Of Tolls and Private Roads

Like it or not, we have a road system that is primarily government owned and operated. Strict libertarians would like roads privatized. The private entities involved would find ways (mostly by exacting tolls) of building and maintaining roads, while also turning a profit. The argument goes that the profit motive would provide incentive for these entities to do a better job of caring for road infrastructure than government does.

This sounds intriguing, but a profit motive alone does not engender incentive for innovation, productivity, and higher quality. Fair competition is required for that to happen. For this reason, road privatization makes sense in only certain instances.

The Adams Avenue Parkway in southern Weber County is a good example of a mutually beneficial private toll road. Most of the $8.9 million construction cost came from private investors. The state put up $2 million and additional property taxes were levied on property owners along the parkway. A private company built the entire 1.6-mile stretch, and then returned all but half a mile of it to local government.

In essence, government paid less for the portion of road it kept than it would have paid to construct the road itself. The property taxes levied on adjacent property owners are no more than if government would have built the road.

Only half a mile of this road is on private property operated by a private company. The private road connects seamlessly to public roads. The $1 toll to drive that short half mile seems terribly steep. But realize that there are several other competing routes available, including major highways. The road is a convenience. No one is forced to drive on this stretch, but it can save some drivers 15-20 minutes at peak traffic times.

This road would never have been constructed by government alone, since no non-toll model would have made funding feasible. The only worry government has with this short road is maintaining the public roads that connect to it: roads government would maintain anyway.

The result is a win-win situation. Drivers that believe that their personal time saved in traffic is worth the high toll are free to use the private road. No one else has to pay for or give a second thought to the road. Since there are competing routes available, the company that owns the road has an incentive to maintain it well. Drivers on the competing routes contend with less traffic than they would otherwise, due to the fact that some drivers opt to pay the cost to drive on the toll road.

Another fairly successful model is the 10-mile long 91 Express Lanes toll highway in Los Angeles. These lanes were constructed between the existing east- and westbound lanes. Government owns the lanes and contracts with a private firm to operate and maintain them. The continuously varying toll prices, based on traffic density (demand), are displayed on electronic billboards along the stretch.

People are free to use the express lanes if they are willing to pay the toll prices — a form of willing self taxation — but they don’t have to. They can opt to drive on the more congested toll-free lanes. Once again, the people that opt to pay to drive on the express lanes relieve some congestion for those that drive on the toll-free lanes.

Still, public-private partnerships don’t always provide sufficient incentives for fair play. The private firm that initially owned the lanes negotiated a non-compete agreement that prevented the state from making significant improvements to the nearby highway for 30 years. This caused a lot of contention until a few years ago when government acquired ownership of the express lanes.

Private road ownership and/or tolling can provide transportation solutions in targeted situations, but experience shows that they can’t be successfully or efficiently implemented everywhere. As we saw with the tolling debate on the Mountain View Corridor, businesses and residents along the corridor would have been unfairly affected by full tolling because it would have raised their costs comparative to those along competing routes.

There is no one-size-fits-all transportation solution alternative. Where it would make sense to implement tolling and/or private roads, each solution must be carefully crafted to suit the conditions.

It must also be recognized that addressing our current and future transportation needs requires a broad spectrum approach. We can’t achieve what needs to be done with tax increases and public transportation improvements alone. No option should be excluded, but each option needs to be implemented where it makes the most sense and will provide the greatest cost-benefit value.