Don't look now, but our public infrastructure is being privatized right under our noses

[tex-wyo-dem]

Push to Privatize Public Roads, Airports, Bridges

Ian Welsh

Business Week writes about how private companies such as Goldman Sachs, Morgan Stanley and the Carlysle Group are buying up private infrastructure such as key roads, airports and bridges (Golden Gate for $3.4 billion and Brooklyn Bridge for $3.5 billion, for example). Cities supposedly think this is a great idea because they get money they can spend on other things.

I don't understand why this is even considered. You don't put basic infrastructure like this in private hands, because it allows monopoly pricing. They will squeeze the most money out of it they can, and that will be the majority of the surplus value produced by the roads. Since they will set the cost to maximize profits, it will be above what some people and some businesses can afford (this is just basic supply/demand graphing -- raise the price, and less people will use a service). What this will mean is that a lot of businesses will make less profit, go under or never be created, a lot of people won't travel even short distances (which will strangle businesses that need those travelers and price certain people out of certain jobs) and will in general reduce economic activity. However much money any government gets in the short term, it will lose more from reduced taxes due to reduced economic activity and reduced economic growth in the long term. (i.e. It isn't just people who use the roads/airports/bridges who lose.)

And odds are, you'll eventually have to either regulate these things to keep prices reasonable (at which point the companies will start shorting on maintenance in order to maintain profit margins) or you'll have to buy them back at a huge markup.

Infrastructure is one of the two very basic jobs of government, and any government that is getting out of it is refusing to do its job.

<more>

http://www.huffingtonpost.com/ian-welsh/push-to-privatize-public-_b_47297.html


Investors await gains as U.S. states privatize roads

Tue Apr 24, 2007 4:12PM EDT

By Joan Gralla - Analysis

NEW YORK (Reuters) - Investors in U.S. tax-free municipal debt have snapped up highway bonds because they hope they will rally when more states raise billions of dollars to build new roads, bridges and tunnels by privatizing.

Any new public-private partnerships likely would require existing municipal bonds to be refinanced and they could be replaced with taxable issues.

"There's usually some tremendous price appreciation when that happens," said Paul Brennan, a municipal bond fund manager with Chicago-based Nuveen Investments Inc.

Bondholders who bought the debt at a discount can snare rich profits from refundings as they are repaid the full par amount.

<more>

http://www.reuters.com/article/reutersEdge/idUSN2443443620070424


Roads to riches
Investors clamor to take over America's highways, bridges, and airports

By Emily Thornton

Updated: 5:54 p.m. CT April 30, 2007

Steve Hogan was in a bind. The executive director of Colorado's Northwest Parkway Public Highway Authority had run up $416 million in debt to build the 10-mile toll road between north Denver and the Boulder Turnpike, and he was starting to worry about the high payments. So he tried to refinance, asking bankers in late 2005 to pitch investors on new, lower-interest-rate bonds. But none of the hundreds of investors canvassed was interested.

Then, one day last spring, Hogan got a letter from Morgan Stanley that promised to solve all of his problems. The bank suggested Hogan could lease the road to a private investor and raise enough money to pay off the whole chunk of debt. Now Hogan, after being inundated with proposals, is in hot-and-heavy negotiations with a team of bidders from Portugal and Brazil. "We literally got responses from around the world," he says.

In the past year, banks and private investment firms have fallen in love with public infrastructure. They're smitten by the rich cash flows that roads, bridges, airports, parking garages, and shipping ports generate — and the monopolistic advantages that keep those cash flows as steady as a beating heart. Firms are so enamored, in fact, that they're beginning to consider infrastructure a brand new asset class in itself.

With state and local leaders scrambling for cash to solve short-term fiscal problems, the conditions are ripe for an unprecedented burst of buying and selling. All told, some $100 billion worth of public property could change hands in the next two years, up from less than $7 billion over the past two years; a lease for the Pennsylvania Turnpike could go for more than $30 billion all by itself. "There's a lot of value trapped in these assets," says Mark Florian, head of North American infrastructure banking at Goldman, Sachs & Co.

<more>

http://www.msnbc.msn.com/id/18396534/

[crikkett]

1. if it's abused maybe we can take it back as imminent domain.

What's good for the working poor is good for the idle rich.

