Building new infrastructure and modernizing existing stock costs megabucks, and some states are saying that they don't want to be in the road or airport maintenance business. It's an admission, to some extent, that private companies might be able to manage these resources more efficiently. It's also a realization that the inherent financial value in existing assets could pay for new ones on a massive scale – projects that probably wouldn't have seen the light of day for years without a cash infusion from external sources.
   "States can't afford to do what is needed to reduce infrastructure deficits – they all have severe budget constraints," explains John Foote, a transportation advisor to the U.S. House of Representatives. "The sale of existing public infrastructure can finance construction of new roads."
   Foote, a senior fellow at the Kennedy School of Government at Harvard University, endorses the privatizing concept – if the state re- invests the profits into its transportation infrastructure, as Indiana has done with the proceeds from the $4- billion sale of its Indiana Toll Road. Earlier this year, Cintra Macquarie, a Spanish- Australian consortium of private toll road operators, bought the critical East- West link between Chicago and Ohio. Foote applauds Indiana Governor Mitch Daniels' approach, as well as his willingness to acknowledge that the state's highway management track record wasn't the best. "The governor said, let's get as much money as we can to help jumpstart transportation infrastructure in the state," Foote says.
   Indiana is using the proceeds to finance a network of road and bridge improvements in a far- reaching bid to heighten the state's competitiveness and to make up for a 20- year infrastructure deficit. Already, the move seems to have paid off, big time, with Honda's announcement that it will build a $550- million assembly plant in Greensburg. Critical to the deal, according to Honda press releases: Indiana's commitment to finance extensive highway improvements.
   Chicago's sale of the famed Chicago Skyway preceded the Indiana sale. The city and state netted $1.8 billion on the sale, signing a 99- year operating lease with the same foreign consortium that bought the Indiana Toll Road.
   But according to Foote, businesses needing to get goods through and around Chicagoland by truck might not see much peripheral improvement. "Not one cent of this sale was reinvested in transportation infrastructure, in a city among the top five congested urban areas in the nation," he says. "If goods can't get from point A to point B, this will have a negative impact on businesses," and on the ability of the city to attract new businesses, he adds.
   Thus far, the situation hasn't affected the city's appeal – at least in some quarters. In July, United Airlines announced a decision to keep its base and its global headquarters in the city. Newly emerged from bankruptcy and re- energized, the airline won $7 million in incentives to move into the former R.R. Donnelley & Sons Co. building on Wacker Drive deep in downtown Chicago. The airline's hub, O'Hare, is also in the midst of a $7- billion renovation and runway upgrade.
   The city and state are considering other candidates for privatization, including Chicago's Midway Airport. "This is all about turning asphalt into gold, but it needs to be done properly, or else it becomes a very short- sighted approach by governments to fix immediate budget woes," Foote, a former executive of a global transportation engineering firm, says.
   Thus far, U.S. investor interest in private infrastructure has lagged considerably behind foreign consortia, which are more familiar with the concept because privatized roads and ports are common in Europe and Latin America. This fact could bring the privatization trend to a screeching halt very soon if the U.S. Congress passes a bill to limit foreign ownership of U.S. infrastructure. The legislation, introduced this spring following the aborted Dubai Ports deal to purchase American port facilities, includes provisions that preclude foreign governments – and foreign companies – from holding majority ownership in these assets.