tennessee voices
By Todd Malan

The Tennessee General Assembly is using the "f" word, and it's about time they cut it out. The "f" word is "foreign" as in "foreigners are a threat if they manage our toll roads."

The Senate recently passed SB 2724, which prohibits any contract or agreement to operate a toll road with a business entity that is not majority-owned by an American. Unless the House acts to stop the bill, legislators will make a mistake that will cost taxpayers money and harm Tennessee's reputation among international investors.

Under last year's Tennessee Toll Act, only the Tennessee Department of Transportation can own a toll facility. However, TDOT can lease or contract out a toll road's operations, as has been done by many governments around the world. While there may be legitimate public policy issues around private contracts for public infrastructure, opponents often focus on excluding international companies from bidding by bandying around the word "foreign." Such fear-mongering is contrary to Tennessee's interests.

First, no bids will lead to any private company, foreign or domestic, owning any road in Tennessee. Generally, consortia compete to manage a long-term lease, under strict performance-based conditions, in exchange for toll revenue. If a company fails to fulfill its obligations, the lease will terminate, and the state keeps the proceeds. No foreign or domestic company can shut down or fail to maintain a road — and they can't take it anywhere.

Second, it is absurd to consider managing a toll road a national security matter. Raising national security concerns also ignore how "foreign" these companies really are. The companies that are qualified to bid for a lease are from such "scary" places as Spain, Australia and Italy. All are countries allied with the U.S. in numerous ways. Moreover, these companies bring decades of expertise in managing public infrastructure. Writing in the City Journal, Steven Malanga notes that within three months of closing a deal to manage the Chicago Skyway, Australia's Macquarie Bank and Spain's Cintra "had installed an electronic toll-collection system to help zoom traffic along and assigned additional collectors during rush hour to gather cash more quickly. The result: reduced wait times … Chicago didn't bother with any of these reforms when it managed the road."

If the competition is as robust as possible, the likely value of the lease would be so large that no company leading a consortium (U.S.-based or not) could avoid international or U.S. participation in the funding group.

Third, excluding potential bidders because they are based abroad will dramatically diminish the revenue the state receives in a competitive bidding process. Imagine selling your house but only letting left-handed people make an offer. It's just common sense: Limit the market, and you get a lower price.

Finally, Tennessee has enjoyed important economic benefits from foreign direct investment or "insourcing." Under governors of both parties, Tennessee has worked hard to recruit international companies such as Siemens, Toyota, Food Lion and Electrolux. Overall, U.S. subsidiaries of foreign companies employ more than 125,000 people in Tennessee, according to the U.S. Department of Commerce.

However, if Tennessee pulls back the welcome mat by passing legislation that would ban or limit international companies from one sector of the economy, it will send a chilling signal to international companies considering investments in other sectors.

Regardless of the nationality of the managing firm, the workers will be local and investors will be from the U.S. and abroad. The "foreign" argument is just a way for people who have other vested interests to distract the debate. The people of Tennessee should stay focused on their self-interest: creating a competitive process that maximizes financial benefit while providing the highest-quality service and stewardship of their roads. Let's take the "f" word out of polite conversation in Nashville.