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Why the public should be nervous. Article in Businessweek

Roads To Riches
by Emily Thornton

Why investors are clamoring to take over America's highways, bridges, and airports—and why the public should be nervous

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 (MS ) 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....... .

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By Mayme at 04/30/2007 - 17:06 | Corporations | News | login or register to post comments

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Public versus private corporations

The distinction between private corporations and public corporations (variously sized governmental entities) is really not that great. The private corporation is a legal construct that's recognized by the state as having rights and obligations similar to a person. The public corporation is a legal construct that differs from the private mainly in its legal right to use physical force to back up its rules and regulations, commonly referred to as the power to police.
And the rationale for granting the power to use force arises from the assumption that the primary purpose of the public corporation is to prevent harm, while the private corporation is assumed to be engaged in doing good--i.e. what people want.
Which is why I'm ambivalent about proposals to let private corporations assume responsibility for building, maintaining and managing thoroughfares. It's true that our experience with the railroads has not been entirely satisfactory. But, in large part, that's because we gave away public assets (rights of way) to private entities without retaining an enforcable guarantee that the expected services would be provided, regardless of profitability.
Our ability to "travel" freely about our country is a basic guarantee in our social compact (Constitution), but I'm not sure that necessarily extends to the vehicles we are inclined to use.
So, at this point, especially since the use of personal vehicles is going to have to decrease, I'd give serious consideration to letting private entities purchase our highways and major thoroughfares, IF the funds derived from the sale are applied to public transit on rails, which is surely the least environmentally destructive mode of mechanical transportation.
By monica smith at Tue, 05/01/2007 - 9:33am | login or register to post comments