Here’s a bankrupt idea: Lobby for private toll roads that supposedly ease traffic congestion, rather than public transportation systems designed to provide traffic alternatives. Then greatly overcharge to build said roads, and skim off profits as they go bankrupt and are sold back to the public for tidy sums. Not a bad racket if you can get it, and plenty of financial institutions masquerading as infrastructure experts have been getting it nicely, thanks very much. I analyzed the transportation privatization racket at the behest of my righteously invested colleagues at AlterNet. Try to avoid the road rage.
Increases in fuel taxes, increases in toll fees. Private-public boondoggles building unprofitable highways — let’s ditch the fossil-fuel economy.
At the end of August, California’s regional planning agency San Diego Association of Governments (SANDAG) met to publicly discuss buying back the 10.5-mile South Bay Expressway from Australian global investment banking titan Macquarie Group for $344 million. That’s more than $50 million than a bankruptcy court recently declared it was worth, but a steal of a deal compared to the $847 million in public and private dollars it actually cost to build on its way to being what you might call an “unprofitable road.”
The South Bay Expressway connects Chula Vista to downtown San Diego and the Mexican border, both a short seven miles away. And someone actually got paid nicely to make an expensive transportation corridor that has never entered the black ever since it became one of California’s first toll roads built via public-private partnership. But the message holds: When it come to toll roads, the contracting economy has reset revenues and expectations alike. And when it comes specifically to the South Bay Expressway, even some SANDAG board members are suspicious about the overall payoff.
“We have a hell of a lot of projects on the books,” county supervisor Bill Horn said. “I support it but I am concerned about the total operation, how much cash is left.” As he should be, given the relative rise of gas prices, flattening of the housing and retail markets – Chula Vista’s economy is mostly based on small businesses and tourism – and other 21st-century new normals.
Voters looking to Republican elite candidate Rick Perry might want to read up on his failed Trans-Texas Corridor, a 4,000-mile traffic and utilities supercorridor that was formally canceled by the Texas Legislature this year after vigorous public outcry. Or the $3.8 billion public-private Ohio Turnpike leasing supported by Republican governor John Kasich, the ex-Fox News talking head. And then there is Florida governor Rick Scott’s proposal for the suspiciously named and privately owned “Heartland Parkway” project, a 146-mile stretch the state has no money to pay for. This from the same guy who gave back over $2 billion to the Obama administration because he didn’t believe in a high-speed rail project that would have both worked and provided the type of congestion relief he evidently believes Florida needs so badly. No wonder American Automotive Association members doubt that toll fees aren’t routed toward infrastructure improvements.
“In general, toll roads are profitable over the long term,” Neil Gray, director of government affairs for the International Bridge, Tunnel & Turnpike Association (IBTTA) told AlterNet. “It may not be a high rate of return, but traffic volumes are generally consistent, barring major external influences like fuel price spikes or the present economic doldrums.”
Those are a lot of bars. Gray noted that the first absolute decline in national vehicle miles of travel happened from 2007-2008 — the temporal epicenter of the Great Depression rerun, if you will — and that setting toll rates “is typically a hot political issue. There are almost 100 toll agencies in the United States, and in any given year there are some that will be seeking a rate increase.”
But even IBTTA, a global forum of toll operators and related industries whose mission is to enhance toll-financed transportation, is fuzzy on the industry’s overall costs and payoffs.
“Our data on this is fragmentary and somewhat dated, because we are in the process of trying to bring our records up to the present,” Gray explained. “Toll collection in the U.S. is in the realm of $11 billion per year. If I were to guess at the worldwide collections, I would very conservatively place it at $30-35 billion-plus. Cost is a complex question. As bonded assets, there is a fiduciary responsibility on the part of the toll agencies to preserve the asset on the bondholder’s behalf. Because they are self-funded, they operate outside of state budget controls. There is the cost of toll collection, as well as the cost of operating the roadway, and capital costs if they are engaged or planning any major enhancements or expansions. In any given year, a toll agency may technically show a surplus, but if this is part of a reserve buildup to support a capital improvement it can’t really be construed as profit.”
