New Jersey Gov. Jon Corzine, a Democrat, is proposing a variation of the “public-private partnerships,” being implemented in other parts of the country and according to critics a danger to the sovereignty of the U.S., as a solution for the state’s expected $3 billion budget deficit, the biggest after California and New York.
Under the typical PPP structure that has been supported by the Bush administration, through the U.S. Department of Transportation’s Federal Highway Administration, projects such as the Trans-Texas Corridor highway, are under way. That new highway project is planned to be four football fields wide and run through Texas parallel to Interstate 35 from Laredo to the Oklahoma border.
It is being leased by foreign investors including Cintra, an infrastructure investment consortium in Spain that has made large payment to operate the highway and collect tolls on contracts written to last as long as a half century.
Critics’ comments about such plans were typified by an attendee at a conference at which a Colorado “public-private partnership” plan was discussed.
“Under P3, the USA is up for sale,” a conference attendee said. “Whatever the public now owns – roads, ports, waste management water systems, rail lines, public parking facilities, airports, even lotteries and sports stadiums – are up for grabs and the only requirement is that the foreigners have the cash.”
Corzine’s variation is that his public-private partnership would involve the creation of a New Jersey non-profit corporation that would issue bonds to raise the revenue to pay for a 75-year long-term lease on the highway.
The governor is calling the structure a “public benefit corporation,” but whatever the name, he faced a hostile crowd at a recent town hall meeting on the issue.
“You’re supposed to be the wizard of Wall Street,” an angry citizen challenged Corzine Monday night in Marlboro, N.J. “Can’t you come up with a better solution to the state’s debt crisis other than leasing away the Garden State Parkway?”
“This scheme to lease the Garden State Parkway doesn’t work it’s not done on the KISS principle,” the questioner insisted. “Why can’t you ‘Keep it Simple, Stupid?’ and just cut state spending until it meets your tax revenue?”
An estimated 750 New Jersey residents, angered the governor failed to propose a reduced New Jersey budget in light of the expected $3 billion deficit, objected to the highway manipulation.
Corzine’s goal is to raise immediately somewhere between $32-$38 billion on a one-time basis when the PBC uses the bond revenue to lease what amounts to three highways – the Garden State Parkway, the Atlantic Highway, portions of the New Jersey Turnpike, and Route 440, which links the Turnpike with a Staten Island bridge.
Some $4 billion of the proceeds would be used in a capital reserve for toll road improvements and widening.
An estimated $10 billion would be used to eliminate existing debt on the toll roads and to create the appropriate bond reserves, while an upfront payment in the range of $18-$24 billion would be used to reduce state debt and fund transportation improvements.
“These won’t be junk bonds,” Corzine, the onetime head of Wall Street investment banking firm Goldman Sachs pleaded with the Marlboro High School audience. “The bond market has received very favorably state finance proposals linked to a certain stream of revenue, such as toll road receipts.”
But for more than an hour, dozens of attendees launching sharply critical questions, some bordering on anger and outrage.
“Why are you going to mortgage New Jersey highways for generations to come, just to get once-only upfront payment of $35 billion?” an attendee asked from the audience.
“You’re going to give up some $150 billion in future toll revenues, or more, over decades just to get this one-time bailout,” he continued. “What are you going to lease the next time you have a budget deficit?”
At one point, the strain on Corzine revealed itself. “If you have a better solution, let me know,” he shot back at one critic.
Some said they did have better ideas: Cutting the budget by dismissing employees and working to reduce pension expenses, disqualifying part-time state workers and various state commissioners from pensions, cutting pension payments, and eliminating various Corzine appointees from participating.
“You talk out of both sides of your mouth and you are mortgaging our future by leasing the Parkway,” one citizen said.
Corzine admitted the solution is not all good. “I don’t like this situation one bit,” he said. “As a politician, I don’t like the challenge of having to explain this proposal.”
He said under the plan, New Jersey may need to hike tolls 50 percent in 2010, 2014, 2018, and 2022 to make needed toll road improvements.
“The state transportation fund will be broke in 2011,” he said. “If we do nothing, we may have to both increase tolls and raise the gasoline tax in the state by 20 cents or more.”
Another audience member said, “We simply don’t trust anybody in Trenton anymore. What will the next governor do, if we let you lease the Parkway now?”
In 1952 the New Jersey Highway Authority was established to oversee final construction on the Garden State Parkway, with the idea that the road would operate as a self-liquidating toll road.
WND earlier reported a top Texas Department of Transportation official told a EuroMoney conference that establishing public-private partnerships that give away control of U.S. infrastructure to foreigners is like playing the casino game “Texas hold’em.”
“Sure, you can expect political objections, but if you play your cards right, you’ll win,” James Bass, the chief financial officer of TxDOT, told a two-day seminar devoted to teaching state government officials how to lease public assets to foreign investment interests.
Are you a representative of the media who would like to interview the author of this story? Let us know.