Jeremy Mohler is a member of the strategic communications team at In the Public Interest.
Maryland Gov. Larry Hogan’s (R) $9 billion plan to add tolled express lanes to the Capital Beltway and Interstate 270 is flawed.
Maryland transportation officials are proposing to borrow the project’s cost from private investors, but they are downplaying how much more expensive it is to borrow directly from a Wall Street bank or a global corporation rather than use municipal bonds, the traditional method of financing. And they are minimizing the potential risks for Maryland residents now and in the distant future, as so-called public-private partnership contracts include pages of complex agreements that extend for decades.
Instead of being up front with the public, those officials point to an alleged local success story: Virginia’s experiment with using private financing to add tolled express lanes to the Beltway and Interstate 95. So, let’s take a look.
Virginia’s 75-year public-private partnership has been plagued by lower-than-expected traffic since being signed in 2012. One year in, weekday usage on the Beltway lanes was only a little more than half of what had been projected. The project’s financier and operator, the Australian corporation Transurban, urged patience, while an analyst at the libertarian Reason Foundation added that it typically takes a year to 18 months for tolled express lanes to pan out.
But, six years later, that hasn’t happened. The project just delivered another year of financial losses, with a 1.2 percent drop in traffic on its Beltway section.
Transurban, which raked in nearly half a billion dollars in profits last year, will be just fine — but Virginia residents have cause for concern. A number of public-private partnerships have gone bankrupt because of financial losses, leaving taxpayers to clean up the mess.
For example, a toll-road project in Indiana launched by then-Gov. Mike Pence (R) failed last year as its financier slid toward bankruptcy. Halfway built, it was taken over by the state after two years of construction delays that caused increased traffic accidents and commute times. To add insult to injury, subsequent analysis found that the original deal was $137.3 million more expensive than if the state had used traditional public financing.
Speaking of expensive, Virginia’s troubles might have to do with the cost of using the express lanes. Just last month, research revealed that, while the lanes usually save drivers time, they might not be worth paying for. Donna Chen, a professor at the University of Virginia, found that at the peak of rush hour, tolls on the Beltway run between $1.50 and $1.80 per mile. That might sound like a bargain, but she also found that a driver is essentially spending $159 for every hour of travel time saved during the morning rush hour. And if drivers were to pay the same rates on Hogan’s proposed Interstate 270 lanes, they would pay upward of $45 for the 25-mile trip from Frederick to Shady Grove.
Additionally, Transurban settled a class-action lawsuit in 2016 that alleged it routinely failed to notify drivers in a timely manner that they had missed tolls and were accumulating huge fees and fines. One driver’s $4.15 in missed tolls snowballed into $3,413.75 in fees and fines, according to the lawsuit.
No wonder tolled express lanes are nicknamed “Lexus lanes.” As Maryland Del. Eric G. Luedtke (D-Montgomery) says about Hogan’s plan, “At these prices, they aren’t Lexus lanes. They’re Lamborghini lanes.”
If the price tag doesn’t scare you, consider this: Public-private partnerships almost always take decision-making power from the public. This is because they are written to all but guarantee high returns for private investors.
Virginia’s Beltway express lanes contract actually penalizes the government if too many people ride together to avoid paying tolls — because that would mean less profit for Transurban. That effectively makes it more expensive for the state to promote carpooling as a way to limit traffic and carbon emissions.
Hogan’s plan is an attempt to build something without doing the hard but necessary work of seeing whether the public really wants it, while enriching a handful of wealthy investors. The governor says it won’t cost tax dollars, that it might even put billions of dollars in the state’s coffers.
Given the history of public-private partnerships in the United States, that sounds a lot like “fake news.”