How The New Infrastructure Deal Could Lead To More Fees and Tolls

Letting private companies lease public infrastructure can go wrong. Just look at Chicago’s parking meters.

When President Joe Biden held a celebratory press conference after agreeing to a new bipartisan infrastructure proposal on Thursday, he emphasized one of his administration’s victories in negotiations with Republicans: No one making less than $400,000 a year would face a tax increase.

Republicans, ruling out the corporate tax increases Biden originally sought to pay for infrastructure investment, had pushed to either increase the nation’s 18.4 cents-per-gallon gas tax or tie it to inflation in the future. They had also pushed for user fees for owners of electric vehicles. Neither made it into the final proposal, which still has a long way to travel before it becomes law.

“We’ve all agreed that none of us got what we all would’ve wanted — I clearly didn’t get all I wanted,” Biden said to reporters outside the White House, flanked by 10 of the 21 senators who have signed on to the bipartisan deal.

Details on the final agreement remain sketchy beyond a White House-issued list of how the negotiators propose to dole out the $579 billion in new spending. There is a list of ways the bipartisan group of Senators proposes paying for the plan, but without details or dollar amounts attached. Some members of Congress on Thursday still seemed unsure of what exactly was in the proposal.

“We haven’t written this down yet, and in terms of legislation, there’s going to be a lot that happens down the road,” said Sen. Mitt Romney (R-Utah), one of the negotiators, admitting details still needed to be worked out.

The details of the bipartisan infrastructure framework President Joe Biden endorsed on Thursday are still up in the air. But a reliance on public-private partnerships to fund the proposals could lead to more tolls on American roads.
The details of the bipartisan infrastructure framework President Joe Biden endorsed on Thursday are still up in the air. But a reliance on public-private partnerships to fund the proposals could lead to more tolls on American roads.
Gary Hershorn via Getty Images

But one of the pay-for provisions should set off alarm bells among some Democrats: “Public-private partnerships, private activity bonds, direct pay bonds and asset recycling for infrastructure investment.”

These deals, broadly referred to as public-private partnerships, are typically long-term leases or sales of public infrastructure — say a road or a port — to a private company. The government uses the revenue from the lease to build new infrastructure, while the private company gets the right to charges tolls or fees to the public for use of the old infrastructure.

And that, almost inevitably, means people up and down the income scale — including those making less than $400,000 — could have to pay more to use some essential infrastructure.

“There’s only one way to pay that money back,” said Donald Cohen, the executive director of In The Public Interest, a nonprofit research group that has warned of the risks of public-private partnerships. “We’ll pay more in taxes, tolls and fees.”

In the past, Democrats have opposed such proposals, labeling them as giveaways to Wall Street and foreign investors that leave Americans holding the bag.

Vermont Sen. Bernie Sanders, an Independent who caucuses with Democrats and chairs the Senate Budget Committee, said Sunday on NBC’s “Meet The Press” that he would struggle to back a deal that turned infrastructure over to private entities.

“One of the concerns that I do have about the bipartisan bill is how they are going to pay for their proposals, and they’re not clear yet,” Sanders said. “Privatization of infrastructure, those are proposals that I would not support.”

The nightmare example of how a public-private partnership can turn sour is in Chicago, where former Mayor Richard Daley sold off the rights to the city’s parking meters and other assets in the late 2000s. The price for a parking space skyrocketed to more than $6 an hour in some parts of the city, and meters were routinely broken or overcharged motorists.

As of August 2020, the consortium of private investors who now own the meters had already extracted more than $1.6 billion from their initial investment of $1.16 billion, according to the Chicago Sun-Times. They have the right to collect parking meter revenue for another 60 years.

Other public-private partnerships in the United States have also gone badly, including toll-road partnerships in Texas, Alabama, Indiana and California that have all gone bankrupt over the past decade.

There are other concerns: Rural Democrats have feared private investors are less likely to back projects outside of major metropolitan areas. Cohen notes the long length of most infrastructure leases limits the options for cities and states over the course of decades.

Former President Donald Trump’s administration aggressively pushed public-private partnerships as part of its failed pitch for “infrastructure week,” and Democrats were supremely dismissive at the time.

“The president’s plan is a recipe for Trump tolls from one end of America to the other,” New York Sen. Chuck Schumer (D), now Senate majority leader, said of Trump’s plans in 2017. “That’s not what the American people are crying out for. They don’t want more tolls. They want us to rebuild our crumbling water systems, bridges and schools — not finance new toll roads.”

But today, it’s unclear if Democrats will react to Biden’s plan with the same vociferousness, especially since it is closely linked to the outcome of their broader agenda.

Arthur Delaney contributed reporting.

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