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It Is Time for the US to Sell Its Highways? |
15 Comments |
| By Matt Mayer in Business, Green Politics, Peak Oil, Transportation | August 28, 2008 | ||
It’s difficult to imagine a person not having heard the old axiom “Buy low, sell high”, and it is prudent advice when you are making financial decisions. It’s the second part of that adage that might warrant a look at our strategy for infrastructure improvement in this country. If you are looking to make the maximum amount of money by selling something you want to sell that something when it’s at its highest value. I wonder then, is it time for our government to sell its infrastructure? You know, since the effects of Peak Oil are beginning to make themselves felt, the value of the infrastructure developed to serve cars running on cheap oil will decline each year into the future; starting soon. Selling high might mean selling soon.
Now, I don’t think we should sell all of it, by any means. We should keep the ports and the train lines, but is now a good time to start selling our roads, highways and airports? There has been news recently of other governments selling their infrastructure (check here for one opinion or here for a story about Pennsylvania, and this guy has the same idea I do, although he doesn’t tie it to Peak Oil), and considering the value of these items in an energy scarce future I would contend that their value will never be higher. In fact, there is already plenty of news about airlines facing massive losses. (And starting to charge for baggage, pillows and normal drinks) How valuable will an airport be if we don’t have airlines? Or what if the ones we do have are marginally profitable? I say it’s better to sell now while the full force of Peak Oil hasn’t quite made itself felt.
I would say the same about roads and bridges. Now, you can’t sell every bridge because you wouldn’t want it to be impossible to cross a river in the future, but the states could certainly lease some of them to companies looking for stable investments. They could at least see some return on all the money we’ve sunk into them. You could say that this is not “fair” or it might smack of fraud, but I would say that it isn’t. If these companies and profiteers can create our current credit crisis, and then look for a bailout from Uncle Sam, they should be smart enough to see through this and see the future for what it will be, but most likely they won’t.
The deal in Pennsylvania applies to just 469 miles of the 3.9 million miles of roadways in our country. Assuming that we could sell (or lease like in PA) 1% of these roads we could raise just over $1.3 Trillion dollars (assuming the same pricing per mile) which would go a long way to building our necessary rail infrastructure. Granted, this figure is obviously not really manageable, but with some effort I would expect we could recognize a fair portion of this number. Rail infrastructure, which has a much longer lifespan than roads, and also a higher carrying capacity, is where we should be focusing these infrastructure dollars.
Based on an estimate I saw for a brand new railway line to Yucca Mountain for nuclear waste the cost to build a new mile of railway is $6.2M, or an estimate of a railway line in Illinois which was running $93K per mile (I’ve since lost the link to the news article). The cost to rehab a railway line, at least in Missouri, is around $250K per mile. That means that for our $1.3Trillion we could build just under 210,000 miles of brand new tracks, using the Yucca example or 13M miles based on the Illinois cost.
These numbers are kind of ridiculous, but the point is that by redirecting our investment from roads, which are really short term, costly, maintenance ridden items to railways, we could build a world class infrastructure for less money, less maintenance and possibly one that might work a little better. It’s high time we the people get something for infrastructure investments other than crappy service, lots of traffic, pollution and an ever spiraling pyramid of costs and maintenance. Buy low, sell high. Sell high, buy low. That’s the key. Better to sell it now than hold it until it’s worthless, which we all know it will soon be.
Picture #1 courtesy of the US Dept of Transportion. Picture #2 courtesy of Steve Balogh.
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Adam Franco said,
I’m sorry, but the glaring fallacy of this argument is that by shifting ownership from the government to corporate, “the people” can somehow avoid paying the cost of deteriorating/less-needed infrastructure. This is completely false.
By definition, for-profit corporations exist _only_ to [attempt to] generate profits for their owners. How can anyone actually profit from maintaining roads? You guessed it, by charging tolls. Since the only roads you can reliably charge tolls on are the ones that are hugely important that “1% of roads” mentioned as good to sell would be the 1% that _are_ really needed for our common interest.
So what happens after a portion of our roads get sold off and they start falling into disrepair? Tolls go up and you and me pay just as much to cover the maintenance as we already pay to the government, plus a percentage over that to provide for corporate profits.
We the people are always going to keep paying for road maintenance and construction until the time comes to downsize them. Shifting the ownership from the government to a less-accountable private entity will only require us to pay more to them for their profits.
- Adam
Clifford J. Wirth, Ph.D. said,
Unfortunately, the Peak Oil energy crisis has reached the point where the rate of oil depletion will remain the same even if all of the automobiles in the U.S. were parked permanently. Here is the problem.
