Analysis: Highway Tolling, Private Roadway Financing Gain Support in States

Published April 1, 2006

According to author Malcom Gladwell, an idea can lie dormant for a long time and then suddenly catch on when the right stimulus comes along. Spreading rapidly like a virus, the idea soon becomes part of the mainstream and turns into a powerful agent of change. Gladwell called this phenomenon “the tipping point.” It looks to us like the idea of charging for the use of highways has reached such a tipping point.

Virtually every week brings fresh evidence that highway tolling and private financing are gaining new converts among governors and state transportation officials, in state legislatures, and in the media. Growing transportation budget shortfalls, eroding value of highway tax revenues, and a supportive federal policy toward tolling and public-private partnerships have helped nurture the idea. Fanning its spread are visions of highway projects built entirely with private funds and prospects of multi-billion-dollar concessionary cash payments that could jump-start ambitious transportation improvements years in advance of their planned execution.

Consider the following evidence, just since the beginning of this year:

January 5, 2006: California Gov. Arnold Schwarzenegger (R) proposes a 10-year Strategic Growth Plan for transportation and other public sectors. A proposed $107 billion investment program in transportation infrastructure includes authority to enter into comprehensive development-lease agreements with private consortia for construction of toll facilities “where a predictable revenue stream can be generated to repay private capital investments.” Implementing legislation (AB 1838) is introduced in the Assembly.

January 6: The Federal Highway Administration (FHA) issues Federal Register Notices announcing various opportunities for participation in new congressionally authorized tolling and pricing programs. They are: (1) Express Lanes Demonstration Program; (2) Tolling of High Occupancy Vehicle Facilities; (3) Interstate System Reconstruction & Rehabilitation Toll Pilot Program; (4) Interstate System Construction Toll Pilot Program; and (5) Value Pricing Pilot Program. By mid-February, 40 expressions of interest have been received under these programs, according to Acting FHWA Administrator Rick Capka.

January 11: The Metropolitan Washington Council of Governments (COG) receives a federal grant to study creation of a network of express toll lanes in the National Capital Region. This follows a decision by the governors of Virginia and Maryland (announced in October 2005) to consider adding express toll lanes to the region’s roads. In addition to High Occupancy Toll (HOT) lanes on the Beltway, Virginia officials are considering private proposals to add priced lanes on I-95. (High-occupancy toll lanes allow single-occupancy vehicles to use high-occupancy vehicle lanes by paying a toll. Tolls vary depending on traffic congestion.) In Maryland, officials are contemplating adding express toll lanes on several of the state’s Interstates. The grant to the Washington COG is part of a wider FHA effort to finance the study and implementation of tolling and pricing projects. Among them are a proposal for Truck-Only-Toll (TOT) lanes in Atlanta, HOT lane implementation on SR 167 in Seattle, and several express toll lane projects in Texas.

January 17: Texas DOT announces the launching of the next generation of public-private partnership projects, known as Comprehensive Development Agreements. A Texas DOT workshop launching the new initiative attracts more than 400 representatives from major foreign and domestic construction firms, investment banks, transportation consulting firms, and private financial advisers–a level of interest seldom seen at pre-proposal briefings. Texas policy is to use tolls and private funds rather than tax dollars as the primary means of financing future highway expansion.

January 17: The Washington State Transportation Commission recommends adoption of a statewide tolling and pricing policy to provide a supplementary source of funding for new highway projects and to facilitate management of the state’s highway system.

January 23: Indiana Gov. Mitch Daniels (R) announces a winning bid of $3.8 billion for the concession and lease of the Indiana Toll Road. The cash from the transaction will be used for an ambitious program of highway improvements throughout the state, including construction of Interstate 69, accelerating its completion by almost 20 years.

Week of January 23: The annual Transportation Research Board meeting, always a reliable barometer of what the transportation community considers as the key issues of the day, draws big crowds to a record number of sessions dealing with tolling, road pricing, and public-private partnerships.

January 25: Harris County, Texas commissioners announce they have agreed to study the sale or long-term lease of the 83-mile system of Harris County toll roads, a deal that could bring as much as $7 billion to the county’s coffers. Goldman Sachs and JP Morgan Securities are to study the options of long-term leasing and sale of the facility respectively, while Citicorp will study the option of keeping it county-owned.

January 26: The South Carolina legislature passes a law authorizing collection of tolls to finance construction and operation of Interstate 73, a new 45-mile highway connecting I-95 with the Atlantic Coast resorts through the recently built Conway Bypass. This is one of seven toll projects planned by the state Turnpike Authority, which was created in 2002 to develop and operate toll facilities in the state.

Week of January 30: Indiana’s decision to lease its toll road to a private consortium is provoking similar thoughts in Kansas and Ohio, according to press reports. In other news, Illinois state legislators and business leaders are calling for lifting the state ban on private financing initiatives to help fund new transportation projects such as western access to O’Hare International Airport. The New York State Department of Transportation announces a March 8 seminar to consider opportunities for innovative financing strategies and tolling concessions in the state.

February 6: The U.S. Department of Transportation proposes in its FY 2007 budget an ambitious $100 million pilot program to demonstrate variable tolling and mileage-charging systems on a statewide or urban-area basis. The demonstration projects would be conducted on a larger scale than any tolling or mileage-charging project to date in the United States, according to the budget document.

February 8: A bill (SB 80) authorizing Utah’s DOT to enter into public-private partnerships to build new toll roads nears approval by the state legislature. Utah will become the 23rd state with a public-private partnership law.

In a May 2003 Innovation Brief, “It’s Time To Take a Fresh Look at Highway Tolls,” we suggested a wider use of tolls would give America’s metropolitan regions congestion relief without the need to raise gasoline taxes. We wrote, “At a time when the needs for transportation capital greatly exceed traditional sources of funding, tolls may assume a dominant role in the funding of new highway capacity perhaps as early as the next decade.” Events in recent months lend credence to our hunch.

C. Kenneth Orksi ([email protected]) is editor and publisher of Innovation Briefs, a publication of the Urban Mobility Corporation in Potomac, Maryland. This article originally appeared February 14 as an Innovation Briefs news analysis. Used by permission.