Western Australia to implement RUC for EVs, Auckland congestion charging to be announced, Virginia launches RUC in July 2022

I've been very busy, but there are some announcements worth noting as follows

Western Australia announces it will introduce distance-based RUC on EVs in 2017

As part of an package of measures to incentivise increased sales of electric vehicles, the Western Australian Premier has announced that the state government will introduce 

 introduce a distance-based road user charge for zero and low emission light vehicles commencing from July 1, 2027 to ensure all motorists pay their fair share towards the maintenance and construction of WA roads.

A base rate of 2.5 cents per kilometre for electric and hydrogen vehicles and two cents per kilometre for plug-in hybrid electric vehicles will apply, with both rates indexed to the Consumer Price Index.

This parallels what has already been announced in New South Wales, what has been introduced in Victoria in 2021 and what was also announced for South Australia (but for which the recently elected Labor Government has vowed to repeal).

Western Australia has some history in looking at heavy vehicle RUC, but it will be interesting to see how this may be implemented, as it could be a simple odometer reporting based system given there is little interstate light vehicle traffic. 

New Zealand Government to make announcement on progressing congestion pricing in Auckland next week

It has been studied and investigated for some time, but Radio New Zealand is reporting (alongside other media outlets) that when the New Zealand Government Emissions Reduction Plan is released on Monday 16 May, it will also announce it will implement congestion pricing for Auckland.  It is likely to be focused on a downtown inner city cordon-style scheme at peak times only, but with the potential to expand into corridor charging beyond that. It also appears that the net revenue may be used to offset a cut and eventual abolition of the Auckland Regional Fuel Tax established only in 2018 to help fund transport projects in the city.  That tax is currently at NZ$0.125 per litre including Goods and Service Tax.

Virginia to launch RUC for EVs on 1 July 2022

Virginia will be the third US state to implement distance-based RUC for light vehicles on 1 July according to NBC12.  Branded "Mileage Choice" it will offer EV, hybrid or other ultra fuel efficient vehicle owners the choice of paying by mile instead of paying a flat annual fee for registration (currently US$109 per annum).  Distance will be measuredly a plug-in device supplied by Emovis, with an initial odometer reading captured by smartphone imaging to register.  

News briefs - Australia, Germany, UK

Australia - Transurban CEO calls for network road pricing and hangs onto Pocahontas 895

AAP reports that Transurban CEO, Lindsay Maxsted, told the company AGM last year that 

"The time is quickly coming where we must face concepts such as distance-based tolls, peak-hour pricing or demand pricing... We must utilise our existing networks better."

The Sydney Morning Herald reported him saying:

the states could not ''build our way out of congestion forever'' and needed to look at different pricing models for roadways.

He said that there could also be off peak discounts, but existing concessions meant Transurban could only charge one price all day long.  He insisted Transurban was not motivated to renegotiate these, but that future concessions should include the flexibility for peak and off peak pricing.

This is a welcome step, and besides being obvious, it demonstrates that private road owners are incentivised by the market to increase yields at peak times, and utilisation off peak, which would benefit them and off peak users (and peak users if congestion is avoided).  

However, New South Wales Minister for Roads, Duncan Gay, responded saying there wouldn't be a "congestion tax" or "time of day tolling", which frankly is a missed opportunity.  Curiously an online poll on the Sydney Morning Herald website suggested 42% would support higher peak time tolls.  A figure which astonishes me, as I wouldn't expect people to support this without expecting more reliable trips or reductions in off peak tolls.

On the beleagured Pocahontas 895 toll road he said Transurban will hang onto the asset, but seek to renegotiate with its lenders:

"That's the most likely outcome: a full reconstruction with those lenders, and we may well be the ongoing owners of that asset," he said  "The fact is that because of the poor performance of the asset, there's not a lot of people out there that run the asset, and in terms of our expertise, we're still probably the logical owner of it but not at the price paid those many years ago."

Germany - attitudes to urban congestion charging

I already reported on how some German states have been considering urban congestion charging as a revenue raising proposition.  An article in The Local points out some more details of what was being considered and responses to it:

- It talks of a single charge of EURO 6.10 per day (US$7.85);
- Green Party says it is "badly needed" to pay to maintain and modernise transport infrastructure;
- Federal commissioner for tourism Ernst Hinsken, of the conservative Christian Social Union (part of the ruling Federal coalition), warned against "defrauding commuters and tourists" arguing it would unfairly punish commuters facing increasing fuel prices;
- HDE, a retail business association, claimed it would make downtown city centres less attractive, by penalising those who visit them for shopping.

Still a fair way to go in Germany before this goes further.

UK - Local transport chief calls for nationalisation of private toll road

According to the Birmingham Mail, Centro (the public body responsible for planning and contracting public transport services in the West Midlands) Chief Executive Geoff Inskip has called for the UK Government to nationalise the M6 toll road.  He said it was "madness" that the parallel untolled publicly owned M6 is "choc a bloc" with congestion, but that high prices on the toll road meant it was underutilised.  Midland Expressway (the company that owns the road) responded by saying it had a "long term view" of the investment.

Virginia replaces fuel tax with fuel and general tax

I wrote in January about how Virginia Governor Bob McDonnell proposed replacing the state's fuel tax with an increase in sales tax, as a way of covering the desperate need to raise more revenue to pay for deferred maintenance and a range of capital projects.

Well, according to the Washington Examiner, the Virginia State Senate agreed on Saturday 23 February to a compromise solution, that effectively raises US$3.5 billion over five years with two rather peculiar solutions.   

It raises the state's general sales tax from 5 percent to 5.3 percent across most of the state and to 6

percent in Northern Virginia and Hampton Roads.   Effectively meaning that everyone buying anything in the state subsidises the roads, regardless of whether they drive, walk, stay at home or run a whole fleet of vehicles.  A blatant transfer from non-road users to road users, penalising those who use roads the least to reward those who use them the most.

The second step may on the face of it seem more sensible, that being to replace the 17.5c/gallon (4.62c/l) gas tax with a percentage gas tax of 3.5% on petroleum and 6% on diesel.  Sounds great right?  More money as prices go up, effectively inflation busting?  Well yes, it does become an escalator on the price, which is fine as long as prices go up.  If it drops, due to a combination of shale oil and the appreciating US$ (largely as it is treated as a safe haven in the short-medium term), then so does revenue.  Presumably the higher rate for diesel is some sort of attempt to reflect the higher damage that trucks cause to the roads, I'm guessing because there is no such thing as light diesel vehicles in Virginia and the fourth power rule (pdf note on this) is beyond the wit and wisdom of politicians.

Clever?  No, not really.  It really is public policy from the dark ages.  It is pure political expediency, because from tax policy and transport policy perspectives, it doesn't make sense.  The only economic merit will be how the money is spent, and unless a comprehensive long term asset management programme is put in place, and new capital works are measured purely against some form of independent cost-benefit analysis, you can't be sure of that either.

