"A moratorium on toll roads is clearly appropriate until a rational policy for roads financing can be agreed."
by David Hartman
East Texas Review
Once again Gov. Perry and the 2007-2008 Legislature have come to an impasse, this time on the question of who has the authority to create toll roads, how, when, and where.
The governor has been skating upon thin ice until now, in effect replacing the Legislature’s approval of the location and financing of state highways, and county highways as well, by privatized toll roads negotiated through his Texas Department of Transportation (TxDOT).
HB 1892 by Wayne Smith (R-Baytown), backed by veto-proof majorities of the House and Senate, now confronts TxDOT with the counties’ claim to state right of way; a two-year moratorium on new comprehensive development agreements (CDA’s) with private corporations for construction, operation, and tolling of new highways; plus limits on length of CDA contracts, non-compete constraints, and terms of state buybacks.
Toll roads have been vigorously prescribed by libertarians and neoconservatives as prime potential for privatization.
Privately owned and managed roads, bridges, and ferries were common at the outset of the Republic, but the “Post Roads” established under the functions decreed by the U.S. Constitution have prevailed as the basis for interstate highways.
While privatization sounds very conservative and efficient, as long as government has the “apron strings,” the resultant “crony capitalism” is seldom an improvement over government-run alternatives.
Proponents claim tolls are a better “price” for charging usage. But taxation by fuel taxes and registration fees as charged at the state and federal level were “user fees” that formerly provided properly for state and interstate highways until these revenues were purloined for other government appetites such that tolling highways in effect is double taxation.
Allowing fuel taxes to dwindle without offset for inflation and improved fuel efficiency has joined misassignment of road taxes to result in under-funding state highways.
Toll roads were adopted by Dallas and Houston to provide relief from congestion as an alternative to “free” roadways. The current projects targeted for toll roads by TxDOT range from the justifiable SH130, a possible segment of a proposed Trans-Texas Corridor to relieve NAFTA interstate traffic North-South, to new county roads and even existing highways in the Greater Austin Area.
The selective double taxation of such toll roads is not justifiable. A moratorium on toll roads is clearly appropriate until a rational policy for roads financing can be agreed.
Another basis for questioning toll roads is the claim to “efficiency of pricing.” The Reason Institute, an early supporter of toll roads, has long proposed variable tolls for “rush hour” versus lower-usage-hours. This strange picture of libertarians proposing to use government to change users’ behavior ignores the fact that people who can, do avoid driving during rush hour. Should people who have to drive to work be triple- taxed?
The identity toll tags on the cars have already been proposed as ideal means of monitoring cars for traffic violation ticketing (in belated “1984” style).
The whole process of adopting toll roads in Texas has been at odds with citizens’ rights to know and be properly represented. The CDA’s have been under clandestine negotiation not visible to the public, or even the state auditor. The expenditures are “off budget,” contrary to the objective of balanced budgets where current spending should equal current assessment of taxation.
A recent article in Business Week (May 2, 2007, “Roads to Riches”) describes the prospective feast state and local officials are anticipating from selling public property and leasing it back via usage tolls, bridges, roads, airports, ports –and even parking garages are ripe candidates.
Estimated revenue within two years could total $100 billion for transportation assets under negotiation. (The Pennsylvania Turnpike alone could sell for $30 billion.) The total could add up to trillions for government to secure as “concession” now, with citizens in the future indentured to toil for tolls indefinitely. And most of theses tolls are scheduled to rise substantially under the terms of these concessions.
According to Business Week, investment bankers and institutional investors are seeking 11 percent to 12 percent returns at limited risk compared to high yield bonds and real estate.
The real return on all U.S. capital after taxes, inflation, and depreciation has varied from 3.3 percent to 5 percent over decades. At these target rates on toll assets, pension funds would have a windfall. Is this why CDA’s are so secretive about terms of concession and tolls until contracts are signed? Why should not these contracts require ratification by the Legislature?
The most objectionable characteristic of toll roads is the intergenerational irresponsibility of the toll burdens left to our children and grandchildren.
Governments do not set aside sinking funds to provide for wear and obsolescence of infrastructure. Traditionally, U.S. citizens were provided the legacy of government infrastructure unencumbered with debt and free of use fees.
Today the average family has personal debts totaling 135 percent of disposable personal annual income. The national debt, and the actuarial obligations to Social Security and Medicare total tens of trillions of dollars, hundreds of thousands of dollars per family. Do we really want to in effect mortgage our transportation infrastructure as the last opportunity to add to this shameful burden to be shouldered by our children and grandchildren?
It would appear that the Texas Legislature has firmly said, “No, not here in Texas.” Let us let them know that they are speaking for the majority of Texans who urge them not to waver.
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