Bush Officials Criticized for Privatization
By Lyndsey Layton and Spencer S. Hsu Washington Post
Staff Writers
http://www.washingtonpost.com/wp-dyn/content/article/2008/03/16/AR2008031603085.html?wpisrc=newsletter
Monday, March 17, 2008
It took a few moments for Tyler Duvall, the top policymaker at
the
Department of Transportation, to digest the news from the Hill.
But when he realized what it meant, he was stunned.
Last year, Congress decided not to dictate how the department
could spend its discretionary funds. No earmarks, no strings, no
arm-twisting from lawmakers to direct money to bus systems or other
mass-transit projects in hundreds of communities nationwide.
Duvall and other top department officials were staring at
nearly $1 billion. And they knew exactly how to spend it.
They used the money to seed five high-profile experiments,
in
New York,
San Francisco,
Minneapolis,
Miami and
Seattle, that feature "congestion
pricing" -- tolls that increase when traffic is heavy. The
idea is to reduce traffic by
discouraging some motorists from
driving during peak hours.
"It's almost sort of un-American that we should be forced to sit
and be stuck in traffic," said D.J. Gribbin, the department's
general counsel and liaison to the
White House, who worked closely with Duvall on the project.
For Gribbin, Duvall and
Transportation Secretary Mary Peters,
the goal is not just to combat congestion but to upend the
traditional way transportation projects are funded in this country.
They believe that tolls paid by motorists, not tax dollars, should
be used to construct and maintain roads.
They and other political appointees have spent the latter
part of
President Bush's two terms laboring
behind the scenes to shrink the federal role in road-building and
public transportation. They have also sought
to turn highways into commodities that
can be sold or leased to private firms
and used by motorists for a price. In Duvall and Gribbin's
view, unleashing the private sector and introducing market forces
could lead to innovation and more choices for the public, much as
the breakup of AT&T transformed telecommunications.
But their
ideas and actions have alarmed transit
advocates, the trucking industry, states struggling to build rail
projects and members of Congress
from both parties.
"They have a myopic view," said
Rep. John L. Mica (Fla.),
ranking Republican on the House Transportation and Infrastructure
Committee. Pricing transportation to drive down traffic may make
market sense, but it harms the public, he said. "This was a country
based on some system of equality. People are paying their taxes and
have representation. You can't exclude them from having a fair
return."
Critics such as Mica do not oppose all tolling,
but they argue that the traditional mechanism for
funding roads and transit, the federal gas tax,
which has not been raised since 1993,
must be increased so that the nation's Highway Trust Fund
does not run out of money in three years. Some Democrats
contend that the Bush administration wants to
starve the fund so that states will be
forced to sell off roads to private firms, charge tolls and
ration the best access to those willing to pay for a faster commute.
"Everything they're doing is
designed to drive things to privatization," said
Rep. Peter DeFazio (D-Ore.), chairman of the House
Transportation and Infrastructure highways and transit subcommittee.
DeFazio said the nation long ago settled that roads are
public goods. "They're just trying to undo 200 years of
history and go back to the Boston Post Road."
Even if the next president reverses its policies,
the Bush administration will leave a
legacy of new toll roads across the country,
a growing number of public roads leased to private companies, and
dozens of stalled commuter rail, streetcar and subway projects --
including the $5 billion extension of Metro to
Dulles International Airport.
A New Focus on Tolls
Tyler Duvall was on his way to a departmental retreat in 2006 when he
hit 25 miles of traffic on Interstate 270. At the retreat, the Bush
administration officials agreed that congestion should be the focus
of their remaining time in office.
Since the 1990s, the Department of Transportation (DOT) has spent
about $10 million a year to study tolls. Inspired by the writings of
economist and Nobel laureate William Vickrey, considered the
"father" of congestion pricing, Duvall decided it was time to crank
up that work. Polling data said the public was fed up with traffic
and willing to try something new.
"We thought, let's expand and let every state try congestion
pricing," he said.
When Democrats took control of Congress and stripped most
earmarks from last year's federal budget, Peters took $850 million
that would have been shipped to hundreds of municipalities and
poured it into Urban Partnerships, a pilot program awarded to five
cities on the condition that they test congestion pricing.
