Ellen Dannin, Truthout (Jan. 31) – The Pittsburgh Post-Gazette announced that the administration of Gov. Tom Corbett finally decided to take action on the state’s crumbling bridges. The action it is taking is to sign a 40-year contract to privatize Pennsylvania bridges.
The word privatization does not appear in any of the announcements. Instead, PennDOT refers to the project as a public-private partnership. However, whether called a PPP, P3, public-private partnership, contracting out or privatization, the result is the same. Infrastructure privatization – that is privatization of roads, bridges, parking garages, parking meters, airports and the like – involves signing a contract, generally for a term of 30 to 99 years.
In the case of Pennsylvania’s bridges, the private contractor takes on responsibility for designing, constructing, financing and operating bridges for up to 40 years.
Pennsylvania will hire a privatization industry insider as a consultant to advise the state. International firms such as Mayer Brown, Morgan Stanley and Macquarie frequently are hired to act as the consultant and, in other cases, will sit on the other side of the table as the private contractor. Consultants often are paid a “success fee” if a privatization agreement is reached. The success fee will motivate the adviser to recommend privatizing.
The public tends to grumble about paying tolls, but that misses bigger issues, such as the contract’s adverse-action rights. Adverse-action rights give the contractor the right to be paid compensation whenever an action lowers the amount of money the private contractor expects to receive.
Chicagoans already have expensive – and extensive – experience with adverse-action compensation as a result of privatizing the city’s parking meters and garages. Chicago has been in litigation over whether it must pay adverse-action compensation because the city built a new parking garage near a privatized parking garage. Chicago has been liable for adverse-action compensation when it has had to put its parking meters out of service – as, for example, when it has had to close a block to do repairs on streets or water and other underground systems.