If Transport Is Privatized Who Will Build the Roads?

Roads, like the rail transit I explored in the previous article of this series, seem as though they’d be a natural monopoly.

Building roads has the same challenges in carving out ROW and funding infrastructure, leading people to believe it requires government organization. “But who will build the roads?” has long been a slogan meant to rebut the liberatarian idea of fully-private service provision.  

This assumption, however, is even more historically-inaccurate in the context of streets than in the context of rail. Private highways have existed throughout human history, including early in the U.S.. Through the 19th century, writes Daniel Klein, a George Mason University economist, our network of turnpikes and toll roads were financed, built, and operated by over 2,000 companies.

As local governments became more powerful in the Progressive Era, they began outlawing and acquiring these paths to operate for themselves, responding to a public backlash against tolls. In 1916, the federal government barred tolls on any road receiving federal funds, and began building new roads itself. The new public roads benefited from taxpayer subsidy and eminent domain, giving them an unfair advantage and causing private routs to shutter. 

Yet, even a century later, there are still more private roads than Americans realize. Rural areas have 1000s of miles of them—often dirt or gravel—that are built by companies working in logging, mining, or other agrarian industries. There are 1000s of HOA-style subdivisions that build their own roads. And there is the occasional private highway or bridge, such as the Dulles Greenway in Virginia, the Orchard Pond Parkway in Florida (see case study below), or the Ambassador Bridge connecting Detroit and Windsor. Scattered examples also exist worldwide, such as in Scandinavian countries like Sweden, where 2/3rds of roads are privately-managed. 

If the federal, state, and local governments in the U.S. did not overwhelmingly provide roads, the private sector would likely do so. History and current market activity suggest this (after all, if a company is willing to build a road in a remote area for logging, imagine the intense bidding war firms would wage for exclusive rights to serve millions of drivers in major metros). 

But private pathways don’t now exist in an urban context, because it makes no financial sense for entrepreneurs to compete with the public option. In this respect, the government road monopoly is less a natural monopoly, than one created by policy. It can reasonably be called “socialist”, since the government plans, builds, operates and maintains almost all our roads, and used to seize them from private companies. 

I argued in a previous Catalyst article that this socialist monopoly has been suboptimal: roads in the U.S. are, depending on the context, either under-utilized (i.e. misplaced), over-utilized (congested), ill-maintained, and/or costly to taxpayers. That is because they’re socialized, and avoid market mechanisms like pricing and competition. 

One reform that became somewhat of a bipartisan cause in recent decades are public-private partnerships, where the government contracts out road provision to private companies. There is literature showing that this has produced efficiency gains for road provision, although that’s never guaranteed for every project.

To me a more compelling idea is full privatization. That could include city or state governments selling off their public parkways, so the liability is taken from the public’s hands and moves to the private sector, which has a proven history of running roads profitably. Or it could include DOTs working with companies to create new road ROW, a strategy I mentioned before for rail.

Full privatization would likely bring a wave of innovation—something that, granted, is hard to confirm because privatization is so rare. But already, toll roads use electrical transponders to charge fares and merge signals to improve traffic flow. And there is a wave of new technology in the pipeline, from snow-melting concrete, to modular materials that streamline construction, to lanes that “self-heal” rather than needing patchwork. Every industry with heavy private sector activity sees innovations like this, and privatization could just as soon bring it to roads.

The question, then, should not be “who will build the roads?”, but “how much better would roads be if governments didn’t build them?”

Toll road case study: Florida

Florida is the U.S. toll road capital. It’s tied with Texas for the most, with 30, and has more toll road miles than any state. This is part of a strategy by the government and business community to handle population growth through more road capacity, which wouldn’t happen with state and federal gas taxes alone. 

The privatization strategy has led to some interesting projects. In Tallahassee, businessman Jeff Phipps built a 5.2-mile toll road called Orchard Pond Parkway along land he owns, improving access to a local airport. The state DOT provided a $13.5 million loan to partially finance the road, and Phipps will pay it off through toll revenue. Phipps is leasing the road from Leon County for 99 years, and after that the county assumes full ownership.

Initial daily traffic was supposed to be 500-1,000 cars, but according to a 2018 Florida State University report, the road was getting about 60% above that, and is expected to soon be profitable. Even more interesting was Phipps’ environmental stewardship. He included wildlife crossings, noise-reducing berms, conservation easements, recycled concrete, and a bike trail, increasing public access to an area that otherwise would be closed-off. This is different from many public roads, which come with legal standards that require environmentally-wasteful overengineering. 

“By building it myself,” he told the Tallahassee Democrat, “I hope I can do a better job than if it had been done (by a government agency) on a tight budget.”