Addressing Some Misunderstandings on Toll Road Concessions

My pal Tory Gattis–purveyor of the excellent Houston Strategies blog–had an interesting post last week on long term toll road concessions. Tory has generally been fairly skeptical of concessions up to this point, but in his post he concedes that it might be a good thing if the private sector absorbs the risks of increased telecommuting, higher fuel prices, etc., which could result in future traffic and revenues far below what’s projected in today’s forecasts. Though reasonable people may disagree on the likelihood of that actually happening, he certainly points out one of the key benefits of public private partnerships–transferring the risks of traffic and revenue shortfalls (as well as construction cost overruns) to the private sector partner. Reading through his original post and reader comments, I noticed what seemed to be some misunderstandings regarding some of the details of PPPs that I felt compelled to respond to, and Tory generously offered me the opportunity to discuss them in a guest blog post. It’s pretty long, so for brevity’s sake, I won’t repost it here. For more details on concessions and transportation PPPs, check out these recent Reason publications: