Tags: Mitt Romney | Money

Good Intent of Public-Private Partnerships Ends Badly

Friday, 23 Oct 2015 02:14 PM Current | Bio | Archive

Democrats don’t hold a monopoly on the ability to pour hundreds of millions of tax dollars into a hole in the ground. Boston may boast the Big Dig (400 percent over budget at $24.3 billion), but Virginia Republicans have the Midtown Tunnel at $580 million and counting.

The only real difference between Democrat and Republican venality is GOP disingenuousness comes as a discount, as befits a party that is bloated government on Jenny Craig.

A recent Washington Post story probably intended to defend government infrastructure spending, while condemning private sector leeches, but all it did was provide a handy set of guidelines for taxpayers to detect disasters in the making.

The Midtown Tunnel was another of the public–private partnerships that former Gov. —soon to be inmate — Bob McDonnell enthusiastically touted. His stated goal was to relieve Tidewater congestion with a new tunnel under the Elizabeth River connecting Portsmouth with Norfolk.

The project featured the usual glowing, but non–binding, promises: “The only public financial support required would be in the form of low-cost federal loans and bonds for private business use. No other subsidy or payment would be needed.”

So why are Virginia taxpayers forking over $581 million, which is more than double what the “private” side is committing?

There are four reasons so universal readers can use the quartet to evaluate any future government project.

1.) No competitive bids. McDonnell had been embarrassed when he tried to privatize harbor management in Norfolk and no private company responded. The governor also had a privatization scheme to sell off state–owned liquor stores killed with extreme prejudice by the legislature.

Not wanting to risk additional humiliation, the governor handed the project to Skanska for construction and Macquarie for finance. When there is only a single supplier the buyer is always at a disadvantage. When the buyer’s ego is at stake, too, the buyer has even less leverage.

2.) No penalty for indecision. The state couldn’t make up its mind on the scope of the project. A sensible request for proposals would have set a goal — reduce congestion in the Norfolk/Portsmouth area — and then solicited concepts. Instead Virginia decided it wanted a tunnel and then kept changing the parameters.

In the private sector indecision costs additional money and going over budget has career repercussions. Steve Jobs was notorious for making new demands, but even he knew eventually the product had to ship.

In government, where the priority is to spend every last penny, constant change orders have no consequences for anyone other than the taxpayer.

The private side was happy to alter designs as long as the public side paid the difference and allowed the single–source supplier to make a guaranteed profit.

3.) Short–term political gain comes at the expense of long–term cost. The original proposal pegged the tunnel toll between $2 and $3 over the length of the 50–year contract.

This is a small price to pay if the alternative is being stuck in traffic. But it was “too high” for politicians hungering for re–election. Only market ignoramuses believe that over the long term it’s possible for tolls to be “too high.”

The market punishes a firm that misjudges pricing. The Post thought it was outrageous an Indiana toll road went bankrupt, when in reality it’s a benefit because tolls are lowered under a second, more cautious owner.

It’s tough to get coffee at Starbucks for three bucks, but Tidewater motorists will be able to tunnel along at $1.59 off–peak and $1.84 peak thanks to the rest of the Commonwealth paying $112.5 million as compensation.

New tolls were delayed until the Democrat governor took office, evidently hoping to make him take the blame. This violates the first rule of American politics: It’s impossible for Republicans to out–pander Democrats. (For examples of repeated violations see “immigration reform.”)

Gov. Terry “Hillary Bundler” McAuliffe laughed heartily and lowered tolls during construction for $82.5 million and then eliminated tolls on the MLK freeway for $78 million.

4.) The side that’s in a hurry always loses. McDonnell was term–limited and wanted the vice president slot on the Romney ticket. He wanted public – private partnerships to be part of his “legacy.” The deal had to be completed before his term finished and Mitt made up his mind.

The result was concession after concession on the part of Virginia, one of the worst being an agreement to pay Skanska for “lost” toll revenue if the state built any additional tunnels or bridges during the next 50 years!

Regardless of the label or the hype these projects are only a “public–private partnership” when the interests of the public take precedence.

Otherwise it's the usual “politician–private partnership” that's always expensive and counterproductive.

Michael R. Shannon is a commentator, researcher (for the League of American Voters), and an award-winning political and advertising consultant with nationwide and international experience. He is author of "Conservative Christian’s Guidebook for Living in Secular Times (Now with added humor!)." Read more of Michael Shannon's reports — Go Here Now.

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In the private sector indecision costs additional money and going over budget has career repercussions. In government, where the priority is to spend every last penny, constant change orders have no consequences for anyone other than the taxpayer.
Mitt Romney, Money
Friday, 23 Oct 2015 02:14 PM
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