The nation's first private toll road opened in 1794, spanning the 62 miles between Philadelphia and Lancaster. Private toll roads flourished in America's early days, as cash-strapped states turned to private investors to fund roads for farmers, merchants and manufacturers to carry goods to market. Today, privately run toll roads may be making a comeback, as states look for ways to expand and maintain aging, overcrowded highway systems.
Over the past decade, states including California, Indiana, South Carolina, Texas and Virginia have entered agreements with private companies to build and/or operate toll roads, with varying degrees of success, and many more are contemplating such arrangements. In 2006, Chicago signed a 99-year lease with private operators to run the existing Chicago Skyway toll road.
In most agreements, the state retains ownership of the road, bridge or other structure, while a company leases it for a specified period — such as 50 years — agreeing to maintain it while collecting toll revenue.
The draw for states is getting upfront cash — typically paid when the lease is signed — without tapping into the government treasury or borrowing on their own.
When private investors built the Southern Connector toll road around Greenville, S.C., "the state was able to get a $200-million federal interstate built without using precious state resources or using the state bond limit," said Pete Poore, communication director for the South Carolina Transportation Department.
While private toll roads exist in many countries, most Americans are familiar only with some publicly run turnpikes and bridges erected during the interstate-highway building boom that began in the 1950s. Most of the tolls were eliminated once the roads were paid for. But with aging highway infrastructure needing critical maintenance as well as expansion, this is a new day, some transportation analysts say.
"In the past, tolling has been there to build a project, and theoretically you take it off when you've paid off the capital debt," says Jeffrey Buxbaum, a transportation consultant with Massachusetts-based Cambridge Systematics. "But the cost of a highway continues when the debt is paid off," and today's tolls would be permanent, not temporary, funding sources.
Economists have long thought a precisely calibrated, distance-based toll would have been the best means of paying for and maintaining interstate highways, "but it was just too difficult to collect," says Michael Pagano, a professor of public administration at the University of Illinois, Chicago. New technologies are making precise toll-collection feasible, however.
Future tolls also will likely feature "congestion pricing," says Pagano. Sensors in the pavement will "fine tune traffic on a highway" by triggering a rise in tolls — which will be posted on overhead signs — when traffic gets heavy, thus discouraging some drivers from entering the road, Pagano says.
California highways developed under public-private franchise agreements in San Diego and Orange County employ such technology today, according to Robert W. Poole Jr., director of transportation studies at the libertarian Reason Foundation in Los Angeles. "At any time during the day when traffic has built to a maximum, they'll up the rate by 25 cents per mile." The high-tech approach permits toll lanes in one congested California freeway to move at 65 mph even at rush hour, Poole says.
Many economists praise tolling as a way of ensuring that those who benefit from a highway are the same people who pay for it. Toll roads are a way to ensure that "people get what they pay for and pay for what they get," says Thomas A. Firey, managing editor of Regulation magazine, published by the libertarian Cato Institute. "Americans deep down really do appreciate fair pricing," so if highway tolls are clearly used to maintain a highway, "then they can probably accept that," he says.
Good lease agreements with private road managers can ensure that acceptance, says Poole. Private companies are "more aggressive in toll revenue — increasing the rates annually," for example, he says. "All the recent, highly publicized public-private partnerships like Chicago's Skyway have an annual index for raising tolls" by linking toll hikes to some measure of general economic change, such as the Consumer Price Index, he says.
Such indexing "wouldn't raise tolls much each year, but over 20 or 30 years the increases make a big difference" in the amount of revenue that could be applied to highway upkeep, Poole says. By contrast, the Indiana public toll roads that were handed over to private management in 2006 "had not had an increase in 19 years," even as the roads deteriorated and the cost of maintenance rose, he says.
But critics of private toll roads argue there's too much room in leasing agreements for money to be shifted away from highway needs and that private companies have no reason to care about the general public that uses their roads.
In the past, "public toll roads built in the United States were designed to provide a high-quality ride for the lowest possible toll" to best serve the public, Gregory M. Cohen, president of the American Highway Users Alliance, told the House Highways and Transit Subcommittee in May.
Under private ownership, however, investors would most likely seek "the highest possible returns," shifting the purpose of toll roads from "maximizing the public good to maximizing profits for investors," Cohen said. "Under such a scenario, tolls are raised regularly, and the process is not subject to public or political review."