[1]
Shirah, congratulations on your diary rescue at dKos.

This post needs some elaboration - it seems off-the-mark. The guy who fixes my car does know a lot more about it than I do, and yes I do expect him to do it correctly, even though he may be wrong occasionally.

The issue is whether a true competition is at work. All three of the firms you listed do have bona fide expertise and their forecasts are far better than yours or mine would be. A real transportation department has its own experts on-staff who review and check the outside expert to make sure he's doing his job, and to keep track of the capabilities and performance of his competitors.

In Federally-funded projects owners are required to make all their assumptions public in public hearings where opponents have the chance to question the assumptions. Before-and-after studies are conducted by outside groups, other firms or universities, to validate forecasts and correct the methodology so the industry gets better at it.

A toll road authority rarely has its own experts and does take expertise on faith, rarely conducting peer reviews. Data are kept secret so there's no chance for public questioning. I think that must be what you mean and that is indeed where the problem lies.

Posted by pdt at Tuesday, May 30, 2006 05:11:37

[2]
The U.S. House Transportation and Infrastructure Committee is interested in the issue of privatizing (tolling) roads and held its first in a series of hearings on Public Private Partnerships on May 24, 2006. I have excerpted some of the testimony of D.J. Gribbin, division director at Macquarie Holdings,USA, from Wednesday's hearing. I'm also including some biographical information about Mr. Gribbin.

"Macquarie [is] a diversified global financial services organization. Macquarie recognized as early as 1990 the potential of infrastructure as an emerging asset class that offers attractive long-term investment characteristics and benefits from a long-term active management philosophy. We take a partnership approach, adding value through specialist strategic, commercial, operational and financial expertise with proven ability to enhance the performance of assets over the long term.
Major infrastructure sectors that Macquarie specializes in include toll roads, airports and airport-related assets, telecommunications, water, rail, port, energy generation, transmission and distribution assets as well as water & wastewater and, social infrastructure.
...Let me thank this committee for the work it has done to encourage increased private sector involvement. The tools you provided under TEA-21 and SAFETEA-LU are helpful. Provisions expanding tolling opportunities, allowing private activity bonds, streamlining the environmental process, and reforming the design-build rules will facilitate private participation in funding transportation infrastructure... the creative energy and finances of the private sector will have an opportunity to more fully influence this market.
...this new model of highway financing liberates billions of dollars of investment...Hernando de Soto, in his book The Mystery of Capital, explained how dead capital has contributed significantly to poverty in the developing world. Dead capital is comprised of investments made within a legal structure that prohibits those investments from being used as capital. For example, poor workers who build a home on land without clear title have created dead capital. They cannot borrow against their investment, and it is very difficult for them to sell their investment... Inadequate legal structures in developing countries have locked up $9.3 trillion in investments of this type... Instead, the legal structure surrounding these investments prevents them from being utilized as capital. Highway infrastructure here in the United States is analogous. Inadequate markets and legal systems in this country have locked up billions of taxpayer dollars in our transportation infrastructure....
...two recent transactions, the long-term leases of the Chicago Skyway and the Indiana Toll Road, have demonstrated that the captive capital invested in these assets can be freed. ...the Indiana Toll Road concession ...freed $2 billion in captive capital..."

According to TOLLROADS news 2006-01-20 http://www.tollroadsnews.com DJ Gribbin was former chief counsel of the Federal Highway Administration (FHWA) and a longtime Washington free marketeer. Gribbin's office worked to reduce obstacles to tolling and toll concessions and other ways to involve investors in road financing. Gribbin was a Washington rep and director of public sector business development of Koch Industries during a period when that company was making a major push for involvement in groups bidding for concessions. Before that he was a lobbyist for the National Federation of Independent Business. He also has a background as Christian activist, having been national field director of the Christian Coalition.

I am guessing that D.J. Gribbin is the son of David James Gribbin, and according to PublicIntegrity.org <http://www.publicintegrity.... and Halliburtonwatch.org http://www.halliburtonwatch... David James Gribbin had a long history with Dick Cheney that included working for him in Congress, the Pentagon, Halliburton (chief lobbyist) and then in the White House.

Posted by alice at Tuesday, May 30, 2006 07:25:13

[3]
Thank you for emphasizing the issue of open access to information. That wasn't my focus, but it is an important one. I'm adding a link here to a piece I did on this issue: Private or Public? Public-Private? Part III - Public Sector Accountabilityhttp://www.unbossed.com/index.php?itemid=463

In this post, I wanted to rally the troops to have the courage to say the emperor has no clothes when that is what they see. Or at least to start asking whether the emperor is naked.

While these companies do have expertise, their track records are so bad they do not deserve unquestionning acquiescence in their findings.

Posted by shirah at Tuesday, May 30, 2006 07:41:45

[4]
Thank you, Alice, for the information. The Department of Transportation has been a captive of the Far Right on the issue of private (aka public-private) tollroads.

In a report of theirs that I discussed a year ago,
http://www.unbossed.com/ind... I mentioned that the DOT was endorsing the use of various sorts of traffic calming methods promoted by ultra conservative groups such as the Reason Public Policy Institute.

They promote anti-competition as a good, because it funnels money to highway investors. In doing this they reduce the role of government to being a conduit for sending tax dollars to the private sector. Regardless of the public's needs or wishes.

