States do the same with toll roads.
It’s weird to think that the state Highway you drive on is owned by some private equity company.
https://www.npr.org/templates/story/story.php?storyId=569539...
It’s weird to think that the state Highway you drive on is owned by some private equity company.
https://www.npr.org/templates/story/story.php?storyId=569539...
"SNC-Lavalin Group Inc. will sell 10.01 per cent of its stake in 407 International Inc., the private consortium that controls the profitable tolled highway in north Toronto, for an expected $3.25 billion, the company announced Friday.
That’s more than a billion than what the government earned 20 years ago – for selling the leasing rights to the entire highway.
In 1999, the Ontario government leased Highway 407 for the next 99-years for $3.1 billion, or $4.4 billion in today’s dollars.
At the time, it was the largest privatization of a public asset in Canadian history. But in hindsight, it may be considered one of Ontario’s biggest financial missteps, considering the SNC-Lavalin sale pegs the value of the highway at at least $30 billion.
The company running the 407 reported revenues of $1.4 billion in 2018"
...they sold the 10% to... Ontario's pension fund...
https://www.yahoo.com/now/worst-deal-ever-the-407-is-worth-3...
What a sad fiasco.
Anything developed with public money or eminent domain should be off the table for selling to a private entity. If private investment wants to own parking spots or highways, it can pay to create them itself. Private investment should result in development, not rent seeking on things that were already developed.
Law should be fully mutable and not subject to privately owned restrictions. Any terms that have been written in to keep the city from doing things like lowering parking rates should be considered unenforceable. And since the city is no longer getting revenue from the meters, citizens should vote to eliminate the parking fees.
Furthermore, most long term debts or contracts that a government could enter into should be repudiatable due to the principle agent problem - specifically the corrupt incentive of politicians to favor short term benefits and ignore long term liabilities. There should be very limited exceptions such as purely financial bonds that are voted on directly, and even those should have time limits of a few decades.
It’s not sold, it’s leased.
In general we should want capital to stay distributed throughout many different actors, especially our governments, rather than them being hollowed out and the assets centralized into the financial markets. For example, all throughout this thread there are people pointing out the newly created difficulties of implementing specific policies (for example bike lanes), due to the inflexibility created by divestment.
So if the highway goes well, the company makes money hand over fist, and it all looks like a giant scam. If it goes really badly, the government takes a bath, and it all looks like a bunch of waste. So ultimately it's very difficult to set up a deal that lasts very long and doesn't seem like a regulatory mistake, one way or the other.
Also note that this isn't purely a US situation: Some form of privatization of toll roads happens all over the world, and success rates are also not all that great