A private highway is a highway owned and operated for profit by private industry. Private highways have been constructed all over Europe; in addition, a few have been built in the United States on an experimental basis. Typically, the U.S. private highways are built by companies that charge tolls for a period of time while the debt is retired; then the highway is turned over to government control. By this means, cash-strapped governments can fulfill immediate transportation needs without privatizing the roads in the long term.
Arguments for and against private highways
Arguments for private highways
Privatization will encourage infrastructure construction and reduce congestion
Since traffic congestion is caused by there being more traffic than the highway can handle, one way to look at congestion is simply a shortage of roads, lanes, exits, or other infrastructure. Libertarian economists frequently cite the free market's pricing mechanism as a superior means of avoiding shortages than government planning. Peter Samuel's Highway Aggravation: The Case For Privatizing The Highways makes a provocative comparison between American traffic jams and Soviet grocery store lines:
- In Russia communism's failure was epitomized by constant shortages in stores. Empty shelves in supermarkets and department stores and customers in line, wasting hours each week, became the face of the system's failure, as well as a source of huge personal frustration, even rage. Communism failed because prices were not flexible to match supply and demand; because stores were bureaucracies, not businesses; and because revenues went into a central treasury and did not fuel increased capacity and improved service. We in supposedly capitalistic America suffer communism--an unpriced service provided by an unresponsive monopolistic bureaucracy--on most of our highways. Our manifestation of shortage, our equivalent of Russian lines at stores, is daily highway backups. There is no price on rush-hour travel to clear the market. There is no revenue stream directly from road users to road managers to provide incentives either to manage existing capacity to maximum consumer advantage or to adjust capacity to demand.
Ronald F. Kirby, transportation director for the Metropolitan Washington Council of Governments, opined that private companies have more of an incentive to invest in infrastructure early, before a public outcry prompts construction. He noted, "Too often in the public sector, the easiest thing to do is let things sit unresolved. The private sector is motivated by self-interest to resolve things quickly"[1].
Voters prefer tolls to taxes
Voters frequently support tolls over taxes[2]:
- Washington, DC (60% / 30%): A randomized telephone survey conducted by TNS of Horsham, Pennsylvania of 1,003 adults for the Washington Post conducted in the last days of January, 2005 had Washingtonians saying tolls are a "better way to pay for highway expansion or new highways" locally than taxes by a 60/30 split. 9% said neither and 1% no opinion[3].
- Minnesota (69% / 23%): An opinion survey for the STAR TRIBUNE between January 15-20, 2004, showed 69% of people there favored tolled express lanes against 23% who wanted the gas tax raised to pay for extra free highway capacity.
Arguments against private highways
Highway owners will overcharge users
A common argument against privatization of public highways is that the companies will charge exorbitant tolls. According to the Growth Management Institute, Mexican highway privatization was a costly failure[4]:
- Over the last decade, the government licensed companies and banks to construct and manage 43 highways and 9 toll bridges. On several of these facilities, the tolls are the highest in the world, the prime example being a 13-mile stretch outside Mexico City that costs $6 to use, twice the daily minimum wage in Mexico.
- The total investment of $12 billion is at risk, causing the government to propose a $7.5 billion bailout to renationalize 23 highways and 2 bridges, most of which carry little traffic and require expensive maintenance. Many of the facilities, it seems, were built in areas needing little additional capacity and priced at a level that dissuaded potential users. Some road-building companies, however, recouped part of their investments through lucrative fees paid during construction, and at least one road was built mainly to benefit a developer's ocean-front property. According to the Times, one prominent political scientist called it "a dumb idea that didn't work."
Private industry cannot plan road locations as well as governments
Another argument against privatized roads is the the companies' construction plans will not be in the public interest. For instance, in May 1996, the Growth Management Institute criticized the Greenway builders for building a road to nowhere[5]:
- Despite optimistic predictions by all involved, the road failed to attract anything close to the 33,000 vehicles a day required for the company to make loan payments, let alone the 68,000 vehicles a day needed to turn a profit. In early 1996, the road was averaging 10,500 vehicles daily.
Private highways around the world
Italy
3,120 kilometers of Italy's highways (comprising 56% of the country's toll roads) are controlled by Autostrade Concessioni e Costruzioni Autostrade. According to Forbes, "Autostrade was an early Electronic Age entry, computerizing to its highway system in 1988"[6].
United Kingdom
The M6 Toll was the first private toll motorway in the United Kingdom[7]. The project was described by urbantransport-technology.com as a "27-mile dual three lane (plus hard shoulder), £485.5 million motorway" with six toll stations[8].
United States
18th and 19th century turnpikes
The Lancaster turnpike, begun in 1792 between Philadelphia, Pennsylvania and Lancaster, Pennsylvania was the first major American turnpike. According to Gerald Gunderson's Privatization and the 19th-Century Turnpike, "In the first three decades of the 19th century Americans built more than 10,000 miles of turnpikes, mostly in New England and the Middle Atlantic states. Relative to the economy at that time, this effort exceeded the post-World War II interstate highway system that present-day Americans assume had to be primarily planned and financed by the federal government"[9]. Since electronics did not exist in that era, all tolls had to be collected by human cashiers at toll booths, creating high fixed costs that could only be covered by a large volume of traffic. As railroads and steamboats began to compete with the turnpikes, the companies started to shut down their less profitable routes or turn them over to governments.
