Bacon's Rebellion

Democracy Thrives in Sunlight

The Mother of All Privatizations

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by

James A. Bacon
in

Del. Harry R. “Bob” Purkey, R-Virginia Beach, wants to explore the idea of privatizing Virginia’s ports. He plans to ask the General Assembly to study whether privatization is in the state’s best interest, according to the Associated Press.

Port Authority Executive Director Jerry A. Bridges raised the possibility of privatization in May. More recently, John G. Milliken, the Port Authority’s chairman, has confirmed that the board has discussed the option.

To my mind, there is only one conceivable reason to oppose the idea: If it ain’t broke, don’t fix it. Virginia’s ports — which include marine terminals in Norfolk, Portsmouth and Newport News and the intermodal Virginia Inland Port in Front Royal — has been growing steadily and gaining East Coast market share.

Here’s the rub: The port’s competitiveness is constrained by transportation bottlenecks on Interstate 64 and U.S. 460 leading out of Hampton Roads. The Commonwealth lacks the money to upgrade those arteries, and it’s not clear how long it will take the Hampton Roads Transportation Authority, with tolls and a modest flow of locally generated taxes, to get the projects built. The general public has exhibited little stomach to pay higher taxes and tolls for the benefit of the region’s maritime interests.

The solution seems simple: Sell the ports to private interests and use the proceeds to upgrade the transportation infrastructure required to serve the ports. Pension funds, insurance companies and private investment groups have demonstrated an increasing appetite for investing in public infrastructure. The value of the port would be measured in the billions of dollars. That’s serious money, and it could pay for a lot of transportation upgrade.

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15 responses to “The Mother of All Privatizations”

  1. Jim Wamsley Avatar
    Jim Wamsley

    “If it ain’t broke, don’t fix it”

    “Sell the ports to private interests and use the proceeds to upgrade the transportation infrastructure required to serve the ports.”

    This is the wrong solution. It will only generate a one time pot of money that VDOT will spend on the wrong things.

    The right solution is to sell revenue bonds backed by the revenue stream from both the Port Authority and the new transportation infrastructure required to serve the ports. The Port Authority should have an oar in the transportation infrastructure spending to insure that it benefits the Ports and is not wasted on more congested highways.

  2. Anonymous Avatar
    Anonymous

    And how many millions of taxpayers dollars have gone to developing the VPA over the years?
    If you sell the ports, are you going to give all Virginia taxpayers a rebate? Or do the taxpayers get a say in what smells very much like an inside deal?
    I’d say it stinks very much

  3. Larry Gross Avatar
    Larry Gross

    JW has it right.

    Do NOT. I repeat, Do NOT give any money to VDOT and do not let VDOT be the planning agency or have a leadership role for new infrastructure. (nor to the HRMPO)

    In other words, get the Government players out of the equation as much as possible and empower private enterprise to seek business solutions.

    Make the port authority responsible for the transportation as a legitimate cost of doing business. They can and should partner with the rail companies and/or PPTA entities for road infrastructure.

    Putting VDOT in charge of “transportation” will ensure a giant sucking noise… they’ll low-ball the cost.. get it approved… start into it and VOILA find out that it’s REALLY going to cost 2 or 3 or 10 times the original estimates and Va taxpayers will once again get snookered.

    Despite VDOT’s claims of on-time and on-budget for projects like Springfield… they love revisionist history because originally Springfield was estimated at around 250 million.

    It was only after they had their big cost overrun audit that they started the clock all over again at 670 million.

    If the State was “smart”, they’d be looking at the Ports, US 460, and good linkage from I-95,I-85 to the CBBT.

    Folks ought to take a look at how LA did multi-modal for their ports.

  4. David Mastio Avatar
    David Mastio

    There are a lot more reasons you’re leaving out that we should privatize.

    a)Right now a special tax (I can’t recall which) kicks in about 30-40 million a year to the port. If the port were privatized, that money could be redirected to state-wide needs.

    b) Right now the state pays Newport News, Norfolk and Portsmouth a fraction of the $10 million or so in real estate taxes that the port does not pay because it is owned by the state. The state could redirect that money while the cities would finally get the full real estate tax and be able to use the money to pay for the costs of hosting the port (road upgrades and repairs).

    c)The money does not have to be spent as a one-tie pot of money. I’d suggest it be split into two pots of money invested in a similar fashion to state pension funds. Pot A would go to fund future road and rail upgrades in Virginia at the direction of the Port. Pot B could go to some important state-wide initiative. I’d prefer making two years of college universally available for Virginia students who graduate from HS with a B or better. I bet Gov. Kaine might go for it as a source for his pre-k initiative.

  5. E M Risse Avatar
    E M Risse

    Why is it so easy to champion more tonnage, bigger share, larger capacity, imporved road access rather than:

    Balance, less waste and an economy that make a higher percentage of the population more prosperous, happy and safe while shipping less stuff shorter distances?

    It seems the theme should be [to modify a recent post]:

    “The historical data show that the Chesapeake region is prone to cyclical periods of drought, [and a finite limit to cheap fuel and air regeneration capacity — only the EU has yet to address the impact of aircraft and seacraft emmissions ] and we need to prepare for it.

    “That means treating water [fuel and transport capacity in general] as the finite resource that it is, and developing institutions, infrastructure and lifestyles that will enable us to survive much longer droughts [and the inevitable need to establish Balance and end the Mass OverConsumtion] than anything we’ve experienced in our lifetimes.”