The economic effect of these measures will be incremental of course, it wont mean an increase in traffic or mode shift of any scale, but it sends a sign.  Virginia is happy to tax residents and businesses to prop up the highway system, and happy for road users to get subsidised use of it.  Presumably Virginia will start offering people cheap electricity paid for by an increase in sales tax, or maybe phone calls, or water. 

Whilst much of the United States and the world shifts towards road users paying to use the roads, and paying for the costs of maintaining and renewing the roads they use, Virginia is taking a step backwards, sharing the cost of a ubiquitous utility with everyone, regardless of how much they use it.  It's the sort of approach that some politicians would call socialism if it were applied to other sectors.

What it could have done may have required more political courage and maybe the ability to communicate some basic economics, but it would have been:

- Use tolls where it is feasible and makes financial and economic sense;

- Raise the existing gas tax by enough to combat inflation and avoid arbitrage behaviour (people shopping for fuel from neighbouring states);

- Undertake a comprehensive study on transport costs and charges, to determine the long term needs for public spending on highways, the existing gap between costs and taxes, and options to move forward.

You see the replacement of the gas tax can't be gas tax and sales tax, it has to be an option that involves charging vehicles for actually using the roads.  However, VMT/MBUF/distance based charging seems alien to the state.

Instead it adopted an approach that, from the outside, looks less rational and has little regard for economics at all. 

Free roads - no, really!

For those of us who advocate better road pricing, the objectives may vary somewhat, but some of the principles remain clear.  One of them is "user pays", that those who use the roads should pay for them, in proportion to the degree to which they use the roads, and the costs they impose upon the system.   This may be around wear and tear, road space when demand is at a premium, or simply sharing the fixed costs amongst those who use the network the most.

Fuel tax is seen as very much a second rate option, largely because although those who use the roads more pay more, levels of fuel consumption don't vary at the levels necessary to reflect variations of other costs.  For example, as trucks get heavier their fuel consumption doesn't raise at levels commensuration to the damage they cause to roads, similarly it doesn't rise to reflect scarcity of road space when demand for it exceeds supply.   Still, it is better than nothing - a point that seems to have somewhat escaped Virginia's governor Bob McDonnell (Republican).

According to various news sources he wants to abolish the state's gas tax  (fuel tax) and replace it with an increase in the general sales tax of 0.8%  (which wont apply to "groceries" but will be hypothecated into transport).  In short, he wants roads to be paid for, not on the basis of usage, but on the basis of how much shopping you do in the state.   Those who drive the most, but are frugal with consumer goods, will be getting subsidised by those who don't drive at all, but buy large expensive items.  Of course it will also promote interstate tax arbitrage, as motorists in neighbouring states will seek to buy petrol at the lower rates.

He wants to retain tax on diesel, because he recognises that trucks cause more damage to the roads (although transport economists will explain that the 4th power rule means that when trucks get beyond 9-12 tonnes of gross laden weight, diesel tax is simply incapable of fairly reflecting this increased damage).  

The lack of diesel cars in the US means this will make little difference to light vehicles, although I would have thought anyone with light commercial diesel vehicles would move to the petroleum equivalents.   Interestingly about two-thirds of state diesel tax revenue comes from interstate trucks, it's curious that there hasn't been a similar figure given for interstate cars (although the figure would be lower).

He wants to introduce new ownership taxes on alternatively fueled vehicles (US$100 a year) and increase other ownership taxes by US$15 a year.  However, according to TollRoadsNews this extra revenue is going to subsidise public transport.  It's not clear the economic justification for that connection to those fees, as again, it penalises those who hardly use their cars at all, but not those who drive the most frequently.

Virginia's state fuel tax is 17.5c/gallon (4.6c/litre), so that is the saving that would be made for motorists.

It is economically irrational as it means highways will be subsidised by virtually everyone buying goods and services in the state.  Environmentally, it means that those who drive the most and emit the most will pay no more than those who do not drive at all, unless of course they also do bigger shopping sprees.

McDonnell makes the sound point that fuel tax is unsustainable because of vehicle efficiency and alternative fuels, but then claims that it is "regressive" because people in rural areas pay more, yet the main costs upon the system are in urban areas.  Unfortunately, this misses some key points.

Maintenance is the bread and butter of highway expenditure, and it is commonplace that motorists in urban areas tend to cross subsidise those in rural areas, because around half the costs of maintenance are fixed, and in rural areas there are less vehicles to divide those fixed costs between.  It is possible to justify charging the fixed costs of highway maintenance in part to property owners adjacent to roads (because they benefit directly from the access amenity), but this argument is difficult to sustain when a road is primarily arterial.  It is also possible to justify charging those costs using a fixed annual licence fee, as an access charge, but this creates its own deadweight distortions, and the externality costs of congestion (and emissions) can be equally as serious, and they are not readily addressed by ownership taxes.

However, what's apparently missing is any serious economic analysis behind this proposal.

I'd argue that what Virginia needs is an economic land transport costs and charges study, similar to those carried out in the UK, New Zealand and several countries in Europe.  That would establish who is underpaying, who is overpaying, the long run infrastructure costs for the state, costs of congestion (and emissions if desired), what existing taxes, tolls and charges do (it can also include public transport and the private railroad networks as well if desired), and provide an evidence base for moving forward.  That would be more robust in terms of economic impacts and distributional impacts, and would address concerns about any existing taxes being regressive or otherwise.

My expectation is that the conclusion would be that motorists do not pay enough to keep the network in a steady state, except those on toll roads.  It would need to be followed by a separate evaluation of options for charging, including expansion of tolls, the role of fuel taxation and options for alternatives like ownership taxes, property access levies and vehicle mileage tax (including a weight based one for trucks).

You see, as much as politicians may focus on the finances, they ignore the economic impacts of what they do.  Abolishing the gas tax will increase private vehicle use, increase congestion and emissions, which will increase demands for new capacity.  Increasing other taxes will see a small deadweight loss in consumption of various goods and services, which will likely have a distributional impact highest on those with the least discretionary spending.

It's astonishing, it is economically irrational and is a step away from the sort of smaller government more market oriented agenda some in the Republican Party espouse.  Indeed, it does absolutely nothing to ensure the roads are better maintained and the quality of service motorists get improves, in fact why should it?  They aren't paying for it.  They should expect what happens in other jurisdictions when governments offer something for next to nothing - unpredictable and wildly varying standards of service.

It has been criticised in many quarters, the Baltimore Sun suggests it would complicate debates for neighbouring states such as Maryland, but some of the public think they would be better off.  Motorists, of course, would be.

I can only hope for a rational debate to come about this proposal.  Well intentioned, with the key issue of the sustainability of fuel tax being central to it, but creating new subsidies and almost completely disconnecting the cost of highways from most of the users is neither economically rational, nor sustainable, nor a solution I'd expect in an economy that purports to be predominantly embracing the principles of market capitalism.

