Frequently Asked Questions About Toll Concessions

December 16th, 2014 by Leave a Comment

Below is the excerpt of a message from one of our senior fellows, Bob Poole, on a timely subject – transportation. Specifically, he addresses conservative concerns about public private partnerships and toll projects. His recently published Frequently Asked Questions about Toll Concessions is worth the read.

I’m Bob Poole, Director of Transportation Policy at Reason Foundation.

The topic I’d like to raise with you is market-based highway policy. What I mean by that term is a set of policies for 21st-century highways that depart from the statist model that evolved in the 20th century. Whereas highways in the pre-auto 19th century were mostly toll roads, created by entrepreneurs, 20th-century highways were entirely governmental—meaning state-owned, with funding based on taxes on fuel (a crude form of user tax, that is now breaking down), no long-term financing of new facilities (as takes place in the private sector), no pricing of services delivered, and most project selection decisions made via the political process rather than via sound economics or benefit-cost analysis. Viewed from this perspective, it’s no surprise that Milton Friedman described highways as “a socialized industry removed from the test of the market.”

For the past 25 years, I have been working to develop a better approach to highways, with the long-term vision of major highways as investor-owned utilities, analogous to electricity, natural gas, telecommunications, railroads, etc., where you are billed for the amount of highway service you use. Among the innovations that Reason Foundation’s work has brought about are replacing ineffective car-pool (HOV) lanes with market-priced HOT lanes or Express Toll Lanes, and private investment and operation of highways, bridges, and tunnels under long-term public-private partnerships.  Today, most large urban areas outside the Northeast have one or more Express Toll Lane projects in operation, and quite a few have plans for entire networks of such lanes. Most of the ones created by converting existing HOV lanes have been done by government agencies, but most of the ones that involve toll-financed new construction have been done by private enterprise, under long-term “concession” agreements. Projects of the latter sort have been pioneered in California, Florida, Texas, and Virginia, but Colorado and North Carolina have recently joined them.

Many free-market think tanks have supported these moves toward a more market-based highway system. But there are now organized grass-roots groups, generally made up of conservatives, who are vigorously opposing toll lanes and private-sector investment under long-term toll concessions. They typically equate tolls with taxes, and consider long-term PPPs as crony capitalism. At least one free-market think tank that I know of has used some of these groups’ rhetoric to oppose such projects. If you know nothing about the subject, on first hearing these claims may sound like righteous attacks on big government and central planning.

To assist the free-market community in understanding these transportation questions, I have prepared a set of Frequently Asked Questions about Toll Concessions. It was released last week and is posted at: http://reason.org/news/show/toll-concession-ppps-frequently-ask.

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