Daniel Schulman and James Ridgeway get the 2007 muckraking season off to a great start with a Mother Jones story on the privatization of the Chicago Skyway and the Indiana Toll Road into which it feeds. As they see it, the city of Chicago and the state of Indiana got taken to the cleaners.
First, they were dealing with Goldman Sachs, which acted as an adviser to Chicago and Indiana — and as an investor in both deals. “When Goldman Sachs began advising Indiana on selling its toll road, it failed to mention to the state that it was putting together a fund whose sole purpose would be to pick up infrastructure for the best price possible in order to maximize returns for its investors. Nor did the bank advertise the fact that, even as it was advising Indiana on how to get the best return, its Australian subsidiary’s mutual funds were … becoming de facto investors in the deal.”
Second, the deal screwed the public, particularly in Chicago. For instance, if the Skyway’s new owners decided to start charging by the time of day, and long-haul truckers responded by taking surface streets instead, the city could face congestion problems it wouldn’t be able to control until the lease runs out — in 2103.
Finally, in the words of Oregon congressman Peter DeFazio, “When you look at the Chicago Skyway, that’s even worse. They are not even reinvesting the proceeds of the sale in transportation. They’re using them for operating costs. That would be like anybody selling their assets in order to live. You can’t sell your assets very long to put food on the table — before long you’re out of assets.” [SEE UPDATE IN COMMENTS — THIS IS ONLY PARTLY TRUE.]
Here’s a brief and cogent critique (PDF) of both deals, as presented to a House subcommittee May 24 by privatization supporter John Foote of Harvard.