page last modified September 20, 2013   102181.

Facts about the financing of the East-West Corridor

East-West Highway proposal seeks public funding to pay investors

Budget for East West Highway project in 2008 dollars as proposed by Cianbro: $2.145 billion

Included in this budget (as private capital):

  • 2 lanes with alternating truck lane
  • 2000-ft right-of-way
  • 30 overpasses
  • Allotment for 170 miles acquisition out of 220 mile road
  • 100 miles of frontage roads (from Calais to Costigan only)

Not included in this budget (requiring State capital):
  • Upgrade of 125 kilometers of existing roadway in Quebec
  • Toll-collection system; design, development, and deployment, including equipment
  • Communications infrastructure to support tolling system
  • Border crossings
  • Environmental documentation and permitting
  • Investment grade feasibility study
  • Engineering design
  • Maintenance and services
  • Inflation
  • Property taxes
  • Interest payments
  • Ultimate widening of facility (from 2 lanes to 4 lanes)

"the East West Highway is not an attractive investment unless some financial contribution is provided by the state/provincial entities" (p. 44)
(Source: 2008 East West Highway Conceptual Feasibility Study Calais to Coburn Gore commissioned by Cianbro Corp. and prepared by Louis C. Berger Group, Inc. Download)

Public Private Partnership means massive government handouts with no public revenue return

"The proposal must limit the use of state capital funding to less than 50% of initial capital cost of the transportation facility"
(Source: State of Maine Statute, Title 23 Sec. 4251 Public-Private Partnerships; Transportation Projects. Download)

"Although P3s [Public Private Partnerships] are advertised as tapping the power of private capital markets to invest in public infrastructure, the reality is that P3 investors enjoy large public subsidies. For example, private companies building P3 highway projects now routinely expect states to grant them authority to issue qualified private activity bonds (PABs). Unlike most lending in private capital markets, interest payments on PABs are exempt from federal taxes.... Since the bonds are not taxed, they allow the borrower to obtain cash at less cost. This form of financing, then, is essentially a tax cut for the investment banks and corporations with the P3 contract. The U.S. Department of Transportation also routinely grants Transportation Infrastructure Finance and Innovation Act (TIFIA) loans to P3 developers. TIFIA loans provide companies with much cheaper interest rates and more flexible terms than anything available in the private capital markets---again because the public subsidizes them."
(Source: Highway Robbery by Darwin Bondgraham, Nov/Dec 2012. Dollars and Sense: Real World Economics)

Private transportation projects are paid for by the public

"A recent Congressional Budget Office (CBO) report [states] 'the case is sometimes made that using funds from private capital markets to finance roads can increase the resources available to build, operate, and maintain roads,' the report notes 'but the sources of revenues available to pay for the cost of a highway project---whether it uses the traditional financing approach or a Public Private Partnership---are the same: specifically tolls paid by users or taxes collected by either the federal government or by state and local governments.'"
(Source: Highway Robbery by Darwin Bondgraham, Nov/Dec 2012 Dollars and Sense: Real World Economics.)
"There is no debate about whether public borrowing costs are lower than the private sector's. Defenders of road privatization may argue that private-sector efficiencies will offset the private sector's higher borrowing costs, but there is little evidence that those efficiencies, where they exist, can make up for higher cost of capital." (p. 25)
(Source: 2009 Private Roads, Public Costs: The facts About Toll Road Privatization and How to Protect the Public, U.S. PIRG Education Fund)

1999 State of Maine East West Highway study determines adverse economic impacts

In 1999, the MDOT studied the impacts of comparable highways in New England as a basis to understand the impact of an East West Highway would have on Maine. They looked at the economic impacts that the construction of I89 and I91 had in Vermont and New Hampshire. The findings:
  • The downtowns of the rural towns along the routes were gutted of their local businesses and associated jobs.
  • There were jobs created at the existing cities along the highways primarily in chain stores.
  • The jobs created at retail chain stores came at the direct expense of the rural downtowns along the interstates. It was a job transfer away from the rural areas, with no net job gains for the state.
  • No increased population growth came to areas along the interstates.
  • The interstates did not halt the pre-existing out-migration trend in the rural areas.
  • There was no significant Canadian investment outside of 100 miles of Montreal.
  • The manufacturing industry in these states continued to decline.

The MDOT concluded that an East-West Highway through Maine would bring no "real economic benefit" and that the harmful "bypass effects" on the communities located on or near the route did not justify building a new four lane highway in Maine.
(Source: 1999 A Summary of the Findings of Studies Regarding a Maine East-West Highway prepared by the Maine Department of Transportation.)
(Source: 1999 Maine East-West Highway Economic Impact Analysis Phase IV Techinical Report Case Study Research
)

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