It's even more astonishing when you consider the point made in TollRoadsNews that tolls are important in Virginia today, yet don't form part of the Governor's plan.   Though I am now less surprised that there are now politicians in the state seeking to nationalise some private toll roads, because they think the price is too high.  Yes, they are Republicans too.   No, really!

HOT lanes open in LA and Virginia

In the world of road pricing, HOT lanes are a peculiarly US answer to the problem of poor pricing of highways.  With the exception of Israel, you wont find HOT lanes anywhere else, largely because the case for HOT lanes is usually based on getting better utilisation of existing HOV lanes by tolling single occupancy vehicles.  Rare is the case that it is economically efficient or financially viable to charge for new lanes, because outside peak times few people will use them, and so the assets remain barely used and not generating much net revenue.  As a result, they tend to be cross-subsidised to reflect the fact that new HOT lanes benefit the users of untolled lanes, by merely shifting demand over to those lanes.  The LA pilot that has been launched is funded by a $210 million federal transportation grant and $80 million from LA Metropolitan Transportation Authority.  

HOT lanes are appealing to politicians because they retain a measure of choice, motorists can pay to bypass congestion or can remain in congestion.  The retention of the poorly targeted HOV component (whereby vehicle occupancy is somehow seen as a blunt measure of better use of road space) is a political sop that does little besides reward families, couples and the handful of people who may work together and live in sufficient proximity to make it worthwhile.  In all those cases I take the view that if 2 or more people value an uncongested trip, they can split the cost of the toll.

Los Angeles

I've written before about the Los Angeles project, with a description here as it comprises two sets of dedicated lanes on major corridors to the south and east of downtown LA.  It is essentially a piloting of HOT lanes for the city, launched whilst the city region is on the cusp of selecting a contractor to undertake a study for a far more extensive network of "express lanes" (Peter Samuel describes why the term Express Lanes is a misnomer).

The key dimensions are:

- Two lanes each way acting as express lanes with specified access and egress points;

- All users, whether HOV or single occupancy vehicles must have a DSRC transponder, and declare how many people are in the vehicle.  Transponders require a $40 deposit, which becomes a credit to toll accounts;

- Tolls are dynamic, with prices rising and falling according to real time conditions on the HOT lanes.  Users pay the price declared at variable messaging signs located at access points.

- Prices are based on per mile usage of the HOT lanes, with a cap of $1.40 per mile being the maximum charged.  If the toll is at that price and the lanes operate at below 45 mph average for longer than 10 minutes, the lanes will be closed to new single occupancy tolled customers.  HOV users will retain free access;

- A low income assistance programme is included, offering transponders for free for selected users, but offering no discount on the toll (as use of the lanes remains optional);

- It is a one year pilot only.  What happens after one year is unclear, but presumably if it generates surplus revenue after operating costs, it may continue.

There have been extensive reports about the LA HOT lanes, which claim it will be a "culture shock" in a city that has had no tolled routes at all until now.

According to NBC Los Angeles, the Los Angeles County Metropolitan Transportation Authority is hoping the HOT lanes encourage commuters to think about their trips:

"We hope it changes commuter behavior in terms of getting people to really plan their trip before they start out," said Rick Jager, a spokesman for the Los Angeles County Metropolitan Transportation Authority.

Jager said the agency is encouraged that more than 30,000 drivers have already ordered transponders needed to enter the lanes, but he acknowledged that some motorists are resistant to the project.

The NBC report describes how motorists can open an account, it's worth noting that even HOV users must have a transponder, even though they need not pay.  They must simply flick a switch in the unit to "declare" it is a high occupancy vehicle, this is one way to deter casual usage:

Solo drivers may use the lanes but will have to pay a toll – from 25 cents to $1.40 per mile, with motorists paying more when traffic is heavier.

Carpoolers and motorcyclists can use the lanes for free, but all drivers must get a new switchable FasTrak transponder, ..., to use the lanes.

When traffic speeds fall below 45 mph for more than 10 minutes in the ExpressLanes, overhead signs will state "HOV Only," alerting solo drivers not to enter the restricted lanes, according Metro's The Source blog.

To obtain a transponder, drivers have to pay a $40 deposit that will go toward future tolls. They'll be billed a $3 monthly fee plus the cost of their tolls. Lower-income drivers can qualify for an "equity plan" that requires a $15 deposit and waives monthly fees.

There are several ways to open an account:

•  call 511 and say "ExpressLanes";
• go online at Metro's ExpressLanes website;
• go to Metro's storefront at 500 W. 190th Street in Gardena;
• go to Metro's customer service center at the new El Monte Station, 3501 Santa Anita Ave. in El Monte.

Violators who are caught in lanes wihtout a transponder by the California Highway Patrol could be issued a $341 ticket, Jager said. Cameras will take pictures of vehicle license plates for cars that don't have transponders, and the owner will be sent a bill, which could result in fines if not paid.

The transponder can be switched to signify one, two, or three or more occupants in the vehicle. It transmits a signal to an antenna above lanes, and the car is then tracked. Accounts are billed for miles driven.

More details on how it works can be obtained at the Metro Express Lanes website

That means that the transponder effectively means that in the longer term, the occupancy level may be raised to three, as one means of managing demand instead of simply raising tolls or in extreme cases banning non-HOV users.   In addition to the lanes, bus services on the corridors have been improved and all net revenues are to be invested in the corridors themselves by state law - although one would have thought the priority ought to be returning the money spend on the lanes in the first place.

The LA Times says:

Stephanie Wiggins, Metro's executive in charge of the program, said gross revenue from the 10 and 110 freeway toll lanes should total $18 million to $20 million a year. Program costs are not expected to exceed $10 million, and any extra revenue will be reinvested in transit or carpool improvements in the 110 and 10 freeway corridors.

Yet the costs are actually $290 million, which is being treated as a sunk cost of capital.  If HOT lanes are going to be promoted as a way of paying for new road capacity, not just a test of congestion pricing, then there needs to be some honesty about such costs.  It is, in fact, the primary reason such ideas get little traction outside the US.

The LA Times quotes Donald Shoup,  a professor of urban planning at UCLA, as saying that it is "about time", given the severity of congestion in LA.  The rest of the report tends to focus on existing users of the lanes who are upset they need to pay $40 deposit for a transponder to keep using them.   Yet it also reports opposition to the lanes for being "undemocratic", presumably the world would be more democratic if you didn't need to pay for what you use.

A New York Times article quotes Robert Poole of the Reason Foundation, who doesn't think it is a big deal:

"I'm not too optimistic about major, big results for the Los Angeles project... I hope I'm wrong. But I suspect that most of the users will be freebies. They won't collect very much revenue. And if only a small percentage of people are paying the charge, the impact on congestion is going to be small."

KCET TV has a TV news article describing the LA HOT lanes.