The focus on toll roads alarmed the transit industry, which
argues that public transportation is the best way to fight gridlock
in cities. Industry leaders say the DOT has made it increasingly
difficult for expensive rail projects to qualify for federal
dollars. The number of major new rail and bus projects on track for
federal funding dropped from 48 in 2001 to 17 in 2007, even as
transit ridership hit a 50-year high last year and demand for new
service is soaring.
William Millar, who heads the American
Public Transportation Association, says he set up three
appointments with Duvall to try to influence how the Urban
Partnership money would be spent, but each was cancelled.
"They just see no role for transit," Millar said.
Duvall, 35, is a fourth-generation Washingtonian
whose father is a well-connected lawyer. He
had no transportation experience when he was plucked from
his job handling corporate mergers and acquisitions at Hogan &
Hartson and was offered a political appointment at the DOT
in 2002. "It was a friend of a friend of a friend sort of
thing," he said.
Within four years,
he was setting national policy.
Tall and lanky, Duvall is a kinetic intellectual who talks
animatedly about pricing theories and e-mails stray thoughts to
colleagues in the middle of the night. In his office, he keeps a
bust of
Dwight D. Eisenhower, father of the interstate system. One
recent day, he was reading a paperback copy of
Barry Goldwater's book "The Conscience of a Conservative," lent
to him by Peters.
Fans say Duvall savors a good policy debate; critics call him
an ideologue who doesn't know how to compromise.
All acknowledge his influence on major DOT initiatives and
statements.
"Tyler Duvall is a little pointy-headed neocon with grand
ideas about the future of transportation, and they all involve
tolling," DeFazio said.
"He's bright, young, energetic -- just totally wrong, and
has a bizarre, neocon view of transportation."
Soon after Duvall arrived at the DOT as a "schedule C" -- the
lowest-level political appointee -- Peters asked him to interview
for the job of general counsel at the
Federal Highway Administration. He lost out to another lawyer --
D.J. Gribbin.
Duvall and Gribbin soon became allies, bonded by a shared passion
to inject free-market theory into transportation policy.
Gribbin, 44, grew up well connected to
the Republican Party. His father was a longtime
aide to
Vice President Cheney and a former head
of
Halliburton's Washington office.
The younger Gribbin worked as a lobbyist for the
National Federation of Independent Business and as a
national field director for the
Christian Coalition under Ralph Reed.
For six months in 2005, he moved his wife and seven children to
Guatemala, where they performed missionary work.
A cautious man who leaves nothing on his desk at the end of the
day, Gribbin hatched the DOT's controversial plan to charge airlines
a fee for landing at New York's JFK and other busy airports during
peak hours -- a proposal the airlines say they will fight.
"Milton
Friedman said 30 years ago you should price roads for users, but
you couldn't because you can't have a toll booth on every corner,"
Gribbin said, invoking the Nobel Prize-winning conservative
economist. But now, transponders and automatic toll collection have
made Friedman's prescriptions possible, Gribbin said.
The cities that won the Urban Partnership grants
-- New York, San Francisco,
Minneapolis, Miami and
Seattle -- are represented by
Democratic leaders and a key Republican.
"Basically, they bought off five urban
areas," said Mica, who represents
Miami. "I got the smallest amount, probably because I squealed the
most about what they were doing."
Mica and other lawmakers curtailed the program this year
by barring it from using more than 10 percent of the department's
bus money.
But communities on the losing side last year were hit hard.
Without funds for new buses,
Dubuque, for example, had to rely on volunteers such as Shorty
Harris, who drove passengers around northeast
Iowa in his 2002
Chevy Cavalier.
"I couldn't believe they could get away with this, to just take
that money away," said Mark Munson, director of the Regional Transit
Authority in Dubuque, which has been frequently forced to deny trips
to the elderly and disabled because there are not enough buses and
volunteers can't fill all the gaps.
Duvall is unapologetic, saying the traditional pork-barrel
process of divvying up transportation dollars is bad policy. The
proof, he said, is the fact that increased government spending on
transportation has not slowed congestion.
None of the five Urban Partnership projects has opened
yet, and several face local opposition. New York faces a
deadline this month for approval from the state legislature and city
council or it will lose the money. Duvall hopes at least one project
-- on I-95 in Miami -- will be operating by summer and will
demonstrate the value of his theories.
"There are 250,000 people a day sitting on I-95 in Miami," he
said. "In four months, thousands of people will have faster
commutes, guaranteed trip times."
Highways and Wall Street
By limiting the federal role in transportation, the Bush
administration has sped the growth of a new business: private
investment in roads.
