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Tuesday, April 7
The Indiana Daily Student

Proposed privatization of I-69 not new debate

Experts: Public-private partnership a possible solution

Across the country many people have been debating the privatization of highways, coming to their own differing conclusions. When Gov. Mitch Daniels proposed privatizing Interstate 69, he brought this debate home to southern Indiana.\nThat national debate is between those who agree with Daniels and say that privatization is the only way to fund the highways that states need, and others who say that it is an unaccountable and irresponsible way to build highways.\nThe highest profile example of a privatized highway and the one Daniels cited repeatedly during a town hall meeting in Bloomington on Sept. 29 was the 99-year lease of the Chicago Skyway to a private corporation for $1.83 billion, and both sides use it as an example in defense of their view.\nOpponents cite the almost immediate increase of the toll from $2 to $2.50 once the private company took control of highway.\n"The contracts are written to ensure the private companies make a profit," said Thomas Tokarski, a co-founder of Citizens for Appropriate Rural Roads, at its annual meeting last month.\nBut, the Skyway also shows the benefits that can come from privatizing a highway, supporters say.\nThe city of Chicago had a $5.3 billion debt which has been accumulating with an interest rate of 5 to 12 percent, according to a study by the Reason Foundation called "Should states sell their toll roads?"\nThe report calculated the city was only getting a 0.4-percent return on its investment in the Skyway. By selling it for $1.83 billion and using that money to pay down the debt, the city can save money each year, the report said.\nBut, Ellen Dannin, a law professor who specializes in privatization issues at Wayne State University in Detroit, said the only way to convince a company to lease a toll road is to have a non-compete clause in the contract. \nThese clauses counteract any benefit that could have come with privatization, she said. A non-compete clause states that the roads around the toll road are not allowed to be improved, and in some cases the speed limits around the toll road are reduced.\nThe supposed benefit of privatization is to have the roads enter the free market where market forces will force the tolling authority to become more efficient, she said, but non-compete agreements shut down the market.\n"If you're going to get rid of the markets, what is the point of privatizing?" she said.\nEven with non-compete clauses, no privatized toll road has made a profit, she said. The only reason governments push for privatization is ideology.\nA good example of a privatized toll road with a destructive non-compete agreement is E-470 outside Denver, she said. The agreement said that speed limits on highways around the toll road be reduced from 55 mph to 40 mph. Also, a number of "useless" traffic lights were added, she said.\n"They make it so unpleasant to drive on nearby roads people will be forced onto (the toll road)," she said.\nNew research is trying to find a way around non-compete clauses.\nKhali R. Persad, a research associate at the University of Texas's Center for Transportation Research, conducted a research project that examined alternatives to using non-compete clauses.\nWhen negotiating the privatization contract, it is essential that the state does not get all the risk, he said in an e-mail. If the risk is shared by using the "best practices" he identified, such as sharing excess revenue or guaranteeing a minimum amount of revenue, the private sector can safely help to build highways faster than the government alone.\n"If (the companies) are willing to risk their money, certainly it's worthwhile to partner with them," he said.\nOne reason that privatization has become more popular recently is that it is the only way many states can afford to build the highways they need, said Joesph Schwieterman, director of the Chaddick Institute for Metropolitan Development at Depaul University.\nGas tax revenue, which is used to build and maintain roads, has fallen because of a combination of higher gas prices and more fuel-efficient vehicles which means less gas is consumed, he said. \nStates can barely afford to maintain existing roads, let alone build new ones, he said. Many of the highways and bridges built in 1960s and 1970s are just now reaching the end of their effective lifetimes and must be replaced to add an even bigger burden.\nStates have no other option than to experiment, and privatization is the most promising experiments they have tried, he said.\nSchwieterman calls privatization an experiment, but Dannin said it is a "lottery ticket" -- taking the chance that it will work.\n"It's like going to a casino and putting all their money on red," she said.

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