[kenny blankenship]

27. that only works when the G seizes property from the little guy

when, on the other hand, real estate assets are seized from corporations they call it "nationalization" --in a tone of voice usually reserved for "child murder"--and plans for wars and assassinations are then laid to punish the nationalizing party and discourage others from following his example.

[Auggie]

2. Huh? Haven't heard anything about the Golden Gate Bridge...

That would be BIG news on the West Coast.

[progressoid]

10. I think the author of that blog took some liberties with the truth.

I found this blogger who speculates how much it might be worth...maybe the person above "borrowed" his bit from here:

Suddenly politicians around the country are wondering how much cash they might be sitting on. Based on the going rate of about 40 times toll revenues, the iconic Golden Gate Bridge could probably fetch $3.4 billion were California interested in selling. The Brooklyn Bridge? If permission were granted by New York City to charge the same tolls as the George Washington Bridge, a private owner might shell out as much as $3.5 billion for it.

http://lanternbrigade.blogspot.com/2007/04/privatizing-our-infrastructure-oh-shit.html

[w4rma]

25. Advertising rights on the Golden Gate were sold to a firm a few years ago, I believe. (nt)

[phantom power]

3. vicious cycle.

Decades of "government is the problem" conservatism have destroyed the budgets of local governments. Now, those same governments are desperate for money, and so the same conservative knuckleheads figure "hey, since govt is always bad and inferior to private enterprise, let's sell off our public assets to make some quick cash."

I used to hope that eventually things would get bad enough that people would see what an enormous blunder the conservative experiment has been, but I've realized that they probably won't. Because the same corporations own the newspapers, and so there will be noboby do explain it to them.

[tex-wyo-dem]

4. Bingo! Anything that is publicly funded or "socialistic" in nature...

has been purposefully undercut, underfunded and scuttled followed by propaganda saying "see, big government doesn't work." The conservative/hyper-capitalists/corporatists have pushed for this for decades in their dream of a privatized world where corporations and monopolies reap the benefits, governments are inconsequential and the consumer gets screwed.

[loudsue]

5. That has been the fascist (corporate control of gov't) aim since WWII

The fascists left Germany and were welcomed with open arms by the fascist party in the United States, many members of which were, and are still, in the republican party.

Corporate ownership of government IS fascism. Look up the history of it.

I was PARTICULARLY proud of Bill Maher last week when he mentioned that little piece of information, and more and more people need to keep repeating it until the republican base "gets it".

:kick::kick::kick:

[Morgana LaFey]

20. Yes, and thank YOU for making it explicit in this discussion

Few Americans -- and not enough DUers -- actually understand what fascism is, and that that's pretty much what we've got right now. The totalitarian aspect is nicely camouflaged with the veneer of a democratic republic, but it's there, coiled and ready to strike.

[donkeyotay]

16. Just like the electric utilities. They said private was cheaper

Then we had that lousy blackout and the taxpayers got robbed for billions to pay for the maintenance that hadn't been done by the privateers. Bureaucracy might be inefficient, but with privatized you pay for profits, at best. At worst, you pay for corruption.

[gauguin57]

6. Here in Pennsylvania, the Rendell administration (D) is trying to lease out the Turnpike

to a private concern. I can foresee a day when I'll have to pay $15 to drive 30 miles of the 'Pike.

A lot of people are up in arms about this, and mad at Rendell et al.

[Kool Kitty]

8. They're talking about doing this with the NJ Turnpike, too.

[RaleighNCDUer]

7. Gee, I guess that means that next time someone says they have

a bridge in Brooklyn to sell, they could be telling the truth.

[kwyjibo]

9. How do you make money from owning a road or a bridge?

Are these already toll roads they're wanting to buy, or are they going to make them toll roads?

[Kat45]

15. Both.

I was just reading about this. It is horrible.

[Nikki Stone1]

11. YES. This is CRUCIAL everybody.

BIG RECOMMEND.

[AnnInLa]

12. PLEASE read "No Logo" by Naomi Klein

People have no idea how far this has gone. This book will explain it all to you in language anyone can understand.

[tex-wyo-dem]

13. Good Mother Jones article on water privatization

Mother Jones: Water for Profit

Even before the water turned brown, Gordon Certain had plenty to worry about. With his north Atlanta neighborhood in the middle of a growth boom, the president of the North Buckhead Civic Association had been busy fielding complaints about traffic, a sewer tunnel being built near a nature preserve, and developers razing tidy postwar ranch homes to make room for mansions. But nothing compared to the volume of calls and emails that flooded Certain's home office in May, when Georgia's environmental protection agency issued an alert to North Buckhead residents: Their tap water, the agency warned, wasn't safe to drink unless they boiled it first. Some neighbors, Certain recalls, had just fed formula to their baby when they heard the alert.