As they have crafted policy, Duvall, Gribbin and other Bush
officials have been working closely with private equity funds.
The DOT persuaded Congress to change
the tax code to make $15 billion in tax-exempt bonds
available for private firms to build
road and freight projects.
The department waived regulations
to speed development of toll road projects and
wrote sample laws to help state legislatures permit the lease
or sale of their roads to private companies, with laws now enacted
in 23 states.
As a consequence, private equity funds focused on transportation
attracted an estimated $100 billion to $150 billion in 2006,
according to industry analysts.
The new opportunities
for private equity have also created job opportunities for
government officials. In the past three years, nine current
and former top DOT appointees have worked for such funds or for
engineering or construction firms interested in tolling projects
subject to federal review.
Gribbin is one of those officials.
He came to the department in 2003 from Koch Industries,
which has a road-building subsidiary and is owned by a
prominent donor to Republican and libertarian causes. As
general counsel at the Federal Highway Administration, he wrote a
report to Congress praising private-public partnerships, citing a
study he commissioned on the benefits of tolling while he was at
Koch.
That report also included ideas attributed to Macquarie
Holdings, a major toll-road builder based in
Australia. Gribbin left the federal government in 2005
to work at Macquarie, where he earned $265,000. He returned
to the DOT last year as general counsel.
Peters followed a similar path. She served as
federal highway administrator from 2001 to 2005, then worked
as a senior vice president at HDR, a construction firm with
several tolling projects, where she was paid a salary and bonus of
$225,833 to craft its public policy. She returned to federal
government as transportation secretary in 2006.
Peters said she sees no conflicts.
"Having someone like D.J. Gribbin who has worked in the private
sector helping us decide what kinds of protections [are needed in
tolling deals] is a big advantage," she said. "I don't think the
policies that we're advocating are premised on the fact that it
creates this opportunity for people to go out and work in this
industry at all. We're doing so because we firmly believe these are
in the best interest of America."
Public distrust of privatization, however, remains high.
Republicans lost control of the
Indiana state legislature in 2006 partly because of controversy
over the governor's lease of a public highway to Macquarie.
Political opposition has also forced governors in
New Jersey and
Pennsylvania to suspend plans to lease roads.
Texas lawmakers put a two-year freeze on the governor's strategy
to privatize a 4,000-mile network of tolled highways.
Last month, the
Government Accountability Office warned that tolls on privatized
roads are typically higher than if the roads remain under public
control, because of the need to generate steady profits for private
investors. The report said the federal government
needs to better
protect the public interest.
"This is all about making money,"
said Frank Busalacchi, the
Wisconsin transportation secretary and a member
of a congressionally chartered commission that last year studied
transportation funding and supported raising the gas tax.
"The financiers, bankers, people coming in -- the foreign dollars
coming in and buying infrastructure in this country that American
people put down."
For Macquarie, the Dulles Toll Road has enormous appeal. The
company approached
Virginia in 2005 about leasing the road, pocketing motorist fees
and financing the rail extension to the airport. But
Virginia officials had other ideas. They wanted to keep the
road in the hands of a public entity -- the
Metropolitan Washington Airports Authority -- and let it build
the rail line.
According to four former senior DOT officials,
Virginia's decision upset
Duvall and then-DOT chief of staff John A.
Flaherty. "They went ballistic," one of the officials said.
"[They] wanted that to be their pet project in the nation's capital.
Tyler would mention that frequently . . . that it would be
better for the project to go to Macquarie."
Duvall said the DOT is not trying to steer Virginia toward a
public-private partnership for Dulles rail and that Flaherty was
angered because the state did not notify the department, not by the
substance of its decision. "My interest in this was solely to make
sure the taxpayer was getting the right deal," he said.
When the DOT said in January that it would not fund the
rail project, Macquarie repeated its interest to Virginia
officials, as did another private equity firm, the
Carlyle Group, which created a $1.5 billion
fund to invest in U.S. infrastructure and has hired Flaherty
to head it.
A final decision on the Dulles extension is on hold. But Duvall
and his colleagues have ignited a national argument -- the first
real debate about how to fund transportation in 50 years.
"This is as big as it gets in terms of policy changes in
America," Duvall said. "It's clear that we've ruffled feathers --
right, left and center -- in talking about new approaches. That
said, I think the public is really dying for new ways to do things.
. . . The genie is somewhat out of the bottle."
