Policy Study

The Market for Private Toll Projects in the United States

Executive Summary

This report surveys the market for privately financed and operated toll highways, bridges, and tunnels. This market is developing because traditional public-sector funding is inadequate for the level of investment needed over the next decade or more; the Federal Highway Administration (FHwA) puts the shortfall at between $13 and $42 billion per year.

Three principal market opportunities exist: new urban congestion-relief tollways, new or rebuilt intercity toll roads, and new or rebuilt bridges and tunnels. The urban market is driven primarily by the potential of offsetting the $34 billion per year in time and fuel wasted by current levels of traffic congestion. The intercity market is driven primarily by the need of trucking firms for time and cost savings, and access for over-100,000-lb. truck-trailer combinations. The primary bridge opportunity lies in rebuilding some of this nation’s thousands of deficient bridges.

This report identifies and quantifies those urban areas with the greatest traffic congestion costs, and those states with the highest fractions of deficient highway and bridge conditions. It also identifies those states where legislation to facilitate private toll projects has been enacted or is being considered.

Prior to enactment of the 1991 federal surface transportation act, private tollway projects worth $10-15 billion were already being envisioned at the state level. The total value of toll projects being considered prior to the 1991 act’s passage was some $28 billion. Now that the 1991 act has opened up the market for rebuilding existing highways, bridges, and tunnels as private toll projects, the potential market is much larger. If states took full advantage of the new act’s provisions, an additional $19 billion per year of private investment could be generated, closing the basic funding gap identified by FHwA. Over a decade, this would put an upper bound on the size of the private tollway market at $190 billion.

At least nine engineering, construction, and development firms are pursuing the private tollway market, along with at least 11 major investment banking firms. In surveys carried out for this project, these firms identified as key success factors for private tollway projects (1) local political support, (2) minimal environmental problems, and (3) state enabling legislation. Since privatization of transportation infrastructure is still a novel idea to most people, there is a need for significant public-information and lobbying efforts to create a favorable climate of opinion and political environment for such projects.

Attachments

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.