| On
December 13, 2005 groups
opposing I-69 in Indiana released this report on Toll Roads and
Privatization. If you
would like to access the actual report as
formated, click
here.
CAUTION—SLIPPERY ROAD AHEAD!
TOLL ROADS AND PRIVATIZATION WHAT COULD GO WRONG? Prepared by: Citizens for Appropriate Rural Roads, Inc. Hoosier Environmental Council Marion County Alliance of Neighborhood Associations Count Us! November 30, 2005 TOLL ROADS AND PRIVATIZATION What Could Go Wrong? I-69 Will Not Work as a Toll Road “It’s a toll road or no road.” Governor Daniels in Bloomington Herald-Times, 30 Sept. 2005 Governor Daniels has stated that the state does not have the money to build I-69 on its own. His solution is public/private partnerships. This means a private corporation would be involved in the design, funding, operation and control of an I-69 toll road. Private toll roads, have proven in many instances to be good for toll operator profits, bad for the taxpayers and the traveling public. “…the road would not be feasible as a toll road.” I-69 Evansville to Indianapolis, Indiana. Tier I Final Environmental Impact Statement, (FEIS) Dec. 2003. Chapter. 1, p. 1.1. INDOT’s I-69 Final Environmental Impact Study continues: “ ‘Toll feasibility’ requires that traffic levels not only pay ongoing operating and maintenance costs, but that they also provide revenues sufficient for construction debt service. Being ‘toll feasible’ requires higher traffic volumes than those which justify construction of a non-toll facility.” Also, making I-69 a toll road would place a hardship on commuters and reduce accessibility, one of INDOT’s core goals for the project. “I-69 at 229km (142mi) would be the longest single toll project undertaken in the US in several decades—unless those Texans roll out a major Trans-Texas Corridor segment meanwhile.” TOLLROADSnews, 26 September, 2005. Toll roads are more expensive to build due to the need for toll plazas and stacking lanes. The construction costs for a complete I-69 in Indiana—Kentucky to existing I-69, would be very high, at least $3-$4 billion. This will necessitate high tolls, expenditure of significant Indiana tax dollars and/or government subsidies to private toll operators. There is no demand for an I-69 toll road in Indiana. One of the main reasons given for building toll roads is driver demand. Encouraged by the promise of congestion relief or safety improvements, drivers accept the toll road as the answer to transportation problems. There is no such demand or need for a toll road I-69 in Indiana. All previous INDOT commissioners and numerous INDOT employees have repeatedly assured the public that I-69 would not be a toll road. INDOT’s I-69 feasibility studies assumed it would not be a toll road. These studies do not show serious congestion or safety problems in SW Indiana. An Evansville to Indy toll road is also likely to fail because there are too many alternate routes that are free. A toll road I-69 from Canada to Mexico is likely to fail because there are existing interstate routes that are shorter and free. What trucker would pay huge tolls to use a route that is longer than free routes? With little demand for I-69 coupled with driver avoidance of toll roads, the project is almost certain to fail. “Demand uncertainty continues to be a major problem at the conception stage and ends up haunting many, if not most, projects.” The Long and Winding Path to Private Financing and Regulation of Toll Roads…Antonio Estache, Manuel Romero, John Strong. The World Bank Institute, Policy Research Working Paper, July 2000. Privatization or Piratization? LOSS OF PUBLIC CONTROL: Vital public facilities operated by a private, for-profit company may end up serving private, special interests rather than those of the public. Before any contract is signed with a private operator/controller, the public and legislators need to know what financial guarantees the state will offer the private corporation. If toll revenues are less than expected will the state be required to subsidize the shortfall? What happens if the private developer defaults on the contract? Will the state be left holding a worthless, incomplete piece of a road that it could not afford to finish itself? Will contracts be renegotiated along the way to the benefit of the corporation? All of these scenarios have happened with other public/private toll road ventures. The World Bank Study cited above warns that if traffic volumes are insufficient “…various types of government support, such as grants or guarantees, are likely to be required.” Note: To date, all major toll road consortia are foreign corporations. Turning existing roads into toll roads is double taxation. SR 37 was built