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States Vulnerable to Make Bad Deals; Public Protections Called for

A major new report identifies problems in a national trend toward private toll roads. The study entitled Private Roads, Private Costs: The Facts About Toll Road Privatization and How to Protect the Public examines 15 completed private road projects and 79 others that are proposed or underway.

“How we fund, finance, and choose our transportation investments is top-of-mind for many policymakers throughout the nation,” said Robert Puentes at the Brookings Institution. “This report is a major contribution to that important discussion and will be valuable for those sorting through the right mix of public and private investments and partnerships.”

A growing number of states are considering arrangements in which a private operator provides an up-front payoff or builds a new road in return for decades of escalating toll receipts. The report assesses these deals and identifies a number of problems:

• Private toll roads typically require greater toll hikes to generate the same upfront payment that could be generated without privation.

• Private deals lead to serious loss of public control that hinders future transportation planning and typically force public payments to compensate private companies if policies reduce toll traffic.

• Deals are often conducted with inadequate public disclosure or input.

• States generally lack the capacity to oversee or enforce private road agreements

• Problems are compounded by the fact that contracts typically extend 50-plus years in order to obtain large federal tax subsidies.

“Public officials need to consider the full range of potential problems,” said Phineas Baxandall, Senior Analyst for Tax and Budget Policy at the Ohio Public Interest Research Group. “No matter how desperate they are for short-term cash, states shouldn’t sign bad deals that will hurt the public over the long term.”

Some states have seen a backlash against this trend. Strong public resistance in New Jersey and Pennsylvania turned back proposed privatization deals in 2007 and 2008.

This issue will likely become more heated in coming months as Congress considers how to finance reauthorization of the six-year transportation bill which expires in September. “Many of the same banks and investment firms responsible for the mortgage market meltdown are lobbying hard for deals to finance America’s infrastructure,” said Baxandall. 

The Ohio PIRG report also documents numerous public opinion surveys showing strong and consistent public opposition to private toll roads.

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