Highway Robbery

Taxpayers get run over as public highways go private


| January 4, 2007


Fixing potholes is often cited as the quintessential job of government. But many US politicians are looking to private investors to do their jobs for them, and the American people are picking up the tab. The Federal Highway Administration estimates that current highway funding will need an infusion of $800 billion over the next 16 years, just to rehab existing bridges and roads. Privatization is being billed as a win-win solution, one in which the roads get fixed and citizens don't have to pay higher taxes. But Daniel Schulman and James Ridgeway, writing for Mother Jones, warn that such deals may be 'a major turn toward handing the nation's common property over to private firms, and at fire-sale prices to boot.'

Lawmakers tend to see privatization as a way to fix highways without taking the politically unpopular step of raising taxes. 'Privatization promises a quick fix,' say Schulman and Ridgeway, 'and a way to outsource difficult decisions, like raising tolls, to entities that don't have to worry about getting reelected.'

The problem is that voters and taxpayers get left out of the equation -- and ultimately end up paying the price. Eileen Welsome of the TexasObserver reports that that privatization may lead to 'double taxation,' whereby motorists are charged both through expensive highway tolls and traditional taxes. To make things worse, writes Welsome, 'the large, multinational companies and global investment firms are often using taxpayer-supported bonds, loans, and grants from sources such as Texas' State Infrastructure Bank, the Federal Highway Administration, and the Federal Department of Transportation.'

What's more, the profits turned from that private capital isn't going back into communities or even staying in the country. Foreign companies such as Cintra and the Macquarie Infrastructure Group have been major investors in highway privatization projects, meaning that the profits from those projects will be exported to Spain and Australia, respectively. It's a scenario that particularly rankles conservatives, already piqued by double taxation. Mother Jones quotes conservative activist Phyllis Schlafly asking, 'Why the rush to sell our transportation systems to foreigners?' But even the lefty consumer rights pioneer Ralph Nader has compared the situation to the Louisiana Purchase, where a huge revenue source is given away for 'a miniscule up-front payment.'

In spite of such attacks, privatization efforts are moving ahead at full speed. Cintra and the Macquarie Infrastructure Group recently purchased a 157-mile Indiana toll road for $3.8 billion, and other private infrastructure deals are being planned from Alabama to Alaska. 'Don't be fooled,' Dollie Cole tells the Texas Observer. 'You are paying for a road twice and will continue to pay throughout your life and throughout your children's driving life.'

Go there >> The Highwaymen from Mother Jones