Sunday, January 15, 2006

Governments are willing to cede control of public roads.

More turning to private tollways

Jan. 14, 2006

Gordon Dickson
Fort Worth Star-Telegram
Copyright 2006

Since 2004, private companies have pledged about $35 billion to build and operate toll roads across Texas and the United States, a Star-Telegram review of proposals shows.

That’s more than the $34 billion in federal highway aid that Congress disbursed nationwide last year.

The value of the projects, many of which are still being negotiated, astonishes even those who support toll roads. The proposals include the Trans-Texas Corridor toll road from Dallas-Fort Worth to San Antonio and toll express lanes on Northeast Loop 820 and Airport Freeway.

At least 17 states are pursuing privatization of highways at some level, a compilation of reports by the Federal Highway Administration and the Reason Foundation shows. Supporters say this may be the beginning of a trend that forever changes how America pays for roads.

“The potential may be limited only by the number of road projects worth building,” said Robert Poole, founder of the Los Angeles-based Reason Foundation, which supports privatization. “There’s several trillion dollars available worldwide.”

Drivers who crave a more efficient highway system and are willing and able to pay to get out of traffic congestion may welcome a national patchwork of toll roads run like a business. But critics say that the focus on toll roads could lead to neglect of existing roads and that private companies will get carte blanche to raise tolls.

Some motorists won’t be able to afford the tolls. The out-of-pocket costs will likely be much higher than on Texas toll roads built in the past 50 years by government-backed agencies, which have traditionally kept tolls artificially low because of political pressure.

“The Lexuses and Lincolns will be getting on the toll roads, and everybody else will be getting on the side roads,” said Lourdes Galvan, who is district director for the League of United Latin American Citizens in San Antonio and who opposes tolls statewide.

Quick cash for governments

Investors view toll roads as a low-risk place to park their cash long-term — almost like a public utility.

Private investment in roads is common in Europe. So far, much of the private money for U.S. roads has come from European and Australian companies with access to large pension and insurance accounts, looking for a place to invest money for 50 to 100 years, said Tom P. Rousakis, vice president of municipal finance for Goldman Sachs & Co.

Efforts to build private U.S. toll roads began percolating a few years ago, when state and federal laws started to change as transportation officials looked for funding alternatives to the gasoline tax.

Thirty-eight cents per gallon of every gasoline purchase in Texas goes toward state and federal gas taxes. The taxes yield about $4.4 billion a year for Texas, not enough to keep up with statewide transportation demands.

Tolls are now needed because past elected leaders weren’t honest with America about the cost of building and maintaining roads, said Ric Williamson of Weatherford, chairman of the Texas Transportation Commission. A half-century of denial has created a highway system no longer adequate for moving people and goods where they need to go and a tax base that can’t fix it, he said.

“Baby, it’s slow roads, no roads or toll roads,” Williamson said. “Public servants who don’t warn their constituents of that aren’t doing them justice.”

Williamson also said toll roads could generate much of the money needed to build a North Texas regional rail system so it wouldn’t be necessary to ask the Legislature for a referendum on a half-cent-per-dollar sales tax.

Two projects got the attention of transportation planners nationwide:

The Trans-Texas Corridor: In December 2004, a Spanish/U.S. consortium was hired to create the $6 billion toll road to relieve gridlock on Interstate 35 between Mexico and Oklahoma. Madrid-based Cintra and San Antonio-based Zachry Construction are the lead partners. Cintra-Zachry agreed not only to build the road at no direct cost to taxpayers but also to pay a $1.2 billion concession fee that the state can use as it wishes on other transportation needs. Cintra-Zachry will collect tolls for 50 years.

The Chicago Skyway: Chicago needed money for various programs and in late 2004 offered to lease the Skyway, a 7.8-mile elevated toll road. Another consortium led by Cintra stepped up and offered $1.8 billion to collect tolls and maintain the road for 99 years.

The Texas and Illinois situations differ but could both result in a big payday for governments willing to cede control of their roads.

Now state agencies nationwide are lining up their own projects. In states such as Delaware, Indiana and New Jersey, there is talk of leasing existing toll roads to the private sector to raise cash.

Indiana is also pressing ahead with plans to build the rest of its portion of Interstate 69, which would stretch southward through East Texas to the Mexican border, as a private toll road. The Texas Department of Transportation is putting out a call for privatization of its portion of the road, too.

Georgia officials are negotiating with private investors to build a toll road, toll express lanes and truck-only lanes in the Atlanta area.

In the Washington, D.C., area, negotiations are under way to build private express toll lanes on the Beltway and other freeways leading into suburban Virginia and Maryland. Virginia is also considering leasing the Dulles Toll Road.

In Houston, consultants recently told Harris County officials that they might get $7 billion or more if they privately leased their toll road system and let a private company keep the tolls.

What could derail the momentum of the move toward privatization?

Political pressure comes from elected officials who don’t like the prospect of requiring residents to pay higher and more frequent tolls to escape congestion, said Peter Samuel, founder of the online newsletter TOLLROADSnews, based in Maryland.

But in the end, Samuel said, states may not be able to resist the big dollars.

Costs and controversy

Most private toll roads will likely be completely electronic.
Instead of paying at toll plazas, motorists will affix transponders such as TollTags to their cars and pay with a credit card or prepaid account without stopping.

Or, for a higher toll, they can drive without a transponder; their license plate would be photographed and the car’s registered owner mailed a bill, as is done now on a toll road in Toronto.

Instead of 10 cents a mile, tolls would be 20 or 30 cents, perhaps $1 in some areas to reduce traffic during peak hours, according to several university studies and the World Bank. Even at 25 cents a mile, a one-way trip on toll lanes from Interstate 35W and Loop 820 in north Fort Worth to Dallas/Fort Worth Airport would cost about $3.75.

The higher tolls are just one hot button.

There’s also the issue of confidentiality. When a state is deciding which consortium to hire for a project, much of the selection process is secret. Companies are encouraged to share trade secrets.

Losing bidders can be paid for their “intellectual property.”

And then there are noncompete clauses.

Private bidders often ask for clauses in their contracts to ensure that a state doesn’t build new roads that hurt business on toll roads for the duration of the contract.

Critics say private toll roads would discourage improvements to surrounding roads.

In the Metroplex, planners can expect to continue building freeways identified in their plans through 2025, but anything after that could be blocked by noncompete clauses, said Amadeo Saenz, Texas Department of Transportation assistant executive director for engineering operations.

Or, as Rousakis, of Goldman Sachs, put it while briefing North Texas leaders about privatization: “The more power you give to the concessionaires, the greater value you’re going to get out of the road.”

This report includes material from the Federal Highway Administration, the Reason Foundation, wire services and other newspapers.

Gordon Dickson, (817) 685-3816

© 2006 Fort Worth Star-Telegram: