Expect from Caesar
When you have it, spend it; when you don’t, find it. Simple enough. Great surpluses are good problems to have and can lead to all sorts of fun and wise investments. Deficits, however, are not fun at all and in such times, like today, individuals and governments alike should not exclude the sale or lease of any asset to balance their books. Public assets, like the Turnpike, are no different than private ones. They are not heirlooms imbued with emotional significance, they are commodities with a store of value, which should be used or liquidated as events demand. If there was ever a fitting demand, I think that today’s fiscal distress in NJ defines it very well. If we were not in such dire straights, leasing a state asset would probably not be a topic worthy of consideration; perhaps as unthinkable as renting your backyard pool to a family from another neighborhood. But, if our kids’ future were on line, as it is, I’d throw in the inflatable rafts and provide towel service as well – what responsible parent wouldn’t? Shouldn’t government be as responsible and make similarly difficult choices?
As for how we got here, let’s not forensically dissect what got us into this economic crisis; there isn’t enough room in Google’s server farms to store all the abuses and gross inefficiencies that our State so mysteriously ignored over the course of several administrations. Also, let’s not contemplate the potential misuse of the proceeds from such a lease – that is a topic for another day. Finally, let’s accept that leasing the Turnpike doesn’t present a security threat that the Dubai Ports World deal did, as the right to police and enforce rules will still rest in the hands of the good guys with NJ badges. Rather, let’s look at how a lease agreement works and at the potential benefits it can provide and then decide the worth of leasing on its own merits, unclouded by the fear of how our State might mis-manage the process.
The leasing of public assets is nothing new. Public-Private Partnerships are all around us and they tend to work very nicely – such as light rail lines in our own state along with larger examples like the Indiana Toll Road and the Chicago Skyway, which has benefited the citizens of Illinois extremely well. A critical element, that is common to these examples and the proposed lease of our Turnpike, is the concession agreement which defines every aspect of the deal. This agreement defines: rate increases, employment numbers, snow removal, rest area upkeep, adjacent business development, road improvement and maintenance, congestion relief, and countless other issues which will all become the responsibility of a private organization, apart from political whims and electoral fluctuations. If the leasing company violates the concession agreement or fails to make us happy consumers, they will be penalized or lose money through reduced usage. They are in business to make money, which they won’t do if drivers don’t feel that they are given the best value and world-class service, a realization that the private sector tends to be more aware of than government.
As for the bargaining table, Governor Corzine and the Goldman Boys around him are experts at negotiating such deals – they’re deal guys, who happen to be pretty good at this sort of thing and would normally get paid a pretty hefty fee just for advising the participants. We, as New Jerseyans, get their years of cut-throat, bottom-line financial expertise for free, which we wouldn’t need if it weren’t for the enormous fiscal hole that we are in. But since we are close to financial disaster, let’s put their most valuable skill set to work – making deals. If we use the projected $10 billion from the sale of the Turnpike to cut our deficit, improve education, make healthcare more affordable, encourage businesses to stay in the state, develop new programs to generate revenues and improve the general well being, in other words, the things that government should concentrate on, then the lease will have been a wise undertaking. This is what we should expect from our Caesars – to supply the things that they are uniquely qualified to provide and leave more dynamic, market driven, endeavors to those who are better able to react to market cues and implement technological innovations, namely private industry.
We often hear complaints of the government’s seeming inability to achieve the competitive efficiencies that is required for the private sector to avoid the creative destruction that Schumpeter spoke of. So why do we hear complaints from the same people when discussing the privatization of operations to an organization that shows the ability to react to market forces and consumer demands more efficiently than public ones?
By unleashing the value of the Turnpike and liberating its captive capital, NJ can promote many essential long-term projects and if the $10 billion yields an appropriate multiplier effect, perhaps we can begin to reverse the declining effects that our economy is suffering from. Whether our elected officials will show the restraint and foresight to use the monetary proceeds wisely is another matter. But if our opposition to leasing a value laden asset is based in our lack of faith in those who will invisibly guide the process, let’s not fault the economic logic or financial benefits of a much needed lease, let’s fault our own voting record.
Zenon Christodoulou is the president of the Greek American Chamber of Commerce and serves of the Board of Overseers of the NJ Governor's School and a Trustee of the NJ Business and Industry Association. He owns businesses in the advertising and printing sector as well as the restaurant sector. Since receiving his MBA with national honors, he has been an adjunct professor of business at the undergraduate and graduate levels, while he completes his doctoral dissertation. In 2004 he represented NJ as a delegate to the presidential National Convention and was on Jon Corzine's transition team for economic and workforce development.