Here is an excerpt from United States Department of Transportation Report to Congress on Public-Private Partnerships December 2004 -http://www.fhwa.dot.gov/rep...

"What States should include in any public-private partnership legislation will vary, according to a previous FHWA review of the literature on public-private partnerships. The literature suggested that legislation should, at a minimum, provide an operating environment that allows a State department of transportation to enter into partnerships and to approve specific activities associated with that partnership. To be effective, State enabling legislation should designate a lead agency, such as the State department of transportation or a toll authority, to implement highway partnerships. The literature also indicated that the lead agency should have the authority to act on behalf of the State; therefore, it should have certain statutory powers. For most projects, these powers should include the power to procure projects through negotiation; to acquire right-of-way through eminent domain (or otherwise) and transfer use of it to a private developer; to acquire and confer environmental permits; to confer exclusive franchises; to establish a geographic non-compete zone; to enter into binding concession agreements and lease arrangements; to regulate tolls or rates of return; to accept unsolicited proposals; and to blend or lend State and Federal funds to a project. The literature noted that without some of these powers, it would be difficult for a State to undertake public-private investment initiatives."

Posted by shirah at Tuesday, May 30, 2006 09:33:06

[5]
Thanks for your excellent work!

Read more about the House Transportation and Infrastructure Committee hearing on May 24, 2006 and see the witness list here
http://www.house.gov/transp...

The recent verdicts in the Enron case make the following excerpted commentaries from the Australian press about Macquarie worth noting.

http://www.smh.com.au/text/...
Macquarie Bank's halo is slipping
Date: October 24 2005

Macquarie Bank innovates. Insatiably. It has mesmerised the sharemarket with financial origami and investors have rejoiced in the apparently endless stream of money it generates. It is admired by analysts, investors and executives who praise its originality and its agility. Its executive pay packets are legendary, to the point its moniker "the millionaires factory" has become a cliche. It is the success story that has dominated its industry so completely it has had to invent new frontiers to conquer.
Sound familiar? Macquarie Bank shares much of this with perhaps the greatest corporate catastrophe in history … Enron, the American energy monster that invented new markets in everything from electricity to bandwidth to weather futures and then imploded.
Macquarie's reliance on a unique and seemingly invincible business model and the fact that its success has turned the workaday business of infrastructure into the sexiest spot on the investment horizon also help to invite the comparison. As do the parabolic growth rates and the massive acquisition prices....
...the market's mad love affair with Macquarie Bank and the many satellites it has spawned appears to be waning. Brokers who were once bullish are increasingly cautious and some investors are beginning to ask what for years has been the unutterable question. Does the invincible Macquarie Model have feet of clay?
http://www.theaustralian.ne...
MARGIN CALL by Michael West
May 20, 2006
[Allan Moss] managed to get governments around the country to outsource their revenue raising to Macquarie Bank. Essential services - roads, communications towers, Sydney Airport - all sold off to Maccas, which then floats them, rips out millions in fees, gears them to the hilt, revalues them at every opportunity, gears them more, and rips out more fees.
You've got to hand it to the boys, they are slick. They make a killing in every division: treasury, funds management, financial products, lending, M&A, advisory. But what really sets these boys apart is they came up with the Macquarie Model, of which Nick Moore (last year's salary: $20.6 million) is the architect.
It works like this. You get your hands on the asset. Hopefully it's a concession from government to operate a solid cash-flow monopoly. Then you spin it off to the stock market in as complicated a corporate vehicle as you can devise. That way, no one understands it. But you've got the track record, the funds managers have got everyone else's money. They put it in because you offer them a nice yield thanks to low interest rates and high gearing.
There's usually a Bermudan entity in your structure so you get your tax bill down on your monopoly Aussie taxpayer revenue via an offshore tax haven on the asset sold by the government on behalf of the punters. But it gets better. Instead of having to produce profits and provide a dividend, you do two things. One, rip out fees upfront from the capital the instos have just given you. You can do that because it's a trust structure. And two, you crank up the valuation of the asset every six or 12 months. That's right, just lift the book value - there's more steak knives than a Demtel ad here - and book a profit from your revaluation.
Assorted fees flow to the bank, whether the underlying stapled security has made a real profit or not (it doesn't matter, most haven't). Hundreds of millions of dollars a year from this dazzling constellation of satellite trusts.

...we've always been a big fan of this bank; in shareholder terms. No one shuffles paper like these boys. If we had to make a call, though, the easy dollars are gone. Instos won't be stumping up the big upfront fees on the satellites and once interest rates go up the squeeze will be on. MIG, for instance, has $3 billion of debt you can see, but off balance sheet you can treble that. To get the same growth pace, which has this bank on such an astronomical market valuation, Big Al [Allan Moss] and team have to make bigger bets. Bigger bets, bigger risk.

Posted by alice at Tuesday, May 30, 2006 10:27:33

[6]
I'd like to add two corollaries to your Myth of Expertise theory:

The Myth of the Free Market
The Myth of Privatization

Both of these suppositions are used as justification not only for tollroads but a host of "drown government in the bathtub" aims.

As shirah has pointed out time and time again with her posts here >> http://unbossed.com/index.p... << the private sectors' performance, cost, and civil liberty-bending practices are great cause for concern.

Posted by em dash at Tuesday, May 30, 2006 10:32:28