Thoughts on taking tolling into state DOTs - EDITORIAL

May 19, 2013
By Peter Samuel

2013-05-19: One by one the state 'turnpikes' seem to be disappearing. The Kentucky and Connecticut Turnpikes went in the 1980s when de-tolling was popular and those state legislatures decided taxes could pay for the roads.

More recently the Massachusetts Turnpike (MTA) was taken into the state DOT, following the MTA's serial mismanagement of  the Big Dig, a largely untolled project ironically. The Texas Turnpike Authority and Florida's Turnpike were both folded into their state DOTs on the argument that they could be managed more efficiently. In the case of Florida the Turnpike is set up as a 'District' within FDOT so it retains a certain coherence and autonomy. That's somewhat like the situation in New Hampshire where there is a Bureau of Turnpikes within the NHDOT.

Indiana had a turnpike in all but name - the Indiana Toll Road Commission which ran the Indiana Toll Road (tho INDOT did maintenance) before the pike was 'privatized' in a longterm lease and concession in 2006.

Around the same time the New Jersey Highway Authority which ran the Garden State Parkway as a separate turnpike-like entity was folded into the New Jersey Turnpike Authority - on grounds that there would be economies of operation.

North Carolina Turnpike Authority has disappeared inside the NCDOT except as a shell bond issuing entity within the NCDOT.

More recently the same argument was used by the new Governor of Kansas to do away with the Turnpike Authority (KTA) and have the state DOT run the Turnpike.

The result of jostling between the executive and legislature in Kansas was a messy compromise in which the secretary of transportation is KTA chief of operations. If the Turnpike Authority board and its chief executive don't control operations what do they do?

And with indictments against leading figures of the Pennsylvania Turnpike Commission and accounts of systemic corruption there are moves in that state to abolish the Turnpike Commission and turn its assets over to PennDOT to operate.

What's left?

Defining independent state turnpikes as state toll entities with at least one tollroad spanning most of the breadth or length of the state we still have at time of writing:

- Pennsylvania Turnpike Commission

- Maine Turnpike Authority

- New York State Thruway Authority

- New Jersey Turnpike Authority

- Ohio Turnpike Commission

- Maryland Transportation Authority

- West Virginia Parkways Authority

- Oklahoma Turnpike Authority

- Illinois Tollway (Illinois State Toll Highway  Authority)

Shadow state turnpikes are

- Rhode Island Turnpike and Bridge Authority which has only one toll bridge but is acquiring a second

- Georgia State Road & Tollway Authority which developed the short urban GA400 tollroad but is losing that due to detolling, but is doing some new toll lanes projects

There are many regional tollers of course, usually established by the state but under varying kinds of local government control, county toll roads, city. Some transit agencies run toll facilities - for example America's biggest in revenue New York's Metropolitan Transportation Authority (MTA) whose main job is the NYC subways and buses. Outside America privately operated toll concessions have become the normal way to do toll facilities. America has a few.

Because expensive-to-cross rivers or estuaries are often jurisdictional boundaries their toll crossings are often run by bi-state or bi-national tollers. Metro plan organizations (San Diego) run a few tollroads. And there are the so-called 'port authorities.'

It's the state turnpikes that seem to be falling to DOTs.

Savings through 'economies of scale'

The argument cited in favor of DOT takeover is usually that there will be cost savings. In  Kansas and Pennsylvania it is asserted to be 'wasteful' to have two state highway agencies. There are supposedly economies of scale in consolidation.

Some DOTs already do tollroads - Delaware, Texas, Washington, Virginia, Louisiana. In Texas the DOT tends to develop new toll projects but to hand them off for operation to regional tollers or concessionaires.

There are two problems with the argument that consolidation makes for more efficiency. First it's almost always an assertion made pre-consolidation. There's very little evidence post consolidation to suggest costs are lower.

There are diseconomies of scale as well as economies. Larger organizations may be able to spread overhead costs and make some savings, but they also become more complex with more layers of management and greater difficulties of coordination. They tend to become more cumbersome and bureaucratized.

Economies of scale through use of shared resources can often best be achieved by contracted arrangements. If Kansas DOT can maintain the Turnpike better and cheaper than the Turnpike then let them bid for the work and take over that aspect of operations under KTA control - preferably in competition with private bidders. But the Governor's claim that folding the Turnpike into the DOT will save tens of millions in costs remains that - just a claim.

Kanouri DOT

If consolidation were such a surefire cost saver then the big-state DOTs would be more efficient than the small state DOTs. And maybe Kansas should combine its DOT with Missouri DOT.

"The bistate Kanouri DOT would eliminate duplication, provide economies of scale and save millions of taxpayer money in both Misouri and Kansas..."

Proposals for consolidation are the kind of glib technocratic 'reform' that often seems to generate some support even though they're snake oil.

Different animals

The second argument against subsuming state turnpikes into state DOTs is that they are very different entities. Turpikes and other toll entities are basically businesses - and that's regardless of their ownership and control.

Whether state, local, private or not-for-profit they earn their revenue through highway service to willing customers who choose whether or not the service theyget is worth the toll. If Turnpikes don't get the traffic and revenue they need to pay operating costs and service capital, they're in trouble. They need to judge all their spending and especially new projects and other major capital spending like any other business does, asking "Will we get our money back?" and "How quickly?" and "What are the risks?"

And they need to price their service - set toll rates - somewhere near the profit maximizing point. If the toll rates are lower they're leaving money on the table and encouraging excess traffic. If they set rates too high they lose more in traffic than they gain per transaction. They are answerable to the people who put up their capital - the investors in their bonds or stock.

DOTs are fundamentally different organizations from turnpikes. They are dependent on legislators for their funds and they are subject to the politically appointed secretary on personnel and priorities. Running a turnpike business inside a government department makes for a very odd fit! - editor.

CLARIFICATION: Larry Higgs, transportation reporter at the Asbury Park Press in northern New Jersey tells us that the major factor in having the Garden State Parkway absorbed into the New Jersey Turnpike was the NJHA's weaker financial position and the need to finance the widening of the Driscoll Bridge. Consolidation allowed the financial strength of the Turnpike to be put behind borrowings for the bridge. He adds to the list of arguments often made for consolidation - greater financial backing. Of course that cuts both ways. One argument for independent toll authorities has also been precisely that the state and its taxpayers do NOT stand behind toller debt. It's a risk investors in bonds carry.

TOLLROADSnews 2013-05-19  CLARIFICATION ADDED May 20 24:00

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