Thursday, 16 May 2013

Ohio Turnpike not to be privatised

As has been previously reported, there had been a lot of debate as to whether it was worthwhile to privatise the Ohio Turnpike.  

According to an article on Cleveland.Com, the revenues for the 241 mile long Ohio Turnpike for 2012 were at a record US$270 million (with an expected profit of US$15 million).

Governor John Kasich is keen to utilise the value of the toll road to support other transport infrastructure projects in the state.  The law currently restricts the net revenues to being spent on transport projects within one mile of the road.

Tolls increased by 10% in January 2012 and traffic volumes have increased, making the toll road a lucrative asset for the state.  It has been reducing staff and consequential costs.

So the decision has been made not to privatise the road, but instead have it issue bonds which will essentially mean the state is borrowing against future revenues from the Turnpike to pay for other transport projects.  US$1.5 billion in bonds will be issued.  

A website called Ohio Turnpike Analysis contains more details. With a specific report of more in-depth analysis here, supported by Big Four accountancy firm, KPMG.  Indeed that report had been commissioned to specifically restrict options to those that exclude privatisation, but could include a lease to a concessionaire for the revenues.

In announcing the decision on the Turnpike the website states:

While the state could have realized more money by leasing the Turnpike, maintaining public control of the Turnpike and keeping the Turnpike Commission independent helps keep tolls low and workers on the job. Better coordination with ODOT keeps virtually all Turnpike revenue in Northern Ohio.

The Ohio Turnpike Commission is to be expanded into the Ohio Turnpike and Infrastructure Commission, which will have new "expanded authority" over major transportation projects in Ohio.

In addition, there will be a cap on tolls as follows:

Tolls for local passenger trips that are paid with EZ Pass will be frozen at current levels for the next 10 years. For all other tolls (longer passenger trips and all truck trips) any increases will be capped at the rate of inflation, or approximately 2.7 percent annually, assuming sustained traffic growth at the historic 1 percent rate. This low, stable rate will be less than half the rate of increase that passenger tolls have seen over the past 20 years and almost a full percentage point less than past increases to truck tolls.


It is always curious to see how reluctant authorities in the United States are to embrace private enterprise, capitalism and free markets when it comes to roads, especially when compared with countries that many Americans would consider to be more regulated and pejoratively, socialist (e.g. France, which has had little hesitation to have a large network of privately owned highways).   The rhetoric around it is remarkably parochial (with the implication that only people from Ohio could run the road "properly").  

What is almost completely absent is this analysis is any idea of the capital value of the Turnpike. The private sector has to account for its assets, but the public sector should as well.  It should make a return on that capital value, because taxpayers' money is tied up in it.  They should understand why their money is making more than a market return or less than that, otherwise it isn't clear whether the asset is being well managed or not.  Of course the only way to get a market capital value would be to talk to the market.  What would it be worth if it was sold, unencumbered (or encumbered by specific legislation)?  It would be dependent on revenue forecasts and expected costs, then the analysis can be done as to whether the surplus, after renewals and depreciation is worth more than the expected sale price.

There is a reasonable case to be made for reducing the risk of monopolistic pricing of the Turnpike, but beyond that if pricing can be efficient, and also reflect demand, there is scope for it to improve utilisation and get better value out of the asset.

In short, it appears that retaining the asset in state ownership is a political decision based on parochial and  long term financial grounds (better for the money to stay in Ohio, and better for the state to spend the revenues rather than monetise the asset, and let the private sector enjoy the revenues).  

The estimated value of a lease was a net NPV of US$1.8 billion, but I would have liked there to be some consideration of the most radical option - selling it.  Not that this is what should be done, but that it would provide a benchmark of value, to measure others against it.  The value of the sale money can then be treated on its own merits.

What I hope is that the new Ohio Turnpike and Infrastructure Commission efficiently transitions to fully electronic free flow tolling, adopts international best practice in asset management and customer management, and so replicates as much as is possible the efficiencies the private sector would bring to its operations.  It should also apply this to how it will supervise and manage other infrastructure projects financed through the forthcoming bond issue.

