PIRGIM Urges Measures to Protect Public from Losing Money and Control
LANSING, Mich., June 23 - The Michigan House Transportation Committee heard testimony last Thursday on a bill that would allow private investors to build and expand highways in Michigan and impose tolls upon them. The Public Interest Research Group in Michigan (PIRGIM) presented testimony at the hearing that called on legislators to add public interest protections to the bill. PIRGIM urged changes including a requirement that any deal provide economic benefits to the public in the long-term, and that the public retain control of traffic management.
“This law would open the door for industry to take advantage of Michigan’s budget shortfalls and pay fire-sale prices for vital roads and other public infrastructure,” said Kara Rumsey, PIRGIM Advocate. “We don’t want to see the people of Michigan stuck with expensive toll road deals that lose the state money in the long term, or hamstring the public’s ability to set transportation policy.”
PIRGIM last month released a report, Public Roads, Private Costs: The Facts About Toll Road Privatization and How to Protect the Public, outlining the potential downside of private road deals based on the experience of other states, and recommending specific safeguards to protect the public.
In addition to presenting testimony, PIRGIM also sent a letter to members of the Transportation Committee outlining a number of its concerns. The text of the letter is reproduced below.
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Dear Member of the Michigan House Transportation Committee:
I am writing on behalf of PIRGIM (the Public Interest Research Group in Michigan) to express our concerns regarding House Bill 4961, which provides for public-private transportation facilities. Although we recognize that there is a role for both public and private entities in meeting Michigan’s transportation needs, HB 4961 as currently written does not ensure that the public gets the value, efficiency, and safety it deserves from its transportation network. In order to ensure that public-private partnerships present a good deal for Michigan taxpayers, both now and in the long term, the law must include more explicit protections of the public interest.
Please find attached a PIRGIM report that outlines how best to protect the public from bad deals in public-private transportation partnerships. The report concentrates on toll road privatization, but its principles are broadly applicable. It includes discussion of the pitfalls other states have encountered in public-private transportation projects, including expected losses of billions of dollars in revenue and diminished public ability to control transportation policy or even prevent a major road from closing. We hope you will consider this information carefully so that Michigan can avoid similar mistakes.
PIRGIM would like to express particular concern regarding the following provisions of HB 4961:
1. Permitting unsolicited proposals. By permitting unsolicited proposals, this law will result in private entities defining potential deals, rather than the Department of Transportation determining public needs and then seeking bidders. When private entities are allowed to drive the planning process and timelines rather than a transparent public process, the public interest can too easily become secondary to maximizing profits through higher tolls and more traffic.
2. Lack of criteria for protecting the public interest. The least defined consideration for the Department when evaluating bids is “benefits to the public,” which is listed as only one factor that the Department “may consider.” Here it would greatly improve the law to clarify:
a. That public control of transportation outcomes including traffic management shall be unimpeded; and
b. That the financial benefits to the state must exceed the value over time of what could have been obtained by collecting the same fees or tolls and obtaining any upfront funds through the public borrowing process. The public costs of evaluating, monitoring, and enforcing a potential private deal should also be considered in these calculations.
3. Protection of the public interest is surrendered to the Department of Transportation. Section 7B abdicates responsibility for protecting the public to the Department of Transportation. It makes sense for the executive branch to execute these protections; but the task of defining how to protect the public should be legislative, especially for major infrastructure deals that will last many decades. The proposed bill allows the terms of the deal to be defined in terms of what is necessary for economic viability, which explicitly puts the public’s interest second to the private operators. Instead, the parameters for any potential deals should be defined in a way that puts the public’s financial and other interests foremost. If private entities can’t bid a good deal, then potential loss of those bids is not a problem.
4. No retention of legislative authority to approve or reject a deal. The proposed bill relinquishes the legislature’s responsibility for approving public-private partnerships, even in the case of a large dollar value deal. Given the profound implications of these deals for the state’s economy and transportation policy, legislators should take responsibility for final approval.
5. Exemption from transparency and disclosure laws. The bill allows the private entities to define which information they want to keep secret from the public and shields it from the Freedom of Information Act. This is not the way to protect the public. Ideally, all documents and communications should be completely open. Failing that, private entities should be required to demonstrate that keeping such information secret is vital to their proprietary interests; the secrecy should be time-limited; and the claimed needs for secrecy should be balanced against the public need for open government.
The attached report provides in-depth discussion of these issues and other important considerations. Please do not hesitate to contact me at (734) 662-6597 with any questions. Thank you for your consideration.
Sincerely,
Kara Rumsey
PIRGIM Advocate
(734) 662-6597
krumsey@pirgim.org
www.pirgim.org
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