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Report: Protecting Consumers
Eight Questions about the Future of the Ohio Turnpike
On November 22, 2011, the Ohio Office of Budget Management and the Ohio Department of Transportation commissioned the consulting firm KPMG Corporate Finance to analyze financing options, including privatization, for the Ohio Turnpike. Privatization schemes would effectively raise money for current transportation funding by borrowing against decades of future tolls to be paid by drivers on the Turnpike. KPMG will be paid $2.85 million by the state to produce the report.
Ohio Governor John Kasich has touted privatization plans as a possible way to fund roadway projects around the state that have been stalled by deep budget cutbacks he signed to highway and bridge construction. Governor Kasich has said that decisions about potentially privatizing the Ohio Turnpike will depend on the results of the KPMG report.
Ohioans must make sure that eight basic questions have been fully addressed to ensure that fair comparisons are made and hidden costs are considered:
1. How much of the additional money that would be generated through privatization is the result of higher tolls, and how much from more efficient operations? In other words, how much smaller would the payout likely be if tolls did not rise?
2. How would the value of an upfront cash payment from a lease compare to the value of revenue that would be forgone if the state charged the same toll rates as a private operator would be allowed to charge? In other words, could the state raise the same amount of money if it were willing to raise tolls as fast as the private operator ?
3. Are the same cost-saving measures included in each proposal, and if not, then why? In other words, what’s stopping the state from introducing the cost-saving measures it anticipates a private operator would make?
4. Will there be language in a lease with a private toll road operator restricting improvements to parallel and competing roadways? How much future compensation might the state be forced to pay a private toll road operator for public measures that could inadvertently reduce private profits from the Turnpike?
5. How might the threat of paying compensation or other prohibitions in the contract constrain Ohio from pursuing policies it would otherwise advance for public benefit?
6. What downsides might result if higher tolls divert traffic onto secondary roads and local communities?
7. What additional costs would the state of Ohio likely incur to pay for professional services or in-house expertise to negotiate, monitor, enforce and litigate its privatization deal?
8. What information would be restricted from the public as a result of a private operator claiming proprietary privileges on information about its operation and finances for public structures?
Given the gravity of long-term decisions about the Turnpike, it would be foolhardy to move forward with a proposal simply because a consulting company was not required to examine the relevant questions, because short-term budget gaps needed filling, or because a number of listening meetings were already conducted. Ohioans should ensure that these eight questions are fully addressed before agreeing to privatize the Turnpike or borrowing against its future proceeds.
The CUT Loopholes Act would put an end to the price and profit shifting that allows publicly traded companies to engage in pervasive tax avoidance.
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