Don’t You Hate It When the Euro-Weenies Are More Capitalist than We Are?

You wouldn’t know it from the myopic punditry regarding the transportation debate in Virginia, but a revolution in transportation financing is sweeping the world. According to Kenneth Orski, editor/publisher of Innovation Briefs, tolls and privatization represent the future of highway construction funding.

Quasi-socialist Europe is way ahead of the United States. Writes Orski in his May/June issue:

In Europe, virtually all major toll road authorities have been privatized. Italy’s state-owned toll authority, Autostrade SpA, was sold to private investors in the late 1990s (and will soon be merged with Spain’s Abertis, creating a vast 6,700 km (4,200 mile) network of private toll roads throughout Western Europe). In France, the three largest toll enterprises in which the government had retained controlling interest, Autoroutes Paris-Rhin-Rhone (APRR); Societé du Nord et de l’Est de la France… ; and Autoroutes du Sud de la France… were put up for sale in late 2005; their privatization is currently in process of being completed. By the end of the year, 8,175 km (5,109 miles) of France’s toll roads will be in private hands, according to the French toll road association, AFSA. In Spain and Portugal, all major toll roads are likewise in private hands.

As far as I know, House Speaker William J. Howell R-Stafford, is the only elected official to be actively pushing privatization. So far, the idea has been a non-starter in Virginia. No question, a number of prickly accountability and governance issues need to be addressed. But as other nations gain experience with privatization, Virginia could learn from them. Meanwhile, Orski cites these practical benefits of privatized roads:

Private sector involvement may also benefit the public interest in other ways. Private toll road operators are likely to bring a higher standard of customer service, achieve more timely and cost-effective completion of planned improvements and introduce a higher rate of innovation into their operations. They offer access to private equity capital which can speed up project delivery by many years. And they can raise toll rates to control demand or fund needed improvements without being influenced by fear of a negative political reaction (although they will be constrained by the terms of the toll rate-setting schedule in their concession agreement).

The proper role of the state is to oversee the transportation system: to ensure that roads and rail facilities are being built and maintained to proper service and safety standards, to ensure that all pieces of the system fit seamlessly together, and to match transportation capacity with human settlement patterns. There is no compelling reason, other than inertia, for the state to be in the business of operating the system.


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3 responses to “Don’t You Hate It When the Euro-Weenies Are More Capitalist than We Are?”

  1. Ray Hyde Avatar

    In Italy a private company is proposing to build a bridge from Sicily to the Coast. It is hugely controversial because of the picturesque area, size of the bridge, and the fact that it is in an earthquake zone.

    They will probably get the bridge, maybe even on time and on budget.

    So, suppose a private company wants to build a road, and they have the data to show that it is economically effective. Suppose that some groups (Like the Ferry operators in Italy) oppose the project, claiming it will promote development, etc. And suppose that Road builder/operator A forms a joint venture with Home Builder B to guarantee that the road capacity matches the settlements / businesses that will use it. Home Builder B has the data to show that the homes have a sufficient market to sell, and maybe even options on the homes already signed.

    Agreements have been reached privately on most of the right-of- way, but there are a few holdouts.

    Considering Kelo and the idea that the state would rake in millions from the combined developments, what should be the states role in mediating the controversy?

  2. Toomanytaxes Avatar
    Toomanytaxes

    It’s been traditional to grant public utilities (e.g., Verizon and Dominion Power) eminent domain authority to construct necessary facilities. While they don’t use this power often, it’s still there.

    One might argue that a private road-builder could, under certain circumstances, be similar to a public utility, such that the state might permit the builder-operator the right of eminent domain. Again, we’d need appropriate circumstances. For example, assume that a road-builder/operator were proposing to build mandatory truck lanes on I-95 (similar to the truck lanes on the NJ Turnpike). Further assume that this met with the approval of the Commonwealth. This might be an appropriate case for the use of eminent domain. This situation seems different from Kelo. I’m not sure where I come out with respect to the hypothetical situation proposed by Ray Hyde.

  3. Ray Hyde Avatar

    I guess this is just too hard.

    All I was trying to point out was that just because the state gets someone else to pay, doesn;t mean their problems are over.

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