You might think that once you have electronic tolling, it is easy to slap up a tolling system on an existing highway. But that is just not the case. Pennsylvania is now thinking of converting I-80 to a tollroad and/or privatizing it and letting the money roll in it. link and link
But they are much more likely to see the state bleed money and destroy an important part of the state's infrastructure.
First, To build a highway means acquiring a large amount of contiguous property in a specific location. Governments can do this through the power of condemnation, but private purchasers have only the power of offering enough money to persuade property owners to sell. That’s how free markets are supposed to operate, but it is costly.
Second, it takes many years of planning, investing, and building before the first revenues begin to trickle in through tolls.
Third, it is not cheap or easy to capture that revenue. According to the World Bank:
Typically 95 percent of revenues for a toll road come from toll receipts themselves. The other 5 percent come from advertising or small concessions such as service areas. Hence the toll level and collection are of critical importance.
Each toll booth costs money to build and staff. You may think that now we have electronic tolling we can do away with toll booths and the people who staff them.
However, pre-paid electronic tolling does not eliminate the need for toll collectors.
If you do not allow drivers who have not pre-paid to use the road, then you are putting up barriers to traffic and cutting potential revenues. You can't let them use the tollroad for free, so you have to have a way to collect tolls from them.
Costs can be kept down by having fewer toll booths, but fewer toll booths means fewer entrances and exits. But when entrances are too far apart, toll roads are less attractive.
The World Bank and others are trying to find ways to overcome this problem. One is “shadow tolling.” Basically, a count is made of traffic flows, and the government uses that count as the basis for calculating the toll road owner’s revenue.
These are best estimates. It is not yet technologically possible to count every car, so the system is necessarily based on inaccurate counts and faulty information. As a result, error and the opportunity for corruption are high, and the ability to exercise oversight is weak. When technology permits close monitoring, there will be new problems involving civil liberties and government monitoring of drivers’ movements.
All these problems make it attractive, and perhaps even necessary, to escape the rigors of the market. The term of art is “noncompete” agreement. Private companies want the government to agree not to compete with the private toll road. This creates a conundrum. When there is no competition, there is no market. But unless there is no competition, there are no profits.
Of course, competition in this arena is complicated. There is no choice as would exist in choosing a brand of peanut butter. There cannot be two roads in the same spot competing with one another. Privatization proponents ignore this problem and focus their attention on the fact that public roads are paid for by federal and state taxes and have no need to generate a profit. They argue that it is therefore impossible to compete head on with public roads. They are certainly correct on this point. The question is what lessons one draws from it.
CATO advocates cutting public funding for roads. There may be some cuts, but the prospects of radical change that cuts off all public funding for roads is poor. On the other hand, privatization proponents are not lobbying to eliminate the subsidies Congress has included in the Highway Bill.
So noncompete agreements or actions to hobble public highways and make them unattractive have become key to private roads. If the roads you are driving suddenly have lowered speed limits, unnecessary stoplights, and no maintenance, this next part is for you.
Noncompetes are common, as we found in Colorado and elsewhere - and very upopular with the public. Just ask government officials in California and Colorado about public reaction once the existence of noncompetes were revealed.
Pennsylvania and I-80
But I-80 through Pennsylvania has to be very attractive because if you are planning to drvie through the state there are no easy alternatives.
There is no competing road.
There is no "market competition".
So if you are a privatizer, you can just envision laying back and letting the dollars roll into your pocket.
Or is it that easy?
What if the result is that people do avoid I-80? What if tolling costs more than it brings in? What if the agreements are arranged so that the state loses revenue? Even large states like Pennsylvania are at a disadvantage when dealing with private companies. These companies are advised and represented by lawfirms that broker deals on behalf of countries. Cash-strapped states are hard put to play on an even footing.
So, what if the deal goes through and Pennylvania towns along the highway start to die because the people who live there have lost convenient access to transportation and the goods and services that those highways provide?
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