According to energy investment banker Matthew Simmons and most independent analysts, global oil production is now declining, from 74 million barrels per day to 60 million barrels per day by 2015. During the same time demand will increase 14%.
This is equivalent to a 33% drop in 7 years. No one can reverse this trend, nor can we conserve our way out of this catastrophe. Because the demand for oil is so high, it will always be higher than production; thus the depletion rate will continue until all recoverable oil is extracted.
Alternatives will not even begin to fill the gap. And most alternatives yield electric power, but we need liquid fuels for tractors/combines, 18 wheel trucks, trains, ships, and mining equipment.
We are facing the collapse of the highways that depend on diesel trucks for maintenance of bridges, cleaning culverts to avoid road washouts, snow plowing, roadbed and surface repair. When the highways fail, so will the power grid, as highways carry the parts, transformers, steel for pylons, and high tension cables, all from far away. With the highways out, there will be no food coming in from “outside,” and without the power grid virtually nothing works, including home heating, pumping of gasoline and diesel, airports, communications, and automated systems.
This is documented in a free 48 page report that can be downloaded, website posted, distributed, and emailed: http://www.peakoilassociates.com/POAnalysis.html
I used to live in NH-USA, but moved to a sustainable place. Anyone interested in relocating to a nice, pretty, sustainable area with a good climate and good soil? Email: clifford dot wirth at yahoo dot com or give me a phone call which operates here as my old USA-NH number 603-668-4207. http://survivingpeakoil.blogspot.com/
Cowlorado said,
Sounds like a good idea until the fine details are revealed. In Colorado, a boondoggle tollway called the Northwest Parkway was sold to a firm from Portugal. Part of the agreement included a NINETY-NINE YEAR non-compete agreement preventing upgrade of local highways for 99 years!
Our elected officials around here are a bunch of total losers…..
Thomas Jefferson said,
There are currently 250 million registered vehicles on the road today. And approximately 16 million new vehicles are sold annually.
If we started selling the highways right now, the cost to the average person would skyrocket.
Why?
Because not just cities, but small cities and townships would suddenly be burdened with the additional cost of “renting” the roads from the corporations that buy them. If a corporation buys a roadway, I will bet you bottom dollar that same corporation will do the best it can to make a profit from them. Subpar road topping, tolls every few miles, etc.
While if the city or state still own the roads, we could do a draw down of their use over time as other means of mass transportation are phased in. (I could also riff on what will happen to local roads that connect to highways, shopping areas, etc, concerning their effect upon local populations, it would be pretty)
But the reality looks more like this. As cars switch to hybrids and/or electric, the taxes we pay at the pump for road maintenance will decrease and our yearly property taxes and sales taxes will go up proportinally to pay for these roads. Thus making the “ownership” of roads a losing propersition. Any corp worth it’s salt will see the writing on the wall and will balk at owning roads ever. It’s a business model that doesn’t work. And just suppose, a workable business model does occur, just imagine the incrediable rise in unsightly billboards along the roads. You think they are bad now, just wait and see what would happen if a corp owned the road.
More over, as people begin using more alternative powered vehicles the gas station of today will vanish or be replaced by a “charging station”. If that happens then a surcharge will be placed upon it to pay for the roadways. But it still won’t make up the gap in funds because most people will be charging up their cars at home.
Mass transit is a wonderful idea, but again, because cities and states are looking to light rail with fixed tracks, the price to build these will be high. On the order of 30 to 50 million a mile.
The Yucca mountain example you give is “only” 6.5 million because it’s being built on existing track. I know that is true because we have done the same thing here in Austin. And the 30 to 50 mill price tag I sight is for new track, redesign of current conditions to conditions containing light rail.
Where does that money come from to pay for all of this? Not only from federal grants and bond issues but also from the tax we pay at the pump.
A much simpler solution would be to install electrified buses with overhead power, much like they have in San Franscico. The price per mile is greatly reduced and much quicker to install and no tracks at all are required.
Also, what needs to be done is to find an alternative to asphalt. The price of which has risen 4x over the last 3 years. Some small towns have completely eliminated resurfacing from their budget. Plus, a greener alternative would have less run off that destroys the environment.
Unless you can find a way to make NOT driving a profitable solution for the government and/or corporations, roads are here to stay. It’s nice to think that humans will suddenly have a appiphany over our polluting ways and stop driving en masse; and in some small ways they have, however, realistically, humans only react when they have to, not when they should. Only corporations react when they should because their shareholders will demand it and they are looking to profit.
There is no such thing as a free ride.
