Study of Private Roads Shows Signs for Caution

Media Contacts

States Vulnerable to Make Bad Deals, Call for Public Protections

TexPIRG Education Fund

A major new report released today identifies problems in a national trend toward private toll roads. The study, Public 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 U.S. 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.

In Texas, where Governor Perry has aggressively pushed for private toll roads.  As Texas State Rep. Jim Dunnam, Chair of the Select Committee on Federal Economic Stabilization Funding said, “Private toll road projects can have long-term, negative affects on the public and often result in private entities unfairly driving the process. This means Texans will have to foot the bill of the roads they use at a far higher cost than is reasonable.”

One of the most outspoken legislators on toll roads, Texas Rep. Garnet Coleman, similarly said, “Private toll roads are raking in billions in profits on the backs of hardworking Texans. It is bad public policy to allow corporations, who are accountable to their shareholders and not the public, to control our roads.”

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

TexPIRG’s report — including analysis of private road projects in Texas — can be found here.