However, I also hope that the broader issues of sustainable revenues for Ohio are looked at more widely.  The Ohio Turnpike is not enough in itself to generate revenues to replace declining fuel tax yields.  Moreover,  Ohio should look at how it can leverage revenues from transit traffic and improve pricing overall to get better network utilisation, and better distribution of charges across users.  

The Ohio Turnpike may not be privatised now, or in the near future, but it should raise the debate for others. Why should states own roads, especially toll roads?  What are the deadweight unseen costs of maintaining that ownership?

Wednesday, 15 May 2013

The problems of measuring traffic congestion

Reuters has published an interesting article by Felix Salmon where he examines more closely the basis for the data behind TomTom's congestion indices.

Some of his points:

- TomTom's data comes from people who have its devices in their cars when they are turned on and being used.  Most peak time commuters are far less likely to be using satellite navigation services for their daily commute compared to occasional users of the road.  As such, both the driving habits, the speeds and the weighting of traffic volumes based on the presence of such devices will be skewed away from regular users.  

Now I think that over time, this may change as these systems also advise on traffic conditions more reliably.   Anything that encourages people to always have the system on will help, but for now it is at least questionable as to whether the sampling of peak users is representative.

- TomTom doesn't have any measure of confidence levels in its data, because it hasn't actually measured the congestion by any other means.  That makes the indices curious, but hardly a sound basis for major public policy decisions.

- Measures of congestion on a percentage basis distorts delays for short trips relative to longer ones.  A half hour delay on a one hour journey would be seen as less of a delay than a 10 minute delay on a 15 minute journey, which it is, in one sense.  Yet, 10,000 people enduring a half hour delay is more significant than a 10 minute delay.

What this all means is that, beyond individual corridors, it is astonishingly difficult to generalise about cities accurately, comparing performance between cities.  That doesn't mean TomTom should be pilloried for what it has done.  It is interesting what it has compiled, but it isn't much more than that.

Tuesday, 14 May 2013

Florida advisory panel proposes distance based road pricing

Columnist Kingsley Guy in the South Florida Sun Sentinel has commented on the proposal from the Florida Metropolitan Planning Organization Advisory Council (take a breath) that the state introduce a 2/c mile tax on road use.

The proposal comes simply from concerns that fuel taxation is becoming increasingly less reliable as a source of revenue to fund the state's transportation expenditure.

The state has 12 different fuel/vehicle ownership taxes (plus two Federal fuel taxes), two of these taxes haven't been increased since 1941 and 1943 respectively (meaning they are now worth 7-8% of what they originally were set at).  3 are inflation adjusted.

Sources of Florida state transportation trust fund revenues

Black line shows where revenues have to be to remain constant in real terms
FMPOAC concludes that six options should be looked at.  These are:
- Index all fuel taxes to inflation;
- 1c optional Municipal sales tax;
- Increase State Highways fuel tax by 2c a year, above inflation;
- Vehicle Mileage Tax;
- 5c local Diesel tax for counties;
- Redirect part of fees that were shifted from transport funding to the State Transportation Trust Fund.

On VMT it said:

This recommendation is to have the Legislature commission and fund an extensive effort to deal with the systemic issues of fuel taxes becoming less sustainable as a primary surrogate for a transportation user fee. While fuel taxes served as an adequate substitute for a true user fee for decades, significant increases in mandated vehicle fuel efficiency and the introduction of all electric and plug‐in hybrid vehicles are eroding transportation revenues. It is recognized that there are significant concerns over the concept of charging users of the highway system based on each mile traveled. These include privacy of citizens, the cost of implementing such a system, and institutional issues associated with revenue sharing. This effort is intended to address these issues at a minimum, deploy a demonstration of the concept and develop a business plan and implementation roadmap to move Florida to a VMT‐based system.

