Reason Foundation

http://www.reason.org
http://www.reason.org/news/show/private-sector-has-the-key-to

Reason Foundation

Arizona Republic

Private Sector Has the Key to Traffic Woes in Arizona

Legislature needs to authorize public-private partnerships to reduce gridlock, improve economic competitiveness

Leonard Gilroy
March 30, 2008

With the average Phoenix driver stuck in traffic for nearly 50 hours a year, there is plenty of time to ponder the infrastructure challenges facing the Valley.

According to a Reason Foundation study, the Phoenix area needs $11 billion in new roads and added lanes by 2030 to reduce congestion and keep pace with a population expected to double by then.

That investment would save drivers and businesses 193 million hours per year that are now lost sitting in traffic.

The problem is finding the money. The federal government siphons gas taxes from Arizona for "bridges to nowhere." And the gas-tax revenues that do return to the state aren't enough. Inflation and improved vehicle fuel-efficiency have crippled the gas tax's power to build roads. The tax will barely be enough to fund repairs to existing roads in coming years, meaning the new roads needed will be increasingly difficult to build.

Fortunately, a new solution is emerging in other high-growth states like Texas, Virginia, Florida and Georgia, which also are facing major road-funding shortfalls. Those states are getting billions of dollars from private companies to build new roads.

In these public-private partnership deals, companies pay for the right to design, finance, build, operate and maintain new roads. To make their money back, the companies are allowed to collect tolls for the length of the contract, usually 35 to 99 years. At the end of that time, the state government still owns the roads.

To protect taxpayers, the amount of toll increases allowed is tied to inflation rates. And if the road exceeds revenue expectations, the state gets to share in the upside. The companies are held to rigorous performance-based contracts that detail everything from how many hours the company has to remove road kill, to how often it must use street sweepers, to when they must resurface the road or add new lanes.

Texas alone has nearly a dozen of these projects in the pipeline and is studying 87 more, altogether totaling over $60 billion in private investment.

Virginia just inked a deal where a private-sector team will finance a $1.7 billion expansion of the gridlocked Capitol Beltway.

Florida also has several privately financed roads in the works, including a $1.5 billion expansion of Interstate 595 in Fort Lauderdale and a $2 billion outer loop around Jacksonville.

Missouri is partnering with a private-sector team to finance the repair and upgrade of 802 bridges statewide over a five-year period.

And, in San Diego, a private team not only financed the new $635 million South Bay Expressway, it also preserved 1,000 acres of habitat, restored area wetlands and built a number of parks-and-recreation facilities as part of the project.

Public-private partnerships offer Arizona good options at a time when tax dollars are stretched thin and traffic is worsening.

These partnerships won't entirely close the funding gap, and they won't be appropriate for every project. But they are a powerful tool that is particularly well-suited for big-ticket projects like interstate expansions; truck-only toll lanes to improve safety; boosting the economy by speeding the movement of goods; and adding road capacity in the Phoenix-Tucson corridor.

But before determining where public-private partnerships can be used, the state needs to allow them.

Right now, private capital is flowing to the states that have already passed legislation creating a solid legal framework for private infrastructure investment. Arizona's Legislature is considering several measures - Senate Bills 1465, 1498 and 1420 - that would do this, giving the state Department of Transportation and other entities the ability to pursue private money for transportation projects. Without such legislation, other states will continue to reap billions at the expense of Arizona's economy and business climate.

The potential in Arizona is tremendous. Private companies can finance roads upfront and get them built quickly. For the health of the economy, it is vital that Phoenix's infrastructure investment keep pace with population growth.

Those worsening morning commutes across the Valley are evidence that the government is struggling to do so. The status quo will deliver aging roads and traffic jams. It's time to fundamentally rethink how we fund our roads and highways.


Leonard Gilroy is Director of Government Reform


Print This