The November issue of Public Administration Review features an article by Government Professor John Gilmour. The article analyzes the intergenerational impact of long-term government leases. It is available online now (for subscribers) and will be out in print next month.
In the article, Gilmour examines several case studies including the Chicago Skyway and the Indiana Toll Road (ITR). He notes that the structure of these long-term leases often uses the proceeds of the agreement to benefit the current generation at the expense of later generations, thus shifting costs forward in time.
In the lease process, states or localities take a revenue-producing asset like a toll road or a port and lease it to a private operator. The lease agreements are generally long-term – 75 or 99 years– and involve a substantial up-front payment from the operator. This payment provides the locality with immediate capital and relief from ongoing maintenance of the asset property, which is generally taken over by the private operator.
This process, Gilmour says, is attractive to politicians because it transfers future revenue to current budgets and eliminates the maintenance costs, but at what price?
If the localities are not fiscally responsible, the spoils of the lease could get distributed “disproportionately in the first few years, leaving little or nothing to citizens in decades to come,” he writes.
One solution could be limiting the lease terms to 30 years, another could be requiring governments to commission independent studies on the impact of the leases before they are signed, Gilmour notes.
In the case of the ITR and Chicago Skyway, “It is possible that if the extent of intergenerational shifting had been understood in advance, opposition would have been stronger and leasing deals might have been structured to have more benign effects on future generations,” he says.
The topic hits close to home for Virginians.
“This is an unusually timely article since the Commonwealth of Virginia is itself considering lease of its ports,” he says. “Long-term public-private partnerships in Virginia –the lease of the ports and the construction of the new Mid-Town Tunnel between Norfolk and Portsmouth – create the possibility of intergenerational transfers.”
Gilmour, who has taught at William & Mary since 1995, is the Paul R. Verkuil Term Distinguished Professor of Public Policy. His research focuses on American politics and public policy with specialization on Congress and the President and on budgetary politics and processes.
Public Administration Review has been a bi-monthly scholarly journal for the field of public administration research, theory, and practice for more than 60 years.
Gilmour holds an bachelor's degree from Oberlin College, and a doctorate in political science from the University of California at Berkeley.