Stephen Rees's blog

Thoughts about the relationships between transport and the urban area it serves

Wall Street’s Next Target: Roads and Bridges

with one comment

David Bollier, Posted September 9, 2008.

The article is a response to a New York Times piece in favour of more road (and bridge) privatisation. And it seems to be mostly about how biased that article was. He does produce a neat summary of why privatisation may not be such a great idea – as a counter balance to the Times. But it does not say anything about recent developments, which have taken the shine off this t wheeze for making money at the public expense.

The first one is the decline in car miles travelled – which is better documented in the US than here. The slumping economy and the steep spike in gas prices have reduced traffic and increased demand for transit. At the same time, transit systems are seeing thier costs rise and their revenue sources reduced. US transit systems rely on sources like gas tax and salkes tax to cover what fares don’t, and many are actually proposing service cuts at the same time as demand is rising. So having a toll road or bridge is not necessarily the license to print momey it once was.

The second one is that the credit crunch has hit the companies that have been working hardest in this field. Investors are increasingly skittish, but also many of these firms have a lot of asset backed paper in their portfolios which is now hard, of not impossible, to value. This means it is harder to raise the funds needed to bring of these deals, which often require a huge up front investment for a very long term pay back. When the market gets jittery, longer term funds get much more expensive and harder to find.

And of course, some of the earliest adopters of privatisation are rubbing their wounds and seriously looking at taking back assets under their own control and getting rid of their “partners”. The French privatised water 100 years ago – but that does not mean they liked what happened and are now ending those deals. Transport for London had to bale out of the Undergound privatisation – and has also taken back the Croydon Tramlink, a deal which was working but was still found to be much more expensive than an inhouse operation. This is not to say that no contract has ever worked – or cannot be made to work – but P3s are not of themeselves a panacea for every ill. And the mantra “private good, government bad” is mindless.

Written by Stephen Rees

September 9, 2008 at 8:15 am

Posted in privatisation

One Response

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  1. As far as I understand, in Australia, P-3’s projects for bridges have not had a happy time. Dublin’s LUAS & Nottingham’s LRT, both true P-3 projects (both consortium’s had to go to real international banks to get loans) are running at a profit (including paying their debt servicing charges which TransLink never includes). A phone call last night from a source from North Van. said that in a presentation to council, the head of Metro (GVRD) said that TransLink did not have the funds to pay for the Canada line after 2012.

    Now, wasn’t the RAV/Canada Line a P-3? Wasn’t the SNC Lavalin led consortium taking the risk for not only building the metro, but operating it? Where did SERCO, the train operating company originally in the SNC/L consortium, disappear to? What is the real story here, is the taxpayer being forced to bail out a Chaleroi style (metro) white elephant?

    Malcolm J.

    September 9, 2008 at 10:31 am

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