My view is that it is positive to expose users to pricing, particularly dynamic pricing based on maintaining minimum standards of service, but there needs to be a more hard-headed approach to wider implementation of such lanes.  The chief concerns of transport policy regarding highways in the US are lack of revenue to maintain and develop networks, and congestion.  This tool will help with the latter, but will not help with the former if it cannot generate net revenue over the capital costs of implementation.   In other words, there needs to be some business case honesty.  Hopefully the wider Los Angeles Express Value Choices study will deliver this.

Virginia

The I-495 express lanes have opened in Virginia, with the Washington Times describing how this large project is a major public-private partnership:

The 495 Express Lanes project cost $1.9 billion. Virginia paid $409 million, according to Mr. Titunik. The two companies in partnership with the state, Transurban — a company that develops toll roads with offices in Australia and New York — and Fluor — a Texas-based engineering and construction company with an office in Arlington — funded $349 million in private equity and also backed $1.2 billion in loans and bonds.The state paid $260 million for the replacement of aging infrastructure, including more than 50 bridges and overpasses, pedestrian walkways, arterial roads, soundwalls and ramps.

The two private companies will get the revenues from the tolls, but if the lanes are successful, the state will receive a cut. Mr. Titunik said that the money will be invested in maintenance.

So in short, the state has part paid for the project, and TransUrban is providing significantly equity.  A contrast to the government funded LA project, which is admittedly much smaller in scale and only a pilot.

I-495 express lanes have a HOV threshold of three occupants, and comprise 14 miles of dual carriageway express lanes along the corridor.   Tolls have no cap so can be raised as high as is necessary to maintain a minimum level of service of average speeds of 45mph, hardly surprising when you have to convince private investors to risk money.  Prices are expected to range between $1 and $6 depending on traffic volumes.

However, the introduction has been reported as being rather bumpy, as some people entered the lanes accidentally then tried to reverse to avoid paying the toll.   What's astonishing is clearly how little attention people pay to road signs.

TollRoadsNews has an excellent article (with a map) about the project including the teething troubles, with Peter Samuel saying:

The 495 Express Lanes are a first not in the dynamic pricing as such, but for using such pricing in a very ambitious and complicated format with so many entries and exits. Nowhere else is there a tollway-within-a-freeway like the 495 Express Lanes equipped entirely with dedicated on- and off-ramps, and a lot of them catering to shorter trips as well as longer. Most others force users to enter and exit via the free lanes, weaving across the traffic. Or else they are long 'pipes' catering only to long trips, so shorter distance travelers can't make use of them. Many others, also are not much more than conversion and upgrade of existing HOV lanes. 

Not so the NoVA Beltway Lanes. Nearly a billion dollars of investors' money has been put into a complete rebuild of this section of the Beltway expanding it from eight lanes to twelve. And it has new direct entries and exits completely separate from the free Beltway lanes around Tysons Corner. 

It's going to be a boon to commuters in northern Virginia but it remains to be seen if they can make enough money to justify the investors' investment.

I wholeheartedly agree.

WJLA also has a video news article about the project.

News briefs - Australia, Florida, Indiana, Ireland, New Zealand, Philippines, South Africa, Virginia

Australia - Sydney to pursue three new toll funded highways

The Australian Daily Telegraph (via the Herald Sun) reports that the New South Wales State Government’s 20 year infrastructure strategy includes three new major highways in Sydney which are proposed to be funded through tolls, including reforms of existing tolls toward distance based pricing.  Let’s be clear this does not mean a change in technology or full network based charging, but by setting the tolls on toll roads at rates to reflect the distance between tolled points on the network.  The price is estimated to be A$10 billion, although it is thought the price could be lowered by private sector innovation and cut and cover construction techniques. 

The New South Wales Government has been studying options for reforming tolls in the Sydney metropolitan area, to normalise what vehicles pay across the tolled network to reflect distance.  The logic seems simple, but the difficulties are around addressing the costs of different concessionaires, as the motorways that have been built had different construction costs (e.g. tunnels are far more expensive than more rural highways).

Florida - Customers paying in high denomination banknotes can be detained at booth

According to the Newspaper.com, in the case of Chandler vs. Florida Department of Transportation, the US Court of Appeals has found that "Motorists can be held indefinitely at toll booths if they pay with large denomination bills".

The report says: "Under FDOT policies in place at the time, motorists who paid with $50 bills, and occasionally even $5 bills, were not given permission to proceed until the toll collector filled out a "Bill Detection Report" with data about the motorist's vehicle and details from his driver's license".

The court decision, responding to a claim that it was a constitutional violation to stop the vehicle from proceeding is as follows:

"In Florida, a person's right and liberty to use a highway is not absolute; it may be regulated in the public interest through reasonable and reasonably executed regulations."

The judges found it was reasonable for Fanueil to set regulations for use of the road -- including the types of acceptable payment. The court decided that drivers implicitly agreed to those conditions by choosing to use the toll road.

Florida - State Road 408 collects 43% of all toll revenue of the Orlando Orange County Expressway Authority.

The Orlando Sentinel reports that the 22 mile long SR408 toll road generated $108 million in 2011, or 41% of the Orlando Orange County Expressway Authority's total revenue.  It carried over 126 million toll transactions in that year and its revenue effectively cross subsidises the rest of the Expressway Authority's network.

Indiana - toll road privatisation touted as success

According to the Newark Advocate, Michael Cline, Indiana Department of Transportation commissioner, has been touting the successes of the privatisation of the Indiana toll road.

He said that the lease paid off old debt and provided "millions" of dollars to counties the road passes through to complete major projects including the extension of Interstate 69 from Evansville to Bloomington and Indianapolis and the reconstruction of U.S. 24 between Fort Wayne and Toledo "dubbed the highway of death for its high number of fatal crashes".

He claimed it "made sense for Ohio to study a similar plan for its section of the toll road".

The report said:  

The Ohio Department of Transportation is conducting a $3.4 million study with Texas-based KPMG Corporate Finance LLC to examine the ways to maximize the financial benefit of the toll road for the state. Jerry Wray, ODOT director, said the study will be completed by mid-November and he hopes to have a recommendation to the state legislature by Jan. 1.

During Cline’s presentation, he tried to eliminate some myths about the Indiana Toll Road lease, including that toll rates have doubled since 2006. Although the cost to drive the entire stretch across Indiana has risen from $4.65 in 2006 to $9.40 this year for drivers paying cash, tolls have remained frozen for drivers using electronic toll pass technology. Those rates can’t increase until 2016.

Tolls for many Ohio drivers have risen at higher than the cost of inflation during the past two decades. The turnpike operates entirely on its own revenue. It had $11 million in profits last year, and turnpike officials previously stated that more can be found through savings.

It is helpful to have this sort of information, because it is easy for privatisation advocates and opponents to both use slogans and cliches to justify their positions.  The best thing for Ohio will be to weigh up the evidence of what went right and wrong in Indiana, but it seems like a balanced approach has been taken that suits the needs of that state.

