New Private Toll Roads: Proceed With Great Caution

Private finance for the construction of new roads could only make sense for certain projects if public interest protections are greatly enhanced. Before considering any privatization agreement, federal and state governments should develop systematic approaches to ensure the public interest is protected.

First, any new roads or new lanes must be consistent with long-term transportation plans, as well as with broader governmental commitments to reduce oil consumption, protect air quality, or curb global warming pollution. Public officials should not prioritize projects based on the availability of private capital. Instead, they should focus on projects that meet true public needs, regardless of whether private investors see those projects as potential profit opportunities.

Second, state governments need to honestly evaluate their capacity to assess and monitor concession agreements to determine whether they can adequately protect their constituents. Many state transportation departments lack the expertise necessary to evaluate privatization agreements properly, and history has shown that it can be dangerous to rely on outside analysts, who may suffer from conflicts of interest. Thus, departments of transportation must build up their own, in-house expertise to ensure they can fully examine the terms of an agreement before signing any long term deals.

Third, states must develop a systematic approach to evaluating privatization proposals. If states continue with their ad hoc approach, it is likely that important public interest concerns will be neglected. State governments could adopt the model used in other countries, such as Australia, where officials are required to impose certain standards for each agreement, such as ensuring transparency, examining the effect on regional mobility, and protecting equity concerns. The U.S. Secretary of Transportation should assist in this process by developing and submitting criteria for identifying the national public interest in privatization agreements.

Finally, the federal government must modernize its approach to transportation. The Federal Highway Administration and the U.S. Department of Transportation should take a more active role in regulating privatization projects, even when federal funds are not used. Privatization agreements with interstate implications, for example, must be rigorously evaluated by the federal government to ensure the interests of the nation as a whole are protected. Further-more, the federal government needs to en-sure that private financing is not being used to bypass important federal regulations, such as environmental and labor laws.

These general approaches to privatization agreements will help ensure that the public interest is protected. However, the state and federal governments need to honestly examine their methods of privatization and adopt systematic approaches to ensure the national public interest is safeguarded in all agreements.