Business: Private Toll Roads Show the Way

BETTER HIGHWAYS

EVERYBODY agrees that the U.S. needs more and better roads, but almost nobody agrees on how to pay for them. While the argument rages, Texas has gone ahead and devised something new: the nation’s first privately owned and privately financed modern toll roads. This week the Texas Turnpike Co. will start constructing a 223-mile, four-lane thruway from the Dallas area to Houston, at a cost of $140 million. At the same time the Sam Houston Toll Road Corp. will start building the first leg (Dallas-Waco, 83 miles) of its $140 million. 246-mile Dallas-San Antonio Thruway. The two corporations, franchised as nonprofit public utilities by the Texas legislature, will float 40-year bonds at 4-5%, pay all costs of construction and operation, including salaries for the promoter-operators. When the bonds are paid off, the turnpikes will become state property.

The Texas idea is a new turn in the development of toll turnpikes. Ten years ago, the nation had less than 300 miles of major toll highways. Today there are 1,058 miles in operation, 1,247 under construction, and another 6,232 either ready for construction or proposed. Until now, all have been built by states or municipalities. Of the $2.4 billion of highway bonds floated last year, $2.2 billion were for toll roads. Some have been phenomenally successful. For example, the 118-mile New Jersey Turnpike, opened in 1951, took in $20,756,344 last year, more than double the engineers’ estimate of $9,500,000. On the other hand. West Virginia’s turnpike traffic is running below estimates, and its bonds are below par. Actually, the toll road is only suitable through a densely populated area, is not a cure-all to the nationwide need for better roads. Traffic engineers estimated that no more than 9,000 miles of U.S. highway (of a total 3,348,000 miles) carry enough traffic to pay for themselves through tolls.

If the toll road is not the answer, what is the best way to finance U.S. highways? For the most part, the nation’s roads are still being built or repaired with revenue from gasoline taxes, license-plate fees and other taxes on motorists and truckers. But in most states the immediate need for roads is greater than the immediate income, and the double-edged question of taxing motorists and building highways regularly touches off pitched battles in state capitals.

One big handicap to road construction is the diversion of motor-vehicle revenue into nonhighway purposes, such as public welfare and mental hospitals. Last year the New Jersey legislature tacked a 1¢ increase on to the 3¢ state gasoline tax, earmarked it for state aid to local schools. Thus, out of $100 million in motor vehicle revenue collected in New Jersey this year, the State Highway Department got only $15 million to spend on highway construction. Half the states have constitutional amendments to block such diversions, and some want to go further: they have asked the Federal Government to give up its 2¢-a-gallon tax on gasoline and diesel fuel so that the states can collect it. But if the federal gas tax were abolished, many a state legislature would hesitate to reimpose it. Thus, the highway funds the Federal Government now collects and gives back to the states ($875 million this year) would be lost. Moreover, the U.S. Bureau of Public Roads believes that only by enforcing minimum federal standards will the nation have the well-knit interstate system it needs. Every tourist who has crossed a state line knows the experience of going from a broad, well-paved highway onto a narrow, crumbling strip of tar and gravel.

To try to solve the nation’s highway problem, President Eisenhower this week formally presented to Congress his program to build $101 billion worth of roads over the next ten years. He wants to do this by raising federal grants from about $9 billion to $30 billion, persuading state and local authorities to revise their spending from about $38 billion to $71 billion. To finance the Federal Government’s additional share, President Eisenhower’s highway committee wants to set up a Federal Highways Corp. that would float some $20 billion in bonds, sell them to private investors around the U.S. It estimates that these bonds could easily be paid off over 30 years from the 2¢ gasoline tax.

Some Democrats complain that an autonomous highway corporation would pave the way for other autonomous agencies to build hospitals, schools, etc. But many a businessman wonders: Why not? When a merchant or manufacturer needs to modernize and grow, he does not hesitate to borrow if he knows he can pay off the loan out of his future profits. In the same way, allowing private investors to put up the necessary cash to build roads would get roads built without either federal or state governments going further into debt.