Commentary

Sell the New Jersey Turnpike—But Do It Right

NY, NJ traffic woes could get fix from private sector

New York state’s toll roads and bridges generate revenues of more than $2 billion a year; New Jersey’s top $1 billion. Together, the two states represent nearly half of all U.S. toll revenue. So when someone proposes selling one of those toll roads, the world pays attention.

A new bill in the New Jersey Senate calls for selling 49 percent of the New Jersey Turnpike to investors. Sen. Raymond Lesniak (D-Union) wants private companies to help run the toll roads and hopes to generate at least $6 billion to help pay the state’s pension deficit.

Lesniak’s proposal is a great idea – mostly – and should start a serious debate that could quickly spread throughout the Tri-State area.

There’s a world-wide trend to get governments out of the toll-road business, delegating the risks and rewards to investor-owned companies. Canada, France, Italy, Spain and Portugal have all done so in recent years. And a host of others, including Australia and Britain, are enlisting the private sector to finance, build and operate new toll roads that those governments can’t afford to build on their own.

America has a history of investor-owned toll roads. New York’s parkways were pioneered by investors. The Long Island Motor Parkway – which from 1907 to 1938 ran 45 miles from Flushing, Queens to Hauppauge, L.I. – was the first modern highway designed to cater exclusively to automobiles and showed the way for the state-sponsored parkways and expressways that followed.

Last year, things really heated up when Chicago got $1.8 billion for a 99-year lease of the 7.8 mile Chicago Skyway, its major link to the east. Just this month, Indiana’s Legislature approved a bill to lease the Indiana Toll Road to private investors for $3.85 billion. And proposals for investor-built toll roads are now being negotiated in Florida, Georgia, Oregon, Texas, Virginia and other states.

Why should governments consider the sale or lease of valuable assets like roads and bridges? What’s in it for taxpayers?

Other countries have found that toll roads work better under commercial management. They have access to larger sums of money that isn’t handcuffed by government red tape, can attract and keep professional management and staff (unconstrained by politics or civil service rules – think of last year’s transit-workers strike), are less likely to do favors for the politically connected, and can operate across state lines to meet the needs of their customers.

Longterm concession contracts set specific limits on toll rates and amount of toll increases that can be charged to drivers, while also laying out exactly what maintenance, road and capital improvements are required.

What taxpayers can get, beyond billions of dollars in up-front concession fees, is a much better-funded (and hence better-performing) overall transportation system.

Of course how this money is spent is of utmost importance. In the Garden State, the main drawback to Sen. Lesniak’s proposal is his plan to use the proceeds to bail out the state pension fund.

Recent studies have shown that New Jersey needs $10 billion in highway rehabilitation, $7 billion in bridge rehab and $5.5 billion to relieve traffic congestion (which costs metro area drivers some $6 billion per year in wasted time and fuel). Yet in the face of these needs, the New Jersey Transportation Trust Fund will have zero funds available for new projects starting this year.

Jersey’s not alone. New York’s state Department of Transportation (which recently held a workshop to assess private-sector interest in investing in toll projects) says the backlog of unfinanced transportation projects in the state is around $70 billion.

Jersey Gov. Jon Corzine says the proceeds from any Turnpike sale “should go into long-term benefits.” He’s right. And given the dire straits into which New Jersey’s highways are about to be plunged by lack of funding, selling part or all of the Turnpike and dedicating the proceeds to highway improvements would be a winning proposition.

In Indiana, the entire $3.85 billion Toll Road proceeds will go to fund a 10-year program to modernize the state’s highway system. That approach plays fair with motorists whose toll payments created the value realized by the lease deal. Both New York and New Jersey should consider doing likewise, with initial proceeds focused on such urgent projects as replacing the obsolescent Goethals and Tappan Zee Bridges.

Leasing government-owned toll roads to investors is a good move. But revenue from such deals should go to building infrastructure, not to cover the latest budget crisis.

Robert Poole is director of transportation studies at the Reason Foundation; Peter Samuel is editor of TOLLROADSnews.com. Their study “Should States Sell Their Toll Roads?” is available here. An archive of Poole’s work is here and Reason’s toll roads research and commentary is here. This column was originally published by The New York Post on March 28, 2006.