"I had parents calling me in tears," he says. "The things that have happened to the water here have sure scared the hell out of a lot of people." A month later, another "boil water" alert came; this time, when Certain turned on his own tap, the liquid that gushed out was the color of rust, with bits of debris floating in it.

Atlanta's water service had never been without its critics; there had always been complaints about slow repairs and erroneous water bills. But the problems intensified three years ago, says Certain, after one of the world's largest private water companies took over the municipal system and promised to turn it into an "international showcase" for public-private partnerships. Instead of ushering in a new era of trouble-free drinking water, Atlanta's experiment with privatization has brought a host of new problems. This year there have been five boil-water alerts, indicating unsafe contaminants might be present. Fire hydrants have been useless for months. Leaking water mains have gone unrepaired for weeks. Despite all of this, the city's contractor -- United Water, a subsidiary of French-based multinational Suez -- has lobbied the City Council to add millions more to its $21-million-a-year contract.

Atlanta's experience has become Exhibit A in a heated controversy over the push by a rapidly growing global water industry to take over public water systems. At the heart of the debate are two questions: Should water, a basic necessity for human survival, be controlled by for-profit interests? And can multinational companies actually deliver on what they promise -- better service and safe, affordable water?

<more>

http://www.motherjones.com/news/feature/2002/11/ma_144_01.html

[Auggie]

17. Water privatization is the scariest. For-profit interests will NEVER put public

saftey first.

[Patiod]

22. You beat me to it

I'm way more concerned about the privatization of water than of roads/bridges, probably because I live in a place where toll roads and toll bridges have been the norm for 300 years. Not that I approve, just that we're used to it out here in the Mid Atlantic - a lot of our roads end in "Pike" as in Germantown Pike, Lancaster Pike, etc., indicating that at one point, there used to be a block (or pike) set up, and the traveler had to pay someone to get by it. I know people raised in California that are maddened by it.

I had my father investing my IRA money for me (he enjoyed it and is retired, I didn't and was traveling a lot). He put way too much of it into water stocks - he never really got the concept of diversifying. If it were anything else, I would sell most of it and spread it out, but I'm afraid, based on everything I've read, that Aqua America is the new Exxon. Which is okay for my retirement money, but not so great for America.

[GuvWurld]

14. Two words: Voting machines

Democracy itself has been privatized, outsourced, neutered and rendered moot.

[Skidmore]

18. Just heard today on NPR that the cable industry is being privatized as

well.

[ProgressiveEconomist]

19. What's going to happen when these formerly public "assets" don't generate the

blue-sky returns the dealmakers promise?

This sounds to me like the knd of thing that happens just before an asset-bubble bursts. Who's going to pay higher and higher roadway tolls, airport fees, and water bills? Not the millions of people who work for a living, who are not benefiting from their skyrocketing productivity over the last few decades.

The question I'd focus on is, who's going to take over when investors abandon these assets because they aren't delivering adequate returns?

Blame Alan Greenspan for this state of affairs. SMU economics professor Ravi Batra explains most clearly how (1) Greenspan's huge increases in FICA payroll taxes to transfer trillions to the rich in "income tax cuts" and (2) his mismanagement of the world monetary system have starved middle-class spending on basic needs and created huge pools of increasing trillions of dollars to chase depreciating and diminsihing assets.

The money that's going to be wasted on these "privatization" deals ought to be going to workers who'd have spent it on housing, US-built appliances, Detroit-built autos, etc., to keep demand growing as fast as supply. When the Greenspan asset bubble finally bursts, it's going to be difficult to put the economy back together again. In October 1987 and March 2000, we've already had previews of what's going to happen again sometime in the next few years.

[entanglement]

21. Captive customers, ultra-low risks, throwaway prices, high profits - the bloodsuckers love it

Too incensed to write a lengthier reply...

[Joanne98]

23. What they privatize, we will nationalize!

[paparush]

24. The Revolution is on Pay Per View

[madokie]

26. I was reading about this the other day and I'm still sick to my stomach

about it too. this sucks big time.