2006 June 07 Wednesday
Toll Roads Grow In Popularity

Cash-strapped states want to privatize highways and charge tolls as a money saving mechanism.

ATLANTA America has a freeway problem.

It needs to spend an extra $118.9 billion - above and beyond current state and federal highway funding - to upgrade its roads and bridges through 2022, the Federal Highway Administration estimates. But motorists, already distraught over rising fuel prices, don't want to foot the bill with higher gasoline taxes. So politicians from Oregon to South Carolina are reviving an old solution: the toll road.

The financial positions of state governments will worsen as the percentage of the medical uninsured rises. Therefore I expect states to grow more enthusiastic about toll roads.

Gasoline taxes haven't kept up with overall inflation. Plus, cars get more miles per gallon. Hence states are not collecting as much money to pay for roads.

Politicians are scrambling for new highway funding options because traditional ones are dwindling. Gas taxes raised per mile of interstate highway, for example, have fallen by about half since the 1960s, after accounting for inflation, says the Reason Foundation, a libertarian think tank in Los Angeles.

States are leasing roads out to private operators.

Moreover, states are increasingly looking at an option already popular in Europe and Australia: leasing to a company the right to collect tolls on roads that it maintains. Illinois last week signed legislation that would allow such public-private partnerships. New Jersey is considering leasing out the New Jersey Turnpike. Texas has gone one better, partnering with Spain's Cintra to build a new highway - the $6 billion, 316-mile Trans-Texas Corridor 35 - expected to open in 2014.

Technological advances are decreasing the transaction costs associated with toll roads. Automated reading devices can scan appropriately outfitted carss to record their passing. This avoids the need for stopping to pay tolls. Also, if toll roads are given sufficient leeway in setting prices then the roads can raise prices during rush hours as a way to limit road usage. This can reduce time wasted in traffic jams.

Libertarian and free market advocates of privatizing public services will cheer this development. But I'm less enthusiastic. Why? Government will not shrink if it sheds some costs. See my post Do Tax Cuts Increase Government Spending? Higher taxes make people want government spending cuts. But the tolls won't be taxes. Governments will take the money saved by road privatization and just spend it on other things.We'll pay as much in taxes plus pay money to ride on toll roads.

Share |      By Randall Parker at 2006 June 07 09:17 PM  Economics Government Costs

daveg said at June 8, 2006 8:07 AM:

I wonder where the funding is ultimately coming from?

I mean, debt is liquid, and we live a world wide marketplace.

Truth is, some of the outflow of dollars must be coming back as the loans to finance the projects. So, in truth we are paying for that outflow through "forced" payments like toll road etc. I have no doubt that chinese and middle easter $ are finding their way to these projects.

Dave said at June 8, 2006 9:25 AM:

I don't understand the libertarian arguement because for anyone who wants to be part of modern society they have got to use the roads to move around and therefor road tolls are not a free market choice they are something we are pretty much forced to pay.

Stephen said at June 8, 2006 3:52 PM:

There was a scandal in Australia where a state government contracted for a toll road highway and later it became public that the government had promised the operator that it would not build competing infrastructure for 50 yrs - including upgrading and extending the light rail network.

Randall Parker said at June 8, 2006 4:52 PM:


That Australian state government is not unique in agreeing to restrain competition of toll roads.

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