Privatization an option for highway infrastructure fixes [Danbury News-Times]

April 7, 2015

As Gov. Dannel P. Malloy scrambles to fund his $100 billion transportation improvement plan, one possible option — privatizing public highways — would place the state on a path towards electronic tolls.

Partnerships with private companies to maintain highways and operate toll systems is gaining popularity among cash-strapped states seeking big money for road, bridge and rail upgrades during an age of declining federal dollars.

For example, Indiana in 2006 contracted with an international consortium to collect tolls and maintain a major highway in exchange for a one-time, $3.8 billion lump payment to fund needed road improvements.

Colorado in 2013 struck a similar revenue producing deal with private investors to build a new toll expressway.

“Everything is on the table,” said Cameron Staples, chairman of Malloy’s new Governor’s Transportation Finance Panel, which is charged with finding ways to fund the governor’s transportation initiative.

“It’s something I would be interested in knowing about,” Staples said of public-private partnerships for highways. “The governor has been clear we should have options to finance the 30-year plan.”

Privatization deals are controversial and would likely lead to electronic tolls on Connecticut’s highways, if only to provide a revenue incentive for the private company. The General Assembly, despite opposition from Fairfield County lawmakers and in other parts of the state, is considering tolls.

“If you go to Indiana, they really got bit by it,” said State Sen. Toni Boucher, R-Wilton, of the state’s privatization deal.

“There is risk to this. Their tolls went up. This is no panacea,” said Boucher, who opposes tolls.

Funding plans

With federal transportation funding flat, and expected to decline in coming years, states are finding myriad ways to finance transportation improvements beyond traditional bonding.

Virginia is financing a $925 million express line project on Interstate 95 with private investors who struck a long-term contract with the state to collect and retain the new toll revenue.

Lawmakers in Minnesota, Utah and Missouri are considering a sales tax on fuel to reap more money.

Maryland, Massachusetts, New Hampshire, Pennsylvania and Wyoming over the last two years increased gas taxes. Georgia is considering slapping an excise tax of 29 cents per gallon on gas.

As he announced the transportation finance panel last week, Malloy said the state must find revenue to fix its aging infrastructure and warned the state cannot rely on federal dollars or declining gas tax revenue.

The finance panel was given to the end of the summer to develop recommendations to finance a major overhaul of the state’s infrastructure, including rail upgrades, widen I-95 and Interstate 84 to relieve congestion and build new bike and pedestrian lanes.

“We need to reform our infrastructure to be competitive, attract business and grow jobs,” Malloy said. “We need to make the smart decisions today so we can build a brighter future.”

Malloy said traditional bonding is an option and warned the state’s gas tax will continue to garner less revenue as cars become more fuel efficient.

“Tolls at best gets us one-third of the way there,” Malloy said. “We need a long-term fix and it’s time to have a serious discussion about how to sustain that vision.”

Paul Timpanelli, a transportation finance panel member and executive director of the Bridgeport Regional Business Council, said privatizing roads could be part of the solution.

“This is a high priority for economic development,” Timpanelli said. “There are ways to pay for it, such as bonding, taxes, tolls and privatization.”

State Sen. L. Scott Frantz, R-Greenwich, said it appears the Legislature’s Democratic majority is gearing up for tolls, and privatization could be part of the formula.

“That’s my impression,” Frantz said, adding Republicans have proposed a bonding-based plan which could provide up to $500 million a year to improve transportation.

“I think certain things can be privatized,” Frantz said. “But the record on transportation is mixed. Some (ventures) have reverted back to the state.”

Highways Inc.

Privatizing a highway does not mean the state gives up ownership and drivers are left to the whims of a big corporation.

Instead, it’s a contractual deal between a private company and a state. The private company, often a consortium of interests, earns revenue by collecting tolls. In return, the company performs a function, such as running the toll system, maintaining the highway or financing construction of new express lanes or highways.

The state receives a large lump-sum payment or opts for smaller payments over time. The state saves money by no longer having to collect tolls, fix potholes or plow snow.

Indiana signed a contract with a private Australian-Spanish consortium to take over the 50-year-old East-West Toll Road, a 157-mile highway which runs from Chicago to the Ohio border.

The consortium will operate, maintain and collect tolls for 75 years. In return, the consortium gave Indiana a one-time payment of $3.8 billion.

The downside: tolls quickly went up during the first year of the contract, to $8 to travel the entire road instead of $4.65.

Malloy’s former campaign manager and top aide, Roy Occhiogrosso, works for the type of company Connecticut could strike a deal with. Occhiogrosso’s Hartford-based Global Strategy Group represents the HNTB Corp, one of the nation’s leading builders and operators of highway tolls.

Not so fast

Opponents say it’s typical to see tolls rise under private management as the company makes adjustments to earn a profit. They also say a state can give up more long-term revenue than it receives in the short term.

The U.S. Public Interest Research Group warned in a recent report the public can lose control over transportation policy, end up with a fragmented road network and have less ability to prevent toll traffic from diverting into local communities,

Senate Minority Leader Len Fasano, R-North Haven, said Malloy’s finance panel is tilted towards tolls.

“The panel appears to be made up of mostly Democrats, and those who aren’t Democrats are inclined towards tolls or raising the gas tax,” Fasano said. “My concern is that this group may be of like mind with the governor and predisposed.”

“It’s a terrible idea,” Boucher said of privatizing highways and installing tolls.

“I’m for privatizing, but when it comes to transportation that is the right thing for government to do,” Boucher said.