Pennsylvania and John Corzine of New Jersey, in the mix, too. Cash-strapped states look to sell-off public infrastructure to get some quick cash for any number of things -- from road projects to filling the gaps in the state budget. Politicians see it as a way to extract money from taxpayers without formally raising taxes. But no matter what, the traveling public will be paying back the money for the P3 lease deals with interest and profits -- for generations.
Repeal the gas tax?
Virginia Governor Bob McDonnell recently floated the idea of replacing the state gas tax with a hike in sales tax to pay for roads. Gas taxes haven’t been raised in most states or at the federal level for decades. Lawmakers aversion to voting for direct tax hikes have caused many to push for indirect tax hikes through tolling and leasing public roads to private toll operators who get public subsidies, profit guarantees, and the privilege of charging much higher toll rates in a state-sanctioned monopoly for a half century or more.
Virginia was a pioneer in P3 projects when it passed the Public-Private Transportation Act over 17 years ago, but the controversy and public opposition to tolling has come home to roost. When a toll hike on the Dulles tollway was going to fund a Metrorail project to the airport, a road-user revolt and litigation ensued. Virginia’s Downtown-Midtown MLK P3 expands an existing free facility and slaps tolls on it, without a free alternative, and a public backlash followed.
So McDonnell is heading a different direction. He also proposes other tax hikes for transit and rail. The problem with all of these scenarios comes down to truth in taxation. We’re getting further away from the users of the road or project paying for the project. Taking a portion of a general sales tax to pay for roads means some who don’t use the roads will be paying for them, and McDonnell’s proposal to hike vehicle registration fees to pay for transit and rail, makes vehicle owners pay for transit and rail that they don’t use. Both get away from taxation tied to the user.
But the gas tax is a declining source of revenue and most states have not even adjusted it to keep pace with inflation. So the gas tax has not kept up with road needs, and politicians continue to borrow, to impose tolls -- the most expensive way to fund roads -- or to obfuscate in order to avoid addressing the elephant in the room -- we need a way to continue to fund our public roads without resorting to sovereignty-threatening P3s and expensive, complex toll arrangements that cost taxpayers far more.
In Texas, a plentiful and growing revenue source tied to users of roadways is the vehicle sales tax -- a $3 billion pot of money and projected to grow $600 million year. Since the price of a car is set by the free market and goes up with inflation, it’s an ideal source fo revenue for public roads. But rather than dedicating the vehicle sales tax money to roads, it’s being dumped into general revenue and funding general government.
Meanwhile Texas Governor Rick Perry claims Texas is out of money for roads in order to justify tolling everything that moves. Starving and canibalizing road user fees has not only led to more tolling and P3s in Texas, it’s spawned a debt habit taking Texas from pay-as-you-go debt-free to leading the nation in road debt, $31 billion, since Perry took office. State leaders have also habitually raided gas tax revenues for non-transportation purposes. So a little truth in taxation is in order in toll-heavy Texas to get the taxes we already pay for roads to their intended use.
While Ohioans chalked-up a big win by defeating the lease of the turnpike, it has some work to do to prevent the borrow and spend debt spiral our politicians continue to ram down our throats. It goes to show our elected leaders aren’t really tax averse, debt averse, or concerned about the affordability of public travel. They’ll railroad these initiatives by bypassing the voters and gladly outsource the tax hikes to un-elected toll agencies -- keeping their own voting record clear of a direct tax hike. Taxpayers’ job is to call them on it and hold them accountable so we can return to sensible, fiscally sound, affordable public road policy in America.
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