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.
