Back in March the portion of the Texas SH 130 toll road that was developed as a public-private partnership (P3) concession filed for bankruptcy, since toll revenue had not recovered enough post-recession to cover its debt service. And last month, the SH 130 Concession Company filed a bankruptcy plan in federal court, transferring ownership to its major lenders. These events have triggered a number of responses, some based on limited knowledge of toll concessions and others by ardent opponents of tolling, per se.
In the first category was a piece in industry journal Engineering News-Record, “When Toll-Road Flows Fall Short.” While acknowledging that the Texas toll road opened during the Great Recession, it added that “SH 130’s disappointing traffic and revenue performance is consistent with other toll projects that have involved private financing.” In evidence, it cited only Virginia’s Pocahontas Parkway, along with several bankruptcy filings in Australia. But that was hardly a balanced portrayal of the outcome of recent U.S. toll projects.
Far worse was an Aug. 23rd piece in a toll-hating online publication calledTheNewspaper.com. Its article on the SH 130 filing claimed that “Nearly every high-profile tolling project has failed,” citing the Indiana Toll Road, California’s 91 Express Lanes, San Diego’s South Bay Expressway, and the three toll roads of the Transportation Corridor Agencies (TCA) in Orange County, CA. As almost everyone realizes, the 91 Express Lanes are an economic and financial success, never went bankrupt, and were purchased by the Orange County Transportation Authority only to get around an overly restrictive non-compete clause (the likes of which nobody is doing any more). As for the TCA toll roads, they never went bankrupt, were refinanced successfully, and have had solid increases in traffic and revenue post-recession.
There have been several bankruptcy filings by P3 toll projects in this country, but those projects all share several characteristics. First, they were financed based on traffic forecasts made prior to the Great Recession, which failed to account for the impact on traffic and revenue of a severe recession. Second, there were no taxpayer bailouts of any of them. Each was financed via revenue bonds and loans plus developer equity investments, with only the investors at risk of losses, not taxpayers. Third, the equity providers in each case lost their initial investments, which as sophisticated investors they knew up-front was a possibility.
As for the claim that “nearly every high-profile tolling project has failed,” that is easily shown to be false. First, there has not been a single failure of an express toll lanes project—whether financed by the private sector or by a state DOT. In fact, a number of these projects are having to raise their peak-period tolls above the levels in their traffic and revenue forecasts in order to maintain the uncongested traffic flow promised to their customers. Among those in the news recently are the I-95 Express lanes in Miami, the I-85 Express lanes in Atlanta, the I-110 Express lanes in Los Angeles, and the I-405 Express Lanes in Seattle. Pew Charitable Trusts’ Stateline carried a good article on this phenomenon this week, “Express Lanes Have a Popularity Problem.”
Another piece of evidence is the market to acquire investor-financed toll roads. To be sure, nobody bid for the failed Pocahontas Parkway in Virginia or the Southern Connector in South Carolina, but those were projects for which enough demand really was not there to cover their capital and operating costs. By contrast, both the bankrupt Indiana Toll Road and the struggling Chicago Skyway have such good long-term fundamentals that both concessions were bought last year by consortia of pension funds for significantly more than the original concession deals—$5.7 billion for ITR and $3.8 billion for the Skyway. Even the sometimes-troubled Dulles Greenway in Virginia seems to be prospering as of 2016, to the point that 50% owner Macquarie Atlas Roads is seeking to purchase the other 50%.
So when anti-toll groups such as the Alliance for Toll-Free Interstates make claims such as “toll roads have a track record of failure,” don’t take their word for it. Instead of listening to what interest groups say, watch what investors do.
(This article first ran in the September issue of Surface Transportation Innovations)
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