Ireland - Sacyr looking to offload debt ridden toll roads

The Independent (Ireland) reports that Spanish owned toll road concessionaire Sacyr is looking to sell its toll road concessions in Ireland.  Infrastructure fund Globalvia is said to be interested in these assets.  The concessions in Ireland are:
- N6 (56km motorway/dual carriageway between Galway and Ballinasloe, with a 7km connection to the Loughrea bypass);
- M50 Dublin (operation and maintenance contract for the 41km of Dublin's part-ring motorway);

New Zealand - unprofitable toll road gets revenue boost but still not enough

According to the Bay of Plenty Times, the Route K toll road has seen a 37% increase in revenues following a 50% increase in the toll for cars.  However, it still remains insufficient to cover the interest costs on the debt of the local authority financed road.

Philippines - Two new toll roads to be pursued in 2013 and Metro Pacific to expand Northern Luzon Expressway

Rappler reports that:

The CALAX project, which will connect the Manila-Cavite Expressway (CAVITEx) and South Luzon Expressway (SLEx), will be among the two projects under the Public Private Partnership (PPP) scheme the Department of Public Works and Highways (DPWH) will pursue in 2013. The PPP section is the 36.01 km length of the expressway from Kawit, Cavite to Sta. Rosa, Laguna. The ODA section is the remaining 11.01 km part of the road from Sta. Rosa, Laguna to SLEx at Mamplasan Exit in Laguna.

"The private proponent shall be responsible for the financing, designing and constructing of the PPP section, and the subsequent operations and maintenance (O&M) of the entire CALAX," the PPP Center explained.

The project is estimated to cost US$1.01 billion.

Meanwhile, Rappler also reports that Metro Pacific Investments Corp  is allocating P2.5 billion (US$61 million) in 2013 to expand and repave parts of the Northern Luzon Expressway.  This includes a P1.6 billion-worth (US$39 million) toll road that will link NLEx Cloverleaf and McArthur Highway near the Valenzuela City Hall with a 2.1-kilometer, 4-lane highway. Depending on how fast the government is in securing right-of-way, construction for Segment 9 will likely start by November or December and will be completed in 2013

South Africa - Gauteng e-tolling allowed, Moody's approves

According to Business Day Live (South Africa), the decision by the Constitutional Court of South Africa to allow the implementation of electronic free flow tolling as part of the Gauteng Freeway Improvement Project, will make a substantial difference to SANRAL's financial position.  Tolling on the project was due to be implemented in April 2012, but was stopped due to a court injunction.  The tolling has been opposed in South Africa on various grounds, but which largely appear to be about the injustice seen in tolling existing as well as new roads, because the existing roads have been upgraded, and because of fears of corruption in the contracts with the foreign suppliers of equipment and tolling services (which have not been substantiated).  The delay has cost SANRAL US$309 million since April.

The report outlines how taxpayers have been providing bridging finance to SANRAL to cover the gap:


Government responded by providing the roads agency with R5.8bn in funds to compensate for the lack of e-toll revenue and to defray operating costs, including debt service payments on the GFIP debt, a large proportion of which government guarantees.

Moody’s said the GFIP was mainly responsible for the rapid surge in Sanral’s debt, which rose to R37.5bn or five times its 2012 annual revenue as of August this year, from R6.2bn in March 2007.

Moody’s downgraded Sanral’s rating to Baa2 from Baa1 in May due to negative pressure on the roads agency’s liquidity.

The rating agency noted that at the end of June, Sanral’s cash reserves and government’s funds totalling R7.1bn were sufficient to cover operating expenditures and short-term obligations, including debt service, over the next 16 months.

Moneyweb reports further on SANRAL's financial position.

Virginia - I-95 HOT lane contract criticised, but doesn't tell the full story and I-495 express lanes about to open

The Newspaper has published an article critical of the PPP contract between the State of Virginia and TransUrban for the I-95 HOT lane project.

The reasons it cites are:

- It is a 73 year contract offering revenue to the concessionaire with no new lanes being added; 

- Casual carpooling will be dissuaded, as all carpoolers (only HOV 3 – meaning at least three people must be in the vehicle to be eligible) must use an EZ Pass tag to “declare” their presence. Those without will be fined; 

- If more than 35% of lane users are HOV (i.e. not paying tolls), the state must pay for each additional HOV vehicle an equivalent to 70% of the tolls that would have applied The state must pay an amount equal to 70% of the toll that would apply TransUrban if more than 35% of lane users are HOV (i.e. not toll paying); 

- If the State wants additional lanes, it must first negotiate an addition with Transurban. If it decides not to adopt an approach including Transurban, it must compensate the firm. The same applies to additional capacity on specific parallel routes. 

- Two-thirds of the project's financing is backed by taxpayers. Virginia is providing US$71 million in grants and US$242 million in revenue bonds. US$300 million comes from the Federal Government with a TIFIA loan.

Certainly it appears like Transurban has a good deal, although it doesn't look that good if traffic levels are flat, and there is a low volume of users with less than 35% of road users being HOV not toll payers.  That's the risk Transurban carries.  If car pooling takes off (which the article suggests is less likely because of the inconvenience of getting an EZ Pass tag), then it will be positive for the state (and users of the existing lanes), and will be because Transurban has encouraged it.   However, it is also understandable that Transurban gets first right of refusal to build new capacity, and that if taxpayers pay for new capacity elsewhere, Transurban gets compensated.  Such is the environment of privately owned lanes vs. government owned lanes. 

Furthermore, the article is plain wrong in asserting no new lanes are being provided.  In fact there will be some new lanes, and some extensions to existing lanes.  The press release announcing Transurban has won the extension specified these, and after all, it does not cost $940 million to do a HOV-HOT lane conversion.  There is a lot of new construction to make these lanes a more complete corridor congestion bypass system.   If you were paying for such improvements, you wouldn't want the state to be suddenly paying for parallel ones to enable motorists to bypass your improvements (and the tolls you need to recoup the costs).

Meanwhile, WAMU reports that the I-495 express lanes are due to open on November 17th.  The report says:


The two new lanes in each direction spanning 14 miles between the Springfield interchange and the Dulles Toll Road will be E-ZPass only.

Everybody needs an E-ZPass to use the express lanes. Carpools need the E-ZFlex for the toll-free trip. So far the Virginia Department of Transportation says signups for E-Z Pass are going well in the local area.

Stewart Schwartz, the executive director of the Coalition for Smarter Growth, criticises the project claiming that it will result in induced demand, filling up the space from vehicles shifting to the express lanes.  This has long been a criticism of any projects involving building new highway capacity, but in an environment where traffic growth has stabilised and there may be a long term trend of flat traffic, does this hypothesis still apply?  If so, does it matter if the new capacity is being charged to ensure it remains efficiently used?