    EMR

  6. E M Risse Avatar
    E M Risse

    Oh yes, see Backgrounder:
    “A New Metric for Citizen Well Being.” at db4.dev.baconsrebellion.com

    EMR

  7. Anonymous Avatar
    Anonymous

    “Make the port authority responsible for the transportation as a legitimate cost of doing business. “

    And why not do the same for other concentrations of business, like NOVA?

    RH

  8. Larry Gross Avatar
    Larry Gross

    “And why not do the same for other concentrations of business, like NOVA?”

    any private business utilizing public infrastructure to transport products that it will sell for a profit – needs to incorporate the cost of the infrastructure.

    When the infrastructure is paid for by taxpayers, the companies that rely on taxpayer funded infrastructure lobby for more – taxpayer-funded infrastructure done grossly inefficiently because it is not tied to specific business needs.

    If businesses have to pay up front for the infrastructure (like tolls), it then becomes a cost of doing business and fair game to find cheaper ways.. to out-compete your competitors.

    The cost gets passed on to taxpayers anyhow but it is a lesser cost because companies have incorporated that cost into their competitive business models.

    The companies essentially assume the middle-man role rather than VDOT.

  9. Anonymous Avatar
    Anonymous

    “it then becomes a cost of doing business and fair game to find cheaper ways.. to out-compete your competitors.”

    Like moving out of the area, state, or country to where that cost does not exist.

    If businesses pay for infrastructure then their customers pay the cost. Their customers may also be taxpayers, but it is incorrect to say that taxpayers absorb the cost.

    But your comment shows that the important idea is for us(customers, employers, employees, and taxpayers) to get the lowest overall cost.

    Toll roads don’t pay for the infrastrucure up front: they pay for it with tolls collected over time, but how do you figure toll roads are paid for by businesses that use public infrastructure?

    If business builds infrastructure, how can we call it “public infrastructure” unless we in fact stole it from business?

    RH

  10. Larry Gross Avatar
    Larry Gross

    “if business builds infrastructure, how can we call it “public infrastructure”

    huh?

    If a private entity build a toll road and it is open to the public then we call it public use.

    If the state enters into a contract with a private business to build and operate infrastructure than can be used by the public then it will.

    re: “like moving out of the area”

    like Jim Bacon says. How much are you willing to pay to keep a business?

    If we charged $25 tolls for trucks on I-81 and a bunch of them went elsewhere and freed up new capacity for private autos – we’d not have to build new lanes would we?

    and then how about if the “elsewhere” was CSX and Norfolk Southern?

    Would that be “worth it” to Virginia Taxpayers? You be it would because many of the trucks are out of state.

    what would be the loss to Va if out-of-state trucks went “elsewhere”?

  11. Anonymous Avatar
    Anonymous

    If a private entity builds a movie theater and it is open to the public, the company still owns the movie theater.

    I think you will find that when private money builds stuff, they are going to act more and more as if they own it.

    As for the rest of it, if it happens, then don’t complain about sprawl, or dysfunctional patterns, because they will reflect what we encouraged people to do.

    The real question will be as EMR says: are we better off and happier?

    RH

  12. Larry Gross Avatar
    Larry Gross

    no no

    you need to distinguish between a privately owned and operated business that can close anytime they wish

    and public infrastructure than can be built and even operated or even leased for 99 years by a private entity but the ownership still is public.

    we’ll all be better off the more that each of us makes our own choices and pays the real for the choices we make.

  13. Anonymous Avatar
    Anonymous

    “built and even operated…… by a private entity but the ownership still is public.”

    That is the single craziest thing I ever heard.

    Why would I pay to build something for the public to own?

    I’ll build (or not build) and maintain whatever the public wants to have. But they should expect are going to have to pay me (or someone) for maintenance, and they should expect to rent or buy the property at a price that covers my costs, including a modest profit, and including the cost of money borrowed.

    They should not expect to get something for free, unless they are thieves.

    We’ll all be better off the more each of us pays the real costs for the choices we make as well as the choices we impose.

    RH

    RH

  14. Anonymous Avatar
    Anonymous

    If the public wants to build it and lease it to me to maintain, that is a differnt thing: under a lease they still own the underlying property, but they have sold the use of it for a specified time.

    If the public wants me to build it for them, and then lease it back to me, that is different still. Now I get profit from the construction, which they own. They can still lease it back to me, in which case they have sold the use of it to me for a period of time.

    Either way, I’m going to sublease temporary use at a cumulative higher price. I make money by subdividing the lease and selling the individual pieces for a cumulative price which is more than the government thought the lease was worth.

    The government could have borrowed the money and pocketed my profits, instead they chose to keep the cost off of their books and avoid the political fallout, by allowing me to be paid more more than it would have cost them.

    Basically what I provide is accounting services, risk avoidance, and political cover, on top of the cost of building and operating the road.

    It’s a good deal, really it is.

    RH

  15. Larry Gross Avatar
    Larry Gross

    Some interesting info about what is EXPORTED from Va Ports:

    “Thomas D. Capozzi, the authority’s marketing chief, said outgoing shipments of such products as paper, grain, logs and chemicals are driving the local growth. Many of the products originate in the Midwest, he said.”

    http://content.hamptonroads.com/story.cfm?story=136494&ran=246723

    So the obvious question is – should Virginia taxpayers pay for the transportation infrastructure to move these exports?

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