Once Again, Taxpayers are Left Paying the Bill

The grand opening of the newly constructed Wilmington transit center is being celebrated as a success story for Delaware’s system of creating public/private partnerships.

Throughout my 14 years as a State Representative, I have consistently questioned and challenged investment of taxpayer money in creating these public/private ventures.

In those cases where I’ve been able to access performance records, the results have been rather disturbing. In many instances these deals are announced as an investment of public money that will give the taxpayers more bang for the buck, enable private investors to more easily expand operations, and create jobs all while promising a healthy return on investment to the taxpayer. Unfortunately the results of these types of speculation has been that the public has borne a preponderance of the investment obligation while the private sector partners have reaped most, if not all, of the rewards. In addition, in many of these deals the taxpayer portion has not been recovered and none of the profits have materialized in the public coffers.

A prime example of irresponsible waste of taxpayer resources can be noted in the Bloom Energy debacle. Although not strictly a public/private partnership, the Bloom investment of millions of taxpayer dollars and its ensuing contractual obligation (of more than 20 years) placed squarely on ratepayers demonstrates the risk to the public that poorly thought out policy decisions can have. Delaware electricity customers will be forfeiting hundreds of millions of dollars in surcharges to a private corporation with absolutely no return on their investment.

Today, the heralded opening of the Wilmington bus hub gives us another opportunity to examine the reality and unfulfilled promises that result from giving public funds to private investors. The state entered into an agreement with Transit Center LLC, an entity consisting of Colonial Parking, EDiS Co., and Emory Hill Real Estate Services Inc. The deal is purported to be a financial win for the state and according to the News Journal’s Karl Baker, a DelDOT spokesperson claimed “a majority of the funding would come from the private sector who will recoup their costs through the parking revenues.”

A review of the information I have received regarding this project reveals a scant chance of recovery of taxpayer funds despite those public funds comprising a majority of the investment costs. The project appears to be another giveaway of taxpayer money to a private entity (LLC) with no chance of recovery of the investment or return on that investment. A brief summary of the situation follows:

Total expenses:

State of Delaware: $10.4 million total

  • 69% of $10 million construction cost
  • $3.5 million environmental clean-up
  • unaccounted cost of ROW, design work, and RFP

Transit Center LLC: $3.1 million total

  • 31% of $10 million construction cost

Although DelDOT’s John Sisson previously said a “majority of the funding would come from the private sector,” now it appears the state is spending over 77% of final costs.

Total revenue:

State of Delaware:

  • every year, pay $50,000 to LLC
  • first 25 years, no revenue at all
  • after 25 years, 25% of net revenue, minus any negative net income from previous quarters

Transit Center LLC:

  • first 25 years, 100% of revenue
  • after 25 years, 75% of net revenue
  • every year, get paid $50,000 paid by state

DelDOT’s John Sisson has also recently said that “this is a good deal” for the state, despite having no projections for the net income of the transit center.

John Kowalko
State Representative
25th District

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