Guy rightly rejects Virginia's bizarre hypothecation of a new sales tax to pay for transport, as if people who rarely drive should pay more for potholes (through their shopping) than a trucking firm does.  May as well pay for electricity through general taxation, or telecommunications.   

He notes that tolling in Florida has had a distance dimension to it, and that is widely accepted.

However, he also notes some important concerns:

- Privacy.  Suggesting an odometer only option.  Which is fair enough, as long as it cannot be defrauded.  However, privacy does need to be respected, not dismissed.  Too many wingnuts think distance based road pricing is part of a conspiracy  (one that would be far better implemented if done in cahoots with mobile phone operators!);
- Fraud.  He expresses concern about people cheating a distance based system, which is fair enough, but this can be addressed and has been elsewhere.  Enforcement is a key part to any such system;
- Visitors.  A big issue for any state only system is covering those from out of state quickly and efficiently.  I'd suggest some sort of vignette (time based charge), but there are other options too.
- Heavy vehicles.  He notes that fuel tax charges heavier vehicles more, and that there needs to be a reflection of weight as well.  He's right, and fuel tax does this very poorly, as it tends to charge the smaller trucks too much, and the heaviest ones not enough.  Notice that the trucking sector can often be very unhappy about better pricing of roads, partly for this reason.
- Transition.  He wonders if there may still be a fuel tax as well as distance charging.

He also notes that there remains an issue of poorly spent money, which is separate from that.

I'm encouraged that Florida is starting to look at this issue more seriously.  The state has done well to use tolls to a wide extent, which has helped it a great deal and will help it with any transition to more direct user charging.  However, it could do worse than look at progress in Oregon, and the lessons learned from distance charging in other countries as well.

Monday, 13 May 2013

Jakarta moving forward with congestion pricing

The Jakarta Post reported that Jakarta Governor Joko “Jokowi” Widodo, has said that the Government Regulation regarding the financial and taxation status of electronic road pricing (ERP - the term being used in Indonesia to describe urban congestion charging) has been signed.

In 2011, a regulation on traffic management and engineering was signed to facilitate ERP, now with there being legal approval at the financial level, there are no legal barriers to implementation. 

The Jakarta Transportation Agency (which has an almost impenetrable website) has said that work will start on the design and concept, including establishing where and by how much motorists will pay.  The current talk is of implementation in 2014 according to the Jakarta Globe.

Electronic Road Pricing will replace blunt HOV rule at peak times

The intention is that ERP will replace the current vehicle rationing system in place in parts of Jakarta, this is essentially a peak time HOV system that requires all cars to have 3 or more occupants.   It applies to specific roads between 0700-1000 and 1630-1900 on weekdays.

This has resulted in entrepreneurial Jakartans standing beside the roads approaching the "3-in-1" zone charging a small fee for hitching with motorists.  The Jakarta Globe has an article about the "Jakarta Jockeys" as they are called, typically charge Rp.15000 (US$1.54) each to be the third (or even second and third) occupants of cars driving into the restricted zone.  Police officers currently enforce the HOV system on sight, issuing fines of up to Rp.1 million (around US$103) for violations.   The roads the system applies to get revised regularly, but the whole system will disappear when ERP is introduced.

The scheme will also replace the odd/even vehicle demand management system that was just introduced in March 2013.  That system restricts vehicles with odd or even number plates from entering certain areas at peak times on specific days, essentially alternating access during weekdays to reduce congestion.  

ERP will contribute to major reduction in congestion

ERP is intended to be the major contributor to a target of reducing traffic delays by 40% by 2014 according to the Jakarta Post.  Apparently only 40% of time spent on the roads by commuters is spent moving.  56.8% of trips into Jakarta are undertaken by car.  Traffic has been increasing by 11% per annum, but road capacity by 0.01%.  

Beyond the urban congestion charge, tough enforcement of illegal on-street parking and on-street vendors on major routes will increase the usable capacity of those roads.  The city and Indonesia itself is loathe to ban people from buying vehicles, but may also consider other measures to restrict vehicles (e.g. banning even or odd numbered licence plated vehicles from certain days).

