Costco Connection - October 2007

from experts in the field:

Geoffrey Segal is the director of privatization and government reform at the Reason Foundation ( www.reason.org), a nonprofit think tank.

SEPTEMBER DEBATE RESULTS:
Should we rely more on nuclear
power to meet our energy needs?

THE TRAGIC BRIDGE COLLAPSE in Minneapolis clearly demonstrates the need to rethink how our nation’s infrastructure is financed, built, maintained and operated. A Reason Foundation study found nearly a quarter of the nation’s bridges are structurally deficient or functionally obsolete. Our current system is broken because it emphasizes political priorities over real priorities, leaving us with crumbling roads, busted levees and leaking pipes.

NO YES 47% 53%

We hear that governments don’t have the money to pay for everything needed. In the wake of the bridge disaster, ill-advised tax increases have been suggested. There’s a better way: public-private partnerships. Public-private partnerships offer a promising shift. The government and private sector join together, bringing the best of both worlds.

Percentage reflects votes
received by September 13, 2007.

Consider how they’d partner to build a new road. The government would own the road, but, rather than using taxpayer money, the private sector would pay to build, operate and maintain the road, making its money back by charging tolls. Only users would pay. If you never drive on the road, you never pay for it.

What about accountability? Won’t the private sector be focused on profits over quality?

AUGUST DEBATE UPDATE:
Should government play a role in
managing health insurance?
YES: 57% NO: 43%
Percentage reflects votes
received by August 31, 2007.

Bridges falling down are bad for business. Public-private partnerships bring more accountability and transparency than today’s traditional methods. These agreements include strict performance guidelines and expectations about construction, materials and even how quickly snow or road kill must be removed. The detailed contracts ensure government control over the infrastructure and contain stiff financial penalties for poor performance. A company could spend billions building a bridge and then lose it to the government if it didn’t meet contract requirements.

The private sector builds our homes, cars, appliances and nearly all of the nation’s military equipment. We trust the private sector to fly our families across the country. With government oversight, we can trust the private sector to fix and build our bridges and roads too.

The rest of the world is already using these partnerships. Yet we’re stuck with rotting infrastructure being held hostage by politics and government inefficiency. It’s time we catch up with the rest of the world and allow private-capital markets to help rebuild and improve our infrastructure. Our economic competitiveness and public safety depend on it. C

from experts in the field:

Tim McFeeley is executive director of the Center for Policy Alternatives ( www.stateaction.org), an organization that works through state legislators to achieve progressive change.

A NEW CRAZE is sweeping across our nation’s states and municipalities: selling or leasing public assets, such as roads, bridges, seaports, utilities, lotteries, parking garages, water systems and airports, to private, mostly for-eign-controlled companies. In fact, private investors have approached more than half of all states, proposing long-term leases to privatize public assets. The publicly stated rationale in favor of these sell-offs is that private

enterprise operates more efficiently than government, but the real motivation is to grab some quick cash so politicians won’t have to make the tough decisions to raise taxes and fees.

Privatization of public assets drains money out of the public sector and hands it to private interests. The payback to the private companies is enormous, and that payback comes from the pockets of individuals who end up with higher water bills and road-toll hikes. For example, Merrill Lynch estimated that under the 75-year lease of an Indiana toll road, the private owners will break even in 15 years and ultimately realize $21 billion in profits.

Often public assets such as roads and airports are constructed through use of the government’s power of eminent domain. Transferring these assets to private interests essentially undermines the constitutional and legal balance between the public and private sectors and hands monopoly power and a derivative eminent-domain power to profit-making companies.

Additionally, once these assets are sold, the public loses control over the quality of the services they provide and the fees being charged for them. The profit motive drives the new owners to cut costs, including labor costs, and raise fees, leaving consumers nowhere to turn for relief.

Ceding public assets to private foreign companies also imperils our homeland security. A
bridge or water system controlled by a Venezuelan or Chinese company is a frightening thought.

But probably the most significant argument against the sell-off of public assets is that it enriches the current generation at the expense of future generations. Our grandchildren will be saddled with the burden of paying higher fees for lower-quality services or buying these assets back when the deals go sour. As guardians of future generations we have a moral obligation to pay now for the services we are consuming and not pass these costs on to our children. C

Opinions expressed are those of the individuals or organizations represented and are presented to foster discussion. Costco and The Costco Connection take no position on any Debate topic.