Public private confusion TERMINOLOGY

May 30, 2011

The New Maine Times has been running a three part "Investigations" piece on the Maine Turnpike Authority.  It repeatedly refers to the Maine Turnpike Authority as a "private corporation." The series begins: "SOMEWHERE NORTH OF THE YORK TOLLS - Everyone who drives a car and travels anywhere from Augusta and Lewiston to Kittery is intimately aware of the Maine Turnpike, if only because they grumble as they look for enough money to pay the tolls.  Even so, most agree, the Turnpike does a fine job of road maintenance. But how did the main north- south road in our state (an interstate highway) get turned over to a private corporation in the first place?"

And in the third part: "MTA was formed in 1947 as a privately invested corporation to build only the second turnpike in the Untied States. It has become one of the most successful enterprises in the country, owning 109 miles of well-maintained highway. It has always more than made enough money through tolls to maintain the roads, pay off its private bonds, and provide a healthy return to its investors...."

The author David Kaler does nevertheless report that the Turnpike Authority was formed in 1947 by state legislation, and that its board members are appointed by the state Governor. He seems to think that it is a "private corporation" because of its independence from direct control by the Governor or other elected officials, and the fact that its debts are not debts of the state but debts secured only to toll revenues.

But such government-created corporations with no shares or tradable equity are generally called public sector or government entities - precisely because of their lack of stock and because their assets are ultimately those of the state or government entity that created them.

Kaler of the New Maine Times has a very odd notion of a private corporation!

But consider this too. In Ohio critics of the state governor John Kasich say he wants to "sell" the Ohio Turnpike the way Indiana has supposedly sold the Indiana Toll Road, or the city of Chicago "sold" the Skyway to Cintra/Macquarie.

Ed Rendell they say wanted to "privatize" the Pennsylvania Turnpike when the Spain based toll operator Abertis bid $12.8b in a procurement which he never got legislative authority to consummate. New Jersey Governor Jon Corzine talked of "monetizing" the New Jersey Turnpike, but again never got legislative authority.

In all these cases there was certainly a large element of privatization in the sense that they were being turned for a long period of years - 75 years or 99 years - to for-profit investors who would have rights to the tolls but  the responsibility to keep up, and improve the road, and would take the risk on meeting their expenses with tolls.

Such longterm leases or toll concessions are 'public-private' in the sense they have elements of private investment and public or government control.

The government element resides in ownership of the fixed assets and in the lease or concession contract (or what the Texans call a comprehensive development agreement). That contract often controls toll rates, requires specific improvements by specific dates and otherwise imposes obligations on the operator.

And sometimes those conditions and obligations on a "private operator" are more detailed and onerous than anything a legislature imposes on a  "public" turnpike.

The notion of public ownership providing public control can prove extremely naive! - editor

TOLLROADSnews 2011-05-30

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