Reedy Creek Improvement District
Main article: Reedy Creek Improvement District
The Reedy Creek Improvement District, established in 1967, operates six-lane freeways in the Walt Disney World area near Orlando, Florida. Technically, the RCID is a public corporation administered by a five-member Board of Supervisors elected by area landowners[10]. However, through a carefully-constructed legal framework, Disney operates the roads and utilities as wholly-owned subsidiaries, rather than as a public-private partnership.
Specifically, Disney is the primary landowner and controls the remaining land through contractual arrangements. In this way, Disney is able to hand-pick the landowning electorate. An Associated Press article notes, "Board members are non-Disney business people from central Florida and must own at least an acre in the district" [11]. A Florida Office of Program Policy Analysis and Government Accountability report explains the contractual arrangement as follows: "Historically, each board member has been deeded approximately five acres of land by an affiliate of the Walt Disney World Co. . . . According to RCID officials, a Walt Disney World Co. affiliate has the exclusive option to purchase land back from board members at any time"[12]. Landowners also have a right to recall Board members before the completion of their four-year terms.
Financial arrangements are also circular. According to the RCID Finance Department, Walt Disney Co. is RCID's largest taxpayer, paying about 86% of the District's taxes in 2004. The remaining taxpayers are Board members and lessees of property owned by Disney affiliates (e.g. House of Blues, Travelodge , and Hilton) paying ad valorem taxes. An American Prospect article notes, "Disney pays taxes to Reedy Creek, which gives the money straight back to Disney, and the circle is closed"[13].
Dulles Greenway
Main article: Dulles Greenway
The Dulles Greenway, Virginia's first private toll road since 1816, is a 14-mile highway connecting Washington Dulles International Airport with Leesburg, Virginia. In 1988, the Virginia General Assembly authorized private development of toll roads. To take advantage of this opportunity, the Bryant/Crane family of Middleburg, Virginia, AIE, L.L.C., and Kellogg, Brown and Root of Houston, Texas joined together to form Toll Road Investors Partnership II (TRIP II). Brown & Root constructed the road with private funds, opening it for traffic on September 29, 1995. Autostrade International , a company with over 30 years of experience in the development, construction, maintenance, and operation of Italian toll road networks, formed an American subsidiary to take over operation of the Greenway[14].
The Greenway has several methods of expediting traffic flow. Six traffic lanes, a uniform 65 mph speed limit, and a complete absence of traffic lights keep traffic moving at a steady pace. In addition, electronic toll collection, using the Virginia Department of Transportation's Smart Tag system, enables Smart Tag lanes to "process five times as many vehicles per hour as conventional cash payment lanes"[15].
The Dulles Greenway charges a fixed amount for use of the road, regardless of whether the driver exits before driving the complete length of the Greenway. The behavior of the Greenway's operators appears to confirm theories about private road operation; they seem to increase tolls and invest in infrastructure as needed to maximize profits. In 2004, the operators won approval from the State Corporation Commission to increase tolls from $2.00 to $3.00 per car[16]. In 2005, Tom Sines of TRIP II announced plans for widening the highway, adding two new exits, expanding the main toll plaza, building a ramp to the airport, and reconfiguring an exit as a cloverleaf[17].
Washington State highway privatization
As of 1993, the Washington State Department of Transportation had approved phased privatization of the entire 135 miles of freeways in the greater Seattle metropolitan area[18].
See also
External links
References
- About RCID, Reedy Creek Improvement District.
- Birmingham Northern Relief Road (BNRR), United Kingdom, urbantransport-technology.com.
- Central Florida's Reedy Creek Improvement District Has Wide-Ranging Authority, Office of Program Policy Analysis and Government Accountability, Report No. 04-81, Dec. 2004.
- Dulles Greenway Expanding, ABCNews, Mar. 4, 2005.
- Dulles Greenway home page.
- Fehr, Stephen C.: Highway Links Loudoun to Region's Growing Pains, The Washington Post, Sep. 24, 1995.
- Gunderson, Gerald: Privatization and the 19th-Century Turnpike, Cato Journal, Vol. 9, No. 1, Spring/Summer 1989.
- Heller, Richard: The Fast Lane, Forbes, April 15, 2002.
- Judge Orders Discovery of Secret BNRR Deal, Alliance Against the Birmingham Northern Relief Road.
- Porter, Douglas R.: Newsletter of The Growth Management Institute, Vol. 4 No. 1, (Fall) 1997.
- Samuel, Peter: Highway Aggravation: The Case For Privatizing The Highways, Cato Policy Analysis No. 231, June 27, 1995.
- Samuel, Peter: Landslide victory! Tolls 60% Taxes 30% in Washington DC metro area poll, Toll Roads News, Feb. 16, 2005.
- Samuel, Peter: Virginia bureaucrats finally OK toll hike for Dulles Greenway Virginia, Toll Roads News, July 8, 2004.
- Schneider, Mike: Disney Rescue Workers in Labor Dispute, The Associated Press, Jan. 18, 2004.
- Wolf, Joshua: Hidden Kingdom: Disney's Political Blueprint, The American Prospect, Inc., Volume 6, Issue 21, Mar. 21, 1995.
