Memo to Gov. Jon Corzine:
Drop any thought of leasing out the state’s toll roads to a private company. I know you’re hoping for some serious revenue, enough to potentially pay off $2.7 billion in debt, but the plan’s potential drawbacks, especially to drivers — the voters who put you in office — are just too great to take the chance.
The state has been looking at two recent deals — in Chicago and Indiana. According to The Star-Ledger, the deals will net Chicago will get $1.83 billion over 99 years and Indiana $3.85 billion over 75.
In both cases, however, tolls are going up: annual toll increases in Indiana beginning in 2010 of “either 2 percent, the rate of inflation or the increase in gross domestic product; in Chicago, tolls can double over the next decade, with hikes conintuing into the future.
It is these hikes — and questions about maintenance — that should give the governor pause.
The Star-Ledger, in a Sunday editorial, put the question pretty straightforwardly:
How much will we pay over the long term if New Jersey gives up control of two of America’s busiest and best toll highways for as long as 99 years?
A governor who wants New Jersey residents to buy into privatization is going to have to come up with a far better deal for the people than those reached by officials in Indiana, Chicago and other jurisdictions that have recently taken the plunge.
Sure Indiana got $3.8 billion for leasing the 157-mile Indiana Toll Road. But the Spanish- Australian consortium taking over the highway for 75 years gets to hike tolls sharply in 2010 and 2 to 7 percent every year after that. And that follows a toll hike earlier this year, just before the takeover, that will phase in hikes of 73 percent for cars over two years and that more than doubles the charge for trucks over four years.
Chicago received $1.83 billion for a 99-year lease on the 7.8-mile Chicago Skyway. But the new operators can raise fares 150 percent over 12 years and 2 to 7 percent or more a year after that, depending on inflation.
New Jersey drivers won’t want to pay increases like that, especially since Parkway tolls have been raised only twice in the past 51 years. The Turnpike has had just five toll hikes in 55 years.
That’s not to say Parkway and Turnpike tolls should never go up. The roads have construction and repair needs totaling in the billions, including a much-needed widening of the Turnpike in the central part of the state. But a toll hike on a privately operated road will almost certainly cost more be cause the private manager wants to make a profit.
The state also will have a se rious challenge in designing a deal that guarantees Parkway and Turnpike maintenance doesn’t slip under private operation.
And Corzine must explain why toll road money should go to anything other than transportation work as it has in the past, including some $300 million in state highway and mass transit projects over the last 20 years.
Corzine deserves a chance to make his case, but privatization deals elsewhere show he has his work cut out for him.
The Princeton Packet — our sister paper — offered an editorial on Tuesday that, like the Ledger, urges cautious debate. The Turnpike, it says, is “a huge financial asset.”
The roadway itself has considerable value, as do the rest areas, toll booths, maintenance equipment and other tangible holdings — not to mention the daily revenue stream, which adds an enormous enhancement to potential lessors or buyers.
It then raised the same questions as the Ledger:
What impact would the lease or sale of the turnpike have on the state’s credit rating? What happens if the state wants to improve nearby roadways, only to have the private toll road operator claim it’s siphoning traffic — and revenue — away from the turnpike? If the turnpike is in private hands, what kind of say, if any, would the public and its elected officials have about future toll increases? And, even if the answers to all these questions are not to everyone’s liking — if, for example, turnpike tolls would skyrocket in private hands — are these tradeoffs nevertheless a fair and reasonable price to pay for long-awaited and much-needed property-tax relief?
Move cautiously and open debate, seems the consensus.
I, on the other hand, am ready to throw caution to the wind and make a decision now. Don’t do it.
South Brunswick Post, The Cranbury Press
The Blog of South Brunswick
Hank Kalet 