Tuesday, January 24, 2006

Up-front cash generates feeding frenzy

Pitfalls abound on private roads

Still, officials enthusiastic about raising cash

January 24, 2006

Ft. Wayne Journal Gazette
Copyright 2006

WASHINGTON | Overly rosy projections for how much traffic private toll roads would attract have limited their financial success. But the idea has excited transportation officials in almost every state in the past few years.

State officials who consider leasing an existing toll road should learn from the mistakes other states have made, said Robert Poole, director of transportation for the Reason Foundation, which supports public-private partnerships in road building.

Taxpayers are at little risk of losing a valuable asset if it is made clear how lease income will be used; toll rates and increases are spelled out; and adequate oversight is included, said Oliver "Trip" Pollard III, a lawyer with the Southern Environmental Law Center.

Recent projects that faltered include:

* Camino Colombia highway, a 22-mile stretch from Texas to Mexico's border that went bankrupt after three years.

Projections that heavy truck traffic would pay $16 per toll never materialized. The state bought the private toll road in 2004 for $20 million, a fraction of its $90 million cost, and Texas got a new road for 22 cents on the dollar, according to Texas officials.

* Pocahontas Parkway near Richmond, Va., where 8.8 miles cost $377 million to build three and a half years ago.

The deal calls for the state to operate and maintain the road until the tolls generate enough money, but use is about half of original projections, according to a report by the Government Accountability Office, the auditing arm of Congress.

The Pocahontas Parkway was a regional priority for years as an untolled highway but couldn't be built, because the state didn't have enough money, said Tamara Neal, spokeswoman for Virginia's Department of Transportation.

Now the state pays for repairs and maintenance. Last year, the state paid for $389,000 in upkeep; so far, the parkway has not repaid the state transportation department.

* Southern Connector toll road that rings Greenville, S.C. for 16 miles and opened in 2001.

Last year, it lost ridership but increased revenue because of a 50-cent toll increase, which allowed the Southern Connector to make a debt payment in January without dipping into its reserve fund for the first time, spokesman Tim Brett said.

The debt payment is scheduled to increase by $10 million next year. When private investors stepped in, the state reaped the benefits.

"The state was able to get a $200 million federal interstate built without using precious state resources or using the state bond limit," Brett said.

When the bonds are paid off in 30 years, the South Carolina Department of Transportation "will own and operate it with no debt," he said.

* Private express toll lanes along 10 miles of highway in Orange County, Calif.

Built by a private conglomerate for $125.6 million in exchange for a 35-year lease, the agreement prevented the state from building or improving roads within 1.5 miles of the toll road, including the adjacent public highway.

In a few years, the noncompete clause became a political nightmare, because it blocked upgrades to the public highway.

In 2003, the state bought the toll lanes for $207.5 million in bonds, which it expects to pay off with toll revenue.

"The main advantage from the standpoint of a state like Indiana is the large amounts of cash upfront to finance badly needed transportation improvements," said Kenneth Orski, a transportation consultant who was a Department of Transportation official in the Nixon and Ford administrations.

Sylvia Smith is Washington editor with The (Ft. Wayne) Journal Gazette.

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