January 7, 2008

Stupid Question of the Day

Carroll Andrew Morse

From Katherine Gregg in Saturday's Projo

A [spokesman for Governor Donald Carcieri] confirmed that the governor’s staff had also “been approached about the concept of selling both the Rhode Island Lottery and the Pell Bridge.” Some proposals apparently came in unsolicited; others in response to a query from the budget office about opportunities for “public-private partnerships” that was appended to a recent request for proposals from underwriters.
Now, can somebody explain to me exactly what a private company can do with a bridge to make it more "profitable" that a state government can't?

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1. Raise Tolls
2. Pay the painters less than the state does (and fewer benefits)
3. Install EZ Pass and reduce toll booth staff.
4. Allow the state to reduce Bridge & Turnpike Authority staff.
5 The raise tolls again when they conclude that they forgot to include a profit margin for the company.

Posted by: John at January 7, 2008 1:32 PM

I think private enterprise could do a lot with the Bridge. They can probably cut cost straight away on payroll. I'm confident they can improve the quality of repair and maintence while lowing those costs. They can run specials, hold sales, vary pricing. They could work in conjunction with Island communities on promotions (e.g. Chowder fest tix include bridge toll). They be do all those things that Government is completely incapable of being: efficient, innovative, customer-focused, cost-conscious...

They could even change the stupid name.

Posted by: George at January 7, 2008 1:34 PM

The concept is widely used in other countries.

There are some benefits to privatizing infrastructure: governments get a large upfront payment that can be a source of revenue without having to raise taxes; most of the companies involved in managing infrastructure possess an expertise in the area of infrastructure that government does not possess; and it allows governments to avoid having to invest large amounts of tax money to rebuild aging infrastructure.

RI is a particularly attractive target.

-It is in a deep finanical hole and needs money.

-RI DOT has been reported to have little technical expertise in the area of bridges. Despite having 780 employees and a $338.8 million budget, the RI DOT doesn't have a single expert in hydraulic and geotechnical engineering and RI DOT even outsourced the drafting of the RI Bridge Design Manual.

-Much of RI's infrastructure is deteriorating.

-The state's political leaders have publicly stated that they want to avoid raising taxes.

-Gas prices are already high and RI already imposes a hefty surcharge on gas, the an additional gas tax (which is often used to defray the costs of repairing infrastructure).

-The bond market is iffy, so RI may find floating bonds to pay for infrastructure (another way to pay) may not be feasible.

-Rhode Islanders need to use bridges to get from town to town. That need almost guarantees that a company can make money on RI's bridges.

Combined, these factors make RI ripe for the picking.

RI would probably be a less attractive target if:

-RI DOT was thoroughly reformed and emphasis was placed on hiring technically qualified people. But this would require firing additional state workers and replacing them with more expensive experts with bridge experience, most likely from out-of-state.

-RI wasn't viewed by the financial community as being desperate for cash and hadn't previously shown that it is willing to spend long-term funds to achieve short-term objectives (think tobacco money).

-RI had made infrastructure maintenance a state priority. The reality is that people don't get excited about maintenance until a bridge collapses, like in Minnesota. Rhode Islanders do care about social services and taxes. Privatizing a bridge generates less public opposition that cutting service or raising taxes.

Can a private sector company run a bridge as well as the government? Probably. But this really isn't about who can run a bridge better. It's all about the CA$H.

Posted by: Anthony at January 7, 2008 1:58 PM

"The most ambitious proposals promise “new funding” for education, road and bridge construction, affordable health insurance and energy-bill relief for low-income Rhode Islanders."

I am a capitalist and firmly believe that the private sector can do most things better than the Government. I have idea where she got the above information from and have to assume that it came from speaking to the potential investors or gov. officials.

However, when I read the above statement, it appears that the idea would be to sell off "public property" to create new or increase existing entitlements. If the government wants to sell/lease the Pell Bridge to fund road construction/repair which will benefit all citizens I might consider that a decent idea. On the other hand, using "public property" (belonging to every citizen of RI) to further special interests would be just another example of the government stealing from the people at the point of a gun.

Don't think it's not at the point of a gun? then try passing through the tolls and not paying. Eventually, some governmental official will catch up with you and make you pay.

Posted by: tcc3 at January 7, 2008 2:01 PM

More one-time revenue sources. Awesome.

Posted by: EMT at January 7, 2008 2:16 PM

I'm completely undecided.

On the one hand, leasing the bridges might result in more professional bridge management and give RI a "fresh start" financially.

On the other hand, I don't think RI state government is capable of taking advantage of a fresh start.

Instead of using the opportunity to restructure state government, as is necessary regardless of the option that is selected, I have little doubt that the money would go immediately into the general fund.

RI will continue to sink into a deeper hole over the long-term.

I doubt much of the procees would ever go into infrastructure maintenance. I even doubt that RI DOT's overhead would be reduced, although they would have far fewer assets to manage.

Posted by: Anthony at January 7, 2008 3:58 PM

If I were to buy that bridge, I would get rid of the union workers and install the EZ Pass. That way, I don't risk sick-outs, work-to-rule BS and every other tactic the unions engage in when they feel the taxpayers are getting out of line, never mind the ridiculous pay and benefits, etc.

Then, I would proceed to jack up the price to cross the bridge to $5 - each way. This would ensure that enough money is available for the proper maintenance on the bridge. I would then start a little fund - I'll call it the Happy Day Fund. Each time I got $100,000 in that fund, I would have a device on the bridge that would identify 1 lucky winner of the Happy Day Fund. This way, crossing the bridge is like playing the lottery, only better because you actually get something for the money you throw down the drain - the right to cross the bridge. In fact, I'd promote it as "Come have a Happy Day, $5 could win $100,000" I wouldn't even tell them it's to cross the bridge, heck crossing the bridge would be like a bonus! I bet there would be plenty of people who didn't even have to cross that bridge but went across anyway, just to try to win. I mean really, would you rather lose your money in some seedy corner convenience store or do it overlooking Newport Harbor. I'll bet I could get traffic backed up to the Jamestown bridge in December. I'd even have a sign as each car passed over the bridge - Have a Happy Day! and they'd all be looking forward to the next time they could cross that bridge and play.

Posted by: Mike Cappelli at January 7, 2008 4:30 PM

The bridges are the trial balloon. The real agenda is to sell 95 to a private toll company. If they can get away with it they will do it. Call it the Nancy Gewirtz Memorial Turnpike.
Don't feel bad suckers.

Posted by: Mike at January 7, 2008 8:41 PM

Encouraging private enterprise to develop NEW infrastructure, such as roads, bridges, tunnels, light rail, clean power generation, etc., I think would be a very good thing for our state. As Anthony mentioned, it's something that's widely practiced in many countries, even including some "socialist" ones. Our turnpike authority basically uses a similar funding mechanism (of course, the state skims much of the money from it which is supposed to support bridge and road maintenance).

Private industry has the advantage of having to do things in an actuarially sound manner -- unlike the state has been doing as of late. If a company keeps spending money that don't have, or pays for a Ferrari and getting Pinto quality, their shareholders wouldn't tolerate it -- and neither would the FTC.

All that being said, I have a big problem with just selling off or leasing existing tangible assets for the long-term, in order to raise short-term cash to plug a hole, because our legislators are so beholden to various constituencies, that they are unwilling to make responsible spending decisions. The problem isn't about revenue, it's that we spend too much money!

Andrew, to specifically answer your question "Now, can somebody explain to me exactly what a private company can do with a bridge to make it more 'profitable' that a state government can't?," it's not about what it "can do", it's about what it "would or will do." The answer is: MAINTAIN IT!

PS Since many of our legislators are for sale already, maybe the state should demand a cut of the action, to help plug the deficit. Does anyone remember muckraker Lincoln Steffen's report about RI in the early 20th century, "A State for Sale"? Nothing's changed, has it?

Posted by: Will at January 7, 2008 8:56 PM

"I have a big problem with just selling off or leasing existing tangible assets for the long-term, in order to raise short-term cash to plug a hole, because our legislators are so beholden to various constituencies, that they are unwilling to make responsible spending decisions. The problem isn't about revenue, it's that we spend too much money!"

Not even if the proceeds went exclusively to the pension liability (where the tobacco cash should have gone if they had to touch it) would this be a good idea.

Hello. You're thinking about liquidating capital assets to cover operating shortfalls. The idea alone should raise major red flags.

Posted by: Monique at January 7, 2008 9:48 PM

It's not just the revenue from the sale of the bridge! More importantly it's the elimination of the high special-interest induced cost of the bridge. Not paying for it would be as simple as taking the scenic route through Fall River and stopping for a chourico and chips grinder. If the bridge is convenient (i.e. of value) to you, then you'll pay the toll.

Now, we own the bridge and pay for it over and over again whether we drive over it or not.

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