September 23, 1998
By Dwight Filley
What if your supermarket was absolutely jammed with shoppers? Day after day, week after week it’s solid people. Checking out takes hoursand it’s been that way for years.
Even imagining such a situation is difficult, because it never happens. Entrepreneurs are always searching for opportunities for profit, and any numskull can see that a routinely overcrowded supermarket means there is money to be made opening a competing store down the street.
It doesn’t happen with supermarkets, or any other retail store, but what about highways? Here the picture is very different. Highways such as Interstate 25 and the Boulder Turnpike routinely jam upsolid cars, hours of delay, and it’s been that way for years.
What is the difference? Admittedly, it is harder to build a highway than a supermarket, but it certainly is not impossible. In the past few years, several toll roads have even been built by private investors, notably the 91 Freeway in Los Angeles and the Dulles Greenway in Virginia.
The overriding difficulty is that the political incentive is far less powerful than the profit motive. Highway departments don’t make any profit when they push through a new project. So congestion persists, with all its frustration, wasted time, wasted gasoline and air pollution.
If we want to relieve congestion, all we have to do is offer a profit to entrepreneurs. It’s obvious that the demand is there, just look at the mousetrap at rush hour.
Why don’t investors rush in to take advantage of this opportunity? The private freeways mentioned above charge tolls, but they use electronic systems like the ones on E-470 and at Denver International Airport. These make it easy to scan cars as they drive by. Computers automatically bill the driver by mail. So why is this fabulous opportunity going begging?
In a wordthe gas tax. About one third of the price of a gallon of gasoline is tax. That money is mostly used to build and maintain highways. So far, so good, but what happens if an entrepreneur considers building a private highway? He will be asking motorists to pay twice. Drivers would pay the government when they buy their gas, and pay the highway owner when they pay the toll. It’s unfair.
The problem is similar to that faced by parents who want a better education for their children. Private schools offer better education but must charge tuition, just as private roads offer less congestion, but must charge tolls. In both cases the consumer pays twice, once in taxes and once in fees.
Vouchers have emerged as a way around the double payment. Under a voucher system, when a child transfers to a private school the government sends part of the cost of that education to the private school.
This points the way toward freeway congestion relief. For every mile driven on a private toll roadand that the public highway system no longer has to accommodatethe government sends the cost of that mile driven to the private highway company. The road company would get a small toll from each driver, and a big check from the government each month after reporting how many vehicle miles were driven on its road. As Milton Friedman, the Nobel Prize winning economist, put it back in 1952,
“The proper solution to this problem is for the state that collects the gasoline taxes to pay the owners of the toll road a sum equal to the tax on the gasoline consumed on the road.”
As things stand, the legislature has a problem: crowded highways and almost no opportunity to build more. It could solve this problemand make our lives far more pleasantwith simple legislation. By offering to refund gas tax money to anyone who builds a highway, those highways would get built. As noted, a few private highways are already being built, even in the face of highly unfair competition.
Many states place additional legal hurdles in the way of private road builders. Not Colorado. According to Ray Wells, who wants to build a toll road from Fort Collins to Pueblo: “Lots of states wish they had laws as friendly to private roads as Colorado does.” So only the double payment problem remains, and the legislature could solve it easily.
As an extra bonus, these highways would then pay property tax, just like any business. State owned highways, on the other hand, are a constant drain on the treasury as repairs are made. Private highways add to the treasury to help fund other government activities.
For companies to remain competitive, they are urged to think outside the box. Its time for the legislature to think outside the box as well regarding traffic congestion.
Dwight Filley is a Senior Fellow with the Independence Institute, a think tank in Golden, Colorado. http//i2i.org.
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