Flaws in Mica’s Reauthorization Proposal

By Terri Hall l July 15, 2011

California Rte. 125-Otay Mesa near Mexican border                                                            George Bush Turnpike Western Extension (SH-161) Dallas/NTTA
Nelvin C. Cepeda/Union Tribune

It comes as no surprise that Congressman John Mica (FL-R), Chairman of the U.S. House Committee on Transportation and Infrastructure, wants to privatize transit and enter into yet more DEBT to fund roads. What is surprising is his proposal to expand the federal TIFIA loan program by nearly 10 times, while also making this claim in the opening statement of his just released proposal for the new federal highway reauthorization bill: “They [the American people] want Washington to live within its means and make the difficult but necessary spending decisions that all Americans are forced to make for their own households. They want reform.”

At his July 7th roll out for his committee’s transportation reauthorization bill in Washington, Mica declared this proposal for a 6-year bill was “all about building infrastructure and creating jobs” – sounds a lot like President Franklin Roosevelt’s Depression-era make-work Civilian Conservation Corps (CCC). But how is expanding its borrow-and-spend debt spiral by 10 times living within its means?

TIFIA, the Transportation Infrastructure Finance and Innovation Act of 1998, is the government subsidized loan program, where the taxpayer bears the risk of loss instead of the private investor or the investment banks like JP Morgan Chase, Goldman Sachs, Morgan Stanley and their stock holders.

The very first TIFIA loan in America was awarded to the South Bay Expressway the privatized tollway in San Diego. No public highway should be handed over to a private corporation using these sweetheart deals known as public private partnerships (PPPs), a marriage of financial convenience combining the TIFIA loan program with the backing of private investment banks and foreign infrastructure companies that rely on ever-increasing tolls in order to repay the highway construction loans.

Steve Schmidt of the San Diego Union Tribune opened his March 23, 2010 article, Toll road operator files for Chapter 11, writing: What was heralded in late 2007 as the next big thing in regional commuting – a 10-mile, privately operated toll road in South County – may wind up testing the wisdom of public-private partnerships.”

PPPs or P3s, as they are also referred to, have profit guarantees, result in markedly higher toll rates, and have gotcha provisions that ensure the surrounding free lanes stay congested to guarantee the private investors have enough toll payers to make their money back. The toll rates on a privatized tollway can cost as much as 75 cents per mile, which is like adding $15 to every gallon of gas you buy.

Privatizing means public money for private profits

PPPs are nothing more than public money for private profits. Fannie Mae and Freddie Mac are two highly visible examples. Both triggered massive housing sector failures that caused the global financial meltdown and subsequent taxpayer bailouts. It’s why conservative commentator Michelle Malkin called PPPs ‘corporate welfare’. It’s also why Sen. Dick Durbin, a liberal from Illinois, and Penn State Professor Ellen Dannin have cautioned against them.

Not quite three years after the tollway opened to traffic, the South Bay Expressway went bankrupt and the taxpayers had to take a nearly $80 million hit on the chin as the private consortium wrote down its debts. The traffic projections were off by over 40,000 cars per day, which has been a longstanding pattern since this new push for tolling.

Overly optimistic traffic forecasts make toll roads look good on paper to investors to have the project financed and built, but end-up costing taxpayers dearly when the traffic doesn’t show up. So to keep their heads above water, the public or private entities hike tolls to make-up for the losses (counter-intuitive since raising rates sheds more drivers), inject more public subsidies, or eventually default or go bankrupt.

At a time when Americans struggle to keep food on the table and pay their bills, the federal government is forgiving the debt of yet more private corporations at our expense. And Mica wants to expand this privatization failure to transit, which has never been able to pay for itself and has always required public subsidies to survive.

Mica’s summary also states his bill is fiscally responsible by “improving programs that don’t work while building upon programs that work well.” It defies logic to think you’re ‘improving’ a program by expanding it. Throwing 10 times more money at it won’t fix the fundamental flaw of public subsidies for private profits.

The power to toll is the power to tax.

So, when politicians vote for PPPs they grant the power to tax to private corporations, no elected official can claim to be doing his fiduciary duty to protect the public interest and ensure there’s no taxation without representation and still support PPPs. Taxpayers can’t pressure the board of a corporation if the toll rates get too high. Politicians know this. That’s why they wish to outsource the pesky tax hikes to a private corporation.

‘Leveraging’ means DEBT

Mica’s proposal goes on to say that “this fiscally responsible, multi-year proposal follows these clear mandates from the American people and creates long-term jobs by: Better leveraging and maximizing the value of limited federal resources…” Leveraging is code for DEBT. Debt on the federal level through the TIFIA loan program and debt pushed down to the state level through state infrastructure banks to be financed by Mica’s proposal. Debt that must be repaid by taxpayers no matter which level of government does it.

When Mica says this proposal is “doing a lot more with less,” it means expanding financing for TIFIA by a factor of 10, as well as funding state infrastructure banks the cost of which will trickle down to taxpayers in the states, while catering to the special interests.

Plus, according to the Weekly Standard, the stimulus program spent $185,000 (adjusted downward from $278,000 per job using the peak of 3.6 million jobs) to create a single job and those jobs were short-lived and now fading from the scene. So there’s no credible way to claim building transportation infrastructure creates long-term jobs. It doesn’t.

Then, how is borrowing money we don’t have fiscally conservative and an example of Washington living within its means? It’s not, it’s more smoke and mirrors by disingenuous politicians using buzz words to tickle our ears and put us back to sleep.

But we’re not going back to sleep. The American people are alert and attuned to their government as never before in this generation. They know now that they can’t trust what politicians tell us, they have to VERIFY everything. Politicians are not going to get away with playing us for fools. They’re setting us up for an infrastructure DEBT BOMB that will be deemed ‘too big to fail,’ and then they’ll come to the taxpayers for yet another bailout. Remember that the last federal highway bill was plagued with over 6,000 earmarks that greatly contributed to voters dumping the Republicans in the following midterm elections.

Americans need to demand from their representatives that they properly fund our public infrastructure without more, generational debt, tolls, and infrastructure banks. Punting by privatizing our PUBLIC roads at a cost far higher to taxpayers than our affordable gas tax-funded public highway system is NOT an acceptable, nor fiscally responsible transportation solution.

Terri Hall is the founder of Texans Uniting for Reform and Freedom (TURF), which defends against eminent domain abuse and promotes non-toll transportation solutions. She’s a home school mother of eight turned citizen activist. Ms. Hall is also a contributor to

SFPPR News & Analysis.