Saturday, 14 May 2011

Maryland's toll increases highlight risks of political interference

The Baltimore Sun reports on an issue stressing some in Maryland – a proposal by the Maryland Transportation Authority to increase tolls on a wide range of roads, including 100% increases (and most controversially an extra 220% on the Chesapeake Bay Bridge). The article highlights that the State needs the money, the problem being that tolls have not kept pace with the debt raised to pay for major road projects. In short, politicians took a short term approach to such debt, to the point that the current administrators have to take steps to address a growing deficit.

Fair on current users? No. These costs should have been spread among users for the last decade or so, but it is more fair to require motorists today to pay than to raise other taxes. However, should this not be a wider lesson in underpricing toll roads? Some fear privatisation or private roads because of concern that private owners will extract rents from motorists using such toll roads, or in other words, monopoly profits. However, there is at least an equal issue with politicians cross-subsidising constituencies they seek support from to maintain power. A longer term solution to Maryland’s toll road debacle could be greater private ownership, which could mean tolls are maintained at sustainable levels and there is little incentive to subsidise private owners if their own investments prove problematic. In addition, private ownership may raise efficiencies that could offset such increases.

The lessons are obvious. Short-term political expediency in reducing tolls has long term consequences. It can be avoided by greater use of the private sector, or keeping politicians from being able to alter tolls without countervailing revenue to cover debt associated with roads. It is a lesson in governance, ownership and procurement that politicians have imperatives not associated usually with economic efficiency.

UPDATE: More on toll increase proposal from the Washington Times.  The State Transportation Secretary argues that Maryland has the steepest discounts in the US.  It simply reinforces how scandalous it is that tolls do not currently cover maintenance costs.

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