Look out, Maryland: Delaware is preparing to pick your pocket. Again.
But this time it may be much more serious than adding slot machines at Delaware Park. Amid a national movement of "privatizing" public highways, the state is considering surrendering the Delaware portion of Interstate 95 to corporate financiers who would control its tolls and maintenance.
It would be a terrific deal for Delaware. The state could raise billions and immediately plug a huge, self-created deficit in its transportation budget.
It would be a terrible deal for everybody else.
Marylanders and other non-Delawareans would pay the inevitably higher I-95 tolls plus any other consequences of placing this economic lifeline in private hands. Leasing I-95 to some corporation would be the worst example yet of a pernicious national trend: transforming public utilities into private monopolies.
Delaware needs billions to pay for road projects over the next six years.
It could raise money the old-fashioned way: by selling bonds. But that would cost taxpayers interest, and if there's one thing Delaware knows how to do, it's shield taxpayers from the consequences of state spending.
Instead, Delaware may pursue the course taken recently by Indiana, which just "solved" its own transportation-finance problem by leasing a 157-mile section of Interstate 90 to Australia's Macquarie Infrastructure and Spain's Cintra Concessiones for $3.8 billion.
Delaware Gov. Ruth Ann Minner hasn't proposed leasing I-95. But the signs suggest that her 2008 budget will do so when it comes out in a week or two.
A state transportation task force raised the idea a year ago. And in a speech last year Minner promised to explore "the possibility of a private/public partnership or other innovative financing plans" for transportation projects, the Wilmington News Journal reported in a front-page story last week on the concept.
To mimic Indiana, Delaware would turn I-95 over to Cintra or somebody else for a lump sum of $5 billion or so and let the company recoup the money - with interest - by collecting tolls for 75 or 100 years. As a result, tolls and maintenance on a critical patch of I-95 would escape public control for three generations.
In case you think some sort of toll cap could be built into the deal, listen to a conference-call presentation by Cintra's chief financial officer last summer. For a Cintra-controlled road in Ontario, "the right of Cintra to raise tolls without prior consent has been accepted and agreed by and reaffirmed by the government," Francisco Clemente happily told investors.
What a disaster for drivers and taxpayers. Discussion about road privatization reminds me of the push to deregulate Baltimore Gas and Electric Co. and other electric utilities a decade ago. Turn regulated assets over to the market, goes the refrain, and everything will be groovy. BGE customers saw how that turned out last year, with a 72 percent rate increase and much higher profits on BGE's former generation plants, now owned by the utility's parent.
Government is incompetent at many things, but history shows that natural monopolies must be owned or heavily regulated by the state. Few monopolies are as natural as I-95, the carotid artery of the East Coast economy. No matter how high its tolls might rise, travelers would have little choice but to pay them.
Even though road privatization is a transparent money grab, elected officials go along with it because it makes their lives easier. They get the money up front without raising taxes, and repercussions won't occur until they're out of office or dead.
It's a new, more insidious form of deficit financing. In an Enronesque sleight of hand, privatization moves transportation liabilities off a state's balance sheet and makes everything look fantastic.
But what about Washington? Won't the federal government, which regulates interstate commerce, stop this for the good of the national economy?
Fat chance. Washington invented deficit financing, and the Bush administration never met a privatization proposal it didn't like, no matter how zany. President Bush just nominated a top Macquarie executive, D.J. Gribbin, to be general counsel of the Department of Transportation, so don't get your hopes up.
At least Hoosiers raised heck about privatizing the Indiana Toll Road, which was pushed by Gov. Mitch Daniels, Bush's former budget chief. ("Keep the Toll Road; Lease Mitch" said the Democratic buttons.) But that would be far less likely in Delaware because, unlike Indianans and I-90, Delawareans don't patronize the I-95 toll booths. Nine out of 10 vehicles paying the toll are from out of state.
Delaware's budget problems probably ensure that tolls will rise again on I-95 no matter what, even if there is no lease deal. But far better they be increased directly by Delaware's legislature than in an outsourcing deal to Wall Street.