Possible first stage of Jakarta Electronic Road Pricing

Blue is Phase 1, Yellow Phase 2 and Red Phase 3 of proposed Jakarta congestion pricing
The city has stated that the prices would likely be in the range of Rp. 6500 (US$0.67) and Rp. 21000 (US$2.16) would be adequate to make a meaningful difference to congestion, prices would vary according to time of day, size of vehicles and location, with higher prices for the most congested routes and crossing points.  The expectation is that a mix of individual routes and cordons will be charged, it is worth bearing in mind that Jakarta has quite a few (manual) toll roads, so is not unfamiliar with road pricing.  There are separate concepts to adapt Jakarta's toll roads towards fully electronic free flow technology, both to address toll plaza congestion and to allow for more dynamic, peak pricing.

"The administration said that the provisional trip charge reflected inflation and economic growth and was based on a survey of motorists and the tolls charged by turnpikes and ERP systems in other countries."

The expectation is that the system will resemble the Singaporean one, with a DSRC type system with on-board units required for all vehicles driving on the charged roads, and prepaid smartcards inserted in them that can be topped up at various retail outlets.  Of course it will also require extensive number plate recognition based enforcement.  

Friday, 10 May 2013

News Briefs - Australia, Canada, Ireland, South Africa, USA

Australia – Survey says distance based congestion charge would change behaviour

According to AAP, reported by Perth Now, a survey from the University of Sydney has indicated that a distance based congestion charge of A$0.05/km (US$0.08 mile) at peak times could see 22% of peak commuters driving at different times (assuming a charge between 0700-0930 and 1630-1830) and 13% to shift to public transport.

The survey comprised 1000 adults. 66% said they had no flexibility to change travel times for commuting, but the other 34% said they did.

Obviously a survey isn’t a wholly reliable measure of behaviour, but what I find telling is the potential for time shift. Far too many think congestion pricing is about mode shift, when there is as much (if not more) to gain from changing time of travel to periods when there remains spare road capacity, which means getting optimal use of the network.

Canada - British Columbia debates road pricing

According to, British Columbian Green Party leader, Jane Sterk, has come out in favour of "pay-as-you-drive" road pricing for Vancouver, to reduce congestion and raise revenue to pay for public transport.  The same article notes that the current Minister of Transportation and Infrastructure for the province, Mary Polak (Liberal), says the issue is up to the cities to come up with a proposal and convince the provincial government that it has public support, whilst the Opposition spokesman Harry Bains prefers to consider other measures first.  The general election for British Columbia is on 14 May.

Meanwhile, the Delta Optimist has published an opinion piece by Ted Murphy who says that road pricing is likely to be the best option:

It stands to reason those who put the greatest strain on the system, and those who are most likely to benefit from any improvements, should be the ones that pay the largest share of the tab.

Conversely, it doesn't make much sense for homeowners, who are an easy mark but don't necessarily tax the transportation network, to continually be gouged every time TransLink is in need of more cash.

There's much to be worked out when it comes to road pricing, and there will undoubtedly be resistance to the idea of paying to traverse roads that up to now have been free, but at the end of the day I suspect it will be the favoured option.

It's not a question of if, but how, they're going to extract more money from us, so they might as well do it in the fairest way possible.

It isn't clear as to whether British Columbia voters think the same way.

Ireland - manual toll booths add costs to trucking firms

The Independent in Ireland reports that toll booth barriers cost them on average an extra (Euro) 0.99c each time (US$1.30) in wasted fuel.  This is with DSRC toll tags that enable automatic payment, but require trucks to slow down to a crawl to trigger the lift of the barrier.

This is crazy of course. The M50 toll road in Ireland was converted to electronic free flow a few years ago, largely because of congestion (it being the ring road for Dublin).  There ought to be a transition towards at least a mix of free flow lanes and barrier lanes.

