Harris County avoids trendy toll road privatizationJust a quick pass-along tonight from Otis White's Urban Notebook (no permalinks) at Governing.com on why governments are looking at selling off toll roads, with a reference to Steve Radack, Harris County commissioner. As I've said before, I think this is a relatively rare case where privatization is a bad idea, and Harris County made the right decision resisting it.
Those Scary, Scary Voters
Tell Me Again Why We’re Selling This Highway
There’s a problem with many of our toll roads: They don’t charge enough in tolls. Some have gone decades without an increase and, as a result, have tolls so low that they don’t even cover the cost of collecting them. So the answer is simple, right? Raise the tolls. Nah, too much trouble. Some politicians would rather just sell the whole darned thing.
We’re not making this up. One state, Indiana, has already leased out its long-distance toll road, which runs from Illinois to Ohio, for the next 75 years. The stated reason: Well, we couldn’t bring ourselves to raise the tolls, so we decided to get out of the business. If you’re thinking that there must be more to this bizarre idea, you’re right. Only thing is, the back story is even stranger.
The back story: Money for building roads is running out fast, the result of supply and demand problems. On the demand side, the cost of road building is skyrocketing. On the supply side, motor fuel taxes aren’t keeping up. (Projections are that the federal highway trust fund will run dry in three years’ time, something that’s never happened. State highway funds are nearly as tight.)
There are some obvious solutions: Raise the gas tax, which has lagged behind inflation; hike existing tolls and use the increase to subsidize construction elsewhere; or allow state toll road authorities to impose tolls on existing roads, also with the idea of replenishing state highway funds. But these solutions run into the political cowardice problem. What if, gulp, the voters don’t like paying a little more? That’s where the bizarre idea of selling the toll roads comes in.
Gov. Mitch Daniels of Indiana is the most ardent advocate of privatization. The payoff? A huge windfall. When Daniels leased the Indiana Toll Road to a consortium of foreign investors, he got $3.8 billion, which he says will be used mostly for new road construction. And what will the new owners do when they take over? They’ll hike the tolls, of course, then keep raising them on a regular basis.
Keep in mind: The state could have raised the tolls itself. It could even have tacked on something extra to help pay for road construction elsewhere. So why didn’t it? Because, Daniels explained in a recent op-ed in the New York Times, the toll road “was run by politicians, who are rarely businesslike and [are] deathly afraid to annoy anyone.” This is a strange self-indictment, considering Daniels is Indiana’s top politician.
Thankfully, not everyone is buying this bizarre logic. One skeptic is Steve Radack, a county commissioner in Harris County, Texas, where Houston is located. As he told the Wall Street Journal recently, he’s handing out copies of the children’s book “The Giving Tree” to people interested in selling off the roads. The book is about a boy and a generous apple tree, which gives the boy its fruit to eat and anything else he wants, including its branches and trunk. In the end, of course, there’s nothing left but the stump. Radack uses the book to make a point: “If you can sell [a highway] for tremendous profit, then why is someone buying it? Because they know they can make even more.” And with a little courage, so could governments.Footnote: But at least Daniels is a hero in his own state for wringing so much money out of the toll road, right? Hardly. People along the route were furious that the governor handed over their road to work to a private company. (Bumper stickers read: “Keep the Toll Road, Lease Mitch.”) Daniels’ approval ratings, the Washington Post reported recently, plunged from about 50 percent before the lease idea to 37 percent after. Next door in Illinois, the Republican and Democratic candidates for governor have taken note of Daniels’ missteps and are promising they won’t sell that state’s roads, even though some estimate the Illinois Tollway alone could fetch $15 billion. “I have no interest in turning it over to private investors,” Gov. Rod Blagojevich told reporters.