There’s news galore all around the privatization front.
Selling off the state’s huge Tidewater port facilities has been nixed; a bunch of private firms show interest in a partially state-funded new tollway tracking U.S. 460; and Gov. Bob McDonnell has finally unveiled his big idea for selling off the state’s ABC stores.
The news, however, is both mixed and quite telling. In every case, funding the right price for the project at hand has been a very nebulous exercise. It shows that privatization, which the state jumped into with great fanfare back in the mid 1990s, is not exactly the cut and paste selloff that its proponents would have you believe.
As the state Department of Transportatin has found out when it considered selling off the gigantic port facilities built with public money over many years, private business people are what they are for a reason. They will but the price squeeze on you. They want a good deal (even better a one-sided one) and could care less about the neo-Jeffersonian nonsense that the usual “think tanks” and blogs and gubernatorial streamlining commission types would have you believe.
Take a look at the three proposals:
- Transportation Secretary Sean Connaughton has pulled the plug on three proposals to operate the Virginia Port Authority facilities in Norfolk, Portsmouth and Newport News. Illinois-based CenterPoint Properties, a partnership of Carrix INc. of Seattle and Wall Street giant Goldman Sachs; and Washington-based Caryle Group with tentacles everywhere all had submitted proposals in 2009. Problem was, the proposals were embarrassing low balls figured on 2009 traffic when the Great Recession had crunched cargo traffic. Upfront cash offers ranged from $250 million to $750 million — not exactly big bucks. A later deal by APM Terminals for VPA to lease its $500 million container facility in Portsmouth for 25 years helped seal the others’ doom.
- McDonnell badly wants a privatized superhighway through the peanut country of Suffolk and other southeastern counties to Petersburg to replace pokey U.S. 460 and offer a safety valve for the clogged U.S. 64 on the Peninusla. Not a bad idea, but McDonnell somehow expected that the state wouldn’t have to poney up any public cash (the usual GOP pipedream). After no bidders showed up, some undisclosed public money was put on the table. Bids are in from 460 Partners, which includes Skanska USA Civil Southeast, AECOM and Bank of America; Multimodal Solutions LLC, including constructon giant Kiewit Cnstructioon, the Louis Berger Group and Autostrade; and finally, Spain’s Cintra Infraestructuras S.A.U., which is one of the leading public-private infrastructure building outfit on the face of the earth (presumably their executives won’t have to monkey with any anti-Hispanic immigration laws that the hard right wing in this state want so badly). It isn’t clear how the financing will work, but proposals in 2006 flopped in part because they would call for tolls of $13 per vehicle to go only 55 miles.
- Lastly, McDonnell has finally unveiled his selloff plans for ABC stores. He claims selling off 300 or so ABC stores will bring in $500 million and keep pumping in nearly $250 million annually in taxes. Facing hard oppostion from his own party, he dropped his goofy idea to add a 4 percent tax masquerading as a fee on mixed drinks in bars. In its place is a 2.5 percent tax on bars and restaurants that choose to buy liquor from wholesales and not retailers. Plus there’s a $17.50 per gallon excise tax on spirits that would be higher than the national average and higher than neighboring states. Opponents are readying their attack, saying the governor’s numbers are loopy. What’s worse, the last two states to privatize their ABC system — West Virginia and Iowa — did not make nearly the revenue from the sell-off as they initially thought. The plan — and the funny way McDonnell has come up with figures — will not be this a slam dunk.
This is a lot to absorb, but it is a “teachable moment” as Barack Obama likes to say. Privatization is a lot harder than it looks. Assessing fair values on properties built with the sweat of Virginia taxpayers is not easy not matter what the dogmatists claim. And when you look at all the effort the McDonnell Administration is putting into these privatization things, you have to ask: Why here? Why now? Why isn’t he concentrating directly on jobs?
Peter Galuszka
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