South Africa - 24 years to repay debts for Gauteng Freeway Improvement Project

Eyewitness News reports that the South African National Roads Authority Ltd has said that it will take 24 years of toll revenues to repay the debts incurred to build the Gauteng Freeway Improvement Project. This is based on the (R)30c/km (US$0.05 per mile) rate agreed by the Government.  The maximum monthly that can be charged is R550 (around US$61).

USA - Maryland - Intercounty Connector exceeds forecasts

At a time when there are more than a few examples of toll roads that have demand well below forecasts, it is perhaps good news to report on the InterCounty Connector in Maryland (Maryland Route 200), a fully electronic toll road that opened in 2011.  According to the Washington Examiner, estimates of 30,000 daily users by June 2012 have been exceeded on the western end of the road by September 2012 (to 35,000) and not far behind on the eastern end (26,000).  The road raised US$19.7 in the year ended June 2012 compared to projections of US$18.7 million.

Thursday, 9 May 2013

Singapore assessing GPS based urban congestion charging

The Star Online reports that the Singapore Land Transport Authority has been trialling a GPS based electronic road pricing system on one road for a year, with the intention being that such a system might replace the existing gantry based electronic road pricing scheme.

According to Yahoo:

"Kapsch TrafficCom, MHI Engine System Asia and NCS, ST Electronics (Info-Comm Systems) and IBM Singapore, and Watchdata Technologies and Beijing Watchdata System were awarded the tender" in 2012 to develop a system within 18 months as replacements for the ERP system, each getting S$1 million (US$812,000) to do so.

Singapore's existing system has been the benchmark for urban congestion charging since it was introduced in 1997.  It charges different prices by location and time of day at all of the charging points, enabling differentiated pricing.  Prices are reviewed regularly up or down, depending on congestion levels, with the intention being to maintain minimal levels of service speeds.  As a result, congestion on Singaporean roads is relatively rare for a city of its size.   It is efficient pricing par excellence, and a far cry from the very blunt charge in London, and the slightly less blunt charge in Stockholm.  Revenue is not a relevant influence on prices.

If successful, the GPS trial could mean 80 gantries currently used for Singapore's congestion charging system would be replaced, and vehicles equipped with the existing prepaid card based tag system would need new charging equipment installed.

However, the report doesn't include good news for those with concerns about privacy, as it says it will be used to enforce other laws:

like catching speeding vehicles and those which beat red lights, spotting illegal parking or tracking hit-and-run drivers.  It can help find stolen cars, assist police in solving certain types of crimes, and aid in tracking offenders.

Singapore's authoritarian reputation appears to be the chief concern.

Some bigger questions arise, as such an all pervasive system that would charge for every kilometre travelled could replace the punitive ownership taxes, by focusing on usage.  Singaporeans seem to treat the ownership taxes as just another cost for owning a car, although the other deterrent to ownership is the limit on the number of cars that are registered - people buy and sell and bid for a limited number of permits to own a car that can double the cost of owning a car.  The result, according to the article, is only 12 in 100 own a car in Singapore, compared to 24 in 100 in Hong Kong, a similar city "state", which does not have restrictions on car ownership and punitive taxes (but car parking is largely provided by the market, which prices parking at a premium in this territory with land scarcity in its inner city areas).

Odds are that Singapore will transition to distance, time and location based urban congestion pricing within the next few years.

In the meantime, the Singapore Land Transport Authority is now assessing the outcomes of the trials to consider the next stage, which may be a tender for full implementation.  However, there is currently no deadline for implementation of a next generation ERP system.

Wednesday, 8 May 2013

Advocates of distance based road pricing look to Oregon in the coming months

I've written before about Oregon's efforts to develop a Vehicle Mileage Tax intended for the most fuel efficient vehicles to replace its fuel tax.  It has successfully run a pilot of various technologies and systems, with the intention being that it become a mandatory requirement for all vehicles with a fuel efficiency above the threshold of 55 Miles per Gallon (5.1 litres per 100km).   Key is choice, with there being technology and non-technology options, with both private and public sector provided options.

