Archive for June, 2010

HMSHost’s Contract With Delaware is Bad for Businesses and Consumers

Monday, June 28th, 2010

On Monday, June 28, the Delaware Department of Transportation reopened the Delaware Welcome Center Travel Plaza after a 9 month, $35 million renovation.  Food service vendor HMSHost will manage the state-sponsored facility for the next 35 years.  The facility is one of a handful of rest areas across the country permitted to offer commercial services under existing federal law. But its opening sends the wrong message to those states looking to overturn the ban on adding commercial services at rest areas as a means of fixing state budgetary woes.

Lisa Mullings, President and CEO of NATSO issued the following statement Monday morning regarding the reopening of the travel plaza:

“In discussing its 35-year contract with HMSHost Corp. to operate the Delaware Welcome & Travel Center, the state of Delaware has grossly exaggerated the benefits of this agreement and failed to inform local residents, businesses and consumers about the deal’s significant downside.

Contrary to claims that the facility will serve as an economic tool generating jobs and state revenue, the Delaware Travel Center represents nothing more than a monopoly that threatens to cripple the many businesses offering food, fuel and other retail services near the I-95 exit interchanges.

With direct access to highway motorists, the state now operates at a significant advantage over the businesses that depend on motorists exiting the Interstate. The 4.5 million visitors HMSHost claims it will service are 10 times what many local businesses would see in terms of visitors. This deal represents a classic example of government teaming up with big business to squeeze out small business.

While nearby businesses are left to flounder, consumers undoubtedly will pay hidden taxes in the form of higher costs for goods and services as the state seeks to recoup its investment.

Furthermore, the state of Delaware has said that beginning today it will balance its budget without regard for the needs of local communities. Local businesses typically pay more in local taxes than it will cost HMSHost to maintain the Travel Center. Without thriving businesses, local communities will lose jobs and the significant tax revenues that pay for public services like schools, police and fire departments.

Delaware’s so-called ‘best investment’ in reality rings the death knell for local communities.”

When Privatization Looks Awfully Similar to a Government Monopoly

Thursday, June 17th, 2010

By NATSO President and CEO Lisa Mullings

This week, I learned that the word “awful” used to mean “full of awe.” Somehow it changed into the exact opposite of its original meaning.

The term “privatization” could be destined for the same fate, at least when it comes to rest areas. Some states see privatized rest areas as a lucrative opportunity –- a business would pay the state for the right to sell food and fuel to drivers right on the interstate median or shoulder.

Rest area privatization sounds like a path to smaller government and free-market competition. So why is it that counties with commercial rest areas have half as many retail businesses, suggesting a less-competitive environment? Because rest area “privatization” isn’t really privatization at all.

True privatization:

  • Eliminates government operation of a business enterprise;
  • Involves transfer from the government to private sector;
  • Substitutes inefficient government with free-market competition;
  • Creates a greater net value for society through more choice and lower prices; and
  • Results in smaller government.

Privatization of rest areas, on the other hand:

  • Eliminates a government responsibility (maintaining rest areas)
  • By taking business away from the private sector
  • And transferring it to one business, greatly diminishing competition
  • Which reduces society’s total net value through higher prices and fewer choices;
  • And enables government to avoid politically-charged decisions about reducing government spending.

Though not operating the business at commercial rest areas, the government operates as a “silent partner.” The rest area’s location means the business has no real competition, and can charge higher prices than the same business could if it was competing on a level playing field. As a result, the rest area vendor can afford to pay the government a higher price, knowing it can recoup it from customers.

In turn, state politicians can avoid making decisions about spending cuts because they are able to effectively tax commercial rest area consumers. It’s ironic that privatization used to be defined by its potential to eliminate the bad effects of government-run enterprise. Now it is being used to create it.

Coalition Warns Arizona Governor of Dangers of Rest Area Commercialization

Thursday, June 10th, 2010

Adding commercial services to state-run rest areas threatens Arizona jobs and will cripple critical public services like schools, fire and police departments, the Partnership to Save Highway Communities warned Arizona Gov. Janice Brewer.

