Taking Their Toll

Privately built and operated roads stage a comeback.

Dulles Greenway, a 14-mile toll road currently under construction between Washington's Dulles Airport and Leesburg, Virginia, is not just the first private toll road in the Old Dominion since 1816. It is the latest venture to join a growing list of road and bridge projects funded exclusively by private investors. Private toll projects are under way or seriously being considered in 10 states and Puerto Rico.

California has OK'd four privately funded road projects with estimated completion dates between 1994 and 1997, and the Dulles Greenway should be open to traffic in 1996. Puerto Rico has identified $325 million of roads it wants to develop; the company Dragados y Construcciones has already begun work on a toll bridge linking San Juan and its nearby airport. Similar toll projects, all of which rely on private-sector investment, are in various stages of development in Texas, Colorado, Illinois, Missouri, Arizona, Florida, Minnesota, and Mississippi.

Robert W. Poole Jr., president of the Reason Foundation and a former adviser to the United States and California Departments of Transportation, believes that private toll roads are the means by which financially strapped state governments can build and maintain new and needed roads.

"Most states are now in various degrees of fiscal distress, and if you look at the share of state budgets that goes to highway and transportation, it's been shrinking the last two decades," says Poole. "If the states were spending enough to properly maintain the existing stock of highways, there would be nothing left for building new ones. There really is a shortage of capital going into the highway field." The toll projects also "weed out pork-barrel projects," since private-sector investors, unlike public officials, will build only where there is strong evidence of the project's necessity.

Although most states do legislate a maximum rate of return, Poole says that since the ceiling is usually between 17 percent and 21 percent, it doesn't scare away potential investors. Between the possibility for a substantial payoff and new "intelligent highway" technologies that eliminate most toll booths, the roads are attractive investments to private companies.