It is expected that there will be vote this week in the Oregon House of Representatives for House Bill (HB) 2354B in the House Revenue Committee.  The expectation is that it will be passed onto the Joint House-Senate Ways and Means Committee.  HB2354B identifies all vehicles that get an estimated 55 MPG or better being subject to distance based tax.

In the Senate, there is a Bill (810A) that provides for a volunteer programme of 5,000 to choose to pay on a distance basis in the state.  

It may be that the Bills will merge meaning that (guess) all vehicle 55MPG or better get taxed up to the first 5,000 that want to volunteer (although I'm unsure quite why many would do so).   If it were up to me, I'd start off with all newly registered vehicles (there are hardly any in that category now anyway).

The House Bill needs a 60% majority because it is a new, mandatory, tax measure. The Senate Bill, because it authorises a voluntary measure, only needs a simple majority to pass.

Whatever happens, one of the bills or a merged one may go for a vote in the next month or so.  That would authorise the implementation of the first VMT/distance based road usage charging system in the USA for cars.

It would be a huge step in policy, albeit a small impact on almost all Oregonians. However, it would provide a basis to protect future revenues for highways in the state.  As vehicles become more and more fuel efficient, more will shift from paying by fuel tax to paying by distance.

If Oregon demonstrates that this can be done, in a way that largely has public acceptability, that doesn't threaten privacy or mean people are paying more than they should for roads, then it opens the door for other US states (and other countries) to start making this transition. 

Monday, 6 May 2013

Georgia (USA) to introduce pure toll lanes as new capacity

Most "managed lanes" or "express lanes" in the USA are what I'd call pure HOT lanes.  They are tolled, but High Occupancy Vehicles (HOVs - cars with 2 or 3 or more occupants) are allowed to use them for free.  More often than not such lanes are conversions from HOV lanes (also called "transit" or "carpool" lanes).

These are new build lanes.  Brand new capacity.  These are pure toll lanes (although local buses can use them for free), with all cars using them having to pay.  Trucks are not allowed to use them.

Atlanta Forward blog has published a debate on the pros and cons of the I-75 Express lanes project The project is a reversible Express toll lane (between 1 and 2 lanes) between SR 155 and SR 138 along an over 12 mile stretch of the Interstate. It is under development now and will be completed in 2016. 

The lanes will be northbound (towards Atlanta) in the AM peak and southbound in the PM peak. Tolls will be dynamic, so will vary in real time according to demand on the lanes. 

A DSRC transponder will be offered for those wishing to use the lanes, or they may choose to pay after usage with a bill sent to the vehicle owner’s address after the number plate has been captured by cameras. The latter option will be more expensive. All revenues from the lanes will be used to pay the capital costs of the lanes, which are estimated to be US$150 million. Trucks are curiously not allowed to use them. 

It will be interesting indeed to see if the lanes can pay for themselves, as this is rare (and explains why such lanes are rare outside the US – as most HOT/toll lanes are conversions, not new lanes). 

The arguments for the toll lane are: 

- They provide a new option; 

- The new capacity will not get congested as pricing will ensure that; 

- Some will use them every day, but most wont. Only when there is a time sensitive appointment, like a meeting; 

- The lanes benefit other travellers because they will reduce congestion on untolled lanes, and buses will have unhindered trips.

Arguments against tolls on the lanes are: 

- Untolled lanes would be used more; 

- Most users will be local, wealthy, extravagant or late; 

- It’s “UnAmerican” to pay (I actually though it was un-Soviet); 

- Gas tax is fairer because everyone will pay and then other road improvements can be built. 

Naturally I’m supportive of the lanes, because ignoring pricing is ignoring an opportunity for those who want new capacity to have to pay for it. It is also right that people pay for premium service when they need it. Unpriced roads risk congestion, the toll lanes promise a standard of service that the “free” egalitarian public domain roads can’t promise.   

Hopefully Georgians will come to see them as an asset, and that it provides a valuable option.  However, my other interest is whether the lanes will pay for themselves.

