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Historical Lessons in Privatization

December 30, 2008 By Conrad deFiebre
Privatizing the publicly owned and operated Minneapolis-St. Paul International Airport appears headed for a prominent place on the 2009 Minnesota Legislature's agenda as policymakers look for ways to erase a record projected two-year state government budget deficit of $5.5 billion. Before hastily jumping on the privatization bandwagon, a history lesson is in order.

Several conservative legislators have proposed that "bold and dramatic" move (their words) as a way to finance college scholarships and other education initiatives. Gov. Tim Pawlenty has hinted that auctioning off the airport and the Minnesota Lottery could be part of his budget-balancing plan.

Proponents point to the $2.52 billion lease of Chicago's Midway Airport for 99 years to a U.S.-Canadian consortium as a model for more public-private partnerships. Everyone from free-marketeer bloggers to government officials to airline spokesmen say the deal will yield near-magical benefits - better service at lower costs, not to mention a 10-figure boost for Chicago's city finances.

Those bright promises could put serious visions of private-enterprise sugarplums dancing in Minnesota policymakers' heads. Our MSP handles 50 percent more flights than Chicago's MDW and nearly twice as many passengers.

"Minnesota has fallen behind other states and cities when it comes to these innovative public-private partnerships," said state Rep. Laura Brod of New Prague.

Maybe that's a good thing. The jury is still out on most of the 21st century's U.S. transportation privatization deals, although tolls have nearly doubled since a Spanish-Australian outfit took over the Indiana Toll Road for $3.8 billion.

But we do have a Minnesota example from the not-too-distant past of the perils of privatization in the transportation market. What was once a national model for urban transit service and comfort was run into the ground by private operators in the years after World War II until the last bus baron, Carl Pohlad, sold what was left of it to the public for $7.9 million in 1970.

By that time, "it was basically all junk," said Aaron Isaacs, a Minnesota transit historian and coauthor of the lavishly illustrated book Twin Cities by Trolley. "The bus garages were shot, and three-quarters of the fleet was worn out."

To be sure, Pohlad's unsubsidized Twin Cities Lines had been sorely challenged by the growing predominance of private cars on publicly subsidized streets and highways, a trend hastened by the bus company's declining quality of service. It didn't help, either, that the firm's previous owners, managers and their associates had stripped its assets in schemes that sent several of them to prison.

By 1967, when the Minnesota Legislature created the Metropolitan Transit Commission, it was clear that "if you wanted a full-service public transit system, it wasn't going to be without public subsidy," Isaacs said.

That led to mostly government-owned buses, although over time operation of many suburban bus routes has been turned over to private contractors. The Metropolitan Council provides their buses free of charge, and "the privates don't maintain them as well as Metro Transit," Isaacs said. "They cut their costs by hiring people who wouldn't qualify for Metro Transit jobs and giving them poorer training. It leads to poorer-quality service. It's my belief that you get what you pay for."

Handing Minnesota's major airport, a vital engine of the state's economy, over to the private sector may look attractive in these tough times. But as the transportation market continues to shift - the current trend is away from cars and airplanes and toward transit and trains - catching up on privatization may force us to relearn hard lessons about what should be public and what should be private.

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