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November 14, 2006

 

'This traffic is brought to you by
Sticky-Widget Investments Inc.'

Fanciful as that might sound, it could happen in the not-too-distant future. And they won't be talking about a rush hour report on your car radio, but about the real thing happening on the highway you're traveling.

Unless state and local governments and the public accept the idea of employing profit-driven private capital to finance major highway projects, the nation faces "a collapse of our transportation system," according to an internationally recognized consultant.

Kevin Soucie was brought to Delaware on Nov. 13  by Wilmington Area Planning Council to keynote a presentation on 'public-private partnerships' to address Delaware Department of Transportation's financial crisis, which earlier this year forced a drastic cutback in its capital program. The situation is not expected to be any better when the General Assembly 'bond bill' committee takes up the fiscal 2008 plan.

Jim Hatter, a financial specialist with the Federal Highway Administration, said Delaware is not alone. Of the 50 states, only Nevada, with extensive revenue from casino gambling, appears able to keep abreast of transportation infrastructure needs using proceeds from tax traditional tax financing. "Insufficient capital is where we're at today," he said.

Hatter said relatively few people are yet aware of the inadequacy of the pay-as-you-go system that has been used since the 1950s with the result that there is considerable political risk in considering "innovative alternatives." Although he did not refer to it, that was borne out by widespread public and legislative opposition to a proposal by former transportation secretary Nathan Hayward to 'privatize' the Delaware Turnpike and the tolls-financed Korean Veterans Highway portion of Delaware Route 1.

Massive increases in the gasoline tax, registration fees, tolls and "credit card financing" through bond sales which result in ever-increasing portions of the transportation budget going to debt service are even more unacceptable, Soucie said.

To illustrate the point, he presented a hypothetical scenario in which a government agency -- the Department of Groceries, or Del-Dog -- took over the operation of grocery stores. Instead of individuals purchasing food, they would be able to take what they wanted from shelves and would be assessed a 'meal tax' which had no relationship to the amount they consumed. "That's exactly how we finance transportation in most states. ... Transportation for the most part  is free and available 24 hours a day -- which sends a message to the consumer to overuse and to the producer to underproduce," Soucie said.

Rather than rely on taxes and tolls set at politically acceptable levels rather than what is needed to cover actual cost, Soucie said it more logical to turn to the private sector.

"The world is awash with capital just looking for a source of return on investment," he said. "We have to address this need and use a model which makes economic sense."

In Milwaukee, where his firm is based, a new freeway  interchange was financed privately. Drivers using it pay a toll, which is collected by scanning moving vehicles electronically in the same way that E-Z Pass express lanes work. Drivers have the option of having their license plates scanned and being billed for each time they pass or obtaining a transponder and receiving a significant discount on a monthly bill

 Soucie did not say what the toll is and what, if any, public authority governs it, but indicated that the revenue generated is sufficient to justify the private upfront investment. "Investment bankers view it very favorably," he said.

Hatter said drivers on Interstate 5  in San Diego have the choice of paying to use a separated high-occupancy vehicle express lane or traveling free in the other more congested lanes. In that arrangement, the toll assessed electronically is changed to reflect actual traffic volume at any given time. The greater the volume, the higher the toll. The amount is displayed so that drivers can choose whether or not they want to use the express lane.

"I know that 'profit' is a dirty word ... [but] there are major private roads all over the world," Soucie said, adding that the future comes down to whether to accept their inevitability or the massive tax increases that are an alternative.

Tigist Zegeye, executive director of the planning council, said there is ample incentive to "identify new sources of revenue." The gap between what is desirable in the way of transportation improvements to satisfy the needs of a growing New Castle County and likely available revenue from present sources, she said, will be $10 million by 2014 and $2.5 billion by 2030.

 

P.S. -- CLICK HERE to read about what's happening
in Pennsylvania, according to the Philadelphia Inquirer.
 

2006. All rights reserved.