News briefs: Australia, Florida, Mexico, UK, Virginia

Australian Federal Opposition suggests more tolls

Australia's Federal Shadow Treasurer (Opposition Finance spokesman) Joe Hockey (LIberal Party) has suggested to the Western Australian State Government that it should consider tolling, pointing out how successful it has been in New South Wales.  According to the Australian Broadcasting Corporation he said:

"From a federal government perspective there is limited money available for infrastructure"

implying that states that adopt tolling are more likely to be considered sympathetically for future funds compared to those that do not, presumably because tolling states have shown greater willingness to get motorists to pay directly for their infrastructure.

Both major parties in Western Australia continue to oppose tolls, but how long they can do so is questionable.  There are no toll roads in Western Australia, but there is a growing number of major highways around Sydney, Melbourne and Brisbane with tolls.  Given much of Australia's highway infrastructure is partially funded from the Federal Goverment paid for by fuel taxes, the inevitable question will be whether states which don't seek to recover whatever they can from tolls should be entitled to the same share of revenue from that tax.

Brisbane's new toll road impresses - but it's free for now

Finally, Brisbane's long awaited AirportLink toll road is opened and media reports indicate that motorists are impressed with the time savings it offers.  That bodes well, the more that try it out for free, the more who will think it is worth paying for, so the owners are hoping.  I profiled the road before, noting that the first month it will be completely toll free, and the subsequent two months it will also be free but users will need to have signed up for an account.  After that, tolls will increase sharply in 6 monthly intervals.   Time will tell if this strategy works.  I suspect it will at first, but such rapid inflation in pricing will put people off too soon, and it may be wiser to wait for a year before making such significant price hikes.   Curiously one report states people queued for "hours" to be the first on the new road.  Does the prospect of a new toll road generate that much excitement and patience elsewhere?

Meanwhile the HeraldSun reports that Brisconnections is trying to avoid the mistakes made around the nearby Clem7 toll tunnel, by being friendlier towards customers with better signage and clarity around speed limits (there was a higher than average level of speed fines on Clem7, with some violators claiming they didn't know the speed limit).

Florida to study shifting toll tariffs towards congestion based pricing

TV station WFTV9 reports that in Florida "Taxpayers are funding a study that could help set even higher toll prices during peak hours on the Florida Turnpike, State Road 528 and State Road 417". ..

The Turnpike Authority received a $400,000 grant from the federal government to study the concept in Florida's three metropolitan areas including, Orlando, South Florida and Tampa. 

The reason for the study is to manage demand on sections that are too expensive to widen, but there is local concern about traffic diversion.  Presumably the study should also consider lowering tolls at off peak times to counteract peak tolls, that is assuming toll revenue is adequate to cover infrastructure costs.  No information about the proposed study is on the Florida Turnpike Authority website.

Mexico - Libramiento de Matehuala highway has steady growth in demand

Standard and Poors affirms the BBB debt rating on the Libramiento de Matehuala toll road in Mexico according to Reuters.  The road is a 14.2 km long toll highway between Mexico City and Monterrey which bypasses Matehuala, on the San Luis Potosi-Saltillo highway.

The report continues:

For the 12 months ended June 30, 2012, traffic increased 4.1% due to the stable economic conditions in the country. Also, revenues grew 9.6% because of higher traffic and tariffs in line with inflation, and a favorable traffic mix, with trucks making up almost 60% of the vehicles on the road. We expect traffic to grow at an average rate of 3% throughout the term of the debt, which reflects the road's vital trade link between Mexico and the U.S. as part of the NAFTA corridor.

The report claims it requires minimal maintenance given its construction is in hydraulic concrete.  Demand is highly dependent on commercial activity and it faces toll-free alternatives.  It has been open since 2004 and carries around 8,579 vehicles per day (low for a toll road).  Tariffs are listed here (in Spanish) ranging from US$1.45 for a car to US$7.24 for the largest trucks.  The concession allows tariffs to be increased in line with inflation.

UK - Lukewarm reception for A14 toll idea

I wrote before about the UK Government's plans to help fund one of its largest highway projects with help from tolling.  It would be fair to say that enthusiasm for tolling is weak at best.  Local newspaper Peterborough Today reports that local businesses are concerned about tolling increasing their costs or that motorists will avoid the tolled route increasing traffic on local roads.   The local Chamber of Commerce head says it might be a "necessary evil".  Clearly there is a lot of work to do to convince people that accelerating a long delayed road project is better than not doing anything at all, but more importantly that the tolling plan envisaged wont make traffic worse.  The key will be to demonstrate that people can either choose to drive the existing route (in one form or another) untolled or have an improved route that is tolled.   Meanwhile, anti-road lobbyists the "Campaign for Better Transport" and "Sustrans" are opposed, because they don't believe in major highway improvements at all - suggesting rail freight improvements would be preferable and that building a toll road will induce additional demand.  It would seem that using pricing to manage demand is considered unacceptable if it means new capacity is funded by it.

Virginia - Dulles Greenway credit rating maintained

Owner of the Dulles Greenway, Toll Road Investors Partnership II, has had its credit rating of BBB- confirmed by Fitch according to Reuters.  TRIP II is 50% owned by Macquarie Atlas Roads.


Key points reported about the toll road (which is just over 20km long from the end of the Dulles Toll Road to the Leesburg Bypass in Virginia):
- From 2013 through to 2020 tolls can escalate annually at the highest of (i) CPI + 1% (ii) Real GDP, or (iii) 2.8% per annum;
- Year on year traffic increased 1.8% by May 2012, but tolls had increased by 6.7% in January 2012 resulting in a 10% increase in revenue year on year;
- This is only starting to offset a year on year decline in traffic since 2005, due to a combination of the economic situation and improvements to parallel routes.

News briefs - Florida, Pakistan, Virginia, Chile, Indonesia

Florida talks about tolling a flyover

Tolling a bridge, tunnel, new highway or new lanes is considered to be feasible and worth considering. What about a simple flyover over a junction? Well Florida DoT is considering just that between the I-95 and SR 202 according to WOKV. The idea is that it could be tolled with free flow electronic tolling, but this certainly would test willingness to pay for a relatively small time saving. Certainly outside peak periods I’d be surprised if many paid at all. However, it is consistent with Florida’s policy of resisting increases in fuel taxation in favour of tolling to the extent practically possible. The bigger question is the extent to which tolls could recover capital costs for such a project when the alternative is so readily available (and the price would have to be very low to attract users).

Pakistan isn't ready for congestion pricing yet

Ahmad Rafay Alam in The Tribune of Pakistan, writes about the chronic condition of traffic congestion in major cities in the country.  He notes how the surfeit of road building has not sustained reductions in congestion as vehicle numbers grow and more people drive.  He also notes the lack of support for pedestrians, cyclists and public transport.  Whilst slightly off topic for this blog, I'll particularly note that pedestrians are typically the poorest relation in urban transport policy in developing countries.  It can be a dominant "mode", but it is seen as a mode of the poor and a way of commuting that shouldn't be encouraged.  Wrong.  Since most trips in cities are short trips, it is a perfectly good way of getting around for distances of less than 1km.  It is a key to avoiding traffic congestion and tying up public transport networks with such trips.  It means ensuring footpaths are adequate and clear of too much obstruction. It means having crossing places on roads, including traffic signal crossings for pedestrians, that are enforced and clear.  Building roads or metro lines or bus rapid transit without recognising that everyone is a pedestrian, is going to start a trend that is harder to reverse.  A trend that major modern cities are now trying to reverse. 

