Redirecting

Friday, March 05, 2010

Privatize!

I read this NY Times story this morning about Arizona closing a few handfuls of rest stops to save money.

"Arizona has the largest budget gap in the country when measured as a percentage of its overall budget, and the state Department of Transportation was $100 million in the red last fall when it decided to close 13 of the state’s 18 highway rest stops."

"The roughly $300,000 a year it cost to operate each rest stop was something the department decided it could no longer manage."

“People think, ‘You just go in and change the toilet paper, don’t you?’ ” said Kevin Biesty, the government relations director for the Transportation Department. “The answer is, no, we have to maintain the water quality, we have do maintenance to the buildings and so on. Some of those places in the middle of nowhere are like their own little cities.”

I was instantly confused.   Every time I stop at a rest stop, I think "Man, I'd like to have the concessions business here."   It's a gold mine.   Why don't they lease out the space to McDonalds, Quiznos and others to generate rent revenues?    I then realized that we might be talking about dinky little rest stop buildings, where significant development costs might be required before this could happen - and of course, Arizona can't afford those development costs.

Then, in a moment of clarity as I was taking a dump, I had an epiphany: "Why don't they sell the rest stops?"  Boom - there you go Arizona - sell the rest stops to a private company who wants to manage them and make money off of them.  There has to be a REIT somewhere who would like to develop a rest stop and bring in some easy monopoly business.

Later in the day, I read this, from Marginal Revolution:

"The German municipality of Niederzimmern does not have the money to fix potholes. They are now selling the right to fix the road to anyone. In return, the owner of the fixed pothole can put on the road a text of her choice."


-KD


11 comments:

JCH said...

$300,000 a year? I recommend they stop mowing the sand.

scharfy said...

My beloved city of Chicago has sold ALL of its parking meters to a private Co. Here's a great article on all of this private/public dealmaking....

Shadow Elite: If You Believe That, I've Got a Bridge to Sell You....

Kid Dynamite said...

yes Scharfy - I know about that deal. note, though, how different it is - the parking meters are a money MAKING asset... these rest stops (and the German pothole repairs) are money LOSING assets.

i'm all in favor of selling money losing assets, but not the money making assets. when municipalities sell their good assets, they are doing patch jobs that just push the pain down the road a bit, but make it worse in the end.

Anonymous said...

I am guessing you must be a young feller, KD. I am old enough to remember when these things were being built - back when this country had the wherewithal and money for such things. Frankly, it was a better country then.

Sometimes I wonder whether I am in the same country that put a man on the moon, defeated communism, and eradicated polio. Maybe we should have entrusted private enterprise to work its magic on those public goals as well?

scharfy said...

I'm up way too late Kid, but I think it's not that simple to gloss over the fact that Public entities deal effective monopolies to private interests.

The start up costs are funded by the taxpayer, then sold at a loss because of GOVT mismanagement.

The concept of Parking meters was to pay for city services. It was a tax. Now those future revenues are sold for a lump sum cash payment to the city (which was about a billion and doesn't even make a dent in the deficits) and future revenues are in private hands.

In short, the GOVT takes a profit center, ruins it, and deals it below market to the private sector, where the proceeds aren't naturally reinvested in the city.

Its a devil's bargain either way, but I'd rather see the city get its act together rather than puking valuable assets to Private sector to streamline the process.

There are definitely scenarios(you've pointed them out) where a natural win/win exists, but the city/state dumping assets below the bid to pay for bloated pensions just ain't right.

Even these rest stops probably have gaudy taxpayer outlays embedded into them, and now via bloated GOVT management, the asset is gone, at a significant loss to the taxpayer.

Kid Dynamite said...

anon - i'm not sure what your point is. there is no debate that the government cannot run the rest stop profitably - it's not my opinion, it's a fact. it costs them $300k per year per rest stop - money which they don't have.

so yes - although private enterprise almost certainly could have "put a man on the moon, defeated communism, and eradicated polio" better than the government did, it's completely irrelevant to the discussion.


@scharfy - i definitely agree that " the city/state dumping assets below the bid to pay for bloated pensions just ain't right."

James said...

Seems to me we are going to see this kind of stuff on a global scale and it could get really really ugly. Look at the situation in Iceland. Trying to sell off assets or create a payment plan for creditors.
Multiply it on a much larger scale and the global economy could get go into a jaw dropping collapse again. Non of us were alive in the thirties and the world does have different technology today, but a lot of themes are still the same as they were then. We have wasted an entire year not fixing anything and possibly making everything worse.

When is the day of reckoning when policymakers realize that it is impossible to create vastly more debt than gdp because eventually you become a ponzi scheme and the system collapses?

getyourselfconnected said...

Hey KD,
ever have armed robbers come through and rob the casino while you were playing poker?:
http://tinyurl.com/yjta5s7
WOWZA!

JCH said...

I'm old enough to remember when they were outhouses and a couple of picnic tables.

When you got to Texas there was a sign full of bullet holes that said, "Welcome to Texas". Now you cross the Red River and there is a huge modern complex where they do gawd knows what. I never stop.

Which is what they need to do. Put up a row of outhouses. Label them "FREE, CLEAN, BUTT STINKY", and put credit-card swipers on everything else.

Anonymous said...

I respectfully beg to differ, KD.

Private enterprise would *never* have gone to the moon (unless there was a guaranteed profit).

Had private enterprise developed the polio vaccine, it would cost 100x in the US what it cost in any other country, which in turn means that not everyone could afford it, and thus it would not be eradicated.

Private enterprise would not have defeated communism because it was *far* too profitable to have an ongoing cold-war.

My point is that there are many common public goals that will never be accomplished by a glibertarian with a 'tude. If government is the problem, move to Somalia and try your luck, pal.

And having actually *been* there, I can state for a fact that America (which I have served, you?) was a profoundly better country then than it is now.

Kid Dynamite said...

anon - while this is a debate that can be had, i would like to repeat it's complete irrelevance to this post. this post is NOT about how the private sector can do things better than the government. if you go back and re-read it, that should be clear.

this post is about how a municipality that is unable to effectively manage an asset (FACT - not opinion) might be able to reach a solution where its citizens maintain the use of that assets (FACT: as of right now, the citizens are losing the use of that asset)

i sincerely thank you for your service on behalf of our country.