A New Frontier in Privatization: State Roads

The forces of privatization have seized control of schools, jails and water supplies, often with disastrous results. Now the State of Indiana is on the verge of privatizing a 157-mile state toll road that stretches across the northern end of the state. Governor Mitch Daniels hails the proposal as “an unprecedented and probably unrepeatable opportunity.” But critics question the long-term implications of the deal, and worry that it risks tying the hands of the legislature and shortchanging the public. (Thanks, Josh Skov, for passing this item along.)

Here are the general terms of the deal: In return for a 75-year lease to operate the toll road, a Spanish-Australian consortium of investors would give the state $3.85 billion. This sum would be able to pay for the state’s road-building needs for the next ten years. The contract would require the consortium to meet certain standards of pavement quality, police patrols and landscaping. The consortium says it plans to spend $200 million over the next three years upgrading the road.

Is this a great deal for Indiana taxpayers and drivers — or a short-term fix with enormous long-term risks?

This much is known: Tolls would rise over the next four years from $4.65 to $8 for passenger cars. Rates for big-rig trucks would go from $14.55 to $32 in 2009. After that, the contract language is vague, according to the Indianapolis Star (January 24, 2006). The deal also has a “non-compete” clause prohibiting the state from upgrading a road that runs parallel to the toll road. The investor consortium would also reap certain tax benefits.

From the details of the Star’s news account, it’s hard for the concerned citizen to do a serious economic evaluation of the privatization plan. A short-term infusion of $3.85 billion sounds like a lot of money. But begin to amortize such money over 75 years — and figure in new, unregulated toll increases — and a different picture may emerge. Moreover, it’s hard to know if the state would be prohibited from pursuing new transportation options — new roads? rapid transit? rail? — if this proposal were consummated.

The Indiana General Assembly needs to check in, and state Republicans are reportedly not united in their support for the deal. So this proposal could fall through.

Even so, the very fact that the privatization of state roads in on the table is a troubling development that only encourages other enclosures of the commons. A marketized road system would turn enfranchised citizens into dependent consumers. They would forfeit their sovereign right of self-governance (using the tax system and state agencies) for a neutered consumer choice that amounts to take-it-or-suffer.

The deal would surrender a prime chunk of public infrastructure to a private monopoly empowered to exploit it to the max. That, let us remember, is precisely what a savvy business does. Whether the public would truly benefit is another issue. Hoosiers would do well to remember the considerable blessings and benefits of the commons before they give away a huge stretch of public roadway for this dubious experiment.