The article notes that congestion charging could be a possible solution.  Indeed it could, but without good reliable means to enforce against vehicles that refuse to pay, it is impossible.  Pakistan is still some way away from having the basic information systems and regulatory requirements across vehicle (and vehicle owner) identification, before it can implement congestion pricing.  The first step should be a national vehicle ID programme., with reliable updates of ownership details and means to enforce failures to register or update details.

Virginia announces Transurban to extend I-95 toll lanes

The Washington Post reports that the state of Virginia "has made a formal agreement with private partners to build 29 miles of high-occupancy toll lanes along Interstate 95. Construction is scheduled to begin very soon and should be done by the end of 2014."

"the agreement with 95 Express Lanes LLC, a joint venture between Transurban DRIVe and Fluor Enterprises Inc., covers construction and operation of 29 miles of express lanes on I-95 from Garrisonville Road in Stafford County to Edsall Road in Fairfax County."

The full press release is here.   Key facts from the press release are:

The key components of construction include:

• Extending nine miles of existing HOV lanes from Dumfries to Garrisonville Road in Stafford County, which alleviate one of the region's worst traffic back ups
• Expanding existing HOV lanes from two to three lanes for 14 miles between Prince William Parkway to vicinity of Edsall Road on I-395
• Making operational improvements to the existing two HOV lanes for six miles from Route 234 to Prince William Parkway
• Adding eight new or improved access points to and from HOV/HOT network at key interchanges
• Expanding and adding commuter parking lots

Financial and tolling highlights:

• Project will cost $925 million with 95 Express providing $854 million in funding. This includes an anticipated TIFIA loan of $300 million, which is expected to be available in November 2012
• VDOT will provide $71 million in public funds, a lower amount than the original estimate of $97 million, due to lower-than-expected financing costs at closing.
• Tolls will be collected electronically using E-ZPass, including the new E-ZPass Flex, eliminating the need for toll booths
• HOV-3+, vanpools, motorcycles and buses travel free. Vehicles with one or two people will pay a toll to use the express lanes or ride the general purpose lanes for free. Tolls will vary based on real-time traffic conditions to manage the number of toll-paying customers who choose to enter the express lanes. Most customers are expected to pay to use express lanes only a couple of times a week when they need a faster trip, with a typical trip during rush hour costing between $5 and $6.
• Project will fund a safety and enforcement program including crews to assist disabled vehicles, incident detection technology and more Virginia State Police. The program is expected to significantly reduce HOV violators. 

 Maps are available here.

Brookfield Infrastructure buys part of Chilean toll road

Canadian Business reports that Canadian firm Brookfield Infrastructure  "and its institutional partners have signed a deal to pay C$590 million (US$589 million) for the 45 per cent stake in the Autopista Vespucio Norte toll road in Chile that they do not already own."  It raises the shareholding to 51%.

Commenting on the road, the firm said   "This Chilean toll road is a key artery in the ring road network surrounding Santiago, and it benefits from an attractive revenue framework whereby tolls escalate annually at inflation plus 3.5 per cent".  In addition it has had compounded annual growth in traffic of around 8% for each of the past three years.

The highway is essentially Santiago's primary northern ring route and is considered by tolling specialists to be very efficiently run, with electronic free flow tolling, and maintained to a very high standard.

RTT News claims that Brookfield is in discussions with Abertis to "create a joint venture to acquire a 60% interest in Obrascon Huarte Lain Brasil S.A. for approximately $1.7 billion, comprised of $1.1 billion of equity and $600 million of assumed liabilities."  Obrascon being a major Spanish toll road concession holder, with roads in Spain, Brazil, Mexico, Chile, Peru and Argentina.   Abertis and Brookfield are already bidding for Obrascon's Brazilian toll road assets. 

Bakrie wants out of toll road business in Indonesia.

Long standing Indonesian business consortium Bakrie Group has announced it is seeking to sell its toll roads business according to the Jakarta Post.

The report states the firm:

"wanted to sell its PT Bakrie Toll Road subsidiary for at least Rp 1.3 trillion (US$137.8 million), an amount equal to the subsidiary’s equity, to settle debts"

Its prime assets include the 35-km Kanci-Pejagan toll road between Cirebon, West Java, and Brebes, Central Java which has been criticised by the Public Works Minister Djoko Kirmanto for being of "poor quality".  Revenues are not particularly good, but the report concludes that this is largely an effort by the large investment firm, that has ties going well back into the Suharto era, to realise assets to pay down its debt burden and refocus the company (which is predominantly a property development firm) on its core business.

Indonesian state toll road company Jasa Marga has start to the year

The Jakarta Globe reports that state owned toll road operator Jasa Marga had a 30% increase in revenues in the 6 months to July 2012.   Part of this is due to an increase in traffic, with an over 11% increase compared to same period last year attributable to rising car ownership in Indonesia.  It also increased toll rates in Jakarta and Surabaya in response to inflation of around 5% per annum.  However, the result is distorted by Jasa Marga's sale of its shareholding in private toll road operator Citra Marga.  Jasa Marga is responsible for 13 toll roads listed here, plus another eight of which it has a partial shareholding.

Jasa Marga's corporate profile describes it as follows:

Founded on 01 March 1978, Jasa Marga is the pioneer in the development of toll road in Indonesia. With 32 years of experience, the Company remains the market leader in the country's toll road industry. Jagorawi (Jakarta-Bogor-Ciawi) Toll Road is the Company's toll road that marks the milestone in the historical development of Indonesian toll road industry. To date, the Company has operated 531 km toll road representing 72% of the total operating toll roads in the country.

News shorts from Florida, London, Portugal and Virginia

Florida

According to Miami New Times, tolls on all state toll roads in central Florida are rising by 25% on average, an increase intended to match inflation over several years. This has provoked considerable outrage by motorists. Ire seems to be focused particularly on the Miami-Dade Expressway Authority which is using the toll revenue to build more roads. It is responsible for five toll roads, three of which have been converted to fully electronic free flow operations. A group called RollBackTolls has set up a website opposing the strategy of the Authority. The organisation doesn’t seem to oppose tolls per se, but is more of a group supporting directing some of that revenue towards public transport subsidies. That’s an interesting variation on those who oppose tolls elsewhere, who tend to want them abolished and don’t have any interest in tolls paying for other modes of transport. However, I suspect the group will use its name to generate support from those simply opposing toll increases.

