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Itís Time to Rethink Americaís Failing Highways
National Review ^ | June 12, 2018 | Robert Poole

Posted on 06/18/2018 8:13:18 AM PDT by Tolerance Sucks Rocks

Here are two recent events you might have missed:

Meanwhile, roads in Los Angeles are in such bad shape that it costs the average driver $892 a year in additional vehicle wear and tear, some 25 percent of all U.S. highway bridges are either too narrow or structurally deficient, and chronic traffic congestion costs Americans $160 billion per year in wasted time and fuel.

Fuel taxes were sold to the public last century as “highway-user fees.” And originally, they were used solely to build and maintain highways. Yet that is far from the case today. Nearly one-fourth of all federal fuel taxes are used for non-highway purposes, and it’s worse than that in some states. In California, over the next 30 years, $18 billion of state gas-tax money is pledged for paying off bonds issued to build Jerry Brown’s high-speed-rail boondoggle.

It’s not hard to see that there is something fundamentally wrong with the way we fund and manage the highways we all depend on. Highways are one of our basic public utilities — along with water, electricity, natural gas, telephones, etc. Yet we don’t have huge political battles over how to pay for those utilities. Every month you get a bill from your electric company, water company, phone company, and satellite or cable company. You pay for the specific services you used, and the money goes directly to the company that provided those services. None of that is true for highways.

Many years ago, Milton Friedman put his finger on what was wrong. Highways, he wrote, are “a socialized industry, removed from the test of the market.” Compared with other utilities, that means that for highways:

In my new book, Rethinking America’s Highways, I make the case that because highways really are utilities, they need to be financed and operated as utilities, rather than as politicized, state-owned enterprises. That means each highway needs an owner. Highway customers should pay their highway bills directly to that owner, based on how much they use the roads and how damaging their vehicle is to the pavement. The owner should assess the need for new links or more lanes, and finance the construction by issuing long-term revenue bonds. Of course, as with any other major construction projects, they should have to comply with existing planning and environmental regulations.

This might sound like a libertarian fantasy, but it’s a model with a long history that stretches into the present day. Private turnpikes were the main inter-city roadways in 18th and 19th century Britain — and 19th century America. After WWII devastated Europe, three countries — France, Italy, and Spain — developed their major highway networks as investor-owned toll roads. Highways there remain very similar to our electric-utility franchises today. Companies bid for a long-term franchise to build and operate a particular highway, subject to the terms and conditions of a long-term contract called a “concession.” In the 1980s and ’90s, this model was embraced by the three largest metro areas in Australia as they sought to develop modern expressway systems. And by the dawn of our current century, private investment in long-term highway concessions was becoming common in most of the countries of Latin America, especially Brazil and Chile.

If done right, a shift from politicized highways to customer-friendly highway utilities could address the American system’s major shortcomings.

It has taken a couple of decades for this model to catch on in the United States, with the first two projects — the 91 Express Lanes in California and the Dulles Greenway in Virginia — opening in 1995. Since 2000, investor-funded toll projects worth $36 billion have been financed, primarily in Colorado, Florida, Texas, and Virginia. Three of these projects — in Chicago, Indiana, and Puerto Rico — are long-term leases of existing toll roads. Those highways are being upgraded with all-electronic toll systems, resurfacing, some added lanes, and better service plazas, among other things.

Of course, we also have an array of state and local toll-road agencies, some of them (like the Florida Turnpike) run as customer-friendly businesses and others (like the New Jersey Turnpike and the Pennsylvania Turnpike) run as money machines that divert toll revenue to politicians’ favorite projects.

If done right, a shift from politicized highways to customer-friendly highway utilities could address the American system’s major shortcomings. Highway owner/operators have strong incentives to properly maintain their facilities, so that customers willingly pay to use them. (In fact, those who purchase the revenue bonds insist on proper maintenance for this very reason.) With per mile toll charging, they have reliable, bondable revenue streams that make it possible to finance large-scale reconstruction, widening, etc. when it’s needed, not someday in the future when the money is somehow cobbled together.

Chronic expressway congestion has a twofold solution: Market pricing brings demand into balance with supply, which in this case means capacity, but it also generates the funds to expand capacity to what makes sense for current and projected traffic levels. Like a cell-phone company, a highway company wants to have the capacity it needs to provide good service — and unlike the state, it will have the means to pay for that additional capacity.

You may see the merits of this case yet despair over how such a large change could ever come about. But continuing the status quo is untenable.

The federal highway-funding system, which now depends on tens of billions in “general revenue” each year to supplement dwindling fuel-tax revenue, is not sustainable. As the national debt nears 100 percent of GDP and entitlements, defense spending, and interest payments consume nearly all federal revenue, there will be little or no general revenue left to subsidize highways and transit. State governments are poorly positioned to take up the slack, since the majority of them have massive unfunded liabilities in their public-employee-pension systems that will restrict their spending for decades to come. And the 20th century gas-tax system is running out of steam, as conventional engines go twice as far on a gallon of gas and electric and other propulsion sources get set to become mainstream in coming decades.

