Road
privatization is a growing issue in the United States as politicians and transportation
officials grapple with budget shortfalls. Toll road privatization takes
two forms: the lease of existing toll roads to private operators and the
construction of new roads by private entities. In both instances,
private investors are granted the right to raise and collect toll revenue,
a right that can amount to billions of dollars in profits for the
shareholders. Though these privatization deals seem to offer state
officials a “quick fix,” they often pose long-term threats to the public interest.
By privatizing roadways, officials hand over significant control over
regional transportation policy to individuals who are accountable to
their shareholders rather than the public. Additionally, the economics of
these deals are such that the upfront concession payments are unlikely to
match the long-term value of the higher tolls that will be paid by
future generations and not collected for public uses. Public
officials, therefore, should approach the idea of private toll roads with great
caution, knowing that the short-term benefits are unlikely to outweigh the
longterm costs.
Toll road privatization is becoming increasingly
prevalent in the United States.
•
Between 1994 and early 2006, $21 billion was paid for 43 highway
facilities in the United States using various “public-private
partnership” models.
•
By the end of 2008, 15 roads had been privatized in 10 different states –
either through long-term highway lease agreements on existing highways or
the construction of new private toll roads.
•
Currently, approximately 79 roads in 25 states are under consideration for some
form of privatization.
•
A few prominent examples of privatized roads include:
o
The Indiana East-West Toll Road, which
carries Interstate 90 approximately 150 miles across northern Indiana
and is a critical link between Chicago and the eastern United States.
o
The Chicago Skyway, which links downtown
Chicago with the Indiana Toll Road.
o
California’s SR 91 Express Lanes, which
were originally built by a private entity to provide a speedier connection
between Orange and Riverside counties.
Though privatization may offer short-term relief to
transportation budget woes, it often has grave implications for the
public.
•
The public will not receive full value
for its future toll revenues. The
upfront payments that states receive are often worth far less than the value
of future toll revenue from the road. Analysis of the Indiana and Chicago deals
found that private investors would recoup their investments in less than
20 years. Given that these deals are for 75 and 99 years, respectively, the
public clearly received far less for their assets than they are truly
worth.
•
The public loses control over transportation
policy. Private road concessions in
particular result in a more fragmented road network, less ability to
prevent toll traffic from being diverted into local communities,
•
Public officials cannot ensure that privatization
contracts will be fair and effective when
leases last for multiple generations. No army of lawyers and
accountants can fully anticipate future public needs. Transurban, for
example, has control over the Pocahontas Parkway in Virginia for 99
years.
In order to protect the public interest, public officials
must adhere to six basic principles in all road privatization agreements:
•
The public should retain control over decisions about transportation planning
and management.
•
The public must receive fair value so future toll revenues are not be sold
off at a discount.
•
No deal should last longer than 30 years because of uncertainty over
future conditions and because the risks of a bad deal grow
exponentially over time.
•
Contracts should require state-of-the art maintenance and safety standards instead
of statewide minimums.
•
There must be complete transparency to ensure proper public vetting of privatization
proposals.
• There must
be full accountability in which the legislature must approve the terms
of a final deal, not just approve that a deal be negotiated.
