Ending Accounting Gimmicks
This Editorial appears in the April 27 print edition of Transport Topics. Click here to subscribe today.
Legislation introduced by two prominent members of the Senate Finance Committee could go a long way toward taking the air out of some politicians’ stampede to raise short-term revenue by leasing out or selling public highways and other public assets.
The bill, sponsored by Chairman Jeff Bingaman (D-N.M.) and ranking member Chuck Grassley (R-Iowa), would both remove an unfair accounting gimmick from such deals and help raise revenue for the Treasury (click here to see p. 1 story).
One of the attractions of these so-called public-private partnerships has been the ability of the acquiring companies to depreciate the cost of the deal over 15 years and not the 45 years that roads and highways usually last.
The bill would require companies to spread the depreciation over the actual anticipated life of the project.
“We’re subsidizing these transactions in a way that’s just not fair,” said Bingaman’s spokeswoman, Jude McCartin.
We couldn’t agree more.
If these “partnerships” are such good deals, surely they need to stand on their own, without a hidden subsidy from the Treasury.
As American Trucking Associations’ Tim Lynch said after it was introduced, the legislation would take “the thumb off the scales so that these deals will either go or not go on their own merits.”
The timing is crucial, because the Obama administration has made it clear that it supports more of these kinds of deals to fund infrastructure development rather than increasing fuel taxes, which we believe would be a much better idea.
In addition, Sen. Bingaman introduced a companion bill that would require states to eliminate privatized roads from the calculations that determine how much federal money the states receive to maintain their public road systems.
Sen. Bingaman said it was a matter of fairness, and again we definitely agree.
Because the affected states already have received payments from their “partners” for the private roadways, and because the private companies are charged with paying for maintenance of the improvements, it “doesn’t make sense and it isn’t fair to other states” to include them in the federal funding program, Sen. Bingaman’s aide said.
We heartily endorse this legislation and believe that both bills would help remove the unfair, hidden public subsidies for what really amounts to a fire sale of public infrastructure assets.
