Selling Public Infrastructure and Privatized Chinatown?

August 27, 2008 by Chinatown Blogger.

Random question: what happens when public infrastructures are privatized? Jenny Anderson of the NY Times wrote on Aug. 26th: Running Out of Money, Cities Are Debating the Privatization of Public Infrastructure (free registration). Anderson argued that as governments face budget cuts, private companies such as Kohlberg Kravis Roberts, Carlyle Group, Goldman Sachs, Morgan Stanley and Credit Suisse are pushing for privatization of public infrastructures. Examples given of these public-private partnerships include the high occupancy toll lanes in Washington, a toll road in Florida, and a deal being worked on for an airport in Chicago. Not surprisingly, former secretary of transportation Norman Mineta, is an advisor to Credit Suisse, one of the private equity funds pushing for privatization.

The article quotes these bankers:
“People are creating a new asset class,” said Anne Valentine Andrews, head of portfolio strategy at Morgan Stanley Infrastructure. “You can see and understand the businesses involved — for example, ships come into the port, unload containers, reload containers and leave.”

“Ten to 20 years from now infrastructure could be larger than real estate,” said Mark Weisdorf, head of infrastructure investments at JPMorgan.

Hmm.. larger than real estate? So, after the failure of the housing market and mortgage-backed securities, Wall Street is looking for new areas to invest and their target is public infrastructures. If private funds can convince the public to mortgage away public infrastructures that we need for daily use - highways, trains, airports, buses - is this not the same as taking an equity line of credit from our house? Local governments may see a short-term boost in revenues from the sale of the infrastructure, but at what price does the public have to pay in order for private investors to achieve their 10% annual return?

But the Chinatown Blogger would argue, why stop at public infrastructures? If the Mass Turnpike Authority can lease air rights over the I-90 to developers, why not privatize neighborhoods?  Physical neighborhoods must be worth more than air, right?

Think about this.. the Seaport can be sold to JP Morgan, Chinatown to State Street, and North End to Td Banknorth. The banks can recoup their money by marketing in the neighborhood to encourage residents to open accounts and invest in funds that are — investing in local communities (and parking meter spaces will now cost $10 per hour).

City Hall would get a double boost, increased revenues from the sale of neighborhoods and cutting budgets for services that will now be provided by private entities. City Hall will be laughing all the way to the bank. Imagine.

(Disclosure: This was written as satire.)

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