and is paid for by gas taxes. Turning it into a toll road means drivers who paid for it once will have to pay for it again. Users will continue to pay gas taxes as well as the tolls. Eminent Domain for private profits A public/private partnership would mean that the state would condemn private property using eminent domain but would then lease that property to a corporation which would help build and operate the road as a private money-making venture. This is very different than having the state build and operate roads for the public good. The Devil Is In the Details Details of contracts with private corporations that build and operate toll roads are extremely complex yet vitally important to protect taxpayers. Often, the details are not revealed until the contract is signed, which means the public has no input. What the tolls would be is not known before the contract is signed. Tolls can and do vary over the life of the contract and over different sections of the same highway. Researchers at Yale University stated: “Our review of the evidence suggests that the promised benefits of highway privatization failed to materialize. The main reason for the failure were the continuous processes of renegotiations of franchise contracts.” “Privatizing Highways in Latin America: Is It Possible To Fix What Went Wrong?” Eduardo Engel, Ronald Fischer, Alexander Galetovic. Center Discussion Paper 866. Economic Growth Center, Yale University. July 2003. Taxpayer and State Costs Escalate With Privatization “Non-compete” clauses in toll road contracts often prevent the state from improving or increasing capacity of highways that would compete with the toll road. In some states, e.g. California,, non-compete clauses have resulted in a deterioration of local roads. (The Los Angeles Times, 7 July 2002.) In other cases, the non-compete clause requires the state to compensate private toll road operators if local roads compete with toll roads. Some contracts require the state to pay “shadow tolls” to the corporation. These are a way of providing subsidies where the government contributes a specific payment per vehicle to the corporation. In some cases private toll road operators encourage the deterioration of local roads so as to get more drivers to use their less congested roads and pay their tolls. Locally, roads such as SR 67, US 41, SR 231 and SR 57 could be allowed to deteriorate so that drivers are forced to use the I-69 toll road. There could also be a effort to make I-65 a toll road so as not to compete with I-69. Public/private partnerships mean higher tolls. If the state builds a toll road it only has to make enough money to pay for repairs and maintenance. Private corporations require a profit above and beyond repair and maintenance costs. Current design plans for I-69 will almost certainly change if it becomes a toll road. If I-69 is operated and controlled by a private corporation, the private partners will want input on all aspects of the highway before agreeing to risk their money. The Federal Highway Administration may require additional study and designs will absolutely need to be recast to provide toll booths and stacking lanes. These costly additions will be necessary even with electronic toll collection methods. Construction jobs could be awarded to out of state or foreign corporations. Many private toll road consortia own construction companies that they prefer to hire for construction of the facility. This could result in Indiana losing the construction jobs that the highway would require. Toll Roads Are Financially Risky and Subject to Fraud “Toll road may be the shortest route to bankruptcy” The Bloomington Herald-Times, community column headline. 3 Oct. 2005 Toll roads are inherently complicated and financially risky ventures. Many have failed to generate expected revenue and end up costing taxpayer huge sums to bail them out. In the Bloomington Herald-Times, community columnist Michael Koryta cited examples of toll road projects that have failed, e.g.,. the Dulles Greenway near Washington, D.C., the Camino-Columbia toll road near Laredo, Texas, and the San Joaquin Hills Corridor in Orange County, California. He also noted that in Pennsylvania, the Turnpike Commission increased tolls on new toll roads aroung Pittsburgh to alleviate massive debt accumulating on those toll roads. A Los Angeles Times article on July 7, 2002, stated: “Political and financial problems have led many state leaders to conclude that California’s nearly two-decade experiment with toll roads has failed, despite fervent hopes and vast investment.” Drivers will avoid toll roads wherever possible. If there are alternate routes, drivers will use them rather than pay tolls. This