Moving Ahead for Progress in the 21st Century Act

Floor Speech

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Mr. DURBIN. The Senate will vote today on the Bingaman-Durbin amendment to the Transportation bill. This amendment will help protect taxpayers when local governments sell or lease public roads and bridges.

The Federal Government provides States and local governments billions of dollars to build, maintain, and improve transportation projects across the country. Federal funding has helped build and maintain roads when local and State governments couldn't afford construction or upkeep on their own. Federal taxpayers have picked up the tab for millions of transportation projects across the country.

The Senate Transportation bill provides States with an average of $40 billion per year to help them upgrade their roads and bridges. These Federal investments have created thousands of jobs and helped our economy. But the temptation to cash in on these projects is great, particularly as States and cities are looking under every rock to find new sources of revenue. Some local governments and States are interested in selling or leasing their highways.

Private hedge funds, banks and investment groups offer States and local governments large, lump sum payments in exchange for the complete control of critical transportation assets. Local governments receive massive, upfront payments to help them fund other local priorities. The private financiers get complete control of a highway for decades--sometimes for as long as 99 years. Sometimes those private entities are able to provide responsible upkeep of the asset over the long run. But too often, the services are reduced, prices go up, and maintenance isn't all it should be. The Federal taxpayer is left holding the bag.

Privatization deals like this set up a turn-key operation where the Federal taxpayer pays for critical infrastructure improvements, only to have local governments turn around and sell or lease this infrastructure for a one-time payment they keep themselves. All levels of governments are facing serious budget shortfalls. The Federal Government shouldn't incentivize local and State governments to make rash, short-term decisions that lease transportation projects for generations just to solve temporary budget shortfalls.

The Bingaman-Durbin amendment will ensure taxpayers are not paying States twice for highways that are sold or leased to private operators. Highway funding has historically been distributed through complex formulas that include the number of lane miles of major roads in each State and the amount of traffic on those roads.

The FHWA formulas are meant to help States pay for the maintenance and upkeep of those roads. However, when States sell or lease their highways, they are paid massive lump sums in exchange for transferring responsibility for maintenance to the private operators. But the road miles and traffic counts on the privatized highway still contribute to each State's formula funding.

The current highway formulas do not take into account how many roads are privatized in each State so the Federal Government continues to pay States for maintaining roads they have handed off to private operators. It doesn't make sense for States to be credited with and given Federal highway funding for privatized toll roads, which it no longer operates or maintains. The private operators of leased roads also get a generous tax benefit from depreciating the road as an asset.

The CBO has found this depreciation reduces Federal revenues and has a negative impact on our deficit. These deals set up a double whammy for the taxpayer--the private operator gets generous tax benefits and the State continues to receive Federal funding for roads they no longer maintain. Taxpayers are literally paying for privatized roads twice by subsidizing tax breaks for private operators who buy public roads and continuing to pay the States for upkeep on roads they are no longer responsible for.

The Bingaman-Durbin amendment will end this practice by removing factors associated with privatized roads from the formulas used to calculate a State's annual highway funding amount. Three States, including Illinois, have privatized some of their highways in exchange for a lump sum payment. In 2006, the city of Chicago leased the 7.8 mile Chicago Skyway for 99 years in exchange for a lump sum payment of $1.8 billion.

The private operator has since raised the tolls on the Skyway and has taken over sole responsibility for maintenance of the roadway. However, those 7.8 miles are still included in the formula calculations that add to a State's share of Federal highway funds. Illinois continues to receive roughly $1.2 million each year because the Chicago Skyway is still included in the Federal highway formulas. Motorists are also paying more to use the road. Under public control, the tolls for the skyway decreased by about 25 percent when adjusted for inflation between 1989 and 2004. But Chicago Skyway tolls have risen 60 percent since the road was privatized in 2005.

The Bingaman-Durbin amendment will stop paying States to maintain roads they have been paid to no longer maintain. The amendment will take those funds and distribute them to other States to help pay for the maintenance of public roads and bridges across the country.

In 2006, I requested a GAO study of highway public-private partnerships along with Senator Inhofe and Representative Peter DeFazio. The GAO study found ``there is no `free' money in public-private partnerships, and it is likely that tolls on a privately operated highway will increase to a greater extent than they would on a publicly operated toll road.'' The GAO called for Congress to require more upfront analysis of these privatization deals to ensure they protect the public interest.

I introduced legislation earlier this year that would provide for a rigorous examination of privatization deals of all transportation assets--highways, airports, bridges and mass transit systems. The Protecting Taxpayers in Transportation Asset Transfers Act would ensure the Federal taxpayer has a seat at the table when State and local governments sell publicly owned transportation assets.

This amendment does not go far enough to protect the public interest in transportation privatization deals, but it does take away an unnecessary incentive for States and local governments to sell publicly funded roads and highways. This amendment will not stop States from privatizing roads, but it will stop the Federal taxpayer from paying twice for privatized roads.

The amendment is supported by AAA, the American Trucking Association, the American Highway Users Alliance, the American Federation of State, County and Municipal Employees, UPS, and the U.S. Public Interest Research Group. CBO has indicated the amendment does not score and will not increase the deficit in anyway.

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