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Notes for Maryland
Taxpayers 2007-06-14 There are three big trends in tolling: 1. All-electronic highway speed electronic tolling/ no cash collection New toll roads all have highway speed through the middle Increasingly they have no cash at all - 91 Express Lanes Cal, 407ETR in Toronto was first major TR with 40 interchanges, Melb City Link, Chile, Israel (Hughes/Raytheon techn), Singapore, London, Stockholm central area tolls, now Westpark in Houston TX, Dolphin Ext in Miami, DNT #1 toll plaza dropped whole Dallas network, Miami Dade, various HOT lanes in US Denver, Minneapolis, San Diego, Houston Here in Maryland the Inter County Connector will be all electronic and also Express Toll lanes on -95 north of Baltimore. 2. Use of variable pricing - toll rates varying by time of day or level of congestion so we can use market mechanisms to maintain free flow and avoid queuing and runout of space even in times of peak demand. Use of variable pricing allows us to maintain flow of 1800 to 2000 veh/hr at 65mph as compared to familiar unmanaged and unpriced lanes where breakdown in flow - stop & go - reduces throughput to 1200 veh/hr at average 25mph Chronic congestion has made roadspace very valuable - they are getting peak-of-the-peak tolls of nearly $1.00/mile in LA, average tolls of 40c or 50c/mile Variable prices are very successful in managed lanes and in congestion pricing for central areas. Central area pricing is being proposed for Manhattan by mayor Bloomberg and being studied in downtown San Francisco. I doubt it has much application in Maryland where congestion is mostly in highway corridors but it is worth keeping in mind for small historic centers. 3. Deploying private equity capital to finance and operate toll roads in toll concessions sometimes called public private partnerships Not really new, a revival of something that died out in 20th century. 18th and 19th centuries the normal way of doing ferries, bridges was family charters and major highways done by turnpike companies - most commonly traded stock on the early stock exchanges. Toll bridge charters got discredited by the New York Bridge Company in 1870s - the Tweed Ring and the Brooklyn Bridge scandal, charter was revoked, and 'good government' movement anathematized private capital in bridges and roads. First engineered highspeed expressway was a privately fiannced toll roads - the Long Island Motor Parkway in New York in first decade of 20th century. Ambassador Bridge in Detroit remains private charter in perpetuity - a private company since 1920s. Now major privatization of tollroads in Europe, S America, Australia, Asia, Canada, and US has been underway for several decades. In the US 91 Express Lanes in California and Dulles Greenway VA were the first of a new wave. Chicago Skyway and Indiana TR 99 and 75 yr concessions $1.85b and $3.8b Pochantas Pwy VA $600m was done in 2005 and many proposals being studied or negotiated in VA. NW Parkway in Denver c $600m toll concession. Texas hugely ambitious program of TxDOT has run into trouble and heavily circumscribed by a reversal of policy by legislature - but some concessions are going ahead. Pennsylvania Turnpike is very big - governor is seeking legislative authority to do a longterm lease/concession but has run into legislative reluctance. The Turnpike Commission has mobilized to block the governor's move. Morgan Stanley has estimated the inherent value of a Penn Pike concession at about $15billion, about 26x toll revenue of $570m (FY2005) $15b invested at 9% can provide an annuity to the state of $1.3b/yr in perpetuity. MS says it might be more than $15b since other concessions have brought considerably higher sums than valuation. Chicago Skyway and Indiana Toll Road and ITR multiples of over 40x annual revenue. Penn Pike at $15b is more than the market capitalization of Chrysler, not much below GM. NJ Turnpike even larger than Penn Pike, but the Governor has backed away from concession but some kind of refinancing in discussion. MdTA's 7 toll facilities do $275m - roughly half the size of the Penn Pike so based on that multiple they'd bring about $7billion or by the Chicago Skyway or ITR multiple of x40 $11billion. Breaking them out separately: Kennedy Hwy I-95 & US40 about $100m in tolls, value at x25 $2.5b x40 $4b 3 Balt Harbor Crossings $135m in tolls x25 $3.4b x40 $5.4b Bay Bridge $34m x25 $850m x40 $1,360m US301 Potomac R Br $11m x25 $300m Contact: petersamuel@mac.com
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