Private toll roads may be in state's future
Miami Herald | September 24, 2007
Imagine Alligator Alley in the hands of private, profit-minded investment bankers instead of state bureaucrats.
Imagine regular, consistent toll increases over the next 50 years.
The 78-mile trip from Sunrise to Naples costs $2.50 cash ($2 for SunPass customers). Imagine that rate rising to $3 next year, to $4.50 by 2012 and $6.75 within a decade.
It's not so farfetched.
Florida is in another budgetary down cycle.
The unsustainable merry-go-round of rising real-estate values and spiraling new construction has finally stopped spinning cash into state coffers. Investment bankers and their powerful lobbyist friends are circling.
Faced with multibillion-dollar shortfalls, Gov. Charlie Crist is considering selling long-term leases on such valuable state assets as the Florida Lottery and toll roads.
''Everything is still on the table,'' said Pamela Griffis, a spokeswoman for Transportation Secretary Stephanie Kopelousos. ``Nothing is set in stone, but we're looking at everything.''
For now, Florida's Turnpike and its progeny, including the Sawgrass Expressway, are off limits. But Alligator Alley, the Sunshine Skyway, the Pinellas Bayway and the Beachline East Expressway are in play.
Those four facilities, combined, generate more than $45 million a year in tolls.
Basically, the governor is looking for large upfront sums of cash, and the vendors are looking to maximize near-monopolistic revenue streams for 35 to 99 years.
Based on public records obtained from the governor's office, some investment bankers have already been running the numbers.
A 50-year lease on Alligator Alley, at the toll rates described above, could be worth $477 million. Leaving the tolls to pure market rates could generate a deal worth as much as $1.3 billion over the long haul.
The Sunshine Skyway could generate $540 million to $1.33 billion, depending on the maximum allowable tolls over 50 years, and the Beachline East could be worth $139 million to $321 million.
While it is more common in Europe, Asia and Latin America, privatizing existing cash-generating infrastructure assets is still a relatively new phenomenon in the United States.
Chicago sold a 99-year lease on the Chicago Skyway, a 7.8-mile elevated toll road, to a consortium of Spanish and Australian investors in early 2005 for $1.8 billion.
Last year, Indiana sold a 75-year lease on its 157-mile toll road to the same consortium for $3.85 billion.
Chicago used its windfall to pay down debt and cover other budget shortfalls. Indiana is planning to use its money to build new roads and widen existing ones over the next 10 years.
It didn't take long for critics to start picking both deals to shreds.
Some argue that aggressive toll hikes are going to inflict disproportionate pain on low-income drivers.
Many say the governments woefully undervalued the infrastructure. A Merrill Lynch analysis of the Indiana deal found that the private investors would break even in year 15 and reap more than $21 billion in profits over 75 years.
A FEW GOALS
It's too early to tell what will happen in Florida.
But let's assume, for the sake of argument, that Crist is willing to negotiate a long-term lease for Alligator Alley.
Based on the early experiences in Chicago, Indiana and elsewhere, here are a few public policy goals worth setting from the outset:
• Make the selection and negotiation processes transparent and accountable.
• Make all contracts contingent on legislative approval.
• Lay out the worst-case toll-schedule scenarios for the entire 50-year lease before lawmakers ratify it.
• Set up a mechanism for the state to share in profits over a certain, preset ceiling if the vendors exceed a preset profit ceiling.
• Create measurable operation and maintenance goals and incentives to guarantee accidents are promptly cleared and the roads are kept in top shape.
• Public safety must trump profits, especially during hurricane evacuations and the aftermath. Who eats the cost for suspending tolls and who decides when to reinstate them, the state or the vendor?
• Assure that the private vendors' control over the toll road doesn't lead to unintended congestion elsewhere. Some vendors have been known to enforce the fine print of noncompetition clauses that penalize or prohibit local governments from building and expanding nearby road networks.
It's probably not much of an issue on Alligator Alley since it crosses the Everglades. But it's a serious policy matter worth addressing now, rather than later.
Hold on. It's going to be a wild ride through the next special session.
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