Lean Management of Toll Roads

Enterprising Roads: Improving the Governance of America's Highways
Enterprising Roads: Improving the Governance of America’s Highways

Washington State DOT conducted a Toll Division Operational Review in November 2013.  This report is quite interesting (and reality based, forecast traffic growth has been scaled back quite a bit).

There is further discussion by  Matt Rosenberg at Social Capital Review: WSDOT Report Muses on Private Transport Partners, who notes that Enterprising Roads was cited:

Drawing on Levinson’s paper, WSDOT says, “the theory…is that roads should be managed by independent enterprises that are charged with a mission of providing service to customers” like other “network utilities” which may be privately run but government-regulated, such as water, electric, pipeline, natural gas “and virtually all telecom and cable” systems.

In its report WSDOT stops far short of endorsing a private state transportation utility but does accent Levinson’s view that “the organizations that manage roads should be able to finance road construction and maintenance through the sale of bonds, without requiring direct consent from higher political authorities.” A variety of related alternatives are mentioned by WSDOT including “a public-private partnership contract involving toll rates where the contract holds the regulatory provisions including items such as a toll structure and associated performance criteria.”

Reaching into Levinson’s paper, the WSDOT report cites the New Zealand Transport Agency as one of the most full-fledged actual working examples of a publicly regulated, privately managed road utility – and says that data show its approach “has delivered large efficiency gains without compromising service levels.”

WSDOT’s public-private partnership program has for several years quietly inched the ball downfield on the idea of transportation public-private partnerships but not gotten far with that approach on major road projects due to legislative opposition.

The new WSDOT musings about a privately owned state road utility, regulated by the state, come as the Washington legislature continues to bog down on what is seen by key stakeholders as a much-needed state transportation funding package. If passed in the next few months a statewide transportation funding deal would probably be to the tune of $10 billion or $12 billion. Business, labor, local and regional governments in Washington state are vocally and energetically lobbying for it. Yet the package by all accounts will almost certainly feature at its core an increase in something that WSDOT correctly says in its new report “has been on a deep downward slide from some time” in terms of effectiveness. That’s the state gas tax.

The agency tolling division report states, “The purchasing power of the state fuel tax is declining. The fuel tax is a flat tax on each gallon sold. It is not indexed to inflation, and does not rise as the price of fuel goes up. In addition, Washington residents are driving fewer miles per capita, vehicles are becoming more fuel efficient, and new federal fuel efficiency requirements and the emergence of electric vehicles will accelerate this trend.”

Only eight of every 37.5 cents collected in state gas taxes per gallon of gas sold in Washington is allowed to go to state highways and ferries “including maintenance, preservation, safety improvements and congestion relief.” Adjusted for inflation based on a 77 percent hike in the construction cost index since 2001, state gas tax revenues have actually dropped by nearly half since then and related revenue projections for 2007-2020 revised downward by $3.7 billion as a result, WSDOT reports.

It is worth noting that user fees are not a left-right thing (or not for most of the political spectrum). They are supported by both Greens and Libertarians.  This is an efficiency notion. We should all want the right amount of travel, not more, not less. (We may of course disagree on how much is efficient, or how to weigh externalities, but we hopefully agree that some things are just dysfunctional.) We might also want beneficiaries to cover their costs, especially if they can, which is in general the case with roads.

It is also worth noting that Road Enterprises need not be privately owned (they aren’t in Australia, New Zealand, or Vancouver), they can be publicly owned corporations. The key is political independence. This needs to be done carefully. The Port Authority of New York  is an unfortunate example of pseudo-independence where politics runs amok without accountability. There are better examples.

Also there are many notions of equity in transportation, and not all of them can be satisfied simultaneously, and there is no agreement about which is morally preferable. Beneficiary pays is certainly a reasonable idea that aligns equity with efficiency. The question to be asked is “does the new policy improve things compared to the baseline”, not whether it is perfect.