States sell rights to roads for cash

State governments have begun selling the toll rights of publicly owned bridges to private organizations. This prompted a response from the Senate Finance Committee, which held a hearing this afternoon on the effects these deals, known as “public-private partnerships”, are having on government revenue and the price of travel for consumers.

According to JayEtta Hecker, director of physical infrastructure issues at the Government Accountability Office, one of the primary motivations for forming these public-private partnerships is the sharing or transfer of risk. She stated that when building highways, the government assumes a large amount of risk on the returns from tolls. By entering into these deals, the state government is guaranteed a large sum of money that can be used to either pay off debt, or perhaps for other state projects. However, these new financial partnerships can also result in higher toll prices for users, as the government is no longer in control of prices.

However, Edward Kleinbard, Chief of Staff on the Joint Committee on Taxation pointed out that often times these contractual agreements do not specify the tax consequences for the federal and states governments. As such, the government could potentially lose revenue that it would have otherwise gained had the road remained under public control.

Hecker concluded by stating that many nations, including Australia and Spain, use these partnerships to build a large majority of the roads those nations enjoy today. In addition, she said that the deals bring much-needed money to cash-strapped governments, and should be encouraged.