Managed Road PPP is the Key for Jobs, Low Taxes and Congestion Relief

02 Aug 2010 -- Eight groups eye Puerto Rico’s first toll road deal. A potential concession for two of the island’s toll roads drew interest from a mix of infrastructure funds, including those managed by Morgan Stanley, JPMorgan and Goldman Sachs.

This is five years after the spectacular failure of installing a heavy rail system on the island city of Jan Juan. San Juan rail had a 100% overrun in construction costs and five years after opening achieved far less than 50% of the forecast daily ridership for the opening year.

Roads both bring congestion relief and private money. Managed roadways are a win-win for commuters and taxpayers.

Here is a more eloquent take on solving congestion, providing jobs and keeping taxation in check by Economics Professor William A. Galston of the University of Maryland and fellow with the Brookings Institution.

"The traditional response is to use the federal government's taxing authority to raise infrastructure funds, and appropriations to fund specific projects. This model has hit a wall: not only will it be very difficult to raise taxes in current or foreseeable circumstances, but there's also the problem of how local and special interests influence, even determine, project selection for reasons that have nothing to do with economic efficiency."

"Over the past generation, we have systematically underinvested in the foundation of an efficient economy and society — namely, infrastructure. Anyone who has traveled in recent years knows that our systems of transportation and information are no longer world-class."

Today, we have trillions of dollars of capital sitting on the sidelines earning almost no return, and millions of long-term unemployed workers who would be thrilled to receive a steady paycheck again. The task is to bring these two factors of production together around projects that make sense.

• To attract private capital, projects must earn a reasonable return, which means increased reliance on user fees (tolls or levies per unit consumed) rather than general taxation.
• Because most infrastructure projects generate public goods (such as economic growth in the areas it opens up) as well as private goods (such as easier commutes).
• To promote economic efficiency and growth, projects must be chosen on economic rather than political grounds. The new model requires a shift away from congressional dominance of the selection process toward an empowered board substantially insulated from day-to-day political pressures.

Freeway Multi-car Collision. Three Apparent Lessons.

Sunday, August 1, 2010, 4:00 PM. A friend sent me three pictures from an accident on H-1 Freeway, Honolulu-bound, near Aiea minutes after it had occurred. Here are a few lessons from the three cell phone pictures received.

(1) This police car is parked at the wrong angle. The police car that blocks and protects the accident scene should be parked in a direction that guides unaffected drivers to the safe way around the scene.


(2) The police officer is talking to involved drivers on the freeway. On a freeway scene all unharmed persons need to be relocated to the shoulders immediately.


(3) This truck appears to be the start of the multi-car "spin outs" on the slick pavement. Notice the old, worn, dirty and off-road style tires. A vehicle with proper highway tires might have not caused this half dozen vehicle collision.

Poverty of Dollars is Largely a Statistical Creation. Poverty of Spirit is Real.

Walter Williams of the Jewish World Review makes a powerful argument that poverty as applicable worldwide is almost absent in the US. He says:

"Material poverty can be measured relatively or absolutely. An absolute measure would consist of some minimum quantity of goods and services deemed adequate for a baseline level of survival. Achieving that level means that poverty has been eliminated. However, if poverty is defined as, say, the lowest one-fifth of the income distribution, it is impossible to eliminate poverty. Everyone's income could double, triple and quadruple, but there will always be the lowest one-fifth."

The real malaise in the U.S. is poverty of the spirit which leads to many ills in our modern society:

"Yesterday's material poverty is all but gone. In all too many cases, it has been replaced by a more debilitating kind of poverty — behavioral poverty or poverty of the spirit. This kind of poverty refers to conduct and values that prevent the development of healthy families, work ethic and self-sufficiency. The absence of these values virtually guarantees pathological lifestyles that include: drug and alcohol addiction, crime, violence, incarceration, illegitimacy, single-parent households, dependency and erosion of work ethic. Poverty of the spirit is a direct result of the perverse incentives created by some of our efforts to address material poverty."

Read his full article "Where Best to Be Poor" for a fuller argument why material poverty is almost largely absent in the U.S.

Oahu Statistics: City, State and Federal Employees

The graph below shows City, State and Federal employment counts on Oahu from 1990 to 2010.

City jobs have been above 10,000 employees and over time they grew by almost 30% while at the same time population grew by less than 10%.

Federal jobs were at an all time high from January 1990 to September 1993 and retrenched to below 30,000 due to the combined effects of Hurricane Iniki, the Gulf War and the burst of the economic bubble in Asia. Despite the recent prolonged recession, federal job count has increased to over 30,000 again since 2007.

The number of state jobs fluctuates greatly from month to month. September almost always has the lowest number of employees followed by a sudden spike of a few thousand in October. This pattern clearly depicts the seasonal effect of 9-month public school teachers (state DOE.)

Soon after the 2008 recession the total State employment on Oahu surpassed 60,000 people for the first time but the count receded in 2010. In the 19 years from 1990 to 2009 state employee count on Oahu increased by 10,000 or +20% whereas population grew by less than 10%.

In other words, between 1990 and 2009, the state government on Oahu added an entire Honolulu city government onto itself!

Two more observations. Bloated government comes at a high cost to the taxpayer. According to a recent article in The San Francisco Chronicle, Hawaii tops the list in total state taxes among all states in the union. That's a very pricey distinction.

Oahu state government added a lot more people as soon as Information Technology (IT, that is computer automation of bureaucracies) took hold. It appears that the powers in charge (government, legislature and unions) kept thousands in the dark ages and hired 5,000 new government workers for the new ages.

Rail Lessons from Greece

• Losses at Hellenic Railways continue to mount — at the rate of $3.8 million, a day. Its total debt has increased to $13 billion, or about 5% of Greece’s gross domestic product.

In comparison, the proposed rail for Oahu is 400% the annual amount of Oahu's CIP budget.

• Some have argued that Hellenic Railways should shut down the majority of its routes; trains manned by drivers being paid as much as $130,000 a year frequently run empty.

Outside multimillion population cities in the U.S., metro rail systems run basically empty except for a couple of hours around the AM and PM commute times. Typical U.S. Transit Authority managers are paid $250,000 to $400,000 annual salaries.

• The general secretary for the Greek Transport Ministry, contends that the government’s plan to close at least 35 loss-making routes and cut 2,500 jobs will make Hellenic Railways attractive to foreign investors.

But the former transportation minister responded: "I said I was not going to privatize Hellenic Railways because I knew I couldn’t find an investor silly enough to invest in a company with so much debt.”

How many investors have "Mufi Hannemann and the Pro-Railers" found?

Zero investors but thousands of payers! The 400,000 Oahu taxpayers!

Source: All bullets excerpted from New York Times' Greek Rail System’s Debt Adds to Economic Woes.