Proceed with Caution: Avoiding Hazards in Toll Road Privatizations

By Pagano, Celeste | St. John's Law Review, Winter 2009 | Go to article overview

Proceed with Caution: Avoiding Hazards in Toll Road Privatizations


Pagano, Celeste, St. John's Law Review


INTRODUCTION

On April 12, 2006, Indiana Governor Mitch Daniels leased the 157-mile Indiana Toll Road to ITR Concession Company LLC, a consortium composed of a Spanish and an Australian company.1 Under the agreement, the private entity paid the State of Indiana $3.8 billion and promised to operate and maintain the road for the next seventy-five years in exchange for various tax breaks and the right to collect toll revenues during that period.2 As a result of the up-front payment, Indiana has funding sufficient to meet its transportation needs for the next ten years.3 Nonetheless, the deal came under strong criticism, including from some of the 2008 contenders for Daniels' job,4 in part because the lease agreement's terms gave the new operators rights to raise tolls, perhaps substantially. Though a statecommissioned financial analysis of the proposal assured the transportation department that the road's $3.8 billion price tag exceeded what the state could have raised through traditional bond financing, a competing report alleged that the allowable toll increases under the new lease actually increased the road's value to $11 billion,5 suggesting that the state had accepted a price that greatly underestimated the current value of the road's future revenue stream.6

The Indiana deal is still the largest toll road concession agreement to date in the United States.7 ITR formally assumed operational responsibility for the toll road on the same day a concession was signed for Virginia's Pocahontas Parkway,8 and both followed on the heels of a 75-year concession for the eight-mile Chicago Tollway.9 In November 2007, Colorado followed the trend, leasing a section of toll road northwest of Denver to a Portuguese toll road operator.10 In 2008, Mississippi and Florida both issued requests for proposals for similar projects.11 The governors of Pennsylvania and Texas attempted even more ambitious projects. On June 6, 2008, Pennsylvania Governor Ed Rendell accepted a $12.8 billion bid to lease, repair, and operate the Pennsylvania Turnpike for seventy-five years to come; the deal eventually died after a failure to obtain legislative approval.12 Texas Governor Rick Perry's original vision for the Trans-Texas Corridor, announced in 2002, would have included a $175 billion system of 4,000 miles of corridors, many privately operated, crisscrossing the state.13 Each corridor was to be one-quarter mile wide, accommodating toll roads, rail, and utility lines.14

These states' toll road lease plans did not arise in a vacuum. Recent road leases are part of a much larger privatization trend that has expanded from the 1980's through today.15 Governments now look to the private sector to provide a wide range of goods and services that government itself used to provide.16 In the face of a widely-recognized need for enormous infrastructure repairs and the fact that toll roads are ready income-producing assets capable of attracting investment, it is natural that states would turn to toll road leasing as one of the next large-scale moves in privatization.

Bankers and economists have presented often-conflicting analyses of the economic valuation of the contemporary toll road leases. Governments and citizens are understandably concerned that the up-front payment and the services to be performed by a toll road company accurately reflect the value of the lease, but in addition to valuation questions, the current crop of toll road leases raise two fundamental sets of concerns. First, privatization can raise tensions between conflicting goals within government programs and the potential for conflicts of interest between the goals of the public and private entities involved.17 These concerns are magnified in the case of toll road privatizations, because the extraordinarily long lease terms lock the parties into agreements that may or may not serve the needs of the state in the distant future. Second, like prior privatization efforts, toll road privatizations run the risk of undermining democratic values, as opportunities for participation and accountability decline. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Proceed with Caution: Avoiding Hazards in Toll Road Privatizations
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.