Selling America’s Infrastructure

The Privatizing of Toll Roads

Topic of the Paper:

This paper will consider the issue of privatization of U.S. roads through the use of Public-Private Partnerships (PPPs). While relatively new in the U.S., this type of infrastructure development has a substantial history in other parts of the world. Moving in this direction as a way of financing infrastructure has both positive and negative aspects. This paper will consider both the pluses and minuses of PPPs in terms of road infrastructure development.

Preliminary Literature Discussion

In a preliminary literature search, a number of sources have been identified as shown in the attached bibliography. Three key themes have recurred:

  1. Examples of PPP toll roads in the U.S. and experience with those roads;
  2. Experience of PPP toll roads in other countries with particular attention to UK/EU, Australia, and to Puerto Rico.
  3. An assessment of the positive and negative aspects of PPPs for toll road development in the U.S.

These three elements will make up the basis of the final report to come to a conclusion about whether such PPP toll roads are a positive or negative trend in U.S. infrastructure development and maintenance. In evaluating the concept of PPPs in the U.S., a number of issues have to be considered, including issues such as public accountability of the PPP, financial stability of the private firm, economic impact of PPP road development, conflicts between private goals for profit and government goals for transportation, and similar issues.

There are arguments in favor of privatization of toll roads in the U.S., including that it decreases the government’s role in everyday life so having private, for-profit companies manage such assets at least seems to offer a hint of free market competition. In addition, privatization of areas where there is more expertise in the private sector than in the government may also present a good case for privatization.

Focus of the Paper

The focus of this paper is to explore the positive and negative aspects of privatization, exploring specific case studies in the U.S. (California, Texas, and others) and in other developed countries such as the United Kingdom, Europe, Australia, and also in Puerto Rico, which is often cited as one of the greatest success stories in road privatization. These form the basis of data from which an evaluation of the success (or failure) of such PPPs can be made.

Methodology

This paper’s methodology will be first to identify key PPP road projects where appropriate data can be collected from public sources to determine how well they have operated. Not all such projects have been successful; for example, a PPP toll road authorized by California in 1983 for a 30-year lease, was purchased back by the state in 2002 because of operational conflicts. Looking at both successful and unsuccessful case studies it should be possible to identify the characteristics that characterize more successful projects and determine whether such PPPs are ultimately a good idea for development of infrastructure such as roadways.

Evaluation/Analytical Framework

In looking at the issues involved in this project, it seems clear that there are three types of characteristics that need to be considered. These are:

  • Economic issues: Does using a PPP provide economic benefits for the state in developing infrastructures at a lower cost to the state?
  • Conflicts between state and private developer: What kinds of risks and issues have developed in past PPPs and what actions, if any, can be taken to ameliorate or avoid such risks in future PPP development efforts?
  • Public accountability: What issues exist in terms of public good when the accounting of such projects is maintained by private firms? What other issues have arisen to ensure that the public’s need for transportation infrastructure is reliable?
  • These are the three general criteria that will be used to evaluate the PPPs as a method for providing transportation infrastructure for the U.S.