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November 2, 2005

  Transportation secretary Nathan Hayward is no slouch when it comes to pushing ideas that fall somewhere between the radical and the revolutionary. So it comes as little surprise that he apparently has locked onto the possibility of 'privatizing' the Delaware Turnpike, the Delaware 1 toll road and possibly the to-be-built-someday U.S. 301 toll road. If the General Assembly goes along, Delaware would join a handful of jurisdictions around the nation that are using or thinking about using that method of transportation infrastructure financing.

The model which Hayward has cited is the Chicago Skyway, an elevated toll road which connects the turnpike across northern Indiana with the Dan Ryan Expressway in Chicago. Closer to home, the New Jersey Turnpike is being eyed as a future possibility. The arrangement has been widely used for several years in Europe and developed areas of Asia.

Here's how it works with an existing highway: An investment group pays to purchase the highway or lease it for a long period of time. It recoups the investment and makes a continuing profit from toll revenue and tax writeoffs for depreciation. In the Chicago example, a consortium of Cintra Concesiones, a Spanish company, and a unit of Macquarie Bank, a multinational financial institution headquartered in Australia, put up $3.8 billion for a 99-year lease deal.

Hayward acknowledged that Delaware probably is not in that league -- although the Turnpike is a vital segment of Interstate 95, the artery which connects New York and Washington -- but he did use the 'B' word after the dollar sign. That sum resting in an endowment fund managed the same way the state employee pension fund is managed would generate sufficient annual income to cover a good portion of the state's transportation capital expenses.

Of course it's a given that tolls will increase. Hayward said the amount of increase can be controlled by terms of the contract covering the deal. Having a private company boost tolls is considered more politically palatable than the state legislature or a quasipublic authority doing it. Moreover, most of the people using the Delaware toll roads -- particularly, the turnpike -- come from elsewhere.

To get some idea of how sweet the deal would be for the successful bidder for the lease, just imagine where you would stand today if you -- or your great-grandpappy -- had been able to buy Ford Motor stock back in 1906. On the other hand, the horseless carriage may not make it to 2104 when our descendents may be moving about by electronic dispatchocarters or some such.

Lest you think this is all futuristic, consider Concord, Kennett and Newport-Gap Pikes. They started out in the 19th century as privately-owned toll roads, built and operated by profit-making entities. Hayward said it is not likely that he or anyone else would propose converting an existing free highway into a toll road.

How receptive will legislators be if and when highway privatization ends up in Governor Minner's fiscal 2006 capital budget proposal? What happened at what was billed as the climatic meeting of the committee she set up to address Delaware Department of Transportation's financial problems provides a clue. Mostly lawmakers among the committee members batted around some possibilities, but in the end decided, as Delaforum reported, not to make any recommendations but to 'present the options' and the pros and cons which go with each of them and let the governor and her staff decide what to recommend for Assembly consideration.

Hayward appeared resigned to that consensus for the moment. The closest he came to a reaction was to note that, other than privatization, the specific options on the table, even if combined, would yield comparatively small change against the scope of the problem.

The number which stood out in the presentation at the meeting about the scope of the problem was $2,279,793,000 -- again, the 'B' word. That, it was said, is the cumulative total of the annual shortfalls during the next five fiscal years between continued capital financing at the fiscal 2006 level adjusted for inflation and what will be needed to complete projects currently in various stages of planning, design and construction. It obviously was advanced as the proverbial worst-case scenario, rather than intended as a realistic projection.

Earlier this year, there was a good deal of consternation among transportation savvy civic activists and affected interest groups when DelDOT, in response to administration budget cutting and parameters set by the Assembly's 'bond bill' committee, lopped several pet projects from the current plan. Included was the long-sought expansion of the Tyler McConnell crossing of the Brandywine and a new road through Delaware Park to connect Churchmans Crossing and Kirkwood Highway.

Wilmington Area Planning Council, the agency designated to present the public's voice in transportation planning, raised a mild fuss. However, ather than risk loss of federal money for projects which still remained in the DelDOT plan, it twice revised its approved transportation improvement program plan to reflect what had happened. The council is not likely to play more than a token role, if that, in determining what happens now.

The root of the current problem, according to DelDOT, is that the Assembly has consistently raided the highway trust fund established in the 1980s to channel the state motor fuel tax to capital spending for transportation to finance a large chunk of DelDOT's operations and for other purposes.

What's to prevent the same thing happening to an endowment from privatization proceeds? Hayward suggests embedding a 'poison pill' in federal legislation the Delaware congressional delegation would have to seek to prevent Delaware from having to give back federal money used to finance building the roads that are privatized. A future Assembly, he reasons, would be most reluctant to mess with the terms of the deal if it meant owing Uncle Sam big time bucks.

Hold on tight. We're in for quite a ride when the Assembly returns in January to deal with an issue which significantly affects most Delawareans on almost a daily basis. As Hayward put it, "Not many of us have switched to riding skateboards yet."

CLICK HERE to read the Delaforum article about the transportation financing meeting.

CLICK HERE to read a recent article on highway privatization from the Indianapolis Star

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