Pricing Roads to Revitalize U.S. Infrastructure

December 20, 2013

A public-private partnership could solve U.S. transportation problems, say Richard Geddes and Dimitar Nentchev of the American Enterprise Institute.

Tax revenue from fuel taxes is declining, while aging transportation infrastructure needs work. To deal with this issue, researchers developed a plan they called an investment public-private partnership (IP3).

The plan is based on similar models elsewhere. Alaska has a system called the Alaska Permanent Fund that pays mineral royalties to the state's residents each year. Royalties are placed in a public investment fund, which pays yearly dividends to all Alaskan citizens.

The transportation plan would work like this:

  • A private company would pay a state a large cash payment in exchange for the right to operate and collect toll revenue from a particular road network for a defined period of time. That private partner must maintain the road for the length of the contract.
  • That lease payment would be placed in an investment fund. Dividends from the fund would be paid annually to households in the toll road region. Those dividends would offset the cost of the toll payments.

An analysis of implementing a program like this in Columbus, Ohio, found that annual dividend payments could amount to $1,900 per household due to one of these toll funds.

An IP3 plan would also relieve congestion. Because the roads would be priced, the price would reflect the actual cost of using the road, and congestion pricing would allocate road space to those who most value it.

Source: R. Richard Geddes and Dimitar N. Nentchev, "Road Pricing and Asset Publicization: A New Approach to Revitalizing U.S. Infrastructure," American Enterprise Institute, December 11, 2013.

 

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