More Issues In the News

BY PHINEAS BAXANDALL

Faced with desperate budget deficits, Gov. Charlie Crist has proposed a number of privatization deals to build or operate roads. Private investors would borrow upfront cash to pay the state and then charge decades of escalating tolls to Florida drivers.

While the public has focused on the toll hikes that would follow, a number of other dangers deserve attention.

Furthest along among these deals is Alligator Alley, which runs from Fort Lauderdale and Naples and is already at a second stage of bidding by toll companies. Not far behind is a proposal to lease the Sunshine Skyway bridge along I-275, the BeachLine Expressway in Orange and Brevard counties and the Pinellas Bayway System in Pinellas County. Also under consideration is a long-term toll concession to connect I-10 on the western side of Jacksonville and I-95 in northern St. Johns County.

Much like the recent spate of no-money-down mortgages, private toll-road deals are driven by a profitable new industry that offers a quick solution to short-term cash-flow problems. The new highway merchants offer politicians upfront cash, innovative financing and tolls that typically start low and grow steeply over time. Profits increase with greater traffic, higher tolls and less investment in the roadway -- interests at odds with those of the public.

Like the mortgage brokers, the toll-road industry asks to be trusted to better handle the public's financial risks. They also typically sell the investment to other financial traders while continuing for decades to impose restrictions and collect hidden fees from the public.

Privatization contracts, such as those proposed for Alligator Alley, can have a variety of hidden costs. The contracts run for hundreds of pages and are peppered with references to ''adverse actions.'' These refer to situations in which the private road operator can sue the public for decisions that may reduce the flow of traffic -- for instance, if the state requires new safety measures or if too many emergency vehicles enter the toll road. Monitoring compliance and ongoing litigation over the contract will require a team of state lawyers at great expense.

The problem is not simply that Florida will take on added hidden costs, or that officials will be forced to make decisions based on what's in the contract, rather than what's best for the public. More troubling, the public will lose control over planning its own transportation infrastructure.

The pitfalls of private toll-road deals are magnified by their extraordinary length, such as the proposed 50-year Alligator Alley deal. Tax laws dictate such length. Private road companies can realize highly lucrative tax subsidies, but only if the contract lasts longer than the expected life of the road.

At best, private road deals look more like the Port of Miami tunnel project. The city of Miami and Miami-Dade County have used the public sector's lower public borrowing costs to raise much of the funds. Private investors will build the tunnel using advanced tunnel technologies, but have no subsequent right to increased tolls or to sue the state for reduced traffic.

Instead, the investors will be paid by the government for keeping lanes available for 35 years and will receive lower payments if lanes close. This deal may not be perfect or necessary; but it's much smarter than the quick-cash versions moving forward in other parts of the state.

Florida should continue to use private contractors when they can provide discrete services better and more cheaply. But seeing privatized toll roads as an easy way to balance state budgets is a mistake. Like many of those ''innovative'' mortgages, if a deal seems too good to be true, it probably is.

Phineas Baxandall is a senior analyst for tax and budget policy at the Florida Public Interest Research Group.