The trou­ble with tolls

The Washington Times Weekly - - Editorials -

Atoll-road project in San Diego, once held up as a model of the “in­no­va­tive” pub­lic-pri­vate part­ner­ships, col­lapsed last month. The South Bay Ex­press­way filed for Chap­ter 11 bank­ruptcy pro­tec­tion af­ter be­ing open for busi­ness less than three years. Pro­po­nents of the tolling fad in­sist that al­low­ing pri­vate com­pa­nies to charge mo­torists to drive on roads rep­re­sents the free-mar­ket so­lu­tion to all of our trans­porta­tion fund­ing woes. The South Bay Ex­press­way fail­ure shows that plan is a road to nowhere.

Thanks to gaso­line prices around $3 a gal­lon and the on­go­ing re­ces­sion, hard­pressed con­sumers weren’t in­ter­ested in shelling out an ad­di­tional $4.50 to drive 10 miles. Mac­quarie In­fra­struc­ture Group, the Aus­tralian firm that owns the ex­press­way, as­sured fed­eral high­way of­fi­cials that 60,000 pay­ing cus­tomers would use the road daily. In fact, only 22,600 did so, leav­ing the project without enough rev­enue to sus­tain its debt obli­ga­tions.

It turns out that es­ti­mates based on rosy sce­nar­ios are the norm in the world of tolling schemes. A Texas Depart­ment of Trans­porta­tion study com­pleted last year found that a ma­jor­ity of toll-road projects over­es­ti­mated traf­fic lev­els in the first five years by at least 20 per­cent to 30 per­cent. Be­cause pub­lic trans­porta­tion agen­cies gen­er­ally cut deals with pri­vate tolling com­pa­nies be­hind closed doors, such detailed fore­casts are not avail­able for pub­lic re­view un­til long af­ter the con­tract is signed.

Plung­ing traf­fic is also the norm na­tion­wide. The Poc­a­hon­tas Park­way in Rich­mond re­ported a 12 per­cent drop in traf­fic last year. Transur­ban, the Aus­tralian com­pany that owns the road, re­sponded by rais­ing prices ev­ery year since 2008 and is sched­uled to con­tinue do­ing so un­til 2016. Dulles Green­way traf­fic is sim­i­larly down 7.2 per­cent, and Mac­quarie has put in mo­tion a se­ries of reg­u­lar price hikes.

In a true free-mar­ket en­vi­ron­ment, the projects would fol­low the law of sup­ply and de­mand, drop­ping rates to at­tract new cus­tomers. In­stead, the for­eign com­pa­nies op­er­at­ing th­ese roads are hik­ing tolls as fast as they pos­si­bly can — the op­po­site of what one would ex­pect in a truly com­pet­i­tive mar­ket­place.

Toll roads get away with this con­duct be­cause they are state-sanc­tioned mo­nop­o­lies, not free-mar­ket op­er­a­tions. Bu­reau­crats and politi­cians turn to pub­lic-pri­vate part­ner­ships be­cause they, in ef­fect, out­source un­pleas­ant rev­enue-rais­ing du­ties to pri­vate com­pa­nies. As we see from the South Bay Ex­press­way, the deals gov­ern­ments strike with com­pa­nies to per­form this task fre­quently are based on faulty, un­sus­tain­able as­sump­tions.

We hope Vir­ginia Gov. Robert F. McDon­nell heeds this les­son and drops his sup­port for the fool­hardy plan to im­pose tolls on the In­ter­state 95/395 high-oc­cu­pancy ve­hi­cle lanes.

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