So we will soon need to shift from taxing per gallon to charging per mile. The technology to do that on major highways — all-electronic toll collection — already exists. Across the country, toll-road operators are tearing down toll booths and plazas in favor of cashless tolling, which uses windshield-mounted transponders to charge a driver’s credit or debit card electronically. Cashless tolling is well-accepted, and can be adapted to those who don’t have debit or credit cards; in Puerto Rico, for example the system allows people to replenish their toll accounts with cash at kiosks in convenience stores.

Those three factors — federal insolvency, state pension liabilities, and the growing use of per mile charging via all-electronic tolling — will make the transition to highway utilities possible. And three other things will make the transition more likely.

One of these is growing awareness of the global (and U.S.) track record of long-term toll concessions, financed by investors. There have been missteps here and there as this model has been adopted by more and more countries, but by and large it has been much more successful than the socialized model.

A second important factor is the enormous growth of infrastructure-investment funds since 2000. Over the last five years, the largest 50 such funds have raised $316 billion in equity to invest in privately financed infrastructure. Since equity is typically about 25 percent of the total (the rest being revenue bonds), that money could finance nearly $1.3 trillion worth of infrastructure. The real question is whether there will be enough American projects for these funds to invest in — currently, the bulk of their investments are in Europe, Asia, and Latin America. The Trump infrastructure proposal included a number of provisions to make the U.S. a more attractive market for such investments, but that is now in the hands of Congress.

A third factor is the growing interest of pension funds in investing in long-lived infrastructure. This began about 15 years ago with Australian and Canadian pension funds, before their American counterparts got on board about five years ago, mostly investing in privatized airports and toll roads in Europe before beginning to expand domestically. In 2015, when the Indiana Toll Road concession was put up for bid, an Australian fund won the bidding on behalf of clients that included 70 large American pension funds. Since most public-employee-pension funds in the United States invest on behalf of retired, unionized public employees, the desire of these funds for more American-owned projects to invest in could attract moderate Democrats to policies that foster private infrastructure investment.

I’m optimistic that the transition suggested here will happen, and the most likely place for it to begin is with rebuilding and modernizing the aging Interstate highway system. The minimum cost of such an undertaking has been estimated at $1 trillion — and there is no existing federal or state funding source or program to carry it out, making it an ideal starting point for the transition to highway utilities. That transition won’t be altogether painless, but it is long overdue and sorely needed.


TOPICS: Australia/New Zealand; Business/Economy; Canada; Constitution/Conservatism; Editorial; Government; News/Current Events; Philosophy; Politics/Elections; US: California; US: Indiana; US: Virginia
KEYWORDS: 115th; 2018issues; aet; australia; bonds; california; canada; construction; demand; entitlements; federalspending; gastax; immoderatedemocrats; indiana; infrastructure; investors; maintenance; p3; pensionfunds; pensions; ppp; privatization; supply; tolling; transportation; utilities; virginia; vmt
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1 posted on 06/18/2018 8:13:18 AM PDT by Tolerance Sucks Rocks
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To: Tolerance Sucks Rocks

Don’t raise gas taxes if other drivers are going to exempted from paying into the roads.

Electric and hybrid could be assessed annual licensing costs.

Doesn’t make sense to put a highway tax on electricity or else your hone AC usage will also be taxes for toads.


2 posted on 06/18/2018 8:16:57 AM PDT by a fool in paradise (Spygate's clock began in 2015 - what did President Obama know and when did he know it)
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To: Tolerance Sucks Rocks

““The last thing we want to do is pass historic tax relief and then undo that, so we are not going to raise gas taxes.”
+++++++++++++
So they will raise taxes last! Again..... and again, and.........
+++++++++++


3 posted on 06/18/2018 8:17:52 AM PDT by gunnyg ("A Constitution changed from Freedom, can never be restored; Liberty, once lost, is lost forever...)
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To: Tolerance Sucks Rocks

Sending money to Mexifornia is even worse than flushing it down the Obamalet.


4 posted on 06/18/2018 8:18:01 AM PDT by Da Coyote
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To: Tolerance Sucks Rocks

In before somebody starts harping about the National Review being a #NeverTrumper publication.


5 posted on 06/18/2018 8:19:34 AM PDT by SeekAndFind
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To: Tolerance Sucks Rocks

Well, when your gas tax dollars go to subsidizing busses and ferries, what do you expect?


6 posted on 06/18/2018 8:21:15 AM PDT by robroys woman (So you're not confused, I'm using my wife's account.)
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To: Tolerance Sucks Rocks
Fuel taxes were sold to the public last century as “highway-user fees.” And originally, they were used solely to build and maintain highways. Yet that is far from the case today

This is the problem in a nutshell. We have enough money thru abusive high taxes but the money always get diverted to liberal social programs and causes.

7 posted on 06/18/2018 8:23:14 AM PDT by 1Old Pro
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To: Tolerance Sucks Rocks
The author of this piece raises some very interesting ideas, even if I may disagree with some of them. This is right up my professional alley, so I'm already adding his book to my reading list.

I would make several quick points here, some of which reflect what he and Milton Friedman have said:

1. It's theoretically possible that U.S. motorists actually pay MORE for their use of the highway system than it really costs to accommodate them. It's not easy to figure this out because the method of financing this infrastructure is more deficient than the amount of money that is collected through taxes and user fees (tolls).