Responding to Arizona’s call to “reform” highway rest areas, the Coalition of highway-based businesses warned Gov. Brewer that adding fuel, food and other retail services to the Interstate right-of-way will radically alter the competitive landscape, devastating nearby businesses and communities by granting the state direct access to highway motorists.

“As a coalition of business owners who rely upon interstate highway traffic, we strongly oppose rest area commercialization, as it would enable state governments and their hand-picked vendors to unfairly compete with private businesses located at interstate highway exits” the coalition said in a letter to Gov. Brewer  June 10.  “At a time when our economy is slowly emerging from the depths of a crippling recession, permitting such unfair competition will endanger any economic recovery and will result in a loss of thousands of jobs in Arizona …seeking the opportunity to engage in direct competition with private businesses is not solution to these [budgetary] problems. ”

The Coalition to Save Highway Communities encouraged Gov. Brewer to seek alternative solutions to solving any budgetary crisis caused by the recession, including innovative ideas that allow the state to partner with businesses to help meet the safety needs of the traveling public without threatening the livelihood of thousands of people.

“In these challenging times, we hope that you will seek to work with our coalition to develop long-term approaches to ensuring the safety of the traveling public and the economic viability of our businesses.  Such solutions will benefit everyone and will lead to future growth for Arizona’s economy,” the letter concludes.

Click here to read the letter

State DOTs Explore Rest Area Commercialization Options

Tuesday, June 1st, 2010

The truckstop industry’s “hardnosed and successful opposition” was cited as one of the primary obstacles that must be overcome by state Department of Transportation (DOT) officials seeking to commercialize rest areas as a way to generate revenues for states facing budget issues.  Yet despite the devastating economic impact rest area commercialization would have on small towns and business along the nation’s interstates, transportation officials seem determined to press forward.

During a roundtable discussion last weekend, members of the American State Highway and Transportation Officials (AASHTO) explored several options for offering commercial services at rest areas.  As state budgets continue to lag, officials in several states are facing decisions about closing rest areas and are looking at the cites as potential revenue generators.

NATSO Vice President of Government Affairs Holly Alfano informed the group that two million jobs depend on traffic from motorists exiting interstates and that many of those jobs would be lost under options being touted as solutions to state revenue shortfalls. In reality, she pointed out, rest area commercialization would give state-controlled plazas a virtual monopoly on travelers’ food, beverage, retail and fuel purchases, stripping revenues from the communities along the interstate.

Alfano said that NATSO and its coalition representing 60,000 highway businesses would continue to vigorously oppose any effort to relax or overturn the 50 year prohibition.  While acknowledging the budgetary issues faced by states, she told the group that interstate-based businesses also have been affected by the recession, experiencing a significant decline in traffic at their locations over the last two years.

AASHTO members cited the upcoming highway reauthorization as an opportunity to repeal or change the law prohibiting commercial services at rest areas.  Some of the options that AASHTO members explored during the session included:

  • Outright repeal of the commercialization ban
  • Passage of a law that would allow limited pilot projects
  • Compromise legislation that would allow commercialization in areas where there are no competing private sector businesses
  • Development of commercial facilities off the right of way accessible by pedestrian-only access from the rest area facility.

The group also discussed the feasibility of states submitting SEP-15 applications, which involves petitioning the Federal Highway Administration (FHWA) for approval as an “experimental project.”  The  states of California, Washington and Oregon previously submitted a SEP-15 application to FHWA but the agency never acted upon it.

As an alternative to commercialization, a Utah official shared his state’s experience implementing the Interstate Oasis program, which allows exit-based businesses to supplant rest areas by offering motorists services they commonly seek at rest areas such as 24-hour restroom access and truck parking.  Arizona had attempted to develop the program, but they were unable to recruit businesses to participate.  Alfano suggested that a dialogue between business owners and the state could be established determine if the program could be made more appealing to businesses.

Asked if NATSO members would ever consider commercialization as a business opportunity, Alfano responded that they most likely would not.  Interstate businesses have already invested millions in the development of their exit-based locations, and would not be willing to jeopardize those investments to become a tenant in a state-owned commercial enterprise, she told the group. She added that that existing commercialized rest area contracts have only been awarded to large corporations.