Privatization of Existing Roadways: A Bad Deal for the Public

The privatization of existing toll roads fails to meet all of these conditions. Public entities, not private companies, have a clear and significant advantage when it comes to the long-term cost of capital: the ability to issue tax-free debt. Second, while the operation of a toll road may be a well-defined task, the provision of overall mobility to the public is not. Non-compete clauses and other provisions in concession agreements - often considered necessary to attract private investment - can undermine the ability to provide a robust and efficient transportation network. Third, toll road privatization creates a monopoly with no meaningful ongoing competition and deals last for several decades. Finally, the length of these deals insulates them from public accountability. The downsides of a deal are likely to surface only after officials have left office and the public has no recourse to change the contract.

As a result, in order to protect the public interest, states should not agree to the privatization of existing roadways.

The evidence shows that concession agreements for existing toll roads provide short-term benefits in the form of lump-sum payments. However, the basic economics of toll deals indicate that the value of those upfront payments will be less than the value of future tolls that drivers will be forced to pay, given the profit margins and higher capital costs of private operators.