2. Related to the previous point, the best description I've ever heard about the dysfunctional nature of financing our highway system was from someone in a D.C. think tank who likened our fuel tax system to a prepaid all-you-can-eat buffet on a cruise ship. The cruise line operator doesn't care about the quality of the food they serve because the customers have already paid for it up front, and the customers have no financial constraint on how much they eat for the same reason. The end result is that the customer gets crappy food, and eats too much of it anyway. This is a perfect comparison to a congested highway.

3. I find the idea of operating public roads as utilities intriguing -- and it would probably work much better this way for all the reasons the author describes. My one overriding condition would be that the public utilities that operate these roads should first be obligated to buy them from the states and refund the taxpayers whose government used its eminent domain authority to take possession of the rights-of-way in the first place.

8 posted on 06/18/2018 8:30:18 AM PDT by Alberta's Child ("I saw a werewolf drinking a pina colada at Trader Vic's.")
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To: Tolerance Sucks Rocks

I don’t think we can afford to maintain our highway infrastructure AND 25 million illegal aliens.


9 posted on 06/18/2018 8:38:34 AM PDT by Oldeconomybuyer (The problem with socialism is that you eventually run out of other people's money.)
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To: Tolerance Sucks Rocks
What happened to 0bama's stimulus package that was supposed to fix things like this, and other shovel ready jobs?
The shovel is all we got.

10 posted on 06/18/2018 8:40:56 AM PDT by BitWielder1 (I'd rather have Unequal Wealth than Equal Poverty.)
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To: BitWielder1

That money was provided to the corrupt apparatchicks and is either long gone or successfully parked off shore


11 posted on 06/18/2018 8:42:38 AM PDT by bert ((K.E. N.P. N.C. +12 ..... Greetings Jacques. The revolution is coming))
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To: Tolerance Sucks Rocks

I wish Mr. Poole would ‘retire’, once and for all. He publishes this garbage EVERY YEAR, and the reaction is always the same - WE DON’T WANT IT! We don’t want the tracking system and behavior control that comes from real-time tolling, and we don’t want the tolling in the first place.

If he loves those foreign systems so much, why doesn’t he just move there and quit making us have to suffer through his pencil-neck view on how to improve the latest form of Communism...or whatever.


12 posted on 06/18/2018 8:47:14 AM PDT by BobL (I drive a pick up truck because it makes me feel like a man)
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To: Tolerance Sucks Rocks

Gotta have bike lanes.
It’s in the Constitution.
/s


13 posted on 06/18/2018 8:47:27 AM PDT by hadaclueonce ( This time I am Deplorableo)
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To: BitWielder1

A couple of years ago my son and DIL took a scenic road trip from the east coast to AZ and back.

They called it the “Crumbling American Infrastructure” tour.


14 posted on 06/18/2018 8:48:07 AM PDT by Rebelbase ( Tagline disabled.)
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To: Tolerance Sucks Rocks

The Interstate System works just fine for me, with the exception of the jamming of traffic and highways to get under the south end of Lake Michigan and the long stretch of no crossings of the Rockies between I80 and I90.


15 posted on 06/18/2018 8:49:12 AM PDT by Paladin2
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To: Tolerance Sucks Rocks

How in the H*ll do you expect us to pay for all the illegals coming into our country. Divert the gas tax money so illegals can get free medical care, free housing, ebt cards,free food, free,free,free. You owe them, don’t ya know!


16 posted on 06/18/2018 9:01:00 AM PDT by notaliberal (St. Michael the Archangel, defend us in battle,)
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To: BobL

Roads are basically communist now. A truly collective endeavor, even when privatized, since the slowest driver on a road can make things miserable for dang near anybody behind him.

As for pencil-neck, I take it you saw his picture in the original article?


17 posted on 06/18/2018 9:06:31 AM PDT by Tolerance Sucks Rocks ( The US Constitution ....... Invented by geniuses and God .... Administered by morons ......)
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To: Tolerance Sucks Rocks

Stop spending on social programs that are not part of the enumerated powers of fedgov, and illegals. Highways are national defense projects and were built under that premise.


18 posted on 06/18/2018 9:08:07 AM PDT by Secret Agent Man ( Gone Galt; Not averse to Going Bronson.)
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To: Tolerance Sucks Rocks

Year after year they raised the gas tax in California to save the road system. Then they spent the money on pet projects. It’s the same old song: The government identifies the few services the public demands; then diverts the funding to fraud - waste - and abuse. Only to claim that they need to raise taxes to fund the Roads; Schools; Police; or Fire Dept. All the while their yearly budgets and Bloated Bureaucracy grows.


19 posted on 06/18/2018 9:10:41 AM PDT by CoastWatcher
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To: BobL
He has a legitimate point.

How is it that we're OK with "tolling" when it comes to electricity and gas, but not when it comes to highways?

20 posted on 06/18/2018 9:11:39 AM PDT by Alberta's Child ("I saw a werewolf drinking a pina colada at Trader Vic's.")
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