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Wednesday, January 25, 2006

Privatization of Roads

Should the allocation of transportation services - driving on roads - be allocated by the price system? If we continue on the road to privatization, will we be satisfied that it is equitable for the haves to be able to drive on roads closed by resource constraints to the have nots?:

Indiana Sells Road for Billions; Prepare for Deluge, by Joe Mysak, Bloomberg: On Monday, Governor Mitch Daniels said a Spanish-Australian consortium had bid $3.85 billion to run the Indiana Toll Road, a 157-mile highway across northern Indiana that runs from the Illinois to Ohio, for 75 years. The legislature still has to approve the proposal...

A Merrill Lynch & Co. report published last July on the subject of U.S. toll road privatization asked whether sales like the Skyway were one-offs, "or do they represent the beginning of a sweeping trend that will spread to other tolled bridges, tunnels, expressways and long-distance toll roads?'' Let's bet on the sweeping trend. The money is just too big to resist...

Merrill Lynch estimates that at least 18 states from California to Massachusetts have state-, county-, or city-owned toll roads that might lend themselves to privatization. ... What you need is an established road, and the flexibility to increase tolls. ... We are going to see more of these transactions, and the numbers are going to get bigger and bigger. It was estimated last year that New Jersey might get $30 billion for the state's Turnpike and Parkway... That would cure a lot of Governor Jon Corzine's headaches. Merrill Lynch estimated that the New York State Thruway Authority might be worth something like $20 billion. ... So now the cry will go up: Sell the roads! ...

The sticky matter for Governor Daniels is selling the state's lawmakers, and everyone else in Indiana, for that matter, on the idea. But we've come a long way from the days where people felt bad about selling assets like landmark buildings and other property to foreign investors. ... The money is just too big.

Selling Yellowstone Park to private developers would raise a lot of money too, but that doesn't mean we should do it. There are arguments both ways here, and some of my concern is redued by recent research showing that toll lanes are used predominantly by people pressed for time, people late for daycare pickups, that sort of thing, not just higher income individuals. Still, equity considerations are a concern.

    Posted by on Wednesday, January 25, 2006 at 07:40 AM in Economics, Market Failure, Regulation | Permalink  TrackBack (1)  Comments (14)


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    » Privatizing roads - to foreigners even! from PSD Blog - The World Bank Group - Private Sector Development

    Having lived in Latin America for much of my life, I am used to highways being operated by foreign companies. Though here in the US the news that the state of Indiana has agreed to lease a toll toad to a Spanish-Australian joint venture has caused cons... [Read More]

    Tracked on Wednesday, June 21, 2006 at 08:34 PM


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