A Bridge Over Muddled Waters

Bay City, Michigan, is debating a proposal to sell a bridge to a private company, which would then rebuild it to a much higher standard and charge a toll for people who crossed. There is a lot of emotion around the proposal, but I’m interested in the options on the table.

Here are the rough details as provided by mlive.com:

United Bridge Partners is proposing to purchase Independence and Liberty bridges from the city for $1 million.

The company would then demolish the existing Independence Bridge and construct a 125-foot tall, non-moveable, concrete bridge as its replacement. It would feature four, 12-foot lanes (the existing bridge has 10-foot lanes), in addition to 10-foot shoulders and a 10-foot shared-use path with overlooks. The existing Independence Bridge has a 6-foot unprotected sidewalk.

The company would also take over Liberty Bridge, make appropriate repairs to the span and find ways to make it more efficient.

All of this would be done at zero expense to the city.

But in order for the company to pay off its investment and eventually see a return, it would charge motorists a toll to cross in both directions. That toll would vary depending on where a motorist lives and the size of the vehicle.

Note that this proposal is very different from the public-private partnerships we’ve grown accustomed to — the ones where the public assumes all the risk while the private company gets all the gain, or the ones where the local government is pawning off an asset to plug a budget hole.

No, in this scenario it appears that the city is ridding themselves of a liability while the private business is assuming all the risk of the project not working out. The public gets a safe, new bridge, enhanced with added capacity for vehicles, bikes and people. And, to top it all off, the city has negotiated an annual kickback worth an estimated $700,000, which is pretty impressive negotiating. This seems like a good deal.

Which is why my initial reaction was: Why doesn’t the city just do this deal themselves? Why do they need a private sector partner?

Why doesn’t the city build the bridge? They can certainly borrow at lower rates than the private business is going to be able to (although that’s likely to be offset by higher construction costs due to the public bidding process) and then charge their own toll, keeping not only the $700,000 per year already scheduled to go to them, but also the profit that would go to the shareholders of United Bridge Partners? They can use that money to, for example, fix other parts of their crumbling transportation system.

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That seems like a better deal for taxpayers. Assuming the local government was competent enough to make this happen – and given their negotiations thus far, they seem more competent (or lucky) than most local governments I’ve run across – it would seem to make the most sense for the city to keep this lucrative project in house. If I’m a taxpayer there, that is what I would want.

Getting beyond the seemingly endless line of people who want a bridge but don’t want to pay for it (I’m a generally small government, fiscal-conservative kind of person and I have no time anymore for such nonsensical people), I wondered if there was anyone there who was advocating for the city going it alone.

The same mlive.com article spelled out the options if privatization is not chosen. I’ll summarize them, but you can read them yourself in their full incoherence:

1. Try to get taxpayers in the surrounding township to pay for it. You know, the ones who live outside the city limits to avoid the city taxes. 
2. Close the bridge and rely on the three other bridges crossing the same river. (Bay City population: 33,500—four bridges.)
3. Borrow the money and, you know, pay it back in time with.... some other money????
4. Try (again) to get the insolvent state DOT to take over the bridge. Maybe they’ll be interested the sixth time you ask.
5. Raise city taxes to pay for it.

I notice two very interesting things about these options. First, a city toll is, apparently, not even on the table. More about that in a minute, because it relates to the second interesting thing: the limits on city taxation. While it’s theoretical that the city could raise taxes and pay for its own bridge, the state – which has its own significant budget problems – doesn’t allow their cities to do that.

Again, from mlive.com:

Raise city taxes? That’s more difficult than it seems because state law limits cities to how much they can tax. There are a handful of cities that have levied an income tax. Saginaw, for instance, has a 1.5 percent income tax for its residents and 0.75 percent for nonresidents. Jackson, Flint and Port Huron levies 1 percent for residents and 0.5 percent for nonresidents.

Here's the other kicker: the city is not allowed to do a toll either. The only way the toll can be established is if the bridge is privately owned.

And that, my friends, is how you needlessly bankrupt a city. You take away all their tools and then watch, like a good helicopter parent, while they fail to thrive.

Oh, and then blame incompetent local officials for the failure.

In times like this, where we're asking cities to innovate and to do more with less, where we need them to address the critical problem of our insolvent development pattern, we should be adding tools to the local government toolbox, not removing them. These artificial limits on local taxation and the ban on local tolls are destructive. And they're wrong. They're the worst kind of paternalism.

If this were my city, I’d make a request to the legislature to authorize a toll. If they didn’t get that done in their next session, I’d sign the deal with United Bridge Partners. I’m not a fan of the public-private partnership model as practiced by cash-strapped cities across the land, but this is not a bad deal. As long as Bay City residents live under the deadbeat state’s thumb, it’s likely the best deal they are going to get.

(Top image from Wikipedia)

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