One sector of toll-financed transportation that isn’t financially floundering are electronic collection systems like the East Coast’s E-Z Pass and the West Coast’s FasTrak, which employ radio-frequency identification transponders to allow customers to pay tolls wirelessly to keep traffic moving, sparing them the extreme frustation of stop-and-go booths. Despite the fact that the contracting economy has slowed overall traffic, both E-Z Pass and FasTrak are enjoying increased attention and accounts.
“Bay Area FasTrak reached our one millionth account last fall,” John Goodwin, spokesperson for the Bay Area Toll Authority (BATA), which administers the San Francisco region’s seven state-owned bridges, told AlterNet by phone. “Without question, it is increasing in popularity and percentage of total bridge traffic even as overall bridge traffic slowly declines. The trend lines are going in opposite direction, which is an interesting thing. The Bay Area workforce still hasn’t come back to where it was in 2001, and there have been ups and downs in gas prices, as well as a series of toll increases in 2004, 2007 and 2010.”
BATA actually licenses the FasTrak brand from Orange County’s Transportation Corridor Agencies, the first in California to launch electronic toll collection in the ’90s. It brings in around $500 million annually in the Bay Area, while annually costing around $20 million, according to BATA’s FasTrak program coordinator Beth Zelinsky. Meanwhile, the Transportation Corridor Agencies’ two Orange County toll roads pull down a cumulative $200 million annually, according to its 2010 annual report.
“But each agency that has a toll facility operates their own programs, the bulk of it going to pay for reconstruction of the bridges, seismic improvements and other infrastructure needs,” Zelinsky explained to AlterNet by phone. “We occasionally have toll increases, but right now we have enough revenue in our forecast over the 20 to 30 years to cover our expenses.”
For its part, E-Z Pass covers 24 toll agencies in 14 states, and pulls down around $5 billion a year in electronic revenue, which is about 70 percent of total tolling in the Northeast, Delaware-based E-Z Pass Group, executive director PJ Wilkins told AlterNet by phone. Its interoperable system has around 21.5 million devices in circulation, and stretches from Maine to Virginia to Illinois, and is currently looking to expand into Florida and North Carolina.
“E-Z Pass is nothing more than an interoperable system of technology,” Wilkins said. “All of the money belongs to the agencies that collect the tolls. Those agencies split the operating costs based on a formula that they come up with each year.”
But the electronic toll-collection “business is great,” Wilkins added. And its often-controversial approach to congestion pricing is going viral in new ways. Skymeter boasts that its own technologically advanced dashboard-mounted meter promises to turn driving activity into “a validated list of financial transactions.” The fact that drivers have to pay to drive to work to get paid to drive to work is a maddening but somehow inevitable post-recession circularity, and it’s going nowhere.
“There is severe stress on the federal-aid highway program, and its reliability to the states is coming into question,” explained Gray. “Just as the aviation taxes lapsed in July, there is a potential for similar lapse at the end of September on the federal gas tax. As vehicle miles-per-gallon has increased, there has been declining revenue derived from fuel taxes — which was last increased in 1993 to its current rate of 18.4 cents a gallon. There is a universal acceptance that fuel taxes have not kept pace with inflation, yet there is very strong political opposition to any efforts to increase the current rate. Alternative fuels and the potential of electric vehicles which would pay no user fees under current revenue mechanisms are also of concern.”
Increases in fuel taxes, increases in toll fees. Private-public boondoggles building unprofitable highways. Driving activities as electronically tracked financial transactions. The future trend becomes clear for the fossil-fuel economy, which is crashing and burning in slow motion.
The new century’s new normal demands much less transportation, and its lethal pollution, at the risk of economic and civic exhaustion. Expansions like Rick Scott’s so-called Heartland Parkway make about as much sense — or is that cents? — as the unprofitable bankruptcy of the South Bay Expressway. Instead of squeezing blood and revenue from asphalt and concrete toll roads, and the suburban sprawl they encourage, American cities need to retrench and increase public transportation alternatives like high-speed rail and walkable communities. That way, its citizens can work and play without wasting their increasingly expensive lives on roads to nowhere.
This article appeared at ALTERNET