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Cintra bankruptcy pending

September 3, 2014

“Many libertarian think tanks like Reason Foundation and Cato Institute and even the conservative Heritage Foundation have called for the use of P3s as a free market solution to funding roads. However, the devil is in the details. There are private roads, but public infrastructure is inherently a governmental function. So free market principles don’t apply. It’s why we have eminent domain – the public understands that sometimes private property must be condemned for public necessity. But under P3s, that land is taken for a private profit.

When a private corporation gets a hold of the toll rates in a government-sanctioned monopoly, the rates are punitively higher than publicly-operated toll projects. On Interstate 635 in Dallas, Cintra uses congestion tolling (where the toll rate varies based on the level of congestion) and charges Texans 95 cents a mile to access its toll lanes during peak hours. Once the full project is open, it’ll cost more than $24 a day to get to/from work.

P3s also have non-compete provisions that allow the private corporations to dictate when and where free public roads surrounding their toll roads can be expanded. Cintra’s SH 130 contract contains a non-competition clause that prohibits the expansion of freeways in all of Caldwell and Guadalupe counties, with the exception of I-35, during the life of the 50-year contract. Texas taxpayers are also on the hook for any ‘uncollectable’ tolls on SH 130, including unpaid tolls from visitors across the border.”

The next paragraph of the article goes on to discuss how the company got special permission to raise the speed limit, something that has only been done for this stretch of road.

First of all, one might think that I might be in support of this PPP (P3) which stands for Public Private Partnership.  I am not.  I am all for private roads.  I’m against the use of eminent domain to grab land for these roads.  I’m against the backing of debt for a private venture with tax dollars.  I don’t have a problem with private companies changing tolls based on demand.  I am against the assumption that government must take care of roads.  I’d go into the rationale and history behind these choices, but I’ll not do it in this blog post.

Here’s a radio interview with Matt McAffrey on private roads.  The interview starts at 13:00 and ends at 25:00  Hopefully this will whet your appetite for more information on how these could work.

If I were to support a private road, it would have to meet these basic criteria:  1.  Land is purchased at market value and eminent domain could not play any roll at all in acquiring land.  2.  ALL financing would be provided by the private entity and there would be no tax payer backing of any aspect of the project financing.  3.  the operator would have complete control over the tolling including premiums for peak usage.  It’s their project, they should be free to pass costs along to the consumer in a manner most consistent with their financial aims. 4. There should be no monopoly of transportation in the given area.   It looks like the Cintas project doesn’t meet any of those criteria and I’ll be glad to see the whole thing go down in flames.

I’m fairly disgusted by several other aspects of the project.  TXDoT gets a revenue sharing provision for having failed to keep roads managed well enough that that such enterprises would think they had a market.  Government profiting from poorly managed assets just rubs me the wrong way.  I’m sick of it.  TXDoT gets a share of consession revenue?  More of the same.  Seeing that TXDoT allowed them to raise the speed limit on the toll road and then lowered the speed limit on competing roads is just deplorable.

“On Cintra’s two projects in Dallas-Ft. Worth, not only did it grab two TIFIA loans that combine to equal $1.5 billion, it secured over $1 billion in Private Activity Bonds (PABs, tax-exempt bonds), and $1 billion in gas taxes for a combined project cost totaling $4.7 billion. Indeed, on I-820, the taxpayers put more cash into the deal than Cintra. So there is simply no way any person confronted with the facts can call P3s free market in ANY way. They’re a form of corporate welfare that socializes the losses while the special interests walk away with all the profits.

Cintra even managed to convince the Dallas Fire & Police Pension Fund to invest in its expensive, risky I-820 and I-635 toll projects. Who’s risking whose money here? It sure isn’t the private corporations. Do you think any government will let these roads fail when its public employee pensions and such vast amounts of public money are at risk in these deals? This is yet another way to guarantee a taxpayer bailout. So you can be sure this is by design to set-up a system too big to fail.”

This was an interesting and infuriating article.  It’s well worth the time to read the whole thing.  It has a great deal of applicability as the I-820 project will impact a large number of us that live in Watauga.  I even travel the I-635 portions of their project though I usually take surface streets to avoid the slow-downs on the road as it is in the midst of construction still.

While I disagreed with many of the authors assumptions, like these two sentences [There are private roads, but public infrastructure is inherently a governmental function. So free market principles don’t apply. ]  but there is a lot of good information in the article.  These are the kinds of things that make me think that Rick Perry is a loser and a poor candidate for the office of President.  In general, it’s also a hallmark of the lying Republican party that dress these projects up to look good while making money hand over fist and then crying with the tax-payer when it all comes apart at the seams.

It would be interesting to see who got contracts for these projects and how much they had contributed to political campaigns.  That might be too big of a dose of reality though, and we’d not want that.  It is sufficient to make me think that when you hear our State level politicians talking about how good our fiscal position is that you should take that with a huge grain of salt.



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