If so, they provide a new model for considering how new capacity can be paid for.

Friday, 3 May 2013

News Briefs - China, India, UK, USA

China - Poll rejects congestion pricing

China Daily reports that an online poll (yes I know) by China Youth Daily saw around 75% of respondents oppose congestion charging for Beijing, preferring to support "improving the city's planning process, the road repairing projects, and the traffic management mechanism" to reduce congestion.  Good luck with that then.

Hong Kong - Hopewell retains BBB- Fitch rating

Reuters reported in October 2012 that Hong Kong based toll road investor, Hopewell, retained its credit rating with Fitch.  Hopewell Holdings owns 68% of Hopewell Highway Infrastructure Limited, and Fitch reported:

Hopewell Highway Infrastructure Limited (HHI), continued its stable performance in the financial year ended June 2012 with a 5% increase in revenue. An overall increase in traffic volume is driven by continued economic growth in the Guangdong province, and improving connections to local road networks and strategic locations. In particular, the West Route enjoys synergies from completion of Phase II, and average daily traffic grew by 39% in FY12.

A new tariff framework effective from June 2012, as well as the "Holiday Toll Free Policy" effective from October 2012 will adversely affect cash flow generation capacity of the toll road portfolio. Fitch expects the toll road portfolio's EBITDA to decrease by around 15% as a result in FY13. 

Hopewell is in joint ventures with Chinese companies over five toll roads in the Pearl River Delta area of Guangdong province in China.

India - Toll tags may be mandatory

A report from the Deccan Herald quotes N R Gokarn, CEO, National Automotive Testing and R&D Infrastructure Project (NATRIP), a government led project, as saying that "RFID tags" that identify vehicles are likely to become compulsory across India.  This would help with identifying vehicles more generally, as well as facilitating a shift towards electronic free flow tolling.  The National Informatic Centre (NIC) contains data on over 90 million vehicles including owners and insurance details, and it is intended that any such system enable ready access to that database for tolling.

India - IRB acquires MVR

IRB's corporate profile states:

The company, along with its subsidiaries has constructed or , operated and maintained around 8,000 lane kms of road length so far and one of the major road developers in the country. The aggregate size of all our BOT projects (both completed and under execution) is around Rs. 170,552 Million (US$3.1 billion).

MVR Infrastructure and Tollways is a construction and toll road management company based in Tamil Nadu.

UK - Manchester still not interested in congestion charging

A rather odd little news report from the Manchester Evening News notes that a survey recently conducted by the AA indicates 80% of those polled oppose congestion charging for Manchester.  A referendum in 2008 saw a 79% "no" vote for a proposed congestion charging scheme that was to raise money to pay for major public transport improvements.

This is hardly surprising.  People wont vote for what they see as a new tax, especially since central government decided to give Manchester the money for some of the public transport improvements anyway, presumably as an election sweetener, and Manchester local authorities borrowed money to pay for the rest.  Meanwhile, Manchester was hit by the recession, and traffic volumes have not increased since 2008.  Any deal for congestion charging needs to offer something in terms of improvements to roads or reductions in other taxes to have any chance of being supported.

UK - Birmingham's transport authority wants private toll road nationalised

I've written about the M6 toll road before.  It was fully privately financed and built, and runs at a loss, without a penny contributed by taxpayers.   It is heavily under-utilised, in part because tolls are highly priced (but revenue maximising) and in part because the travel time savings are not high, except at peak times when the untolled parallel motorway is congested.

This upsets the planners at Centro - the West Midlands Transport Authority - which is responsible for transport planning in the wider metropolitan region surrounding Birmingham.  Centro has no authority over the motorways, but according to the Birmingham Post, Chief Executive, Geoff Inskip wants central government to buy the M6 toll road, reduce or eliminate the tolls, and so relieve the existing untolled road.  It even suggested tolling the existing untolled road at peak times, to help pay for the purchase.

