Strapped for highway funds, Arizona considering tolls

By Glen Creno

Pay-as-you-go roads have eased congestion on clogged highways and brought states much-needed revenue.

But toll roads, often created through partnerships with private business, also come with heavy opposition and battles over control.

Lawmakers will have to weigh the benefits and disadvantages as they consider several new bills that if passed would add Arizona to a growing list of states turning to tolls roads to help pay for rising transportation costs.

"This isn't going to solve all of your problems," said Leonard Gilroy, director of government reform for the Reason Foundation, a Los Angeles think tank. "It's going to apply to a slice of your transportation needs, largely in urban areas where you've got a lot of growth."

Arizona's relentless growth and rising costs of construction and maintenance is stretching the limits of traditional financing based on fuel taxes and fees, forcing officials to consider alternatives such as toll roads. The need is especially critical as the state develops a long-term plan for transportation improvements that could cost billions of dollars. The state is at a crossroads of changing its method of transportation funding, Gilroy told the board of the Greater Phoenix Chamber of Commerce in November. Foreign companies are pouring money into other states such as Texas and California, and Arizona should position itself to rake in money from public-private partnerships, he said.

Key legislators have been reluctant to approve toll roads because they place an additional tax on residents. A new effort to create a statewide transportation plan and Gov. Janet Napolitano's push for transportation improvements could change that.

The option of creating toll roads "has to be in the mix," said Marty Schultz, a member of a coalition of business interests pushing for the statewide transportation plan. "We can't stick our heads in the sand."

The benefits

Deals with private industry to finance, build and operate new or existing highways can take financing pressure off of state budgets. Companies also can build roads faster than governments, advocates say.

Facing a $1.8 billion highway construction shortfall, Indiana in 2006 leased its Indiana Toll Road for $3.8 billion to a joint venture for 75 years. The companies involved are owned by an Australian developer and toll-road operator and a Spanish toll-road and parking-lot operator.

Indiana Gov. Mitch Daniels said the tollway was losing millions of dollars every year and the lease provided ready cash for more than 200 transportation projects.

"Leasing it extracted the equity in the project," said Thomas Gresik, an economics professor at the University of Notre Dame. "There were no gains coming out of the toll road as it stood before."

Besides generating money, toll roads can offer ways to manage congestion. They can fund new highway construction, and the cost of the tolls can prompt drivers to pursue other routes.

"In a fiscally restrained environment, toll roads offer a solution to increase capacity," said Christopher Poe, director of the Center for Tolling Research at the Texas Transportation Institute. "Arizona, Texas, other Sun Belt states, you're going to need all of these (financing) tools to (address) the transportation needs that these states have."

The drawbacks

Despite their benefits, toll roads are controversial.

In Pennsylvania, a dispute rages over turning Interstate 80 into a toll road. Angry crowds have turned up at meetings run by the Pennsylvania Turnpike Commission, which would operate the toll road.

Elsewhere, opponents in Texas, Indiana and Illinois have been critical of those states' handing of toll roads.

People oppose toll roads primarily because they are viewed as double taxation. They feel their taxes already paid for a road that they now will have to pay to use.

"This is not free markets applied to roads," said Terri Hall, regional director of the anti-tolling San Antonio Toll Party. "These are state-sanctioned monopolies. This is big business teaming up with government to stick it to the little guy."

John Enright, an escrow officer who commutes between northeast and downtown Phoenix, lived in Buffalo, N.Y., and used the toll roads there. He said the toll roads were always clogged and even systems with auto-pay scanners required drivers to slow to a crawl so devices in their cars could be read by overhead scanners.

"The drive time in Phoenix already is a pain," he said. "It would be devastating if they put tolls where there are heavy morning commutes."

Another problem with toll roads is in the deals themselves. When private companies take over highways, states give up some of their control. There also is backlash about foreign ownership of U.S. infrastructure.

A consortium of private interests built a $130 million toll road on California 91. But the contract carried a non-compete clause that barred new roads within 1.5 miles of both sides of the toll lanes. The toll operator objected when the state wanted to expand. The dispute was settled when the Orange County Transportation Authority bought the toll road for $207.5 million.

Poe said it's difficult for government to write a contract with a toll-road company that will predict all of the issues that will crop up over, say, a 50- or 75-year term. Government needs to retain its right to build whatever roads it deems necessary, he said, but balance that with the pressure new or expanded roads would put on profits of the toll roads.

"The public sector can keep as much control as they want through that concession agreement," he said. "If they give up too much, shame on them."

What's ahead for Arizona

Arizona legislators considered several toll-road bills last year, including one to convert the Valley's carpool lanes into pay lanes.

Two key proposals died in committee. Not enough lawmakers were willing to take up the pay-to-drive issue, but similar measures are being considered this year.

"Too many people consider roads an entitlement and resent paying for roads and road maintenance," said Curtis Lueck, a Tucson transportation consultant. "Frankly, if our legislators continue refusing to raise gas taxes and user fees, tolls become an attractive option - maybe the only option, short of stopping growth."

Polls say the public would rather pay higher gas taxes than use pay highways. But money for new roadways has to come from somewhere. Experts acknowledge that the public is going to pay, either in taxes or tolls. The debate is on which is most appropriate.

Eric Anderson, transportation director of the Maricopa Association of Governments, expects to see more innovations in transportation financing. For instance, he thinks that in the next couple of decades the gas tax will be replaced with a vehicle mileage tax.

Anderson said there is a mistaken notion in the state that toll roads can be the easy answer to Arizona's transportation-funding issue.

"It will not solve the crisis," he said.