Opinion: Stop the privatization of U.S. 36


Building the U.S. 36 HOV lane is important, but the privatization approach is a huge mistake. CDOT is setting up a no-win situation: the goals of private business are to maximize revenues (from tolls); to minimize costs (on snow removal and maintenance); to limit risk (by financing its investment by selling bonds, and thus reduce its exposure); and to avoid downsides (by eliminating free HOV2, and obstructing innovation that might reduce toll revenues). The public’s goals are exactly the opposite.
This arrangement is nothing like a multi-year lease for a restaurant, where the terms are pretty standard, good deals can be struck because competition is strong, and the leased space is not a critical public asset. This is a one-time 50-year no-exit monopoly on essential infrastructure. Worse, the concessionaire is collecting tolls on one lane but doing the maintenance on all lanes, creating an inherent conflict. With a 600-page Concession Agreement plus numerous side agreements (guaranteeing years of expensive lawyers’ fees) and with highly paid executives on the other side (with vast experience at writing contracts to their benefit), the public will almost certainly come out second best.
The behavior of CDOT and its High Performance Transportation Enterprise (HPTE) division has been appalling. First they said that the agreements are too secret to disclose. Then, after being pressured, they reversed course and made public most of the Concession Agreement, but not the financials. Then in a Wednesday’s Denver Post article, it was revealed that the Goldman Sachs investors will see all the documents, with no exceptions. CDOT should make all the documents public, including detailed long-term projections of traffic counts, toll collections and rates of return. Without these, we have no idea how high the profits could go; I noted an already outrageous 13-plus percent return figure in HPTE’s Summary.
We also need to understand the financial inter-relationships between CDOT, HPTE, the concessionaire, its international owners, and the Federal government, which is loaning a lot of the money. Apparently the concessionaire, Plenary Roads Denver (PRD), is separate legally entity whose assets and liabilities are distinct from its owners. PRD intends to raise capital by selling bonds (actually issued by HPTE), so it could end up with very little skin in the game, kind of like the securitization of housing loans that put us into the Great Recession. So if PRD has financial difficulties, there may be no significant assets to pay off the Fed loans, and we may end up on the hook, negating one of the alleged benefits of this “privatization”.
Policy changes at the state level could disrupt the whole arrangement. The state could intelligently shift from general taxes to user fees to fund most state and local transportation. This would force RTD to raise its rates, since its approximately 80 percent tax subsidy would shrink. Under the agreement, that would push up the minimum tolls, providing more profits to PRD. Or, the Feds might change policy to allow tolling on all existing interstate lanes.
The HPTE board is involved in approving any toll increases (the maximum starts at almost $28 for a two-way trip.) But what are their criteria? Will the process be public? Will their decisions be subject to judicial or legislative review? The PUC process is Byzantine enough as it attempts to regulate private monopolies like Xcel — we’ll see a lot worse nonsense here.
There are financing alternatives for this piece of the funding that don’t involve privatization. For example, if the rules for setting the tolls were clear so that investors actually knew what they were getting into, then the state could issue revenue bonds, or even do a real Public-Public-Partnership, where citizens willing take on the risk get the rewards. A district-based auto registration fee, like the 2009 FASTER fee, could backstop the cash flow to reduce risk. Development impact fees could easily secure the debt; if they were in place, the cash would already be available. With any of these approaches, or actually putting something on the ballot, private sector involvement would be avoided, and the citizens could maintain control of our infrastructure.


Popular Posts

Opinion: Opportunity for the new Boulder City Council

Congratulations to the four new Boulder City Council members! You have a great opportunity to make a contribution to the Boulder community, but it will take a lot of work to do it responsibly; the learning curve is pretty steep. Here are some suggestions for you (and other Council members) that may help improve the process. Read the Charter. It is the document that governs how you, city staff, and board and commission members operate, and how you relate to each other. It defines the limits of your and their power, and can only be amended by a citizen vote. You don’t have to remember every word. But just knowing what’s there makes you more self reliant and less at the mercy of others’ opinions. For example, relative to the recent meeting discussion over diversity, the council does  not  have the power to suspend the rules as to when the mayor is selected. Charter Section 14 specifies, “The mayor shall be chosen by the council from its own number, upon the convening of t...
Read more

Opinion: Is this the end of Boulder as we know it?

Much of what has made Boulder such a great place to live has been the work of people half a century ago. These people recognized what I call the “ ratchet effect ,” that bad development decisions cannot be undone, so policies needed to be put in place to prevent, or at least limit, the damage that a growth-at-all-costs majority of the council could do. These policies include charter limits, like the Blue Line that prevents city water for development from being supplied above a certain altitude, the 55-foot height limit that has prevented high-rise development from cutting off our views, and the open space referendum process that allows a 60-day window for citizens to challenge disposals of open space. Other constraints include the Boulder Valley Comprehensive Plan’s requirement for Planning Board agreement for land-use changes in the area inside the city limits (Area I) and additional agreement by the county commissioners and county Planning Commission for urban development further...
Read more

Policy Documents: Impact Fees and Adequate Public Facilities

I am writing this to correct some of the apparent inaccuracies put forward at the 10/14 CC/PB study session about charging growth for its costs. I do not claim to be an expert in the field, but I have studied it long enough and consulted with enough supposed experts and legal types to understand most of the basics. In addition, I have found that the experts don’t necessarily know everything and won’t necessarily put forward the most appropriate solutions. The fundamental rule, both legal and equitable, is that growth should pay to address its impacts so as to maintain existing levels of service (LOS) for existing residents and businesses. But growth cannot be required to improve levels of service. LOS is measured in all sorts of ways depending on the facility and/or service being measured. For transportation, it could be total VMT, travel time, intersection waits, access to transit, etc. For schools, it might be square footage per pupil, etc. For water, it could be water righ...
Read more