Last week, Rachel Alexander a writer on Townhall.com who typically authors columns on socially conservative viewpoints such as how “Taking God out of the schools has contributed to the decline in society,” and how the “Disney Channel is fueling a degenerate culture because it is full of hyper, crass-behaving children,” decided to take on toll roads. Her very creative but very incorrect column on PPPs is so blatantly wrong that most blog commentators trashed it. Toll roads that allow the market to dictate when to build a new road or add capacity are as free market libertarian as any transportation concept. Let’s dissect Ms. Alexander’s myths one by one:
Myth one: It is an illusion that toll roads are a free market way to solve a growing government expense. Toll road contracts are set up as public-private partnerships, which are not the same thing as privatization. Public-private partnerships (PPPs) result in government-sanctioned monopolies granted to one or more favored companies, essentially crony capitalism. It is easy for the government to write specifications for projects so they will only fit select businesses. The PPPs may last from 30 to 100 years, granting an extremely long monopoly without competition.
Reality: Procuring a public-private partnership is an open competition with many stages. All bidders must pass through many steps including a request for qualifications, a request for proposal and a bid. It is not a monopoly since the private bidder has to meet very real performance standards. If those standards are not met the government can cancel the lease, reassume control of the highway and restart the bid process. Public-private partnerships are not the same as privatization, and where truly private roads are realistic, we support them. But full privatization is not realistic for most roads. There has been no evidence that governments have written PPPs to favor one company. But if they did, this is a failure of government not of PPPs. PPPs are long-term contracts because the public sector, the private sector and toll road users get the best deal. If the state wants to choose a shorter contract, it is free to set a contract for any length that it wants.
Myth two: The most expensive highway project in the U.S. (the big dig) was paid for by tolls, and so mismanaged that taxpayers filed a lawsuit against the state of Massachusetts over being required to pay tolls for the enormous expense.
The big dig was a conventional toll project not a PPP. Its costs escalated because after the initial plan was created, politicians put pressure on the state to add unneeded elements. Had the big dig been a PPP, this cost escalation would NOT have happened since PPPs help insulate projects from politicians. Ms. Alexander actually made a point in favor of PPPs!
Myth three: There are reports that 80 percent of the money raised from tolls goes to the company managing the toll roads. Tolls rarely disappear after enough money has been raised to pay for a project. Proponents admit this, but defend the perpetual tolls by stating that the money goes to ongoing maintenance. Isn’t that what gas taxes are for?
Reality: Tolls are the method used to finance the road. Financing is a far better method to pay for roads than funding. Since private companies build the road, it is only logical that they get paid for their work. As the private operator is responsible for road maintenance such as repaving, mowing and updating signs, they receive small continual payments for this service. For private toll roads, the owner collects the toll and operates the road. And as Ms. Alexander points out earlier in the report gas taxes do not pay for all maintenance costs since they have much less buying power than 10 years ago. Private operators receive the funds because they are the entity that is managing the road.
Myth four: The traffic diversion that results from toll roads increases congestion on roads in other locations. This leaves too few motorists on the toll roads to make them efficient.
Reality: Traffic diversion from toll roads is very minor. Often the alternative roads are just as congested or take much too long to be a realistic alternative. Toll roads put an economic price on an otherwise unpriced trip. Since gas taxes do not fully pay for roads, driving is artificially cheap. Toll roads help restore economic balance to the system.
Myth five: Those who do not pay the tolls, for whatever reason, are treated practically like criminals and fined incredible amounts of money. Not to mention the state may suspend their driver’s license and registration.
Reality: Enforcement is not any toll road operator’s favorite task. And some toll road operators wait to begin enforcement until multiple violations have occurred. Those who do not pay tolls are breaking the law; as many toll roads do not receive gas tax money, they have no other source of funding. If everybody freerode like these toll violators there would be no money to maintain the road or pay back the bonds. Each toll violation is a small fine. But if somebody has 50 violations, that is going to be a significant amount of money. Suspending someone’s license is the last alternative and only occurs after someone has racked up multiple violations.
Myth six: There is a deafening silence from the left about the disparate impact toll roads have on the poor. The left is also noticeably silent regarding the extra wasted fuel that is used and dispersed into the environment as motorists drive extra miles to avoid the toll roads.
The Transportation Research Board has studied equity issues in toll roads and found a very minor impact. Lower income individuals often value toll roads more than others because they face more serious repercussions from being late to their jobs. Drivers with children in daycare value toll roads because the cost of the toll is far lower than the cost of picking up their children 15 minutes late. Some toll operators have studied vouchers. But since the equity effects are so minor, it is generally not good public policy.
Myth seven: Toll roads wouldn’t be quite as bad if government would adopt them in place of gas taxes.
Reality: Toll roads can be funded without gas taxes. And Mileage Based User Fees (MBUFs) may allow gas taxes to eventually disappear. But gas taxes pay for local, state, and federal roads and only a fraction of these roads have tolls.
Myth eight: Gas taxes may not be a perfect way to fund roads, but they aren’t much more of a tax than toll roads.
Reality: Gas taxes are not a perfect way to fund roads and tolling is much better. With tolls the highway operator can charge users the exact amount the highway costs to build and maintain. And to manage congestion, the toll can be varied depending on the time of day. A gas tax is a flat instrument that pays for all roads equally. Roads that are more extensive to maintain such as freeways are charged the same rate as roads that are cheaper to maintain such as neighborhood streets. And part of the federal gas tax and many state gas taxes supports transit, bicycling, walking and removal on non-native vegetation. It is hard to understand how a tax that supports these non-highway project is a better way to pay for highways.
There are some other important facts that Ms. Alexander forgot to mention. It was President Eisenhower’s and many other transportation policy makers choice to toll the interstate highway system from its inception in 1956. However, lower traffic counts in the west and the lack of technology made this unrealistic. But now where traffic counts are feasible there is no reason not to build new toll roads. In poll after poll motorists favor tolls over increasing the gas tax. The left-of-center Brookings Institute, the fiscally and socially conservative Heritage Foundation, the moderate Eno Foundation, and yes we heathenous libertarians at the Reason Foundation, Cato Institute and the Competitive Enterprise Institute all support tolling because it is the fairest and most economic way to pay for infrastructure.