Friday, March 02, 2007

"All that up-front cash looks sweet, but ..."


The real price of private toll roads

Mar. 01, 2007

The Brookings Institution
The Dallas Morning News
Copyright 2007

Back in the 1970s, the humor magazine National Lampoon published a commentary on corporate influence in America titled "We're Changing the Name of the Country to Exxon."

It doesn't seem like such a stretch today. From naming rights to professional sports venues to companies offering financial support to cash-strapped public schools in exchange for marketing their brands and products, corporate influence in America today is pervasive.

Now commercial interests and smart investors are turning their eyes toward some of our nation's most prominent roadways. We need to slow down.

Certainly states and cities across the country face massive transportation challenges. Roads and bridges are crumbling, traffic congestion has become intolerable, air quality is deteriorating, working families are having difficulty reaching many jobs, and several transit systems are either constrained or seriously overcrowded.

So politicians are looking for a quick fix.

Two specific deals at the south end of Lake Michigan have sparked this movement.

Earlier this year, Indiana Gov. Mitch Daniels leased his state's toll road for 75 years to a private consortium for $4 billion, which he then spent on other roadway projects around the state. In 2004, Chicago Mayor Richard Daley reprogrammed the $1.8 billion from his 99-year lease of the Chicago Skyway back into city coffers to be spent largely in unspecified ways. New Jersey is considering the selling or leasing of the Jersey Turnpike, Garden State Parkway, and the Atlantic City Expressway to private companies.

The payoff for private companies, syndicates and their advisers also is huge. They're putting up billions of dollars banking on steady, ever-increasing toll revenues from generations of captive motorists.

This scheme sounds much better than it is. These deals have set off a frenzy, prompting Standard & Poors to warn of a dotcom-like pricing bubble.

Governments lose more than they gain. All that up-front cash looks sweet, but the long-term revenue stream is lost because all the toll receipts flow directly to the private operators. Governments also lose the option to borrow against those future revenues.

Far worse, policymakers lose the ability to connect transportation to other emerging metropolitan trends. Transportation planning is inherently a metropolitan issue -- people and goods travel in and out of cities and between suburbs -- and removing a piece of the puzzle hampers the ability to deal strategically with the system in an integrated manner.

Also, governments are taking steps to manage the demand for car trips because of concern about how traffic congestion affects climate change. These important policy objectives are in conflict with the commercial interests of private companies running toll roads. They want more traffic -- not less.

Some thoughtful politicians are having second thoughts.

Houston turned down $20 billion to lease the region's toll roads. Officials believe they'll be better stewards of an enormous public asset, and the fast money didn't outweigh the long-term costs of doing the deal. Illinois Gov. Rod Blagojevich expressed similar concerns about the specifics of a proposal for his state's tollway system.

Selling off toll roads is not a silver bullet solving all transportation problems. It allows politicians to demonstrate action and provides a lot of cash-in-hand for pork projects. But it's not the conversation we should be having about transportation in America today.

All the focus on this latest hot idea comes at the expense of a more comprehensive and inclusive discussion about transportation -- a discussion that includes accountability, overall intent and connection to broader goals of economic growth and personal mobility.

We're letting politicians and policymakers off the hook.

We should all roll up our sleeves, define, design and embrace a new, unified, competitive vision for transportation policy and not be seduced by the easy money.

What's next -- the "SUBWAY" subway?

Robert Puentes is a fellow at the Brookings Institution's Metropolitan Policy Program. 1775 Massachusetts Ave. N.W., Washington, D.C. 20036

© 2007 The Dallas Morning News Co

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