Chad M said,
I think that the large corporations – those with the capital to actually purchase, say, significant portions of the interstate system – are already clued-in to the Peak Oil dilemma. That they don’t acknowledge this openly is simply because they don’t want to cause panic in the Sheeple, ahem, Patriotic Consumers, ahem — American Citizens until the fleecing is complete. I think they see the writing on the wall and have the intelligence to recognize a lemon when they see it. Only if the Peak Oil dilemma is overshadowed by, say, the bankruptcies of state and county governments might this scenario work, and then probably only with smaller investment groups and less sophisticated buyers.
There’s also a problem with selling intact corridors and linear easments associated with our existing road infrastructure. While not all of these alignments are favorable for conversion to rail, a significant portion of them are or can be modified to more favorable grades. Certainly the path of least resistance (financially and technically), at least over mid- to long-distances would be to build rails within the existing easements of rural and suburban portions of the interstate system. We just won’t have the energy to re-tool our country at the scale we did when we built the interstate system.
As a sidenote, one of better things we have done as a society recently is to preserve old rail corridors through the Rail-to-Trails program. To have let these corridors revert back to a patchwork of private ownership would have been a tremendous waste, and I believe that we’ll be laying rails upon some of them within 10 years.
The Yucca Mtn numbers are not representative of construction costs except in areas with sparse population, large land parcels, signifcant BLM, USFS, and tribal considerations, and ground-up consrtuction. Needless to say, much of the U.S. is not adequately described as having similar political and technical issues.
pond said,
I agree with the others here: private roads would cost drivers more money than public roads cost taxpayers. Most of the extra price would go into CEOs’ pockets; meanwhile the poor schlubs who drive the trucks and patch the asphalt would be paid minimum wages with no benefits.
One good thing about privatising the roads would be that (I assume) only those who drive would pay for them. This would of course mean that drivers would pay even more! — but if you don’t drive, you would be spared. Call it an additional gas tax, if you will.
But that brings up my main reason these things should never be sold off: if you don’t drive, how would you get anywhere? My God, you couldn’t even leave your house without paying a tax to a private company — and they tell you how much you have to pay, and maybe they don’t like you, so they don’t let you use ‘their road.’
The ancient rights of way were established long before governments. These are part of the ancient commons — just like rivers, oceans, and the air. Sell them, and you deliver one of the basic human rights into the hands of the few. And they will control all transportation.
Bad, bad, bad idea.
aaron newton said,
I think some of these comments are missing the point of the article. The author says this,
It doesn’t matter how much you want roads or think you need roads capable of serving automobiles. In the near future the decreasing availability of cheap liquid fossil fuels will mean higher prices at the pump and even scarcity much sooner than most think. The author argues that we will be driving less in the future and that we’d be better off moving the responsibility of road maintenance onto the balance sheets of corporate America and using our transportation taxation to fund alternative forms of moving around people and stuff .
Like it or not, you will be driving less in the future. Why not get the most money for our investment in asphalt infrastructure now while we still can? It’s an interesting discussion.
Brian said,
I can’t agree with the premise of this article. In order to do so, one would have to assume that the only value in the public infrastructure is monetary. Some of the other comments have already alluded to the problems that arise with a private infrastructure. If Matt Mayer is truly looking for solutions to eliminating public debt and financing alternative energy/transportation, then I believe this post can be taken in good faith. If he thinks the “magic” of free markets and privatization will be a solution to our problems, I would offer up the past eight years of the Bush Administration as argument to the contrary.
Matt Mayer said,
Thank you all for the comments. Here’s the deal: roads, airports, highways, etc are all losing propositions for investment in the future. As we descend further down Hubbert’s Peak and gas becomes more scarce driving will revert back to an activity that only the wealthy do, or an activity that a normal family does occasionally say for a once a year vacation or something. So, if that’s the case why continue to sink money into this infrastructure that’s worthless? That doesn’t make any sense.
What does make sense is to invest in activities that move a lot of people around. I would recommend serious mass transit within cities similar to what Cuba has done. Uncle Sam could even hand out rebates for bicycles for people to purchase a bike to ride. This would certainly be a lot less money than is currently used on roads, supporting oil companies, or subsidizing our car culture. Further expansion of Amtrak for intercity transit is vital to our ability to avoid a return to the pre Iron Horse days. Sadly we don’t seem to have the stomach for this investment. We’d rather hand out checks to retired people so they can go on cruises and enjoy bocci ball in Boca.
With the gas spikes this year we’ve already seen total vehicle miles driven fall, and I would expect that for each bump in gas prices we’ll see a corresponding decrease in mileage. Eventually we’ll get to a point where the government will have all these roads that very few people use. In the business world this is called a wasted asset. Trucks won’t be cost effective so shipping will move to rail, which is woefully underinvested right now, and has a lot of capacity issues already. If there was a 10% jump in shipping the train network would have some serious hiccups. Not to mention that freight trains are much more efficient at moving goods so they can better utilize what fuel we do have access to.
