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Tuesday, November 20, 2012

I-495 HOT Lanes Concession -- Corporate Control of traffic

I do not yet have a view on the new commuter lanes on I-495 (the DC Beltway), which opened yesterday (with 6 accidents occurring at the same spot, as commuters swerved to try to avoid getting trapped in a pay lane).  I rarely take that road during rush hour. 

But it's an interesting study on the whole "capitalism as cure for everything, including taxes" approach.  Apparently Virginia knew that it had to relieve the congestion on the beltway somehow, but it was politically impossible for it to do that by raising taxes.  So it turned to private industry. 

I'm sure there's an easy answer to the question of whether the contract was competitively bid, but it's interesting that it's not available on the VA HOT Lanes website anymore -- neither of the google search results below leads anywhere.

All links just redirect to the cover page and I couldn't figure out how to get where I wanted to go from there. Wikipedia is not much help on the question either.  Interestingly, most of the links on wikipedia likewise simply redirect to the uninformative cover page.

But in the end, I found some references to the fact that Transurban-Fluor beat out Clark-Shirley for the "concession."

Transurban is an Australian corporation, per wikipedia.  Fluor is a Texas company.  I get the sense that Transurban is the mastermind (it does toll roads generally), while Fluor will actually do the construction and engineering work.  This suggests to me that the profits will ultimately go to Transurban, and that Transurban (the foreign part of the partnership) will be the one that decides whether and how much to increase the tolls.  All of this bears checking out, but right now it seems like a good guess (what I would do for more time!).

So the fact that our tolls for the next 80 years (that's the deal -- 80 years) are simply leaving the country, for the benefit of the Australian economy, is one of the downsides to the project.  This is going on all over the place -- the Pennsylania turnpike was leased (for the next 75 years) to a consortium including Citibank and Spain’s Abertis Infraestructuras.  And Chicago sold a 75-year parking concession to Morgan Stanley, which apparently sold a large (possibly controlling) interest off to the investment arm of Abu Dhabi.

But even apart from the foreign interest, I question whether we want corporations, as opposed to governments, in charge.
1.  I generally approve of the idea of providing a HOT lane like this, so that commuters in a hurry can "pay" for the ability to get where they are going faster.  There is also a provision that if you have three people in the car, you can take the lane for free.  This is all to the good, and the these lanes are used, the more that reduces congestion in the remaining lanes.  It's actually a decent example of a market solution to the congestion problem, and it's been made feasible by technology that takes your toll without requiring you to stop your car.

2.  I am deeply suspicious, however, of letting private companies set the rates.  Their motive, pure and simple, is to maximize profits.  They don't care about the public good.  And there will be times in the next 80 years when those interests come into conflict.  

3.  So ideally, the State of Virginia would have funded the thing with tax dollars, and then retained control over the concession, so that it could manage it in the public interest.  The money that came in from the tolls would have gone right back to the Virginia taxpayers. That's got to be the way a public good -- like infrastructure -- should work.  

4.  But since it was impossible to raise the taxes necessary to pay for it, perhaps private ownership was the only choice.  And perhaps what we've got is better than the alternative -- nothing.  Still, it's an 80 year commitment to allow someone else to decide -- and to profit from -- how much our commuters pay to get to work.  

5.  So the jury is still out for me.  But I am worried.  Stay tuned.

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