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WTF?photo by SUCHAT PEDERSON, News Journal

Once again conversation has turned to whether we should sell our roads to the highest bidder. What are the options?

First of all one needs to look at who has done it so far. In America there are very few cases from which to gather data. Those are the Skyway in Chicago, the Pocahantas Parkway in Virginia, the Indiana Turnpike, and the Texas superhighway at the border town of Laredo. Overseas there are two major players, one from Australia and the other from Spain.

Most of these leases are made for a period of 90 some years. The oldest, the Chicago Skyway, is only less than three years old. The newest, the Indiana turnpike deal, was signed as recently as last summer. So there is no evidence of the long term effects on privatizing toll roads. Therefore any argument for or against must be based on faith and theory. This is important for all to know as they listen to arguments pro and con.

Historically, toll roads were built by private investors. It was only rather recently that American taxpayers money was used to construct and operate major highways. So the concept of private highways is not new.

The question that needs to be asked is simple. Will we be better off if our roads are privatized?

Let us look at what happens when a road that has been built publicly is transferred to the private sector. First of all, a large purchase price is received by the seller. The Chicago skyway sold for 1.8 billion, the Indiana Turnpike sold for 3.85 billion, the Pocahontas Parkway sold for .6 billion. The savings continue as all maintenance is maintained by the consortium that purchases the road.

In Chicago, after expenses were deducted, the skyway over a year netted only a profit of 8.4 million. When this is applied to the roads purchase price of 1.8 billion, it yields a rate of return of .4%, a very low rate of return on the investment. In selling off its asset, the state loses the annual income of 8.4 million, but no longer has the debt of the highway on its books. It also has a large amount of cash to spend any way it wishes. If the highway is losing money as did the Pocahontas Parkway outside of Richmond, then a negative drain of finances is removed and responsibility and cost of upkeep is handed off to someone else.

However, no consortium buys a road to lose money. Their interest is in how much return they can receive on their investment. This raises the question of how much money they will invest in protecting the infrastructure, how high they will raise tolls, and what happens if they go belly up?

There is no evidence in this country on whether these roads will be kept up as well by private firms as they are currently maintained by the states. However in Europe and Australia the roads are kept in good condition. In both of those areas the roads were privately built by the firms themselves. They knew what they were buying and built the roads to last. One can only hope the Skyway’s bridges do not start to rot……therefore the argument that they will spend only the minimum allowed to keep the roads open is one we must settle before we sign any papers.

The tolls will go up. Indiana set a limit on how high the tolls could go. It is reasonable to assume that the tolls will be at the maximum set by law, since there is no governmental pressure that can be applied because of paying customers’ outrage.

There is an example that took place in this country that may portend what will happen if tolls are pushed higher. In Texas a thirteen mile highway bypassing Laredo was opened. This was to be the first piece of the trans Texan superhighway that would facilitate traffic to and from Mexico. The charges were the same as Delaware’s for about the same mileage that I95 crosses this state. 3$ for passenger cars and 16$ for trucks. This highway saved forty five minutes by bypassing the city proper. The price was too high; no one traveled it, it failed to make its debt payments, and was bought up by the state for one tenth of its cost. It turned out well for Texas. But most drivers were willing to take the longer route for free, than pay for the privilege of traveling quickly. This natural human tendency is seen in our own state, especially where Route 13 parallels Route 1. Each year more and more cars and trucks learn that exiting right off the bridge, bypasses the minimal 1$ toll.

And so what happens if we privatize I 95 and the privateers raise the toll to 5$. Will thru traffic deviate onto our Route 4’s and Old Baltimore Pikes? Many do so already, balking at the 3$ charge. More than likely the major traffic will take the alternate route South across Interstate 80 and south down Interstate 81 to avoid the collective tolls of New Jersey, Delaware Memorial Bridge, Delaware, and Maryland’s toll roads, thereby missing Delaware altogether and spending their discretionary income in other states. And will in-state commuters still continue to have free access I-95 into Wilmington to work, or will they be expected to pay 2600$ more per year so that their taxes do not rise 15$?

These are important questions that need to be asked before we jump in with both feet. Remember the Texas incident: there was no residual loss of business because it had not developed along the new highway. But when you privatize an existing road, you put each of those businesses that depend on that very road’s traffic to survive, in jeopardy.

Furthermore, one must be careful on whose advice one listens to. Goldman Sachs made 20 million in consulting fees on the Indiana deal. Of course they paint a rosy picture.

99 years is a long time. Like buying a new car, the feeling is great while the deal is new. However, get it wrong, and this state will suffer from being puckered on a lemon of a deal.