As far as these Wall Street people being too smart to invest their money this way…really? You think so? These same people who sold $300K houses to Wal-Mart greeters? The ones thought it was normal and OK for house prices to jump up by 20% a year for year after year after year? The Wall Street culture rewards people year to year based on the money they have under management, not how well they do (typically, except Hedge Funds) so as long as they have the money invested and utilized, even if the investment isn’t functioning that well, they still make their 1.5% or whatever on assets under management. They couldn’t get two shits about the investors (unless it’s their money riding there as well) as long as they are getting their management cut.
Never once did I look at this from the perspective of a typical GOP politician and think that the private sector could do it better. In fact, I would never put something like this in the hands of corporate interests, because they will screw people to maximize profits. I simply thought it’s a good time to dump these assets now. Similar to what a real estate business might have thought in 2006 when those assets were at the top of their value.
I’m not even opposed to the states buying these back in the future when they have a lower value. I think it’s important for us to focus on what is usable in the future. Are roads something that will be used in 20 years? What about airports? Railroads? Shipping? The ones that we think are viable when fuel is more expensive are the ones that we should keep a tight grip on and be investing in now. Roads and airports are two that I can emphatically say will eventually be worthless. Might as well sell them now.
Jennifer said,
Matt, I understand what you’re saying, and as someone who gave up a car nearly four years ago and would far prefer seeing our governments funnel money into public transit instead of highways, I do appreciate your point that Peak Oil, rising gas costs, etc. are going to make highways increasingly less valuable as an asset.
HOWEVER — I am currently reading Naomi Klein’s “The Shock Doctrine” (a depressing but highly recommended read) and would like to point out that privatization of public goods, services, and infrastructure has been an ongoing pet project of many politicians and economists. Where such privatization of the public infrastructure has occurred, there has been an increase in profits taken by the new owners, often coupled with declining services and/or higher costs to the public. How about Atlanta and their privately owned public water system? Problematic, to say the least. How about all the Americans who are unable to pay their health care because prices at privately owned hospitals are through the roof?
If the public highways are privatized, what is there to stop a corporate owner from levying exorbitant rents or tolls on communities or citizens, as mentioned above? Nothing. A corporation exists to make profit for its shareholders, not to serve the public interest. As a result, a lot more people would find themselves facing critical economic decisions — can they afford to drive to work? Can they afford to visit an ailing parent in another city? Something like this would have a much more immediate impact on people’s income and expenses than a mere gas tax.
Yes, it would be a wonderful thing if we could all drive less, live closer to work, live closer to family, etc. But these changes will not happen overnight. And by taking away public infrastructure, no matter how losing a proposition in the long run they may seem, and handing them (for a pittance, likely) to the private sector, we risk creating an ever-larger underclass of those who cannot make ends meet. That could mean you or me or your next door neighbor.
Why not look at a “worthless” infrastructure and see an opportunity? Why not take those highways and begin creating mass transit or additional rail lines in their places? Why not think a little more radically instead of settling for a sell-off?
Lyle Grant said,
Selling highways to private interests makes a good deal of sense. Privatized roads would enable the actual users to pay for maintenance and construction costs. Currently all taxpayers subsidize highways, which discourages the development of local industries and cheaper local travel options.
There are many opportunities for some creative solutions to longer-term problems here as well, as Jennifer alludes. Attractive options include giving the highways to private interests provided that private capital builds both bike paths and rail lines using the highway right of way. Over the longer term bicycle and rail are far more viable transportation options than highways. The U.S. needs to expand its rail transportation system and this is one means to finance it.
cjryan2000 said,
Good idea except that if done, the previously public domain, where free speech and freedom of movement not only by car, but also by bicycle and as a pedestrian, take place, would now be privately controlled. If you can’t display an antiwar t-shirt in the mall, just wait until the roadways are owned by corporations.
A to Z Energy ETF » Blog Archive » DrumBeat: August 28, 2008 said,
[...] It Is Time for the US to Sell Its Highways It’s difficult to imagine a person not having heard the old axiom “Buy low, sell high”, and it is prudent advice when you are making financial decisions. It’s the second part of that adage that might warrant a look at our strategy for infrastructure improvement in this country. If you are looking to make the maximum amount of money by selling something you want to sell that something when it’s at its highest value. I wonder then, is it time for our government to sell its infrastructure? You know, since the effects of Peak Oil are beginning to make themselves felt, the value of the infrastructure developed to serve cars running on cheap oil will decline each year into the future; starting soon. Selling high might mean selling soon. [...]
Aaron Newton said,
U.S. highway fund crushed by cutback in driving
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