Will PPPs Fragment Our National Highway Network?

Congressional threats to thwart long-term PPP toll concessions are unjustified, counterproductive

I was stunned when I saw the official May 10, 2007 letter to every state governor, aiming “to discourage you from entering into public-private partnership (PPP) agreements that are not in the long-term public interest in a safe, integrated national transportation system.” The letter, on official U.S. House Committee on Transportation and Infrastructure letterhead, was signed by Reps. James Oberstar (D, MN) and Peter DeFazio (D, OR), who chair the full committee and the highways and transit subcommittee.

While the letter goes on to raise concerns about non-compete clauses, a mistaken belief that highway safety and performance will suffer, and other issues that are being addressed sensibly by state DOTs in their concession agreements, their main point seems to be that toll concessions will “undermine the integrity of a national system.” This is the same point that Gov. Bill Graves, president of the American Trucking Associations, has been making for months. In a guest commentary in Traffic World in March, Graves wrote that “[W]e are effectively witnessing the piecemeal dismantling of the nation’s interstate highway network,” thanks to privatizations like the leases of the Chicago Skyway and the Indiana Toll Road. Graves went on to raise the specter of the world’s best highway system being “transformed over the next several years into a patchwork quilt of privately operated toll roads.”

What Graves and Oberstar and DeFazio apparently think happened in the 1950s was a massive exercise in central planning, in which the all-wise federal government planned and built a single, unified system linking everywhere to everywhere. The reality is that what we call the Interstate highway system is, in fact, a patchwork quilt of roadways, owned and operated by 50 separate state governments plus numerous toll agencies. In 14 states, major Interstates such as I-95, I-90, I-88, I-80, I-76, I-44, and I-35 were developed not with federal aid but with toll revenue financing. That’s not even counting dozens of urban toll roads, which are all part of the National Highway System. They present drivers and truckers with a “patchwork quilt” of different toll regimes and different electronic toll collection technologies. And it is only those toll roads which are candidates for privatization via long-term leases. No private firm would lease a non-tolled Interstate because it is still against federal law to put tolls on non-tolled Interstates.

To be sure, the initial general plan for the Interstates was worked out jointly by the feds and the state DOTs. And the non-toll-road portions of the system must, in exchange for federal funding, meet a number of federal standards (as do the toll road portions, if they want to keep their Interstate designation). But the feds have not done much beyond that to make the system more seamless. For example, the most impressive effort to make electronic toll collection interoperable across state borders has been carried out by the Inter-Agency Group of toll road agencies in the northeastern states. Today, you can use an E-ZPass transponder from Maine to Virginia, and from Massachusetts to Illinois, without having to worry which agency issued the transponder or how the payments get worked out among them.

But could the profit-hungry private sector ever pull off something like that? They already have, in Santiago, Chile. That growing metro area has a brand-new urban toll road system, built and operated under long-term concessions by four different companies. The all-electronic (no toll booths whatsoever) toll system there is completely seamless and interoperable. And in the United States, where the same private-sector team won the bidding to lease both the Chicago Skyway and the Indiana Toll Road (which are both part of I-90), their operations are being integrated across the state line, to operate as a single system.

As for the future, when more existing toll roads may be leased, and the private sector may have built toll truck lanes and congestion-relief toll lanes on many Interstates, nationwide electronic tolling is on the horizon. The International Bridge, Tunnel & Turnpike Association has been working with the Federal Highway Administration, state DOTs, and the electronic tolling industry on the standards for seamless, interoperable nationwide ETC, operating in a higher band of the frequency spectrum. Fragmentation?

What should concern governors, state DOT officials, and state legislators is the congressmen’s threat to take away the powerful tool of long-term PPP toll concessions, and even to undo deals already entered into. Fortunately, unlike various banana republics, we live in a society governed by the rule of law. Congress cannot pass a law making illegal business deals that were legal at the time they were entered into in good faith by consenting parties. So that one is an empty threat. (Ironically, all it may do is to increase the pace at which states move to close such deals, at a time when the congressmen decry the “rush” into PPPs.)

But the real threat is that when Congress gets around to the next federal transportation reauthorization, in 2009, they might undo some of the PPP-friendly measures (e.g., private activity bonds) they enacted in SAFETEA-LU. If they were really high-handed, they could even reduce federal highway grants for those states whose PPP laws don’t conform to some one-size-fits-all model. (Of course, that might have the effect of hastening the de-facto devolution of highway funding already under way in fast-growing states.)

At a time when the nation faces an enormous and growing highway funding gap, the last thing we need is for Congress to remove a powerful new funding tool from state DOTs’ toolbox. Everyone concerned with increasing U.S. highway investment-AASHTO, ARTBA, ACEC, etc.-should be very concerned over this threat. And the groups representing state legislators-ALEC and NCSL-should mobilize to let their congressional delegations know what they think about this new threat to PPP toll roads.