The selling of America:From
Bloomberg: (excerpts, emp add)
Transurban Group, Australia's second- biggest toll road owner, agreed to buy Virginia's Pocahontas Parkway for $611 million, gaining its first U.S. motorway.
Transurban is among companies attracted to the reliable cash flows from toll roads that it estimates will spur some $200 billion of deals worldwide in the next 10 years. Macquarie Infrastructure Group and Cintra SA got state approval in March for their $3.85 billion bid for Indiana's toll road as U.S. states sell rights to their highways to pay debt.
"A lot of the state governments there are running budget deficits and they need the cash from wherever they can get it."
More U.S. states will sell roads as they seek to raise non- tax revenue to pay for repairs to heavily traveled highways and bridges, Merrill Lynch & Co. said in a report in March.
That's what happens when you don't tax enough to pay for stuff. You end up selling your assets.
posted by Quiddity at 5/16/2006 02:37:00 AM
If the states that are selling these roads were operating them at a profit (or even at break-even), then it is nothing short of foolish to sell such performing assets. This was the strategy that Pan Am airlines used back in the 1980s when it decided to compete for domestic flights. Its domestic operations were major money losers, so Pan Am sold its highly profitable international routes to subsidize the domestic-operations black hole.
If the states were losing money on these roads, it makes one wonder how the new owners plan to make a profit. Maintenance is by far the biggest chunk of expense. Will the new owners cut costs by reducing maintenance? Or maybe they will create their own private highway patrol and make up revenues by ticketing every driver who is so much as 1 mph over the speed limit?
It will be interesting to see how this plays out in the next 10 years.
Look at the electricity infrastructure! Remember the great blackout? Minimum maintenance in order to increase the bottom line.
Why should it be different here?
HB
