Treat Roads as Utilities?

Commercializing Highways (2 page pdf, Robert W. Poole, Jr, Institute of Public Affairs (IPA) Review, Dec. 2000)

The paper reviewed today is more than a decade old but has many quotes that lay the basis for road pricing, starting with the concept of highways managed as arms length utilities instead of top-down politically managed, as many roads and highways are still run today.

Key Quotes:

“Automobiles provide 95 per cent of all individual surface trips, and trucks transport an ever-larger majority of all freight”

“$72 billion in fuel and time being wasted each year in the 68 largest US metropolitan areas due to traffic congestion”

“Transport economist Gabriel Roth calls the twentieth-century highway paradigm ‘Soviet-style’. By that he means a system:

• that is centrally planned, in a top down fashion;
• whose resources are allocated by political rather than economic criteria; and
• which almost completely avoids the use of pricing”

“Several dozen countries have adopted the build-operate-transfer (BOT) model of competitively awarding long-term concessions to private consortia to finance, design, build and operate major new highways (as toll roads) over the past decade.. Last year, several countries (Canada, Italy and Portugal) went even further, actually selling off existing state toll-road owner-operators”

“Several French toll roads now charge higher prices during weekend hours when Parisians are returning to the city—and those congested peaks have been flattened and decongested”

“The new paradigm taps into pools of capital—revenue bonds and shareholder equity— that have been little used for highways. But the requirement that each project pass muster with investors serves to weed out highways built for political rather than economic reasons”

“Tolls can and should be a permanent, ongoing funding source—just like electric utility and telecom bills”

“Few people object to direct pricing in air and rail travel, electricity and telecoms service, and letter and parcel service. Once roads are understood as network utilities, pricing will come to be seen as the normal way of doing business”

“A market-driven system, where users cover all the costs, will lead to a new allocation between auto use and transit, tailored to the specifics of each metropolitan area”

“Once roads are understood as network utilities, pricing will come to be seen as the normal way of doing business”

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