The US government should take a cautious approach to toll road privatisation because the short-term benefits are unlikely to outweigh the long-term costs, warns a new report by a leading American lobby group.
The report, by the federation of state Public Interest Research Groups (PIRGs), says privatisation transfers “significant control over regional transportation to individuals who are accountable to their shareholders rather than the public”.
PIRG looked at Indiana's lease of the Indiana Toll Road and Chicago's lease of its Skyway toll bridge and found that private investors would probably recoup their investment in less than 20 years, even though the deals are for 75 and 99 years respectively.
“Politicians can be shortsighted in these things. It's like in Indiana, where the governor can feel very happy for having funded a 10-year transportation plan, but its a 75-year lease,” Phineas Baxandall, one of the co-authors of the report, told InfrastructureInvestor.
Baxandall argues that the long-term returns for private investors will be considerably higher than the toll road costs, so the public receives far less for their assets than they are worth.
“The question is: is this is there value that is created [beyond] what you would have gotten doing the same thing without getting the private sector involved to raise the tolls?” Baxandall asked. “There’s no reason to go to a private sector middleman to make this happen.”
Baxandall added that PIRG is “not against tolls”, but cautioned that “the real added value [in these deals] comes from added tolls”.
PIRG's report drew harsh criticism from The Reason Foundation – a free-market think tank that supports long-term leases of government-owned assets.
“The report . . . is highly critical of the Indiana Toll Road lease but doesn't acknowledge that the state was losing money on every toll transaction while the road was falling into disrepair. The lease to a private consortium provided a way to generate revenue that didn't exist before and dramatically increased the quality of the road and service provided,” Samuel Stanley, Reason's director of urban growth and land use policy, blogged in response to the report.
Some 15 roads were 'privatised' in the US last year, according to PIRG, and another 80 across 25 states are being considered for some form of privatisation. PIRG argues that, in order to protect the public interest, states should not agree to the privatisation of public roadways.
Cezary Podkul contributed reporting to this article.