Privatizing Wisconsin's Interstate Highways

Executive Summary

Wisconsin's excellent highway system is the most important component of the state's transportation infrastructure. Yet this system is aging; the majority of the state's major highways-and especially the Milwaukee-area freeway system-will require major reconstruction over the next 25 years. Current funding sources are inadequate to this task. Studies by the Wisconsin Department of Transportation project a shortfall of $8.9 billion over the next 25 years.

This study suggests a new approach to solve a major portion of this problem. Following the lead of a dozen other states and many other countries, Wisconsin could enlist private capital into its highway system. Specifically, the state could solicit bids from the private sector to invest $3.1 billion in rebuilding and modernizing the rural and urban Interstate system, recovering this investment from tolls charged to users.

Public-private partnerships of this sort have provided the major motorway systems of France and Italy, and are now being used for major urban expressways in Australia, China, Hong Kong, Malaysia, and Thailand. Congress embraced this principle in the 1991 surface transportation act (ISTEA). Since 1988, 12 states and Puerto Rico have authorized public-private partnerships for highway projects; two new tollways of this type opened to traffic in 1995. Minnesota received five proposals for such tollways in November 1995.

Because current federal law permits tolling Interstates only under certain conditions, a portion of previous federal aid may have to be repaid if Wisconsin privatized and tolled its entire Interstate system. But even taking into account such repayment, the proposed conversion is financially feasible. Tolls for the rebuilt system would be comparable with those charged on other recent rural and urban toll projects. Nonstop electronic toll collection would be far more user-friendly than old-fashioned toll booths.

Besides avoiding over $3 billion in rebuilding costs, the proposed public-private partnership would generate several billion dollars in. additional revenues to the state over a 25-year period, which could be applied to the projected $8.9 billion shortfall and/or used to cover a portion of local roadway costs now paid for by property taxes. That would permit significant local property-tax relief.

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