Robert Poole is director of transportation policy and Searle Freedom Trust Transportation Fellow at Reason Foundation. Poole, an MIT-trained engineer, has advised the Ronald Reagan, the George H.W. Bush, the Clinton, and the George W. Bush administrations.

Surface Transportation

In the field of surface transportation, Poole has advised the Federal Highway Administration, the Federal Transit Administration, the White House Office of Policy Development, National Economic Council, Government Accountability Office, and state DOTs in numerous states.

Poole's 1988 policy paper proposing privately financed toll lanes to relieve congestion directly inspired California's landmark private tollway law (AB 680), which authorized four pilot toll projects including the successful 91 Express Lanes in Orange County. More than 20 other states and the federal government have since enacted similar public-private partnership legislation. In 1993, Poole oversaw a study that coined the term HOT (high-occupancy toll) Lanes, a term which has become widely accepted since.

California Gov. Pete Wilson appointed Poole to the California's Commission on Transportation Investment and he also served on the Caltrans Privatization Advisory Steering Committee, where he helped oversee the implementation of AB 680.

From 2003 to 2005, he was a member of the Transportation Research Board's special committee on the long-term viability of the fuel tax for highway finance. In 2008 he served as a member of the Texas Study Committee on Private Participation in Toll Roads, appointed by Gov. Rick Perry. In 2009, he was a member of an Expert Review Panel for Washington State DOT, advising on a $1.5 billion toll mega-project. In 2010, he was a member of the transportation transition team for Florida's Governor-elect Rick Scott. He is a member of two TRB standing committees: Congestion Pricing and Managed Lanes.

Aviation

Poole is a member of the Government Accountability Office's National Aviation Studies Advisory Panel and he has testified before the House and Senate's aviation subcommittees on numerous occasions. Following the terrorist attacks of Sept. 11, 2001, Poole consulted the White House Domestic Policy Council and the leadership of the House Transportation & Infrastructure Committee.

He has also advised the Federal Aviation Administration, Office of the Secretary of Transportation, White House Office of Policy Development, National Performance Review, National Economic Council, and the National Civil Aviation Review Commission on aviation issues. Poole is a member of the Critical Infrastructure Council of the Los Angeles Economic Development Corporation and of the Air Traffic Control Association.

Poole was among the first to propose the commercialization of the U.S. air traffic control system, and his work in this field has helped shape proposals for a U.S. air traffic control corporation. A version of his corporation concept was implemented in Canada in 1996 and was more recently endorsed by several former top FAA administrators.

Poole's studies also launched a national debate on airport privatization in the United States. He advised both the FAA and local officials during the 1989-90 controversy over the proposed privatization of Albany (NY) Airport. His policy research on this issue helped inspire Congress' 1996 enactment of the Airport Privatization Pilot Program and the privatization of Indianapolis' airport management under Mayor Steve Goldsmith.

General Background

Robert Poole co-founded the Reason Foundation with Manny Klausner and Tibor Machan in 1978, and served as its president and CEO from then until the end of 2000. He was a member of the Bush-Cheney transition team in 2000. Over the years, he has advised the Reagan, George H.W. Bush, Clinton, and George W. Bush administrations on privatization and transportation policy.

Poole is credited as the first person to use the term "privatization" to refer to the contracting-out of public services and is the author of the first-ever book on privatization, Cutting Back City Hall, published by Universe Books in 1980. He is also editor of the books Instead of Regulation: Alternatives to Federal Regulatory Agencies (Lexington Books, 1981), Defending a Free Society (Lexington Books, 1984), and Unnatural Monopolies (Lexington Books, 1985). He also co-edited the book Free Minds & Free Markets: 25 Years of Reason (Pacific Research Institute, 1993).

Poole has written hundreds of articles, papers, and policy studies on privatization and transportation issues. His popular writings have appeared in national newspapers, including The New York Times, The Wall Street Journal, USA Today, Forbes, and numerous other publications. He has also been a guest on network television programs such as Good Morning America, NBC's Nightly News, ABC's World News Tonight, and the CBS Evening News. Poole writes a monthly column on transportation issues for Public Works Financing.

Poole earned his B.S. and M.S. in mechanical engineering at Massachusetts Institute of Technology (MIT) and did graduate work in operations research at New York University.