Senator Proposes Liens on Transportation Assets

The ability of state and local governments to raise cash by leasing or selling transportation assets to private investors would be slowed, if not killed altogether, under a bill introduced by Sen. Richard Durbin (D-Illinois).

Introduced June 16, Durbin’s bill would place federal liens on all transportation facilities that have received more than $25 million in federal funding and are valued at more than $500 million.

Before a lease or sale could be executed with a private investor, the federal money used to build or maintain that asset would have to be repaid.

When private investors “take control of an airport, road or other transportation asset for decades — sometimes as long as 99 years — the federal taxpayer is often left holding the bag,” Durbin said in a statement.

“My bill will ensure that the interests of the federal taxpayer are protected when a private company seeks to operate a public asset for a profit,” he stated.

States strapped for money as a result of a global recession that severely narrowed tax revenues have been eyeing lease deals as a quick way to raise upfront cash.

Ohio Gov. John Kasich, for instance, is exploring a lease deal for the Ohio Turnpike.

In neighboring Indiana, Gov. Mitch Daniels leased the Indiana Turnpike in 2006 for 75 years to a group of Spanish and Australian investors who paid $3.8 billion upfront in exchange for the right to collect tolls.

In Durbin’s home state, the city of Chicago leased out its parking meter system and its Skyway and is considering leasing out its Midway Airport under a federal aviation pilot privatization program.

Durbin’s bill — the Protecting Taxpayers in Transportation Asset Transfers Act — calls for the Department of Transportation to create a formula that would ensure the repayment of federal money.

The formula would have to take into consideration the “reasonable depreciation” of a transportation asset. And the repaid federal money would have to be used to help pay for other transportation projects.

If the bill becomes law, within 180 days the DOT would have to “establish a program under which a federal lien shall be attached to each public transportation asset.”

The Durbin bill and its formula would apply only to the sale or lease of existing facilities, not to new public-private partnerships formed to build transportation assets such as toll roads, bridges or airports.

It was unclear, however, if the Durbin bill would make the lease or purchase of existing public assets financially unattractive to private investors.

The bill requires that prospective investors or the government entity that owns the asset pay the federal lien before a lease could be executed.

Phineas Baxandall, an expert in privatization at U.S. PIRG, a federation of public-interest research groups, said it is unfair to say that Durbin’s bill is intended to end the leasing or sales of transportation assets.

“If the major motivation for these deals is to save the taxpayer money, and you start putting in some conditions that they say they actually do have to pay the taxpayer money, that shouldn’t be an obstacle to good deals,” said Baxandall.

Baxandall is a critic of lease deals that are too investor friendly and not favorable enough for taxpayers. He said he supports the Durbin bill but did not help write it.

“I think the lien idea is genius and we’ve never thought of it,” Baxandall said.

While Durbin was touting his bill, Illinois Sen. Mark Kirk (R), announced that he would introduce a bill to promote private investment for new roads, airports and railroads. Kirk had not introduced his bill by press time.