Now I'm no fan of nationalisation, but tolling the existing route at peak times would provide some "competitive neutrality" between the routes.  One idea is that vehicles are charged to use both routes through fuel tax, but none of that fuel tax goes to the owners of the M6 toll road.  If a deal was done to reduce tolls by a proportion reflecting that contribution, it might make a small difference.

USA - New York - Citizens' Budget Commission recommends higher tolls

Capital New York reported in October that the lobby group "Citizens Budget Commission" proposed that 25% of funding of the New York public transit system should come from tolls:

The commission argues that not only should drivers' tolls cover the upkeep of bridges and tunnels, which they do now, but they should also underwrite a quarter of mass transit services, thanks to all of the "harmful consequences" that drivers cause but do not pay for, like "noise, congestion, air pollution and greenhouse gas emission."

To that end, the commission would raise tolls on M.T.A.-controlled bridges and tunnels to as much as $9 in cash. Right now, drivers pay $6.50. Once the 2013 and 2015 hikes go into effect, drivers will pay $7.50.

Further, the commission proposes raising vehicle registration fees, which are now amongst the lowest in the country, and the gasoline tax.

The CBC also says congestion pricing should also be considered, again.

It also proposes fare increases for public transit.   This doesn't mean tolls on untolled crossings, but raises the obvious question as to why not, as the inequities of only charging some crossings simply becomes exacerbated.

Wednesday, 1 May 2013

Spain's growing network of bankrupt toll roads

Spain was once lauded for having a large network of first class privately financed toll roads.  Now it looks like many of those roads were commissioned by government, and built by the private sector based on overly optimistic forecasts of growth off of the back of Spain's property led boom, that was a bubble which has popped.

Phys.Org reports from AFP on the debacle of the roads heading for bankruptcy, and it isn't just rural highways, but big urban highways near Madrid:

Two highways, Radial 3 and Radial 5, opened in 2004 at the height of Spain's construction boom. Now the company owes 660 million euros ($850 million) to the bank, 340 million to the builders and 400 million to residents evicted to build it.

Six toll roads have entered bankruptcy proceedings since May 2012, when the Madrid-Toledo (AP-41) toll road was the first.  It was managed by  Grupo Isolux Corsan SA, Comsa SA, Azvi and Banco Espiritu Santo SA, and owed over US$646 million in debt. 

Many more more are also heading for bankruptcy.

It isn't just roads, as Spain built high speed railways and airports, with some of both of those now looking like woeful investments.  

The craze drove Spain to break records: it became the country in Europe with the most kilometres of motorways and the most commercial international airports, and was second only to China in the world for the length of its high-speed train lines.

Meanwhile, the government already upgraded existing roads as well, untolled roads.  At a time of deep recession, it is clear that Spaniards are preferring to save money over time, so are avoiding the toll roads in favour of the untolled government roads.  

Motorway traffic is now at levels not seen for over 15 years. 

The report continues:

On the Accesos de Madrid roads, "where there were supposed to be 35,000 vehicles a day, there are 10,000," said Jose Antonio Lopez Casas, director of Accesos de Madrid, the company that manages two major highways around the capital.

What is the lesson?  

That road projects should be driven not by political imperatives, but commercial ones.  The private sector assumed that perpetual growth would continue and that forecasts of growth were robust, but ignored the bubble economy (like so many others did).  Instead of project let concessions, it may have made more sense to commercialise parts of the network, letting the private sector manage existing highways and decide on the merits of upgrading them instead of building new tolled roads.  

However, there is a bright side in that the risk has been born by the private sector.  The roads are built, and the cost to maintain them is a fraction of the capital cost to build them, which in most cases will be wiped out and born by the creditors.

Spain is obviously "overbuilt" for toll roads, and bankrupt toll roads may see prices cut to encourage demand, but may also put pressure on government to change how it charges its untolled network (through fuel tax).  The bigger issue is whether the sheer scale of this bankruptcy overwhelms, and is likely to create mergers and require more fundamental reform of the highway sector, or if government feels pressured to nationalise the roads (unnecessary and unwise in my view).