If the increase is still linked to expenditure on the tolled network it is difficult to argue against, especially if it clear that the additional capacity is economically justifiable.  Given the state tolling authorities are bound to reinvest revenue in new roads, the risk is that this continues in perpetuity, rather than generating a reasonable rate of return for the owners as an investment, because at some point it wont be worth it to make major investments in new capital.

London

Fleetnews reports that Transport for London is consulting on amending its current 100% discount for environmentally friendly vehicles, by lowering the threshold for low emission vehicles from those which emit less than 100g/km to 80g/km. The current standard is 100g/km and meeting the Euro 5 standard. There is pressure to reduce this further, in part to increase revenues, but also to keep incentives for more environmentally friendly vehicles at the cutting edge of low emission vehicles.

This discount replaced the Alternative Fuels discount in 2010, which had been criticised for not being based on objective environmental criteria. The latest ultra-fuel efficient petrol and diesel cars having lower CO2 emissions than some older hybrids. Of course an obvious solution, and complication, would be to apply a lesser discount to the vehicles above 80g/m. At the moment it is all or nothing, and if the congestion charge is to maintain this secondary environmental objective, would it not make sense to offer perhaps a 50% discount for those currently eligible that will no longer be so? Or are the administrative costs of this confusion such that it is simply not worth it?

Portugal

Now I’m an advocate, in principle, although not evangelical about, the switch of toll roads to fully electronic free flow tolls. It saves time, fuel and makes a toll road trip akin to an untolled trip, with the minimum fuss involved in payment. However, what happens when motorists are in a foreign country and face trying to find out how to pay for such a road when signage and information is not readily available. This is the situation in Portugal according to the Daily Mail.

The road in question is the A22 from Castro Marim (near the Spanish border) to Lagos on Portugal’s southern coast. The scenario is that rental car firms do not advise of the toll roads, how to pay or a facility for motorists to pay unless you leave credit card details (in which case the rental car company will pass on the tolls plus administrative charges – which risks being potentially high). However, it is clear once on the roads that there is a toll – just no obvious means to pay. Rental cars and tolls are a perennial problem. Ideally, rental car firms in locations with regular toll use should simply have accounts with tags for the toll roads, and when finally billing the customer the toll transactions can be calculated and added onto the trip. Otherwise, there needs to be clear information in advance of toll roads of ways of paying by phone, for example. No doubt incentives to do this are mixed. Toll roads may make more money from chasing up violators than spending money on information so tourists know how to pay, but I suspect in the long run it is far superior to have a relationship with rental car companies that means motorists find it easiest to use the toll roads. 

Virginia

Location of Pocahontas Parkway

The West Australian reports that Australian toll road concessionaire, Transurban, has written down its investment in the Pocahontas Parkway in Virginia, USA, by A$138.1 million (US$140.7 million).   It has a 75% shareholding in the road.   The reason being that forecast growth in traffic is not expected to eventuate, as it was predicated on substantial property development that has now been shelved due to the state of the property market.   This concession lasts till 2105 (yes that is a year) and the Sydney Morning Herald claims it originally cost $US611 million ($A815 million) in 2006 values.

It reported that the original deal was that Transurban contributed $US191 ($A255 million) in equity and gained 100 per cent control of the Pocahontas Parkway.  Of the $US611 million of funds for the acquisition, $US487 million was used to pay Pocahontas debt.

In effect, the equity stake is now substantively written off.

Curiously, the Sydney Morning Herald also has a tongue in cheekreference to a claim by some that the road is “haunted”.

Subsidised toll roads and HOT lanes in Virginia

The Washington Examiner reports that the Governor of Virginia is proposing using taxpayers’ money to kickstart four toll road projects in the state, on the basis that it makes the projects viable for the private sector.

The projects are:

-       VA17 Dominion Boulevard;

-       US460 89km expressway;

-       Second Midtown Tunnel;

-       I-95/I-395 HOT Lanes.

The average subsidy per project is 25%, so that private concessionaires are expected to raise the remainder and charge tolls to recover the cost. 

The initial reaction may be that toll roads should be viable in their own right.  Yet if there remain other road related taxes (e.g. fuel taxes), it is quite legitimate to count state revenue from such taxes when such roads are being used as being able to contribute towards the project’s costs.  Nevertheless, I have yet to see such a deliberate “shadow toll” approach used that connects fuel taxation to particular projects.

However, as tolling is to be welcomed as a source of financing, the viability and economics of the projects may be questioned.

TollRoadsNews has more on the projects, and its own commentary.

Is the Washington Times completely wrong on toll roads?

The Washington Times editorial on 10 December is damning of the Virginian Governor’s policy on using private finance and tolls to improve Virginia’s highway infrastructure. It is easy to dismiss this as a kneejerk reaction to tolls, which advocates of tolling often observe. Some are suspicious that private finance can lead to corruption, and that users can be ripped off.

However, is there some truth behind what the newspaper is saying that those in the tolling/PPP sector need to take on board?

The editorial implies that because Governor O’Donnell announced his plans in the presence of various engineers, investors and consultants involved in the sector, that this was somehow suspicious as such firms will make money from the plans. It would be if there were not open competitive tendering and strict auditing of such procedures. Actually if the private sector was largely set free to initiate and build routes itself, there shouldn’t be a problem, but this is neither the plan, nor what the Washington Times endorses. Transparency is important and I would hope the Governor would ensure that is the case, and the state legislatures should also expect it. The phrase public/private partnership should not be a euphemism for dodgy deals. What is important is for the role of the private sector to be clear and open.

My key criticism is in the establishment of a state infrastructure bank, which implies that road projects can’t be financed by private sector investment at all (which raises the real question as to whether the projects are worthwhile in the first place). If projects are worthwhile they should be attractive to the private sector in raising their own finance and for the costs to be recovered over the long term. There is a separate value in setting up an independent funding body to bypass politically motivated roads funding decisions, but that isn’t the matter here. It should be what Virginia pursues, as it is international best practice.

However, the editorial criticism of the lease of HOT lanes is less well founded. Converting a shoulder into a lane is cheap, but the operation of HOT lanes provides a choice for motorists. The only criticism I would have is that ultimately additional capacity should be added, financed by the lanes, if viable. Finally transponders and camera systems will not track drivers’ every move. Use of a single lane is hardly an infringement on privacy. HOT lanes are a step in the right direction.

Tolling is a market oriented concept, because it is about user pays. Charging for usage of a piece of infrastructure is hardly big government oriented. The claim in the editorial that it is a tax hike is preposterous, as it is only right that those who use highways pay for them. Finally to claim that expanding highway lanes is the only true solution to congestion is part of the point. Basic economics tells you that eventually pricing needs to be combined with infrastructure construction. It would be a significant breakthrough if the Washington Times understood that the value of HOT lanes is in exposing motorists to the laws of supply /demand related to roads, but are only a first step towards moving towards full network road pricing.