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Opinion The true cost of Maryland’s toll-road plan

Opponents of a Maryland Department of Transportation plan to add toll lanes to part of the Capital Beltway and Interstate 270 rally in Rockville in June. (Katherine Shaver/The Washington Post)
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Jeremy Mohler is the communications director of In the Public Interest.

There are many reasons to oppose Maryland Gov. Larry Hogan’s (R) $6 billion plan for new toll lanes on part of the Capital Beltway and Interstate 270, from environmental concerns to a recent state study that revealed the lanes wouldn’t lessen traffic. But the most common question in politics is “How are you going to pay for that?” The answer should alarm all Maryland residents.

The answer is the same as it would be for any other road, school building or other public infrastructure project: out of our pockets. Hogan has claimed that the lanes would have “virtually no cost to taxpayers,” because the 50-year deal the state would sign to finance and build it — called a “public-private partnership” — would be paid for using private financing. That’s not true.

Public-private partnerships — a relatively new way to finance infrastructure — are not free money. Any financing arrangement or equity contribution from the private investors must be paid back using the very same sources that fund all infrastructure: taxes, tolls and/or user fees.

They’re also more expensive — often vastly more so — than financing projects the traditional, tried-and-true public way. The private investors lined up to finance the proposed lanes wouldn’t be interested if they weren’t going to make high returns on their investment. And they’re very interested. Transurban, the Australian lead investor, sees the toll-road project as a potential advertisement for politicians visiting D.C.

Just ask Indiana. A toll-road project in Indiana launched by then-Gov. Mike Pence (R) in 2017 ended up costing the state at least $137.3 million more than if traditional public financing had been used. And that was calculated before the private investors went bankrupt during construction, forcing the state to take over the project at even more expense.

Or Long Beach, Calif. A subsequent state study found that a courthouse built in 2013 using private financing may have been cheaper by as much as $160 million if it had been built the traditional way.

Or Australia. A Transurban tunnel project there has ballooned to 11 billion Australian dollars (or about $8.1 billion), nearly double the initial estimate, including 4 billion Australian dollars in cost overruns because of utility relocation costs, delays and lack of attention to environmental impacts associated with contaminated soil.

Or even the state of Maryland itself. We’re still waiting to hear how much more expensive the $2 billion Purple Line project will be after the original investors sued and walked away from the public-private partnership because of delays and cost overruns.

That’s why the dollar figures on the proposed toll-lane project are so staggering.

The toll for a rush-hour 12-mile trip from the George Washington Parkway to Interstate 370 at Shady Grove could be $50. It could cost $100 to go from Frederick to the George Washington Parkway in Virginia. One way. Transurban has already said that these estimated rates are not high enough.

The Washington Suburban Sanitary Commission estimates that utility relocations would cost upward of $2 billion, far higher than what’s been projected by the Maryland Department of Transportation (MDOT).

On Nov. 3, the Board of Public Works — which includes Hogan — approved an additional $45 million for the engineering consultant assisting the state with its plan. MDOT says that money will be paid back through fees paid by the investors who will eventually sign the public-private partnership — though Transportation Secretary Gregory Slater has said that the total $135 million that’s been paid to the consultant is already committed elsewhere to repay previous expenditures.

If all of that weren’t enough, it remains unclear how much revenue risk the private investors would truly bear in the final contract. Public-private partnerships are notoriously complex arrangements, stretching for hundreds of pages. It appears that Transurban and its team would receive rate covenant shortfall payments from MDOT or through increased tolls, fees, escalations or other charges. It would also be compensated for external events that cause or may cause revenue drops, such as changes in the law or another pandemic.

Hogan has repeatedly said that he wants the toll lanes to be “shockingly innovative.” By claiming that Maryland residents won’t have to pay anything for the project, he’s being shockingly deceptive.