creates several problems: *Traffic is diverted to other local roads that then become more congested and unsafe. *Tolls are increased to make up for lost revenue. *When sufficient revenue is not generated, the contracts with the toll road concession are often restructured, usually to the benefit of the consortium and with a loss to taxpayers. For the above reasons, tolls on new roads often start out low in order to attract more drivers but then are gradually raised. “Many toll road projects in the last decade have dramatically overestimated traffic levels.” World Bank Study, page 2. Traffic volumes are crucial to the success of toll roads. Deliberate overestimation of traffic volume is done to justify the building of toll roads. When revenues from the toll roads do not approach anticipated levels, contracts are restructured and taxpayers end up footing the bill. The Study continues: “…traffic volumes are very sensitive to income and economic growth. The failure to recognize this may be one of the main reasons why so many toll road projects have failed or ended in bitter renegotiations.” To date, INDOT has not released expected traffic volume data for I-69 as a toll road. Public/private toll road projects are subject to corruption, fraud and political payoffs. The Desert-Mountain Times, on May 2005, reported on the contributions of Texas’ top ten road contractors as well as bidders on the Trans-Texas Corridor. It states: “In the past four years, these road-building interests alone gave more than $2.7 million in contributions to executive and legislative candidates for Texas state offices, the report states.” (The “report” refers to a study done by several Texas watchdog groups entitled: “Big Money Paves The Way for the Trans-Texas Corridor”.) The article continues: “The state’s leadership (the governor, lieutenant governor, attorney general, comptroller and house speaker) received more than $1.2 million and applicable Senate and House Committee members over $215,000.” And this: “The report outlines more than $800,000 in campaign contributions by the winning Cintra bidding team , which will collect and keep all tolls on TTC-35 (Trans-Texas Corridor, I-35) for 50 years.” (8) While not illegal per se, campaign contributions are often used to “grease the wheels” to gain political support for unpopular projects. Use Caution – Slippery Road Ahead No feasibility study for I-69 has ever recommended building it as a toll road. The studies that were done to justify the construction of I-69 assumed that it would NOT be a toll road. If I-69 is tolled then the performance measures used to justify it will change and the studies will have to be redone. These performance measures include accessibility, impacts on local businesses, its role as a NAFTA trucking corridor, safety, and others. The new federal transportation act, SAFETEA-LU, requires that states meet several criteria before they can build an interstate toll road. A quick and dirty study by INDOT to justify I-69 as a toll road will not be acceptable. A supplemental EIS, including public hearings and comment periods will be required. Tolling/privatizing roads in Indiana is a radical departure from the usual way in which highways are funded. We need vigorous public and legislative debates on toll road/privatization issues. Tolling schemes must not be rushed into. The current proposal to build I-69 as a toll road is the thin edge of the wedge of tolling and privatization of our highway infrastructure. Many more such schemes are expected if the I-69 project goes forward as a toll road. There must be meaningful legislative and citizen oversight allowed at all stages of the development of this risky new venture. For example, all of the following provisions must be included in the consideration of any public/private toll road venture: *Require legislative approval of each public/private transportation project. *Require the posting of bonds to cover all foreseeable failures on part of private partners. *Require adequate insurance to cover all possible losses. *” Non-compete” clauses must not be allowed in contracts. * The Indiana Utility Regulatory Commission must have a role in the regulation of tolls and rate of return. *Private consortium must use government subcontracting and procurement methods. *Government selection/negotiations cannot bypass regular state and federal environmental rules and regulations. For more information please contact: Thomas Tokarski Citizens for Appropriate Rural Roads (812) 825-9555 Tim Maloney Hoosier Environmental Council (317) 685-8800 Pat Andrews Marion County Alliance of Neighborhood Associations (317) 856-3341 John Smith COUNT US! (812) 327-6142 |
© COUNT US! 2002 -'03,'04 |
